M/s. New India Assurance Company Limited,46, Moore Street, Chennai-1 v. V. Bommi & Ors.

According to the claimants, the legal representatives of the aboveVijaya Baskaran, it was the rash and negligent driving of the lorrydriver which caused the accident. They claimed Rupees One Crore ascompensation since according to them, the deceased was the proprietorof Saran Engineers and Builders and was earning between Rs.25,000/-and Rs.35,000/- per month. The owner of the lorry, who was the firstrespondent in the claim petition and who is the fifth respondentherein, remained ex parte initially and then sought to set aside theex parte order and contested the claim. According to the owner, thedeceased was under the influence of alcohol and fell down in hisattempt to overtake the vehicle that was going in front of him.2. The appellant-insurance company, which was the secondrespondent in the claim petition, disclaimed its liability on theground that there was no subsisting insurance policy in respect ofthe lorry on the date of the accident. The vehicle was covered bythe policy for the period from 26.8.1996 to 25.8.1997. The owner ofthe vehicle had issued a cheque on 23.8.1996 for Rs.12,190/-. Thecheque was returned for want of funds. On 5.9.1996, the appellantreceived the cheque from the Bank and intimated the fact of dishonourto the owner of the vehicle on 18.9.1996. The intimation was sent byR.P.A.D. There was no response from the owner and the policy wascancelled. Therefore, on the date of the accident, viz., 18.3.1997,there was no policy. On 19.3.1997, the owner approached theInsurance Company and took a fresh policy. The appellant examinedR.W.5., the Bank Officer to support their case. The Tribunal gave anaward for a sum of Rs.25,00,000/-. Aggrieved by that, the presentappeal has been filed.3. Learned counsel Mr. K.S. Narasimhan appearing on behalf of theappellant-insurance company submitted that when there is nosubsisting policy, the insurance company has no liability toindeminfy the owner. Even on quantum, he made his submissions.Learned counsel appearing for respondents1 to 4-claimants, on theother hand, relied upon several judgments to support his case.Learned counsel appearing for the fifth respondent-owner too made hissubmissions.4. The chronological dates and events are as follows :23.8.1996 – Cheque issued towards premium23.8.1996 – Cover Note issued26.8.1996 to 25.8.1997– Period of Policy 5.9.1996 – Dishonour of cheque13.9.1996 – Letter to the insured intimating the cancellation of the policy https://hcservices.ecourts.gov.in/hcservices/

18.9.1996 – Acknowledgment received18.3.1996 – Accident19.3.1997 –Fresh policy taken for the same vehicle 5. The decisions relied upon are discussed hereunder : In (2000) 3 S.C.C. 195 [New India Assurance Co. Ltd. vs. Rula &Others], the Supreme Court held that a contract of insurance like anyother contract is concluded by the offer and acceptance and liabilitywould arise only on payment of premium. In that case, the a chequewas issued on 8.11.1991 towards the premium, it was dishonoured andthe insurance policy was cancelled. In that case, the accident tookplace on 8.11.1991. The Supreme Court held that the subsequentcancellation of the insurance policy on the ground of dishonour wouldnot affect the rights of a third party which had accrued on the datewhen the policy was issued. The subsequent cancellation of insurancepolicy will not affect the rights already accrued in favour of thethird respondent. Learned counsel relied on this decision to drawthe inference that this would clearly show that if on the date of theaccident the policy had already been cancelled, then the insurer canrightly defend the claim made against him.6. In 2001 A.C.J. 638 [National Insurance Co. Ltd. vs. SeemaMalhotra & Others], the accident took place on 31.12.1993. Theintimation of dishonour came on 10.1.1994. The insurer informed theinsured on 20.1.1994 that the policy was cancelled with immediateeffect. The Supreme Court made the following observations :"8. The direction that insurance company can now deductthe premium amount from the compensation to be fixed is nosolace to the insurer. The essence of the insurance businessis the coverage of the risk by undertaking to indemnify theinsured against loss or damage. They agree to pay thedamages arising out of any accident by taking a chance thatno accident might happen. Motivation of the insurancebusiness is that the premium would turn to be the profit ofthe business in case no damage occurs. Such business of theinsurance company can be carried on only with the premiumpaid by the insured persons on the insurance policy. Theonly profit, if at all the insurance company makes, of theinsurance business is the premium paid when no accident ordamage occurs. But to ask the