Life Insurance Corporation of India vs KOMURAVELLI RAMA RATNAM

WE heard Mr. K. Srinivas appearing for the appellants. Counsel for the respondent, Mr. P. Keshava Rao, is not present and there is no representation on his behalf.

THE opposite parties in CD No. 21/1995 i.e. the Life Insurance Corporation of India (''LIC'' for short), preferred this appeal questioning the order of the Warangal District Forum therein dated 16.11.1995. THE complainant is the respondent in the appeal. The complainant is the widow of one Sri K. Rajaiah, the insured, who died on 15.6.1994. It is not in dispute that K. Rajaiah took a 15 years Endowment Assurance Policy, with profits and with accident benefit, bearing No. 62369175 for Rs. 50,000/- with the period and risk commencing from 28.1.1986. The annual premium payable on the policy was Rs. 3,802.50 ps. The due date for payment of the annual premium was 28th January. The complainant was the nominee under the policy. It is not in dispute that K. Rajaiah paid the premium payable on 28.1.1994 on 14.2.1994 and payment of that premium is evidenced by receipt in original and that amount was realised by the LIC. After K. Rajaiah''s death on 15.6.1994, the complainant informed the LIC about his death and thereafter the complainant was informed by the LIC by letter dated 1.8.1994 that the amount payable on the policy taken by her late husband was only Rs. 31,182.50ps. In that letter the complainant was required to furnish duly completed Claim Forms ''A'', discharge form after due execution, the policy bond, the certified extract of death register, and the last premium receipt. By letter dated 12.11.1994 addressed to the complainant, the LIC informed her that her policy was in a lapsed condition due to non-payment of the yearly premium due on 28.1.1992 and 28.1.1993, and that by mistake the yearly premium due of 1/94 was received on 14.2.1994 and that the same would be refunded to her. They explained that the sum of Rs. 31,182.50ps. was due to her on the policy as follows : Subsequently, LIC addressed another letter dated 18.11.1994 to the complainant explaining to her why she was entitled only to 31,182.50 ps. Therein it was stated as follows : "This has reference to your letter dated Nil. We are to inform you that your deceased husband has not paid the yearly premium due on 28.1.1992 and 28.1.1993. The Policy has lapsed due to non-payment of premium due on 28.1.1992 and 28.1.1993, acquiring paid-up value (P.V. 20,000 + Bonus 7,380 Refund of 1/94 premium 3,802.50 = 31,182.50). The premium for 28.1.1994 was accepted on 14.2.1994 by our Branch Office Narsampet by mistake. We are sure that you have not paid the yearly premium due 28.1.1992 and 28.1.1993. If the premiums have been paid of those dues, we request you to produce the copies of receipts. If the yearly premiums, due 28.1.1992 and 28.1.1993 had been paid, we could have settled the claim for 50,000/- alongwith bonus. We are not liable to pay anything except Rs. 31,182.50 according to the policy conditions."

Aggrieved, the complainant approached the Warangal District Forum for redress seeking directions to the opposite parties/appellants to pay Rs. 50,000/- towards the policy amount, the entitled bonus amount, and also Rs. 5,000/- towards damages and interest on the entire amount payable and costs.

THE appellants received notice in the CD and filed their counter. It was stated in the counter that the insured had not paid the yearly premia due on 28.1.1992 and 28.1.1993 and that the premium due on 28.1.1994 was accepted on 14.2.1994 by mistake without noting the fact that the earlier two yearly premia were not paid. It was contended that that was a bona fide mistake. It was also further stated as follows : "THE circumstances under which a bona fide mistake was committed by the staff of the first opposite party are that the staff issued a special premium receipt No. 66066, dated 27.5.1993 for Rs. 821.20ps. towards three half yearly premiums received under Policy No. 62369178. THEse premiums were posted wrongly in Policy No. 62369175 instead of posting in Policy No. 62369178 by mistake. As a result of this the premium due on 28.1.1994 was accepted, when remitted across the counter. THE opposite parties further submit that the basis for posting in the ledger sheet is the carbon copy of the special premium receipt, which was hand-written. THE Policy No. 62369178 looked like 62369175 in the carbon copy of the receipt. THE two yearly premiums were posted as paid by mentioning the S.P.R. No. 66066, dated 27.5.1993. Normally, while giving postings, the name and premium amount also will be verified by a quick glance at the particulars on the ledger sheet. But in this instance, the front page of the ledger sheet was exhausted and the page was turned to make the postings on the reverse side. Thus, the chance of such normal verification was lost. In these circumstances the staff of the first opposite party could not indentify the two yearly premiums due on 28.1.1992 and 28.1.1993 as gaps and could not inform the life assured about the position during his life-time."

