NATIONAL INSURANCE COMPANY Vs. SEEMA MALHOTRA

JUDGEMENT

(1.) LEAVE granted.

(2.) UNDER a contract of insurance the insured gave a cheque to the insurer towards the first premium amount, but the cheque was dishonoured by the drawee bank due to insufficiency of funds in the account of the drawer. Is the insurer liable in such a situation to honour the contract of insurance? There is no dispute that the insurer is liable as against third parties because it is covered by the statutory provisions contained in Chapter x of the Motor Vehicles Act, 1988. But the insurer vehemently disputed the liability when the claim is made by the insured himself or his legal heirs, without any third party being involved. To avoid confusion we may point out that the insurance company has no dispute that the claims, if any, made by the kith and kin of the insured for the injuries sustained by them in the accident including the claims made by the legal representatives of the deceased in such accident would also be treated as third party claims.

(3.) ON 10. 1. 1994 the bank on which the cheque was drawn by the insured sent an intimation to the insurance company that the cheque was dishonoured as there was no fund in the account of the insured. ON 20. 1. 1994 the insurance company informed the business concern of the insured as under: "notwithstanding anything contained to the contrary, it is hereby agreed and declared that your cheque has been dishonoured by the bank. So we are cancelling the abovesaid policy with immediate effect. The company is not at risk".