- 1 - NC: 2025:KHC-D:3648 MFA No. 24732 of 2011 IN THE HIGH COURT OF KARNATAKA, DHARWAD BENCH DATED THIS THE 21ST DAY OF FEBRUARY, 2025 BEFORE THE HON'BLE MR. JUSTICE HANCHATE SANJEEVKUMAR MISCELLANEOUS FIRST APPEAL NO.24732 OF 2011 (MV-I) BETWEEN: SRI. P. YADAVA RAO S/O. MALLAIAH, AGE: 37 YEARS, OCC: BUSINESS, R/O: TILAK NAGAR, GUNTAKAL, ANDHRA PRADESH STATE. …APPELLANT (BY SRI HANUMANTHAREDDY SAHUKAR, ADVOCATE) AND: 1. SRI. RAMAIAH S/O. SRIRAMULU, AGE: MAJOR, OCC: DRIVER OF LORRY NO.AP-04/V-5190, R/O: DUGGANAGARI PALLE VIMAL MANDALAM, DIST: CUDDAPAH, ANDHRA PRADESH STATE. 2. SRI. NAGARJUNA REDDY S/O. SREERAMI REDDY, DOOR NO.3/262 VEMPALLE ROAD, YERRAGUNTLA, YERRAGUNTLA CUDDAPAH, ANDHRA PRADESH STATE, PINCODE-516309. 3. THE ICICI LAMBARD GENERAL INSURANCE CO. LTD., BY ITS MANAGER MAYURA COMPLEX, DOUBLE ROAD, BELLARY. …RESPONDENTS (BY SRI NAGARAJ C.KOLLOORI, ADVOCATE FOR R3; R1-SERVICE OF NOTICE DISPENSED WITH; NOTICE TO R2 IS SERVED) THIS MISCELLANEOUS FIRST APPEAL IS FILED UNDER SECTION 173 (1) OF M.V. ACT, PRAYING TO, THE JUDGMENT AND AWARD DATED 28.08.2010 IN MVC NO.6/2009 PASSED BY THE FAST TRACK COURT-I MACT-IX, BELLARY, MAY KINDLY BE SET ASIDE ONLY IN SO FAR IT PERTAINS TO THE REJECTION OF THE CLAIM OF THE APPELLANT AND ALLOW THE APPEAL AS PRAYED FOR WITH COST IN THE INTEREST OF JUSTICE AND EQUITY. R Digitally signed by MALLIKARJUN RUDRAYYA KALMATH Location: HIGH COURT OF KARNATAKA - 2 - NC: 2025:KHC-D:3648 MFA No. 24732 of 2011 THIS MISCELLANEOUS FIRST APPEAL, COMING ON FOR FURTHER ARGUMENTS, THIS DAY, THE COURT DELIVERED THE FOLLOWING: ORAL JUDGMENT (PER: THE HON'BLE MR. JUSTICE HANCHATE SANJEEVKUMAR) This appeal is filed by the claimant challenging the judgment and award dated 28.08.2010, passed in MVC No.6/2009, by the learned Fast Track Court-I MACT-IX, Bellary (for short, ‘Tribunal‘), questioning the judgment and award passed by the Tribunal insofar as fastening of liability on respondent No.2/owner of the lorry bearing registration No.AP- 04/V-5190 by exonerating the Insurance Company. 2. It is the case of claimant/appellant that on 22.07.2007, when claimant was going in the Tata Indigo Car bearing registration No.AP-10/AJ-80 from Hospete to Guntakal and at about 11.30 a.m., at Chellagurki Cross, the driver of lorry bearing registration No.AP-04/V-5190 came with high speed and in a rash and negligent manner and dashed the car from hind side. Due to which, the car was damaged. Thereafter, claimant spent of Rs.3 lakhs for getting repair of car bearing registration No.AP-10/AJ-80. Therefore, filed the claim petition for claiming damages. - 3 - NC: 2025:KHC-D:3648 MFA No. 24732 of 2011 3. The Tribunal has awarded a compensation of Rs.45,000/- along with interest at the rate of 6% per annum, by fastening liability on respondent No.2/owner of lorry, to pay compensation by exonerating the Insurance Company on the reason that insurance policy was cancelled by the Insurance Company, since cheque was dishonoured and an intimation of cancellation of insurance policy was sent to the owner of lorry. Therefore, exonerated the Insurance Company and fastened liability on the owner of lorry. 4. Learned counsel for the appellant/claimant has preferred the appeal and argued that the Insurance Company has not intimated cancellation of insurance policy as per law and there is no evidence on part of Insurance Company to prove that intimation of cancellation of insurance policy was received by the owner of lorry. Therefore, unless and until it is proved that the owner of lorry has received an intimation of cancellation of insurance policy, till then, the Insurance Company is liable to indemnify the owner and pay compensation to the claimant. Further, the claimant was third party, therefore, it will be burden on the Insurance Company to - 4 - NC: 2025:KHC-D:3648 MFA No. 24732 of 2011 prove that intimation was reached and received by the owner of lorry. But in the present case, the Insurance Company has not proved that owner of lorry has received an intimation of cancellation of insurance policy. The learned counsel for the appellant places reliance on the judgment of this Court in the case of SRI.GANESH CHELUVADI VS. SRI.PREMKUMAR S/O BHEMA NAIK AND ANOTHER, passed in MFA No.21747/2009, decided on 12.08.2015 and also places reliance on the judgment of this Court in the case of THYAGARAJ Vs. SMT.SIDDAMMA AND M/S. BAJAJ ALIANZ GENERAL INSURANCE COMPANY LIMITED, REP. BY ITS BRANCH MANAGER AND ANOTHER - LAWS (KAR) 2014 1 118. 