Holding

An insurance policy is effective only from the date and time specifically incorporated in it, and the insurer is not liable for accidents occurring prior to that time.

Summary

The National Insurance Co. issued a motor insurance policy to the respondents that expired on 29‑06‑1994. An accident occurred on 20‑07‑1994 at 9:15 a.m., three weeks after the policy had lapsed, and the policy was renewed only at 2:00 p.m. on the same day via a Motor Renewal Endorsement. The claim petition was allowed by the Motor Accident Claims Tribunal and upheld by the High Court, which held the insurer liable despite the lapse. The Supreme Court examined the contractual terms and held that an insurance policy becomes effective only from the date and time expressly mentioned in it; therefore the insurer was not liable for the accident that occurred before the renewal became effective. Consequently, the Court set aside the High Court’s judgment and allowed the appeals, directing the parties to bear their own costs.

Issues considered

Whether an insurer is liable for an accident that occurs before the insurance policy becomes effective as per the specific date and time mentioned in the renewal endorsement.

Legislation cited

General Clauses Act, 1897

Subjects

insurancepolicy effectivenessrenewal endorsementmotor accidentliabilitycontract of insuranceGeneral Clauses Actpolicy lapse

Judgment

I
y
A NATIONAL INSURANCE CO. LTD.
v.
SMT. SOBNA IAKAI AND ORS.

JULY 9, 2007
B [A.K. MATHUR AND DAL VEER BHANDARI, JJ.]

·Insurance:

Insurance Policy-Effectiveness of -Held: Effective from the time and
c date specijically lncofporated In the policy and not from earlier point of
time.
The appellant-Insurance company issued an Insurance policy to the
respondent on 22.6.1994. This policy expired on 21.6.1993 and was renewed
D after 6 days of Its expiry on 30.6.1993. The said policy expired on 29.6.1994
After 21 days of the expiry of the said Insurance policy, accident occurred at -.;,,
about 9.15 a.m. on 20.7.1994 killing two persons. The insurance pol!~Y was
renewed on the same day I.e. on 20.7.1994 at 2.00 p.m. The time was
specifically mentioned in the document called 'Motor Renewal Endorsement'.

E The MACT allowed the claim petition Ignoring the specific terms of
the insurance policy. On appeal, High Court held insurance company liable
to pay compensation for the reason that Cashier and Development Officer had
not been produced by the appellant company. Hence these appeals.

Allowln1 the appeals, the Court
F
HELD: 1.1. The effectiveness of the Insurance policy would start from
the time and dated speclOcally Incorporated In the policy and not from an
earlier point of time. (Para 19) (114·CJ
1.2. Admittedly, at the time when the accident had occurred at 9.IS a.m.
G on 20.7.1994, the respondent did not have the Insurance cover. The insurance
policy w•s obtained at 2.00 p.m. on 20.7.1994, which Is clearly evident from
the motor renewal endorsement. The Insurance policy and the motor renewal
endorsement were on record. Both these documents were produced and proved
by the appellant company. The Tribunal and the High Court have seriously ,•..
H 108
,_ NATIONAL INSURANCE CO. LTD. v. SOBNA !AKAi [DALVEERBHANDARl,J.] 109
'
" erred In lgnorlna these basic and vital documents and In decldln1 the case A
1
against thee appellant company on the ground or non-production or the Cashier
and Development omcer. [Paras 12 and 13) [t 11-G-H; 113·A·BI
New India Insurance Company v. Ram Dayal, (199012 SCR 570; Mis"
National Insurance Co. Ltd. v. Smt. Jikhubhai Nathuji Dabhi, 119971 t SCC
66; Mis. Oriental Insurance Co. Ltd. v. Sunita Rath/, [1998] 1 SCC 365; New B
India Assurance Co. v. Bhagwaii Devi, 11998) 6 SCC 534; New India
Assurance Co. Ltd v. Sita Bai, 11997) 7 SCC 575; National Insurance Co.
ltd v. Chinto Devi, (2000) 7 SCC 50 and Kalaivanl & Ors. v. K. Sivashankar
& Ors., (2001) 10 SC 396, relied on.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1393 of2001. c
From the Judgment and Order dated 4.10.1999 of the High Court of

- Assam Nagaland, Meghalaya, Mizoram, Manipur, Tripura and Arunachal
· Pradesh (Shillong Bench) in MA. (F) No. 3 (SH) of 1998.
WITH D

C.A. No. 1394 of 2001.
K. Singhal, Vineet Malhotra and Rajeev Nanda and Binu Tamta for the
Appellant in C.A. Nos. 1393 and 1394of2001.
E
.. The Judgment of the Court was delivered by

DALVEER BHANDARI, J. I. These appeals are directed against the
judgment dated 4.10.1999 passed by the Oauhati High Court in MA (F) Nos.
3 (SH) and 4(SH) of 1998.
F
2. The facts of both these appeals are identical, therefore, these appeals
are being disposed of by a common judgment. For the sake of convenience,
the facts of Civil Appeal No. 1394 of 200 I are recapitulated.

