In a significant ruling, the Chhattisgarh High Court has upheld the liability of United India Insurance Company Ltd. to pay compensation in a motor accident claim despite the insurer’s contention that the insurance policy was void due to cheque dishonour. The court also enhanced the compensation granted to the claimants from ₹2.75 lakh to ₹6 lakh.
Background of the Case
The case revolves around the tragic death of a 12-year-old boy, Deepak Kannouje, who was fatally injured on April 21, 2017, when a tipper truck (Hyva) bearing registration number CG 04 JC 2459 hit his bicycle near Rajkumar Kirana shop. The vehicle was being driven by Lokesh @ Lukesh Sen and owned by Ramji Sahu. The boy succumbed to injuries during treatment.
The parents of the deceased, Puran Lal and Chitrarekha Bai, had filed a claim petition before the Motor Accident Claims Tribunal (MACT), Baloda Bazar, under Section 166 of the Motor Vehicles Act, 1988. The Tribunal had awarded compensation of ₹2.75 lakh with an interest of 9% per annum against the insurance company.
Dissatisfied with the compensation amount, the claimants filed MAC No. 1380 of 2018, seeking an enhancement of the award. Meanwhile, United India Insurance Company filed MAC No. 1746 of 2018, seeking to set aside the award and absolve itself from liability, arguing that the insurance policy had been cancelled due to non-payment of the premium.
Legal Issues Considered by the Court
The primary issue before the Chhattisgarh High Court was:
1. Whether the insurance company could be absolved from liability on the ground that the insurance policy was cancelled due to dishonour of the premium cheque.
2. Whether the compensation awarded to the claimants was adequate and required enhancement.
Court’s Observations and Decision
The bench, presided over by Justice Naresh Kumar Chandravanshi, delivered a common judgment for both appeals.
On the Issue of Insurance Policy Cancellation
The insurance company contended that the vehicle owner, Ramji Sahu, had initially issued a cheque for the insurance premium covering the period from April 5, 2017, to April 4, 2018, but the cheque was dishonoured on April 11, 2017, due to insufficient funds. As a result, the policy was cancelled, and a fresh policy was issued only on April 26, 2017, which was after the accident.
However, the court found that while the bank had informed the insurance company about the dishonoured cheque on April 11, 2017, the insurer did not promptly notify the vehicle owner. Instead, the company sent the notice much later—on May 4, 2017—after the accident had already taken place.
The court observed:
“Had the insurance company issued an immediate notice, the owner could have deposited the balance amount. The delay in sending intimation deprived the owner of this opportunity.”
It further noted that the cheque was dishonoured due to a minor shortfall of just ₹988, which could not be considered an act of bad faith on the part of the vehicle owner. Given these facts, the court held that the insurance company remained liable and dismissed MAC No. 1746 of 2018 filed by the insurer.
On Enhancement of Compensation
The court also reviewed the compensation amount awarded by the MACT. It noted that the Tribunal had based its calculations on the Kishan Gopal v. Lala & Ors. [(2014) 1 SCC 244], where the Supreme Court had assessed a notional income of ₹30,000 per annum for a deceased minor and applied a multiplier of 15 to compute the compensation.
However, since the accident in the Kishan Gopal case occurred in 1992, the court recognized that inflation and the declining value of money warranted an increase in compensation. Referring to the Supreme Court’s decision in Kusmi Devi v. Md. Kasim & Anr. [(2023) ACJ 1658], the court enhanced the compensation amount from ₹2.75 lakh to ₹6 lakh, citing:
“The financial value of rupee has significantly depreciated over the years, and compensation should be revised accordingly to meet present economic realities.”
Final Verdict
The appeal filed by United India Insurance Company (MAC No. 1746 of 2018) was dismissed, and the insurer was held liable to pay the compensation.
The claimants’ appeal (MAC No. 1380 of 2018) was allowed, enhancing the compensation from ₹2.75 lakh to ₹6 lakh with an interest of 7% per annum from the date of the claim.
The insurance company was directed to deposit the enhanced amount within two months before the MACT, Baloda Bazar.
The enhanced compensation would be kept in a fixed deposit for three years in a nationalized bank for the benefit of the claimants.
