Karnataka High Court
The Hdfc Ergo General Insurance Company … vs Smt Lakshmamma on 6 July, 2026
Author: Shivashankar Amarannavar
Bench: Shivashankar Amarannavar
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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 6TH DAY OF JULY, 2026
BEFORE
THE HON'BLE MR. JUSTICE SHIVASHANKAR AMARANNAVAR
MISCELLANEOUS FIRST APPEAL No. 2143 OF 2023
(MV-D)
C/W
MISCELLANEOUS FIRST APPEAL No. 1255 OF 2023
(MV-D)
IN MFA No. 2143/2023
BETWEEN:
1. SMT. LAKKSHMAMMA
W/O LATE MARIYAPPA
AGED ABOUT 48 YEARS
R/O No.36, 3RD CROSS
MM ROAD, BYATARAYANAPURA
MYSORE ROAD, NEAR BHEL
BENGALURU SOUTH
Digitally signed by BENGALURU- 560 026.
LAKSHMINARAYANA ...APPELLANT
MURTHY RAJASHRI
Location: HIGH
COURT OF
KARNATAKA
(BY SRI HARISH N.R, ADVOCATE)
AND:
1. THE HDFC ERGO GENERAL INSURANCE CO. LTD.,
No.2/1-1, 2ND FLOOR, 11TH MAIN ROAD
3RD BLOCK, OPP JAYANAGARA
BENGALURU - 560 011.
(POLICY No. 2315202834552000000 VALID FROM
20-06-2029 TO 19.6.2020)
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2. SRI HANUMANTHRAJU
S/O SIDDAPPA
No. 311, VISHWESHWARAPURA
NELAMANGALA TALUK
BENGALURU RURAL DISTRICT - 562 123.
(R.C OWNER OF LORRY BEARING
REG. No. KA-32-A-9259)
...RESPONDENTS
(BY SRI LINGARAJ H S, ADVOCATE FOR R1
SRI PUNITH C, ADVOCATE FOR R2)
THIS MFA IS FILED UNDER SECTION 173(1) OF MV ACT
AGAINST THE JUDGMENT AND AWARD DATED:30.09.2022
PASSED IN MVC No.6374/2019 ON THE FILE OF THE IV
ADDITIONAL JUDGE, COURT OF SMALL CAUSES, BENGALURU
SCCH-6, PARTLY ALLOWING THE CLAIM PETITION FOR
COMPENSATION AND SEEKING ENHANCEMENT OF
COMPENSATION.
IN MFA No. 1255/2023:
BETWEEN:
1. THE HDFC ERGO GENERAL
INSURANCE COMPANY LIMITED
No.2/1-1, 2ND FLOOR, 11TH MAIN ROAD
3RD BLOCK, OPP JAYANAGAR
BENGALURU-560 011
NOW AT No.25/1, 2ND FLOOR
BUILDING No.2, SHANKARANARAYANA BUILDING
M G ROAD, BENGALURU-560 001.
BY ITS MANAGER(L).
...APPELLANT
(BY SRI LINGARAJ H S, ADVOCATE)
AND:
1. SMT. LAKSHMAMMA
W/O LATE MARIYAPPA
NOW AGED ABOUT 49 YEARS
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R/AT No.36, 3RD CROSS, M M ROAD
BYATARAYANAPURA, MYSORE ROAD
NEAR BHEL, BENGALURU SOUTH
BENGALURU-560 026.
2. SRI HANUMANTHARAJU
MAJOR
(AGE NOT MENTIONED IN THE CLAIM PETITION)
S/O SIDDAPPA
No.311, VISHWESHWARAPURA
NELAMANGALA TALUK
BENGALURU RURAL DISTRICT.
...RESPONDENTS
(BY SRI. HARISH N.R, ADVOCATE FOR R1
SRI PUNITH C, ADVOCATE FOR R2)
THIS MFA IS FILED UNDER SECTION 173(1) OF MV ACT
AGAINST THE JUDGMENT AND AWARD DATED:30.09.2022
PASSED IN MVC No.6374/2019 ON THE FILE OF THE IV
ADDITIONAL JUDGE, COURT OF SMALL CAUSES, BENGALURU,
SCCH-6, AWARDING COMPENSATION OF Rs.14,79,000/- WITH
INTEREST AT 6 PERCENT P.A. FROM THE DATE OF PETITION
TILL REALIZATION.
