ORIENTAL INSURANCE CO, LTD. versus INDERJIT KAUR AND ORS.

Citation: [1997] SUPP. 6 S.C.R. 255 · Decided: 08-12-1997 · Supreme Court of India · Bench: J.S. VERMA · Disposal: Dismissed

Judgment (excerpt)

ORIENTAL INSURANCE CO, LTD. 
A 
v. 
'""_°'!'' 
INDERJIT KAUR AND ORS. 
DECEMBER 8, 1997 
B 
-...._ 
(AM. AHMADI, CJ., S.P. BHARUCHA AND S.C. SEN, JJ.] 
Insurance Act, 1938-Section 64 VB-Accident Compensation 
· Clai~us collided with Tntck 011 19.4.9(}-Death of Tmck D1ive,.......Premiwn 
amount for insurance of the bus paid by cheque disho11oured-Subsequently c 
premium amount paid in cash on 2.5.199(}-Denial of claim by the Insura11ce 
Company as Premium was not paid in adva11ce---Tribunal awarded compe11-
sation--On appeal, held, insurance company not absolved of its obligation to 
pay compensatio11 on the grou11d that it did not receive the premium 
amount-Public interest to prevail over interest of the Insurance Com- D 
pany--Hence Insurance Company is liable to pay compensation-Motor 
Vehicles Act, 1988-Sections 147(5) and 149( 1). 
" 
A bus was insured with the appellant Company on 30th November 
1989. The premium for the policy was paid by cheque which was 
dishonoured. The appellant sent a letter stating that as the cheque was 
dishonoured they were not at risk. Thereafter, the premium was paid in E 
cash on 2nd May, 1990. In the meantime, on 19th April 1990, the bus 
collided with a truck and the driver of the truck died. The respondents, 
widow and minor sons of the deceased filed a claim petition. The appellant 
denied the claim on the ground that under the terms of Section 64-VB of 
the Insurance Act, 1938 no risk was assumed by an insurer unless the F 
premium had been paid in advance. The Motor Accident Claims Tribunal 
rejected the appellant's contention and awarded compensation to the 
claimants alongwith interest. The appeal filed before the High Court was 
~ 
dismissed. Hence the present appeal. 
i 
G 
The contention of the appellant was that in view of the provisions of 
Section 64-VB of the Insurance Act, the appellant could not in law have 
assumed any risk under the policy of insurance covering the bus until the 
t 
premium had been paid. It was also contended that the decision of this 
Court in *United India Insurance Co. was misread by the Tribunal as well 
as by the High Court. 
H 
255 
256 
SUPREME COURT REPORTS [1997] SUPP. 6 S.C.R. 
A 
Dismissing the appeal, this Court 
HELD : 1. The appellant Insurance Company was not absolved of its 
obligation to third parties under the policy because it did not receive the 
premium. Its remedies in this· behalf lay against the insured. The policy of 
insurance that the appellant issued was a representation upon which 
B authorities and third parties were entitled to act. [261-C-D] 
Montreal Street Railway Co. v. Nonnandin, AIR (1917) Privy Council 
142, referred to. 
2. It was the appellant Company itself which was responsible for its 
C predicament. It had issued the policy of Insurance upon receipt only of a 
chec1ue towards the Premium in contravention of the provisions of section 
64VB of the Insurance Act 1938. The public interest that a policy of In-
surance serves must, clearly, prevail over the interest of the appellant. 
Despite the bar created by section 64-VB of the Insurance Act, the appel-
D lant, an authorised insurer, issued a policy of insurance to cover the bus 
without receiving the premium thereof. By reason of the provisions of 
section 147(5) and 149(1) of the Motor Vehicles Act, 1988 the appellant 
became liable to indemnify third parties in respect of the liability which that 
policy covered and to satisfy awards of compensation in respect thereof, 
notwithstanding its entitlewent to avoid or cancel the policy for the reason 
E that the cheque issued in payment of the premium thereon had not been 
honoured. [261-A-C; G-H) 
*United India Insurance Co. Ltd. v.Ayeb Mohammed & Ors., (1991) 2 
ACJ 650, dissented from. 
F 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 8570 of 
1997. 
From the Judgment and Order dated 30.11.93 of the Punjab & 
Haryana High Court in F.A.O. No. 1819 of 1993. 
G 
Jitendra Sharma, B.K. Pal and Parmanand Gaur for the Appellant. 
The Judgment of the Court was delivered by 
BHARUCHA, J. Leave granted. 
H 
This appeal is heard by a Bench of 3 Judges because learned counsel 
• 
j 
"' 
O.I.C. LTD. v. INDERJITKAUR [BHARUCHA,J.] 
257 
for the appellant, the Oriental Insurance Co. Ltd., had submitted that the A 
decision of this Court in United India Insurance Co. Ltd. v. Ayeb 
Mohammed & Ors., (1991) 2 AC.I 650, had been misread by the Motor 
Accic.lent Claims Tribunal and the High Court and that, while the appell

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