AREA: PURCHASE MUST BE FOR CONSIDERATION
FACTS:
The Deceased, the husband of the respondent has insured his car with the Appellant & given a cheque for the premium towards the first installment and he was given a ‘cover note’ as contemplated under section 149 of the Motor Vehicles Act.
Unfortunately, the car met with an accident killing the deceased. Subsequently, the Bankers of the Insurance Company informed it about the bouncing of the premium cheque given by the deceased on account of insufficient funds in the account.
The Claim filed by the widow was repudiated.
Under Section 64V(B) of the Insurance Act 1938, the recovery of premium is a pre-condition for the grant of insurance cover, and in the absence of consideration, there did not exist any contract between the parties.
State Commission decided against the respondent whereupon an appeal was filed in the High Court at Jammu which directed the insurance company to assess the compensation by law and make the payment after deduction of the premium.
ISSUE:
Is the judgment of the High Court directing the Appellant to indemnify the respondent valid in the wake of applicable provisions of the Insurance Act 1938?
JUDGMENT:
1. Section 64-VB (1) for the ds insurance company from assuming risk in respect of any insurance business until premium in respect thereof is paid or guaranteed and until such deposit is received in advance.
2. Section 64-VB(2) provides that 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 received in cash or by cheque by the insurer.
Issue in the case is the legal position about the liability of the insurer in case of dishonor of the premium cheque by the banker to the payer of the premium.
To answer these issues, the Court referred to sections 51, ,52, and 54 of the Contract Act dealing with ‘Performance of Reciprocal Promises’.
Thus, where the insured failed to pay the premium or the cheque for the premium amount dishonored by the bank, the insurer need not perform his part of the promise.
Under section 25 of Contract Act 1872, a contract without consideration is void.
Comments