Life Insurance Corporation of India vs ANOOP KUMAR

COMPLAINANT-respondent Sri Anoop Kumar Goyal, a minor, made a proposal through his father Sri Radha Krishan Goyal, to the appellant Insurance Corporation (the ''Corporation'') on 28.3.1996 for purchase of an insurance policy on his life for Rs. 50,000/-. He had duly paid the first premium of Rs. 3,052/- to Sri K.K. Sharma (respondent No. 2), the Agent of the appellant. In token of having received the aforesaid amount of Rs. 3,052/- the appellant issued to him a duly stamped receipt on 30.3.1996. This receipt informed the insured that his proposal had been accepted and that his Policy Number was 191214198. It required him to make payment of the next yearly instalment of the premium on 28.8.1997. By his letters dated 28.8.1997 and 8.9.1997 the insured had allegedly requested the appellant to deliver the policy in question to him but such requests produced no result. He, therefore, filed a complaint under Section 12 of the C.P. Act, 1986 (the ''Act'') before the District Forum at Bharatpur.

THE appellant resisted the complaint of the respondent on the ground that the insured had paid the first premium to appellant''s agent, who was not authorised to receive such payments, through a cheque which was dishonoured by respondent''s Bank for "insufficient of funds", whereupon the first premium receipt and the policy issued to the respondent were cancelled and he was duly informed of such fact. THE District Forum, however, did not accept such version of the appellants and directed them to deliver the policy in question to him after his making payment of the yearly instalments, which fell due after the issue of first premium receipt, within a period of seven days of appellant''s informing him of the details of the payable amount. Aggrieved by such order in Complaint Case No. 205/1998, the appellants has filed this appeal. We heard the learned Counsel for the parties at sufficient length and carefully went through the decision of the Hon''ble Supreme Court in the case of Harshad J. Shah & Anr. v. L.I.C. of India & Ors., AIR 1997 SC 2459, relied upon by the learned Counsel for the appellant.

The main argument advanced before us on behalf of the appellant was that since the respondent had made payment of the first premium of Rs. 3,052/- through a cheque and the acceptance of respondent''s proposal and issuance of the first premium receipt in respect thereto was subject to the collection of the cheque but such cheque was dishonoured by respondent''s banker for "insufficient of funds", no contract of insurance was created between the parties. In support of such argument, reliance has been placed on the language of the letter of acceptance, as contained in the first premium receipt dated 30.3.1996 (F.P.R.) and on the photo-stat copy of the Office Copy dated 14.6.1996, allegedly sent by the appellants to the respondent through Registered A.D. Post. On the other hand the case of the respondent is that the amount of the first premium was paid to appellant''s agent in cash and not through cheque.

ON careful consideration of the merits of the arguments advanced before us and the documentary evidence pressed into service in support thereof we entertain no doubt that the version of the case, as per appellant, was not at all acceptable in the facts and circumstances of the instant case, and has rightly been rejected by the Forum. In the absence of any entry made to the contrary by the appellant in the space provided in the proposal form for official use, it is beyond any challenge that this proposal was made on 28.3.1990. This proposal form makes no reference to the fact as to whether the amount of the first premium was received by Sri K.K. Sharma, agent of the appellant, in cash or through any cheque. The language written on the right side of the F.P.R. (Ex. 1) informs us that the proposal made by the respondent was accepted in the following manner : "Dear Sir/Madam, Your proposal of Assurance as per particulars noted in the Schedule, has been accepted by the Corporation as proposed at ordinary rates with AB/with extra/with lien of Rs. ____% OR + 10(o). We have also received the First Premium on the policy of assurance for the Plan and amount indicated therein. The acceptance of this payment places the Corporation on risk with effect from the date of this Acceptance cum first premium receipt and if the Proposal is under the children Deferred Assurance Plan from the referred date on terms and conditions of the policy of assurance, which will be sent shortly. The issue of this receipt is also subject to the realisation of amount in case, and conditions of acceptance printed over leaf. Additional ____ Premium @ Rs. ____ due also adjusted. Balance help in Deposit Rs. ______ Notice Your next premium falls due on 28.3.1997 Stamp Illegible Prepared by P. Sr./Branch Manager Illegible P. Sr./Div. Manager"

