Judgment:
A. Pasayat, J.
1. This appeal though surfacially involves a a dispute relating to date of death of owner of a vehicle, because of seminally important aspects integrally connected with that issue, the learned counsel for the parties have pressed several points for consideration and have addressed us at length. In this background, it has become necessary to consider all the points raised.
2. The factual backdrop necessary to be referred to for adjudication of the intricating questions which we shall deal infra is as follows ;
An accident took place on 6-9-1988, wherein a vehicle bearing registration No. ORP 5510 was involved. The registered owner of the vehicle was Brajabandhu Senapati (hereinafter referred to as the 'owner/ insured')- One Govind Chandra Naik (hereinafter referred to as the 'deceased') lost his life in the accident. His widow Harapriya and parents Bhikari Charan Naik and Musi Dei lodged a claim for compensation on 28-11-1988 claiming compensation of Rs. 3 lakhs Under Section 110-A of the Motor Vehicles Act, 1939 (in short, the 'Old Act'). According to them, the deceased was engaged as Manager of M/s. Bhubaneswar Udyog Private Limited and was getting Rs. 2,000/- per month. At about 1 p. m. on the fateful day the accident took place on the Sachivalaya Marg, Bhubaneswar when the deceased was travelling along with a friend in a Bajaj Scooter bearing registration No. ORK 8737. They had stopped on the left side of the road near Keshari Talkies, when the offending truck which was being driven in rash and negligent manner, came from the back-side, i. e., Rabindra Mandap side and ran over the pillion rider and subsequently on the deceased. The scooter was also dragged to a distance of about 20 to 30 yards. The pillion rider died at the spot and the deceased sustained severe injuries on his person. He was removed to Bhubaneswar Government Hospital for treatment, but finding his condition to be precarious his removal to S. C. B, Medical College Hospital, Cuttack was advised, Since the doctors of the said hospital were on strike, the deceased was admitted to Cuttack Nursing Home, where he succumbed to the injuries sustained, on 10-9-1988. As the doctors of S. C. B. Medical College Hospital were on strike, no post mortem could be conducted. But a certificate was issued by the Cuttack Nursing Home regarding the cause of death. The age of the widow was indicated to be 23 years, and that of the father to be 55 years ; but no age was given of the mother. A police case was instituted on 6-9-1989, which was numbered as P. S. No. 243 of Kharabela Police Station. Four witnesses were examined to further the claimants' case, before the Third Motor Accidents Claims Tribunal, Puri (in short, the 'Tribunal')- Entitlement of the claimants was assessed at Rs. 2,27,000/-by the Tribunal. It was held that the liability of the Oriental Insurance Company Limited (hereinafter referred to as the 'insurer' ) was Rs. 1, 50,000/ and the balance liability was that of the owner. An appeal was filed in this Court Under Section 173 of the Motor Vehicles Act, 1988 (in short, the 'Act')- Notice issued to Brajabandhu Senapati was returned with endorsement by postal authorities that Brajabandhu had expired. The notice sent through Court came back with endorsement made by the Process Server on 7-1-1992 to the effect that Brajabandhu had died 8 to 10 years back. When this matter was placed for orders, a motion was made by the insurer that the owner of the vehicle having died during pendency of the case before the Tribunal, and the claimants having not taken any step for substitution of the legal representatives of the deceased, appropriate orders were necessary to be passed. The insurer prayed for time to take steps in this regard, but by order dated 14-5-1992 it was directed that the necessity for substitution and the effect of non-substitution of the legal representatives of the deceased before the Tribunal shall be considered at the time of the appeal. The learned counsel for the claimants was directed to file an affidavit relating to the report of the process server that Brajabandhu had died 8 to 10 years back. When the matter was called on 6-7-1992, application was filed by the claimants for modification of the earlier order requiring the claimants to file affidavit regarding report of the process server. The prayer for modification of the order was not accepted but the effect of non-filing of the affidavit was directed to be considered at the time of hearing. An application was filed by the insurer to accept the death certificate indicating that Brajabandhu had died on 1-10-1982 at S. C. B. Medical College Hospital, Cuttack as additional evidence. An objection was filed by the claimants to the said petition. By order dated 20-1-1993, the question whether additional evidence is to be accepted was directed to be cosidered at the time of hearing of the appeal. Th8 learned Single Judge who disposed of the appeal held that there was no material to show that Brajabandhu had died in 1982 as claimed. He was insured on 6-9-1988, and it was not disputed by the insurer that the policy in question had been issued. The prayer to accept additional evidence was rejected. Reference was made to the counter affidavit filed by the claimants stating that alleged death did not relate to Brajabandhu. the owner, who was alive as the registration certificate still stody in his name. Accordingly, the appeal was dismissed. The cross appeal which was filed by the claimants for enhancement was also rejected.
