CMA NO.133/95 -Mahaveer & Ors. Vs. Sushila & Ors. Judgment dt.10.11.09 1/14 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR. JUDGMENT Mahaveer & Ors. Vs. Sushila & Ors. S.B. CIVIL MISC. APPEAL NO.133/1995 against the judgment dt.3.8.1994 passed by learned Judge, MACT Cases No.3/1993. Date of order : 10th November, 2009 PRESENT HON'BLE DR. JUSTICE VINEET KOTHARI Mr. R.J. Punia for Mr. Vijay Vishnoi for the appellant-owner. Mr. U.C. S. Singhvi for the respondent-Insurance Company. Mr.Trideep Bhandari for Mr.R.L.Jangid for respondent-claimants. ------- REPORTABLE BY THE COURT:- 1. This appeal has been filed by the owner of the vehicle under Section 110-D of the Motor Vehicle Act, 1939 against the award of the MACT, Churu dated 3.8.1994 whereby the learned Tribunal decided the issue No.5 holding that the Insurance company would be liable to the extent of limited liability of Rs.50,000/- under the provisions of 1939 Act and not to the extent of unlimited liability of compensation as awarded by the learned Tribunal. 2 The learned counsel for the appellant-owner of the vehicle Mr. R.J. Punia for Mr. Vijay Vishnoi submitted that the CMA NO.133/95 -Mahaveer & Ors. Vs. Sushila & Ors. Judgment dt.10.11.09 2/14 insurance company was liable to unlimited extent because they had charged Rs.240/- as a premium for insurance of the vehicle in question namely Bus No.RJI 2365 and, therefore, third party risk was covered to the extent of unlimited liability of the insurance company. 3. This was contested by the learned counsel for the insurance company vehemently and during the course of arguments, the learned counsel for the Insurance Company Mr. U.C.S. Singhvi pointed out that vide insurance policy or certificate of insurance Exhibit A/1 on record, it would transpire that the date of accident was 10.5.1984 and the cover note was also obtained effective from 10.5.1984 to 9.5.1985 for a period of one year whereas the premium in question of Rs.532/- to total including Rs.240/- for “liability to public risk” which would cover only 'own damages to property' and not third party risk, was also deposited by the insured vide receipt No.237163 dated 21.5.1984 after 11 days of the date of accident and though the date of cover note showed the commencement period from 10.5.1984, the insurance company would not be liable as insurance contract had not come into existence on 10.5.1984. 4. Mr. U.C.S. Singhvi, therefore, urged that the insurance company has taken the stand right from the beginning before the learned Tribunal that the contract of insurance obtained by the CMA NO.133/95 -Mahaveer & Ors. Vs. Sushila & Ors. Judgment dt.10.11.09 3/14 appellant owner of the vehicle was a forged and fraudulent one and the insurance in question cannot be said to be effective prior to 21.5.1984 when the premium in question was received by the respondent-insurance company and in view of the clear provisions of Section 64(VB) of the Insurance Act, 1938, the respondent-insurance company is not at all liable to pay the compensation in question and there is no question of making it liable even to the extent of limited liability under the provisions of 1939 Act as held by the learned Tribunal much less to the unlimited extent as contended by the learned counsel for the appellant-owner of the vehicle. 5. He urged relying on the decision of the Apex court in the case of National Insurance Company Ltd. Vs. Yellamma and another – 2008 ACJ 1906 and Bombay High Court decision in the case of Oriental Fire and General Insurance Co. Ltd. Vs. Panvel Industrial Co-operative Estates Ltd. - 1993 Vol.73 Company Cases 478 (Bom.) and decision of Hon'ble Supreme Court in case of Life Insurance Corporation of India Vs. Raja Vasireddy Komalavalli Kamba and others – AIR 1984 SC 1014 that since the premium in question was received on 21.5.1984, therefore, the insurance company is not liable to pay the compensation for the death or bodily injury arising out of such accident which admittedly took place on 10.5.1984. CMA NO.133/95 -Mahaveer & Ors. Vs. Sushila & Ors. Judgment dt.10.11.09 4/14 6. The learned counsel for the claimants Mr. Trideep Bhandari urged that in fact the Tribunal has determined lower compensation than what the claimants were entitled to under the law and even though the claimants have not filed any cross appeal in the facts and circumstances of the case, the suitable enhancement for compensation may be granted. He, however, does not dispute the legal position obtaining under the various case laws cited before this Court. 