A.S. Naidu, J.
1. The insurer is the appellant assailing the award of the Second Motor Accident Claims Tribunal, Cuttack in Misc. Case No. 330/86. In an application Under Section 110-A of the Motor Vehicles Act, 1939 filed by the claimant-respondents 1 to 4 the Tribunal awarded a compensation of Rs. 1,20,000/- in favour of the claimant-respondents 1 to 4 and directed the appellant-insurance Company to pay the same. The appellant challenges the said award mainly taking the stand that the insured, i.e. the owner of the offending vehicle, respondent No. 5, not having paid the premium in time, the insurance policy had been cancelled and the accident having taken place much after such cancellation, the Insurance Company was not liable to pay the compensation. The second stand taken by the appellant was that the vehicle being a passenger vehicle, the liability of the Insurance Company was limited up to Rs. 50.000/- and this aspect was not kept in mind by the Tribunal.
2. To appreciate the contentions raised, it would be prudent to narrate the facts in short :
It was alleged by the claimants in their claim petition that on 28th July, 1986 at about 4.00 P.M. deceased, Sukadev Das, was standing on the left flank of the Express Highway. The offending bus bearing Registration No. OSU-7244 belonging to respondent No. 5 came in high speed and knocked down Sukadev Das. Consequently he sustained grievous injuries and succumbed to the same. It was further asserted that the said bus was duly insured with the appellant-Insurance Company and the accident took place due to rash and negligent driving of the driver of the offending vehicle.
3. The owner, respondent No. 5, though received notice, did not contest the case and was set ex parte. The appellant-Insurance Company contested the case by filing a written statement vaguely denying all the averments made in the claim petition and putting the claimants to strict proof of the same. It denied the validity of the insurance policy of the offending vehicle in question.
In order to substantiate .their case, the claimants got examined five witnesses and exhibited four documents. The Insurance Company got examined two witnesses and exhibited five documents. The Tribunal after vivid discussion of the evidence, both oral and documentary, arrived at a conclusion that Sukdev was not a passenger in the bus, but was standing on the left-flank of the road when the offending vehicle caused the accident. Relying upon the ratio of the decision of this Court in the case of New India Assurance Company Ltd. v. Sri Prafulla Kumar Das and Ors. reported in 68 (1989) CLT 15, the Tribunal rejected the plea taken by the Insurance Company that as the premium was not paid, the cheque having bounced, the Insurance Company was not liable to pay the compensation. The Tribunal awarded as sum of Rs. 1,20,000/- towards compensation and fixed the liability on the appellant.
4. In the present appeal, learned counsel for the appellant-Insurance Company strenuously submitted that as the cheque issued by the owner had bounced, the appellant-Insurance Company had cancelled the policy and had intimated the same to the owner. Therefore no liability can be saddled on the insurer. This issue as it appears, was also fought vehemently before the Tribunal, but then as would be evident from the award, relying upon the ratio of the decision of this Court in the case of New India Assurance Co. Ltd. v. Prafulla Kumar Das and Ors. (supra), the Tribunal held that the Insurance Company could not be absolved of its liability to indemnify the insured only because the policy was unilaterally cancelled.
It is apt to mention here that the accident having taken place in the year 1986, the case is governed under Old Act i.e. Motor Vehicles Act, 1939.
5. Mr. A.K. Mohanty, learned counsel appearing for the appellant-Insurance Company, relying upon the decision of the Supreme Court in the case of United India Assurance Co. Ltd. v. Ayed Mahammed reported in 1991 ACJ 650 and in the case of Oriental Insurance Co. Ltd. v. Inderjit Kaur reported in : (1998)1SCC371 as well as the decision in the case of National Insurance Co. Ltd. v. Seema Malhotra and Ors. reported in 2001 AIR SCW 902. forcefully submitted that the premium having not been paid by the owner, the policy was cancelled and the said fact was notified and intimated to the owner and as such the liability of the insurer ceased and it cannot be held that the Insurance Company was liable to pay any compensation.
Learned counsel for the appellant also relied upon the judgment of the Delhi High Court in the case of Chandan and Anr. v. Kanwarlal and Anr. reported in 1989 ACJ 816. The Delhi High Court in the said case held that cheque covering the premium having been dishonoured there was no policy covering insurance of the vehicle at the relevant time and, as such, the Insurance Company could not be held liable to pay the compensation.
