Judgment:
A.N. Venugopala Gowda, J.
1. 1st Respondent/Petitioner, filed a claim petition under Section 166 of the Indian Motor Vehicles Act, 1988 (for short 'the Act') in the Motor Accident Claims Tribunal, Metropolitan Area, Bangalore (for short 'Tribunal') against the 2nd Respondent/Insured and the Appellant/Insurer, claiming compensation for the loss caused, on account of the injuries sustained by her, due to the actionable wrong on the part of the insured, in driving his motor vehicle - Car bearing No. KA-02-P/0993 on 20.8.2003. The owner/Insured, did not appear and was placed ex-parte by the Tribunal. The Appellant/Insurer, contested the claim petition. In its statement of objections to the claim petition, the insurer stated that, it had issued a policy in favour of the 2nd Respondent, insuring the said vehicle for the period 22.3.2003 to 21.3.2004. However, the cheque issued by the insured towards the premium in respect of the policy was returned dishonoured and therefore the policy was cancelled and hence it is not liable to indemnify the insured, in the event of the award being passed in the case, as there was no contract of insurance subsisting between the insurer and the insured, since the policy had stood cancelled as on the date of the accident. Based on the pleading of the parties, the Tribunal framed the following issues.
1. Whether the petitioner proves that she sustained injury in the accident arising out of the use of Motor Vehicle No. KA-02-P/0993 CAR on 20.8.2003 at about 2.00 p.m.?
2. Whether the petitioner is entitled to get the compensation? If yes, how much & from whom?
3. What order or award?
2. PW1 deposed on behalf of the minor claimant and Ex. P1 to P10 were marked. On behalf of the insurer, RW1 deposed and Ex. R1 to R8 were marked. The claim petition was allowed in part, awarding compensation of Rs. 20,000/- with costs and interest @ 8% from the date of petition till the date of realisation. Both the Insured and the insurer were jointly and severally directed to pay the compensation amount. Even after noticing the statement of RW1 with regard to the dishonour of the cheque issued by the insured to obtain Ex. R1 Insurance policy and also the intimation by the Insurer to the Regional Transport Authority- Ex.R7 regarding cancellation of the Insurance policy, still the insurer was made liable to pay the compensation on the basis of the decision, Oriental Insurance Company Ltd. v. Smt. V. Honnamma : ILR 1998 KAR 1776. The insurer was directed to deposit the amount and then recover the same from the insured. Aggrieved by the said award, the insurer has filed this appeal.
3. I have heard Sri. S. Srishaila, Learned Advocate for the Appellant. Both Respondents - claimant and the Insured, have remained absent and are not represented. I have perused the records.
4. Learned Counsel for the Appellant, vehemently contended that, the impugned judgement and award, fastening the liability on appellant to pay the award amount is unjust and illegal. He contended that, the Tribunal has not taken into consideration, evidence of RW1 and Exs. R2 to R8, in the proper perspective. It was pointed out that, the Learned Member of the Tribunal has failed to appreciate that, the car of the insured was not covered with Insurance with the Appellant on 20.8.2003, the date of accident, to fasten the liability on appellant. Learned Counsel took me through the deposition of RW1 and Ex. R2 to R8 and submitted that, the impugned award is unsustainable, keeping in view, the decision in case of, Deddappa v. National Insurance Company : (2008) 2 SCC 595.
5. Keeping in view the contentions and record, the main point for consideration is:
When a cheque issued by the insured to the insurer towards the premium amount was dishonoured by the drawee Bank due to insufficiency of funds in the account of the drawer, is the insurer liable in such a situation to honour the contract of insurance?
