Pay a claim if premium cheque encashed: SC

"A contract of insurance like any other contract, is a contract between the insured and the insurer. The amount of premium is required to be paid as a consideration for arriving at a concluded contract," a bench of Justices S B Sinha and L S Panta observed.     

Interpreting Section 64VB of the Insurance Act, the apex court said, a contract of insurance comes into being only after the insurer gets the premium in advance.     

The apex court passed the ruling while upholding the appeal filed by the National Insurance Company Limited challenging a Karnataka High Court order that the liability of the insurer would commence from the date of issuance of the cheque and not from the date when it is encashed.     

The High Court had directed the insurance company to pay Rs 1.5 lakh as a third party insurance claim to victim Yellamma who suffered injuries in a road accident involving a mini-bus whose insurance .     

In this case the insurance company had, inadvertently, issued an insurance cover for the vehicle for the period between September 3, 1991 to September 2, 1992 on the basis of a cheque for premium issued by the owner, even before it could be encashed.     

However, the insurance company on realising that it had issued the cover even before encashment of the cheque requested the owner to pay it in cash. But the owner declined to do so and instead returned the original policy document and took back his cheque.