Insurance Company not to pay accident claim if policy cancelled

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New Delhi, Dec 30 (UNI) The Supreme Court has held that an insurance company is not reliable to pay motor accident claim in case the cheque for payment of premium of the insurance policies has been dishonoured and the policy cancelled.

A bench comprising Justices S B Sinha and Harjit Singh Bedi observed, ''We are not oblivious of the distinctions between the statutory liability of the insurance company vis-a-vis a third party in the context of sections 147 and 149 of the act and its liabilities in other cases.'' ''However, 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, we are of the opinion that the insurance company would not be liable to satisfy the claim,'' the bench added.

A young girl, Shantamma, died on the spot when she was run over by a tempo while sleeping in her hut on February 6, 1998.

Motor Accident Claim Tribunal, district Koppal in Karnataka directed the National Insurance Company to pay a compensation of Rs 1,58,000 along with an interest of 12 per cent per annum.

The Karnataka High Court, however, set aside the order of the tribunal on an appeal by the insurance company.

The victim's father approached the Supreme Court. The apex court , however, exercising its powers under article 142 of the Constitution, directed the insurance company to pay the amount of compensation to the appellant as he hailed from the lower strata of the society.

The court, however, permitted the insurance company to recover the amount of compensation from the owner of the vehicle who was driving the tempo at the time of the accident.

The cheque for premium of the policy was dishonoured by the bank on account of insufficient funds on October 21,1997 and subsequently the insurance company cancelled the policy of insurance and duely informed the owner of the vehicle as well as regional transport officers about it.

The apex court concluded by saying, ''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.'' UNI

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