The Oriental Insurance Co. Ltd. v. M.Pushpam

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED 28.04.2009CORAMTHE HONOURABLE MRS. JUSTICE PRABHA SRIDEVANandTHE HON’BLE MR. JUSTICE T.S.SIVAGNANAM CMANo.3254 of 2006The Oriental Insurance Co. Ltd.,Cuddalore.. Appellant/2nd Respondent -vs-1.M.Pushpam2.M.Rajan3.M.Indira4.M.Venkatesan5.M.Anusuyadevi6.S.Thamimul Ansari.. Respondents/Petitionersand 1st RespondentPrayer :Civil Miscellaneous Appeal under section 173 of the M.V.Act,1988 against the award and decree dated 4.10.2005 made inM.C.O.P.No.15 of 2004 on the file of the Motor Accidents ClaimsTribunal, Principal Sub Judge, Cuddalore.For Appellant: Mr.S.Arun Kumar For Respondents: Mr.N.Damodharan – R1 toR5 Mr.R.Shivakumar – R6.........................J U D G M E N T (Judgment of the Court was delivered by T.S.SIVAGNANAM J.)Heard Mr.S.Arun Kumar, learned counsel for the appellant andMr.N.Damodharan, learned counsel for the claimants (respondents 1 to5) and Mr.R.Shivakumar, learned counsel for the 6th respondent.2.The above appeal has been directed against the award ofthe Motor Accidents Claims Tribunal, Cuddalore in M.C..O.P.No.15 of2004, granting an award of Rs.14,30,000/- together with interest at https://hcservices.ecourts.gov.in/hcservices/ 9% p.a. The claimants before the Tribunal were the wife and fourchildren of one P.Marthandan.3.On 24.8.2003, at about 11.30 a.m., the deceased wasstanding at the extreme eastern side of the Cuddalore to ChidambaramMain Road at Cuddalore old Town and the vehicle owned by the 6threspondent namely a Tata Sumo Car proceeding from North to Southdirection driven in a rash and negligent manner hit against thedeceased and caused the accident. Due to the accident, the deceasedsustained grievous injuries and died after two days. In the ClaimPetition, it was stated that the deceased was 50 years old, earnedRs.15,000/- per month as Timber, Wood Merchant and as CasuarinaDealer, that he is the only bread winner of the family and due to theaccident, the entire family is suffering for their livelihood.Accordingly, a claim for Rs.25 lakhs was made with interest at 18%p.a. 4.The Insurance Company resisted the Claim Petition by filing acounter affidavit disputing the age of the deceased as well as hisincome. The Insurance Company also contended that the accidentoccurred since the deceased suddenly crossed the road without mindingabout the on coming vehicle and invited the accident. The Insurerclaimed that the compensation was highly speculative and prayed fordismissal of the Petition.5.During the course of argument, the counsel for the appellantstated that an additional counter statement was filed by theInsurance Company stating that the cheque issued towards the premiumhad returned unpaid and that the Insurance Company on receipt of theintimation from their Bankers had cancelled the Policy on 3.9.2003and the intimation of the cancellation was sent on 3.9.2003 andreceived by the Insurer on 4.9.2003 and the postal acknowledgmentcard showed that the Insurer had received the intimation on 8.9.2003.It was further contended that the Insurer had taken a fresh Policywith validity from 11.11.2003 to 10.11.2004. Therefore, the learnedcounsel contended that Insurer is not liable to pay the compensation.6.On the side of the claimants, the first respondent/claimantexamined herself as P.W.1 and one Ramesh, who had seen the accidentand lodged the Police complaint was examined as P.W.2 and markedExs.P1 to P8. On the side of the Insurer, one Ravi was examined asR.W.1 and marked Exs. R1 to R5.7.The Tribunal after considering the oral and documentaryevidence available on records, framed two questions for considerationnamely (i) as to whether the accident was caused on account of the rashand negligent driving of the Tata Sumo owned by the 6th respondentherein ? and https://hcservices.ecourts.gov.in/hcservices/ (ii)as to whether the claimants are entitled for compensationand if so what is the quantum ?8.Before, we proceed to deal with the reasoning given by theTribunal on two issues, it would be necessary for us to consider thepreliminary point raised by the learned counsel for the appellantthat the Insurance Policy had been cancelled and therefore, theInsurance Company is not liable to settle the claim.9.It is to be seen that the Insurer had issued a cheque dated29.7.2003 towards the premium, which was marked as Ex.R1. Based onthe said payment, an Insurance Policy, Ex.R2 was issued to the ownerof the vehicle, which has validity from 30.7.2002 to 29.7.2003. Thecheque issued towards the premium is said to have been returned bythe Indian Overseas Bank, Vadakarai Branch by a written memo dated4.8.2003 and the same having been communicated to the State Bank ofIndia, Myliaduthurai Branch (Banker’s of the Insurance Company) on5.8.2003 and that the said intimation was received by the InsuranceCompany on 3.9.2003. Based on the