United India Insurance Co. Ltd. vs. Laxmamma & Ors.

United India Insurance Co. Ltd. vs. Laxmamma & Ors.
In the Supreme Court of India
Arising out of SLP(C) No. 23511 of 2009
United India Insurance Co. Ltd.
Laxmamma & Ors.
Date of Judgement

17th April 2012
Honorable Justice Mr. R.M. Lodha; Honorable Justice Mr. H.L. Gokhale


The appeal was made by the United India Insurance Co. Ltd. claiming that it’s not liable to cover the risk of the third party hence not entitled to indemnify the respondents here.

Statues and provisions involved

  • Section 146, Section 147, Section 149 of the Motor Vehicles Act, 1988
  • Section 25, Section51, Section 52, Section 54, Section 65 of the Indian Contract Act, 1872


  • Nagaraj (spouse of respondent no. 1 and father of respondent nos. 2 and 3) was going in a transport bearing enlistment no. KA 018116 on May 11, 2004. At about 8.50 a.m. on that day because of careless/negligent use of brake by the transport driver, the secondary passage of the transport out of nowhere opened and M. Nagaraj remaining close to the entryway tumbled down.
  • He continued egregious wounds and in this manner kicked the bucket. The respondent nos. 1 to 3, to have alluded as inquirers, documented a case appeal before the Motor Accident Claims Tribunal, Bangalore (for short, ‘Court’) looking for the compensation of Rs. 15 lakhs.
  • The present appealing party, the insurer was impleaded as respondent no. 2 while the proprietor of the transport was impleaded as respondent no. 1. The proprietor and the insurer challenged the case request on assorted grounds. The backup plan brought the supplication up in the composed proclamation that the protection approach dated April 14, 2004, gave by it covering the said transport for the period April 16, 2004, to April 15, 2005, was not substantial as the premium was paid through check and the check got dishonored and, subsequently, there was no obligation on it to cover the risk of the third party.


  • Regardless of whether the appealing party, i.e. the insurer United India Insurance Company Limited is freed of its commitments and obligations to the third party under the insurance policy in light of the fact that the check given by the proprietor/owner of the vehicle towards the premium got dishonored and resulting to the accident of the deceased, the insurer plunged the insurance policy?

Arguments Advanced

Appleant’s Contention 

  • With respect to the clear fact that the cheque given by the proprietor of the vehicle towards the premium for protection of vehicle was disrespected, the insurance policy got void and the insurer couldn’t be constrained to play out its piece of guarantee under the approach. He presented that no risk can be secured on the inquiries plans qua the third party if the arrangement of protection is rendered void for the need of thought to the insurer.
  • Learned counsel of the Appellant presented that the view taken by this Court in Oriental Insurance Co. Ltd. v. Inderjit Kaur and others[i] has been weakened by the later choices of this Court on account of National Insurance Co. Ltd. v. Seema Malhotra and others[ii] and Deddappa and others v. Branch Manager, National Insurance Co. Ltd.[iii]
  • In the other option, learned direction for the insurer presented that if the Court holds that the insurer is entitled to give compensation to the respondents, the sum so paid by the insurer to the respondents i.e. the claimants must be permitted to be recuperated from the insured or indemnified.

Respondent’s Contention

  • On the date of the accident of the deceased, the approach was subsisting and the liability of the insurer proceeded and, in this way, the insurer can’t recoup the sum paid to the petitioners from the guaranteed.


  • The consequent termination of the insurance policy in the immediate case on the opinion that the cheque in the course of which premium was rewarded was dishonored would not impinge on the third party’s rights which had accumulated on the insurance policy on the date accident occurred.
  • If, there was a policy of insurance on the date of the accident, with respect to the vehicle concerned, against the Insurance Company the third party would have a claim, and with respect to the claim of that party the owner of the vehicle would have to be indemnified. Consequent termination on the ground of non-payment of the premium would not affect the rights in the insurance policy previously accumulated in support of the third party here.

Ratio Decedendi 

In an insurance contract when a cheque is given by the insured for the payment of premium such an insurance contract involves a reciprocal promise. The insurer when get promised by the drawer of the cheque, on presentation, that cheque would give in the amount.

A cheque is a bill of exchange represented by a specified banker and this can’t be ignored. Writing containing an unconditional order directing a certain person to pay a certain sum of money to a certain person is what called a bill of exchange i.e. an instrument. It absorbs that such money would be paid as per the promise.


Where the policy of insurance is given by an approved insurer on receipt of cheque towards the installment of premium and such cheque is returned dishonored, the obligation of the approved insurance to repay third parties in regard of the risk which that strategy secured subsists and it needs to fulfill an honor of pay by reason of the provisions concerned in Sections 147(5) and 149(1)of the Motor Vehicles Act except if the approach of insurance is dropped by the approved insurer and suggestion of such crossing out has arrived at the guaranteed or insured before the accident.

Edited by Parul Soni

Approved & Published – Sakshi Raje


[i] Oriental Insurance Co. Ltd. v. Inderjit Kaur and others (1998) 1 SCC 371.

[ii] National Insurance Co. Ltd. v. Seema Malhotra and others (2001) 3 SCC 151.

[iii] Deddappa and others v. Branch Manager, National Insurance Co. Ltd. (2008) 2 SCC 595.

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Adya Samal
I’m Adya Aditi Samal, pursuing B.A. LL.B in Xavier Law School. I’m a self-motivated law student who believes in the idea that “there is always someone better than you”, and this makes me keep going. I love to learn new things because I feel learning refine you, redefines you. I’ve been an ardent admirer of world history, psychology and mythology all through my life. Finally, my heart found solace when I fell in love with criminal law and human rights law. The intrinsically intimate thread between society and law mesmerizes me every time. In my leisure, I write poems and short stories in Odia. And finally; I don’t eat to live but rather live to eat.