'Insurance Company Cannot Claim Non-Receipt Of Premium When It Was Negligent In Handling Cheque': Bombay High Court
Saksham Vaishya
23 Dec 2025 3:55 PM IST
The Bombay High Court held that an insurance company cannot avoid liability by pleading non-receipt of the insurance premium when the cheque towards the premium was received in time but was negligently handled by the insurer itself. The Court observed that where the insurer assumes risk after receiving the premium cheque and issues a renewed policy, it cannot subsequently repudiate the claim on the ground of dishonour of the cheque, especially when the dishonour was not due to insufficiency of funds and was attributable to operational lapses.
Justice Somasekhar Sundaresan was hearing a writ petition filed by New India Assurance Co. Ltd. challenging an order of the National Consumer Disputes Redressal Commission, which had directed the insurer to honour an insurance claim filed by Gayatridham Phase Co-operative Housing Society. The Society had renewed its Standard Fire and Special Perils Policy by issuing a premium cheque on 17 July 2005, following which New India renewed the policy on 22 July 2005. On 26 July 2005, severe floods in Mumbai caused extensive damage to the Society's property, leading to a claim being lodged on 7 August 2005. Although New India later claimed that the cheque had been dishonoured and purported to cancel the policy on 4 August 2005, the cheque had in fact been deposited belatedly by the insurer, and the bank confirmed that there were sufficient funds and that the non-processing of the cheque was due to flood-related disruption.
The Court noted that New India failed to produce any contemporaneous material establishing that the cheque was dishonoured for insufficiency of funds, including the cheque return memo. It further observed that the insurer's conduct in appointing a surveyor, processing the claim, and actively following up for a survey report even months after the alleged repudiation belied its contention that the policy stood cancelled. The Court held that if the insurer genuinely believed that the policy was void for non-payment of premium, there was no justification for processing the claim or pursuing the survey.
The Court rejected the insurer's reliance on Section 64VB of the Insurance Act, 1938, holding that receipt of the premium cheque before commencement of risk satisfies the statutory requirement. It held that when realisation of the cheque is delayed due to the insurer's own negligence or banking lapses beyond the control of the insured, the insurer cannot take advantage of its own default to deny coverage.
“… reliance on Section 64VB of the Insurance Act, 1938, claiming non-receipt of insurance premium is also of no assistance to New India… if the realization was delayed owing to New India's own deficiency in its own operational conduct, the consequence of the same cannot be visited upon the innocent Society,” the Court observed.
Accordingly, the High Court dismissed the writ petition, upheld the award directing New India Assurance to pay compensation of ₹34,78,002.40 to the Society, and imposed costs of ₹25,000 on the insurer for prolonging the litigation.
Case Title: New India Assurance Co. Ltd. v. Gayatridham Phase Co-operative Housing Society & Ors. [WRIT PETITION NO. 12510 OF 2024]