5. On the other hand, learned counsel for the Insurance Company submitted that upon dishonour of cheque, the Insurance Company has sent an intimation letter dated 22.05.2007, under certificate of posting as per Ex.R1 and Ex.R2. Therefore, the Insurance Company has discharged its burden in intimating the owner regarding cancellation of insurance policy on 22.05.2007 itself and subsequently on 22.05.2007 the accident was occurred. Therefore, the - 5 - NC: 2025:KHC-D:3648 MFA No. 24732 of 2011 Insurance Company is not liable to indemnify the owner of lorry. He further argued with reference to Section 64VB of the Insurance Act, 1938 and Rule 4 of the Insurance Regulatory and Development Authority (Manner of receipt of premium) Regulations, 20021 (for short, ‘Regulation Act’), that the Insurance Company has discharged its burden of intimating cancellation of insurance policy on 22.05.2007 itself by post and it is burden on the owner to prove that he has not received intimation of cancellation of insurance policy, but owner has remained as exparte. Therefore, the Tribunal is justified in passing the judgment and award by fastening liability on the owner of lorry. 6. Upon hearing submissions of learned counsel for both the parties and perusal of records, the point that arise for my consideration is as follows: “Whether, under the facts and circumstances involved in the case, the Insurance Company is liable to be exonerated 1 Vide Notification F.No.IRDA/Reg./10/2002, dated 16th October, 2002, published in the Gazette of India, Extra, Pt. III, Sec.4, dated 17th October, 2002. - 6 - NC: 2025:KHC-D:3648 MFA No. 24732 of 2011 on the reason that intimation of cancellation of insurance policy was discharged through Under Certificate of Posting and it can be construed as the said intimation was received by the owner of offending vehicle?” 7. The undisputed facts are that claimant’s car i.e., Tata Indigo Car bearing registration No.AP-10/AJ-80 was hit by the lorry bearing registration No.AP-04/V-5190 from hind side on 22.07.2007 and the said Tata Indigo Car was damaged. It is also not disputed fact that respondent No.2/owner of lorry has paid premium towards purchase of insurance policy through a cheque commencing from 12.04.2007 to 11.04.2008. It is not disputed that the Insurance Company has issued a cover note to the owner of lorry after receiving the cheque. Thereafter, the said cheque got dishonoured and returned to the Insurance Company as ‘insufficient fund’. Then, on 22.05.2007, as per Ex.R1, the Insurance Company has issued intimation to the owner of lorry ‘Under Certificate of Posting (UCP)’ as per Ex.R2. Therefore, in this context, the Insurance Company is contending that it has dispatched an intimation of cancellation of insurance policy, therefore sought for exoneration of its liability. In this regard, the mode of intimating cancellation of - 7 - NC: 2025:KHC-D:3648 MFA No. 24732 of 2011 insurance policy by certificate of posting as contended by the Insurance Company whether is it sufficient to construe effective intimation is to be considered in the back drop of statutes in this regard. 8. Section 64VB of the Insurance Act, 1938 reads as under: “64VB. 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. (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 - 8 - NC: 2025:KHC-D:3648 MFA No. 24732 of 2011 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 despatch 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. (5) The Central Government may, by rules, relax the requirements of sub-section (1) in respect of particular categories in insurance policies. (6) The Authority may, from time to time, specify, by the regulations made by it, the manner of receipt of premium by the insurer.” 