3. The primary question that arises for consideration is whether a proceeding against Brajabandhu Senapati whom the insurer claims to have died much prior to the date of accident and issue of policy was maintainable. The learned counsel for the insurer urged the following points.
(i) The claimants have not placed their claim with clean hands ;
(ii) Policy if any issued to a person who was dead has no legal effect;
(iii) Policy significantly was taken on the date of accident and the same having been taken after the accident had occurred cannot bind the insurer ;
(iv) The quantum awarded by the Tribunal was absolutely arbitrary without any material basis ; and
(v) the Tribunal erred in stipulating a defult clause of higher rate of interest in case of default in payment within the time stipulated.
4. The learned counsel for the claimants on the other hand submitted that even if Brajabandhu was dead as claimed by the insurer. us liability to indemnify the claimants cannot be disputed. Since the insurer itself had issued the policy to a person who is claimed to be dead in 1982 its liability was absolute. Even if the claim that Brajabandhu died in 1982 is factually correct that is a matter between insurer and Brajabandhu, for which the claimants cannot be denied the indemnification by the insurer. The insured having not chosen to contest the appeal at the instance of the insurer questioning the quantum is not maintainable. There is no limitation on stipulating a higher rate of interest in case of non-payment within stipulated time since grant of interest Under Section 110-CC of the old Act is a discretionary matter. Even if the policy was taken after the accident had taken place as claimed (which according to him, is factually not correct) yet the policy operates from the midnight of the previous day and therefore, the policy covers the accident even though it was taken after the date of accident. In law the vehicle is required to be insured and not the person. Since in the instant case the vehicle was insured the death of Brajabandhu was inconsequential.
5. Certain disturbing and baffling circumstances have been noticed by us which need to be highlighted as it has repeatedly come to notice of this Court that the parties before the claims tribunals are not participating in the proceedings in a proper manner. The Tribunals more often than not are merely acting as tape recorders, by recording evidence, oblivious of the responsibility of passing an award determining the amount of compensation which appears to it to be 'just'. The responsibility to do so is a statutory obligation as required Under Section 110-B of the old Act and Section 168 (1) of the new Act. Awards are being made which are fanciful and detached from realities. Though it cannot be gainsaid that it is extremely difficult, and almost an impossible task to say with certainty as to what would be 'just' compensation, yet an attempt should be made to See that the award is not an absurd and/or fanciful award. It is true that the value of a man's life or the suffering on account of injury cannot be weighed in golden scales, and some amount of guess work is bound to be there. But the same should be within the reasonable limits. The claimant, owner and insurer have a duty to assist the Court in making a just award. Unfortunately, in large number of cases they are deficient in that regard.
6. Coming to the facts of the case, we start with the claim petition. Therein the address of Brajabandhu was given to be 'village- Rencha, P. S, Delanga, at present c/o. Rajendra Kumar Acharya, 143 Satyanagar, Bhubaneswar.' In the first information report lodged in respect of the accident in column No. 2 relating to the name and residence of the accused/it is stated that 'Driver of truck Mo. not noted.' In the charge-sheet in column No. 3, the accused, one Duryodhan Swain was stated to be in custody. In the charge-sheet also there is no reference to the truck number, and address of Brajabandhu. We asked the learned counsel for the claimants as to how he had indicated the address of Brajabandhu Senapati to be care of Rajendra Kumar Acharya. He submitted that the indication was with reference to the papers of the case. To a query as to what were the papers, which indicated so, no reply was given and no paper was also produced. This becomes significant because the notice which was issued by the Tribunal to Brajabandhu Senapati, was received on 5-3-1989 by Rajendra, who simply put his signature, without even indicating that he had received it on behalf of Brajabandhu. The Process Server reported that the notice was given to the person in whose care of, the noticee's name was indicated. Strangely the Tribunal accepted the notice to be sufficient on 25-7-1989. This shows complete non-application of mind by the Tribunal.
7. The Orissa Motor Vehicles (Accidents Claims Tribunals) Rules, 1960 (in short, 'old Rules') and The Orissa Motor Vehicles (Accidents Claims Tribunals) Rules, 1983 (in short, 'Rules') provide that certain provisions of Code of Civil Procedure, 1908 (in short, 'CPC') shall apply in certain cases to proceedings before the Claims Tribunals. Order V, Rules 9 to 13 and 15 to 30 have amongst other provisions, been made applicable to such proceedings. The modes prescribed in Order 5, Rules 9 and/or 12 have not been followed in the case at hand. Learned counsel for the claimants draws our attention to Rule 15 to contend that service is proper. The contention is fallacious. The Rule has application only when the defendant cannot be found and has no agent empowered to accept service, and the defendant is absent from his residence at the time and there is no likelihood of his being found at the residence within a reasonable time. It has no application when the noticee is dead, which is claimed to be the case here. In such a case neither can the noticee receive it nor can have an agent empowered to do so. The matter of service is of primary importance as it is one of the fundamental rules of the law of procedure that parties should have a fair and reasonable notice of legal proceedings against them which they are entitled to defend. This rule has its roots in our sense of justice and fairplay.
