NATIONAL INSURANCE CO. LTD. versus ABHAYSING PRATAPSING WAGHELA AND ORS.

Citation: [2008] 12 S.C.R. 1049 · Decided: 29-08-2008 · Supreme Court of India · Bench: S.B. SINHA · Disposal: Dismissed

Judgment (excerpt)

[2008] 12 S.C.R. 1049 
NATIONAL INSURANCE CO. LTD. 
v. 
ABHAYSING PRATAPSING WAGHELA AND ORS. 
(Civil Appeal No. 5305 of 2008) 
AUGUST 29, 2008 
[S.8. SINHA AND CYRIAC JOSEPH, JJ.] 
A 
B, 
Motor Vehicles Act, 1988 - ss.145(1)(b) and (d), 146 
and 147 - Accident -
Third party claim -
Cheque issued 
towards premium of insured vehicle, dishonoured - But 'Cover c 
Note' issued therefor - After the accident, premium amount 
paid in cash - Liability of insurer to reimburse third party 
claim -
Held: Insurer is liable to reimburse the third party 
claim having issued 'Cover Note' - 'Cover Note' would come 
within the purview of definition of 'Certificate of Insurance' and 0 
'Insurance Policy' - A contract of insurance for the purpose of 
covering third party risk could not be purely contractual - It is 
to be contra-distinguished from the contract covering liability 
of the owner of the vehicle. 
Respondent No.1 sustained severe injuries in an 
E 
accident caused by the insured vehicle (a truck). 
Respondent No.1 made a third party claim. A cheque was 
issued with the Insurance Company five days prior to the 
date of accident towards premium of the offending 
vehicle. On receipt of the same a 'Cover Note Number' 
F 
was given by the Insurance Company. The cheque was 
dishonoured. However, three days after the date of the 
accident, premium amount was paid in cash. Claims 
Tribunal as well as High Court held that the Insurance 
Company was obliged to reimburse the third party claim 
G 
in view of the fact that it had issued 'Cover Note'. Hence 
the present appeal. 
Dismissing the appeal, the Court 
1049 
H 
1050 
SUPREME COURT REPORTS 
[2008] 12 S.C.R. 
A 
HELD: 1. Chapter XI of Motor Vehicles Act, 1988 
provides for insurance of motor vehicles against third 
party risks. The first respondent is a third party in relation 
to the contract of insurance which had been entered into 
by and between the appellant and the owner of the vehicle 
B in question. A document was produced before the 
Tribunal. Even according to the appellant, although it was 
only a Motor Input Advice cum ·Receipt, it contained the 
Cover Note Number. It is, therefore, to be supposed that 
a Cover Note had, in fact, been issued. If a Cover Note 
c had been issued which in terms of clause (b) of sub-
section 1 of Section 145 of the Act would come within the 
purview of definition of Certificate of Insurance; it also 
would come within the purview of the definition of an 
Insurance Policy. If a· Cover Note is issued, it remains 
0 
valid till it is cancelled. Indisputably, the insurance policy 
was cancelled only after the accident took place. A finding 
of fact, therefore, has been arrived at that prior to the 
deposit of the premium of insurance in cash by the owner 
of the vehicle, the cover note was not cancelled. [Paras 
E 13 and16] [1055,B; 1056,H; 1057,A·C] 
2. A contract of insurance is, no doubt, to be governed 
by the terms thereof, but a distinction must be borne in 
mind. between a contract of insurance which has been 
entered into for the purpose of giving effect to the obje.ct 
F and purport of the statute and one which provides for 
reimbursement of the liability of the owner of the vehicle 
strictly in terms thereof. In that limited sense, a contract 
of insurance entered into for the purpose of covering a 
third party risk would not be purely contractual. An 
G ordinary contract of insurance does not have a statutory 
flavour. The Act merely imposes an obligation on the part 
of the insurance company to reimburse the claimant .both 
in terms of the Act as also the Contract. So far as the 
liability of the insurance company which comes within 
the purview of Sections 146 and 147 is concerned, the 
H 
NATIONAL INSUR. CO. LTD. v. ABHAYSING 
1051 
PRATAPSING WAGHELA & ORS. 
~ ""--1 
same subserves a constitutional goal, namely, social A 
justice. A contract of insurance covering the third party 
risk must, therefore, be viewed differently vis-a-vis a 
contract of insurance qua contract.[Para 17] [1057,D-G] 
National Insurance Co. Ltd. v. Laxmi Narain Dhut (2007) 
3 SCC 700; Oriental Insurance Co. Ltd. v. Meena Variyal and 
B 
' -l 
Ors. (2007) 5 sec 428; Oriental Insurance Co. Ltd. V. 
Sudhakaran K. V and Ors. 2008 (8) SCALE 402; Oriental 
Insurance Co. Ltd. v. lnderjeet Kaur (1998) 1 SCC 71 - relied 
on. 
United India Insurance Company Ltd. v. Rattan Singh 
and Ors. AIR 1993 MP 197; Oeddappa and Ors. v. Branch 
Manager, National Insurance Co.

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