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TMI Blog2001 (2) TMI 917X X X X Extracts X X X X X X X X Extracts X X X X ..... ble in such a situation to honour the contract of insurance ? There is no dispute that the insurer is liable as against third parties because it is covered by the statutory provisions contained in Chapter X of the Motor Vehicles Act, 1988. But the insurer vehemently disputed the liability when the claim is made by the insured himself or his legal heirs, without any third party being involved. To avoid confusion we may point out that the insurance company has no dispute that the claims, if any, made by the kith and kin of the insured for the injuries sustained by them in the accident including the claims made by the legal representatives of the deceased in such accident would also be treated as third party claims. 2. A Division Bench of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he company is not at risk." 5. The respondents who are the widow and children of the insured who died in the accident, filed a claim for the loss of the vehicle. When the claim was repudiated, the respondents moved the State Consumer Protection Commission. As per a judgment pronounced by the Commission the said claim was rejected. The judicial member of the State Commission, who delivered the judgment, has stated thus : "In so far as the facts of the present case are concerned, it is a settled law that the insurer even if it had issued a cover note is entitled to cancel the policy if it fails to cash the cheque for premium. The concept of contract in essence envisages a proposal, acceptance and passing of consideration. In the absence of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for this reason the argument addressed on behalf of the insurance company based on section 64VB of the Insurance Act, 1938, also does not hold good. There was nothing which prevented the insurance company to have informed the appellants that the policy stood cancelled from the date of its issuance, and as such it is not liable for the payment of any compensation." 7. The direction that the insurance company can now deduct the premium amount from the compensation to be fixed is no solace to the insurer. The essence of the insurance business is the coverage of risk by undertaking to indemnify the insured against loss or damage. They agree to pay the damages arising out of any accident by taking a chance that no accident might happen. The mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... policy of insurance to cover the bus without receiving the premium therefor. By reason of the provisions of sections 147(5) and 149(1) of the Motor Vehicles Act, the appellant became liable to indemnify third parties in respect of the liability which that policy covered and to satisfy awards of compensation in respect thereof notwithstanding its entitlement (upon which we do not express any opinion) to avoid or cancel the policy for the reason that the cheque issued in payment of the premium thereon had not been honoured." (p. 311) Thus, the three-judge Bench refrained from expressing any opinion on the question of the insurer's entitlement to avoid or cancel the policy as against the insured when the cheque issued for payment of the prem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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." 12. Sub-section (1) is not applicable to cases in which premiu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tracted below : "Effect of default as to that promise which should be first performed, in contract consisting of reciprocal promises.-When a contract consists of reciprocal promises, such that one of them cannot be performed, or that its performance cannot be claimed till the other has been performed, and the promiser of the promise last mentioned fails to perform it, such promiser cannot claim the performance of the reciprocal promise, and must make compensation to the other party to the contract for any loss which such other party may sustain by the non-performance of the contract." 12. In a contract of insurance when an insurer gives a cheque towards payment of premium or part of the premium, such a contract consists of reciprocal prom ..... X X X X Extracts X X X X X X X X Extracts X X X X
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