said intimation, the Policy wascancelled on 3.9.2003 under Ex.P4.10.The intimation of cancellation was sent to the insured underEx.R5 on 3.9.2003 by a registered post with acknowledgment due andthe same was received by the Insured on 4.9.2003 and the postalacknowledgment card was received by the Insurance Company on8.9.2003. Thereafter, the Insured had approached the InsuranceCompany and taken a fresh Policy from 11.11.2003 to 10.11.2004.11.By relying upon the above mentioned dates, the learnedcounsel for the appellant would contend that the Insurance Companyhaving cancelled the Policy, cannot be mulcted with the liability tosettle the claim. The learned counsel for the appellant placedreliance on the Judgment of the Hon’bel Supreme Court in DEDDAPPA &OTHERS Vs. THE BRANCH MANAGER, NATIONAL INSURANCE CO. LTD. Reportedin 2008 (2) TN MAC 138 (SC). In the said case, the factual positionwas that the Insurance Policy was to remain valid for the period from17.10.1997 to 16.10.1998; the Insurer had issued a cheque on15.10.1997; the said cheque was presented for encashment and the samewas returned and thereafter the Insurance Company had cancelled thePolicy. The Postal Acknowledgment Card was produced to prove thatthe cancellation of the Policy was communicated to the Insured. Theaccident had occurred in the said case on 6.2.1998 i.e. much afterthe communication of cancellation of the Policy. In the said factualscenario the Hon’ble Supreme Court after analyzing the variousprovisions of the Motor Vehicles Act and also the law laid down haslaid down as follows:“26.We are not oblivious of the distinctionbetween the statutory liability of the Insurance https://hcservices.ecourts.gov.in/hcservices/ Company vis-à-vis a third party in the context ofSections 147 and 149 of the Act and its liabilities inother cases. But the same liabilities arising under acontract of insurance would have to be met if thecontract is valid. If the contract of insurance hasbeen cancelled and all concerned have been intimatedthereabout, we are of the opinion, the InsuranceCompany would not be liable to satisfy the claim.” 12.The learned counsel for the appellant would next placedreliance upon the decision of the Hon’ble Supreme Court in UNITEDINDIA INSURANCE CO. LTD. Vs. GLAN CHAND AND OTHERS reported in 1997ACJ 1065, wherein the Hon’ble Suprme Court had held that when theInsured had handed over the vehicle for being driven by anunlicenced driver, the Insurance Company would get exonerated fromits liability to meet the claim of third party, on account of theaccident caused by such unlicensed driver.13.The learned counsel for the appellant would however fairlyadmit that the accident took place on 24.8.2003 and for thecancellation of the Policy was done only on 3.9.2003 and received bythe Insured on 4.9.2003. However, the learned counsel for theappellant would state that there was no delay on the part of theInsurance Company to take steps to cancel the Policy since they hadreceived intimation from their Bankers about the return of the chequeissued by the Insured only on 3.9.2003. It is the further contentionof the appellant that the owner of the vehicle is a prudent businessman who ought to have taken immediate steps to pay the premium oncoming to know that the cheque issued by him was dishonoured on4.8.2003. Further the owner of the vehicle had taken a fresh Policywith validity from 11.11.2003 to 10.11.2004. In such circumstances,the learned counsel for the appellant would submit that the InsuranceCompany cannot be held liable.14.Mr.R.Sivakumar, learned counsel appearing for the owner ofthe vehicle would contend that they had not received any intimationof cancellation of the Policy and in any event the accident havingoccurred prior to the cancellation, the Insurance Company cannotdisown their liability. He further submits that the decision of theHon’ble Supreme Court in DEDDAPPA’s case (cited supra) would notadvance the case of the appellant Insurance Company since the factsin the said case was different. 15.As discussed above, the accident took place much after thecommunication of the cancellation of the Policy and therefore theHon’ble Supreme Court held that the Insurer is liable to satisfy theclaim. However, in the present case, it is an admitted fact that theaccident took place much prior to the cancellation and thereforeapplying the law laid down by the Hon’ble Suprme Court, theInsurance Company cannot disown their liability. https://hcservices.ecourts.gov.in/hcservices/