insurance company to bear theentire loss of damages of somebody else without the companyreceiving a pie towards premium is contrary to theprinciples of equity, though the insurance companies are https://hcservices.ecourts.gov.in/hcservices/ made liable to third parties on account of statutorycompulsions due to the initial agreement, entered betweenthe insured and the company concerned.""20. However, if the insured makes up the premium evenafter the cheque was dishonoured but before the date ofaccident it would be a different case as payment ofconsideration can be treated as paid in the order in whichthe nature of transaction required it. As such an event didnot happen in this case the insurance company is legallyjustified in refusing to pay the amount claimed by therespondents."7. In 2008 A.C.J. 581 [Daddappa vs. Branch Manager, NationalInsurance Co. Ltd.], the accident took place on 6.2.1998 and it waslong after the communication as to the cancellation of the insurancepolicy. The Supreme Court referred to Section 64-VB of the MotorVehicles Act which provides that no risk will be assumed unlesspremium is received in advance, and after extracting the Section,observed as follows :"15. The said provision, therefore, in no unmistakableterm provides for issuance of a valid policy only onreceipt of payment of the premium...."19. The said decision proceeded on the basis that itwas the Insurance Company which was responsible for placingitself in the said predicament as it had issued a policy ofinsurance upon receipt only of a cheque towards the premiumin contravention of the provisions of Section 64-VB of the1938 Act. The public interest in a situation of that natureand applying the principle of estoppel, this Court held,would prevail over the interest of the Insurance Company. 20. The ratio of the said decision was, however,noticed by this Court in New India Assurance Co. Ltd. v.Rula and Ors., 2000 ACJ 630 (SC). It was held thatordinarily a liability under the contract of insurancewould arise only on payment of premium, if such payment wasmade a condition precedent for taking effect of theinsurance policy but such a condition which is intended forthe benefit of the insurer can be waived by it. https://hcservices.ecourts.gov.in/hcservices/ It was opined :'...If, on the date of accident, there was apolicy of insurance in respect of the vehicle inquestion, the third party would have a claim againstthe Insurance Company and the owner of the vehiclewould have to be indemnified in respect of the claim ofthat party. Subsequent cancellation of the insurancepolicy on the ground of non-payment of premium wouldnot affect the rights already accrued in favour of thethird party.'The dicta laid down therein clarifies that if on the dateof accident the policy subsists, then only the third partywould be entitled to avail the benefit thereof."In that case, however, the Supreme Court, in exercise of its powerunder Article 142 of the Constitution of India and in view of thefact that the appellant hailed from the lowest strata of the society,directed the insurer to pay the claim and recover the same from theowner. 8. In 2008 A.I.R. S.C.W. 5298 [National Insurance Co. Ltd. vs.Yellamma], the Supreme Court held as follows :"8. In today's world payment by cheque is ordinarilyaccepted as valid tender but the same would be subject toits encashment. A distinction, however, exists between thestatutory liability of the insurance company vis-a-vis thethird party in terms of Sections 147 and 149 of the MotorVehicles Act and its liability in other cases but it isclear that if the contract of insurance had been cancelledand all concerned had been intimated thereabout, theinsurance company would not be liable to satisfy the claim.9. In this case, there cannot be any doubt or disputewhatsoever that no privity of contract came into beingbetween the appellant and the second respondent and as suchthe question of enforcing the purported contract ofinsurance while taking recourse to Section 147 of the MotorVehicles Act did not arise. Second respondent did not contest the case at anystage. It did not adduce any evidence before the Tribunal.It does not appeal from the judgments of the High Court. Noargument in the appeal was advanced in his behalf. Before usalso, no appearance has been made on behalf of therespondent No.2 despite service of notice. https://hcservices.ecourts.gov.in/hcservices/ ...11. In the peculiar facts and circumstances of thiscase, we are, therefore, of the opinion that the interest ofjustice would be subserved if we, in exercise of ourjurisdiction under Article 142 of the Constitution of India,direct that the awarded amount be paid by the appellant tothe first respondent with liberty to it to recover the samefrom the second respondent by initiating