1. THIS appeal is directed against the order passed by the District Forum, Kozhikode in O.P. No. 860/96. The opposite party No. (1) is the appellant.
2. THE case of the complainant is that he purchased a 100cc model Yamaha Bicycle from M/s. Indus Motor Company Ltd., 25.7.1995 and the total price of the vehicle amounted to Rs. 37,250/- and payment was effected after availing of higher purchase loan for an amount of Rs. 28,000/- from the second opposite party. THE said vehicle was taken delivery by the complainant on 29.7.1995. Before taking delivery a comprehensive motor vehicle insurance cover note executed by the opposite party No. (1) in favour of the complainant was arranged after paying an amount of Rs. 775/- as a premium and it came into force on the very day the vehicle was delivered to the complainant as per the terms of the cover note. Effective date of the commencement of the insurance was on 29.7.1995 and the stipulated date of expiry was on 28.7.1996. Subsequently a certificate-cum-policy was issued to the complainant. Unfortunately the vehicle was stolen on 29.7.1995 at about 7.30 p.m. while it was parked in front of Rahmat Mahal. Immediately the matter was reported to the police and FIR was lodged and investigation in that regard was commenced. Intimation regarding the theft was given to the first opposite party also alongwith the request to indemnify for the loss sustained. However the first opposite party repudiated the claim on the ground that the policy came into effect only on on 31.7.1995. Hence the complaint.
The opposite party filed a detailed version in which it was contended that the first opposite party has only authorised M/s. Indus Motor Company Ltd. to issue motor cover note for the brand new vehicle delivered by them from their Calicut office, subject to the condition that no person other than individuals, namely. Assistant Sales Manager or Sales Assistant can issue cover note. The cover note was not issued or signed by designated persons. The cheque was issued only by M/s. Vijaya Leasing Ltd. on 31.7.1995 and therefore the cover note is not valid and not binding on the opposite party. It is further stated M/s. Indus Motor Company had issued the said cover note without being duly signed by authorised person and the premium cheque was dated 31.7.1995 whereas the theft was on 29.7.1995 and in the circumstances at the time of theft there was no valid policy.
The learned Counsel also heavily relied on various decisions based on Section 64 V.B. of the Insurance Act and contended that since the cheque was not encashed on 29th there is no liability.
3. IN support of this contention, learned Counsel relied on the decision of the Karnataka High Court in Oriental INsurance Company Ltd. v. Smt. Rukini and Others, AIR 1995 Karnataka 18. IN that case the Division Bench of the Karnataka High Court found that there was no evidence except producer''s cover note that the complainant had paid the premium. The Division Bench held that payment of premium in advance in the prescribed manner being a condition precedent under Section 65 V.B., and the said condition having not been complied with, it cannot be said that there has been a completed contract having complied with the requirement of Section 64 VB.. It also held in order to make a proposal into a promise, there must be an absolute and unqualified acceptance by express terms in the usual form by the acceptor and that there is no such express acceptance of the proposal of vehicle owner by the INsurance Company. IN that case no premium was paid in advance and the proposal was not duly completed. The Division Bench pointed out that the issuance of the cover note by the insurance agent without receiving the premium amount and issuing a receipt thereon would be of no assistance to the complainant as it has no binding force.
Learned Counsel also relied on the decision of the Division Bench of Madhya Pradesh High Court in United India Insurance Company Ltd. v. Ratansingh and Others, AIR 1993 Madhya Pradesh 197. The Division Bench held that the issuance of a cover note was not sufficient to cover the risk and that the risk is covered only when premium is received as is provided in Section 64 V.B. of the Insurance Act. In that case the cheque issued was dishonoured and therefore it was contended that there was no payment and no risk and this contention was upheld by the Division Bench. The risk commences only on payment of the premium by the insured in advance by a cheque or in cash which is a condition precedent for assuming the risk. Thus, where the premium was not received by the Insurance Company because of the bouncing of the cheque issued against the cover note, the vehicle could not be said to be insured and the insurer would not be liable to pay any amount of compensation as there was no assumption of risk. In that view the award passed was set aside by the Division Bench.
4. IN another decision rendered by the Bombay High Court in Oriental Fire and General INsurance Company Ltd. v. Panvel INdustrial Co-operative Estates Ltd., AIR 1992 Bombay 107, the agent of the INsurance Company approached the respondent for the purpose of insuring his shed and ascertained the premium. A cheque towards premium was given to the agent by the respondent. The agent was not ready to issue the cover note unless the proposal form was duly filled in and the site was inspected by him to enable him to know the nature of the risk. Therefore no cover note was issued. On the next day of the acceptance of the cheque the shed in question caught fire and was damaged extensively. The cheque was not encashed, but it was returned to the respondent after about 4 months. There was no agreement between the parties on the fundamentals of the insurance proposed, particularly regarding the nature of the risk, the period of insurance and the rate of premium. The appellant declined to pay damages suffered by the opposite party on the ground that it had not accepted the risk. It was held that there was no concluded contract of insurance between the parties, nor was there any absolute and unqualified acceptance of risk by the appellant INsurance Company so as to fasten liability upon it. It was further held that ascertainment of premium and acceptance of cheque towards premium or keeping the cheque for 4 months would not amount to implied acceptance by conduct and a concluded contract.
The question to be decided in this case is whether there is a valid and concluded contract on 29.7.1995 on which date the vehicle was stolen. In the light of the decision referred to above it would be difficult to hold that there is a concluded contract in this case merely on the ground that a cover note was issued by the second opposite party M/s. Vijaya Leasing Ltd. We may also point out that it is the case of the Insurance Company that this cover note was issued not by authorised person, namely, M/s. Indus Motor Ltd. Even without going into that aspect in view of Section 64 V.B. it has to be held that there is no concluded contract. The District Forum took the view that Ext. A2 cover note was issued in the form of the first opposite party and it is signed by the second opposite party for and on behalf of the opposite party and that being the position the first opposite party as the principal cannot disown the liability. However, the District Forum did not go into the question whether in view of mandatory position contained in Section 64 V.B., there is concluded contract as explained in the decisions cited above. A mere issue of a cover note will not create a valid contract. The cheque was issued by the complainant towards premium only on 31.7.1995. The vehicle was stolen on 29.7.1995 and on that date there is no payment as contemplated under Section 64 V.B. of the Insurance Act. In the above circumstances, we are unable to sustain the order passed by the District Forum. In the result, we allow the appeal, set aside the order of the District Forum and dismiss the complaint. Appeal allowed. _____________
