IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH FAO No.2083 of 2005 Date of decision:01.09.2010 Oriental Insurance Company Limited ....Appellant versus Smt. Salochna Devi and others ...Respondents II. FAO No.2084 of 2005 Oriental Insurance Company Limited ....Appellant versus Mange Ram and others ...Respondents III. FAO No.2085 of 2005 Oriental Insurance Company Limited ....Appellant versus Smt. Salochna Devi and others ...Respondents IV. FAO No.2086 of 2005 Oriental Insurance Company Limited ....Appellant versus Ankit (minor) and others ...Respondents CORAM: HON’BLE MR. JUSTICE K. KANNAN ---- Present: Mr. Ashwani Talwar, Advocate, for the appellant. None for the respondents. ---- FAO No.2083 of 2005 - 2- 1. Whether reporters of local papers may be allowed to see the judgment ? 2. To be referred to the reporters or not ? 3. Whether the judgment should be reported in the digest ? ---- K.Kannan, J. (Oral) 1. All the four appeals arise out of the same accident and address the same issue of liability. They are taken up together and are disposed of by a common judgment. 2. The Insurance Company is in appeal denying liability on the ground that on the date of the accident, there was no valid insurance. The contention of the insurer was based on the fact that a cover note had been issued on 09.08.2001 on receipt of premium through a cheque. The cheque had been dishonoured and communicated to the insurer by the drawee banker on 24.08.2001 and on the same day the policy was cancelled. However the dispatch of communication was made on 27.08.2001, with 25th and 26th intervening days being holidays. The accident had taken place on 25.08.2001. 3. A contract of insurance is a specie of contract law and a cancellation must therefore proceed only in the manner provided under the Contract Act. The cancellation could be effective only from the time when it is communicated to the person, who had taken the contract. If there had been a dispatch only on 27.08.2001 and the accident had taken place before that date, it cannot avail to the insurer to contend that the policy was no longer subsisting to protect the insurer liable. This issue came to such ruling through a decision of the Hon'ble Supreme Court in National Insurance Company Limited Versus Abhaysing Pratapsing FAO No.2083 of 2005 - 3- Waghella and others-2008(9) Supreme Court Cases 133 which dealt with the case of an accident that had taken place on 27.01.1995. In that case, the cover note had been issued on 23.01.1995 prior to the date of the accident and the insurance policy was cancelled immediately after the accident had taken place. The finding of fact had been arrived at that prior to the deposit of the premium of insurance in cash, the cover note had not been cancelled. The Hon'ble Supreme Court made a particular distinction regarding the difference between a contract of insurance qua the owner and one covering third party risk and held that as far as third party risk was concerned if there had been a cancellation of policy earlier the insurer will still become liable. The same judgment also covers another proposition that if a cover note is issued it would remain valid till it is cancelled. Indisputably the insurance policy was cancelled only after the accident had taken place. The liability of the insurer was therefore properly secured not merely to satisfy the claims of policy but also to provide for indemnity to the insured. The remedy of the insurer for enforcing a dishonoured cheque would be independent of the finding recorded by this Court relating to the satisfaction that the insurer is bound to make under the award. 4. The respective awards are, under the circumstances, confirmed and all the appeals filed by the insurer are dismissed. (K.KANNAN) JUDGE 01.09.2010 sanjeev