M/S Royal Sundaram General Insurance Co. Ltd. Vs Sri C… — Insurance | Karnataka HC (2025)

M/S Royal Sundaram General Insurance Co. Ltd. Vs Sri C… — Insurance | Karnataka HC (2025)

What the court decided

AI extract

Outcome

No relief to the appellant-insurer; the appeal fails and is dismissed. The amount in deposit is directed to be transmitted to the Tribunal forthwith; the insurer's rights against the insured are preserved should proof of service of the cancellation notice be produced.

Issue for consideration

Whether the appellant-Insurance Company was liable to pay compensation under the policy notwithstanding its contention that the policy stood cancelled due to dishonour of the premium cheque and non-communication of the cancellation. +1 more

Court's answer

The Division Bench judgment in HDFC ERGO General Insurance Co. Ltd. v. Mohammed Nawaq (MFA 8329/2023, dated 27.06.2024), relied on by the appellant and founded on Section 64 VB of the Insurance Act and Regulation No.4 of IRDA, is distinguishable on facts because in that case proof of service of the notice of cancellation of the policy on the insured was placed on record, unlike here.

Ratio / Principle

There is no documentary evidence that the cancellation notice at Ex.R2 was served on the insured or the concerned RTO; it is only the oral testimony of RW1 that the notice was sent by registered post, and the best evidence available with the insurer — the postal acknowledgement or postal receipt for sending the notice by RPAD — was not produced.

Key takeaways

Since the deeming clause of Section 27, General Clauses Act becomes operational only when the postal window receipt and the proper address are established, and such best evidence was withheld despite RW1's statement, there is no acceptable evidence of communication of the cancellation (cheque issued 23.06.2014, policy renewed 25.06.2014 as admitted by RW1, accident on 12.06.2015); the cancellation was therefore not effective, the Tribunal was justified in fastening liability on the insurer, and its conclusions cannot be faulted.ratio¶79
If the appellant-Insurance Company has proof of service of the notice of cancellation of the policy, its rights to take up the matter against the insured remain open under extant laws; this protective observation accompanies, but is not necessary to, the dismissal of the appeal.obiter¶83

Detailed headnote1 paragraphs

M.V. Act — Insurer's liability where policy allegedly cancelled for dishonour of premium cheque — Communication of cancellation is decisive. Insurer contended that premium cheque No.95280 dated 27.6.2014 (Rs.21,664/-) was dishonoured and the policy cancelled by RPAD notice dated 01.07.2014, with the RTO informed. Apart from RW-1's bare testimony that the notice was sent by registered post, there was no documentary proof of service of the cancellation notice (Ex.R2) on the insured or the RTO, and the postal acknowledgement/RPAD receipt — the best evidence required to operationalise the deeming provision of S. 27, General Clauses Act (service by post) — was not produced. The cancellation was therefore not communicated and not effective; the Tribunal was justified in fastening liability on the insurer, consistent with M. Nageswara Rao v. New India Assurance Co. Ltd., 2004 ACJ 1554 and The Oriental Insurance Co. Ltd. v. Smt. Honnamma, ILR 1998 Karnataka 1776. The Division Bench ruling in HDFC ERGO General Insurance Co. Ltd. v. Mohammed Nawaq (MFA 8329/2023, dated 27.06.2024), resting on S. 64 VB, Insurance Act and IRDA Regulation No.4, was distinguished on facts since proof of service of the cancellation notice existed therein. The insurer's rights against the insured were kept open should proof of service surface. Appeal dismissed; amount in deposit to be transmitted to the Tribunal.