THE NEW INDIA ASSURANCE CO. LTD. versus SMT. AFROZ BI AND ORS.

Citation: [2006] SUPP. 9 S.C.R. 860 · Decided: 30-11-2006 · Supreme Court of India · Bench: ARIJIT PASAYAT · Disposal: Case Partly allowed

Judgment (excerpt)

A 
B 
THE NEW INDIA ASSURANCE CO. LTD. 
v. 
SMT. AFROZ BI AND ORS. 
NOVEMBER 30, 2006 
[ARIJIT PASAYAT AND S.H. KAPADIA, JJ.] 
Motor Vehicles Act, 1988-Accident claim-Vehicle insured with N 
company when the accident occurred-For subsequent period insured with 
C appf!llant-insurer-Liabi/ity of insurer-Tribunal held appellant not liable-
High Court held appellant liable, ignoring the fact that the vehicle was insured 
with N company which was not arrayed as party in claim petition-On 
appeal held: High Court to examine the liability of appellant in the facts of 
the case-Thus, matter remitted back to High Court. 
D 
N met with an accident on 17.8.1992. The offending vehicle was 
insured with N Company from 5.10.1991 to 4.10.1992 and with the 
appellant-insurance company from 7.11.1992 to 6.11.1993. The cheque was 
issued to cover the premium for the subsequent period and the same was 
dishonored. Claim petition was filed and the owner of the vehicle, the 
driver and appellant were impleaded as respondents. Tribunal held that 
E the appellant was not liable to pay compensation as on dishonour of cheque 
the insurance policy became inoperative. However, High Court held the 
appellant liable. It dismissed the review petition, though it was brought 
to its notice that cheque was issued for the subsequent period which was 
after the date of accident and when accident took place the vehicle was 
F insured with N company which was not arrayed as party in the claim 
petition. 
Partly allowing the appeal, the Court · 
HELD: High Court was required to examine the liability, if any, of 
G the appellant-Insurance Company. The question whether bouncing of the 
cheque subsequently affected the liability of the insurer was really not 
relevant. N Company which is stated to be the insurer for the relevant 
period, during which the accident took place, was not pleaded as party 
before the Tribunal. Thus, the case is remitted to High Court for fresh 
H 
860 
.... 
•
NEW INDIA ASSURANCE CO. LTD. v. AFROZ Bl [PASAYAT, J.) 861 
hearing and adjudication. High Court may permit the claimants to implead N A · 
Company as respondent. 1862-G-H; 863-A-B) 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5285 of2006. 
From the Final Judgments and Orders dated 14-7-2004 and 2-2-2005 of 
the High Court of Madhya Pradesh, Indore Bench, Indore in M.A. No. 473/ B 
1997 and M.C.C. No. 597/2004 respectively. 
S.L. Gupta, Baldev Krishan Sharma and Goodwill Indeevar for the 
Appellant. 
The Judgment of the Court was delivered by 
ARIJIT PASAYAT, J. Leave granted. 
c 
Challenge in these appeals is to the orders passed by the Division 
Bench of the Madhya Pradesh High Court, Indore Bench in Miscellaneous 
Appeal No. 473of1997 which was disposed ofon 14.7.2004 and MCC No. D 
597 of 2004 filed for reviewing the said order which was rejected by order 
dated 2.2.2005. 
Background facts in a nutshell are as follows: 
One Nisar Khan (hereinafter referred to as the 'deceased') met with an E 
accident on 17.8.1992. The offending vehicle (No. MP-09-0-3815) was the 
subject !llatter of insurance with National Insurance Company Ltd. Policy of 
insurance issued by it covered the period from 5.10.1991 to 4.10.1992. 
Appellant issued insurance cover in respect of the vehicle covering the period 
from 7.11.1992 to 6.11.1993. A petition claiming compensation was filed F 
before the IVth Additional Member, Motor Accidents Claims Tribunal, Dewas 
(in short the 'MACT'). The claim was lodged by the widow, three minor 
children and the mother of the deceased. In the claim petition the owner of 
the vehicle, the driver of the vehicle and the appellant Insurance Company 
were arrayed as the respondents. The MACT taking into account the evidence G 
on record held that the owner of the vehicle and the driver were liable to pay 
the compensation fixed at Rs.1,20,000/- with interest. So far as the present 
dispute is concerned the quantum of award and the interest is really not 
relevant. The MACT took note of the fact that the offending vehicle was not 
the subject matter of insurance with the appellant-insurance company because 
the cheque which was issued to cover the premium had been dishonored and H 
862 
SUPREME COURT REPORTS [2006] SUPP. 9 S.C.R. 
A the policy had become inoperative. Copy of the insurance policy was annexed 
as Annexure P-1. It was therefore held that present appellant has no liability 
with regard to the accident as on the fateful day the vehicle was not the 

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