GANESH DUTTA TIWARI vs Divisional Manager, Life Insurance Corporation of India

THIS appeal is directed against the order dated 17.6.2002 passed in Case No. 15/1999 by the District Consumer Disputes Redressal Forum, Jabalpur (for short the "District Forum") whereby the complaint for deficiency in service in not making the payment of the double accident benefit of Rs. 50,000/- was dismissed.

ADMITTEDLY, the deceased life assured A.K. Tiwari was employed as Assistant Engineer, Rani Awanti Bai Sagar Pariyojna, Jabalpur, who obtained a Jeevan Mitra Double Cover Endowment Plan With Profits (With Accident Benefit) Policy No. 370527136 of the table and term 68-20 of the sum assured of Rs. 50,000/-, mode of payment of premium quarterly of Rs. 937/- issued on 28.2.1994 with the date of commencement of the policy was 28.1.1994. The life assured did not make the payment of premium due on 28.10.1995. However, the life assured paid the premium of Rs. 937/- on 28.1.1996, which was adjusted towards quarterly premium due on 28.10.1995 towards the lapsed policy. The life assured died on 25.3.1996 due to cardiac failure due to coronary heart disease as per post mortem report. On submission of the claim, the Life Insurance Corporation of India (for short "LIC") made the payment on 10.12.1996 as ex-gratia payment of Rs. 56,467/- after deducting the due premium of December, 1995 and 1996. The appellant filed the complaint, which was resisted. The District Forum dismissed the complaint holding it as barred by time and on merits held that notice under Section 50 of the Insurance Act, 1938 (for short "Insurance Act") was not necessary as it was the duty of the life assured to pay the premiums due even in the absence of premium notice. Therefore, the LIC for the policy which had lapsed in February, 1996 prior to the death of the life assured on 25.3.1996 rightly made the ex-gratia payment after adjustment of the premium due treating the payment of the premiums of the whole two years. After hearing learned Counsel for the parties, in our opinion, the complaint could not have been dismissed as barred by time as it is well-settled that Public Authority should not resort to plea of limitation to defeat the just claim of citizens though such plea is permissible under law, which can only be taken when the claim is not well-founded. See, the decisions of the Supreme Court in Madras Port Trust v. Hymanshu International, (1979) 4 SCC 176, and Mahavir Kishore & Ors. v. State of Madhya Pradesh, AIR 1990 SC 313, and a Division Bench decision of the High Court of Madhya Pradesh in State of M.P. v. Ramrao Krishnarao Palsikar, 1990 JLJ 315, followed by this Commission in Appeal No. 547/1999 decided on 21.5.2001, Dilip Kumar Jain v. New India Insurance Company Ltd. & Anr.

It is not in dispute that the policy had lapsed for non-payment of the premium. In such circumstances, learned Counsel for the appellant submitted that Section 50 of the Insurance Act, 1938 (for short the "Insurance Act") was not complied with nor Rule 39 of the Insurance Rules, 1939. Rule 39 speaks of minimum information to be maintained and the checks and other verifications to be adopted which is not of much relevance for consideration of the submission as the main planks of the contention is on Section 50 of the Insurance Act, which we quote : "Section 50. Notice of options available to the assured on the lapsing of a policy-An insurer shall, before the expiry of three months from the date on which the premiums in respect of a policy of life insurance were payable but not paid, give notice to the policy holder informing him of the options available to him unless these are set forth in the policy."

FROM a bare reading of Section 50 of the Insurance Act, it is evident that an insurer shall before the expiry of three months from the date on which the premiums in respect of a policy of life insurance were payable but not paid given notice to the policy holder informing him of the options available to him unless these are set forth in the policy. In view of Section 43 of the Life Insurance Act, 1956, Section 50 of the Insurance Act applies to LIC as it applies to any other insurer. However, non-compliance of Section 50 of the Insurance Act will not entitle the appellant to claim the benefits under the lapsed policy, as Condition No. 2 of the Policy deals with the "Payment of Premiums". Condition No. 3 deals with "Revival of Discontinued Policies", Condition No. 4 deals with "Non-forfeiture Regulations". Condition No. 5 deals with "Forfeiture in certain events" which we do not reproduce to burden this order. From these conditions, it is evident that the policy deals with the situations or options in cases of non-payment of the premiums, hence, in our opinion, notice of options available to the assured on lapsing of the policy was not required nor it is fatal to the LIC who in the best interest exercised the discretion bonafidely and instead of forfeiture of the claim has dealt with the claim and made the ex-gratia payment after adjustment of the premium due of the lapsed policy by applying relevant clauses of the Manual for Policy Servicing Department.

CLAUSE 3.1 relates to "Ex-gratia claims" and CLAUSE 4 relates to "Relaxation in the matter of settlement of Death Claim under Policies where Premiums were paid for full two years" of the Manual which we quote : "3.1 Ex-gratia Claims : Ex-gratia payment of claims would arise where there is no legal liability on the Corporation to make payment as in the case of a repudiated claim or unconcluded contract (incomplete proposal). Though there is no legal liability on the Corporation to pay the claim, in order to mitigate hardship to the claimants, payment by way of equitable relief may be consideration. The analysis particularly of a repudiated claim for consideration of an ex-gratia payment is a skillful exercise and, therefore, it is not possible to reduce it to a set of formal rules. However some guidelines are given in this behalf, in the Claims Investigation Manual which may be referred to for settlement of claims on Ex-gratia basis, formats of Covering Letter (F. No. 5169-A and 5169-B) and Discharge Voucher (F. No. 5170-A) given in para 14 of Chapter 4 should be used. 4. In the case of Money Back Policies, if the death of life assured occurs between six months and one year from the due date of the first unpaid premium, death claim to the extent of a proportionate notional paid up value on the basis of actual premiums paid becomes payable, provided atleast two full years premium has been paid. The notional paid up value at duration 2 years for the different terms under Money Back Plan is as given below : Term Notional paid up value at duration 2 years per thousand S.A. 12 200 15 170 20 140 25 120 26 Rule 39 of the Rules speaks of maintenance of record. As it is not the grievance of the life assured that he was not allowed to inspect the record of the payment of premium, therefore, in the present case Rule 39 of the Rules has no relevance. In such circumstances, even if there was a violation of mandate of Section 50 of the Insurance Act for exercising the options which was not set-forth in the policy, the LIC in the circumstances instead of not making the payment of the lapsed policy settled the claim in all fairness in view of Clauses 3.1 and 4 of the Manual for Policy Servicing Department and paid the ex-gratia payment after adjusting the premium due. In such circumstances, the LIC cannot be held deficient in service.

IN the result, the appeal fails and is dismissed with no order as to costs. A copy of this order be conveyed to the parties and a copy be sent to the District Forum along with the record of the case. Appeal dismissed.