CONSUMER EDUCATION AND RESEARCH SOCIETY vs LIFE INSURANCE CORPORATION OF INDIA

THE appellants had filed a complaint before the Consumer Disputes Redressal Commission, Gujarat, which was registered on its file as Complaint No. 231/91. The State Commission by its impugned order dated the 16th June, 1992 dismissed the complaint as barred by limitation. It did not decide the other contention raised by the opposite party (i.e. the present respondent) to the effect that the contract of insurance was not a concluded one.

THE facts of the case as gathered from the record are that the present appellant No. 1, Consumer Education and Research Society (who was complainant No. 1 in the Original complaint) is a voluntary consumer association while Mohanlal Lilaram Vaparani (now appellant No. 2 and who was arrayed as complainant No. 2) is the father of the deceased, Chandraprakash Mohanlal Vaparani Complainant No. 2 had filled up a proposal form allegedly on 6.7.1987 for a life policy for Rs. 50,000/- with the opposite party in respect of his son, Chandraprakash and is said to have paid an amount of Rs. 1,650/- as half yearly premium on 8th July, 1987 to the opposite party by means of a cheque. The father i.e. complainant No. 2 was nominee of the assured under the life policy. The above amount paid towards premium was kept by the opposite party in suspense account. The assured met with an accident on 9th July, 1987 while riding on4the pillion on a scooter. Ultimately he died on 11th July, 1987. Complainant No. 2 informed the opposite party on 19th August, 1987 about the accidental death of his son and claimed the benefit under the policy. On 14th October, 1987 the opposite party repudiated the claim. On 1st July, 1991 the complainants filed the aforementioned complaint before the State Commission. The main defences of the opposite party were that the complaint had been filed beyond the period of limitation and more over the claim was not maintainable. It may be mentioned here that the State Commission has also remarked in para No. 7 of the Order as follows:" The LIC has also given written statement and has stated that the minor met with the accident on 9.7.87 and actually died on 11.7.87. The proof of age is dated 13.7.87 and the proposal was received in the branch after 13.7.87 (on 14.7.87 i.e. after the death of the life assured). In the written submission the opposite party has stated that they have caused Search Report to be obtained in respect of SB Account of State Bank of India from which the cheque was issued and from the pass book of the said account it appeared that on 6.7.87 when the proposal was said to have been made there was no balance in the SB Account. The amount is deposited on 10.7.87 after the issuance of the cheque and after the accident took place. Mr. Bhagat, the learned advocate appearing on behalf of the LIC has further submitted that the signature of the assured in the proposal for insurance and the medical examination report did not tally. This has weighed in the mind of the Corporation while not accepting the aforementioned recommendations. There were other suspicious circumstances also.

AS noticed earlier the State commission has only discussed the question of limitation and held that the complaint was barred by time.

THE Counsel for the appellants argued that the provisions of Limitation Act do not apply to proceedings under the Consumer Protection Act, 1986 and, therefore, the State Commission was not justified in rejecting the complaint on the ground that it was barred by limitation. This argument has been noticed just to reject it. It has been the consistent view of this Commission that though the Limitation Act in terms does not apply to the proceedings before the Consumer Disputes Redressal Forums the principles incorporated in the Act are to be applied to such proceedings on the ground that it will not be conducive to public policy and public good to have stale claims brought up for adjudication after lapse of long periods of time thereby depriving the public of the sense of security and certainty that old matters which have become settled and stale by long lapse of time will not be allowed to be opened. Reference may be made to the Order of this Commission made in Mrs. Agnes D'' Mello v. Canara Bank and Anr. decided on 26th March, 1992. The above dictum was reiterated by this Commission in V. Balasubramaniam and Bros. v. New India Assurance Co. Ltd. 1(1992) CPJ 313 (NC) The Counsel for the appellants next argued that in view of Art. 44(a) of Limitation Act the complaint cannot be deemed to have been barred by time as it has been filed within three years from the date of final denial of the claim under the policy. Relevant portion of the Article reads as under: The line of argument of the Counsel was that the after the claim had been repudiated by the Insurance Corporation, the complainant No. 2 had made a representation to the Claim Review Committee of the opposite party and that representation was rejected on 10th May, 1990 and, therefore, the period of limitation for filing the complaint should be computed from the date of rejection of the representation by the Claim Review Committee. We have not been able to persuade ourselves to accept this argument. It was admitted by the Counsel for the appellants that the Claim Review Committee is not a statutory body nor is there any statutory Rule which lays down that after a claim has been rejected by the Corporation, a representation could/should be made before the Claim Review Committee as a condition precedent before approaching a Court of law. Now-a-days to remove public grievances, cells have been created in many government and public departments dealing with public. Some such cells are called Public Grievances Cells. Similarly some departments hold Adalats for out of Court settlement of disputes pending before the Courts. Such Grievance Cells or Adalats or Claim Review Committees do not acquire the status of a Statutory Authority.