It is relevant to note at this juncture that the notice issued by this Court in the Misc. Appeal was also in the name of Brajabandhu, care of Rajendra Kumar Acharya, which came back with the endorsement that Brajabandhu had expired. That is how the subsequent enquiries regarding his date of death have been started. We had issued notice to Rajendra Kumar Acharya to appear and state as to in what capacity, he had received the notice issued to Brajabandhu, and the date of death of Brajabandhu. Rajendra has filed an affidavit stating that Brajabandhu was his maternal grandfather and due to his severe illness he was residing in the house of Rajendra at the time of his death and he died in the year 1982. He-has stated that since the summons was sent to Brajabandhu in his address, he had received the same The original death certificate issued by the Government of Orissa,Department of Health and Family Welfare, Registrar,Births &Deaths;,Cuttack Municipality has been filed in addition the affidavit of Rajendra in whose address the claimants had sent notice is another piece of evidence which has been considered by us. The plea of the claimants that the certificate relating to death may not concern Brajabandhu, the owner of the vehicle falls flat in view of the affidavit of Rajendra. There is, therefore, not an iota of doubt that Brajabandhu died in the year 1932, and the proceeding before the Tribunal was against a. dead person. Such a proceeding is non est in the eye of law. The learned Single Judge was not justified in his conclusion that there was no material To show that the owner of the vehicle was dead by the date of accident. On that score alone we set aside the judgment of the learned Single Judge, and remit the matter back to the Tribunal so that the claimants can take necessary steps for substitution.
8. An application was filed in the Miscellaneous Appeal to accept the death certificate as additional evidence. The same was rejected on the ground that acceptance thereof would involve investigation into factual aspects. Additionally, it was observed that plea relating to fraudulent obtaining of policy was not raised before Tribunal. Facts situation elaborated above clearly shows that insurer had no opportunity to know about death of Brajabandhu before the reports of the Process Server and postal authorities were placed on record in this Court, The conclusions of the learned Single Judge, with great respect do not appeal to us and we set aside them. At this stage, we shall deal with a plea of the learned counsel for the claimants that the Miscellaneous Appeal did not relate to the offending vehicle and related to vehicle No. OPP. 5540 and the judgment under challenge related to that vehicle. The plea to say the least is frivolous. The claimants clearly understood that the Miscellaneous Appeal related to the offending vehicle O.R.P. 5540. This is apparent from the counter affidavit filed by the claimants on 20-1-1993, more particularly paragraphs 7, 8 and 9 thereof. By a typo- graphical error O.R,P. 5540 appears to have been mentioned as O.P.P. 5540 in the Miscellaneous Appeal. That would have put an end to this appeal. But as indicated above the parties have addressed us on various aspects, and we shall deal with them infra,
9. We start with the basic, principles relating to insurance. A contract of 'insurance* is one uberrimae fidei. and demands a full disclosure of all facts and circumstances affecting the risk and is vitiated by their non-disclosure, what or innocent or fraudulent. (See Devies v. London and Provincial Mirine Insurance : 8Ch, D. 469; North Britain Insurance v. Lioyd : 24 L.J. Ex. 14; Seaton v. Heath ; (1899) 1 Q.B. 782; Biggar v. Rock Life Assurance ; (1902) 1 K.B. 561; Reid v. Employers' Accident Insurance :1 Fraser 1031, Schloss v. Stevens : (1906)2 K.B. 665: Jeol v. Law Union Crown Insurance, (1908) 3 K.B. 863; Refuge Assurance v. Kettlewell : (1909) A.C. 243 Thames and Mersey Marine Insurance v. cunford Ship Co. (1911) A.C. 529; Newsholme v. Road Etc. Assurance Co. (1929) 2 K.B. 356).