6. At the other hand, learned counsel appearing for the claimant-respondents 1 to 4 forcefully submitted that Section 96 of the Motor Vehicles Act stipulates the liability of the insurer against the persons insured in respect of 3rd party risks and even if the policy was cancelled the insurer shall have to satisfy the third party. He further submitted that in view of Section 95(5) of the Act which stipulates that 'notwithstanding anything contained in any law, a person issuing a policy of insurance under this section shall be liable to indemnify the person or classes of persons specified in the policy in respect of any liability which the policy purports to cover in the case of that person or those classes of persons' the insurer cannot be absolved of its statutory liability. In support of the said contention reliance is placed upon the judgment of this Court in the case of New India Assurance Co. Ltd. v. Saraswati Jena reported in 1992 ACJ 885. It is pertinent to note that the ratio of this decision was the same as that in the decision of this Court in the case of Ayeb Mahammad (supra) which was reversed by the Apex Court. Learned Counsel for the respondents also relied on decision in the case of New India Assurance Co. Ltd. v. Prafulla Kumar Das and Ors. reported in 78(1989) CLT 15, wherein it has been held that Section 96 of the Act being a beneficial provision the insurer is liable to pay the compensation irrespective of the fact that the insurance policy has been cancelled and in such case the insurer can proceed against the insured but cannot deny the payment of compensation to the 3rd party. Learned counsel for the claimant-respondents further relied upon the judgment of this Court in the case of National Insurance Co. Ltd. v. Madhab Chandra Das and Ors. reported in 1994 ACJ 890. In the said decision this Court has held as follows :
'So far as the old Act is concerned, Section 94 mandated insurance. Sub-section (1) thereof prescribed prohibition on use of a motor vehicle in a public place by any person except as a passenger, unless there is in force in relation to the use of the vehicle by that person a policy of insurance complying with the requirements of Chapter VIII of the Act relating to the insurance of motor vehicles against third party risks. The prohibition also applies to causing or allowing any other person to use the vehicle. Section 94(1) makes it imperative to insure all vehicles which are to be used in public places. The object is to provide for indemnification by. insurer of damages awarded to any victim of an accident arising out of use of the vehicle in a public place. The same is intended to mitigate any difficulty that may arise in enforcing collection against the driver or the owner, as the case may be, due to unsound financial condition. In that context, intimation in terms of Section 105 to the registering authority assumes great significance. The intention is to ensure strict compliance with requirement of Section 94(1) of the old Act, corresponding to Section 146(1) of the new Act.'
This Court held that if information was not given to the registering authority within the prescribed time as stipulated Under Section 105 of the Act, the liability of the Insurance Company shall not cease.
The Supreme Court in the case of Complete Insulations (P) Ltd. v. New India Assurance Co. Ltd. reported in 1996 (1) TAC 340 (SC) has observed that under the Old Act there was protection to third parties that is victims of the accident by virtue of Sections 94 and 95 of the Old Act. The said case was one dealing with Transfer of Certificate of Insurance. Further the Supreme Court in the case of New India Assurance Co. Ltd. v. Rula and Ors. reported in AIR 2000 Supreme Court 108 has observed that any contract of insurance under the Motor Vehicles Act contemplates a third party who is not a signatory or a party to the contract of insurance but is, nevertheless, protected by such contract. Thus the rights of the third party to get indemnified can be exercised only against the insurer of the vehicle. It is thus clear that the third party is not concerned and does not come into the picture at all in the matter of payment of premium. Whether the premium has been paid or not is not the concern of the third party who is concerned with the fact that there was a policy issued in respect of the vehicle involved in the accident and it is on the basis of this policy that the claim can be maintained by the third party against the insurer.
7. In the case at hand, admittedly the cover note was issued in respect of the offending vehicle on 31st December, 1985 by accepting cheque. The appellant-Insurance Company took the plea that the cheque had bounced and the policy was cancelled. The said fact is said to have been intimated to the owner by letter dated 25th January, 1986, Ext. G. The accident took place on 28th July, 1996. The ground of cancellation was that the cheque for the premium of policy issued by the owner of the vehicle to the Insurance Company had bounced. A letter intimating the owner that it had cancelled the policy was issued.
