United India Insurance Company Ltd., Regional Office, Sector-8, Chandigarh v. Smt. Prakash Kaur (since deceased represented through her LRs)

Mr. S.K. Chauhan, Advocate for the claimants-respondents. CORAM: HON'BLE MR. JUSTICE K. KANNAN

1. Whether Reporters of local papers may be allowed to see the judgment ? To be referred to the Reporters or not ?

2. 3. Whether the judgment should be reported in the Digest? K. KANNAN J. -.-

1. The only point that arises for consideration in this appeal by the insurance company is whether there existed a valid policy of insurance on the date of the accident. The Tribunal assessed the compensation of Rs.96,000/- for death that resulted in a motor accident and made the owner of the offending vehicle and the insurer liable for the accident. The contention by the insurance company was that on the date when the accident took place, there had been no policy of insurance at all. On the other hand, there had been a proposal for under-writing a policy of F.A.O No.2734 of 1998 2 insurance and a draft was said to have been delivered on

11.03.1995 that is on the date prior to accident, to the agent of the insurance company. On 13.03.1995, when the insurer asked for the production of the vehicle at the time of issuance of policy, it was informed that the vehicle had been seized by the police and therefore, the insurance company did not have the benefit of inspection of the vehicle. 11.03.1995 Saturday and the following day being a holiday, the insurance company did not issue a policy of insurance or even a cover note only because the vehicle was not available for its inspection and on the next working day, the insurance company came to know that the vehicle had been involved in the accident and therefore, no policy of insurance was issued to them.

2. The whole proof of whether there existed a policy or not was taken by the Tribunal as obtaining through a copy of the cash order that was produced, showed that it was drawn in favour of the insurance company on the Delhi State Cooperative Bank Limited for Rs.1386/-. It was in evidence that the insurance company had not returned the cash order subsequently and therefore, the insured was under a belief that the proposal had been accepted and there existed a valid insurance policy at that time.

3. The most crucial issue that has to be seen is, whether there existed a contract of insurance, for a policy of insurance is a specie of contract. There is no denial of fact that there had been a proposal on 11.03.1995 and there had been a payment of the F.A.O No.2734 of 1998 3 premium through a cash order of the bank. It is only one side of a contract and till an acceptance is made and a policy of insurance is issued or at least even a cover note was issued, there can be no undertaking of risk by the insurance company. It is a written instrument of a contract that finally puts a seal to the respective obligation between the parties. It is perfectly possible for an insurer to receive and demand inspection of the vehicle before a policy of insurance is issued to a person who makes a proposal. In this case, apart from delivering a draft after an initial proposal, there exists nothing to show that there had been a valid acceptance of a risk by issuance of either cover note or a policy.

4. The Tribunal was in error in assuming that the payment of the premium itself concluded a contract between parties. The evidence has been led through the owner of the truck to the effect that on 11.03.1995, he paid premium of Rs.1386/- to Sh. A.S. Garg, the authorized agent of the company through a pay order dated 11.03.1995. In the cross examination, it was elicited that he originally paid cash to Sh. A.S. Garg on

10.03.1995 and subsequently also obtained a pay order in favour of the insurance company on 11.03.1995. It must be remembered that it was not merely a case of renewal of a policy where there could exist an obligation for an insurer to issue a renewal even without inspection of the vehicle. In this case, it is brought out in the cross-examination of the owner that the vehicle had been insured with New India Insurance Company Limited, Bharatpur Branch, Delhi upto 09.03.1995 and the subsequent policy was F.A.O No.2734 of 1998 4 sought to be taken with the United India Insurance Company only on 11.03.1995. He has also admitted in evidence that except the pay order, he has no other instrument to show the payment of the premium amount. He admits that on 13.03.1995 at about 3 PM or 4 PM, the vehicle had been impounded by the police. He denied the suggestion that the vehicle was not shown to the agent to get the cover note, for the cover note was also not issued and the premium was not paid.

5. The least that the insured owner could have done was to secure a cover note on the date when he made the payment of premium to the agent of the insurance company. If even a cover note was not issued, I will agree to the suggestion to the owner by the insurer that the vehicle had not been given for inspection to the insurance company or its agent and that was why there was no issue of even a cover note. I also find from the record that the insurance company had actually moved an application to supply the policy particulars of the vehicle and the policy had not been produced by the owner. I have already observed that even a cover note had not been issued at the time when the premium had been given by the owner to the agent of the insurance company.

6. I have to, therefore, only hold that there existed no policy of insurance at all on that date when the accident took place. The Tribunal was in error in assuming that merely because a premium had been paid there existed a contract of insurance as well. The insurance company could not have been made liable in the absence of a valid policy of insurance. One thing cannot be F.A.O No.2734 of 1998 5 lost sight off that is, the insurance company had retained the draft in spite of the fact that it had chosen not to issue the policy. It is not seen now whether the draft or the pay order that had been delivered to the insurance company had been encashed. In any event, the amount, which was paid by the insured, had not been refunded to the insured. To that extent, there had been a loss to the insured. The said amount of Rs.1386/- shall be returned by the insurance company with interest @12% from

11.03.1995 till the date of payment.

7. The liability to satisfy the claim shall be wholly on the insured and no part of liability shall be fastened on the insurance company. I have no details to know whether the amount has been recovered by the claimants from the insurance company. If the amount has been recovered during the pendency of the appeal after the disposal of the case by the Tribunal, the right of recovery by the insurer shall be enforced only against the insured and not against the claimants.

8. The award of the Tribunal fastening the liability on the insurance company is set aside and the appeal filed by the insurer is allowed. November 12, 2010 Pankaj* (K. KANNAN) JUDGE