Life Insurance Corporation Of India And Anr. vs A. Yasodamma And Anr.

THE husband of the Complainant / Respondent No. 1 had taken LIC Policy under Salary Savings Scheme for a sum of Rs. 50,000 on 28.12.1998 from the petitioners. The assured had appointed his wife as nominee. The assured died on 23.12.2000. The Complainant submitted relevant documents to the petitioners and claimed the policy amount. However, since no action was taken by the petitioner, the Complainant had approached District Forum. The District Forum vide detailed order directed the present petitioners to pay the insurance amount of Rs. 50,000 along with benefits after deducting the premium amount of Rs. 6,816 @ Rs. 426 X 16 instalments due to the petitioners with interest @ 12% on the balance amount of Rs. 43,184 from the date of petition till the date of realization. In addition, costs of Rs. 400 were awarded.

THE order of the District Forum was challenged before the State Commission and the State Commission vide impugned order, which is a subject matter of challenge in this revision, dismissed the appeal.

THE employer/opposite party No. 1 had taken the stand before the District Forum that insured had absented without leave from May, 1999 and July, 1999 due to which, the premium was not deducted from the salary and was not sent to LIC and subsequently, the insured was compulsorily retired w.e.f. 1.11.1999 and it was for the assured to have sent the premium to LIC directly after he was compulsorily retired. The opposite party Nos. 2 and 3 namely, the present petitioners have stated that the deceased policy holder had executed an authorization authorising employer, Sr. Divisional Personnel Officer, South Central Railway, Guntakal to deduct the monthly premium of Rs. 426 from his salary from February, 1999 onwards towards the policy. On verification, it was found that monthly premium in respect of the policy was not received for the months of May, 1999 and July, 1999 and from November, 1999 to December, 2000 till the death of the assured.

LEARNED Counsel for the petitioner submitted before us that the policy had lapsed due to non -payment since the assured remained absent and the employer did not pay the premium and subsequent to compulsorily retirement of the assured, premium with effect from November, 1999 to December, 2000 was not paid by the assured, even though, as per authorization given by the assured, it was his sole responsibility to pay the said premium in the circumstances. He further submitted before us that the judgment in the case of Delhi Electric Supply Undertaking v. Basanti Devi and Anr., III (1999) CPJ 15 (SC)=VIII (1999) SLT 279=AIR 2000 SC 43=1999 (8) SCC 229, is distinguishable and does not apply to the case under consideration. He also urged before us that notice under Section 50 of the Insurance Act, 1938 is not required to be given in the light of authorization given by the assured.

RESPONDENT No. 1/Complainant did not appear and Counsel for Respondent No. 2, Sr. Divisional Personnel Officer, South Central Railway, Guntakal submitted that once the assured had been compulsorily retired, it was the duty of the assured that he should have sent the premium directly to LIC as the employer could no longer deduct the premium.

WE shall first deal with legal aspects, which have bearing in the matter under consideration. The Apex Court in Chairman, LIC and Others v. Rajiv Kumar Bhasker, V (2005) SLT 567=JT 2005 (6) SC 416, has considered the entire Salary Savings Scheme. The salient features of the scheme as pointed out by the Apex Court are : the scheme is accomplished by savings automatically deducted from the pay of the employees to be remitted to LIC every month; each employee owns his policy individually; the responsibility for collection of premium by deducting the same from the salary of the employee and making over the same to Corporation is that of the employer; the employer thus accepts the sole responsibility to collect the premium from its employees and remit the same by means of one cheque to the Corporation; provisions are made for in the event of the life assured leaving employment, etc. In the cases before the Apex Court for one reason or the other, the employer did not deduct the premium from the salary of the concerned employee. The Apex Court also noted that the Salary Savings Scheme provides for a tripartite arrangement; the Corporation did not issue any receipt of individual premium or premium due notice and the entire responsibility was thrust upon the employer by the Corporation; keeping in view the facts that Corporation did not make any offer to the employees nor would directly make any communication with them regarding payment or non -payment of the premium or any other matter in relation thereto or connected therewith including the lapse of the policy, if any, it could not be said that employer had no role to play on behalf of the Corporation; that so far as employees are concerned, they could not approach the insurer directly and, thus, for all intent and purport they were to treat their employers as agents'' of the Corporation; the scheme clearly and unequivocally demonstrates that not only the contract of the insurance was entered into by and between the employers and the insurer through the employer but even the terms and conditions of the policy were to be performed only through employer and if the employee had reason to believe that his employer was acting on behalf of the Corporation, a contract of agency may be inferred. The Apex Court emphasised that even in case of non -payment of premium for any reason whatsoever, in view of the object the Scheme seeks to achieve, it was the duty of the insurer to inform the employee about the consequences of non -receipt of such premium from the employer and the Corporation had failed or neglected to do so. It was further pointed out by the Apex Court that in terms of the scheme, significantly the employee for all transactions was required to contact his employer only and as such the Corporation could not be permitted to take a different stand so as to make the employee suffer the consequences emanating from the default on the part of the employer. It was further pointed out that if for some reasons, the employer is unable to pay the salary to the employees, as for example, its financial constraints, the employee may be held to have a legitimate expectation to the effect that his employer would at least comply with its solemn obligations. Therefore, such obligation having been undertaken to be performed by the employer at the behest of the Corporation as its agent having the implied authority therefor, the Corporation cannot be permitted to take advantage of its own wrong as also the wrong of its agent and in any event the employer was obligated to inform the employee that for some reason he is not in a position to perform his obligation whereupon the latter could have paid the premium directly to the Corporation.

