THE HON’BLE MR JUSTICE R. KANTHA RAO C.M.A.No. 586 of 2000: DATED: 25.09.2009 BETWEEN: United India Insurance Co. Ltd. .. Appellant And Chowdari Eswarudu and others .. Respondents THE HON’BLE MR JUSTICE R. KANTHA RAO C.M.A.No. 586 of 2000: JUDGMENT: This appeal is directed against the award, dated 08.09.1999 passed by the Motor Accidents Claims Tribunal (District Judge), Srikakulam in M.V.O.P.No.125 of 1994. 2. The United India Insurance Company Limited, Gajuwaka, Visakhapatnam which is the third respondent before the Tribunal is the appellant herein. 3. The award dated 08.09.1999 passed by the learned Tribunal is assailed by the appellant-insurance company on the ground that it is not liable to pay compensation to the claimants before the Tribunal but the liability was wrongly fastened on it by the Tribunal. 4. I have heard the learned counsel appearing for the appellant as well as the respondents/claimants. 5. It is the specific contention of the appellant that prior to the accident in the instant case wherein the offending lorry bearing No. AP-7-T-869 was involved on 17.01.1994, the appellant cancelled the policy by it’s registered letter dated 11.01.1994 sent to the third respondent, the insured of the vehicle and the same was received by him on 13.01.1994 on the ground that the cheque issued by the third respondent towards payment of premium was dishonoured and as such, there was no privity of contract between the insured and the appellant on the date of the accident and the appellant is not liable to pay compensation. 6. On the other hand, it has been contended by the learned counsel appearing for the respondents/claimants that since the insured was not provided any time o pay the premium after the alleged dishonour of cheque, the appellant is not exempted from liability to pay compensation to the respondents who are the third parties. 7. Reliance is placed by the learned counsel appearing for the appellant on DEDDAPPA AND OTHERS v. THE BRANCH MANAGER, NATIONAL INSURANCE COMPANY[1], AND NATIONAL INSURANCE COMPANY LIMITED v.YELLAMMA[2] the judgments in which the Apex Court had consistently laid down that where the cheque was issued by the insured towards payment of premium was dishonoured, in consequence thereof, the policy of insurance was cancelled and the insured was intimated about the cancellation much before the accident, the insurer is not liable to pay compensation. Since it could be said that no privity of contract came into being between the owner and the insurer. Reliance is also placed by the learned counsel appearing for the appellant on UNITED INDIA INSURANCE CO.LTD. v. A.NARAYANA REDDY[3] and MUNAGALA SRINIVASA RAO AND ANOTHER v. S. RAJENDRA SINGH AND OTHERS[4] wherein it is held that in case the cheque issued by the insured in favour of the insurance company towards the payment of premium is dishonoured, after such dishonour the insurance company can repudiate the contract. The liability of insurance company would not arise in case of cancellation of policy on account of dishonour of cheque amount of premium and when accident occurred after communication of cancellation of policy. In the judgment 4th referred above, the learned Judge of this Court held that when the cover containing the cancellation endorsement of policy sent to the insured to address found in policy but returned with postal endorsement ‘not known’, a presumption of due service under Section 27 of the General Clauses Act can be drawn. 8. In the instant case, the proof of the dishonour of cheque, cancellation of policy of insurance, the communication thereof, and intimating the R.T.A. about the cancellation has been very well established by the appellant insurance company by examining one of it’s officials as RW-1 and marking Exs.B-1 to B-6 namely, cancellation endorsement policy with covering letter, Xerox copies of postal receipts and acknowledgements, letter from branch office to Divisional Office at Srikakulam, dishonoured cheque issued by the owner K.Mallikarjunarao, letter from State Bank of Hyderabad, Gajuwaka Branch, Visakhapatnam addressed to Andhra Bank, Gajuwaka Branch returning the dishonoured cheque and office copy of endorsement addressed to K.Mallikarjuna Rao informing him that the policy issued to him was cancelled. 9. It has been contended on behalf of the respondents 1 and 2 that the acknowledgement dated 13.01.1994 which is said to be served on the owner of the vehicle does not contain the signature of the owner and therefore, there is no valid service. I absolutely see no force in the contention because as held by the learned single Judge in the decision 4th referred above, the presumption under Section 27 of the General Clauses Act in favour of the insurance company that letter was duly served on the third respondent owner of the vehicle can be drawn and the presumption being rebuttable one, it is for the owner of the vehicle to prove that it was not actually served on him, but they did not do so. 10. The judgment relied upon by the learned counsel appearing for the respondents 1 and 2 reported in MANAGER, UNITED INDIA INSURANCE COMPANY LTD. v. ABBISETTI VENKATARAO AND OTHERS[5] cannot be applicable to the facts of the present case since in the said case before the learned single Judge of this Court there was no evidence that the insurance company served notice on the insured about the cancellation of the policy. Similarly, the judgment in UNITED INDIA INSURANCE COMPANY LIMITED v. TUNIKI AND ANOTHER[6] is also not applicable since in the said case the insurance company neither pleaded nor proved that registering authority was notified the factum of cancellation of cover note before the accident. Further the judgment in ORIENTAL INSURANCE COMPANY LIMTIED v. INDERJIT KAUR AND OTHERS[7] was also rendered with regard to altogether different facts and circumstances and is not applicable to the case on hand. 11. Now, the law is well settled that if the cheque issued by the insured is dishonoured, the insured was informed by the insurance company about the cancellation of policy and if the accident occurs subsequent to such cancellation of the policy, the insurance company cannot be held liable to pay compensation since there is no privity of contract between the insured and the insurer. 12. For the foregoing reasons, I am of the view that the learned Tribunal below took an erroneous view that the appellant-insurance company is liable to pay compensation despite the fact that the cheque issued by the insured towards premium was dishonoured and fastened the liability on the insurance company which is unsustainable in law and is liable to be set aside in this appeal. 13. Consequently, the finding of the Tribunal fastening the liability on the appellant-insurance company is set aside and it is held that the insured alone is liable to pay compensation, but the appellant-insurance company is not liable to pay compensation to the claimants. The appeal, therefore, succeeds and the same is allowed without any order as to costs. ____________ R. KANTHA RAO, J Date: 25.09.2009. CCM [1] AIR 2008 SC 767(1) [2] AIR 2008 SC 3145 [3] 2007(3) ALT 568 [4] 2009(4) ALT 711 [5] 2008 ACJ 1845 [6] 2008 ACJ 596 [7] 1998 ACJ 123