AS stated earlier, though the F.P.R. mentioned the Policy Number, but such policy was not delivered by the appellant to the respondent. Any way, the first part of the letter of acceptance, as reproduced above, clearly mentions the fact that the appellant had received the amount of first premium. The second part of the acceptance, however, stated that the issue of the receipt was subject to the realisation of the amount in cash. This receipt nowhere mentioned the fact that the appellant had received any cheque of the amount of First Premium from the respondent. No mention of such a fact was made either in the proposal form when it was received nor in the F.P.R. when it was issued, by the appellant. Even the blanks in the proposal and the FPR, which were meant and required to be filled in by the appellants, were not filled up. If the later part of the language acceptance letter was intended to be made applicable to the instant case, the former part thereof was not struck off. The appellants, may be they were acting or had acted in good faith, cannot derive any benefit to themselves, from their own acts of omission or commission. The FPR, thus does not advance their cause. It was submitted that along with the FPR the appellant had separately issued a "Kutcha Receipt" mentioning the fact that the amount of the first premium had been received from respondent No. 1 through cheque. On examining the contents of this "Kutcha Receipt" we note that it mentions neither the Policy Number (as was mentioned in the FPR of the even date) nor the particulars of the alleged cheque. Even the space meant to be used for mentioning the mode of the amount of premium has been left blank. Neither the name nor the designation of the official issuing this receipt has been mentioned in it. Then how was it that although this receipt stated the fact that a "pucca receipt" would be issued after the amount of first premium had been paid and received according to the rules, but the "pucca receipt", evidenced by the FPR, was issued on the very same day without having received the amount. This receipt too, in our opinion, does not support the case of the appellant. The last document upon which much reliance has been placed by the appellant is the photostat copy of the O/C dated 14.6.1996, stated to have been sent to respondent No. 1 by registered A.D. post. This letter, apart from suffering from other material and serious infirmities, does not mention either the particulars of the cheque alleged to have been received from the respondent, or the name of his banker. It simply says that appellant''s Bank has dishonoured the cheque for Rs. 3,052/-. It speaks of the Bank Memo, but such material Bank Memo was not produced by the appellant, despite having been demanded by us. It informs the respondent of cancellation of the policy and the FPR issued to him, but at the same time, requires him to send the amount of Rs. 3,052/- which the appellant would like to receive with thanks. Above all, this letter is not signed by the Branch Manager, whose designation has been mentioned at the bottom of the letter. Although it purports to have been sent through registered A.D. post but neither the number of the registered letter nor even the despatch number of such letter has been mentioned in it. For these reasons, this letter inspires no confidence in us.