The aim of all insurance is to make provision against the dangers which beset human life and dealing. He who seeks safety, called the 'insured' or 'assured', pays a certain sum, called the premium, to the insurer or underwriter who, in consideration of this premium, takes upon himself the risk insured against and undertakes to make good to the assured any loss which he may sustain by reason of the named peril. The contract of insurance is called an sleatory contract because it depends upon an uncertain event. Therefore, indemnity is the first principle of insurance. The second great principle is that the assured must have an insurable interest, i.e., to effect a valid contract of insurance the assured must have something at stake, something to lose by the happening of the peril insured against. The interest, to be capable of substantiating an insurance must be something more than an expectation or an anxiety, and a purely sentimental interest would not be enough. The third great principle is that of good faith, of uberrimae fidely the assured must disclose to the insurer all material facts. Unless the risk has attached, the contract of insurance is not enforceable. An insurable interest is that interest which the law requires a person to have to enable him to effect a valid insurance. 'To be interested in the preservation of a thing, is to be so circumstanced with respect to it as to have benefit from its existence, prejudice from its destruction' Per Lawrence, J., Lucana v. Craufurd, 2 Bos. and P. (N.R.) at 302). An insurable interest does not mean a perfect legal interest. But a right arising from a contract which is void affords no insurable interest because no interest of any kind is created thereby. The incidence of good faith is caused as the law presumes that the assured has means of knowledge which are not accessible to the insurers and he is bound to disclose to them everything which is likely to affect their judgment. Insurance is a contract of indemnity not against accident, but against loss caused by accident. These aspects have been highlighted by N. P. Picard in his book 'Elements of insurance Law'. The burden of proving that the insured is guilty of non-disclosure or misrepresentation of a material fact lies on the insurer. Where the proposal is made the basis of the contract, any misstatement in it, whether material or not, is a ground on which the insurers may avoid liability under the policy. (See Dawsons, Ltd. v. Bonnin : (1922) All E.R. 88). Statutory notice has also been taken of these basic requirements as is evident from Section 96 of the old Act corresponding to Sec 149 of the new Act. It has been stipulated in these provisions that the insurer can defend against it on the ground that the policy is void on the ground that it was obtained by the non- disclosure of a material fact or by a representation of fact which was false in some material particular. If a person is dead and in his name a policy is sought to be taken there cannot be a shadow of doubt that it is misrepresentation out and out, and there can be a legitimate conclusion that it was obtained by fraud. An agent of the insurance company who accepts the policy should be careful enough to see that the insurance, company is not taken for a ride.
10. The question arises what is insured. Is it the person or the vehicle The answer is clear and simple. A person is insured but the vehicle is the subject-matter of insurance. It is apparent from a reading of Secs, 94 and 95 of the old Act corresponding to Sections 146 and 147 of the new Act. While Section 146 requires that a vehicle must be covered by an insurance policy before it can be used in a public place, Section 147 prescribes the liabilities that should be covered by the policy, the limit of the liability of the insurer and the liabilities which are not required to be covered by the policy. The policy of insurance is a result of a contract between the insurer and the insured under which the insurer agrees to indemnify the insured against the liability incurred by him. The liability which is sought to be indemnified is the one arising out of the use of that motor vehicle which is the subject-matter of insurance. It is the person in whose favour the policy is issued who is indemnified and not the vehicle. There is nothing in Sections 94, 95 and 96 of the old Act corresponding to sections 146, 147 and 149, which would make the insurer liable to indemnify someone other than the insured. (See Shantilal v. Aher Bawanji : AIR 1985 Guj. 164 (F.B.). The policy must specify the person or class of persons who are insured with respect to their liability to third persons. In New Asiatic Insurance Co. v. Pessumal ; AIR 1964 SC 1736, it has been observed that Section 95 of the old Act (corresponding to Section 147) Says down the requirements which are to be complied with by the policy of insurance issued in relation to the use of a particular vehicle, They are : (i) the policy must specify the persons or classes of persons who are insured with respect to their liability to third parties; (ii) the policy must specify the extent of liability which must extend to the extent specified in Sub-section (2); and (iii) the liability which may be incurred by the specified person or classes of persons in respect of death or bodily injury to any person caused by or arising out of the use of the vehicle insured in a public place.
11. Section 95 of the old Act corresponding to Section 147 makes it absolutely clear that that is the person who is insured, it provides that in order to comply with the requirements of this chapter, meaning Chapter XI, a policy of insurance must be a policy which, (a) is issued by a person who is an authorised insurer; and (b) insures the person or classes of persons specified in the policy to the extent specified in Sub- sec. (2); (i) against any liability which may be incurred by him in respect of the death of or bodily injury to any person or damage to any property of a third party caused by or arising out of the use of the vehicle in a public place; (ii) against the death of or bodily injury to any passenger of a public service vehicle caused by or arising out of the use of the vehicle in a public place.
