NEW INDIA ASSURANCE CO. LTD Vs. RAMBHA DEI

JUDGEMENT

(1.) This Misc. Appeal has been filed by the insurer appellant challenging the award made by the Second Motor Accidents Claims Tribunal, Cuttack, in Misc. Case No. 142 of 1985 granting a sum of Rs. 36,000/ - excluding interest which will run at the rate of 12 per cent per annum from the date of claim till payment. It was indicated in the award that out of the said amount of compensation respondent No. 1, mother of the deceased, will be entitled to a sum of Rs. 16,000/ - and the respondent No. 2, the widow of the deceased, will be entitled to the balance. There was also further direction that out of the said amount as far as the amount awarded to the mother is concerned a sum of Rs. 12,000/ - and Rs. 15,000/ - as far as the amount awarded to the widow of the deceased is concerned be kept in fixed deposit in a nationalised bank for a term of six years and that fixed deposits shall not be withdrawn or pledged. The amount of Rs. 36,000/ - has already been deposited in the court along with the interest pursuant to the direction of the court and is lying in the judicial deposit.

(2.) THE appellant, however, challenges this award made by the 2nd Motor Accidents Claims Tribunal only on the ground that it had no liability to pay any amount of compensation since the policy of the insurance, Exh. C, which was taken out on 14.3.1985 and was valid up to 13.3.1986 was already cancelled by the insurance company and it was communicated by the letter dated 19.4.1985, Exh. E. Admittedly, the occurrence took place on 14.4.1985 and the deceased who was a mason doing colouring work of buildings, doors and windows succumbed to death by the accident leaving behind respondent No. 1, the mother and respondent No. 2, the widow. - -

(3.) IT is admitted that the insurance company had issued a letter of cancellation to the owner of the vehicle on 19.4.1985 after 5 days of the accident which is filed as Exh. E and a copy of which was submitted to the R.T.O. The ground of cancellation is that a cheque for the premium of the policy had been issued by the owner of the vehicle to the insurance company, having been drawn on Indian Bank and on receipt of the said cheque, the policy of insurance was issued in favour of the owner of the vehicle insuring the vehicle for the period from 14.3.1985 to 13.3.1986. The policy was issued in original and was not subject to any confirmation in future. But since the company found that the cheque bounced and was not honoured by the bank, in exercise of its power under Section 96 of the Motor Vehicles Act, 1939, it issued a letter giving intimation to the owner that it had cancelled the policy of insurance and the motor vehicle authority (R.T.O.) was also intimated about the same which is required under Section 105 of the said Act. Before a policy of insurance is issued, the insurer is required to be satisfied that all requirements for issuance of the policy are satisfied. A vehicle is permitted to ply on the road only when it had a valid insurance policy to cover the liability and the token authorising the vehicle to run on the road which would not be issued by the transport authorities in the absence of such policy. The moment a vehicle is on the street, it has the right to invite passengers to board the vehicle. When a passenger boards, he is impliedly assured that in the event of his injury or death, the compensation is to be paid by the insurance company within the limit of its liability. Section 105 of the Motor Vehicles Act also requires the insurance company to notify the registering authority regarding the cancellation or suspension of the policy so that it may take necessary action in not allowing the vehicle to ply on the road. In the present case the agent of the insurance company had issued the policy of insurance covering the vehicle as indicated. The insurance company could have waited to see if the cheque was honoured before issuing the policy. But without waiting for the same it had issued the policy. The policy already issued, therefore, cannot automatically become void because the cheque bounced. If the insurance company was cheated to issue such a policy, the company is not without remedy to meet its grievance, but it cannot be exempted from its liability under the policy.