Life Insurance Corporation of India vs Gita Sharma

MR. Justice Ashok Bhan, President-Life Insurance Corporation of India-petitioner herein, which was the opposite party before the District Consumer Disputes Redressal Forum, North, Tis Hazari, Delhi (hereinafter referred to as ''the District Forum'' for short), has filed the present Revision Petition against the Order dated 8.9.2008 passed by the State Consumer Disputes Redressal Commission, Delhi (for short, ''the State Commission'') wherein and whereunder the Appeal was dismissed.

SHORTLY stated, the facts leading to the filing of the case are:

IT is stated in the complaint that the husband of the respondent/complainant, during his life-time, purchased an Insurance Policy from the petitioner-Insurance Company being the Jeevan Suraksha (Pension Plan) with life risk cover. That vide cheque No. 169066 dated 22.12.2001, the insured paid the exact amount of premium as demanded after due calculation by the petitioner and had completed all the formalities. That the cheque was encashed on 26.12.2001. That on 15.1.2002, the insured died of Meningitis at Delhi. It was stated that the petitioner did not send the receipt and/or policy to the insured until his death. That even the receipt dated 22.12.2001 issued against the premium of Rs. 10,181was handed over by the petitioner to the respondent after the death of the insured in the month of March, 2002. That the respondent on 11.3.2002 wrote to the petitioner informing about the untimely demise of the insured and to rectify the name of the deceased in its record and to send the claim form. That respondent received a communication dated 8.5.2002 from the petitioner regarding refund of the proposal deposit along with cheque dated 9.5.2002 for a sum of Rs. 10,181. That the respondent had not encashed the said cheque and sent several letters to the petitioner demanding the entire amount under the Policy besides monthly pension as nominee under the Policy. That the respondent had filed a Writ Petition being C. W. No. 4423 of 2003 which was dismissed as withdrawn by the High Court with a liberty to the respondent to seek remedy in Civil Court. That during the pendency of the Writ Petition, petitioner had issued another cheque dated 21.6.2003 against the previous cheque which the respondent did not encash. Thus, alleging deficiency in service on the part of the petitioner to pay Rs. 2,99,000 towards the claim under the Policy, compensation for causing mental agony and harassment, miscellaneous expense along with interest @ 12% p.a. from March, 2002 to June, 2005 along with cost of litigation, respondent filed the complaint before the District Forum.

ON being served, petitioner filed its Written Statement stating that it received the cheque for amount of Rs. 10,181 without any proposal form and Sunil Chand Sharma-insured, never presented himself for medical examination before any authorized medical officer of the petitioner. That in the absence of proposal form, question of its approval and issuance of Insurance Policy to the insured by the petitioner does not arise. That no concluded contract of insurance took place between the insured and the petitioner. The petitioner denied the purchase of any alleged Policy by the insured. That the receipt issued against the premium amount was a kacha receipt issued as a token of receipt of cheque and the decision to issue the policy was yet to be taken after the receipt of the relevant documents. That since no proposal papers were received in the Office of the petitioner, the question of any nomination does not arise. Thus, denying the allegation made in the complaint, respondent prayed for dismissal of the complaint.

DISTRICT Forum, after taking into account, the pleadings and the evidence led by the parties, directed the petitioner to pay Rs. 1,80,000 towards the claim filed by the respondent along with monthly pension as payable plus other reliefs under Jeevan Suraksha Policy. Rs. 30,000 were awarded as compensation for causing mental agony and harassment to the respondent. Rs. 5,000 were awarded as cost of litigation.

BEING aggrieved by the Order passed by the District Forum, petitioner-Insurance Company filed an Appeal before the State Commission which has been dismissed by the Impugned Order.

BEING aggrieved by the Order passed by the State Commission, petitioner has filed this Revision Petition. Counsel for the parties have been heard at length.