9. As per explanation of Sub Section 2 Section 64VB of the Insurance Act, 1938, 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. This is in the context that when cheque towards payment of premium is posted, but in the present case, it is not disputed that respondent No.2/owner of lorry has issued the cheque towards payment of premium and is received by the Insurance Company, then the risk was commenced. 10. The Regulation 4 of the Insurance Regulatory and Development Authority (Manner of Receipt of Premium) - 9 - NC: 2025:KHC-D:3648 MFA No. 24732 of 2011 Regulations, 2002 (the Regulation 2002), which reads as follows: “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. Provided that in the case of a policy of general insurance that where the remittance made by the proposer or the policy holder is not realized by the insurer, the policy shall be treated as void ab-initio: Provided further that in the case of a policy of life insurance, the continuance of the risk or otherwise shall depend on the terms and conditions of the policy already entered into.” 11. The Regulation 2002 stipulates about commencement of risk in terms of Section 64VB of the Insurance Act, 1938. Therefore, soon after handing over of cheque to the insurance company towards purchase of insurance policy, then the commencement of risk starts, unless otherwise, in the context stated in Section 64VB of the Insurance Act, 1938 and in the Regulation 2002. - 10 - NC: 2025:KHC-D:3648 MFA No. 24732 of 2011 12. In case, cheque is dishonoured, then, until the time the owner receives intimation of cancellation of insurance policy, the risk is continued. Just because, cheque is dishonoured, that cannot ceases continuance of risk unless intimation of cancellation of risk is received by the insured or such intimation reaches the insured. Therefore, it is burden on the insurance company to send such intimation of cancellation of insurance policy through post. 13. Rule 10 of Motor Vehicles (Third Party Insurance) Rules, 1946 stipulates as follows: “10. Cancellation or suspension of certificate or cover-note When a policy of insurance or cover-note is cancelled or suspended by an insurer, the insurer shall forthwith inform the policy holder of such cancellation or suspension, by post to the latest address of the policy holder recorded in the records of the insurer.” 14. Therefore, when policy of insurance or cover-note is cancelled or suspended by an insurer, the insurer shall forthwith inform the policy holder of such cancellation or suspension, ‘by post’ to the latest address of the policy holder. Therefore, it is bounden duty of the insurance company - 11 - NC: 2025:KHC-D:3648 MFA No. 24732 of 2011 immediately send information/intimation to the policy holder/owner of the vehicle of such cancellation. In the present case, the insurance company is claiming that on 22.05.2007 as per Ex.R-1, intimation of cancellation of insurance policy was forwarded to respondent No.2/owner of lorry who is policy holder Under Certificate of Posting. In this context, learned counsel for insurance company argued that by sending the intimation of cancellation of insurance policy Under Certificate of Posting is sufficient to hold that the insurance company has discharged its burden of making intimation to the respondent No.2/owner of lorry. Therefore, argued insurance company is not liable. 15. Then, the question comes when such intimation of cancellation of insurance policy is sent to the policy holder/owner of vehicle by post, then, what is the meaning of sending intimation through ‘post’ is to be considered under the provisions of Section 27 of the General Clauses Act. Section 27 of the General Clauses Act, reads as follows: “27. Meaning of service by post.—Where any Central Act or Regulation made after the commencement of this Act authorizes or requires any document to be served by post, whether the expression “serve” or either of the expressions - 12 - NC: 2025:KHC-D:3648 MFA No. 24732 of 2011 “give” or “send” or any other expression is used, then, unless a different intention appears, the service shall be deemed to be effected by properly addressing, pre-paying and posting by registered post, a letter containing the document, and, unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post. 16. This Court in the case of THYAGARAJ v. SMT. SIDDAMMA & ANROTHER reported in LAWS(KAR) 2014 1 118, has held that when the cover note is cancelled as per Rule 10 of Motor Vehicles (Third Party Insurance), Rules, 1946, the insurance company was supposed to intimate the same under registered post under Section 27 of the General Clauses Act, 1897, which is not being complied with by the insurer. 