12. Rule 56 of the Central Motor Vehicles Rules, 1989 (in short, 'Central Rules') also throws beacon light on the question. It provides that where the owner of a motor vehicle dies/the person succeeding to the possession of the vehicle may, for a period of three moths, use the vehicle as if it has been transferred to him where such person has, within thirty days of the death of the owner informs the registering authority the occurrence of the death of the owner and of his own intention to use the vehicle. Section 157 of the Act corresponding to Section 103-A with material changes is also relevant. Sub-section (1) of Section 157 entitles the insured to transfer the policy of insurance along with the transfer of the vehicle which is the subject-matter of insurance. Another provision which lends a prop to the view that a person is insured Under Section 155 which provides that the death of a person in whose favour a certificate of insurance is issued if it occurs after the happening of an event which has given rise to a claim under Chapter XI shall not be a bar to the survival of any cause of action arising out of the said event against his estate or against the insurer.
The inevitable conclusion is that a person is insured in respect of a vehicle which is the subject-matter of insurance. If any authority is necessary to buttress this view the same is Minu B. Mehta and Anr. v. Balkrishna alias Ramchandra Nayari, AIR 1977 SC 1248.
13. Coming to the question of maintainability of the appeal relating to quantum at the behest of the insurer the situation is some- what slippery. Section 96 of the old Act corresponding to Section 149 of the new Act delineates defences available to the insurer. The insurer is not to avoid its liability except on the grounds mentioned in Section 96(2) of the old Act corresponding to Section 149(2) of the new Act. But this does not preclude the insurer from disputing the very basis of its liability under the policy. If there is collusion between the claimant and the insured, the insurer can question correctness of the award on merits. Whether there is a collusion or whether the person against whom the claim is made has failed to contest the claim, are grounds available to be taken. The collusion is to be inferred from conduct.
14. In National Insurance Co. Ltd. v. Jugal Kishore : 1988 ACJ 270 (SC), the contention for the claimants was that the insurance ... company cannot file an appeal for restricting its liability to the pecuniary limits mentioned in Section 95(2) of the Act. The contention was that the same was not one of the defences mentioned in Section 96(2) of the Act. The contention was rejected by the Apex Court with the observation that Section 96(2) which restricted 1he insurer to a limited number of defences applied only if the insurance policy was to be either 'cancelled' as in Section 96(2)(a) or if it was to be totally 'avoided' on the ground of misrepresentation or suppression of material facts as in Section 96(2)(c) or where as in Section 96 (2)(b), the injured had committed a breach of certain specified conditions of the policy thereby giving a right to the insurer to 'avoid' the policy. It was held by their Lordships that when an insurer wanted to file an appeal contending that it could not be made liable for anything beyond the liability required to be covered Under Section 95(1)(b), such a plea could not be described as a plea to avoid the policy itself in toto within Section 96(6) of the old Act. Even in British India General Insurance Co. Ltd. v. Captain Itbar Singh : 1958-65 ACJ 1 (SC), it was held that the insurer is to reserve its right to defend the case on grounds available to the owner.
15. At this juncture it is necessary to consider scope and ambit of Section 96(2) of the old Act corresponding to Section 149(2)(b) of the Act. In terms of those provisions, it is open to the insurance company to allege and prove that the policy giving rise to a claim was obtained by non-disclosure of any material fact, or by representation of a fact which was false in some material particular, and was consequentially void. Sub-section (6) of Section 149 of the Act, and Sub-section (5) of Section 96 of old Act define what will be a material fact or a material particular. The ambit of the clause is wide enough to cover a plea that the cover-note and the insurance policy was obtained by fraud and therefore, the policy was void. If a person has died much prior to the date on which insurance is intended to be obtained and a proposal in his name is submitted, fraud can reasonably be inferred. Insurer's plea is that this is a crystal clear of fraud. Whether fraud was really practised or not normally needs factual adjudication. Claimants assert that being fully aware of actual facts insurer may have issued policy. Such plea may be available when a person is alive and another with mala fide intents submits a proposal for insurance. Where, however, a person is dead by the time a proposal is submitted in his name, it is out and out a case of fraud. Further, a certificate of insurance and/or policy cannot be issued in the name of a dead parson. The conduct of the insurer in issuing it appears to be a careless act, without minimum enquiry. But in view of our finding that Brajabandhu died in 1982, the issue of certificate of insurance appears to be on the basis of a fraud practised on it. So it cannot help the claimants.