16.Likewise, the other decision relied on by the learned counselin UNITED INDIA INSURANCE CO. LTD. Vs. GLAN CHAND AND OTHERS reportedin 1997 ACJ 1065, (cited supra) was entirely in a differentcircumstances, where the vehicle was driven by a person who did notpossess a valid driving licence. The said issue does not arise forconsideration in the present matter. 17.The Hon’ble Supreme Court in a decision in NEW INDIAASSURANCE COMPANY LTD., Vs RULA AND OTHERS reported in 2000 ACJ 630,held that in a contract of Insurance under Chapter 11 of the MotorVehicles Act a third party who is not a signatory to the contract ofInsurance, is nevertheless protected by such a contract. It isfurther held that the third party is not concerned and does not comeinto the picture at all in the matter of payment of premium. Whetherthe premium has been paid or not is not a concern of the third partywho is not concerned with the fact that there was a Policy issued inrespect of vehicle involved in the accident and it is on the basis ofthis Policy that the claim can be maintained by the third partyagainst the Insured. It was further held in the said decision, if onthe date of the accident, there was a Policy of Insurance in respectof the vehicle in question, the third party can claim against theInsurance Company and the owner of the vehicle would have to beindemnified in respect of the claim of that party and any subsequentcancellation of the Insurance Policy on the ground of non payment ofpremium would not affect the rights already accrued in favour of thethird party. So it would appear that it was in not payment ofpremium or non-payment thereof, but whether the policy was alive orcancelled.18.The said decision of the Hon’ble Supreme Court appliessquarely to the facts of the present case. As stated, the accidenttook place on 24.8.2003 and the cancellation of the Policy was on3.9.2003 i.e. much after the accident. Therefore, it is to be seenthat on the date of the accident, the Insurance Policy was notcancelled. If the Insurance Company had been diligent, they couldhave asked from their Bankers about the dishonour of the cheque atthe earliest point of time and intimated the Insured, the Insuredwould have had an option to immediately remit the premium.Therefore, we hold that the Insurance Company is liable to settle theclaim. 19.The further contention raised by the learned counsel for theappellant that the Insurer had taken a fresh Policy from 11.11.2003and had not renewed the cancelled one would not in any way alter theposition. The vital fact which is to be noted as to whether thePolicy was cancelled prior to the date of accident or thereafter. Itis not in dispute that the cancellation was after the accident, sothe Insurance Company has to be held liable. https://hcservices.ecourts.gov.in/hcservices/

20.On the ground of negligence, the first respondent claimantexamined herself as P.W.1 and she deposed that on 24.8.2003 at about11.30 a.m., her husband was standing in the corner of the Road, theTata Sumo Car came in a rash and negligent manner and dashed againsther husband, ultimately resulting in the death of her husband. OneRamesh was examined as P.W.2 who had deposed that the accident didnot occur when the deceased crossed the road, but the accidentoccurred when he was standing on the lefthand side of the road andthat P.W.2 was at a distant of about 10 ft. and after seeking theaccident, he had lodged the Police complaint.21.Thus on appreciation of the evidence on record, the Tribunalhas rightly come to the conclusion that the accident occurred due tothe rash and negligent driving of the Tata Sumo Car. Therefore, thefinding regarding the negligence as arrived by the Tribunal standconfirmed.22.The next issue to be seen is regarding the quantum ofcompensation payable to the claimants. It is the case of theclaimants that the deceased was aged about 50 years and that he hadbeen carrying on business in Timber, rice, Wood merchant and ascasuarina dealer and was earning Rs.15,000/- per month. Ex.P4 isthe licence issued under the provisions of the Standards of Weightsand Measurements Enforcement Act 1986 to establish that he wascarrying on rice business. Ex.P5 is the Lease Agreement entered intobetween the deceased and one Selvarj in respect of the of the shopwhich he had taken on rent. Ex.P6 is a ‘Bogyam Deed’ entered intobetween one Dhandapani and the deceased Marthandan, where he wasentitled to enjoy the property for the amount of Rs.80,000/- paid.23.P.W.1, the wife of the deceased in the cross examination hasclearly stated that her husband used to earn Rs.15,000/- per month.There is no contrary evidence. The Tribunal fixed the monthly incomeonly at Rs.10,000/-. The Tribunal accepted that the age of thedeceased at 50 years, adopted the Unit method and calculated thatthe deceased would have been utilizing Rs.2,000/- per month for hispersonal expense and contribute Rs.8,000/- per month to the family,thus multiplied by 12, works out to Rs.96,000/- and considering theage of the deceased 13 was adopted as the multiplier. The counsel forappellant submitted that the rice business is still continuing andtherefore at best what should be deducted is only the loss ofservices. The evidence of P.W.1 is that he was also doing timber andCasuarina