1 BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT DATED:18.04.2011 CORAM: THE HONOURABLE MS.JUSTICE K.B.K.VASUKI C.M.A(MD).320 of 2011 D.Amirthalinga Nadar ... Appellant/Claimant Vs. 1.K.Sivakumar 2.Tata AIG General Insurance Company Ltd., No.I, Commandar Chief Road, Ethiraj Salai, Egmore, Chennai. ... Respondents PRAYER: Civil Miscellaneous Appeal filed under Section 173 of the Motor Vehicles Act, 1988 against the award dated 16.08.2010 made in M.C.O.P.No.150 of 2009 on the file of the Motor Accident Claims Tribunal (Additional District Judge, Fast Track Court No.I), Tuticorin. For Appellant : Mr.S.Siva Thilakar For R1 : Mr.A.Joseph Jawahar For R2 : Mr.S.Srinivasa Ragavan J U D G M E N T The claimant is the appellant herein. The award of compensation of Rs.2,38,450/- with interest at 7.5% per annum is made in his favour for the injuries sustained by the claimant in the accident occurred at 5.00 p.m., on 18.01.2009 near Thesaikaval road diversion on Arumuganeri to Moolakarai Main Road due to rash and negligent driving of the vehicle owned by the first respondent and insured with the second respondent/insurer. 2. The Tribuanl has on the basis of the evidence let in, awarded compensation of Rs.2,38,450/- under the following heads: Permanent disability :Rs. 60,000/- Pain and suffering :Rs. 10,000/- Mental Agony :Rs. 5,000/- Medical expenses :Rs.1,45,450/- Extra Nourishment :Rs. 5,000/- Transport Expenses :Rs. 1,000/- Loss of Income during Treatment period :Rs. 12,000/- --------------- Total :Rs.2,38,450/- --------------- 3. The claimant/appellant herein has in this appeal questioned the award of compensation mainly on two grounds. Firstly, the Tribunal has erred in absolving the Insurance Company to pay compensation and in fastening the liability upon the owner of the vehicle on the ground that the cheque issued towards payment of premium was returned as dis-honoured and the policy was cancelled and the cancellation of policy was duly https://hcservices.ecourts.gov.in/hcservices/ 2 intimated to the appellant. Secondly, the Tribunal has failed to award any compensation to the damages caused to clothings and articles. 4. Regarding the first aspect, it is sought to be contended that the insurer has received cheque towards payment of premium for the insurance policy at its own risk as under relevant provisions of law, the prescribed mode of payment is only by way of cash and the insured and other authority concerned are not duly intimated about the cancellation of insurance policy and as the insurer failed to prove due communication of cancellation of the insurance policy already issued, on receipt of cheque for payment of premium is deemed to be in force and the insurer cannot be permitted to avoid the liability towards the insured in respect of third party risks and is hence liable to indemnify the third party risks. 5. Per contra, the learned counsel for the Insurance Company has cited the following authorities both for and against the contention that the Insurance Company is not liable to pay compensation in the event of cheque issued for payment of premium being dis-hononoured much before the date of the accident. The authorities cited are (1) 1998 1 SCC 371 (Oriental Insurance Company Limited vs. Inderjit Kaur and others, (2) (2000) 3 SCC 195 (New India Assurance Company Limited vs. Rula and others (3) (2001) 3 SCC 151 (National Insurance Company Limited., vs. Seema Malhotra and others) and (4) 2009 (2) TN MAC 86 (DB) (New India Assurance Company Limited vs. V.Bommi and four others. 6. It may by true that the Apex court in the case reported in (2001) 3 SCC 151(cited supra) arising out of the claim made by the insured for the damages caused to the vehicle has held that "the business of Insurance Company can be carried on only with premium paid by the insured person on the Insurance Policy and the only profit, if at all the Insurance Company makes, of the insurance business is the premium paid when accident or damage occurs. But to ask Insurance Company to bear the entire loss or damages of somebody else without the company receiving a pie towards premium is contrary to the principles of equity, though the Insurance Companies are made liable to third parties on account of statutory compulsions due to the initial agreement, entered into between the insured and the company concerned." 