16. A further question arises whether the Court is helpless when it finds in an appeal that the award is usconscionable, yet insurer is the appellant, and quantum is in issue Our answer to the question is an emphatic no. Court cannot remain a mute spectator when the course of justice is deflected by latent collusion, a shadow-boxing. It cannot stand in the side lines watching helplessly the games played by the parties which put off a show of contest while really shaking hands of friendship aimed at making a fortune out of a misfortune. That itself is collusion. There may be cases where the Tribunal itself acts without application of mind. We may illustrate it. With a simple scratch on the claimants' hand a claim of Rs. 1 crore is laid. The owner contents, or puts off a show of contest. The Tribunal awards Rs. 1 crore. Can the insurer's appeal be thrown out on the ground that it cannot question correctness of the quantum. It would be travesty of justice. The award cannot be termed just, if it has no basis or foundation. The expression which appears to it to be 'just' appearing in Section 110-B of the old Act corresponding to Section 168 of the Act clearly shows that a wide discretion is conferred. Notwithstanding the wide amplitude of such discretion, the determination cannot be arbitrary and must be based on certain data establishing reasonable nexus between the loss incurred and the compensation to be awarded. The Tribunal is obligated statutorily to make an award which appears to be just. The Tribunal is required to give reasonings as to why it feels the award to be Just. The same is not beyond the pale of Judicial scrutiny. The legislature thought it wise to use the expression 'just'. The same is not without a purpose. It is an extremely difficult task to assess the compensation. The amount of compensation has to be determined on the ground of justness
17. A distinction has to be made between a compensation which at one hand is not to be punitive nor on the other a source of profit in whose favour it is awarded, and it should not he a wind all to make fortune out of a misfortune. Captain Itbar Singh's case (supra), on which reliance is placed to rule out the appeal by the insurer on the question of quantum is clearly distinguishable on facts. That was a case where it was not decided anything about the appellate powers. The only question in that case was whether the insurer can take pleas in defence other than those mentioned in Section 96(2) o1 the old Act. In case a view is taken that the insurer would not be able to assail the quantum, the quantum fixed by the Tribunal though unreasonable and arbitrary would become final. The appeal which is wide in its scope would be limited in its scope which cannot be the intention of the legislature. Appeal is a continuation of the original proceeding.
In pur considered view, where the quantum awarded by the Tribunal is unreasonable and arbitrary and cannot be held to be just, the Court is not powerless to decide on quantum though appeal has been filed by the insurer. In such a case, the Court has a duty to see whether the compensation award is just, untrammelled by the limited defence available to the insurer. Section 110-B of the old Act corresponding to Section 173 of the Act permits any person aggrieved by an award to prefer an appeal within a stipulated time, subject to restrictions imposed relating to quantum of award in respect of which appeal can be preferred. Once an appeal is before the appellate Court it can test the justness of the award, because Tribunal is obligated to pass a just award. A similar view has been expressed in Braja Kishore Mohanty v. M. C. Shyamasundar and Anr. : 1989 ACJ 450 by a learned Single Judge. The same has our concurrence.
18. That takes us to another interesting question about the time from which the policy becomes operative. In the case at hand the records don't throw any light as to when the policy was taken. The conduct of the insurer in the proceeding before the Tribunal is absolutely deplorable. The claimants filed a petition on 12-10-1990 praying that specific direction should be issued to the insurer to state before the Tribunal specifically and swear an affidavit in respect of the policy, if any, of the offending vehicle. On 20-10-1990 a memorandum was tiled by the learned counsel for the insurer stating that one truck bearing registration No. ORP 5540 of Brajabandhu Senapati, at Rench, P. O, Berobhi, District Puri was insured with the Oriental Insurance Company Limited coverig the period 6-9-1988 to 5-9-1989 subject to terms and conditions mentioned in the policy. The policy No. is MV 4689 of 1988. The policy was taken on the date of accident. This should have sounded as a warning bell to the insurer particularly in absence of earlier insurance particulars. Unfortunately due care and caution was not exercised by the insurer before the Tribunal. According to the insurer, time of policy is material, while according to the claimants date is important. Reliance is placed on New India Assurance Co. Ltd. v. Ram Daval : 1990 ACJ 545 (SC) for the submission that date is important
19. The question as to whether the word 'date' could also be understood as having reference to time, having due regard to the context which it is used, assumes importance. The nature of the consequences which has relevance to the date and time are determinative factors. In this context, it is necessary to refer to the decision of the Apex Court in Nagendra Kawni v. Manik Rao : AIR 1977 SC 2171. In that case the question was whether the inclusion of names of fifteen persons in the voters' list for election to the Legislative Council of the State of Karnataka from local authorities-constituencies to the State Legislative Council after 3 p. m. on the last date fixed for filing the nomination which was 17-4-1974 could be regarded as valid. In that case Section 23 of the Representation of the People Act, 1950 was referred to which prescribes that the inclusion of names in the electoral roll can be carried out tilt the last date for making nominations for an election in the concerned constituency. A question was raised, what, then, was the last date and, when did the last date cease to be The Court observed that the purpose of the provisions was to illumine its sense, and a sense of rationality has to be used. It was observed that the expression 'last date for making nominations' must mean that the last hour of the last date during which presentation of nomination papers is permitted under Sec.23 of the Representation of the People Act, 1950. An insurance policy is meant to cover liability