an appropriateproceeding in this behalf."9. In 2008 A.I.R. S.C.W. 6178 [National Insurance Co. Ltd. vs.Abhaysing Pratapsing Waghela], the finding of fact was that the covernote was not cancelled prior to the deposit of premium in cash by theowner, but only after the accident. In these circumstances, theSupreme Court held that the insurer was liable to cover the thirdparty claim and observed as follows :"17. It is in the aforementioned situation, we are ofthe opinion, that the judgment of the High Court cannot befaulted. No doubt, a contract of insurance is to be governedby the terms thereof, but a distinction must be borne inmind between a contract of insurance which has been enteredinto for the purpose of giving effect to the object andpurport of the statute and one which provides forreimbursement of the liability of the owner of the vehiclestrictly in terms thereof. In that limited sense, a contractof insurance entered into for the purpose of covering athird party risk would not be purely contractual. We mayplace on record that an ordinary contract of insurance doesnot have a statutory flavour. The Act merely imposes anobligation on the part of the insurance company to reimbursethe claimant both in terms of the Act as also the Contract.So far as the liability of the insurance company which comeswithin the purview of Sections 146 and 147 is concerned, thesame subserves a constitutional goal, namely, socialjustice. A contract of insurance covering the third partyrisk must, therefore, be viewed differently vis-a-vis acontract of insurance qua contract."10. In an unreported judgment of this Court dated 12.11.2003rendered in C.M.A. No.2524 of 2003 and C.R.P. Nos.1384 to 1387 of2003, a Division Bench of this Court has held as follows: https://hcservices.ecourts.gov.in/hcservices/ "The second respondent is the owner of the lorrybearing Regn. No.TNP-7272. He insured the said lorry forthe period from 14.2.1998 to 13.2.1999 and though he gave acheque for a sum of Rs.5,503/- towards premium since thesaid cheque was dishonoured, the Insurance Company sent anotice one 27.2.1998 which is marked as Ex.R5 to the ownerof the vehicle stating that the Insurance Policy of thelorry bearing Regn. No.TNP-7272 was cancelled. Since thesaid policy was cancelled even before the date of accident,viz., 24.5.1998, the Tribunal is not correct in making theInsurance Company liable to pay the claim of the claimants."11. As against this, we have the following judgments. In 1998A.C.J. 123 [Oriental Insurance Co. Ltd. vs. Inderjit Kaur & Others],the Supreme Court has held thus :"8. We have, therefore, this position. Despite the barcreated by Section 64VB of the Insurance Act, the appellant,an authorised insurer, issued a policy of insurance to coverthe bus without receiving the premium therefore. By reasonof the provisions of Section 147(5) and 149(1) of the MotorVehicles Act, the appellant became liable to indemnify thirdparties in respect of the liability which that policycovered and to satisfy awards of compensation in respectthereof notwithstanding its entitlement (upon which we donot express any opinion) to avoid or cancel the policy forthe reason that the cheque issued in payment of the premiumthereon had not been honoured.9. The policy of insurance that the appellant issuedwas a representation upon which the authorities and thirdparties were entitled to act. The appellant was not absolvedof its obligations to third parties under the policy becauseit did not receive the premium. Its remedies in this behalflay against the insured....11. It must also be noted that it was the appellantitself who was responsible for its predicament. It hadissued the policy of insurance upon receipt only of a chequetowards the premium in contravention of the provisions ofSection 64VB of the Insurance Act. The public interest thata policy of insurance serves must, clearly, prevail over theinterest of the appellant." https://hcservices.ecourts.gov.in/hcservices/

12. In T.A.C. 48 (A.P.) [Oriental Insurance Co. Ltd. vs. PinjariHussainamma & Others], a learned single Judge of the Andhra PradeshHigh Court held that in a case where the cancellation of cover notewas not communicated to the registering authority, the insurancecompany cannot escape its liability to pay the awarded amount. In2001 A.C.J. 585 [New India Assurance Co. Ltd. vs. Shamsed & Others],the accident took place on 27.2.1989. The policy was issued on5.10.1988 by accepting a cheque, but the cheque was dishonoured on8.10.1988. The policy was, therefore, cancelled on the date of theaccident. In these circumstances, the Kerala High Court held thatthe rights of the parties had got crystallized and the third partieswho are entitled to get the benefit out of the policy were not at allaffected by the dishonouring of the