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Judgment
S.A./S.B. Amt/P.U. Value of the policy,"Rs. 9,50,000=00",
Vested Bonus,"Rs.7,12,500=00",
Total,"Rs.16,62,500=00",
Loan amount due against the policy as on
22/03/2011","Rs.5,88,348=00",
Interest due on loan amount,"Rs.52,951=00",
Total amount due with interest in loan account,"Rs.6,41,299=00",
Balance paid as on 22/03/2011,"Rs.10,21,201=00",
petitioner had failed to pay the last half yearly premium.,,
Before proceeding, it would be relevant to refer to the relevant provisions of the Policy as relied upon by both the counsel. Clause 4 of the Policy,",,
which provides for non-forfeiture in certain cases, is set out below:-",,
“4). Non-Forfeiture Regulations: If after at least three full years premiums have been duly paid in respect of this policy, any subsequent",,
premium be not duly paid, this policy shall not be wholly void, but the sum assured by it shall be reduced to such a sum as shall bear the same ratio to",,
the full sum assured as the number of premiums actually paid shall bear to the actual number originally stipulated in the policy. The policy so reduced,,
shall thereafter be free from all liability for payment of the within mentioned premium, but shall not be entitled to the future Guaranteed Additions. The",,
existing vested Guaranteed Additions, if any, will remain attached to the reduced paid up policy.",,
Notwithstanding what is above stated, if after at least three full years premiums have been paid in respect of this policy, any subsequent premium be",,
not only said to the event of the death of the Life Assured within six months from the due date of the first unpaid premium, the policy moneys will be",,
paid as if the policy had remained in full force after deductions of (a) the premium or premiums unpaid with interest thereon to the date of death on the,,
same terms as for revival of the policy during such period and (b) the unpaid premium being due before the next anniversary of the policy.,,
Notwithstanding what is above stated, if after at least five full years premiums have been paid in respect of this policy, any subsequent premium be not",,
duly paid, in the event of the death of the Life Assured within 12 months from the due date of first unpaid premium, the policy moneys will be paid as",,
if the policy had remained in full force after deduction of (a) the premium or premiums unpaid with interest thereon to the date of death on the same,,
terms as for revival of the policy during such period and (b) the unpaid premiums falling due before the next anniversary of the Policy.â€,,
The Policy also contains the special provisions for guaranteed additions, which are set out below:-",,
“Special provisions:,,
1) Guaranteed Additions: Provided the policy is in full force, a Guaranteed Addition of Rs.75 per thousand Sum Assured will be added to the policy at",,
the end of each policy anniversary and will be payable when the sum assured become payable.â€,,
As is apparent from the plain language of clause 4 of the Policy as quoted above, in the event three full yearâ€s premium has been paid, the Policy",,
would not be treated as void but the sum assured would be proportionately reduced. In other words, the Policy would be treated to be in force, albeit,",,
with the reduced sum assured.,,
The Claims Manual also contains the similar clause except the minimum premium payable is specified as 1/10th of the term. The relevant extract,,
of the Claims Manual is set out below:-,,
“If under Jeevan Shree (Table 112, 151, 162) policies, premiums have been paid at least for 1/10th of the term (subject to a minimum of one full",,
yearâ€s premium) and any subsequent premiums be not duly paid, the policy shall not be wholly void but shall acquire paid-up value. The paid-up value",,
shall be worked out equal to a sum that shall bear the same ratio to the full Sum Assured as the number of premiums actually paid shall bear to the,,
total number originally stipulated in the Policy. Any vested Guaranteed Additions shall also remain attached to such Reduced Paid Up value. Such,,
paid-up value shall become payable on maturity or earlier death.â€,,
There is no dispute that the LIC has not treated the Policy in question as void and also paid the guaranteed additions that had accrued upto the,,
date of default in payment of premium.,,
However, in so far as guaranteed additions post default in payment of the last premium is concerned, the LIC disputes that the same is payable.",,
The LIC rests its case on clause 4 of the Policy, which provides that in certain cases where all the premiums are not paid but at least three or more",,
premiums have been paid, the sum assured by it shall be reduced to a sum as shall bear the same ratio to the full sum assured as the number of",,
premiums actually paid shall bear to the actual number originally stipulated in the Policy. It also provides that the Policy so reduced shall thereafter be,,
free from all liability for payment of within mentioned premium, but shall not be entitled to the future guaranteed additions.",,
Thus, on a plain reading of clause 4 of the Policy, the petitioner would not be entitled to future additions if the policyholder fails to pay further",,
premiums after making payment of at least three full years premium. Clause (1) of Special Provisions also expressly provides that guaranteed,,
additions would accrue at the rate of ₹75/- per thousand provided the Policy remains in full force. Clause (1) of the Special Provisions also expressly,,
provides that guaranteed additions would be added “Provided the Policy remains in full forceâ€. Thus, on a plain reading of the terms of the Policy,",,
the guaranteed additions after the petitioner has defaulted would not be payable.,,
The learned counsel appearing for the petitioner contended that paragraph 3.4 of the Claims Manual contained certain special provisions in respect,,
of cases where the premiums in the last policy year have not been paid. The relevant extracts of paragraphs 3.4 and 3.5 of the Claims Manual are set,,
out below:-,,
“3.4 Where premium/s in the last policy year has/have not been paid:,,
If any premium due in the last policy year has not been paid but the policy was in full force on the policy anniversary prior to the maturity date the,,
claim should be paid for the full sum assured subject to deduction of unpaid premium/s for the last policy year together with late fee up to the date of,,
maturity.,,
3.5 Discounted Value of Claims:,,
(A) Except for a Double Endowment Policy and the Pure Endowment policy, when an Endowment type of policy is desired to be surrendered within a",,
period of one year before the date of maturity, the surrender transaction, if and when settled before the date of maturity, should be treated as a",,
settlement of Maturity claim, the amount payable being the amount at maturity less discount at 5% / 9% p.a. compound interest using surrender value",,
Table 7 or 7A.,,
The following procedure should be followed in this behalf.,,
xxxx xxxx xxxx xxxx,,
8) If the policy is in force but has not become fully paid up and only one full yearâ€s or less than one full yearâ€s premium (that is 1 yearly or 2 or 1,,
Particulars,"Amount computed as per
Sangeeta Khera?s case, as
directed by Honâ€ble High Cour
Rs,","Amount actual paid by the LIC as
per policy terms and conditions.
t
Sum Assured,"10,00,000=00","09,50,000=00
Guaranteed additions,"11,25,000=00","07,12,500=00
Loyalty additions,"02,50,000=00",
Total,"23,75,000=00","16,67,000=00
Less,,
Premium for the half year 07/2005
to 01/2006","00,58,782=00",
Interest on premium up to 01/2011
i,e, up to the date of maturity","00,31,042=00",
Loan amount due,"05,88,348=00","05,88,348=00
Interest accrued on loan,"00,52,951=00","00,52,951=00
Total amount deductible,"07,31,123=00","06,41,299=00
Net amount payable,"16,43,877=00","10,21,201=00
Amount paid,"10,21,201=00","10,21,201=00
Difference,"06,22,676=00",Nil