LIFE INSURANCE CORPN.OF INDIA vs CONSUMER EDUCATION AND RESEARCH SOCIETY

LATE Shri Jasvantrai Shah had obtained four insurance policies for a total value of Rs. 1.00 lakh from the Appellant-Insurance Corporation. He had paid the premia on 6.3.1986 and 6th September, 1986. The third half-yearly premium was due on 6th of March, 1987. According to the Respondent, the agent of the LIC- Mr. Chaturbhuj Shah obtained a bearer cheque from the deceased for Rs. 2,730/- on the 4th June, 1987 the due date for the third half-yearly being 6th of March, 1987. The payment was made by the bearer cheque to Shri Chaturbhuj in his capacity as a general agent for LIC. The said cheque was encashed by his son Shri Deepak Chaturbhuj on 5th July, 1987. However, the amount was not deposited by him with the Appellant-Insurance Corporation till the 10th of August, 1987. Meanwhile, the insured Shri Jasvantrai Shah died in an accident on 9th of August, 1987.

THE Appellant-Insurance Corporation resisted the claim for insurance on the insurance policies on the ground that they had lapsed w.e.f. 6th of March, 1987 due to non-payment of the half-yearly premia which were due on 6th of March, 1987 and even before the expiry of grace period viz. 5th June, 1987. The State Commission, however, came to the finding that the payment of premia was accepted by the general agent of the LIC and this should be deemed to have been paid to the LIC, that the payment was made within the grace period of three months and therefore, the policies could not be deemed to have lapsed especially when the premia were accepted by the Corporation on 10th of August, 1987. According to the State Commission this was indicative of mal-administration and mismanagement of the LIC for which the policy holder could not be made to suffer. It also added that the LIC''s agent might have been guilty of criminal negligence and temporary misappropriation but the consumer could not be made to suffer due to the criminality on the part of insurance agent. The State Commission, therefore, gave the finding that the "decision of the LIC to treat the policies of the deceased Jasvantrai as lapsed is contrary to law, facts and rules and, therefore, cannot be sustained". According to the State Commission failure to settle the genuine, legitimate and admissible claim amounted to deficiency of service of the opposite party. We have gone through the records and also heard the Counsel for the appellant. Nobody appeared on behalf of the Respondents.

THE facts make a very sorry reading. In the first instance we are unable to understand why the insured paid the premia by a bearer cheque on the 4th June, 1987 when as per the rules of the Corporation the cheques should be drawn in favour of the Corporation, crossed, account payee only. In any case even if there was no such rule, the insured could and should have made the payment of the premia by drawing up a cheque directly in favour of the Corporation. Again we fail to understand why the cheque was delivered by the insurance agent to his son who encashed it and kept the money with himself from the 5th July (5th June) till the 9th August, 1987. This amounted to temporary misappropriation. It is also significant that the cheque bears the date of 4th June, 1987 one day before the expiry of grace period on which the premia were actually due that is 5th of March, 1987.

FURTHER according to the rules of Corporation the insurance agent had no authority to collect any moneys or to accept any risk for and on behalf of Corporation or to bind the Corporation in any manner whatsoever. In view of this specific provision it was the duty of the insurance agent to refuse the bearer cheque when tendered by the insured. If, however, he acted contrary to his mandate he cannot by such unauthorised act pass any consequential liability to the LIC. The mere acceptance of the amount as premia deposit on 10.8.1987 in the absence of knowledge of the death of the deceased on the part of the Insurer cannot mean that the latter had accepted the premia and condoned the breach of the contract of Insurance.

WE are surprised, to say the least, that the State Commission despite its having come to the view that the third Opposite Party (insurance agent) had committed criminal negligence and temporary misappropriation has proceeded to hold that the LIC is liable under the insurance policy. Under the law if anyone commits a criminal offence he alone is personally liable and the liability cannot be shifted under any circumstances to anyone else including his master or principal. Surely the State Commission could not have been unaware of the legal position. We also feel that the State Commission had made unfair and unwarranted remarks against the functioning of the Appellant-Insurance Corporation. The facts lead to the conclusion that the beneficiaries under the insurance policies had set up a false claim to sustain which concocted evidence was sought to be created. Such a tendency must be curbed. No such person should be allowed to misuse the Consumer Protection Act, for making any unlawful gain or to harass those who render service to the public. We, therefore, set aside the order of the State Commission and dismiss the complaint. The Respondent-Complainant shall pay a sum of Rs. 5,000/- as costs to the Appellant-Insurance Corporation.