ORIENTAL INSURANCE CO. LTD.versusSUNITA RATH! AND ORS.

A                     ORIENTAL INSURANCE CO. LTD.
                                   v.
                         SUNITA RATH! AND ORS.

                               DECEMBER 4, 1997
B
         [J.S. VERMA, C.T, S.P. BHARUCHA AND A.P. MISRA, JJ.]


         lnsurancr:-Accident of vehiclr:-Insurance obtained on same day-Ex-
  press mention of effective date and time of commencement of insurance in
C the policy-Time of policy ~pccified at 2.55 P.M.-Accident occwred prior to
  that time i.e. at 2.20 P.M.-Held in such a case liability is that of the owner
  and not of the insurer.

         A motor vehicle was involved in an accident which took place on 10th
  December, 1991 at 2.20 P.M. Thereafter on the same day at 2.55 P.M. the
D vehicle owner obtained insurance policy which expressly stated that the
  effective date and time of commencement of the insurance for the purpose
  of the Act was 10th December 'l.991 at 2.55 P.M. 'on the question of
  insurer's liability the High Court held that the owner of vehicle was not
  liable and that the insurer alone was liable. The Insurance Company made
  payment to the claimant in satisfaction of entire claim of the latter but
E preferred appeal before this Court for getting a decision on the question
  of its liability in such a situation.

          Allowing the appeal, this Court

F       HELD : The conclusion reached by the High Court is clearly er-
  roneous. The liability of the insurer arises only when the liability of the
  insured has been upheld for the purpose of indemnifying the insured under
  the contract of insurance. The High Court, without assigning any reason,
  has simply assumed that the owner of the vehicle was not liable ;ind that
  insurer alone was liable in the present case. There is, thus a basic fallacy
G in the conclusion reached by the High Court on this point. The insurer
  cannot be held liable on the basis of the insurance policy in the present
  case, and therefore, the liability has to be of the owner of the vehicle.
  However, in the circumstances of the case, the amount already paid by the
  insurer to the claimants is not required to be refunded by claimants to the
H insurer. [202-C-G]
                                      200
        ORIENfALINSURANCECO.LTD.v. SUNITARATHI[VERMA,CJ.]                201

      New India Assurance Co. Ltd. v. Ram Dayal & Ors., [1990] 2 SCR            A
570, explained and held inapplicable.

       M/s. National Insurance Co. Ltd. v. Smt jikubhai Nathuji Dabhi &
Ors., (1996) 8 SCALE 695, relied on.

        CIVIL APPELLATE JURISDICTION : Civil Appeal No. l:S:i04 of              B
1997.

     From the Judgment and Order dated 3.7.96 of the Allahabad High
Court in F.A. No. 477 of 1996.

        Jitender Sharma and B.K. Pal for the Appellant.                         c
        Ashok K. Mahajan (NP) for the Respondents.

        The Judgment of the Court was delivered by

      VERMA, CJ. This appeal by the insurer involves for decision only a        D
                                                 •
short point relating to its liability under the policy of insurance issued
subsequent to the accident even though it was issued some time later on
the same day. The Tribunal as well as the High Court have held against
the insurer placing reliance on the two-Judge Bench decision of this Court
in New India Assurance Co. Ltd. v. Ram Dayal & Ors., [1990] 2 SCR 570.          E
The question is whether that decision has been correctly applied in the
facts of the present case.

       The motor accident occurred on 10th December, '1991 at 2.20 PM.
It was only thereafter the same day at 2.55 PM. that the insurance policy
and the cover note were obtained by the insured, owner of the motor             F
vehicle involved in the accident. There is express mention in the cover note
that the effective date and time of commencement of the insurance for the
purpose of the Act was 10th December, 1991 at 2.55 PM. The applicability
of the decision in Ram Dayal's case (supra) has to be considered on these
facts. In our opinion the decision in Ram Dayal's case (supra) is distin-       G
guishable and has no application to the facts of this case. The facts of that
decision show that the time of issuance of the Policy was not mentioned
therein and the question, therefore, was of presumption when the date
alone was mentioned and not the time at which the insurance was to
become effective on that date. In such a situation, it was held in Ram
Dayal's case (supra) that in the absence of any specific time being men-        H
    202                   SUPREME COURT REPORTS [1997] SUPP. 6 S.C.R.

A tioned, the logical inference to draw was that insurance became effective
  from the previous mid-night and, therefore, for an accident which took
  place on the date of the policy, the insurer became iiable. There is no such
  difficulty in the present case in view of the clear finding based on un-
  disputed facts that the accident occurred at 2.20 PM and the cover note
  was obtained only thereafter at 2.55 PM in which it was expressly men-
B
  tioned that the effective date and· time of commenceni'ent of the insurance
  for the purpose of the Act was 10.12.1991 at 2.55 PM. The reliance on Ram
  Dayal's case (supra) by the Tribunal and the High Court was, therefore,
  mis-placed, we find that in a similar situation, the same view which we have
  taken, was also the view in Mis. National Insurance Co. Ltd. v. Smt. Jikubhai
C Nathuji Dabhi & Ors., (1996) 8 SCALE 695, wherein Ram Dayal's case
  (supra) was distinguished on. the same basis.

        It follows that the insurer cannot be held liable on the basis of the
  above policy in the present case and, therefore, the liability has to be of
  the owner of the vehicle. However, we find the High Court, without
D assigning any reason, has simply assumed that the owner of the vehicle was
  not liable and. that the insurer alone was liable in the present case. This
  conclusion, reached by the High Court, is clearly erroneous. The liability
  of the insurer arises only when the liability of the insured has been upheld
  for the purpose of indemnifying the insured under the contract of in-
E surance. There is, thus, a basic fallacy in the conclusion reached by the
  High Court on this point.

          The question now is of the final order to make in the present case.
    We find that the insurer has made the payment to the claimants in the
    present case in satisfaction of the entire claim and it has been fairly stated
F   by the insurer that this appeal was filed only for getting a decision on this
    point pertaining to its liability in such a situation. In the circumstances of
    the case, we deem it fit to say that the amount already paid by the insurer
    to the claimants is not required to be refunded by the claimants to the
    insurer.
G
           For th::, aforesaid reasons, the appeal is allowed. The judgment of
     the High Court and Tribunal are set aside. However, as indicated earlier,
     the claimants are not required to refund the amount already paid to them
     by the insurer.

     TN.A.                                                       Appeal allowed.