N.K. Jain, J.
1. This is an appeal by the claimant under Section 173 of the Motor Vehicles Act, 1988, from the award dated 20.8.1994 passed by VIth Addl. Motor Accidents Claims Tribunal, Indore, in his Claim Case No. 64 of 1991 awarding him compensation of Rs. 81,931/- against the respondent Nos. 1 and 2 and not against insurance company, respondent No. 3.
2. Briefly stated, facts as unfolded are that the claimant met with an accident, occurring on 22.4.1991 at 5.30 p.m. on Nemawar Road, near Indore, by the truck bearing registration No. MPM 3265 owned by the respondent No. 1 and driven by the respondent No. 2. The appellant fractured his right leg which had to be ultimately amputated. The vehicle was insured earlier with New India Assurance Co. Ltd. up to 15.3.1991 but instead of obtaining a renewal, a fresh insurance was taken from the respondent No. 3, Oriental Insurance Co. Ltd., on 22.4.1991 which is the date of the accident. These facts along with the finding of the Tribunal that the accident occurred due to actionable negligence on the part of driver of the vehicle are not disputed before us.
3. The appellant claimed Rs. 5,00,000 as compensation from all the respondents. The respondent Nos. 1 and 2, i.e., the owner and driver of the vehicle remained absent after service of summons and were, therefore, proceeded ex parte by the Tribunal. The respondent No. 3, i.e., the insurer repudiated its liability on the ground that the policy had been taken at 9.00 p.m. on 22.4.1991, i.e., after the accident and, therefore, it had no liability to meet the demand. It was further alleged that the owner insured had knowledge of the accident and this material fact was deliberately concealed by him at the time of taking fresh insurance and on this count also the insurance company was not liable to meet the claim. The Tribunal accepted the contention and rejected the claim against the insurer. It awarded Rs. 81,931/- only against the owner and the driver of the vehicle.
4. The claimant has challenged the award on two counts: one, that the insurance company too should have been made liable for the compensation, and two, that the level of the amount of award is too low and needs to be enhanced.
Respondent Nos. 1 and 2 have remained absent in this court too. The appeal is resisted by the respondent No. 3, insurance company alone. Counsel for the insurance company, respondent No. 3, strenuously submitted that the insurance company was not liable for the reasons noted below:
(i) There is evidence to indicate that the insurance policy did not come into existence before 9.00 p.m. on the date of accident and since accident occurred at 5.30 p.m. on the day, the company was not liable;
(ii) The cover note, Exh. D1-C, contained the time proclaiming immunity till then;
(iii) The insured owner did declare against specific column in the proposal form, Exh. D-1, that no accident is caused by the vehicle in question up to the time of seeking insurance. There was thus fraudulent suppression of material fact which vitiated the policy; and
(iv) Section 64VB of the Insurance Act makes the policy enforceable only after payment/acceptance of premium.
5. There is evidence, both oral and documentary, in the case that the vehicle was insured earlier up to 15.3.1991 with some other insurance company and the insured instead of obtaining renewal took fresh insurance from the respondent No. 3 on 22.4.1991. While the cover note, Exh. D-2, specifically mentioned the time of insurance, i.e., 9.00 p.m., the certificate of insurance issued to the insured, vide Exh. P-42, does not contain any time of the commencement of the insurance but simply indicates the date as 22.4.1991 as the effective date of commencement of insurance for the purposes of the Motor Vehicles Act, 1988. The question which falls for consideration is whether in such circumstances the policy can be taken to be operative only from 9.00 p.m.? The answer is not far to seek. The Apex Court in the case of New India Assurance Co. Ltd. v. Ram Dayal 1990 ACJ 545 (SC), in a similar situation has laid down 'that when a policy is taken from a particular date, its effectiveness is from the commencement of that date.'
6. Faced with this authoritative pronouncement, the Counsel for the respondent No. 3 urged that as the policy was obtained by fraudulent suppression of the material fact of prior occurrence of accident, the policy stands vitiated making the insurance company immune from any liability under such policy. Our attention in this behalf was drawn to the proposal form, Exh. D1-C, submitted by the insured wherein against item No. 15 in reply to a query as to whether any accident happened to the vehicle, the proposer declared 'No.' Reliance was also placed on the decisions in the case of Mithoolal Nayak v. Life Insurance Corporation of India AIR 1962 SC 814 and case of British India Genl. Ins. Co. Ltd. v. Ramnath AIR 1962 MP 368, wherein it was held that when a policy is obtained by fraudulent suppression of any material fact, the policy is vitiated.
