LIFE INSURANCE CORPORATION OF INDIA vs SHRI DEEPAK CHHABRA & ANR

The case of the complainants/respondents, who are parents of the deceased Mr. Dheeraj Chhabra, is that their deceased son applied for a LIC policy through opposite party no. 2, Sh. S. K. Sehgal, an agent of LIC of India by submitting a proposal form to the aforesaid agent alongwith a cheque of Rs. 2,885/- towards the insurance premium. The proposal according to the complainants was submitted on 01.09.2005. The deceased Mr. Dheeraj Chhabra having expired in a train accident on 25.09.2005, a claim was submitted by the complainants to LIC of India. The claim, however, was rejected on the ground that the corporation had not even received any proposal from the deceased. Being aggrieved, the complainants approached the concerned District Forum by way of a complaint.

The complaint was resisted by the petitioner Corporation on the ground that they had not even received a proposal from the deceased and therefore there was no occasion for them to accept the said proposal.

Vide its order dated 30.04.2009, the concerned District Forum directed the petitioner Corporation to pay a sum of Rs. 2 lakhs to the complainant alongwith compensation amounting to Rs. 50,000/- and cost of litigation amounting to Rs. 10,000/-.

Being aggrieved from the order passed by the District Forum, the petitioner Corporation approached the concerned State Commission by way of an appeal. The said appeal having been dismissed by the State Commission vide impugned order dated 05.09.2011, the Corporation is before us by way of this revision petition.

As noted earlier, the case of the petitioner Corporation is that the proposal alleged to have been submitted by the deceased was never received by them. Reliance in this regard is placed upon an endorsement dated 19.11.2005, which is available on page no. 28 of our paper book. The case of the complainants on the other hand is that the receipt dated 01.09.2005 issued by the Corporation being a Proposal Deposit Receipt, there can be no doubt that a proposal was actually submitted to the Corporation through an agent, who was impleaded as opposite party no. 2 in the complaint.

Section 4 of the Contract Act, to the extent it is relevant for our purpose provides that the communication of an acceptance is complete, as against the proposer, when it is put in a course of transmission to him so as to be out of the power of the acceptor. It is complete as against the acceptor, when it comes to the knowledge of the proposer. Admittedly, no acceptance of the proposal was ever issued by the Corporation and no such acceptance was ever received by the deceased from the Corporation. Therefore, even if we proceed on the assumption that the proposal was actually submitted to the Corporation through an agent, it cannot be said to be complete, as against the Corporation, since neither it was accepted nor any acceptance was ever conveyed to the deceased.

The learned counsel for the complainant relies upon Section 8 of the Indian Contract Act, which to the extent it is relevant, provides that the acceptance of any consideration for a reciprocal promise which may be offered with a proposal, is an acceptance of the proposal. A perusal of the receipt dated 01.09.2015 issued by the Corporation would show that it carried an express stipulation that acceptance of the deposit did not mean the Corporation would be liable for acceptance of the risk. In view of the aforesaid stipulation printed on the deposit receipt, it cannot be said that the Corporation had accepted the proposal by accepting the amount of Rs. 2,885/- from the deceased. In fact, the issue involved in this case is no more res-integra in view of the binding decision of the Hon''ble Supreme Court in LIC of India vs. Raja Vasireddy Komalaralli Kamle & Ors., AIR 1984 SC 1014 . In the aforesaid case, the deceased filled a proposal for insurance on 27.12.1960. This was followed by a medical examination on the same day. He issued two cheques in favour of the Corporation. The first cheque towards premium of Rs. 300/- was encashed by the Corporation. The second cheque was initially dishonoured, but later encashed on 11.01.1961. The deceased died on 12.01.1961. The widow of the deceased

thereupon demanded the payment of Rs. 15,000/- from the Corporation. The claim having been denied a Civil Suit was filed by her, against the Corporation. The Trial Court held that there was no concluded contract between the parties. Being aggrieved, the plaintiff approached the High Court, which ruled in her favour. The Corporation thereupon took the matter to the Hon''ble Supreme Court. Allowing the appeal filed by the Corporation, the Hon''ble Apex Court, inter-alia, held as under:- 13. The mere receipt and retention of premium until after the death of the applicant or the mere preparation of the policy documents 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. XLIV 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 offerer, 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."

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.

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."

In view of the aforesaid binding decision of the Hon''ble Supreme Court, the impugned orders passed by the District Forum and the State Commission cannot be sustained and the same are accordingly set aside. The complaint is consequently dismissed with no order as to cost. The amount which the Corporation had received from the deceased shall be refunded to the complainants alongwith interest on that amount at the rate of 9% per annum unless already paid alongwith interest. In case, only the principal amount has been paid, interest from the date of receipt by the Corporation till the date of payment shall be paid by the Corporation within six weeks from today. We make it clear that in case the Corporation has made some payment to the complainants in compliance of the order of the District Forum, it shall be entitled to recover that amount from them in accordance with law unless it is refunded by the complainants of their own.