LexDEDDAPPA & ORS. versus THE BRANCH MANAGER, NATIONAL INSURANCE CO. LTD.
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DEDDAPPA & ORS. A ~ v. THE BRANCH MANAGER, NATIONAL INSURANCE CO. LTD. DECEMBER 12, 2007 B [S.B. SINHA AND HARJIT SINGH BEDI, JJ.] ·1 Insurance Act, 19 38 - s. 64-B - Contract of insurance - Third party insurance - Under Motor Vehicles Act - Liability of insurer - Motor accident - Claim for compensation - Plea of insurer that c accident having taken place after cancellation of policy in view of dishounour of cheque towards premium, it was not liable - Motor accident tribunal holding that insurer was liable despite dishounour of cheque - High Court reversing order of tribunal - On appeal, held: Third party liability of the insurer arising under insurance D contract, would be met only if the contract is valid - In the instant ~ case policy was not valid as premium could not be said to have been received in view of dishonour of cheque - However, in the facts of the case, direction issued to insurer to pay the claim amount, and E later recover the same from the owner of the vehicle- Motor Vehicles Act, 1988 - ss. 147 and 149 - Constitution of India, 1950 - Article 142 ~ Contract. A tempo, driven by respondent No. 2 ran over the daughter of the appellant-claimant while she was sleeping in her hut. She F died on the spot. Appellant fded application claiming compensation u/s 166 of Motor Vehicles Act, 1998. Respondent-insurance company took the plea that although vehicle in question was insured for the relevant period, but the cheque issued therefore having been dishonoured, the policy was cancelled and thus it was G not liable. The insurer also examined witnesses, to prove cancellation of policy by producing the Postal acknowledgment y showing intimation thereabout which was served to the insured and a copy of letter to RTO and the memo issued by the Bank as 287 H 288 SUPREME COURT REPORTS [2007] 13 (Addl.) S.C.R. A regards dishonour of the cheque. Tribunal allowed the claim holding that insurer was liable to pay the awarded amount despite cancellation of the contract of insurance. High Court allowed the appeal preferred by the insurance company. Hence the present B appeal. Allowing the appeal, the Court HELD: 1.1 Section -64-VB of Insurance Act in no unmistakable terms provides for issuance of a valid policy only on receipt of payment of the premium. There is distinction between c the statutory liability of the insurance company vis-a-vis a third party in the context of Sections 147 and 149 of Motor Vehicles Act and its liabilities in other cases. But the same liabilities arising under a contract of insurance would have to be met if the contract is valid. If the contract of insurance has been cancelled and all D concerned have been intimated thereabout, the insurance company would not be liable to satisfy the claim. [Paras 15 and 26) [292-F] [297 A-·B] x New India Assurance Co. Ltd. v. Ru/a and Ors. 2000 (3) SCC 195; National Insurance Co. Ltd. v. Seema Malhotra and Ors. 2001 E (3) SCC 151 - relied on. Oriental Insurance Co. Ltd. v. Inderjit Kaur and Ors. 1998 (1) SCC 371; New India Assurance Co. Ltd. v. Harshadbhai Amrutbhai Modhiya and Anr. 2006 (5) SCC 192 - referred to. F 1.2 A contract is based on reciprocal promise. Reciprocal promises by the parties are condition precedents for a valid contract. A contract furthermore must be for consideration. In today's world payment made by cheque is ordinarily accepted as valid tender. Section 64-VB of the Insurance Act also provides G for such a scheme. Payment by cheque, however, is subject to its encashment. [Paras 22, 23 and 24) [295 C-D) H Damadilal and Ors. v. Parashram and Ors. 1976 ( 4) SCC 855 - referred to. 1.3 A beneficial legislation should not be construed in such DEDDAPPA& ORS. v. THE BRANCH MANAGER, 289 NATIONAL INSURANCE CO. LTD. [SINHA, J.] .... ' a manner so as to bring within its ambit a benefit which was not A ~ contemplated by the legislature to be given to the party. [Para 27] [297 B-C] Regional Director, Employees' State Insurance Corporation, Trichur v. Ramanuja Match Industries AIR 1985 SC 278- relied on. B 2. However, as the appellant hails from the lowest strata of society, in a case of this nature, the Court should, in exercise of its extra-ordinary jurisdiction under Article 142 of the Constitution oflndia, direct the Respondent No.1 to pay the amount of claim to the appellants herein and recover the same from the owner of c the vehicle viz., Respondent N
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