Case: United India Insurance Co. Ltd Vs. Santro Devi

2. One Atma Ram Sharma was the owner of a truck bearing registration No.HIN-4737. It was hypothecated to a Bank. Atma Ram Sharma died sometime in 1991. The said vehicle was insured with the appellant. Renewal of the contract of insurance, however, used to be done by the Bank. Despite the death of the said Atma Ram Sharma, no step was taken either by the Bank or by his heirs and legal representatives to get the registration of the vehicle transferred in their names. The insurance policy also continued to be renewed in the name of Atma Ram Sharma.3. The said vehicle met with an accident while being driven by Shri Chhater Singh on 15.9.1994 in which he died. The legal heirs and representatives of the said Chhater Singh filed an application for grant of compensation under Section 4 of the Workmens Compensation Act, 1923 against the widow of the deceased Atma Ram Sharma as also the appellant-Insurance Company claiming a sum of Rs.1,22,400/-.4. Appellant, having been given notice by the Commissioner of Workmen Compensation, in its reply, raised the following purported primary objections:1. That the para No.1 of the petition as stated is wrong hence denied. In fact Shri Atma Ram died in the year 1991 and on the date of alleged accident no legal insurance policy was in force. It is pertinent to say that alleged offending vehicle No.HIN-4737 was fraudulently got insured vide policy No.111302/31/16/21/0065/94 on 12.5.1994 by concealing the true facts. Even according to law the contract cannot be made in favour of dead person. So under the Indian Contract Act, 1872 the alleged contract of Insurance is not liable to pay any amount of compensation. The respondent No.1 was not insured, so as per the terms and conditions of the insurance policy, the company is not bound to indemnify the claim."5. The Commissioner, Workmens Compensation, having regard to the pleadings of the parties, framed several issues, issue No.5 whereof reads asWhether the contract of insurance of the truck in question between Atma Ram & Co. is void and not enforceable as alleged. ... OPP.From the order of the Commissioner, Workmen Compensation, it does not appear that any witness was examined on behalf of the appellant. The learned Commissioner, Workmen Compensation, determined issue No.5 in favour of the respondent,the contract of insurance of the truck in question between Atma Ram and Co. is void? RW1 Rati Ram has deposed in his statement that Shri Atam Ram was the owner of the truck and after his death his wife is owner of the said truck. He is general power of attorney of Gumani Devi. He further deposed that the truck was insured with United India Insurance Company and copy of Insurance Cover is Ex.RW1/8. The driver of ill-fated truck was Chattar Singh who died in truck accident near Ronhat in year 1994 who was given Rs.2000/- per day (sic). In cross-examination he admitted that Atma Ram died in 1991 and the truck was insured with SBI Kafetta. He denied that Chattar Singh was gratuitous passenger in the ill fated truck. Since the truck was insured with the respondent No.2, therefore, it is the liability of the Insurance Co. to pay the amount of compensation. Therefore, this issue is decided in favour of the petitioners and against the respondents.A sum of Rs.1,42,465/- was directed to be paid by way of compensation. An appeal preferred there against by the appellant herein under Section 30 of the Workmen Compensation Act has been dismissed by the High Court relying on or on the basis of the decision of this Court in Rikhi Ram & Anr. v. Sukhrania (Smt.) & Ors. [(2003) 3 SCC 97] ,is thus clear that whether intimation is given or not given to the Insurance Company with regard to the transfer of a vehicle. The Insurance Company under the provisions of the Motor Vehicles Act, 1988 is liable to pay compensation. The Insurance Company at the time when it renewed the policy of insurance and accepted the premium should have verified whether Atma Ram was alive or not. In the present case the premium appears to have been paid by the bank with which the vehicle was hypothecated."

Court's reasoning:
In this case, the statute itself takes care of validity of the contract. It is mandatory. Once a valid contract is entered into, only because of a mistake or otherwise, the name of the original owner has not been mentioned in the certificate of registration and/or the documents of hypothecation of the vehicle with the bank had still been continuing in his name, it cannot be said that the contract itself is void unless it was shown that in obtaining the said contract a fraud had been practised. Not only the particulars of fraud had not been pleaded, but even no witness was examined on behalf of the appellant. It cannot, thus, be said that a case of fraud in the matter of entering into the contract of insurance had been made out by the appellant.