3. The question which falls for adjudication in these appeals is whether
the insurance company can be held liable for payment of compensation for Q
a period when the insurance policy was not even in existence.
I .'
4. The appellant, National Insurance Co. Ltd. originally issued an
insurance policy to the respondent bearing no. 201002/31/92/63/00057 on
22.6. 1992 at 12.45 p.m.; this policy expired on 21.6.1993. This policy was H
;
110 SUPREME COURT REPORTS (2007) 8 S.C.R.
,,__
A renewed after 9 days of its expiry on 30.6.1993 and the said policy also expired f

on 29.6.1994. After 21 days of the expiry of the said insurance policy, the·~us
bearing registration number ML-04-2741 met with an accident at about
9.15 a.m. on 20.7.1994 killing two persons. One died on the spot and another
died after a few days in the hospital. Admittedly, in the present case, the
insurance policy was renewed on 20. 7.1994 at 2.00 p.m. whereas the accident
B had occurred at 9: 15 a.m. on 20. 7.1994. The time is specifically mentioned in
the document called Motor Renewal Endorsement. It is incorporated in this
document that the policy is renewed for twelve months from 20. 7.1994 (2.00
p.m.) to 19.7.1995. Since the entire controversy revolves around the time of
the renewal endorsement, therefore, we deem it appropriate to fully set out
C the Motor Renewal Endorsement as under:
MOTOR RENEWAL ENDORSEMENT

Endorsement No. E/94/00095 on Policy No.
201002131192/63/00057 ...
D
Insured: MC.A.B. Martlang. Ale. Shrl Eklensing Slangsho.I
"
Address: Vmmulong, Jalntla Hiiis Distt.
Jt is hereby declared and agreed that the insurance by this Policy is
E renewed for a period of twelve months from 20·07·9412.,n.m:l to 19·
07·95 at a premium of Rs.76411· as detailed below:
The Vehicles
eg1strat1on eat ng nsure s
Mark & No. capacity estimated
F manufacture including value
driver or including
carrying accessories
capacity (Indian Currency)/
28+2 --Rs.3;0 ,000.
0
Premium Computation:
a. Act/T.P. Own Damage .............. Rs. 450.00
b, Own damage JEV"' ~•et11u1e,1,u11u~1~e111 Rs,J,4SQ,QQ
c:. .. Rs.3,900.00 \
,
1-
H; d. 28 passengers............ Rs.3,080.00 I

•
r
NATIONAL INSURANCE CO. LTD. v. SOSNA !AKAi [DAL VEER BHANDARl,J.] 111

e. Act, DIC .................... Rs. 680.00 A
f Rs.7,660.00
Less 5% S.D ............. Rs.383.00
Rs.7,277.00
Add 5% S.T ............. Rs. 363.85
Rs. 7,640.85
Net= Rs.7,641/-
B
Sd/-
Divisional/Branch Manager"
.,. 5. In the aforementioned Motor Renewal Endorsement, the time and date
have been specifically mentioned. According to the appellant, in view of the
special nature of contract, the insurance policy came into force only from C
2.00 p.m. on 20.7.1994.

6. A claim petition for Rs. l, 78,000/- plus interest @ 12% per annum was.
filed in the Motor Accident Claims Tribunal, Jowai. The appellant company
filed a written statement wherein it was specifically pleaded that the policy D
was not current at the time of accident. The relevant paragraph of the written
statement reads as under:

"that the policy was not current at the time of accident. The
vehicle was re-insured after a lapse of about 3 weeks on 20.7.94 at
about 2.00 p.m. whereas the alleged accident occurred on the same E
day at 9.15 a.m. As such the opposite party (Insurance Co.) is not
liable for any payment to claimant. Copy of insurance certificate· is
enclosed."

7. The Motor Accident Claims Tribunal allowed the claim petition ignoring
the specific terms of the insurance policy and averments of the written F
statement filed by the appellant company. The Tribunal also ignored the
settled legal position as crystallized by a series of judgments of this Court.
The Tribunal awarded the compensation of Rs. l ,06,000/- along with interest
@ 12% per annum from the execution of the claim petition and directed the
appellant company to pay the same within a period of two months, failing
which additional interest @ 15% shall be paid till the final payment of the G
~ompensation is given to the claimant.

8. The appellant company, being aggrieved by the order of the Tribunal,
filed MA (F) No. 4 (SH) of 1998 before the Shillong Bench of the Gauhati High
Court. The High Court noticed the pleadings and referred to the decided H
112 SUPREME COURT REPORTS [2007) 8 S.C.R.

A cases of this Court. The High Court, after discussing the various judgments .
of this Court, culled out the following propositions of law:

(i) If time is mentioned in the insurance policy or cover note, the
effectiveness of the policy would start from that time and date
and not from an earlier point of time;
B (ii) If the accident takes place on that very date before the time
which is mentioned in the insurance policy, the insurer will not
be liable to indemnify the insured;
(iii) If the time is not mentioned in the insurance policy, it would
commence from the date which means midnight and in case the
tc
"· accident occurred on the date of taking the policy, the insurer will
be liable to meet the liability of the insured under the award."

