PRASANNA B. Vs. KABEER P.K.

JUDGEMENT

(1.) It is settled law that the liability of the insurer to indemnify the third parties subsists unless the insurance coverage is cancelled by the insurer and intimation thereof has reached the insured and the registering authority. On whom does the burden lie to prove that the insurer has so intimated about the cancellation on the dishonour of the cheque received towards premium? This is the question referred to the Full Bench for the sake of clarity in view of the following observations in United India Insurance Company Limited Vs. Laxmamma and others [(2012) 5 SCC 234]:

(2.) A cover note mentioned in Sec. 147(4) of the Act precedes the certificate of insurance and would normally be issued by the insurer or its agent on receipt of a cheque from the insured towards premium. The cover note is an interim insurance binding on the parties as per its terms till it is superseded by a certificate of insurance issued subject to the realisation of the cheque. The cheque issued by the insured towards premium may get dishonoured due to a variety of reasons like 'insufficiency of funds' or 'difference in the signature of the holder'. The insurer under such circumstances is justified in cancelling the insurance coverage and intimating the same to the insured as well as the registering authority. The insurer has on many occasions sent the intimation aforesaid under 'Certificate of Posting' as provided under Rule 195 of the Indian Post Office Rules, 1933 which was in vogue earlier. Such a certificate is issued to the sender to afford an assurance that the letter or other articles entrusted to servants or messengers for posting have actually been posted. The practice of issuing a Certificate of Posting has since been discontinued by deleting Rule 195 of the Rules aforesaid by Notification dated 31.1.2011 of the Union Government. A Certificate of Posting raises a presumption under section 114 of the Indian Evidence Act, 1872 that the common course of business has been followed in the particular case. It is for the addressee to rebut the presumption that he did not in fact receive the intimation notwithstanding the Certificate of Posting produced by the sender.

(3.) The surest way to prove that the intimation has been sent by the insurer about the cancellation of the insurance coverage is to dispatch it by registered post with or without postal acknowledgment. The production of the receipt evidencing the dispatch by registered post raises a presumption in favour of the insurer that the intimation has been sent to the addressee for secured delivery. The fundamental difference between speed post and registered post is that the former is address specific and time bound whereas the latter is addressee specific. A presumption in favour of the sender for a properly addressed and prepaid post is supported in law too by section 27 of the General Clauses Act, 1897 which is extracted hereunder: