Justice K. Vinod Chandran, Justice NV Anjaria, Supreme Court
Insurance Company Can Be Asked To Pay Compensation To Motor Accident Claimants & Thereafter Recover The Same In Case Of Policy Cancellation: Supreme Court
|The Supreme Court was considering an appeal preferred by the Insurance Company, challenging the judgment passed in a Motor Accident Claims Appeal by the Delhi High Court.
The Supreme Court has affirmed that cancellation of an insurance policy issued in favor of the third party for covering third party risk, because of bouncing of cheque for premium or non-payment of premium, would absolve the insurer from liability to pay the motor accident compensation. The Court can direct the insurance company to make payment of compensation to the claimants and thereafter to permit it to recover the same.
The Apex Court was considering an appeal preferred by the Insurance Company, challenging the judgment passed in a Motor Accident Claims Appeal by the Delhi High Court, which confirmed the award of the Motor Accident Claims Tribunal.
The Division Bench of Justice K. Vinod Chandran and Justice N.V. Anjaria held, “From the facts on record and more particularly in view of the decisions of this Court in Deddappa (supra) and United India Insurance Company Ltd. (supra) it could be immediately seen that even as this Court has underscored the proposition that cancellation of insurance policy issued in favour of the third party for covering third party risk, because of bouncing of cheque for premium or non-payment of premium, would in law, absolve the insurer from liability to pay the compensation, once the insurer has intimated the cancellation to the parties concerned, in the final directions issued, the Court thought it fit to direct the insurance company to make payment of compensation to the claimants and thereafter to permit it to recover the same.”
AOR Amit Kumar Singh represented the Appellant while AOR Sudhir Naagar represented the Respondent.
Factual Background
One Dheeraj Singh died in an accident which occurred in the year 2005. He was driving a motorcycle along with a pillion rider. The motorcycle was hit from behind by a speeding truck-offending vehicle. The Tribunal, taking into account the relevant aspects, including that the deceased was 36 years old and had been serving as a Computer Engineer, awarded a total compensation of Rs 8,23,000 under different heads.
The defence of the appellant-Insurance Company before the Tribunal as well as before the High Court was that the policy of insurance issued in relation to the offending vehicle was cancelled by it and the owner as well as the Regional Transport Officer were informed about it. However, the Tribunal directed the appellant-insurance company to pay the compensation in the first instance and accorded it the right to recover the amount from the Owner. The High Court was of the view that no ground existed to interfere with the judgment and award of the Tribunal. Aggrieved thereby, the Insurance Company approached the Apex Court.
Reasoning
The Bench found that the accident took place on August 22, 2005, and the cheque towards the premium was dishonored and intimation was given vide a letter dated May 4, 2005. There was a gap of more than three months from the date when the insurance policy was liable to be treated as cancelled and the date when the accident took place.
It was also noticed that the appellant-Insurance Company had already deposited one-half of the total awarded compensation with interest and the claimants had withdrawn the said amount.
The Bench thus said, “Depositing of the compensation amount by the Insurance Company as above could be well said to be conforming the law laid down by this Court in Deddappa (supra) and in United India Insurance Company (supra). The Insurance Company has deposited the 50% amount of compensation with interest as awarded, the same is also released and the respondent-claimants have received them, in larger interest of justice to all parties, no recovery deserves to be permitted for the said amount deposited and withdrawn from the claimants. It would be not only harsh but would amount to setting the clock back.”
The Bench held that 50% amount which was already paid to the claimants need not be touched. The Bench ordered that there should be no recovery from the claimants in respect of the said half part of the compensation. “The appellant – Insurance Company, however, shall be at liberty to recover the said 50% amount along with interest deposited by it as above and received by the claimants as above, from the owner of the offending vehicle in accordance with law. As far as the balance of 50% amount along with interest is concerned, which remains, the claimants shall be entitled to recover the same from the owner of the offending vehicle in accordance with law”, it held.
Cause Title: National Insurance Company Limited v. Sunita Devi & Ors. (Neutral Citation: 2025 INSC 951)
Appearance
Appellant: AOR Amit Kumar Singh, Advocates K Enatoli Sema, Chubalemla Chang, Prang Newmai
Respondent: AOR Sudhir Naagar, Advocates Aditya Chauhan, Pradeep Kumar Shukla, Sameer Nandwani, Syed Ahmed Saud, Mohd. Parvez Dabas, Uzmi Jameel Husain, Daanish Ahmed Syed, Aqib Baig, Varun Chugh, Mohd. Shahib, AOR M/S. Shakil Ahmad Syed