8. As a matter of fact, before a policy of insurance is issued, the insurer is required to be satisfied that all the requirements for issuance of a policy were complied with. A vehicle is permitted to ply on the road only when it has a valid insurance policy to cover the liability. On being satisfied that the vehicle is insured, the transport authorities issue the token authorising the vehicle to run on the road and not otherwise. The moment a vehicle is on the street, it has right to invite passengers to board the vehicle. When a passenger boards, he is impliedly assured that in the event of his injury or death, the compensation is to be paid by the Insurance Company. Section 105 of the Motor Vehicles Act also requires the Insurance Company to notify the registering authority regarding the cancellation or suspension of the policy, so that it may take necessary action in not allowing the vehicle to ply on the road. The Insurance Company had issued the policy/cover note with regard to the offending vehicle. The Insurance Company could have waited till the cheque was honoured before issuing the policy, but without doing so it had issued the policy. The policy once issued cannot automatically become void because the cheque bounced. If the Insurance Company was cheated and was made to issue such a policy, the Company is not without remedy to mitigate its grievances, but it cannot be exempted from its liability under the policy.
9. Section 105 of the Act deals with the duty of the Insurer to notify the registering authority regarding cancellation or suspension of a policy within a specified time. Section 104 casts a duty on the insured to surrender the certificate of insurance when the period covered under the policy of insurance is terminated or suspended before expiry by efflux of time or by any means. The surrender has to be done within seven days of such termination or suspension. A cumulative reading of Sections 103, 104 and 105 lands to an irresistible conclusion that a policy precedes a certificate of insurance. Though there is no specific procedure prescribed as to how a certificate of insurance is to be cancelled. Section 96(2)(a) throws some light in this aspect. It has been provided therein that the insurer can take a defence of its non-liability, if either before or not later than 14 days after happening of the accident, it has commenced proceeding for cancellation of the certificate after compliance with the provisions of Section 105. The said provisions presuppose that only after due intimation has been given to the registering authority within the time prescribed in Section 105, cancellation of a policy comes into effect. In the present case, no evidence has been adduced by the Insurance Company to indicate that at any time any intimation was issued to the registering authorities as required under Section 105 of the Motor Vehicles Act.
10. In the case of Oriental Insurance Company Ltd. v. Indarjit Kaur and Ors. (supra), the Supreme Court in paragraph 8 of the judgment has held as follows :
'The policy of insurance that the appellant issued was a representation upon which the authorities and third parties were entitled to act. The appellant was not absolved of its obligations to third parties under the policy because it did not receive the premium. Its remedies in this behalf lay against the insured.'
This Court in the case of New India Assurance Co. Ltd. v. Smt. Rulla Dei and Ors., in M.A.No. 91 of 1993 disposed of on 20.1.1995 and in the case of Divisional Manager, New India Assurance Co. Ltd. v. Rajendra Kishore Harichandan and Anr. in M.A.No. 864/2001 disposed of on 20.5.2005 has also expressed the same view.
11. In view of the aforesaid authoritative pronouncements and more so as the appellant-Insurance Company has not intimated the fact of cancellation of the policy to the Transport authorities within the time prescribed Under Section 105 of the Motor Vehicles Act, the irresistible conclusion would be that it cannot be absolved of its obligation to third parties under the policy only on the ground that it did not receive the premium.
12. So far as the second contention with regard to quantum of compensation is concerned, though the said plea is strictly not available to the insurer, scrutiny of the evidence clearly reveals that the deceased was not a passenger in the Bus but was standing by the side of the road when he was knocked down by the offending vehicle. The Tribunal has also on analysis of the materials available and evidence, both oral and documentary, arrived at the same conclusion. I do not find any infirmity or illegality in the finding arrived at by the Tribunal. However, in view of the peculiar facts and circumstances, I direct that the claimants shall be entitled to interest @ 6% per annum from the date indicated by the Tribunal.
With the aforesaid modification, the Misc. Appeal is disposed of. Parties shall bear their own costs.