THE Apex Court referred to the case of C. Shankuntala and Another, Civil Appeal No. 2357 of 2003, in which District Forum held that both the Corporation and the employer were jointly and severally liable to pay the assured amount to the concerned employee in view of the deficiency in service. The State Commission set aside the said order. In revision, the order of the State Commission was set aside by National Commission and order of District Forum was restored against which, Special Leave Petition was filed by Deputy Manager (Finance Adv.), BHEL being Civil Appeal No. 2357 of 2003, wherein it was urged on behalf of the Corporation that view taken in Basanti Devi (supra) requires reconsideration as employer is not agent of Corporation and in the event of non -payment of requisite premium either by the employee or the employer, the policy would lapse and Corporation was not liable to pay the assured amount. Learned Senior Advocate for the employer urged that having regard to the decision in Delhi Electric Supply Undertaking v. Basanti Devi and Anr., III (1999) CPJ 15 (SC)=VIII (1999) SLT 279=AIR 2000 SC 43=1999 (8) SCC 229, the National Commission must be held to have committed apparent error in affirming the judgment of the District Forum as the employer cannot be made liable to pay the amount under the policy. In this appeal, cross -objections were filed by the Corporation. The Apex Court dismissed the cross -objections and Civil Appeal No. 2357/2003 filed by employer BHEL was allowed.

IN Basanti Devi''s case (supra), the State Commission had directed employer, Delhi Electric Supply Undertaking (DESU) to pay the insurable amount and LIC was absolved of any liability. National Commission affirmed the said order. The Apex Court directed that LIC shall pay the insurable amount with interest to the Complainant and thus substituting LIC for DESU as ordered by State Commission and affirmed by National Commission. However, for suffering which Complainant had to undergo for default committed by DESU in not remitting premium to LIC, the Apex Court directed that DESU will pay cost of these proceedings quantified at Rs. 25,000. It is pertinent to note that in this case premium was deducted from the salary, but it was not remitted to LIC.

LEARNED Counsel for the petitioner before us has placed heavy reliance on authorization letter, which is at page 28 of the record. The said authorization letter reads as under: "Dear Sir, Ref: Policy No. ..........own life. I have taken out a life insurance policy with the Life Insurance Corporation of India under the Salary Saving Scheme. The particulars of the policy are given below. I desire to pay premiums by deduction from salary every month. I request you to kindly arrange to deduct and pay to the Sr. Branch Manager, Life Insurance Corporation of India___________the premium amounts stated below from my salary due for the month given below and also to continue to deduct and pay such amounts regularly every month including arrears of premiums, if any with interest till further advice from me. I agree that your liability will be confined to making arrangements for deduction of premiums from my salary whenever this can be made and for remitting the amount of deduction to the Corporation in time upto the month and year of last instalment stated below or till I give you and the LIC a specific Notice of withdrawal of authorisation. I also agree that the notice of authorisation shall not be withdrawn by me until premiums have been paid for a minium period of 5 years or th of the original premium paying period of the policy, whichever is less, but in any case unit less than 3 years, premiums are paid from the date of commencement of the policy. I shall be entirely responsible for any consequence on account of non -payment of premiums on any policy for reasons beyond your control, such as in the event of my proceeding on leave without pay or my drawing advance salary without deduction of premium per chance or my withdrawing this authorisation by a due notice to you and to the Corporation, after the minium period as stated above or my being transferred to on office where the Salary Savings Scheme has not been introduced or my being transferred on promotion to a gazetted post where the Salary Savings Scheme is not operative or my leaving the present service. In any case or in case of withdrawal of the Salary Saving Scheme with you by the Life Insurance Corporation of India for any reason whatsoever it will be my responsibility to make arrangements for remittance of premium directly to the Life Insurance Corporation of India to prevent my policy from lapsing. Yours faithfully, Sd/ - Signature of the policyholder