THESE APPEALS HAVING BEEN HEARD AND
RESERVED FOR ORDERS ON 02.07.2026, THIS DAY,
SHIVASHANKAR AMARANNAVAR J, DELIVERED THE
FOLLOWING;
CORAM: HON'BLE MR. JUSTICE SHIVASHANKAR AMARANNAVAR
CAV JUDGMENT
MFA No.2143/2023 is filed by the claimant seeking
enhancement of the compensation and MFA No.1255/2023
is filed by the insurer challenging the liability saddled on it
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by the judgment and award dated 30.09.2022 passed in
MVC.No.6374/2019 by the IV Additional Judge, Court of
Small Causes and MACT, Bangalore.
2. The claimant made a claim petition seeking award
of compensation for the death of Shri.Punith, aged 32
years (son of the claimant) in a road traffic accident
occurred on 01.09.2019 contending that the accident
occurred due to the rash and negligent driving of the
driver of the lorry bearing Regn.No.KA-32-A-9259. The
Tribunal after recording the evidence, appreciated the
evidence on record and assessed compensation and
awarded compensation under different heads as under:
Sl.No. Heads Amount in (Rs.)
01. Loss of dependency 13,44,000/-
02. Funeral and transportation 25,000/-
expenditure
03. Loss of love and affection 60,000/-
04. Loss of estate 50,000/-
Total 14,79,000/-
3. The Tribunal has also awarded interest @ 6% p.a.
from the date of petition till realisation and directed the
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respondent Nos.1 and 2, owner and insurer jointly and
severally liable to pay the compensation and directed the
respondent No.1 – insurer to deposit the said
compensation amount. The insurer, challenging the
liability saddled on it has filed the appeal in MFA
No.1255/2023 and the claimant seeking enhancement has
filed appeal in MFA No.2143/2023.
4. Heard the learned counsel for claimant and
learned counsel for insurer.
5. Learned counsel for claimant would contend that
the Tribunal has not calculated the loss of future prospects
while calculating loss of dependency. The deceased was
aged 32 years as on the date of accident and therefore, he
is entitled to future prospects at 40% as per decision of
the Hon’ble Apex Court in National Insurance Co.Ltd
vs. Pranay Sethi (AIR 2017 SC 5157). He further
contended that the deceased was a third party, even
though the insurance policy was cancelled by the insurer
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due to dishonour of cheque paid towards the premium by
the owner, the insurer is liable to pay the compensation
amount as held by the Tribunal.
6. Learned counsel for the insurer would contend that
the cheque (Ex.R1) issued by the owner of the lorry has
been dishonored. The dishonour intimation was received
by the insurer on 26.06.2019 (Ex.R2). Thereafter the
insurer by letter dated 28.06.2019 (Ex.R3) intimated the
same to the insured i.e. the owner of the vehicle by
registered post and cancelling the policy issued. The said
letter has been sent by registered post and postal
acknowledgment is at Ex.R4 and it is dated 03.07.2019.
So the accident occurred on 01.09.2019 is subsequent to
the letter at Ex.R3 dated 28.06.2019. Therefore, when
policy is cancelled for non-payment of premium the insurer
is not liable to pay the compensation amount. The learned
counsel placing reliance on the decision of the Hon’ble
Apex Court in the case of Deddappa and others vs.
Branch Manager, National Insurance Co. Ltd (2008)
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2 SCC 595 would contend that in the similar case the
Hon’ble Apex Court has considered and held that the
insurer is not liable to pay the compensation amount. He
further contented that the Hon’ble Apex Court in the case
of United India Insurance Company Limited vs.
Laxmamma and others (2012) 3 SCC 234, has
considered a similar case, but in that case the intimation
has not been given of the dishonour of the cheque to the
owner prior to the accident and considering the same the
Apex Court has directed the insurance company to pay the
compensation amount and recover the same from the
owner of the vehicle. He also placed on a decision of the
Division Bench of this Court rendered in MFA
No.8329/2023 disposed on 27.06.2024 wherein in a
similar case the Division Bench has held that the policy
issued by the insurance company was cancelled for non-
receipt of premium amount much before the accident and
therefore, there was no insurance coverage to the
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offending vehicle as on the date of accident and set- aside
the liability fastened on the insurance company.
7. Learned counsel for the claimants would contend
that the deceased was a third party and lapse on the part
of the owner, the third and his legal heirs cannot be put to
inconvenience in recovering the compensation amount
from the owner. The cheque has been paid for renewal of
the policy which indicate that there was an existing policy.