business. This was not contradicted. Considering thenature of business and the income and deduction of loss of service,the monthly income could have been fixed at Rs.12,000/- instead ofRs.15,000/-. If so we arrive at the same figure by deducting 1/3rdunder conventional heads the award may be marginally high and hencewe are not inclined to interfere. Therefore, we find that there is noerror in the amount of compensation awarded by the Tribunal byadopting the multiplier at 13. Similarly the compensation awarded https://hcservices.ecourts.gov.in/hcservices/ under the conventional heads also is reasonable and called for nointerference.24.The learned counsel for the appellant would contend that inthe event we hold that the Insurance Company is liable to settle theclaim and they may be permitted to settle the claim and recover fromthe owner of the vehicle. In this regard, the learned counsel wouldrelied upon the observation of the Hon’ble Supreme Court inDEDDAPPA’s case (cited supra) in paragraph No.28, which reads asfollows:“28.However, as the appellant hails from the loweststrata of society, we are of the opinion that in a caseof this nature, we should, in exercise of ourextraordinary jurisdiction under Article 142 of theConstitution of India, direct the Respondent No.1 to paythe amount of claim to the appellants herein and recoverthe same from the owner of the vehicle viz. RespondentNo.2, particularly in view of the fact that no Appeal waspreferred by him. We direct accordingly.”25.In a recent decision of the Full Bench of this Courtreported in 2009 (1) CTC page 7, it had an occasion to consider thedictum of 'Pay and Recover'. The question that was referred forconsideration before the large Bench in the said matter is to thefollowing effects:“28. In the light of the latest decisions of the SupremeCourt, exonerating the Insurance Company from its liabilityto pay compensation for the death ‘ injury to thegratuitous passenger traveling in a goods vehicle,substantial doubt arises whether the decision of theDivision Bench of this Court made in United India InsuranceCompany Ltd., vs. Selvam and others, 2005 (2) TN MAC 345(DB): 2006 (1) MLJ 154 could be followed. 29. In view of the latest decisions of the Supreme Court,in my considered view, the decision of the Division Benchof this Court made in United India Insurance Company Ltd.,vs. Selvam and others, 2005 (2) TN MAC 345 (DB) : 2006 (1)MLJ 154 is to be clarified”. The Hon’ble Full Bench held that the doctrine of pay and recover inthe context of Section 149 of the Motor Vehicle Act has beenrecognized by the Hon’ble Supreme Court in AIR 2001 SC 1419 (NewIndia Assurance Co. vs. Kamala and others) and AIR 2004 SC (NationalInsurance Co. versus Swaran Singh and another) and that the decisionsof the Hon’ble Supreme Court are in the context of the provisionscontained in Section 149 (4) and Section 149 (5) of the Act. The https://hcservices.ecourts.gov.in/hcservices/ Hon’ble Full Bench next proceeded to consider whether the doctrine of“pay and recover” can be invoked in another cases even though Section149 is not as such application. The Hon’ble Full Bench then proceededto take in to consideration the Judgments of Hon’ble Supreme Courtreported in 1.2004 (1) CTC 210 (SC), National Insurance Co., Limited vs.Baljit Kaur2.2004 (2) CTC 464 (SC), Oriental Insurance Co., Limited vs.Nanjappan3.2007 (7) SCC 56, Oriental Insurance Co., Ltd., vs. Brijmohan andothers4.2006 (2) CTC 347, National Insurance Co., Ltd., vs. Kusum Rai &others5.2008 (3) MLJ 568 (SC), Premkumari and others vs. Prahlad Dev &othersand held that even though the statutory provisions under Section 149(4) and 149 (5) was not applicable the Hon’ble Supreme Court appliedin doctrine of pay and recover and the ratio of the decision has beenapplied selectively in some of the later decisions and has not beenapplied by the Hon’ble Supreme Court depending on the facts of aparticular case. After analysis of the statutory provisions whichwere explained by the Hon’ble Supreme Court in the various decisions,the Hon’ble Full Bench held as follows. (i) The Insurance Policy is required to cover the liabilityenvisaged under Section 147, but wider risk can always beundertaken.(ii) Section 149 envisages the defences which are open tothe Insurance Company. Whether the Insurance Company is notsuccessful in its defence, obviously it is required tosatisfy the decree and the award. Whether it is successfulin its defence, it may yet be required to pay the amount tothe claimant and thereafter recover the same from the ownerunder such circumstance envisaged and enumerated in Section149(4) and Section 149 (5).(iii) Under Section 147 the Insurance Company is notstatutorily required to cover the liability in respect of apassenger in a goods vehicle unless such passenger is theowner or agent of the owner of the goods accompanying suchgoods in the concerned goods vehicle.