LexNATIONAL INSURANCE CO. LTD. versus YELLAMMA & ANR.
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[2008} 7 S.C.R. 860 A NATIONAL INSURANCE CO. LTD. .... ¥· v. YELLAMMA & ANR. (Civil Appeal No. 3317 of 2008) B MAY 6, 2008 [S.B. SINHA AND LOKESHWAR SINGH PANTA, JJ.] _._ Contract of insurance - Insurance policy in respect of bus- Issue of third party cheque by purported insured towards payment of insurance premium - Cheque not encashed by c insurer as it was third party cheque and allegedly returned - Accident of bus - Claim petition - MACT allowed claim but held insurer not liable to pay compensation on ground that there was no valid insurance policy - Appeal by victim - No appeal by purported insured - High Court held that there was D no provision that consideration for policy should flow from insured and not from third party - On appeal, Held: Contract .... ~ of insurance like any other contract is a contract between insured and insurer - Amount of premium is required to be paid as consideration for arriving at concluded contract - If E insurer insists that cheque should be issued only by insured and not by third party no exception thereto can be taken - No privily of contract came into being between insured and insurer and as such question of enforcing purported contract of insurance while taking recourse to s.147 of Motor Vehicles F Act did not arise - Accident took place in Kamataka and insured was resident of Ludhiana and transaction was purported to have been entered in Ludhiana - Victim, ~ ~ therefore, may not be in a position to enforce award against insurer- In peculiar facts and circumstances of case, interest G of justice would be served if in exercise of jurisdiction under Article 142, it is directed that award be paid by insurer with liberty to it to recover same from purported insured - Motor Vehicles Act, 1988- ss.147 and 166- Constitution of India, 1950-Article 142. H 86G - NATIONAL INSURANCE CO. LTD. v. YELLAMMA 861 &ANR. .. Respondent no. 2 sought to take insurance policy in A respect of mini bus owned by him and issued a third party cheque towards payment of insurance premium. The Development Officer of the appellant-insurer issued a cover note. However, when he noticed that it was B a third party cheque, he contacted respondent no.2 to pay _.. the premium amount. It was not tendered and instead the respondent no.2 allegedly returned the original cover note and took back the cheque. The original cover note as also all the duplicate copies thereof were cancelled. The said insurance cover was issued for the period c 3.9.1991 to2.9.1992. On or about 12.9.1991, the said vehicle met with an accident. First respondent who suffered an injury filed a claim petition in terms of the provisions contained in s.166 of the Motor Vehicles Act, 1988. An D award for a sum of Rs.43,000/- was made. The Tribunal ~ '"'" however held that there was no valid insurance policy as on the date of accident and as such insurer was not liable to pay any compensation to the victim. Second Respondent did not prefer any appeal thereagainst. First E Respondent only preferred an appeal questioning the quantum of compensation. High Court while enhancing the amount of compensation to Rs.1.50 lacs held that there is no provision in law that the consideration for policy should F flow only from the insured and not from the third party 't .. and since the accident has occurred within 15 days from : the date. of issue of cover note, the insurer was liable to pay the compensation. Hence, the present appeal. Partly allowing the appeal, the Court G HELD: 1. It is neither in doubt nor in dispute that all the copies including the insurance cover had been ..... produced before the Tribunal to show that original insurance cover had been taken back by the Development H 862 SUPREME COURT REPORTS [2008] 7 S.C.R. A Officer concerned for one reason or the other. The Administrative Officer of the appellant not only examined himself before the Tribunal but also proved the note prepared by the Divisional Manager. The Tribunal, on appreciation of the evidence produced before it, held that B the vehicle was not legally insured. The High Court, however, wrongly proceeded on the premise that the cheque could be issued by a third party. A contract of insurance like any other contract, is a contract between the insured and the insurer. The amount of premium is C required to be paid as a consideration for arriving at a concluded contract. If the insurer ins
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