He placing reliance on the decision of Hon’ble Apex Court
in the case of National Insurance Co.Ltd vs. Sunita
Devi and others (AIR Online 2025 SC 718) contends
that insurance company to make payment of
compensation to the claimants and thereafter permit it to
recover the same. He placing reliance on the decision of
the Hon’ble Apex Court in the case of Prema and others
vs. Sampathkumar and others (2020 ACJ 2283)
would contend that the cheque issued for renewal of the
policy which got bounced even though return of cheque
was intimated by the insurance company to the owner
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before the accident, it cannot be said that there was no
existence of insurance policy at all and as the claim
petition relates to third party risk, it is fit and proper to
direct the insurance company to pay the compensation
and then recover the same from the owner of the vehicle.
He placing reliance on the decision of the Hon’ble Apex
Court in the case of New India Assurance Co.Ltd vs.
Rula and others (2000) 3 SCC 195 would contend that
subsequent cancellation of insurance policy on the ground
that the cheque through which premium was paid was
dishonored, would not affect the rights of the third party
which had accrued on the issuance of the policy on the
date on which the accident took place. He placing reliance
on the decision of the Hon’ble Apex Court in Oriental
Insurance Co.Ltd vs. Inderjit Kaur and others (1998)
1 SCC 371 would contend that the insurance company
was not absolved of its obligations to third parties under
the policy because it did not receive the premium and its
remedies in this behalf lay against the insured. He placing
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reliance on the decision of Full Bench of this Court in New
India Assurance Co.Ltd., Bijapur by its Divisional
Manager vs. Yallavva and another (ILR 2020 KAR
2239) would contend that even if the policy is void vis-à-
vis third party, the insurer is not completely absolved of its
liability and it has to pay to third party and recover from
the insured the amount paid to third party.
8. Having the heard the learned counsels, the Court
has perused the judgment, award and trial court records.
The following points arise for consideration:
(i) Whether the claimant has made out a
case for enhancement of the
compensation as awarded by the
Tribunal?
(ii) Whether the Tribunal is justified in
saddling the liability on the insurer even
though the cheque paid towards
premium has been dishonored,
intimation of dishonor has been issued
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to the owner and policy has been
cancelled?
On point No.1:
9. The deceased as on the date of accident was aged
32 years. The Tribunal has rightly taken the notional
income of the deceased at Rs.14,000/- p.m. The Tribunal
has not taken into consideration future prospects. Since
the deceased was aged 32 years as on the date of
accident, he is entitled to future prospects at 40% in view
of the decision of the Hon’ble Apex Court in Pranay Sethi
(supra). The Tribunal has rightly applied the multiplier
’16’. In view of the above, the loss of dependency is
calculated as under:
Rs.14,000 + 40% (5,600) = Rs.19,600-50% = Rs.9,800/-
Rs.9,800x12x16=18,81,600/-.
10. The Tribunal has awarded loss of love and
affection in a sum of Rs.60,000/-. The deceased died as a
bachelor leaving behind the claimant/mother. Therefore,
the claimant is entitled to loss of consortium in a sum of
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Rs.40,000/- as against loss of love and affection awarded
in a sum of Rs.60,000/-. The claimant is entitled to funeral
expenses and transportation of dead body in a sum of
Rs.15,000/- as against Rs.25,000/- awarded by the
Tribunal and Rs.15,000/- towards loss of estate as against
Rs.50,000/- awarded by the Tribunal. Therefore, the
claimant is entitled to total compensation under different
heads as under:
Sl.No. Heads Amount in (Rs.)
01. Loss of dependency 18,81,600/-
02. Loss of consortium 40,000/-
03. Funeral expenses and 15,000/-
transportation of dead body
04. Loss of estate 15,000/-
Total 19,51,600/-
11. Therefore, the claimant is entitled to total
compensation of Rs.19,51,600/- as against Rs.14,79,000/-
awarded by the Tribunal. Consequently, the claimant is
entitled to enhanced compensation of Rs.4,72,600/- with
interest @ 6% p.m. from the date of petition till
realisation.