THE complainant has not been able to produce before us any rule or instruction under which the decision of the Claim Review Cominittee has been made binding upon the opposite party. Therefore, for the purpose of escaping the bar of limitation the claimant No. 2 cannot take advantage of the fact that he had made a representation before the Claim Review Committee for settlement of his claim. Hence the rejection of his representation by the Claim Review Committee cannot give him a fresh starting point for computing the period of limitation. The claim had been repudiated on 14th October, 1987 and the period of limitation will commence from that date.

IT is further, to be noted that the Claim Review Committee had rejected the representation of the complainant No. 2 on 10th May, 1990 long before the expiry of three years from the date of repudiation. In spite of it, the complainant No. 2 kept quiet till 1.7.1991 on which date the complaint was filed for securing the benefit of the policy. We, therefore, hold that the petition filed by the complainants before the State Commission was hopelessly time barred and the State Commission was justified in rejecting it on the said ground.

THE State Commission did not go into the question if there was a concluded contract of insurance in the present case. It, however, expressed certain doubts about the bona fides of the claim. However, in Agnes, case (Supra) this Commission had also remarked: "Time and again, it has been pointed by the Supreme Court of India that it is not proper that the Government and instrumentalities of State should avoid the adjudication of a claim made against them merely on the technical plea of bar of limitation when there has not been any manifest and deliberate latches on the part of the citizen putting forward the claim."

In view of the said observations, this Commission decided to hear the parties on merits i.e. whether there was a concluded contract of insurance between the parties. If the answer to the above query is in the affirmative, the appellants can succeed otherwise the appeal is liable to be dismissed.

IN the present case the proposal form allegedly was filled on 6th July, 1987 and the cheque for Rs. 1,650/-as half yearly premium was issued on 8th July, 1987 (though the actual premium was only Rs. 1,016.30). The medical examination report is said to be dated 6th July, 1987. However, the said proposal papers were registered in the City Branch No. 1/837, Ahmedabad on July 14, 1987. The school certificate received along with the proposal papers is dated July 13, 1987. Thus the proposal was received by the Branch after the death of the proposor who expired on 11th July, 1987. As the proposed life to be assured was a substandard one, the case was referred to Divisional Office and after a reference to the Divisional Medical Referee, it was decided to accept the proposal with an extra premium of Rs. 2.60 per thousand and first premium receipt-cum-acceptance letter was issued on July 27, 1987 much after the death of the proposed life to be assured. It may be mentioned here that by that time the respondent-Corporation had not been intimated about the death of the assured. As noticed earlier, intimation about the death of the assured was sent to the Corporation vide letter which was received by the Corporation only on August 19, 1987. In the light of the above facts it was vehemently argued on behalf of the respondent that in the present case as the proposal had not been accepted during the life time of the assured there was no concluded contract of insurance between the assured and the insurer and, therefore, the present claim under the policy was rightly rejected by the Corporation Reliance was also placed upon Vasireddy''s case (Supra) In that case the assured had filled a proposal form for insurance for Rs. 50,000/- on 27th December, 1960. On the same date there was a medical examination of the assured. Assured had also issued cheques in respect of first premium. The cheques had been encashed before the death of the assured which took place on 12th January, 1961. On 16th January, 1961 the widow of the assured - deceased wrote to the Life Insurance Corporation of India intimating the death of the deceased and demanded payment of Rs. 50,000/-. The Life Insurance Corporation denied its liability on 20th January, 1961. The legal heirs of the deceased filed a suit. The plaintiff pleaded that the deceased had fulfilled his part of the insurance contract and the Corporation by its overt acts of encashing the cheques and crediting the amount in its accounts accepted the proposal of the deceased. In the premises it was said in the plaint that there was a concluded and valid insurance contract between the deceased and the Corporation. The suit was resisted by the Corporation and it was pleaded that the amounts paid by the deceased were kept only in deposit in suspense account and was not adjusted towards the premium since the proposal was not considered, the terms of acceptance were not fixed and the premium amount required for the proposal was not calculated. The Corporation claimed that there was no liability for the risk and as such the plaintiffs had no right to claim and there was no cause of action. It was held by the Supreme Court (paras Nos. 14 and 15): "The mere receipt and retention of premium until after the death of the applicant or the mere preparation of the policy documents is not acceptance. Acceptance must be signified by some act or or acts agreed on by the parties or from which the law raises a presumption of acceptance. See in this connection the statement of law in Corpus Juris Secundum, Vol. XLIV page 986 wherein it has been stated as:

