Firm can't deny claim if premium cheque bounces: MACT

Ramkrishan Upadhyay

Chandigarh, June 10

An insurance company is liable to pay compensation in an accident case even if the premium cheque of the policyholder bounces. In one of the significant judgments, the MACT, Chandigarh, has decided a case in favour of a third party after rejecting the arguments of the insurance company that it is not liable to pay the compensation as the policy was cancelled soon after the cheque given for the premium bounced.

Rajender Singh and his wife Badi Raja have filed a claim petition under Section 166 of the Motor Vehicles Act for the compensation through advocate AP Singh after their son died in an accident. They said their son, Deepesh Raja Bundela, was going on his motorcycle to Sector 66, Mohali, from Gurdwara Sahib Sahida on February 16, 2018. When he reached the Sector 66/67 light point, a car jumped the red light and rammed into his motorcycle. He died due to the injuries he suffered in the accident.

Upon notice, the driver and the owner of the car did not appear and was proceeded ex-parte. The insurance company said the claimant was not entitled for the claim as the company cancelled the policy of the car owner after the cheque bounced. The company said the car owner deposited the cheque dated August 17, 2017 for Rs 20,920 to get the vehicle insured with United India Insurance Company Limited for the policy commencing from August 18, 2017. The cheque was accepted subject to the condition that the policy stands cancelled and becomes void in case the cheque was dishonoured.

The cheque was presented for encashment, but it returned unpaid due to insufficient funds. Thereafter, the insurance company sent a registered letter dated August 24, 2017, to the owner intimating him that for want of encashment of cheque, the insurance cover stands cancelled and he was asked to return the policy certificate. It has been argued that as the insurance policy was not enforce on the date of the accident, the insurance company was not liable to pay the compensation amount.

AP Singh, counsel for the claimant, while relying on a judgment of the Supreme Court in a case, argued that whether the premium had been paid or not was not the concern of the third party. It was concerned with the fact that there was a policy issued in respect of the vehicle involved in the accident and it was on the basis of this policy that the claim could be maintained by the third party against the insurer.

After hearing the arguments, Jagdeep Sood, presiding officer, Motor Accident Claims Tribunal, said the claimants are held entitled for a compensation of Rs 31,45,000. The insurance company should pay the award at the first instance and then recover the compensation from the driver and the owner later.

The Tribunal said the insurance company could not be absolved of its obligation to third parties under the policy because it did not receive the premium. A policy of insurance being a public interest concept prevails over the interests of the insurance company.