THE above discussion on the factual aspect of appellant''s case should not require us to examine it from the angle of applicability of the Supreme Court decision cited by the appellant. However, with a view to make the legal aspect of this case quite clear, we are inclined to refer to the distinguishing feature found existing between the cited case vis-a-vis the instant case. We see no better way to highlight the distinguishing features, than to reproduce the relevant part of the decision of the Hon''ble Supreme Court : Paras 4, 5, 6 and 7 of the said decision read as under : "4. It is not disputed that the third half-yearly premium had become payable on the four insurance policies of the insured on March 6, 1987 and it was not paid within the grace period of one month prescribed in the insurance policies. In condition No. 2 of the conditions set out in the Insurance Policy it is stated that if the premium is not paid before the expiry of the days of grace, the policy lapses. THE case of the appellants is that since the payment was made to respondent No. 3 who was the agent of the LIC on June 4, 1987 by bearer cheque dated June 4, 1987 for Rs. 2,730/-, the policies did not lapse on account of non-payment of the premium within the period of grace and that in any event the said policies could be revived on payment of the interest payable for the delayed payment of the premium amount. THE case of the LIC, on the other hand, is that respondent No. 3 had not been empowered by the LIC to receive payment from the insured on the policies and that handing over of the cheque of Rs. 2,730/- by the insured to respondent No. 3 on June 4, 1987 cannot be regarded as payment of premium by the insured to the LIC on June 4, 1987. THE premium on the said policies were paid to the LIC only on August 10, 1987 and, therefore, the policies, which had lapsed on account of non-payment of premium, could not be revived. THE LIC, in this context, places reliance on the Life Insurance Corporation of India (Agents) Regulations, 1972 (hereinafter referred to as ''the Regulations'') framed by the LIC, in exercise of the powers vested in it under Section 49 of the Life Insurance Corporation Act, 1956 (hereinafter referred to as ''the Act''). Regulation 8 dealt with functions of agents and Clauses (3) and (4) of the said Regulation provide as follows : (3) Every agent shall, with a view to conserving the business already secured, maintain contact with all persons who have become policy-holders of the Corporation through him and shall : (a) advice every policy-holder to effect nomination of assignment in respect of his policy and offer necessary assistance in this behalf; (b) endeavour to ensure that every instalment of premium is remitted by the policy-holder to the Corporation within the period of grace; (c) endeavour to prevent the lapsing of a policy or its conversion into a paid up policy; and (d) render all reasonable assistance to the claimants in filling claim forms and generally in complying with the requirements laid down in relation to settlement of claims. (4) Nothing contained in these regulations shall be deemed to confer any authority on an agent to collect any moneys or to accept any risk for or on behalf of the Corporation or to bind the Corporation in any manner whatsoever : Provided that an agent may be authorised by the Corporation to collect and remit renewal premiums under policies on such conciliations as may be specified. 5. By the Life Insurance Corporation (Amendment) Act, 1981 (Act 1 of 1981), Clause (cc) was inserted in Sub-section (2) of Section 48 as a result, rule-making power was conferred on the Central Government to make rules providing agents of the LIC including those who became employees and agents of the LIC on the appointed day under the Act and corresponding provision in Section 49 of the Act which empowered the LIC to make regulations in that regard was deleted. By virtue of Sub-section (2-A) of Section 48, which was also introduced by Act 1 of 1981, it was provided that the regulations and other provisions as in force immediately before the commencement of the Life Insurance Corporation (Amendment) Act, 1981, with respect to the terms and conditions of service of employees and agents of the Corporation including those who become employees and agents of the LIC on the appointed day under Clause (cc) of Sub-section (2) and shall, subject to the other provisions, have effect accordingly. In view of the said provisions, the Regulations by legal fiction introduced by Section 48(2) of the Act became Life Insurance Corporation (Agents) Rules (hereinafter referred to as ''the Rules'') with effect from January 31, 1981, the date of coming into force of Act 1 of 1981. 6. On behalf of the LIC it has also been stated that one of the conditions of appointment of respondent No. 3 as General Agent, as laid down in the letter of appointment dated December 5, 1962, was : ''10. As a probationary agent you are not authorised to collect moneys, accept risks or bind the Corporation in any way other than to collect the deposit towards the first premium and fees as stated in the booklet entitled "Hints to Agents", nor are you authorised or allowed to advance premium to the Corporation on behalf of policy-holders or to become an assignee except with the prior permission in writing of the Divisional Manager, under policies on the lives of persons other than your own or your very near relatives such as wife or minor children, or major children if they are members of a joint family, or to get assigned to such very near relatives'' policies on the lives of persons other than their near relatives. You are also not authorised to collect or pass receipts for moneys paid towards premiums, in respect of which remittance should be made to the Branch Office of the Corporation concerned and receipt in the Corporation''s official form obtained. In respect of any unauthorised collection, you will be acting as an agent of the Corporation and you alone will be answerable to the party for consequence of such unauthorised action.'' 7. On the basis of the aforesaid provisions contained in the Regulation/Rule 8 of the Regulations/Rules and Clause 10 of the conditions on which respondent No. 3 was appointed as the agent of LIC claims the respondent No. 3 had not been authorised by the LIC to collect the premium from the insured and the action of respon-dent No. 3 in receiving the cheque of Rs. 2,730/- from the insured on June 4, 1987 cannot be regarded as receipt of premium by respondent No. 3 on behalf of the LIC and, therefore, the said payment cannot be treated as payment of premium was paid only on August 10, 1987 after the death of the insured."

