: 1 : SD IN THE HIGH COURT OF JUDICATURE AT BOMBAY IN THE HIGH COURT OF JUDICATURE AT BOMBAY IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION CIVIL APPELLATE JURISDICTION CIVIL APPELLATE JURISDICTION FIRST APPEAL NO.1862 OF 2007 FIRST APPEAL NO.1862 OF 2007 FIRST APPEAL NO.1862 OF 2007 WITH WITH WITH CIVIL APPLICATION NO.401 OF 2008 CIVIL APPLICATION NO.401 OF 2008 CIVIL APPLICATION NO.401 OF 2008 The Oriental Insurance Co. Ltd.,Pune ...Appellant V/s. Subhash Sadashiv Kulkarni & Anr. ...Respondents Mr.R.N. Sanghavi, Advocate, for the Appellant. Mr.S.S. Vidyarthi, Advocate, for Respondent No.1. CORAM : ABHAY S. OKA, J. CORAM : ABHAY S. OKA, J. CORAM : ABHAY S. OKA, J. DATE : 7TH APRIL, 2008. DATE : 7TH APRIL, 2008. DATE : 7TH APRIL, 2008. ORAL JUDGMENT : ORAL JUDGMENT : ORAL JUDGMENT : 1. This Appeal was admitted on 23rd July, 2007. When Civil Application No.401 of 2008 filed by the 1st respondent was on board, by consent of the parties, the Appeal was taken up for final disposal. Accordingly, the Appeal was finally heard on 22nd February, 2008 and today the Appeal is kept for dictation of the Judgment. 2. The Appeal is preferred by the appellant-Insurer taking an exception to the Judgment and Award dated 31st October, 2006 passed by the learned Member of the Motor Accident Claims Tribunal, Pune in a claim petition filed by the 1st respondent. : 2 : The claim petition was filed under section 166 of the Motor Vehicles Act, 1988. The claim petition was filed by the 1st respondent claiming compensation on account of injuries sustained by him in a motor accident. The 1st respondent was driving his own Maruti van on 26th April, 2001. A bus insured with the appellant-Government gave a dash to the Maruti van, as a result, the 1st respondent sustained serious injuries. The learned Member of the Tribunal held that the driver of the bus was driving the bus in a rash and negligent manner which has caused the accident. The case made out by the appellant while defending the claim petition filed by the 1st respondent was that though a policy of insurance was issued against a cheque towards premium amount, the said cheque was dishonoured and, therefore, the appellant was not liable to pay the compensation. The Tribunal accepted the said case made out by the appellant. However, the Tribunal directed the appellant to pay the compensation amount and thereafter recover the same from the 2nd respondent without filing a separate suit. 3. The challenge to the Award in this Appeal is confined only to that direction of the Tribunal by which the appellant-company has been ordered to pay : 3 : compensation and thereafter to recover the same from the insured. 4. The submission of the learned Counsel for the appellant is based on the decision of the learned Single Judge of this Court in the case of New India Assurance Company Limited V/s. Anjanabai and Ors. The submission of the learned Counsel for the appellant is that once it is established that the cheque issued by the insured towards the premium was dishonoured and there is cancellation of cover note before the date of accident, the insurance company is not liable to pay compensation. As the insured having failed to pay the premium as promised, the insurance company need not perform its part of the promise. He, therefore, submitted that in no case the compensation was payable by the present appellant. 5. The learned Counsel appearing for the 1st respondent has placed reliance on the decision of the Apex Court in the case of Oriental Insurance Company Ltd. V/s. Inderjit Kaur and Ors. [1998 ACJ 123] as well as a decision of this Court in the case of Oriental Insurance Company Ltd. V/s. Yogendra Bhalchandra Patil and Anr. [2007 ACJ 2051]. It is submitted that the liability of the insurance company to the third parties continues to exist : 4 : notwithstanding the dishonour of the cheque issued towards premium. He submitted that no interference is called for as the appellant-insurance company has been sufficiently protected. 6. I have carefully considered the submissions. The evidence on record shows that the cheque issued by the insured towards the premium was dishonoured. By letter dated 9th August, 2000, the appellant informed the 2nd respondent about the dishonour of the cheque and cancellation of the cover note which was already issued by the appellant. The accident took place on 26th April, 2001. Reliance has been placed by the Advocate for the appellant on the decision of the learned Single Judge of this Court in the case of New India Assurance Company Ltd. V/s. Anjanabai and Ors. In paragraph No.6 of the said decision, the learned Single Judge has held thus:- "6. In the aforesaid decision, the Apex Court has also considered the judgments in (i) New India Assurance Co. Ltd. v. Rula, 2000 ACJ 630 (SC) and (ii) Oriental Insurance Co. Ltd. v. Inderjit Kaur, 1998 ACJ 123 (SC). Thus, the legal position that emerges is that when the insured fails to pay the premium promised, or when the cheque issued by him towards the premium is returned dishonoured by the bank concerned, the insurer need not perform his part of the promise and : 5 : the corollary is that the insured cannot claim performance from the insurer in such a situation. This being the legal position, the contention of the learned counsel for the insurance company that the insurance policy was not in existence on the date of accident and as such is not liable to pay compensation has to be accepted." 7. The learned Single Judge was dealing with the Appeal preferred by the insurer of the vehicle. In the said case the insurer of the said vehicle had issued cover note on 8th September, 1993 after receiving a cheque for the premium. As the cheque was dishonoured on 16th September, 1993, the cover note was cancelled by a communication issued on the same date. The accident occurred on 26th April, 2001. After referring to the decisions of the Apex Court referred to above and after making aforesaid observations in paragraph No.6 of the Judgment, the learned Single Judge held that the insurer was not liable as the cover note was cancelled on the date on which the accident took place. 