incurred by the owner of a vehicle or property as a result of accident taking place in future and not in respect of an accident which had already taken place, unless materials are placed to show that the insurer also undertook to indemnify liability already incurred. In this context, Section 64-VB of the Insurance Act assumes importance. The provisions of the Act should not be interpreted in a manner which would result in encouraging practice of fraud on the insurance company by unscrupulous owners of vehicles by suppression or non-disclosure of a material fact or by a representation of fact which was false in some material particular. Section 96(2)(c) stipulates that the insurer has the right to defend the action on the ground that the policy is void as it was obtained by nondisclosure of a material fact or by a representation of fact which was false in some material particular in cannot be said in all cases that even knowing that there was accident the insurer agreed to indemnity the accident which might have taken place that date prior to taking of the insurance policy. Section 64-VB of the Insurance Act, 1938 has to be construed in that sense. No insurance policy issued by an insurance company on any day expressly specifying the date and time of issue on the cover note or the policy, covers the risk in respect of the accident caused by the vehicle earlier on the same day, in respect of which such policy is issued if the premium was paid and insurance policy was taken/issued after the accident.
The insurance policy is issued in continuation of the cover note which is issued after receipt of premium. The cover note and the policy are to be read together and not in isolation. Otherwise it becomes incongruous. It cannot be said that cover note operates from a point of time subsequent to time of receipt of premium while policy operates by preponement of time to midnight of previous day. The explanation to Section 64-VB(2) of the Insurance Act has been pressed into service in many cases to show that insurer may assume liability from the date on which cheque was posted. But that does not take away right of the insurer 10 make enquiry whether the vehicle was involved in any accident before issuing the policy. It can enquire about both time and date of accident. It can by no stretch of imagination be said that insurer is bound to issue policy and /or indemnify notwithstanding knowledge about accident at a time antecedent to time of posting of the cheque Since policy is the result of a contract, the intention of the parties is the determinative factor.
20. Additionally we find that all questions in a proposal form are material. Any statement which is to the knowledge of the proposer not correct would attract the mischief of Section 45 since insurance is a contract of utmost good faith (uberima fide). However, all the three requirements for application of second part of Section 45 of the Insurance Act must be satisfied. The three conditions are as follows :
(a) the statement must be on a material matter or must suppress facts which it was required to disclose ;
(b) the suppression must he fraudulently made by the policy- holder and :
(c) the policy-holder must have known at the time of making the statement that it was false or that is suppressed facts which it was obligated to disclose.
(See Mithoolal Nayak v. Life Insurance Corporation of India ; AIR 1962 SC 315).
Sub-section (B) of Section 96 of the old Act lays down that the expressions 'material fact' and 'material particular' mean, respectively, a fact or particular of such a nature as to influence the judgment of a prudent insurer in determining whether it will take the risk and, if so, at what premium and on what conditions.
21. So far as the decision of the apex Court in Ram Dayal's case (supra) is concerned, no time was specified on the cover note or in the insurance policy in the case. Therefore, the observations of the apex Court are to be limited to the facts of that case, and cannot have universal application. In the case at hand there is no material as to when the policy was taken, but this is academic because of the view taken by us regarding validity of policy.
22. The last question is whether the Tribunal can stipulate a default clause with regard to interest. It is not disputed by the contesting parties that grant of interest Under Section 110-CC of the old Act (corresponding to Section 171 of the Motor Vehicles Act, 1 988, in short the 'new Act') is discretionary. The purpose for award of interest is to coerce the relevant person not to delay in making the payment; and, to compensate the victim or his defendants for such delay as may occur, by way of interest. In determining the quantum of interest awardable under the relevant section, the Tribunal acting Under Section 110 of the old Act corresponding to Section 166 of the new Act can derive direct guidance from Section 34 of the Code of Civil Procedure, 1908 (in short, the 'CPC'). in tact, the provisions require payment of interest in addition to compensation already determined. Even though the expression 'may' is used, a duty is laid on the Tribunal to consider the question of interest separately with due regard to the facts and circumstances of the case. The provision is discretionary and is not and cannot be bound by rules. In the words of Lord Cairns, L.C. in Julius v. Bishop of Oxford : (1880) 5 A.C. 214, 'there may be something in the nature of the thing empowered to be done, something in the object for which it is done, something in the condition under which it is to be done, something in the title of person or persons for whose benefit the power is to be exercised, which may couple the power with a duty, and make it the duty of person in whom the power is reposed to exercise that power when called upon to do. This classic observation has been quoted with approval by the apex Court in several cases. (See Commissioner of Police v. Goardhandas Bhanji : AIR 1952 SC 16, and S.P. Gupta v. Union of India : AIR 1982 SC 149). In Halsbury's Laws of England, 4th Edn. Vol. I, it has been observed :
'A statutory direction is not, however, necessarily or, indeed, usually absolute; it may be qualified by express and implied legal duties to comply with substantive and procedural require- ments before a decision is taken whether to act and how to act. Moreover, there may be discretion whether to exercise a power, but no discretion whether to exercise a power, but no discretion as to the mode of its exercise, or a duty to act when some conditions are present, but a discretion how to act. Discretion may thus be coupled with duties.'