Speaking over the nature, extent and scope of the authority of an LIC Agent, their Lordships further observed in para Nos. 12, 13, 14, 15 and 16 as under : "12. Under the Law of Agency, as applicable in England, the authority if an agent may be : (i) actual or (ii) apparent. 13. Actual authority results from a manifestation of consent that he should represent or act for the principal made by the principal to the agent himself. It may be express if it is given wholly or in part by means of words or writing or it may be implied when it is regarded by the law as the principal having given him because of the interpretation of the two parties. Implied authority may arise in the form if incidental authority, i.e., authority to do whatever is necessarily or normally incidental to the activity expressly authorised, or usual authority, i.e., authority to do whatever an agent of the type concerned would usually have authority to do, or customary authority, i.e., authority to act in accordance with such applicable business customs as are reasonable. THE authority of the agent may also be implied from the circumstances of the particular case. 14. THE authority of the agent is apparent where it results from a manifestation made by the principal to third parties. THE doctrine of apparent authority involves the assumption that there is in fact no authority at all. It is the authority of an agent as it appears to others. Under this doctrine where a principal represents, or is regarded by law as representing, that another has authority, he may be bound as against a third party by the acts of that other person within the authority which that person appears to have though he had not in fact given that person such authority or had limited the authority by instructions not make known to the third party. THE notion of apparent authority is essentially confined to the relationship between principal and third party. 15. THE position is not very different in the law in India. Section 186 of the Indian Contract Act, 1872 lays down that the authority of an agent may be express or implied. An authority is said to be express when it is given by words spoken or written and an authority is said to be implied when it is to be inferred from the circumstances of the case and things spoken or written, or the ordinary course of dealing, may be accounted circumstances of the case (Section 187). Section 188 prescribes that an agent having an authority to do an act has authority to do every lawful thing, which is necessary in order to do such act. In Section 237 it is provided that when an agent has, without authority, done acts or incurred obligations to third persons on behalf of his principal, the principal is bound by such acts or obligations if he has by his words or conduct induced such third persons to believe that such acts and obligations were within the scope of the agent''s authority. 16. Under the law governing Contracts of Insurance the premium may be paid by the assured to the insurers or to an insurance agent acting on behalf of the insurers and if the agent has authority to receive it the payment binds the insurers. THE authority need not be an express authority; it may be implied from the circumstances."

NOW, it may be appreciated that whereas the case before their Lordships was in respect of amount paid towards revival of lapsed policies of the insured, the instant case is with regard to the receipt of first premium and the consequences necessarily and naturally flowing from issuance of such receipt. Then, whereas to the case before their Lordships, the provisions of the Life Insurance Corporation of India (Agents) Regulations, 1972 were applicable, that is not the position in the instant case. Above all, in the cited case condition No. 10 in the letter of appointment of the concerned agent dated 5.12.1962 clearly and expressly barred the agent from collecting moneys, accept risks or bind Corporation in anyway, no such Agreement between Sri K.K. Sharma, agent and the appellant was produced before us. In fact it could not be denied before us that Sri K.K. Sharma, agent, had all the authority from the appellant, to collect the amount of the first premium, either in cash or through cheques. That being the undisputed factual position in this case, we hold that the principle laid down in the cited case is not applicable to the facts and circumstances of the case before us. To sum up, we find no force in this appeal and dismiss it as such with cost at Rs. 2,500/- to the respondent from the appellant. Appeal dismissed.