't> 9. The ratio culled out by the High Court of the decided cases of this
Court is correct but the High Ceurt has wrongly applied the ratio of these
D cases and erroneously held that the insurance company is liable to pay
compensation for the reason that the Cashier and the Development Officer
have not been produced by the appellant company.

IO. We have heard the learned counsel for the parties and also perused
.. the relevant documents carefully. The learned counsel appearing. ·for the
E appellant sub_mitted that the controversy involved in the case is no longer res
integra. In the instant case, though the High Court has correctly enunciated
the law, but has seriously erred in not applying the ratio of the judgments of
this Court correctly. He further submitted that when the insurance policy and
the motor renewal endorsement were duly filed and these documents were
duly proved before the Tribunal, in that event,. the entire controversy ought
F to have been decided on the basis of these two documents and the production
of Cashier and the Development Officer was not at all necessary for deciding
the controversy in the case.

11. On the other hand, the learned counsel for the respondents supported
G _the judgme.nts of the Tribunal and the High Court.
12. Admittedly, at the time when the accident had occurred at 9.15 a.m:
on 20.7. I 994, the respondent did not have the insurance cover: The insurance
;·
policy was obtained at 2.00 p.m. on 20.7.1994, which is clearly evident frolll •
the motor renewal endorsement set out in the earlier part of the judgment.

H
NATIONAL INSURANCE CO. LTD. v. SOBNA !AKAi [DALVEERBHANDARl,J.] 113

13. The insurance policy and the motor renewal endorsement were on A
record. Both these documents were produced and proved by the appellant
company. The Tribunal and the High Court have seriously erred in ignoring
these basic and vital documents and deciding the case against the appellant
company on the ground of non-production of the Cashier and Development
Officer. This manifestly erroneous approach of the High Court has led to
serious miscarriage of justice. B

14. This Court had an occasion to examine the similar controversy in the
case of New India Insurance Company v. Ram Dayal, [1990] 2 SCR 570. In
this case, this Court held that in absence of any specific time mentioned in
the policy, the contract would be operative from the mid-night of the day by C
operations of the provisions of the General Clauses Act but in view of the
special contract mentioned in the insurance policy, the effectiveness of the
policy would start from the time and date indicated in the policy.

15. A three-judge Bench of this Court in Mis National lnsurance·Co.
Ltd v. Smt. Jikhubhai Nathuji Dabhi, [1997] l SCC 66 has held that in_ the D
absence of any specific time mentioned in that behalf, the contract would tie
operative from the mid-night of the day by operation of provisions of the
General Clauses Act. But in view of the special contract mentioned in the
insurance policy, it would be operative from the time and date the insurance
policy was taken. In that case, the insurance policy was taken at 4.00 p.m. on
25.10.1983 and the accident had occurred earlier thereto. This Court held that E
the insurance coverage would not enable the claimant to seek recovery of the
amount from the appellant company.

16. Another three-Judge Bench of this Court in Mis Oriental Insurance
Co. Ltd v. Sunita Rathi, [1998) 1 SCC 365 dealt with similar facts. In this case, F
the accident occurred at 2.20 p.m. and the cover note was obtained only
thereafter at 2.55 p.m. The Court observed that the policy would ~e effective
from the time and date mentioned in the policy.

17. In New India Assurance Co. v. Bhagwati Devi, (1998) 6 SCC 534,
this Court observed that, in absence of any specific time and date, the G
insurance policy becomes operative from the previous midnight. But when the
.J
specific time a1,1d date is mentioned, then the insurance policy becomes
effective from that point of time. This Court in New India Assurance Co. Ltd
v. Sita Bai, (1999) 7 SCC 575 and National Insurance Co. Ltd v. ChintoDevi,
[2000] 7 sec 50 has taken the same view.
H
>(

114 SUPREME COURT REPORTS [2007) 8 S.C.R.

A 18. In Kalaivani & Ors. v. K. Sivashankar & Ors., JT (200 I) I 0 SC 396,
this Court has reiterated clear enunciation of law. The Court observed that it ,..,
is the obligation of the Court to look into the contract of insurance to discern
whether any particular time has been specified for commencement or expiry
of the policy. A very large number of cases have come to our notice where
B insurance policies are taken immediately after the accidents to get compensation
in a clandestine manner.

19. In order to curb this widespread mischief of getting insurance
policies after the accidents, it is absolutely imperative to clearly hold that the
effectiveness of the insurance policy would start from the time and date
C specifically incorporated in the policy and not from an earlier point of time.

20. In view of our foregoing conclusion, these appeals have to be
allowed and we order accordingly. Consequently, the impugned judgments of
the High Court are set aside. In the peculiar facts and circumstances of the
case, we direct the parties to bear their own costs.
D
D.G. Appeals allowed.