17. As per this Section 27 of the General Clauses Act, if any document is to be served by post in order to say that, document is served or given or sent, then such post shall be by registered post containing a letter, a document with properly addressed, pre-paid and posted. Therefore, the meaning of post as per this Section 27 is through registered post. When in this context, the insurance company is claiming that, it has sent intimation of cancellation of policy through certificate of - 13 - NC: 2025:KHC-D:3648 MFA No. 24732 of 2011 posting, whether is it a proper service Under Certificate of Posting is to be considered. Sending intimation Under Certificate of Posting, at the most, it proves the fact that the insurance company has dispatched the intimation to the addressee, but under certified posting, it cannot be held that, that post was reached to the addressee or the addressee has received such intimation. Therefore, in this context, at the most, the insurance company proved the fact as per Ex.R-1 and R-2 that the insurance company has dispatched its content of letter to respondent No.2 but there is no proof that such letter has been reached to respondent No.2-owner of vehicle or respondent No.2 has received the said letter. Here, in this regard, there is no proof by the insurance company that it has complied service of intimation letter as per Section 27 of General Clauses Act. Whereas, as per Rule 10 of Motor Vehicles (Third Party Insurance) Rules, 1946, cancellation of suspension can be made through post and what is the mode of post is within the meaning of service by post is only through registered post as per Section 27 of General Clauses Act. If the insurance company has sent intimation of cancellation as per Ex.R-1 through registered post and has produced postal receipt and - 14 - NC: 2025:KHC-D:3648 MFA No. 24732 of 2011 postal acknowledgement, then, it could have been said that the insurance company has complied with Rule 10 of Motor Vehicles (Third Party Insurance) Rules, 1946, and Section 27 of the General Clauses Act, 1987. But in the present case, what the insurance company at the most proved the fact that intimation of cancellation of insurance policy was sent Under Certificate of Posting. It proves only the dispatch of intimation letter but not proved the fact that whether the owner has received the said intimation letter. In this context, unless such intimation of cancellation of insurance policy is reached to the owner of the offending vehicle, till then, the coverage of risk under the policy is continued. 18. Once the factum of intimation of insurance policy is received by the owner and made known to him of such cancellation, then at that point of time, the insurance company discharges its burden indemnifying the owner. Till then, the burden of indemnifying the owner towards third party is continued. 19. Therefore, in this regard upon considering the facts and circumstances and evidence on record, proved the fact that - 15 - NC: 2025:KHC-D:3648 MFA No. 24732 of 2011 respondent No.2 has purchased the insurance policy commencing from 12.04.2007 to 11.04.2008 by paying premium through cheque. The cheque was dishonoured. The insurance company has sent intimation letter dated 22.05.2007 as per Ex.R-1 through Under Certificate of Posting -Ex.R-2. The accident is caused on 22.07.2007, but there is no evidence on part of the insurance company that, it has sent intimation of cancellation of insurance policy through registered post. The insurance company has not produced postal receipt for having sent notice through registered post and acknowledgement that the owner of the offending lorry has received the said intimation. This makes difference in the factual matrix in this case. 20. Learned counsel for the respondent No.3/insurance company has relied on the decisions of Hon’ble Apex Court in the case of United India Insurance Company Limited V/s Laxmamma and Others2 and in the case of Daddappa and others V/s Branch Manager, National Insurance Company Limited3 and also places reliance on the decision of 2 AIR 2012 SC 2817 3 2008 ACJ 581 - 16 - NC: 2025:KHC-D:3648 MFA No. 24732 of 2011 High Court of Orissa at Cuttack in the case of Divisional Manager, Oriental Insurance Company Limited V/s Babaji Rout and another4. 