7. There cannot be any dispute with the proposition that absence of good faith vitiates the contract as between the parties to the contract. The position in regard to 'third party' is surely on different footing. In Oriental Fire & Genl. Ins. Co. Ltd. v. Ram Singh 1995 ACJ 26 (MP), this court held that:
when the insurance company takes the stand of fraud or misrepresentation and seeks avoidance of the insurance policy on the ground of fraud or misrepresentation or concealment of a material fact, in order to entitle the insurer to avoid the policy, insurer has to prove that it has been procured by means of fraudulent misrepresentation as to matters material to the risk. A charge of fraud naturally requires a high degree of probability. It must be established beyond all reasonable doubt and could not be based on suspicion and conjectures. Fraud is odious and cannot be presumed; fraus est odiosa et non praesumenda. The court will not be satisfied with proof which falls short of showing that the intentional misrepresentation was made with the knowledge of perpetrating fraud. The onus probandi in all such cases rests heavily on party alleging fraud or misrepresentation to repudiate the claim or avoid liability because of the breach of the policy.
8. There are some important aspects of the case which engage our attention. As already pointed out the certificate of insurance, Exh. P-42, issued by the respondent No. 3 does not specify the time of insurance. The respondent company did not even after service of notice of the claim petition and even thereafter take any action seeking for the cancellation of the policy and refund the premium amount. Under the circumstances, as held in the case of Oriental Fire and Genl. ins. Co. Ltd. v. Ram Singh 1995 ACJ 26 (MP), 'it cannot be held that the policy was void from its inception.' The claimant is a third party who has lost his one limb in the accident. He cannot certainly be left in the lurch. So far as he is concerned the vehicle stands insured on the date when the accident took place.
9. The Counsel for the insurance company was unable to explain as to-
(a) Why the request for insurance was accepted at 9.00 p.m. on 22.4.1991 when previous policy ended as back as on 15.3.1991?
(b) Why premium was accepted at odd hour as contended, like 9.00 p.m.?
(c) Why the vehicle was not examined so as to find out whether any accident had been caused by the vehicle?
(d) Why alleged time was not mentioned in the policy when there is a clear column in that behalf in the policy paper?
(e) Why permission in terms of Section 170(b) of the Act was not sought from the Tribunal to contest the claim on all grounds when owner and driver had failed to contest the same?
10. It is the insurance policy and not the cover note which covers the risk and determines the rights and liabilities of the parties thereto vis-a-vis a third party. So mentioning of time in the cover note, even if true, cannot destroy the worth and effect of the policy vis-a-vis third party like the claimant.
11. The Counsel for the insurance company also contended that in view of Section 64VB of the Insurance Act, 1938, the insurance company cannot be saddled with the liability as the premium was paid and accepted after the alleged accident. In our view this argument deserves to be rejected in view of the law laid down by the Apex Court in New India Assurance Co. Ltd. 1990 ACJ 545 (SC). However, the insurance company, if it is so advised, may resort to an appropriate remedy against the owner on the fulcrum of suppression of material fact. If the insurance company chooses to initiate any such proceedings against the owner, the observations contained in this judgment would not bind such litigation.
12. The Motor Vehicles Act, 1988, coming into force from 1.7.1989 replacing the Motor Vehicles Act, 1939, consolidated and rationalised various laws regulating road transport. Section 146 of the Act mandates:
No person shall use, except as a passenger, or cause or allow any other person to use, a motor vehicle in a public place, unless there is in force in relation to the use of the vehicle by that person or that other person, as the case may be, a policy of insurance complying with the requirements of this Chapter.
The provision has been inserted obviously with a view to protect members of the community travelling in vehicles or using roads, from the risk attendant upon the user of motor vehicles on the roads. The law provides for compensation to victims of the accident. But, such protection would remain a paper protection only, unless there is a guarantee that the compensation awarded by the courts/Tribunals is recovered and paid to the claimant. Section 146 has been incorporated to overcome this situation and it clearly indicates legislative intent that not only every motor vehicle should be insured before it can be used in a public place but that the insurance should be operative against third party risk. We thus hold that the insurance company, respondent No. 3, shall be equally liable for the award.
13. Now we take up the contention of inadequacy of the amount of award. We find that the claimant, aged 28 years, has lost his right lower limb as a result of the accident. The doctor has assessed this disability to the extent of 95 per cent. He was an employee in a factory on a monthly salary of Rs. 640/-. He has been rendered disabled for proper employment in future. Under these circumstances, the amount of Rs. 81,931/- awarded as compensation on account of the permanent disability is inadequate. In our considered opinion this amount needs to be augmented to Rs. 1,00,000/-.
14. In the result, this appeal succeeds in part. The award is modified as indicated above. The respondent No. 3 is held equally liable along with the respondent Nos. 1 and 2. The direction as regards the interest made by the Tribunal remains unaltered. We, however, make no order as to costs in this appeal.