Dishonoured premium cheque defeats motor insurance coverage where no valid premium was received before the loss.

An insurer is not bound to honour the insured's own claim where the premium cheque is dishonoured and no valid premium is received before the loss. Section 64VB of the Insurance Act requires advance receipt of premium before risk can be assumed, and the insurance contract operates as a reciprocal promise dependent on real payment. Once the cheque fails, consideration fails and the insured cannot enforce coverage against the insurer. The position concerning third-party liability under motor insurance is treated separately from the insured's personal claim, but as between insurer and insured the policy is not enforceable without valid premium receipt.

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Issues: Whether an insurer is liable under a motor insurance policy when the premium cheque issued by the insured is dishonoured and the accident occurs before valid receipt of premium.

Analysis: The statutory scheme under section 64VB of the Insurance Act, 1938 permits assumption of risk only when premium is received in advance, and the insurance contract is one of reciprocal promises. When the insured tenders a cheque towards premium, the insurer's promise to cover the risk is conditioned upon real payment of the premium. If the cheque is dishonoured, consideration fails and the insured cannot insist on performance by the insurer. The liability to third parties under the Motor Vehicles Act is distinct from the insured's own claim; as between insurer and insured, the absence of premium prevents the contract from being enforced. The provisions on reciprocal promises and failure of consideration under the Contract Act support this position.

Conclusion: The insurer is not liable to honour the claim of the insured or his legal heirs when the premium cheque is dishonoured and no valid premium is received before the loss.

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