UNITED INDIA INSURANCE CO Vs. SK AYEB AHAMMED

JUDGEMENT

(1.) THIS appeal is at the instance of the insurer as against an award determining the compensation payable by the appellant and the respondent No. 3 jointly and severally at Rs. 15, 000/ - together with the consolidated cost of Rs. 500/ - and interest at the rate of 6% per annum from the date of claim to the respondent Nos. 1 and 2. It is the submission of Mr. A.K. Mohanty, the learned Counsel for the appellant that since it was the specific case of the appellant insurer as was also found by the Tribunal that long before the accident the insurance policy itself had stood cancelled even at the commencement thereof, the appellant cannot be saddled with the liability to meet the compensation determined. Such contention of the appellant having been rejected by theTribunal, the appellant has preferred this appeal.

(2.) ASSAILING the order of the Tribunal, Mr. Mohanty has urged that though the insurance certificate Ext A had been issued on 9 -12 -1981 in favour of the respondent No. 3, the owner of the truck which committed the accident, covering liability from 12 -12 -1981 to 11 -12 -1982 yet the appellant intimated respondent No. 3 on 6 -1 -1982 in its letter Ext D that the cheque Ext. B issued by him towards the premium amount had been dishonoured by the Bank with a note Ext. C and that the amount of premium should either be remitted in cash or by Bank draft within 12 -1 -1982 failing which the policy is to be automatically stand cancelled. Since the payment was not made by the respondent No. 3, the policy was cancelled on 23 -2 -1982 and the R.T.O. was intimated of the fact through Ext E. The letter was also received by the R.T.O. as would appear from the acknowledgement receipt Ext. E/l and besides the financier of the truck, OSFC was also issued a copy of the letter ExtE the acknowledgement of which is Ext.E/2. On the basis of such facts, it is urged that thoi'gh Section 96(1) of the Motor Vehicles Act, 1939 (hereinafter referred to as 'the Act') makes the insurer liable to meet the award amount, yet such liability of the insurer is subject to the provision of Sub -section (2) of Section 96 and hence as the policy had been cancelled from the very beginning, it must be held that the appellant had been able to establish its defence as contemplated under Section 96(2) of the Act because of which no direction would have been given in the award to the insurance company to pay the amount

(3.) SECTION 94(1) imposes statutory liability on the insurer to satisfy the judgment against the insured if the judgment is in respect of any liability in respect of which a policy is required to be taken out and the liability is in fact covered by the policy, irrespective of the fact whether the insurer is either entitled to avoid or cancel the policy or in fact has avoided or cancelled it. This liability of the insurer is however subject to the provisions of Sec.96 which in Sub -section (2) provides that the insurer would have no liability to pay any amount in respect of the liability created under Sub -section (1) unless it has received notice of the bringing of the proceedings or of the judgment where the execution thereof has been stayed in appeal. A statutory right is created in favour of the insurer to whom the notice of the bringing of the proceedings is given to be impleaded as a party to the action and defend the action on any of the grounds as stipulated in Clauses (a), (b) or (c) of Sub -section (2).