6. Indisputably, the 2nd Respondent and the Appellant, entered into an insurance contract on 22.3.2003 by insuring Maruthi Omni KA-02-P/0993. The insured gave cheque for Rs. 4,281/- (Ex.R-5) towards the premium and the insurer issued a Cover Note (Ex.Rl), as contemplated in Section 149 of the Act. The said cheque was returned by the Bank on 26.3.2003 with an endorsement 'insufficient balance' (Ex.R-6). The insurer informed the insured on 28.3.2003(Ex.R-2) about the dishonour of premium cheque and the resultant cancellation of policy since inception. Ex.R-2 was sent by RPAD. The postal receipt and acknowledgement of insured are at Exs. R3 and R-4. The insurer notified the Regional Transport Officer, Rajajinagar on 28.3.2003 (Ex. R-7) about the cancellation of motor policy of vehicle No. KA02-P/0993 and simultaneously, the insured was also requested to immediately surrender the policy for cancellation. RW1 has filed his affidavit evidence stating the said facts and he was not cross examined. The sworn affidavit of RW1 and Exs.R2 to R8 have remained unchallenged. As already noticed, the tribunal, in the impugned award directed the insurer to deposit the amount and recover the same from insured, by placing reliance on the decision reported in ILR 1998 KAR 1776. Hence, it shall be necessary to first consider whether, the said decision has application to the facts of the present case. A reading of the said Judgement shows that, it was rendered in a different factual background. The material facts of the case therein were, a cover note had been obtained by the owner of the vehicle on 3.3.1990 by issuing a cheque in favour of Insurance Company. On the very day, the driver of the vehicle caused the accident, resulting in the death of the person, whose legal representative's filed the claim petition, which was contested, by both the insured and the insurer. The Tribunal allowed the claim in part and an award was passed, which was challenged in appeal before this Court, mainly on the ground that, on the date of issue of policy on 3.3.1990, the insured had issued the cheque, which subsequently came to be bounced and as such, it could not be said that the premium was paid as against the issue of policy and therefore, the insurance policy that came to be issued was void and did not cover the risk to fasten the liability there-under as against it. After making a reference to Section 64-B-V of the Insurance Act 1938 and the decision of the Hon'ble Supreme Court in the case of Oriental Insurance Co. Ltd. v. Inderjit Kaur and Ors. : JT 1997 (9) SC 760, it was held that, the Insurance Company was liable to indemnify the third party in respect of the liability covered by the policy, since, the policy issued remained in force without cancellation of the same on bouncing of the cheque. Thus, it is clear that, the Learned Member of Tribunal, has mechanically, without properly noticing the facts and circumstances of the case and without taking into consideration, the un-challenged version of RW1 as well as the cancellation of the policy vide Ex. R7 on 28.3.2003 itself, has passed the impugned award, fastening the liability on the appellant, initially to pay and then recover.
7. It is trite that, the Court should not place reliance on decisions without discussing as to how the factual position fits in with the facts situation of the decision on which reliance is placed. The ratio of any decision must be understood in the background of the facts of that case as it has been said that, a case is only an authority for what it actually decides and not what logically follows from it A little difference in facts or additional facts may make a lot of difference in the presidential value of a decision. The Court below, without noticing the factual difference and without discussing the testimony of RW. 1 and Exs.R2 to R8, has mechanically applied the decision reported in ILR 1998 KAR 1776 and has thereby committed an error in fastening the liability on the insurer.
8. In the case Inderjit Kaur (Supra), the material facts were that, premium was paid by cheque, which was later dishonoured and the insured was intimated about it by the insurer, two months after the vehicle got involved in the accident. The claims made by the legal heirs of the driver who died in the accident was resisted by the insurer on the strength of Section 64-B-V of the Insurance Act 1938. The contention was not accepted in view of Section 147(5) and 149(1) of the Act. The said decision and the subsequent decision in the case of New India Assurance Company Ltd. v. Rula : (2000) 3 SCC 195, were noticed by the Hon'ble Supreme Court in the case of National Insurance Company Ltd. v. Seema Malhotra and Ors. : (2001)3 SCC 151, wherein, the point considered was, 'under a contract of insurance, the insured gave the cheque to the insurer towards the first premium amount but the cheque was dishonoured by the drawee Bank due to insufficiency of funds. Is the insurer liable in such a situation to honour the contract of insurance? ' The material facts in the case of Seema Malhotra (Supra) were that, the insured and the insurer entered into an insurance contract 21.12.1993 by insuring a Maruthi car. The insured gave the cheque towards the first installment of premium and the insurer issued a cover note. The insured died and the car was completely damaged in an accident, which was caused on 31.12.1993. On 10.1.1994, the Bank sent an intimation to the insurer that the cheque was dishonoured. On 20.1.1994 insurance company informed the business concern of the insured about the cancellation of policy with immediate effect. The legal heirs of the insured, filed a claim for loss of vehicle, which was repudiated and there after they approached the State Consumer Protection Commission, wherein, the claim was rejected and the matter was carried to the High Court, which held the insurer liable to honour the claim. When the insurer challenged the said order in the Hon'ble Supreme Court, after making reference to Section 2(9), 2D, 64BV of the Insurance Act 1938 and Section 51, 52 and 54 of the Indian Contract Act, while upholding the contentions of the insurer, it was held as follows:
18. Thus, when the insured fails to pay the premium promised, or when the cheque issued by him towards the premium is returned dishonoured by the Bank concerned the insurer need not perform his part of the promise. The corollary is that the insured cannot claim performance from the insurer in such a situation.