8. It will be necessary to refer to the decision of the Apex Court in the case of Oriental Insurance Company Ltd. V/s. Inderjit Kaur and Ors. In the case before the Apex Court, the policy of insurance was issued on 30th November, 1989. The cheque issued : 6 : towards the premium amount was dishonoured and a letter was sent by the insurer to the insured to that effect on 20th January, 1990. The accident occurred on 9th April, 1990 and the premium was paid in cash on 2nd May, 1990. The Apex Court considered the scheme of the Motor Vehicles Act, 1988. In paragraph Nos.8 and 9 of the said decision, the Apex Court held thus:- "8. We have, therefore, this position. Despite the bar created by section 64-VB of the Insurance Act, the appellant, an authorised Insurer, issued a policy of insurance to cover the bus without receiving the premium therefor. By reason of the provisions of section 147(5) and 149(1) of the Motor Vehicles Act, the appellant became liable to indemnify third parties in respect of the liability which that policy covered and to satisfy awards of compensation in respect thereof notwithstanding its entitlement (upon which we do not express any opinion) to avoid or cancel the policy for the reason that the cheque issued in payment of the premium thereon had not been honoured. 9. The policy of insurance that the 9. The policy of insurance that the 9. The policy of insurance that the appellant issued was a representation appellant issued was a representation appellant issued was a representation upon which the authorities and third upon which the authorities and third upon which the authorities and third parties were entitled to act. The parties were entitled to act. The parties were entitled to act. The appellant was not absolved of its appellant was not absolved of its appellant was not absolved of its obligations to third parties under the obligations to third parties under the obligations to third parties under the policy because it did not receive the policy because it did not receive the policy because it did not receive the premium. Its remedies in this behalf premium. Its remedies in this behalf premium. Its remedies in this behalf lay against the insured." lay against the insured." lay against the insured." (Emphasis added). 9. Coming back to the case of the New India Assurance Company Ltd. V/s. Anjanabai and Ors. : 7 : (supra), what is observed by the learned Single Judge in paragraph No.6 of the said Judgment is already quoted above. The law laid down by the Apex Court is that once a policy of insurance was issued by the insurer, a representation is made by the insurer on which the authorities and third parties were entitled to act. The Apex Court specifically held that the insurer is not absolved of its obligations to third parties under the policy because it did not receive the premium. It is observed that the remedy of the insurer in that behalf lay against the insured. 10. What has been observed by the learned Single Judge in paragraph No.6 is in a different context. The learned Single Judge has not referred to the rights of the third parties in relation to the insurer on the basis of the policy which is already issued by the insurer. On the basis of what has been observed in paragraph No.6, it cannot be held that the ratio of the decision of the learned Single Judge is that the insurer is not liable to pay compensation on the ground that the cover note of the policy was cancelled as a result of dishonour of the cheque issued towards the premium. On the contrary, the law laid down by the Apex Court is very clear that in such event the insurer continues to be liable to third parties and : 8 : remedy of the insurer is against the insured. This ratio of a binding precedent of the Apex Court has not been considered by the learned Single Judge. Therefore, the decision of the learned Single Judge cannot be read as a binding precedent. Thus, the decision of the learned Single Judge referred to above will not help the appellant. 11. In the present case admittedly a cover note was issued by the appellant-insurer. Therefore, in view of what is held by the Apex Court, the appellant-insurance company will be liable in sofar as the 1st respondent who is a third party. By the impugned Judgment and Award, not only that the remedy of the insurer against the insured has been protected, but the Award itself permits the appellant to recover the amount of compensation paid by the appellant to the 1st respondent from the 2nd respondent on the basis of the same award without filing a separate suit. 12. Therefore, in view of the legal position which is reflected from the decision of the Apex Court in the case of Oriental Insurance Company Ltd. V/s. Inderjit Kaur and Ors, the learned Member of the Tribunal was right in holding the appellant liable to pay compensation. As pointed out earlier, the : 9 : appellant has been protected by permitting recovery of the compensation amount from the insured. 13. There is no other challenge by the appellant in the present Appeal, obviously because there was no leave granted in favour of the appellant under section 170 of the Motor Vehicles Act, 1988. In any event except for the aforesaid point, no other point has been canvassed. 14. Therefore, the Appeal must fail and I pass the following order :- "O R D E R" "O R D E R" "O R D E R" (a). Appeal is dismissed with no orders as to costs. (b). The appellant will be entitled to refund of sum of Rs.25,000/- deposited in this Court. (c). As a result of dismissal of the Appeal, the interim relief obviously stands vacated and therefore Civil Application No.401 of 2008 does not survive and the same is : 10 : disposed of accordingly. (d). Now the Tribunal will make disbursement of the amount of compensation in terms of the Award which is confirmed by this Judgment. [ABHAY S. OKA, J.] [ABHAY S. OKA, J.] [ABHAY S. OKA, J.]