THE District Forum had dealt with the authorization letter, which is in printed form and this authorization letter is said to have been taken from all the employees and only on the basis of the said authorization letter, it could not be concluded that the assured was aware of the contents of the same. The District Forum also observed that some gaps have been left blank in the authorization letter. The Authorization letter does not even mention the policy number, which column is also left blank. In any case, authorization letter does not specifically deal with the contingency of the compulsorily retirement. Admittedly, neither the employer nor the petitioner had informed the assured about the non -payment of the premium. The Apex Court in Chairman, Life Insurance Corporation and Ors. v. Rajiv Kumar Bhasker (supra), has held: "20. The Scheme clearly provides that in the event of cessation of employment the concerned employee if continues his employment under a new employer, the former employer has to inform the Corporation thereabout. Furthermore, upon retirement or in situations other than taking up of any job with any other employer, the employee would be entitled to continue with the policy but therefore, he will have to pay a higher premium. Even at that stage, the Corporation would have a duty to inform the employee concerned towards his right. Even in case of non -payment of premium for any reason whatsoever, in view of the object the Scheme seeks to achieve, it was the duty of the insurer to inform the employee about the consequences of non -receipt of such premium from the employer. The Corporation has failed or neglected to do so. In that view of the matter, we do not find any reason to take a different view.

In terms of the Scheme, significantly the employee for all transactions was required to contact his employer only. In view of our findings aforementioned, the Corporation, thus, cannot be permitted to take a different stand so as to make the employee suffer the consequences emanating from the default on the part of the employer. If for some reasons, the employer is unable to pay the salary to the employees, as for example, its financial constraints, the employee may be held to have a legitimate expectation to the effect that his employer would at least comply with its solemn obligations. Such obligations having been undertaken to be performed by the employer at the behest of the Corporation as its agent having the implied authority therefore, the Corporation cannot be permitted to take advantage of its own wrong as also the wrong of its agent. In any event, the employer was obligated to inform the employee that for some reason, he is not in a position to perform his obligation whereupon the latter could have paid the premium directly to the appellant herein."

The premium for the months of May, 1999 and July, 1999 was not paid but thereafter the premium for the months of August, 1999 to October, 1999 was received by the Insurance Company. Once the said premiums were received, the Insurance Company cannot turn about and say that the policy had lapsed on account of non -payment of premium for the months of May, 1999 and July, 1999. Insofar as the payment of premium after compulsorily retirement is concerned, the authorization does not speak of any such contingency. The employer as well as the Insurance Company were, therefore, bound to inform the assured of the consequences of the non -payment of the premium consequent to his retirement.

THE Insurance Company has placed on record of these proceedings, a copy of the Insurance Policy of the assured in this case and the said policy is totally unreadable. If Insurance Company can place such unreadable copy before this Commission, it can be well imagined that what type of copy, if any, would be supplied to the assured. There is also nothing on record to suggest as to whether the contents of the Authorization letter and its consequences had been explained to the assured or a copy thereof was given to him for his record and compliance in the event of non -payment of the premium. Respondent No. 3/Petitioner No. 2 in the counter filed before the District Forum has stated that a letter was written to the employer by registered post dated 15.2.2001 seeking reasons for non -recovery of premium dues for Rs. 599 and Rs. 799 but there was no reply from the employer. However, admittedly, the Insurance Company never informed the assured that the premium had not been paid.

IN the aforesaid facts and circumstances of the matter, we are of the opinion that the impugned order passed by District Forum and confirmed by State Commission is just, fair and equitable and it does not call for any interference whatsoever. The revision is accordingly dismissed with no order as to costs. R.P. dismissed.