''The mere receipt and retention of premiums until after the death of applicant does not give rise to a contract, although the circumstances may be such that approval could be inferred from retention of the premium. The mere execution of the policy is not in acceptance; an acceptance, to be complete, must be communicated to the offer or, either directly, or by some definite act, such as placing the contract in the mail. The test is not intention alone. When the application so required, the acceptance must be evidenced by the signature of one of the company''s executive officers.

Though in certain human relationships silence to a proposal might convey acceptance but in the case of insurance proposal, silence does not denote consent and no binding contract arises until the person to whom an offer is made says or does something to signify his acceptance. Mere delay in giving an answer cannot be construed as an acceptance, as, prima facie, acceptance must be communicated to the offer or. The general rule is that the contract of insurance will be concluded only when the party to whom an offer has been made accepts it unconditionally and communicates his acceptance to the person making the offer. Whether the final acceptance is that of the assured or insurers, however, depends simply on the way in which negotiations for insurance have progressed. See in this connection statement of law in Mac Gillivary and Parkington on Insurance Law, Seventh Edition Page 94 paragraph 215."

The facts of the present case are more strong than the above case. In the present case the proposal itself reached the branch concerned of the Corporation on or after 13th July, 1987 as the school certificate attached with the proposal form was obtained on 13th July, 1987. Therefore, the question of acceptance of the proposal form before the death of the assured did not arise. The proposal was accepted on 27th July, 1987 on which date the official receipt for the premium was issued by the branch concerned and it was also mentioned therein that the proposal for insurance as per particulars had been accepted by the Corporation as proposed at ordinary risk. As noticed earlier the cheque towards the first premium was issued for Rs. 1,650/-. On calculation it was found that the amount paid was more than the actual premium. Thus in the present case even the premium had not been calculated before the death of the deceased.

THE Counsel for the appellants placed reliance upon Life Insurance Corporation of India v. L. Kamalamma, AIR 1986 Kerala 215. We have carefully gone through the facts of that case and are of the opinion that the facts of the case are entirely different from that of the present case. In that case the proposal was registered and the amount tendered was accepted in the belief that it was the correct amount. All this happened before the death of the assured. Some deficiency in the premium paid was found but before it could be communicated to the assured he had died. In the above circumstances it was held by the Kerala High Court that contract of insurance had come into existence during the life of the deceased and was binding on the Corporation. As noticed earlier, in the present case the proposal of the assured had reached the branch concerned only after the death of the deceased and the amount paid on behalf of the assured bad been kept in the suspense account. Before the death of the assured even the premium amount had not been calculated.

IN the light of the above discussions it is held that in the present case no binding contract of insurance had come into existence between the assured and the insurer and therefore, the Corporation was justified in repudiating the claim under the policy. Hence the present appeal is liable to be dismissed and we accordingly dismiss it. The appellant will pay Rs. 2,500/- as costs of this appeal to the respondents.