7. On the other hand, Mr. R.J. Punia, learned counsel appearing for the appellant-owner drew the attention of the court towards a judgment rendered by coordinate Bench of this Court in S.B. Civil Misc. Appeal No.455/1997 – The Oriental Insurance Company Ltd. Vs. Smt. Shakuntla Devi & Ors. decided on 16.4.2009 and the relevant portion of which is quoted below:- “Much was sought to be argued on the basis of Ex.D4, that amount of Rs.288/- only was received in the company, and that too on 2.2.1988. It would suffice to say, that the insured's act comes to an end with making the payment to the agent, and receiving cover note. Payment to the agent is a valid payment to the insurance company for the purpose of Section 64(VB) to attract the liability of CMA NO.133/95 -Mahaveer & Ors. Vs. Sushila & Ors. Judgment dt.10.11.09 5/14 the insurer. Section 64(VB) does not require the insured to ensure, that the amount paid by him to the agent does actually travelled (sic!) to the company, and is credited to the coffers of the company, as a sine-qua-non, for validating of the insurance cover. That may be a matter between the company and the agent. Neither the insured is covered with that, nor can the third party be said to be concerned with that, and if the insured had paid the minimum of Rs.150/- additionally, for covering limited liability to third parties, it cannot be said, that the limit of liability of the insurer is limited to Rs.1,50,000/-. Thus, this contention also has no force. The net result of the aforesaid discussion is, that I do not find any force in the appeal. The appeal is, therefore, dismissed. Sd/- ( N P Gupta ), J.” 8. The legal position as it emerges from the three judgments relied upon by the learned counsel for the Insurance Company, Mr. UCS Singhvi, may summarized as below:- 9. In National Insurance Company Ltd. Vs. Yellamma and another – 2008 ACJ 1906 (supra), the Hon'ble Supreme laid down as under:- CMA NO.133/95 -Mahaveer & Ors. Vs. Sushila & Ors. Judgment dt.10.11.09 6/14 “8. In today's world payment by cheque is ordinarily accepted as valid tender but same would be subject to its encashment. A distinction, however, exists between the statutory liability of the insurance company vis-a-vis the third party in terms of section 147 and 149 of the Motor Vehicles Act and its liability in other cases but it is clear that if the contract of insurance had been cancelled and all concerned had been intimated thereabout, insurance company would not be liable to satisfy the claim. 9. In this case, there cannot be any doubt or dispute whatsoever that no privity of contract came into being between the appellant and the respondent No.2 and as such the question of enforcing the purported contract of insurance while taking recourse to section 147 of the Motor Vehicles Act did not arise. Respondent No.2 did not contest the case at any stage. It did not adduce any evidence before the Tribunal. It does not appeal from the judgments of the High Court. No argument in the appeal was advanced in his behalf. Before us also, no appearance has been made on behalf of the respondent No.2 despite service of notice.” 10. The Bombay High Court decision in Oriental Fire and General Insurance Co. Ltd. Vs. Panvel Industrial Co-operative CMA NO.133/95 -Mahaveer & Ors. Vs. Sushila & Ors. Judgment dt.10.11.09 7/14 Estates Ltd. - 1993 Vol.73 Company Cases 478 (Bom.) (supra) laid down that neither sub-section (2) nor Explanation thereto in section 64(VB) of the Insurance Act, 1938 means that the risk attaches immediately on payment of premium and the insurer undertakes the risk. Merely because there was ascertainment of the premium by the agent and the cheque was paid by the respondent, it would not mean that there was a concluded contract the retention of the cheque for four months without encashing it could not also and pass any benefit to the respondent (owner of the vehicle). The relevant portion from the head note of the said law reports is extracted below for ready reference:- “Held, (i) that mere payment of the premium and acceptance thereof by the agent could not amount to a concluded contract of insurance. Section 64VB(1) of the Insurance Act, 1938, provided that unless and until it receives payment of premium or it is guaranteed to be paid in a particular manner and within a particular time as may be prescribed in advance, there can be no assumption of risk on the part of the insurer. Sub- section (2) of the said section lays down that risk may be assumed not earlier than the date on which the premium has been paid in cash or by cheque to the insurer in case of those risks for which premium can be ascertained in advance. Sub- CMA NO.133/95 -Mahaveer & Ors. Vs. Sushila & Ors. Judgment dt.10.11.09 8/14 section (2) is an enabling provision. The contract between the insurer and the assured may be