Though Section 110-CC of the old Act (Sec. 171 of the new Act) confers a discretion on the Tribunal to award interest, the same is meant to be exercised in cases where the claimant can claim the same as a matter of right. In the above background, it is to be judged whether a stipulation of higher rate of interest in case of default can be imposed by the Tribunal. Once the discretion has been exercised by the Tribunal to award simple interest on the amount of compensation to be awarded at a particular rate and from a particular date, there is no scope for retrospective enhancement for default in payment of compensation. No express or implied power in this regard can be called out from Section 110-CC of the old Act or Section 171 of the new Act. Such a direction in the award for retrospective enhancement of interest for default in payment of the compensation together with interest payable thereon virtually amounts to imposition of penalty which is not invisaged and prescribed.
23. In conclusion, the appeal is allowed, the award of the Tribunal and the judgment of the learned Single Judge are set aside and the matter is remitted back to the Tribunal for fresh disposal in accordance with law keeping in view our observations {supra).
24. Before we part with the case, we may state that cases have come to our notice which highlight that the benefit of the award does not reach the person or persons for whom it is intended. It is very often alleged that proceedings before the Tribunals are the outcome of 'Corpse-chasing' or 'injured-chesing' and these chasers are the real beneficiaries. Judicial notice has been taken of this alarming situation by various Courts, (See New India insurance Co. Ltd., v. Malapati Naramma: 1990 ACJ 378 (A.P.) : Srisailam Devastanam v. Bhavani Pramilam 1983 ACJ 580 (A.P.): and New India Assurancs Co. Ltd. v. Nanaram and Ors. : 1993 ACJ 673 (Gujarat) (F.B ). The apex Court also noticed these unfortunate trends in Bisnan Devi v. Sirbaksh Singh : 1979 ACJ 496 (SC) and observed that in most cases it is seen that large part of the award is frittered away during litigation and by payment to persons assisting in the litigation. This pernicious practice should be nipped in the bud Effort should be made by the Tribunals to see that the beneficiaries are really benefited and are not left with pittance, whereas the major portion of the award is otherwise sucked out. To avoid this contingency, the Tribunals would do well to direct deposit of amounts varying between 80 to 95% of the amounts awarded including interest to be kept in fixed deposit in any scheduled bank, depending on the amount awarded. The percentage should be 80% in case of amounts up to Rs. 50,000/-, between 80% to 90% in case of it exceeds Rs. 50,000/-up to Rs. 1 lakh, and between 90%to 95% in case it exceeds Rs. 1 lakh. It should be specified that the fixed deposit would be for long terms with a condition that no loan/advance would be available against the fixed deposit without specific order of the Tribunal. However, if there is urgent need of money, on an application being filed before the Tribunal which on being satisfied that the cause indicated justifies a loan or advance withdrawal against the amount kept in fixed deposit, pass appropriate orders therefor. Directions in similar lines nave been given by the apex Court in National Insurance Co. Ltd. v. Swarnalata Das and Ors. ; 1993 ACJ 748 (SC).
25. During the pendency of the appeal, we had permitted the claimants to withdraw Rs. 25,000/- deposited by the insurance. Since the appeal filed by it has succeded, and the matter has been remitted back to the Tribunal, we should normally have directed that the entitlements would be adjudicated by Tribunal. We find that the insurer's participation in the proceeding before the Tribunal was casual and displayed a sense of interestless detachment, rather than one of involvement. A careful handling of the matter would have in all probabilities avoided further proceedings before this Court. Therefore, the sum of Rs. 25,000/- is awarded against the insurer. When the entitlement of the claimants is adjudicated, this shall be noted by the Tribunal. Even if no amount is awarded against the insurer, the amount shall not be recovered by the insurer from the claimants.
D.M. Patnaik, J.
I agree.