cheque and as far as they wereconcerned, it was a valid policy to their benefit, notwithstandingthe fact that the cheque was dishonoured.13. We may also look at the change in the law from the 1939 Actand then in 1988 and again in 1994. Under the 1939 Act, Section 105imposed upon the insurer the duty to notify to the registeringauthority the cancellation or suspension of the policy. It read asfollows :"105. Duty of insurer to notify registering authoritycancellation or suspension of the policy.Whenever a policy of insurance issued under theprovisions of this Chapter is cancelled or suspended by theinsurer who has issued the policy, the insurer shall withinseven days notify such cancellation or suspension to theregistering authority in whose records the registration ofthe vehicle covered by the policy of insurance is recordedor to such other authority as the State Government mayprescribe."Whereas, in the two subsequent Acts, the provision relating totransfer of certificate of insurance which was available underSection 103A in the 1939 Act is reproduced as Section 157 in the 1988Act and again in the 1994 Act. However, this requirement to notifythe registering authority has not been included in the subsequentenactments. Even if the insurer had omitted to notify thecancellation, that by itself would not keep alive the rights of thethird parties to claim the benefit of the policy – vide A.I.R. 1956Cal. 555 (DB) [Bir Singh vs. Smt. Hashi Rashi Banerjee & Others].Therefore, regardless of the omission or existence of this provision, https://hcservices.ecourts.gov.in/hcservices/ once we accept that the cancellation had been duly intimated to theinsurer, the non-intimation thereof to the registering authoritycannot affect the right of the insurer to claim exoneration from itsliability. 14. If we look at the evidence, R.W.1 is Dhakshinamoorthy, theowner of the vehicle. In his chief-examination, he has said, "I donot know that the insurance company informed me that the cheque hadbeen dishonoured. I was informed of the same only after theaccident". Ex.R.3 is the acknowledgment form for receipt of theintimation by the insurance company. R.W.1 has looked at thesignature and has stated, "The signature in the acknowledgment cardlooks like my signature, but I cannot be sure". According to him, hewas informed of the cancellation only after the accident. R.W.4 isthe Senior Assistant of the Insurance Company. According to him, thecheque was returned to them on 5.9.1996. Thereafter, the company hadcancelled the policy vide Ex.R.6. The Office Register is marked asEx.R.7 and the Tapal Register is marked as Ex.R.8. According to him,this was received by the fifth respondent-owner on 18.9.1996 and sixmonths later, the accident took place. In cross-examination, he hasstated that the duration of the policy under Ex.R.5 is from 26.8.1996(4 PM) to 25.8.1997 (12 PM). His evidence is, "In Ex.R.5, thedishonour of the cheque is noted, but not the cancellation of policy.In Ex.R.5, the date of cancellation is noted". He has denied thatafter the insured received the letter, the policy can be cancelledonly after the insured came to the office. He has denied thesuggestion that ExR.7 has been materially altered to suit theirconvenience.15. Now we will go through the documentary evidence. Ex.R.1 isthe advocate's notice asking to produce the following documents – (i) The original letter dated 13.9.1996 addressed by theinsurance company tothe owner-fifth respondent which was received on18.9.1996.(ii) The original of the cancellation endorsement dated26.8.1996 – No.31/40/30.(iii) Letter received from Indian Overseas Bank, PerungalathurBranch informing the owner-fifth respondent about the dishonour ofthe cheque issued to the appellant.Ex.R.2 is the dishonoured cheque with the endorsement "On account ofinsufficient funds" sent by the Indian Overseas Bank to the Bank ofBaroda. Ex.R.3 is the carbon copy of the registered letter sent by https://hcservices.ecourts.gov.in/hcservices/ the appellant to the fifth respondent-owner stating that the premiumhas been returned since it exceeds arrangement and that "We are noton risk in respect of the above policy in the absence of a validpayment of premium"; it also informs the insured that payment ofpremium in cash immediately is necessary to enable the insurer toassume the risk subject to the confirmation that there has been noloss thus far. This was received on 18.9.1996 and the acknowledgmentcard was shown to the insured, who has indicated that it looks likehis signature, but he cannot be sure. Ex.R.5 is the policy and ithas been crossed with the words "Cheque being dishonoured", thoughthere is no date written on it. Ex.R.6 is the cancellation in whichthe appellant-insurance company has stated the fifth respondent-owneron 13.9.1996, "It is hereby declared and agreed that the above policyis cancelled from inception as premium remitted by you by way ofCheque No.644069 dated 23.8.1996 has not been realized and returnedby our Bank". We find that this is dated 13.9.1996. Ex.R.7 is thecheque dishonour book. In this, Entry No.05 is 13.9.1996, which isthe policy in question and the date of cancellation is shown as13.9.1996. Entry No.06 is 18.9.1996 and the date of cancellation isshown as 18.9.1996. 