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On Point No.2
12. The owner of the vehicle in order to renew his
policy has issued cheque – Ex.R1 dated 19.06.2019 and
policy has been issued on 19.06.2019 and validity of the
policy is for the period between 19.06.2019 to
18.06.2020. The said cheque has been dishonored on
26.06.2019. The intimation of dishonour is at Ex.R2 and it
is dated 26.06.2019. The reason for dishonour is signature
differs. The cheque Ex.R1 is drawn for Rs.57,600/- and it
is towards the premium. After receipt of the intimation of
dishonour of the cheque, the insurer has sent a letter
dated 28.06.2019 (Ex.R3) to the insured/owner of the
vehicle by registered post intimating that the policy is
treated as void from inception due to dishonour of the
cheque paid towards the premium. The said letter – Ex.R3
dated 28.06.2019 has been sent to the insured/owner of
the vehicle by registered post acknowledgement due. The
postal acknowledgment is at Ex.R4 and it has been served
on the addressee on 03.07.2019. Even though the said
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registered article is served on one Gayathri but the
address of the owner of the vehicle/insured on the postal
acknowledgment has not been disputed. Therefore, there
is deemed service of registered article addressed to the
owner/insured.
13. The said intimation of dishonour of the cheque
paid towards premium was prior to the accident i.e.
28.06.2019 served on 03.07.2019. The accident occurred
on 01.09.2019. The Hon’ble Apex Court has considered a
similar situation in the case of Deddappa(supra) wherein
it is observed as under:
“9. Before embarking on the said question we may
notice the admitted facts. The second respondent
who was driving the vehicle was also the owner
thereof. The insurance policy was to remain valid for
the period 17-10-1997 to 16-10-1998. Respondent 3
issued a cheque on 15-10-1997. The said cheque was
presented for encashment before Syndicate Bank.
The Bank by its letter dated 21-10-1997 issued a
“return memo” disclosing dishonour of the cheque
with the remarks “fund insufficient”. The first
respondent thereupon cancelled the policy of
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insurance. The said information was communicated to
Respondent 2. An intimation thereabout was also
given to RTO concerned.
10. Before the Motor Accidents Claims Tribunal, the
insurer has also examined witnesses, inter alia, to
prove cancellation of the policy of insurance, postal
acknowledgement showing intimation thereabout
which was served to the insured and a copy of the
letter dated 6-11-1997 issued to RTO and the memo
issued by the Bank as regards dishonour of the
cheque, etc.
11. Indisputably, the accident had occurred on 6-2-
1998, that is, much after communication of
cancellation of the policy.
12. Keeping in view the aforementioned backdrop of
all events, we may notice the legal issues addressed
before us by the learned counsel.
13. Section 147 of the Act obligates the owner of the
motor vehicle to get the vehicle insured insofar as the
claim of third party is concerned. The Act does not
deal with contract of insurance as such. Contract of
insurance is governed by the Insurance Act, 1938
(for short “the 1938 Act”).
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14. Section 64-VB of the 1938 Act provides that no
risk is to be assumed unless premium is received in
advance in the following terms:
“64-VB. No risk to be assumed unless
premium is received in advance.–(1) No
insurer shall assume any risk in India in
respect of any insurance business on which
premium is not ordinarily payable outside
India unless and until the premium payable is
received by him or is guaranteed to be paid by
such person in such manner and within such
time as may be prescribed or unless and until
deposit of such amount as may be prescribed,
is made in advance in the prescribed manner.
(2) For the purposes of this section, in the
case of risks for which premium can be
ascertained in advance, the risk may be
assumed not earlier than the date on which
the premium has been paid in cash or by
cheque to the insurer.
Explanation.–Where the premium is tendered
by postal money order or cheque sent by
post, the risk may be assumed on the date on
which the money order is booked or the
cheque is posted, as the case may be.
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(3) Any refund of premium which may
become due to an insured on account of the
cancellation of a policy or alteration in its
terms and conditions or otherwise shall be
paid by the insurer directly to the insured by a
crossed or order cheque or by postal money
order and a proper receipt shall be obtained
by the insurer from the insured, and such
refund shall in no case be credited to the
account of the agent.
(4) Where an insurance agent collects a
premium on a policy of insurance on behalf of
an insurer, he shall deposit with, or dispatch
by post to, the insurer, the premium so
collected in full without deduction of his
commission within twenty-four hours of the
collection excluding bank and postal holidays.”
The said provision, therefore, in no
unmistakable term provides for issuance of a
valid policy only on receipt of payment of the
premium.