COUNSEL for the petitioner relies upon a recent decision of this Commission in Revision Petition No. 1170 of 2006, Manoj Balmukund Aggarwal v. LIC of India, in which, this Commission, relying upon the Judgment of Hon''ble the Supreme Court of India in Life Insurance Corporation of India v. Raja Vasireddy Komalavalli Kamba and Ors., reported in AIR 1984 SC 1014, has held that till the issuance of the Policy no binding contract comes into existence between the parties and the Insurance Company is not liable to pay the sum insured. Counsel for the petitioner relied upon the observations made by the Supreme Court in paragraphs 13 and 14 of the Judgment in Raja Vasireddy''s case (supra), which reads as under: "13. When an insurance policy becomes effective is well-settled by the authorities but before we note the said authorities, it may be stated that it is clear that the expression "underwrite" signifies ''accept liability under''. The dictionary meaning also indicates that. (See in this connection The Concise Oxford Dictionary Sixth Edition, p. 1267.) It is true that normally the expression "underwrite" is used in Marine Insurance but the expression used in Chapter III of the financial powers of the standing order in this case specifically used the expression "underwriting and revivals" of policies in case of Life Insurance Corporation and stated that it was the Divisional Manager who was competent to underwrite policy for Rs. 50,000 and above. The mere receipt and retention of premium until after the death of the applicant or the mere preparation of the Policy document is not acceptance. Acceptance must be signified by some act or acts agreed on by the parties or from which the law raises a presumption of acceptance. See in this connection the statement of law in Corpus Juris Secundum, Vol. XLV, page 986 wherein it has been stated as:"The mere receipt and retention of premiums until after the death of applicant does not give rise to a contract, although the circumstances may be such that approval could be inferred from retention of the premium. The mere execution of the policy is not an acceptance; an acceptance, to be complete, must be communicated to the offer or, either directly, or by some definite act, such as placing the contract in the mail. The test is not intention alone. When the application so requires, the acceptance must be evidenced by the signature of one of the company''s executive officers." 14. Though in certain human relationships silence to a proposal might convey acceptance but in the case of insurance proposal silence does not denote consent and no binding contract arises until the person to whom an offer is made says or does something to signify his acceptance. Mere delay in giving an answer cannot be construed as an acceptance, as, prima facie, acceptance must be communicated to the offeror. The general rule is that the contract of insurance will be concluded only when the party to whom an offer has been made accepts it unconditionally and communicates his acceptance to the person making the offer. Whether the final acceptance is that of the assured or insurers, however, depends simply on the way in which negotiations for an insurance have progressed. See in this connection statement of law in MacGillivray and Parkington on Insurance Law, Seventh Edition page 94 paragraph 215."

(Emphasis supplied)

AS against this, Counsel appearing for the respondent relies upon a Judgment of this Commission in Revision Petition No. 2030 of 2006, LIC of India and Ors. v. Rakshna Devi, reported in IV (2005) CPJ 214 (NC), to contend that since the petitioner-Insurance Company did not take any action in spite of receipt of the premium amount within 15 days, the petitioner is liable to pay the insured amount under the Policy. That the Order passed by this Commission in Manoj Balmukund''s case (supra), runs contrary to the Judgment in Rakshna Devi''s case (supra).

IT is well settled by now that the law laid down by Hon''ble the Supreme Court of India is binding on all the High Courts as well as various Tribunals functioning in the country. In the present case, the Judgment of the Supreme Court, being the binding precedent, has to be followed. In this case, Supreme Court has observed that though in certain human relationships silence to a proposal might convey acceptance but in the case of insurance proposal, silence does not denote consent and no binding contract arises until the person to whom an offer is made says or does something to signify his acceptance. Mere delay in giving an answer cannot be construed as an acceptance, as, prima facie, acceptance must be communicated to the offeror. The contract of insurance will be concluded only when the party to whom an offer has been made accepts it unconditionally and communicates his acceptance to the person making the offer. Mere receipt and retention of premium until after the death of the applicant or even the mere preparation of the Policy is not acceptance.

IN the present case, neither the proposal form was sent nor any medical examination was conducted, nor the Insurance Policy had been issued to the respondent. The cheque was encashed on 26.12.2001 and the insured died within 20 days thereof, i.e., on 15.1.2002. It cannot be said that the Insurance Company had unnecessarily delayed the issuance of the Policy. In the absence of the proposal form and medical examination, the Insurance Company could not have issued the Policy. In view of this, we are of the opinion that no concluded contract had come into existence between the parties and the Fora below have erred in allowing the Appeal taking the encashment of the cheque sent to the petitioner as a concluded contract of insurance between the petitioner and the insured.

FOR the reasons stated above, the Revision Petition is allowed. Orders passed by the Fora below are set aside and the complaint is ordered to be dismissed. The petitioner shall further refund the sum of Rs. 10,181 received from the respondent against the premium for the alleged Policy in question. R.P. allowed.