16. Therefore,according to the appellant, on the date on whichthe accident took place, the policy had been cancelled and the ownerof the vehicle had also been intimated of the same. , and so nopolicy was subsisting on the date of the accident. This is notsimilar to the other cases, where the dishonour of the cheque wasintimated, but the policy had not been cancelled on the date of theaccident, and therefore, the Supreme Court held that as far as thethird parties were concerned, there was a subsisting policy. In thiscase, the records indicate that the policy was cancelled. 17. When the policy is cancelled what happens to thirdparty risk? This question has been answered by the Supreme Court inOriental Insurance Co. Ltd., Vs. Swaran Singh (2004 A.C.J. 1) in thefollowing words : "31. The right of a victim of a road accident to claimcompensation is a statutory one. He is a victim of anunforeseen situation. He would not ordinarily have a handin it. The negligence on the part of the victim may,however, be contributory. He has suffered owing towrongdoing of others. An accident may ruin an entirefamily. It may take away the only earning member. Anaccident may result in the loss of her only son to amother. An accident may take place for variety of reasons.The driver of a vehicle may not have a hand in it He may https://hcservices.ecourts.gov.in/hcservices/ not be found to be negligent in a given case. Other factorssuch as unforeseen situation, negligence of the victim, badroad or the action or inaction of any other person may leadto an accident....33. In other words, what would also be covered by thecontract of insurance vis-a-vis the beneficent statutoryprovisions like Sub-section (2) of Section 149 of the saidAct would be when a death or bodily injury has been causedas a result of assured's own voluntary act. Even anunforeseeable result of assured's deliberate act may comewithin the purview of the accident. Even if an accident hasoccurred due to negligent driving of the assured person, itmay not prevent recovery under the policy and certainlythereby a third party would not be non-suited....36. Sub-section (1) of Section 149, casts a liabilityupon the insurer to pay to the person entitled to thebenefit of the decree as if he were the judgment debtor.Although the said liability is subject to the provision ofthis section, it prefaces with a non-obstante clause thatthe insurer may be entitled to avoid or cancel or may haveavoided or cancelled the policy. "Furthermore, the statuteraises a legal fiction to the effect that for the saidpurpose the insurer would be deemed to be judgment debtorin respect of the liability of the insurer....48. Furthermore, the insurance company with a view toavoid its liabilities is not only required to show that theconditions laid down under Section 149(2)(a) or (b) aresatisfied but is further required to establish that therehas been a breach on the part of the insured. By reason ofthe provisions contained in the 1988 Act, a more extensiveremedy has been conferred upon those who have obtainedjudgment 'against the user of a vehicle and after acertificate of insurance is delivered in terms of Section147(3) a third party has obtained a judgment against anyperson insured by the policy in respect of a liabilityrequired to be covered by Section 145, the same must besatisfied by the insurer, notwithstanding that the insurermay be entitled to avoid or to cancel the policy or may infact have done so. The same obligation applies in respectof a judgment against a person not insured by the policy in https://hcservices.ecourts.gov.in/hcservices/ respect of such a liability, but who would have beencovered if the policy had covered the liability of allpersons, except that in respect of liability for death orbodily injury."18. It would, therefore, appear from the above that thecancellation of the policy only entitles the insurer to proceedagainst the owner and recover what it has paid as per the award, butit must and shall satisfy the innocent third party. 