concluded later on. However, the insurer can assume the risk from the date when the money order is booked or the cheque is posted towards the premium. The phrase “risk may be assumed not earlier than” in sub-section (2), and the phrase “may be assumed” used in the Explanation means that the risk attaches immediately on payment of premium and the insurer undertakes the risk. Merely because there was ascertainment of the primium by the agent, and the cheque was paid by the respondent, it would not mean that there was a concluded contract. The retention of the cheque for four months without encashing it could not also pass any benefit to the respondent. (ii) That there was no unqualified acceptance of risk; the matter was still under negotiation and no binding contract had resulted. There was also no interim contract for a limited period in the form of a cover note. Since the proposal form had not been filled in by the respondent and the site had not been inspected by the agent, he could not have issued the cover note. Moreover, there was no pleading or evidence to show that there was an agreement between the parties on the fundamentals of insurance proposed particularly regarding the nature of the risk, the period of insurance and the rate of premium. Therefore, there was no positive conduct on the part of the appellant indicating such acceptance. CMA NO.133/95 -Mahaveer & Ors. Vs. Sushila & Ors. Judgment dt.10.11.09 9/14 Acceptance of the cheque towards premium or keeping the cheque for four months would not amount to implied acceptance by conduct. (iii) That, therefore, as there was no binding or concluded contract between the parties, the respondent was not entitled to recover any damages from the appellant. LIFE INSURANCE COROPRATION OF INDIA V. RAJA VASIREDEY KAMALAVALLI KAMBA [1984] 56 Comp Cas 174 (SC) and RATILAL (R.) AND Co.V. NATIONAL SECURITY ASSURANCE CO. LTD. (1984) 54 Comp Cas 275 (SC) referred to.” 11. In Life Insurance Corporation of India Vs. Raja Vasireddy Komalavalli Kamba and others – AIR 1984 SC 1014 (supra), the Hon'ble Supreme Court held, relying on the relevant extract from the Corpus Juris Secundum, Vol.XLIV that even the mere receipt and retention of premium only after the death of the claimant-appellant or the mere execution of policy document is not acceptance (of the proposal of the insurance). Acceptance must be signified by some act or acts by the parties or from which the law raises a presumption of acceptance. It would be appropriate to reproduce the relevant facts of the said case from para 1 of the judgment and then ratio of the said judgment contained in para 13 of the judgment:- CMA NO.133/95 -Mahaveer & Ors. Vs. Sushila & Ors. Judgment dt.10.11.09 10/14 “One late Raja Basireddi Chandra Dhara Prasad (hereinafter referred to as 'deceased') died intestate on 12th January, 1961. He had filled a proposal for insurance for Rs.50,000/- on 27th December, 1960. There was medical examination by the doctor of the life of the deceased on 27th December, 1960. The deceased had issued two cheques for Rs.300/- and Rs.220/- respectively in favour of the appellant as first premium. Cheque for Rs.300/- was encashed by the appellant on 29th December, 1960. Cheque for Rs.220/- was dishonoured three times and finally encashed on 11th January, 1961. As mentioned hereinbefore, the deceased died on the day following i.e. on 12th January, 1961. On 16th January, 1961, the widow of the deceased, respondent No.1 herein, wrote to the appellant intimating the death of the deceased and demanded payment of Rs.50,000/-. The Divisional Manager, Masulipatam Branch, denied liability on 28th January, 1961. Thereafter there was correspondence between the parties betweens February, 1961 to 23rd December, 1963 wherein the respondents-plaintiffs had claimed the payment and the appellant had denied liability for the same. 2. to 12 ........ 13. When an insurance policy becomes effective is well-settled by the authorities but before we note CMA NO.133/95 -Mahaveer & Ors. Vs. Sushila & Ors. Judgment dt.10.11.09 11/14 the said authorities, it may be stated that it is clear that the expression “underwrite” signifies 'accept liability under'. The dictionary meaning also indicates that (See in this connection The Concise Oxford Dictionary Sixth Edition p.1267). “underwrite” is used in Marine insurance but the expression used in Chapter III of the Financial powers of the Standing Order in this case specifically used the expression “underwriting and revivals” of policies in case of Life Insurance Corporation and stated that it was the Divisional Manager who was competent to underwrite policy for Rs.50,000/- and above. The mere receipt and retention