The Chhattisgarh High Court has reaffirmed that an insurer cannot be saddled with liability for compensation arising from a motor accident unless there is a valid contract of insurance in force, supported by actual receipt and acceptance of premium by an authorised officer. The judgment upholds existing statutory interpretation and precedent, clarifying obligations under Section 147 of the Motor Vehicles Act, 1988, and Section 64VB of the Insurance Act, 1938; it serves as binding authority for similar cases involving disputes over insurance liability in motor accident claims.
Summary
| Category | Data |
|---|---|
| Case Name | MAC/36/2016 of The National Insurance Company Limited Vs Gajropan Yadav |
| CNR | CGHC010257102015 |
| Date of Registration | 11-01-2016 |
| Decision Date | 29-10-2025 |
| Disposal Nature | ALLOWED |
| Judgment Author | Hon’ble Shri Justice Radhakishan Agrawal |
| Court | High Court of Chhattisgarh |
| Precedent Value | Binding on all subordinate courts in Chhattisgarh |
| Overrules / Affirms | Upholds and applies existing statutory requirements; no overruling of prior precedent reported. |
| Type of Law | Motor Accident Claims, Insurance Law |
| Questions of Law | Whether an insurance company can be made liable for motor accident compensation in absence of a valid policy and actual receipt of premium by an authorised person? |
| Ratio Decidendi |
The High Court held that no liability can be fastened on the insurer for compensation if there was no valid contract of insurance at the time of accident. This requires that the premium must be actually received and accepted by the insurer or its authorised representative, and a valid cover note or policy must be issued. Documents showing deposit of premium are insufficient unless the insurer accepted the risk by proper procedure. In this case, the person purported to have accepted the premium was neither authorised at the material time nor was the cheque encashed. Therefore, the risk was never assumed by the insurer, and liability rests solely on the vehicle owner. The judgment relies on Section 147 of the Motor Vehicles Act and Section 64VB of the Insurance Act. |
| Judgments Relied Upon | None specifically cited; statutory interpretation relied upon. |
| Logic / Jurisprudence / Authorities Relied Upon by the Court | Statutory analysis of Section 147, Motor Vehicles Act, 1988, and Section 64VB, Insurance Act, 1938. Evidence regarding authority of insurance officials and actual receipt of premium. |
| Facts as Summarised by the Court | The owner’s agent purported to pay premium via cheque to a development officer (B.L. Khess) whose authority to receive such was revoked, and he was later suspended. The insurance company had advertised his lack of authority. Premium and proposal were returned and no policy or cover note was ever issued by the insurer. Criminal proceedings were pending against the said officer. |
Practical Impact
| Category | Impact |
|---|---|
| Binding On | All subordinate courts in Chhattisgarh |
| Persuasive For | Other High Courts, particularly in cases involving insurance contract formation and liability |
| Follows | Follows and applies established statutory requirements under the Motor Vehicles Act and Insurance Act |
What’s New / What Lawyers Should Note
- Reconfirms that mere deposit of insurance premium (especially by cheque) is not sufficient for a binding insurance contract; actual receipt and acceptance by the insurer or its authorised representative is mandatory.
- Fastening of insurance company liability in motor accident claims requires proof of a valid policy or cover note issued by an authorised official, and acceptance/encashment of premium.
- Public notices revoking the authority of a company officer to accept premium render subsequent acts by such officer invalid vis-à-vis the insurer.
- If the insurer rejects or returns the premium payment before an accident, no risk is assumed and insurance company is not liable for compensation.
- Importance of documentary evidence such as prior policies, authority of agent/official, and ministry of procedural compliance.
Summary of Legal Reasoning
- The court analysed Section 147 of the Motor Vehicles Act, 1988, which mandates issuance of an insurance policy by an authorised insurer as a precondition for liability.
- Section 64VB of the Insurance Act, 1938, was interpreted to mean that no insurance risk is assumed until the premium is received by the insurer or by an authorised person, and risk can only be considered covered from the date of such receipt.
- Evidence established that the individual who purportedly received premium (B.L. Khess) had his authority revoked and was suspended before the transaction in question; public notice of this action was given.
- The cheque for premium was never encashed or accepted by the insurer; it, along with the proposal, was returned to the vehicle owner’s agent, and no policy or cover note was issued.
- The court distinguished between mere payment attempts and actual receipt and acceptance, holding that insurance liability cannot be created in the absence of both valid issuance and authority.
- Criminal proceedings against the involved official and lack of supporting documentation from the owner further supported the insurer’s exoneration.
- As precedent, the court affirms existing statutory interpretation, denies liability in absence of valid contract, and clarifies procedural requirements for future claims.
Arguments by the Parties
Petitioner (Insurance Company):
- The offending vehicle was not insured with the appellant on the date of incident.
- Deposit challan regarding Act-only policy was not issued by an authorised officer.
- Authority of B.L. Khess to issue cover notes/policies was revoked and public notice had been issued.
- Premium proposal and cheque were returned, and the company never accepted risk for the vehicle.
- Tribunal erred in fastening any liability upon the insurer.
- Quantum of compensation awarded was excessive.
Respondent No.3 (Owner):
- Offending vehicle was insured with the appellant at the material time.
- Premium cheque was given to B.L. Khess, development officer.
- Company is thus liable and Tribunal did not err.
Factual Background
The claimants sought compensation under Section 163-A of the Motor Vehicles Act for the death of Madhusudhan Yadav, who died when his tractor turned turtle. The vehicle was owned by respondent No.1 and was allegedly insured with the appellant. The owner claimed to have paid premium by cheque via a development officer whose authority had already been revoked and later suspended. The insurance company, upon learning of the attempted transaction, returned the premium and proposal, never issuing a valid policy or cover note. The trial Tribunal held both insurer and owner liable, but the appeal challenged insurer’s liability.
Statutory Analysis
- Section 147, Motor Vehicles Act, 1988: Requires issuance of an authorised insurance policy to cover third-party risks. Clarifies policy must be issued in prescribed form by an authorised insurer.
- Section 64VB, Insurance Act, 1938: No insurer can assume any risk unless premium is actually received in advance. Risk attaches only post-actual receipt and acceptance; mere offering of premium does not suffice.
- The court interpreted these sections to require (i) valid acceptance of premium by authorised person and (ii) proper issuance of policy or cover note for liability to arise.
Procedural Innovations
No new procedural guidelines or innovations noted in the judgment.
Alert Indicators
- ✔ Precedent Followed – The judgment strictly follows existing statutory requirements and established legal understanding that insurance contracts require valid policy issuance and actual receipt of premium by an authorised person.