21. In the above said three cases, the facts proved that the intimation of cancellation of insurance policy was received by owner of the offending vehicle. Under those circumstances, it was held that since, the owner has received intimation, therefore, the insurance company is not liable to indemnify the owner and pay compensation. But in the present case, the facts are different that the insurance company has not proved the fact that the owner of the lorry has received the intimation or the intimation has been reached to the owner of the lorry. Therefore, upon difference in factual matrix between the above said decisions and in the present case, the above said decisions are not helpful to the insurance company. 22. Therefore, for the above said reasons, applying Rule Rule 10 of Motor Vehicles (Third Party Insurance) Rules, 1946 and Section 27 of the General Clauses Act, 1897, the insurance company has failed to prove that the intimation sent by it has 4 2009 ACJ 2124 - 17 - NC: 2025:KHC-D:3648 MFA No. 24732 of 2011 been reached to respondent No.2-owner and therefore, when it is not proved that the intimation was reached to the owner, till then, the risk is covered. Hence, in this regard, the Tribunal has not appreciated these factual matrix in the background of law as above discussed. Therefore, the Tribunal has committed error in exonerating the insurance company to indemnify the owner and pay compensation. Therefore, insurance company is liable to indemnify the owner and pay compensation. 23. The Tribunal has awarded compensation of Rs.45,000/- with 6% interest. Ex.P-6 to P-10 are the cash bills and invoices. It is submitted that the claimant is entitled to compensation as he has got repaired the vehicle by spending an amount of Rs.3,00,000/- but PW-2 is the mechanic running his Garage under the name and style as Fazal Automobiles, Bellary and he has deposed that he has repaired the TATA Indigo Car of the claimant. Ex.P-6 is the bill for having purchased spare parts worth of Rs.53,318/- and Ex.P-8 is another bill for having purchased spare parts of Rs.4106/-. Ex.P-9 and 10 are the bills of the mechanic as he repaired the vehicle at Rs.29,200/- and Rs.30,480/- respectively. Therefore, from the evidence of PW-2 and Ex.P-6 to P10, it is proved that - 18 - NC: 2025:KHC-D:3648 MFA No. 24732 of 2011 the claimant was constrained to purchase the spare parts as per Ex.P-6 to 8 and as per Ex.P-9 and P-10-the labour charges, it is proved that the claimant has made total expenditure towards repair of the car of Rs.1,17,104/-. Therefore, the claimant is entitled to damages of Rs.1,17,104/- as against Rs.45,000/- along with interest at the rate of 6% p.a. from the date of petition till the date of realization. 24. Accordingly, I proceed to pass the following: ORDER i. The appeal is allowed in part. ii. The judgment and award dated 28.08.2010, passed by the Fast Track Court-I-MACT-IX, Bellary, in MVC No.6/2009 is hereby modified holding that the claimant is entitled for total compensation of Rs.1,17,104/- along with interest @ 6% p.a., from the date of petition till its realization, as against what has been awarded by the Tribunal. iii. The respondent No.3/insurance company shall deposit the compensation amount along with interest before the Tribunal within a period of six - 19 - NC: 2025:KHC-D:3648 MFA No. 24732 of 2011 weeks from the date of receipt of certified copy of this judgment. iv. On such deposit, the same shall be released in favour of the appellant. v. No order as to costs. vi. Draw modified award accordingly. Sd/- (HANCHATE SANJEEVKUMAR) JUDGE PMP-para 1 to 9 RKM-para 10 to end List No.: 1 Sl No.: 41