National Insurance Co. Ltd vs Yellamma & Anr

The Supreme Court held that under Section 166 of the Motor Vehicles Act, 1988, an insurance policy can be validly issued against a cheque, and liability commences from the date of issuance, not encashment. The Court found that the cancellation of the insurance policy was invalid due to lack of proper procedure and notice to the insured. Consequently, the insurer was held liable to pay compensation for the accident that occurred shortly after the issuance of the cover note, enhancing the compensation amount to Rs. 1,50,000.