Sanjiv Khanna, J. - (1.)The present appeals raise a common question of law relating to third party liability of an insurance company under the Motor Vehicles Act, 1988 (hereinafter referred to as the Act, for short) even after the cheque given by the insured, i.e., the owner of the vehicle, to cover third party liability has bounced and notice terminating the contract of insurance has been served on the insured. Learned Motor Accidents Claim Tribunal has held that the appellants, the insurance companies will be liable to third parties.
(2.)Under law of contract, if one party commits fundamental breach of the terms of the agreement, the other party is entitled to terminate the contractual relationship and be absolved from performing it's obligations. Failure and default in paying consideration as per terms agreed, is a fundamental breach of a contract. In fact the party terminating the contract is entitled to sue the other side and claim/recover damages, if any. The Act, however, has made inroads into the law of contract as far as contract of insurance relating to motor vehicles is concerned. The Act has specific provisions in respect of third party liabilities. Being a beneficial legislation, the Courts have interpreted the provisions of the Act to ensure that the legislative intent and benefit is not nullified by the insurance companies on the basis of contractual terms to the contrary. Courts have always endeavored to ensure maximum protection to third parties who suffer as a result of a road accident so that they are not penalised. Brief Facts of MAC. APP. No. 259/2004
(3.)Motor car bearing registration No. DL-1Y-2760 was owned by.Megha Tours and Travels. The owner issued a cheque dated 22nd February, 1997 towards payment of premium for insurance cover to the Oriental Insurance Company Limited. The insurance was for the period 22nd December, 1997 to 21st December, 1998.