7. Whereas three Judges larger Bench of Supreme Court has in the earlier judgment reported in (1998) 1 SCC 371(cited supra) the Supreme Court, was of the view that the insurer is to be held liable, notwithstanding the premium not being received for third party risk as the public interest served by an insurance policy must prevail over the insurer's interest. It is held that "the policy of insurance that the appellant issued was a representation upon which the authorities and third parties were entitled to act. The insurer was not absolved of its obligations to third parties under the policy because it did not receive the premium. Its remedies lay against the insured. It was the appellant- insurer who was responsible for its predicament by having issued the policy of insurance upon receipt only of cheque towards premium in contravention of the provisions of Section 64-VB of the Insurance Act. The public interest that a policy of insurance serves must, clearly, prevail over the interest of the appellant. The appellant become liable to indemnify third parties in respect of liability which that policy https://hcservices.ecourts.gov.in/hcservices/ 3 covered and to satisfy the award of compensation in respect thereof notwithstanding entitlement of the insurance company to avoid or cancel the policy for the reason that the cheque issued in payment of premium thereon had not been honoured." The Apex Court has by observing so fastened the liability upon the Insurance Company to satisfy the award passed in favour of third party without giving further liberty to the Insurance Company to realise the same from the insured. Similar view is expressed in the judgments reported in 2000(3) SCC 195 (New India Assurance Company Limited vs. Rula and others) and in 2008(2) TN MAC 209 (DB) (Jharkhand)(Oriental Insurance Company Limited vs. Neelu Devi and Others). The Jharkhand Division Bench has clearly held that "When insurer failed to discharge its burden by not giving intimation to owner against acknowledgement as well as appropriate authority and in the absence of such acknowledgement/receipt, there shall be presumption of Insurance of vehicle against valid policy and Insurer shall be bound to compensate claimants by indemnifying Insured/owner." 8. The Division Bench of our High Court in the judgment reported in 2009(2) TN MAC 86 (DB) (New India Assurance Company Limited vs. V. Bommi & 4 others) has under identical circumstances after detailed analysis of entire legal development on this aspect as to whether dishonouring of cheque issued towards payment of premium amounts to non-payment of premium and whether there is no contractual liability and the same absolves the insurer to indemnify the insured and by following the earlier Supreme Court decision reported in 2004(1) TN MAC 104 (SC) (Oriental Insurance Company Limited., vs. Swaran Singh, thereby applying pay and recovery theory held that the judgment of award must be satisfied by the insurer though he may be entitled to avoid or cancel the policy or actually cancelled the policy but without duly sending intimation to the insured under R.P.A.D to the Regional Transport Authority as required by G.R.24 of Motor Tariff Regulations-II but has further observed that in such event, the insurer shall recover the compensation amount from the owner of the vehicle. 9. As rightly argued by the learned counsel for the claimant, the combined appreciation of the legal dictum laid down by the Apex Court and our High Court would compel this Court to hold that on the failure of the insurer to produce any acknowledgement/receipt for giving intimation to owner about cancellation, the Tribunal has grossly erred in absolving the Insurance Company from answering the award and the Tribunal ought to have directed the Insurance Company to satisfy the award with liberty given to it to recover the same from the insured and the liability aspect is hence accordingly decided. 10. Regarding the quantum of compensation no dispute is raised against the same by the insurer but the claimant would seek enhancement of the same by awarding some reasonable amount towards damages to clothings and articles and his two wheeler. This Court is inclined to award a sum of Rs.1550/- towards damages to clothings and articles and the total compensation thus comes to Rs.2,40,000/-. 11. In the result, the award dated 16.08.2010 made in M.C.O.P.No.150 of 2009 on the file of the Motor Accident Claims Tribunal (Additional District Judge, Fast Track Court No.I), Tuticorin, is modified by awarding a sum of Rs.2,40,000/- with interest at 7.5% per https://hcservices.ecourts.gov.in/hcservices/ 4 annum from the date of claim petition till date of payment payable by the insurer within two months from the date of receipt of the copy of this order and the insurer shall have the liberty to recover the same from the insured. On deposit of the amount into Court, the appellant/claimant is permitted to withdraw 50% of the award amount with entire interest and costs. The balance amount shall be invested in any of the nationalised banks for three years and the appellant/claimant is permitted to withdraw the future accrued interest once in three months directly from the bank. Time for payment of additional Court fee if any is one month from the date of receipt of the copy of this order. This Civil Miscellaneous Appeal is disposed of accordingly. No Costs. Sd/- Assistant Registrar /True Copy/ Sub Assistant Registrar To, The Motor Accident Claims Tribunal, (Additional District Judge, Fast Track Court No.I), Tuticorin. +1cc to Mr.S.Srinivasa Raghavan, Advocate, SR.No.14248 +1cc to Mr.S.Siva Thilakar, Advocate, SR.No.14336 +1cc to Mr.A.Joseph Jawahar, Advocate, SR.No. pm GH : 14.07.2011 : 4p/5c CMA.No.320 of 2011 18.04.2011 https://hcservices.ecourts.gov.in/hcservices/