19. As regards the quantum, the deceased was 28 years old at thetime of his death. Though it was the case of the claimants that hewas earning between Rs.25,000/- and Rs.35,000/-, no documents werefiled to support this. On the basis of Exs.P.1 to P.8, which weredocuments showing the educational qualifications, without any basis,the Tribunal determined his monthly income as Rs.15,000/-. Accordingto the Tribunal, it was his degree which persuaded it to do so.Ex.P.6 is an experience certificate which shows that the deceased wasworking as a Technical Assistant in a World Bank Aided Project.Ex.P.7 is also an experience certificate given by M/s. BuiltecEngineers and Builders, which shows that the deceased was drawingRs.2,500/- per month working as a Site Engineer. Ex.P.8 is anotherexperience certificate given by M/s. Sudarsan Construction, whichshows that he was paid Rs.1,800/- per month. The deceased had boughta Yamaha Motorcycle. Ex.P.17 is the quotation given by the deceasedon behalf of Saran Engineers and Builders to one Varadha Narayan fora proposed construction at Bell Nagar. 20. There is absolutely no evidence regarding the income of thedeceased. But we will roughly take what might have been the startingsalary for a P.W.D. Civil Engineer at that time and it could not havebeen more than Rs.10,000/-. Since the deceased had his own privatebusiness, we will take it that his monthly income was Rs.10,000/-.Thus calculated, his annual income would have been RS.1,12,000/- andif we deduct one-third of it from this amount, the contribution ofthe deceased to his family would have been Rs.80,000/- per annum. Wewill adopt the same multiplier as adopted by the Tribunal, i.e., 18and thus arrive at a sum of Rs.14,40,000/- which was the loss ofincome to the family. The Tribunal has been generous in grantinghuge sums under the heads of conventional damages and we necessarilyhave to reduce that. It has awarded a sum of Rs.2,00,000/- towardsloss of expectation of life; Rs.50,000/- towards loss of consortiumto the wife; Rs.50,000/- towards loss of love and affection to theminor son; and Rs.50,000/- towards loss of love and affection to theparents of the deceased. We reduce these as follows :- https://hcservices.ecourts.gov.in/hcservices/ Loss of Consortium to the wife : Rs. 20,000Loss of love and affection to the minor son : Rs. 20,000Loss of love and affection to the parents of deceased : Rs. 15,000Funeral Expenses : Rs. 5,000Adding to this, the amount which we have awarded under the head Loss of Estate to the family : Rs. 14,40,000 ------------------Total Compensation Payable to the Claimants : Rs. 15,00,000 ------------------21. It is true that Section 149(1) of the Act casts a liabilityon the insurer notwithstanding the fact that the insurance companywill be entitled to cancel or may have in fact cancelled the policy,they have to satisfy the claim. But in Daddappa's case (supra), theSupreme Court referred to Sections 147(5) and 149 of the Act inparagraph 17 and have observed as follows :"17. We may, however, notice that in terms of Sub-section (5) of Section 147 and Sub-section (1) of Section149 of the Act, the Insurance Company became liable tosatisfy awards of compensation in respect thereof,notwithstanding its entitlement to avoid or cancel thepolicy for the reason that the cheque issued for payment ofpremium thereon had not been honoured."Then they referred to Inderjit Kaur's case (supra), where thisquestion was left open and where the insurance company had issued thepolicy of insurance in violation of Section 64-VB of the 1938 Act,whereupon the Supreme Court held that public interest should prevailover the interests of the insurance company. Finally, in Daddappa'scase (supra), the Supreme Court after referring to Rula's case(supra) where it was held that a liability under the contract ofinsurance would arise only on payment of premium held:"26. We are not oblivious of the distinction betweenthe statutory liability of the Insurance Company vis-a-vis athird party in the context of Sections 147 & 149 of Act andits liabilities in other cases. But the same liabilitiesPage 4595 arising under a contract of insurance would haveto be met if the contract is valid. If the contract ofinsurance has been cancelled and all concerned have beenintimated thereabout, we are of the opinion, insurancecompany would not be liable to satisfy the claim. https://hcservices.ecourts.gov.in/hcservices/

