IN THE HIGH COURT OF JUDICATURE AT PATNA MA No.1 of 2007 ORIENTAL INSURANCE COMPANY LTD through the Regional Manager at Regional Office – Pirmohani, Patna (For the Divisional Manager, The Oriental Insurance Company Ltd. Motijheel, P.S. Town District Muzaffarpur …… Appellant Versus ASHA DEVI & ORS ………………….. Respondents ----------- For the appellant : Mr. Mukteshwar Pd. Singh, Advocate For respondent nos. : Mr. Mukesh Prasad Singh No. 2 1 to 5 For respondent no.6 : None O R D E R By order dated 27.9.2006 passed in Claim Case No. 33 of 2006 by the learned 2nd Additional District Judge cum Claims Tribunal, Muzaffarpur, an award directing the Insurance Company to pay interim compensation of Rs. 50,000/- under section 140 of the Motor Vehicles Act (hereinafter referred to as „M.V. Act‟) to respondent nos. 1 to 5, the claimants, by way of “no fault liability” for the death of one Rameshwar Sah @ Rameshwar Prasad on 8.12.2005 caused by the use of the motor vehicle. Aggrieved thereby the Insurance Company have preferred this appeal. The only point raised by the learned counsel for the appellant Insurance Company is that they were not liable to pay any compensation since the cheque furnished by way of payment of premium having bounced there was no Insurance Policy in force 2 and as such the Insurance Company could not be fastened with the liability of paying “no fault liability” to the claimants. The brief facts of the case is that respondent no. 6 herein, the owner of the truck bearing registration no. BR – 06 P – 3291, had deposited a cheque bearing no. 308105 dated 8.4.2005 for renewal of the policy of the vehicle but the said cheque was dishonoured, intimation whereof and the intimation of the policy of the vehicle having been cancelled by reason of bouncing of the cheque was communicated to the owner in due course. The learned Claims Tribunal without dwelling into the intricacies of the matter directed the Insurance Company to pay the statutory amount under the “no fault liability” to the claimants under section 140 M.V. Act and reliance in this regard was placed on the decision of New India Assurance Company Ltd. Vs. Rula & ors. reported in 2000(3) SCC 195, remiss of the provisions of Section 25 of the Contract Act. In National Insurance Company Ltd. Vs. Seema Malhotra reported in 2001(3) SCC 151, a Division Bench after examining the position observed as follows in paragraph 17 of the decision: “In a contract of insurance when the insured gives a cheque towards payment of premium or part of the premium, such a contract consists of reciprocal promise. The drawer of the cheque promises the insurer that the cheque, on presentation, would yield the amount in cash. It cannot be forgotten that a cheque is a bill of 3 exchange drawn on a specified banker. A bill of exchange is an instrument in writing containing an unconditional order directing a certain person to pay a certain sum of money to a certain person. It involves a promise that such money would be paid.” Section 147 of the M.V. Act obligates the owner of the motor vehicle to get the vehicle insured in so far as the claim of third party is concerned but it does not deal with the contract of insurance as such and the same is covered under the Insurance Act. In the instant case the cheque towards renewal of the policy dated 8.4.2005 was handed over to the Insurance Company but it was dishonoured on presentation. The date of presentation and dishonour of the cheque are not mentioned in the impugned order but the fact remains that the accident causing the death of Rameshwar Sah @ Rameshwar Prasad took place on 8.12.2005 at about 3 P.M. Admittedly the owner of the vehicle has not appeared and on the presumption that on the date of accident the vehicle was insured and, therefore, the liability of payment was thrust upon the Insurance Company by the impugned order. The claimants filed a certified copy of the FIR of Lauriya P.S. along with fardbeyan of Bharat Sah to indicate that Lauriya P.S. Case No. 121 of 2005 had also been filed for the same offence. As stated above the date of the bouncing of the cheque has not been disclosed and the appellants as also respondent nos. 1 to 5 have also failed to indicate the date when the cheque had bounced and intimation of the bouncing of the cheque and cancellation of the 4 policy had been sent to the vehicle owner. Admittedly, Rameshwar Sah @ Rameshwar Prasad died due to the accident involving the use of a motor vehicle on a date when the Insurance policy does not appear to be in vogue. Therefore, the Insurance Company not having received the money due to him from the vehicle owner the contract of insurance had not been completed. It is by now well settled that contract of insurance is governed by the Insurance Act, 1938. In today‟s world payment made by cheque is ordinarily accepted as valid tender and Section 64 – VB of the Insurance Act also provides for such a scheme. But it is to be noticed that payment by cheque, is subject to its encashment. From the documents annexed by the appellants it would appear that the advise of the bouncing of the cheque was sent to the appellant on 15.4.2005 and the policy was cancelled on 22.4.2005 due to the bouncing of the cheque and intimation thereof was sent to the vehicle owner on the very same date by registered post. It would thus appear that on the date of accident which was 8.12.2005 there was no Insurance policy subsisting and therefore, the appellants were not liable to pay any compensation. Due regard being had to the facts and circumstances of the case the award by the Claims Tribunal does not appear to be justified and is hereby set aside. Accordingly, appeal is allowed and the impugned order of the Claims Tribunal being 5 against the law in force is hereby set aside. Patna High Court, Patna. Dated : The 17th of July, 2009 Sanjay Pd./A.F.R. (Abhijit Sinha, J.)