On that basis the appellants contended before the District Forum that the policy in question was in a lapsed condition and that, as premia were paid for five years, the complainant was entitled to the paid up value under the policy which came to Rs. 20,000/- and that she was also entitled to vested bonus of Rs. 7,380/-. The District Forum held that the non-payment of the two premia as alleged by the appellants was found only after the complainant preferred her claim for payment of the insurance amount after the death of her husband. The District Forum held that when the later premium was received it must be deemed that the earlier premia were received by the Corporation. It is further observed by the District Forum as follows : "In the instant case, the defence of the other side is, that the mistake was committed by one of the employees of the Corporation and that the premia paid by one Khasim for his insurance policy was credited to the account of the deceased husband of the complainant. These were paid in the year 1992 and 1993, the opposite party have never demanded for the payment of the premia by the deceased. As the policy holder died we do not know what was transpired in between it may be that the deceased has paid his premium for these two years and most probably it was not credited, it may be due to the mischief of the employee or it may a mistake or it may be something else. Further the two premia for the years 1992-93 are entered in the account of the deceased as having been paid. It is true, that the premia for the deceased is payable yearly but the premium of the said Khasim is payable half-yearly. The amount of the premium is also different. The premium payable by the said Khasim is in three figures whereas the premium payable by the deceased is in four figures. On a careful reading of the facts in this case we see, that this mistake cannot be committed in a Public Undertaking like the opposite party. We suspect some foul play or a grave mistake. If the LIC maintains such defective or fault accounts the policy holders cannot be made to suffer."

The District Forum, therefore, did not accept the contention advanced on behalf of the appellants that the premia for the years 1992 and 1993 were not received and, inasmuch as the premium for the year 1994 payable on 28.1.1994 was received on 14.2.1994 about 4 months prior to the death of the insured, they cannot turn around after the demise of the insured for the first time stating that the earlier two years premia were not received. In that view of the matter, the District Forum directed the appellants to pay the insured amount together with accrued bonus and other benefits and also pay costs of Rs. 1,000/-.

AFTER giving anxious consideration to the matter, we are satisfied that, in view of the fact that the premium due on 28.1.1994 was received by the appellants on 14.2.1994 without any objection and a receipt was given for that, they are estopped from raising the contention after the death of the insured and after the claim was made that the policy was in a lapsed condition by that date and that therefore the premium was mistakenly received. As rightly pointed out by the District Forum, the amounts allegedly credited to the insured account towards the premia by mistake were only Rs. 821.20 ps. paid by another insured Mr. M. Khasim and they were payable half-yearly. We also notice from Ex. B7 account filed by the LIC that the total amount of premia paid to the account of Mr. M. Khasim was only Rs. 821.20 ps. including interest and the sum assured under the policy issued to him was only Rs. 10,000/-. Therefore only Rs. 821.20 ps. could have been credited and on that basis it could not have been taken by mistake by the clerk of the LIC that the sum of Rs. 7,605/- (Rs. 3,802.50 ps. + Rs. 3,802.50 ps.) was discharged towards the premia of K. Rajaiah for the two years 1992 and 1993. If that was possible, it was possible equally that the premia paid by K. Rajaiah were credited by similar mistake into somebody else''s account. If the LIC had any doubt, it could have ascertained whether the premia were paid or not for the years 1992 and 1993 by asking the insured K. Rajaiah during those years to produce the receipts. From the inability of the widow, after his death, to produce receipts for payment of 1992 and 1993 premia, it cannot be concluded that those premia were not paid. If really the policy was in a lapsed condition by 14.2.1994 and the premia for the earlier two years were not paid, the insured should have been informed about it, in which case, he would have had an opportunity of paying those premia and getting the policy revived. AFTER his death the policy could not be revived. Therefore, there was a clear lapse on the part of the LIC and, therefore, deficiency in service is established beyond doubt. The complainant cannot be visited with the consequences of that deficiency. The LIC alone will have to bear the consequences of that deficiency. In the circumstances we are not inclined to interfere with the order of the District Forum. The appeal is, therefore, dismissed. No costs. Appeal dismissed.