27. A beneficial legislation as is well known shouldnot be construed in such a manner so as to bring within itsambit a benefit which was not contemplated by thelegislature to be given to the party. In Regional Director,Employees' State Insurance Corporation, Trichur v. RamanujaMatch Industries, AIR 1985 SC 278, this Court held:'We do not doubt that beneficial legislations shouldhave liberal construction with a view to implementingthe legislative intent but where such beneficiallegislation has a scheme of its own there is no warrantfor the Court to travel beyond the scheme and extend thescope of the statute on the pretext of extending thestatutory benefit to those who are not covered by thescheme'.We, therefore, agree with the opinion of the High Court.22. So in Daddappa's case, the Supreme Court has in fact referredto Section 149(1) and then held that if the contract of insurance hasbeen cancelled and all concerned had been intimated, the insurancecompany would not be liable to satisfy the claim. Then in exercise ofthe jurisdiction under Article 142 gave the following direction:"28. However, as the appellant hails from the loweststrata of society, we are of the opinion that in a case ofthis nature, we should, in exercise of our extra-ordinaryjurisdiction under Article 142 of the Constitution of India,direct the Respondent No. 1 to pay the amount of claim tothe appellants herein and recover the same from the owner ofthe vehicle viz., Respondent No. 2, particularly in view ofthe fact that no appeal was preferred by him. We directaccordingly."23. In an unreported judgment in dated 10.1.2008 rendered inM.A.C. Appln. No.730 of 2007, a learned Single Judge of the DelhiHigh Court dismissed the insurance companies case holding that sinceintimation was not given by the Insurance Company to the RegisteringAuthority about the cancellation of the insurance policy there was nomerits in the appeal. 24. Section 146 of the Act deals with the necessity for insuranceagainst the third party risk. Therefore, no person can use a motorvehicle in a public place unless there is an insurance policy. Thisis the protection for the third party who may met with an accidentowing to the use of the insurance vehicle. The Motor TariffRegulations-II of IV General Regulations GR.24 deals with https://hcservices.ecourts.gov.in/hcservices/ Cancellation of Insurance and Double Insurance and it reads asfollows:"GR.24. Cancellation of Insurance and Double Insurancea. Cancellation of Insurancei. A policy may be cancelled by the insurer by sendingto the insured seven days notice of cancellation byrecorded delivery to the insured's last know address andthe insurer will refund to the insured the pro-rata premiumfor the balance period of the policy.ii. A policy may be cancelled at the option of theinsured with seven days notice of cancellation and theinsurer will be entitled to retain premium on short periodscale of rates for the period for which the cover has beenin existence prior to the cancellation of the policy. Thebalance premium, if any, will be refundable to the insured.Refund of premium will be subject to :•There being no claim under the policy, and•The retention of minimum premium as specified in theTariff.•A policy can be cancelled only after ensuring that thevehicle is insured elsewhere, at least for Liability Onlycover and after surrender of the original certificate ofInsurance for cancellation.•Insurer should inform the Regional Transport Authority(RTA) concerned by recorded delivery about suchcancellation of insurance."Therefore, even though the Section relating to the duty to inform theRegional Transport Authority is not found in the present case, theregulations should have the third party risk by insisting that thepolicy can be cancelled in the manner mentioned above. Therefore, weare satisfied that in this case, there is a proof that he hasintimated the facts of cancellation to the insured. But it has notbeen complied with in full with its duty as laid down in GeneralRegulations mentioned above. Therefore, even though the insurancecompany may contend that it owes no duty to the insured to indemnifythe claim for compensation as far as the third party is concerned, he https://hcservices.ecourts.gov.in/hcservices/ is bound to receive the just and reasonable compensation. 25. We have already referred to Swaran Singh's case where theSupreme Court has clearly stated in paragraph 48 that a judgment mustbe satisfied by the insurer, though the insurer may be entitled toavoid or to cancel the policy or may in fact have done so.Therefore, though we may accept that the policy has in fact beencancelled, the judgment will have to be satisfied by the insurer andthe insurer may recover it from the policy holder. It is to thisextent only that we can say that the insurer has no liability toindemnify the insured. But the third party's claim stands unaffectedas we understand from Swaran Singh's case. Therefore, we feel thatthe only course open to us would be to direct the insurance companyto pay the claimants and thereafter, recover the same from theinsured. 