(iv) Since there is no statutory requirement to cover theliability in respect of a passenger in a goods vehicle, theprinciple of “pay and recover”, as statutorily recognizedin Section 149(4) and Section 149(5), is not applicableipso facto to such cases and, therefore, ordinarily the https://hcservices.ecourts.gov.in/hcservices/ Court is not expected to issue such a direction to theInsurance Company to pay to the claimant and thereafterrecover from the owner. (v) Whether, by relying upon the decision of the SupremeCourt in Satpal Singh’s case, either expressly or even byimplication, there has been a direction by the Trial Courtto the Insurance Company to pay, the Appellate Court isobviously required to consider as to whether such directionshould be set aside in its entirety and the liabilityshould be fastened only on the driver and the owner orwhether the Insurance Company should be directed to complywith the direction regarding payment to the claimant andrecover thereafter from the owner. (vi) No such direction can be issued by any Trial Court tothe Insurance Company to pay and recover relating toliability in respect of a passenger traveling in a goodsvehicle after the decision in Baljit Kaur’s case merelybecause the date of accident was before such decision. Thedate of the accident is immaterial. Since the law has beenspecifically clarified, no Trial Court is expected todecide contrary to such decision. (vii) Whether, however, the matter has already been decidedby the Trial Court before the decision in Baljit Kaur’scase, it would be in the discretion of the Appellate Court,depending upon the facts and circumstances of the case,whether the doctrine of “pay and recover” should be appliedor as to whether the claimant would be left to recover theamount from the person liable i.e., the driver or theowner, as the case may be. Thus as held by the Hon’ble Full Bench it is the discretion ofthe Appellate Court depending upon the facts and circumstances of thecase whether the doctrine of pay and recover should be applied. Inthe earlier part of this Judgment we have upheld the conclusion ofthe Tribunal that the accident occurred due to the negligence of theTata Sumo Vehicle and that the Insurance Policy was admittedlycancelled only after the date of accident. From the chronology ofdates given by the Learned Counsel for the Appellant it is seen thatno steps were taken by the Insurance Company for nearly one monthafter their bankers received intimation regarding the dishonour ofthe cheque. Therefore the Insurance Company have to be heldresponsible for their own act and cannot be heard to say that eventhough the accident occurred prior to the cancellation of the policythey have to be absolved of their liability. It is to be noted thatthe Hon’ble Full Bench had stated that the doctrine of “pay andrecover” has not been applied in all cases by the Hon’ble SupremeCourt in respect of matters which are not strictly covered under https://hcservices.ecourts.gov.in/hcservices/ Section 149 (4) and 149 (5) and it has been applied by the Hon’bleSupreme Court depending upon the facts and circumstances of aparticular case. Therefore we are not inclined to grant the prayersought for by the Learned Counsel for the Appellant to “pay andrecover”. In the light of the decision rendered by the Full Bench ofour Court, we are unable to accept the submissions made by thelearned counsel for the appellant.26.It is to be noted that the Insurance Company was not diligentin the sense that the fact of dishonour was made known to the insuredbelatedly. He was therefore perhaps denied the opportunity to havethe policy renewed immediately thereafter. It is true that theinsured obtained a fresh policy on 11.11.2003 though he was informedof the dishonour on 08.09.2003. But there is no evidence regardingthe date when he approached the company for renewal or fresh issue.The fact remains he issued a cheque within time to pay the premium.The fact also is that the cancellation was made after the accident.In respect of the cheque having been dishonoured on 4.8.2003 cannotnow state that they should be absolved of the liability since theycancelled the Policy as soon as they received intimation from theirBankers. However, the test laid down by the Hon’ble Supreme Court isto the effect that if the cancellation is after the accident, thethird party risk has to be covered and the Insurance Company cannotdeny their liability.27.For the above reason, we hold that the award of the Tribunalcalls for no interference and the Appeal stands dismissed. However,there will be no order as to costs. Sd/Asst.Registrar/true copy/Sub Asst.RegistrarrpaTo 1.The Principal Subordinate Judge, Motor Accidents Claims Tribunal, Cuddalore. 2.V.R.Section, Madras High court, Chennai.1 cc To Mr.S.Arunkumar, Advocate, SR.195361 cc To Mr.N.Damodaran, Advocate, SR.18724C.M.A.No.3254 of 2006RSM(CO)SRA(3/7/2009)