15. The question came up for consideration before
this Court in Inderjit Kaur [(1998) 1 SCC 371]
wherein it was opined that a policy of insurance
which is issued in public interest would prevail over
the interest of the insurance company. In that case a
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bus met with an accident. The policy of insurance
was issued on 30-11-1989. A letter stating that the
cheque had been dishonoured was sent by the
Insurance Company to the insurer on 23-1-1990. The
premium was paid in cash on 2-5-1990. The accident
took place on 19-4-1990. Despite noticing Section
64-VB of the 1938 Act, but having regard to the
underlying public policy behind the statutory scheme
in respect of insurance as evidenced by Section 147
and Section 149 of the Act and in particular having
regard to the fact that policy of insurance to cover
the bus without receiving the premium had already
been issued, this Court held that the Insurance
Company was liable to indemnify the insured.
16. We may, however, notice that in terms of sub-
section (5) of Section 147 and sub-section (1) of
Section 149 of the Act, the Insurance Company
became liable to satisfy awards of compensation in
respect thereof, notwithstanding its entitlement to
avoid or cancel the policy for the reason that the
cheque issued for payment of premium thereon had
not been honoured.
17. The said question, however, was left open in
Inderjit Kaur [(1998) 1 SCC 371]. The said decision
proceeded on the basis that it was the Insurance
Company which was responsible for placing itself in
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the said predicament as it had issued a policy of
insurance upon receipt only of a cheque towards the
premium in contravention of the provisions of Section
64-VB of the 1938 Act. The public interest in a
situation of that nature and applying the principle of
estoppel, this Court held, would prevail over the
interest of the Insurance Company.
18. The ratio of the said decision was, however,
noticed by this Court in New India Assurance Co. Ltd.
v. Rula [(2000) 3 SCC 195 : 2000 SCC (Cri) 601]. It
was held that ordinarily a liability under the contract
of insurance would arise only on payment of
premium, if such payment was made a condition
precedent for taking effect of the insurance policy but
such a condition which is intended for the benefit of
the insurer can be waived by it. It was opined: (SCC
p. 200, para 13)
“13. … If, on the date of accident, there
was a policy of insurance in respect of the
vehicle in question, the third party would
have a claim against the Insurance Company
and the owner of the vehicle would have to
be indemnified in respect of the claim of that
party. Subsequent cancellation of the
insurance policy on the ground of non-
payment of premium would not affect the
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rights already accrued in favour of the third
party.”
The dicta laid down therein clarifies that if on
the date of accident the policy subsists, then only
the third party would be entitled to avail the
benefit thereof.
19. Almost an identical question again came up
for consideration before this Court in National
Insurance Co. Ltd. v. Seema Malhotra [(2001) 3 SCC
151 : 2001 SCC (Cri) 443] and a Division Bench
noticed both the aforementioned decisions and
analysed the same in the light of Section 64-VB of
the 1938 Act. It was held: (SCC pp. 156-57, paras
17-20)
“17. In a contract of insurance when the
insured gives a cheque towards payment of
premium or part of the premium, such a
contract consists of reciprocal promise. The
drawer of the cheque promises the insurer
that the cheque, on presentation, would yield
the amount in cash. It cannot be forgotten
that a cheque is a bill of exchange drawn on
a specified banker. A bill of exchange is an
instrument in writing containing an
unconditional order directing a certain person
to pay a certain sum of money to a certain
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person. It involves a promise that such
money would be paid.
18. Thus, when the insured fails to pay
the premium promised, or when the cheque
issued by him towards the premium is
returned dishonoured by the bank concerned
the insurer need not perform his part of the
promise. The corollary is that the insured
cannot claim performance from the insurer in
such a situation.
19. Under Section 25 of the Contract Act
an agreement made without consideration is
void. Section 65 of the Contract Act says that
when a contract becomes void any person
who has received any advantage under such
contract is bound to restore it to the person
from whom he received it. So, even if the
insurer has disbursed the amount covered by
the policy to the insured before the cheque
was returned dishonoured, the insurer is
entitled to get the money back.
20. However, if the insured makes up
the premium even after the cheque was
dishonoured but before the date of accident it
would be a different case as payment of
consideration can be treated as paid in the
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order in which the nature of transaction
required it. As such an event did not happen
in this case, the Insurance Company is legally
justified in refusing to pay the amount
claimed by the respondents.”
20. A contract is based on reciprocal promise.
Reciprocal promises by the parties are condition
precedents for a valid contract. A contract
furthermore must be for consideration.