26. The Full Bench of Kerala High Court in 2006 A.C.J. 106(Oriental Insurance Co. Ltd., Vs. Sivankutty and others) has heldthat the insurer cannot disown liability to a third party and thattheir remedies have to be worked out against the insured. It is forthis reason that in 1987 A.C.J. 411 (Skandia Insurance Co. Ltd., Vs.Kokilaben Chandravadan), it was held thus :"... When the option is between opting for a viewwhich will relieve the distress and misery of the victimsof accidents or their dependants on the one hand and theequally plausible view which will reduce the profitabilityof the insurer in regard to the occupational hazardundertaken by him by way of business activity, there ishardly any choice. The Court cannot but opt for the formerview. Even if one were to make a strictly doctrinaireapproach, the very same conclusion would emerge inobeisance to the doctrine of 'reading down' the exclusionclause in the light of the 'main purpose' of the provisionso that the 'exclusion clause' does not cross swords withthe 'main purpose' highlighted earlier. The effort must beto harmonize the two instead of allowing the exclusionclause to snipe successfully at the main purpose."27. In Branch Manager, United India Insurance Co. Ltd., Vs.Nagammal, Unnamalai and V.B. Krishnan (2009 ACJ 865), the Full Benchafter referring to Section 149 of the Motor Vehicle Act observed thatSection 49 itself contemplates that under certain contingencies, eventhough ultimately the insurer may not be liable, it is required tosatisfy the award and recover the same subsequently from the owner.The following paragraphs from Swaran Singh's case (supra) are https://hcservices.ecourts.gov.in/hcservices/ relevant :"78. Sub-section (5) of Section 149 which imposes aliability on the insurer must also be given its full effect.The insurance company may not be liable to satisfy the decreeand, therefore, its liability may be zero but it does not meanthat it did not have initial liability at all. Thus, if theinsurance company is made liable to pay any amount, it canrecover the entire amount paid to the third party on behalf ofthe assured. If this interpretation is not given to thebeneficent provisions of the Act having regard to its purportand object, we fail to see a situation where beneficentprovisions can be given effect to. Sub-section (7) of Section149 of the Act, to which pointed attention of the Court hasbeen drawn by the learned Counsel for the petitioner, which isin negative language may now be noticed. The said provisionmust be read with Sub-section (1) thereof. The right to avoidliability in terms of Sub-section (2) of Section 149 isrestricted as has been discussed hereinbefore. It is one thingto say that the insurance companies are entitled to raise adefense but it is another thing to say that despite the factthat its defense has been accepted having regard to the factsand circumstances of the case, the Tribunal has power todirect them to satisfy the decree at the first instance andthen direct recovery of the same from the owner. These twomatters stand apart and require contextual reading.... 99. It is, therefore, evident from the discussions madehereinbefore that the liability of the insurance company tosatisfy the decree at the first instance and to recover theawarded amount from the owner or driver thereof has beenholding the field for a long time....102. We may, however, hasten to add that the Tribunal andthe court must, however, exercise their jurisdiction to issuesuch a direction upon consideration of the facts andcircumstances of each case and in the event such a directionhas been issued, despite arriving at a finding of fact to theeffect that the insurer has been able to establish that theinsured has committed a breach of contract of insurance asenvisaged under Sub-clause (ii) of clause (a) of Sub-section(2) of Section 149 of the Act, the insurance company shall be https://hcservices.ecourts.gov.in/hcservices/ entitled to realise the awarded amount from the owner ordriver of the vehicle, as the case may be, in execution of thesame award having regard to the provisions of Sections 165 and168 of the Act....".In the present case, the family has lost its sole bread winner. Wethink justice requires that we should direct the insurance company topay the amount of compensation to the claimant and to recover it fromthe owner of the vehicle since these directions have been holding thefield for a long time as seen from the above decisions.28 For all the aforesaid reasons, the appeal is partly allowed.The quantum of compensation as awarded by the Tribunal is modifiedand the claimants are entitled to receive a compensation ofRs.15,00,000/-. The appellant-insurance company shall pay theclaimant the compensation as modified by us and recover the same fromthe fifth respondent-owner. However, there shall be no order as tocosts. Sd/Asst.Registrar/true copy/Sub Asst.Registrarab To1.The Motor Accidents Claims Tribunal (IV Judge, Court of Small Causes),Chennai.2.The Record Keeper, V.R.Section, High Court, Madras.1 cc To Mr.K.S.Narasimhan, Advocate, SR.226981 cc To Mr.M.Swamikkannu, Advocate, SR.22637C.M.A. No.1851 of 2004 bv(co)pmk.25.6.2009.