19. Under Section 25 of the Contract Act an agreement made without consideration is void. Section 65 of the Contract Act says that when a contract becomes void any person who has received any advantage under such contract is bound to restore it to the person from whom he received it. So, even if the insurer has disbursed the amount covered by the policy to the insured before the cheque was returned dishonoured, the insurer is entitled to get the money back.
20. However, if the insured makes up the premium even after the cheque was dishonoured but before the date of accident it would be a different case as payment of consideration can be treated as paid in the order in which the nature of transaction required it. As such an event did not happen in this case, the Insurance Company is legally justified in refusing to pay the amount claimed by the respondents.
(Emphasis supplied by me)
9. In the case of Deddappa, (supra) the material facts were, the appellant's daughter, who sustained injuries due to motor vehicle accident, succumbed due to injuries and the appellant filed claim petition under Section 166 of the Act. The insurer though admitted that the offending vehicle was insured by the owner, but the cheque issued therefor having been dishonoured, policy was cancelled and thus was not liable therefor. The Tribunal allowed the claim petition holding that the insurer was liable to pay award amount despite cancellation of the contract of insurance. When the insurer challenged the award in this Court, the Appeal was allowed, which was challenged by the claimant in the Hon'ble Supreme Court by placing reliance on the decisions in Inderjit Kaur and Seema Malhotra (supra). Noticing the undisputed facts that, the policy issued was to remain valid for the period 17.10.1997 to 16.10.1998 and the cheque towards premium was issued on 15.10.1997, which was returned by the Bank on 21.10.1997, the insurer cancelled the policy of insured, which information was communicated to the insured and to the RTO concerned and the accident having occurred on 6.2.1998, much after communication of cancellation of policy and after noticing the question that arose for consideration having been left open in Inderjit Kaur (supra) and the fact that the identical question was decided in case of Seema Malhotra (supra), it was held as follows:
24. We are not oblivious of the distinction between the statutory liability of the insurance company vis-a-vis a third party in the context of Sections 147 and 149 of the 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 concerned have been intimated thereabout, we are of the opinion, the insurance company would not be liable to satisfy the claim.'
(Emphasis supplied by me)
10. The insured obtained the cover note as at Ex.R1 by entering into an insurance contract with the insurer on 22.3.2003. The cheque issued towards premium of Rs.4281/- as at Ex.R5, was returned dishonoured by the Bank concerned, which is evident from the endorsement dated 26.3.2003 of the Bank as at Ex.R6. The insurer immediately informed the insured i.e., on 28.3.2008 vide Ex R2 about the dishonour of the cheque and the resultant cancellation of the policy since inception. The said intimation was sent by RPAD which is evident from Exs.R3 and R4. The insurer notified the concerned Regional Transport Authority on 28.3.2003 which is evident from Ex.R7 wherein the cancellation of Ex.Rl policy was made known and simultaneously the insured was also sent with a copy thereof, notifying him to immediately surrender the policy for cancellation. Thus the insurance contract being one without consideration, is void in terms of Section 25 of the Contract Act and as a necessary corollary, the insured cannot have the coverage of the policy and demand performance of indemnity by the insurer. The contract of insurance was cancelled as per Ex.R2 and the insured was duly notified of the same, much prior to the date of accident, in view of which, the appellant not be liable to indemnify the insured. This difference in the facts, which is apparent, from the facts of the case reported in ILR 1998 KAR 1776, was not noticed by the Learned Member of the tribunal, which has resulted in the erroneous decision against the appellant.
11. Applying the ratio of the decisions in the cases of, Seema Malhotra and Deddappa (supra), I find that, the tribunal has committed an error in directing the appellant to deposit the award amount and then recover. The appellant, in the absence of a subsisting and a valid insurance contract, has no obligation to indemnify the insured. The award passed by the Tribunal against the appellant, without examining the factual position and the law, being erroneous, is liable to be set aside.
In the result, I allow this appeal, insofar as the appellant is concerned, but in the facts and circumstances of the case, I would direct that, there should be no order as to costs throughout.
Registry is directed to refund the amount in deposit to the appellant.