21. In today’s world payment made by cheque is
ordinarily accepted as valid tender. Section 64-VB of
the 1938 Act also provides for such a scheme.
22. Payment by cheque, however, is subject to its
encashment. In Damadilal v. Parashram [(1976) 4
SCC 855] this Court observed: (SCC pp. 865-66,
para 13)
“13. On the ground of default, it is not
disputed that the defendants tendered the
amount in arrears by cheque within the
prescribed time. The question is whether this
was a lawful tender. It is well established that
a cheque sent in payment of a debt on the
request of the creditor, unless dishonoured,
operates as valid discharge of the debt and, if
the cheque was sent by post and was met on
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presentation, the date of payment is the date
when the cheque was posted.”
(emphasis supplied)
23. Recently, again in New India Assurance Co.
Ltd. v. Harshadbhai Amrutbhai Modhiya [(2006) 5
SCC 192 : 2006 SCC (L&S) 973] although in the
context of the Workmen’s Compensation Act, 1923,
Balasubramanyan, J. opined: (SCC p. 199, para 24)
“24. … It is not brought to our notice that
there is any other law enacted which stands in
the way of an insurance company and the
insured entering into a contract confining the
obligation of the insurance company to
indemnify to a particular head or to a
particular amount when it relates to a claim
for compensation to a third party arising
under the Workmen’s Compensation Act. In
this situation, the obligation of the insurance
company clearly stands limited and the
relevant proviso providing for exclusion of
liability for interest or penalty has to be given
effect to. Unlike the scheme of the Motor
Vehicles Act the Workmen’s Compensation Act
does not confer a right on the claimant for
compensation under that Act to claim the
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payment of compensation in its entirety from
the insurer himself.”
It was further observed: (SCC p. 199, para 23)
“23. The law relating to contracts of
insurance is part of the general law of contract.
So said Roskill, L.J. in Cehave NV v. Bremer
Handelsgesellschaft mb H, The Hansa Nord
[1976 QB 44 : (1975) 3 WLR 447 : (1975) 3
All ER 739 (CA)] . This view was approved by
Lord Wilberforce in Reardon Smith Line Ltd. v.
Hansen-Tangen [(1976) 1 WLR 989 : (1976) 3
All ER 570 (HL)] (All ER p. 576h) wherein he
said:
‘It is desirable that the same legal
principles should apply to the law of contract
as a whole and that different legal principles
should not apply to different branches of that
law.’A contract of insurance is to be construed in
the first place from the terms used in it, which
terms are themselves to be understood in their
primary, natural, ordinary and popular sense.
(See Colinvaux’s Law of Insurance, 7th Edn.,
Para 2-01.) A policy of insurance has therefore
to be construed like any other contract. On a
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construction of the contract in question it is
clear that the insurer had not undertaken the
liability for interest and penalty, but had
undertaken to indemnify the employer only to
reimburse the compensation the employer was
liable to pay among other things under the
Workmen’s Compensation Act. Unless one is in
a position to void the exclusion clause
concerning liability for interest and penalty
imposed on the insured on account of his
failure to comply with the requirements of the
Workmen’s Compensation Act of 1923, the
insurer cannot be made liable to the insured
for those amounts.”
24. We are not oblivious of the distinction
between the statutory liability of the insurance
company vis-à-vis a third party in the context of
Sections 147 and 149 of the Act and its liabilities in
other cases. But the same liabilities arising under a
contract of insurance would have to be met if the
contract is valid. If the contract of insurance has
been cancelled and all concerned have been
intimated thereabout, we are of the opinion, the
insurance company would not be liable to satisfy the
claim.
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25. A beneficial legislation as is well known
should not be construed in such a manner so as to
bring within its ambit a benefit which was not
contemplated by the legislature to be given to the
party. In Regional Director, Employees’ State
Insurance Corporation, Trichur v. Ramanuja Match
Industries [AIR 1985 SC 278], this Court held : (SCC
pp. 224-25, para 10)
“10. …..We do not doubt that beneficial
legislations should have liberal construction
with a view to implementing the legislative
intent but where such beneficial legislation
has a scheme of its own there is no warrant
for the Court to travel beyond the scheme
and extend the scope of the statute on the
pretext of extending the statutory benefit
to those who are not covered by the
scheme.”
We, therefore, agree with the opinion of the
High Court.