of premium until after the death of the applicant or the mere preparation of the policy document is not acceptance. Acceptance must be signified by some act or acts agreed on by the parties or from which the law raises a presumption of acceptance. See in this connection the statement of law in Corpus Juris Secundum, Vol.XLIV page 986 wherein it has been stated as:- “The mere receipt and retention of premium until after the death of applicant does not give rise to a contract, although the circumstances may be such that approval could be interfered from retention of the premium. The mere execution of the policy is not an acceptance; an acceptance, to be complete, must be communicated to the offerer, either directly, or by some definite act, such as CMA NO.133/95 -Mahaveer & Ors. Vs. Sushila & Ors. Judgment dt.10.11.09 12/14 placing the contract in the mail. The test is not intention alone. When the application so requires, the acceptance must be evidenced by the signature of one of the company's executive officers.”” 12. In view of this legal position, the observations made by the learned Single Judge of this Court in the judgment in the case of The Oriental Insurance Company Ltd. Vs. Smt. Shakuntla Devi & Ors. (supra) relied upon by the learned counsel for the appellant- owner cannot be said to be the correct and final statement of law on this issue. On the other hand, the legal position which emerges is that the contract of insurance cannot be said to commence or begin unless and until the premium has been received by the insurance company and the acceptance of the insurance contract is signified and conveyed or communicated to the proposer namely the insured owner of the vehicle. 13. In the facts obtaining before this Court in the present appeal all these facts do not appear to have been properly thrashed out with the relevant evidence produced by either of the sides. But it is certain that accident in question took place on 10.5.1984 and the certificate of insurance Exhibit A/1 also shows both the things namely the period of commencement of the insurance is from 10.5.1984 till 9.5.1985 whereas the premium has been received by the CMA NO.133/95 -Mahaveer & Ors. Vs. Sushila & Ors. Judgment dt.10.11.09 13/14 insurance company vide receipt No.237163 dated 21.5.1984. Whether the said premium of Rs.532/- was received by the agent of the insurance company on 10.5.1984 or on 21.5.1984 is not clear. Whether the insurance company or its agent retained the premium from 10.5.1984 till 21.5.1984 and under what circumstances is also not clear. Whether the insurance company took any steps for conveying its acceptance and the insurance proposal prior to 21.5.1984 or even thereafter and what point of time is also not established on record. 14. Therefore, this Court is of the opinion that certain facts and questions which go to the root of the matter and touch upon the validity of the contract of the insurance in question have remained not established or unanswered, therefore, it would be appropriate to remand the case for decision afresh in accordance with law. That though this Court would have left the matter only by remanding the issues No.4 and 5 which are main issues between the insurer and the insured but since the claimants are also claiming higher compensation in the present case, this Court is of the opinion that it would be appropriate to set aside the entire award and ask the Tribunal to decide the case afresh in accordance with law. Since the accident in question is of the period after which a long period has already lapsed since 10.5.1984, the learned Tribunal is requested to decide the case CMA NO.133/95 -Mahaveer & Ors. Vs. Sushila & Ors. Judgment dt.10.11.09 14/14 afresh in accordance with law expeditiously preferably within a period of six months from today. No fresh notices are required to be issued by the said Tribunal to the parties concerned and the parties concerned may appear before the Tribunal in the first instance on 1st December, 2009 with certified copy of this judgment through their counsels and the Tribunal shall re-frame the issues, if necessary, and after allowing reasonable opportunity to the parties concerned to adduce additional evidence, if any, the learned Tribunal may decide the claim petition afresh. It is needless to say that the compensation amount already determined paid or disbursed shall be kept in status quo position and will abide by fresh decision of the Tribunal after this remand. All the parties appearing in this case will be free to raise all their legal contentions afresh before the learned Tribunal. 15. Appeal accordingly disposed of. No costs. [ DR. VINEET KOTHARI ], J. item No.32 babulal/