26. However, as the appellant hails from the
lowest strata of society, we are of the opinion that
in a case of this nature, we should, in exercise of
our extra-ordinary jurisdiction under Article 142 of
the Constitution of India, direct the Respondent
No.1 to pay the amount of claim to the appellants
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herein and recover the same from the owner of the
vehicle viz., Respondent No.2, particularly in view of
the fact that no appeal was preferred by him. We
direct accordingly.”
14. In view of the above, as the contract of insurance
has been cancelled and the insured has been intimated
about the same, the insurance company would not be
liable to satisfy the claim. It is pertinent to note that it is
observed by the Hon’ble Apex Court at para 26 of the
judgment “in exercise of our extraordinary jurisdiction
under Article 142 of the Constitution of India, direct
Respondent No.1 to pay the amount of claim to the
appellants herein and recover the same from the owner of
the vehicle viz. Respondent No.2.” Such a direction cannot
be issued either by the claims Tribunal or even by this
Court.
15. Following the observations of the Hon’ble Apex
Court, this Court is of the opinion that the insurance
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company is not liable to pay any amount of compensation
to the claimant.
16. The Division Bench of this Court in the case of
HDFC Ergo General Insurance Company Limited vs.
Mohammed Nawaq (MFA No.8329/2023 DD
27.06.2024) has considered a similar case and observed
as under:
7. Section 64VB of the Insurance Act
clearly states that unless the premium is
received, the risk would not be covered. In the
Regulations issued by Insurance Regulation
and Development Authority, regulation No.4
clearly states that:
“4. Commencement of Risk: In all cases of
risks covered by the policies issued by an
insurer, the attachment of risk to an insurer
will be in consonance with the terms of
Section 64VB of the Act and except in the
cases where the premium has been paid in
cash, in all other cases the insurer shall be on
risk only after the receipt of the premium by
the insurer.”
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8. Now, it becomes clear that the cheque
issued by 2nd respondent was dishonoured.
The policy issued by insurance company was
cancelled for non-receipt of premium amount
much before the accident. Therefore, on the
date of accident, there was no insurance
coverage to the offending vehicle. In this view,
the Tribunal has erred in fastening the liability
on the insurance company……
17. The Hon’ble Apex Court considering the earlier
decisions has elaborately considered the liability of the
insurance company in Deddappa (supra). In that case
also, the Hon’ble Apex Court has exercised its extra
ordinary jurisdiction under Article 142 of Constitution of
India directing the insurer to pay the amount of
compensation to the claimants and recover from the
owner of the vehicle.
18. The insurer has not at all received any
premium. Therefore, it cannot be directed to pay the
compensation to the claimants and then recover from the
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owner. The liability is on the owner to pay the
compensation since the policy issued by the insurer is
intimated to have been void/cancelled since premium has
not been collected due to dishonor of cheque. The pay
and recover can be ordered only if there is violation of
conditions by the insured. Even in the case relied by the
learned counsel in the case of Sunita Devi (supra) the
Apex Court has not ordered for pay and recover and
directed the claimants to recover from the owner.
19. The Hon’ble Apex Court in
Lakshmamma(supra) has ordered payment of
compensation by the insurer and recover the same from
the owner on the ground that the intimation of dishonour
has not been given to the insured/owner of the vehicle
prior to the accident. In the case on hand, the insurer has
intimated dishonour of the cheque paid towards the
premium prior to the accident. In view of the above, the
Tribunal has erred in fastening the liability of payment of
the compensation amount on the insurer. Therefore, the
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liability fastened on the insurer requires to be set aside.
Point No.2 is answered, accordingly.
In view of the above, the following:
ORDER
(i) The appeal filed by the insurer in MFA
No.1255/2023 is allowed.
(ii) The liability saddled on the insurer to
pay the compensation to the claimant is set
aside.
(iii) The appeal filed by the claimant in
MFA No.2143/2023 is allowed in part.
(iv) The claimant is entitled to enhanced
compensation of Rs.4,72,600/- with interest
@ 6% p.a from the date of petition till
realisation.
(v) The respondent No. 2 / owner of the
vehicle is liable to pay the compensation
awarded by the Tribunal and enhanced
compensation awarded by this Court to the
claimant with interest.
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(vi) The insurer is entitled to get back the
amount deposited. Hence, office is directed to
refund the amount deposited by the insurer to
the insurer.
Sd/-
(SHIVASHANKAR AMARANNAVAR)
JUDGE
DKB
List No.: 1 Sl No.: 68
Ct.sm
