Minimol Lukose and Others vs Life Insurance Corporation of India

C.N. Ramachandran Nair, J.—The petitioners are challenging Exh. P5 order where under respondent No. 2 has declined petitioners'' insurance claim for the death of the husband of the petitioner No. 1 and father of petitioner Nos. 2 and 3.

I have heard counsel for petitioners and Standing Counsel appearing for L.I.C. Petitioner''s husband, Benny Lukose gave a proposal for taking a double accident benefit insurance policy for Rs. 5,00,000 on 6.6.1999. Along with the proposal initial premium of $ 660 was paid through a cheque drawn on an American bank. However, before collecting the cheque and crediting the same to the premium account, the assured died on 16.6.1999. The cheque got realised only on 30.6.1999 and since the policy had not been issued, L.I.C. vide impugned proceeding declined to pay the policy amount to the legal heirs of the deceased. Even though civil suit was filed before the munsiff court, Palai, the same was rejected as it was beyond the pecuniary jurisdiction of the munsiff court. Therefore, the O.P. is filed challenging the order declining benefit under the policy. Counsel for the petitioner has relied on Exh. P2 which according to him is unconditional acceptance of the premium amount and commencement of the policy. He has relied on Division Bench decision of this Court in L.I.C. of India v. Kamalamma 1986 ACJ 510 (Kerala) and contended that once premium is accepted unconditionally, the beneficiary is entitled to benefit of policy even if policy document was not issued. The counsel for L.I.C. on the other hand referred to the decisions of the Apex Court in L.I.C. of India v. Raja Vasireddy Komalavalli Kamba (SC) and in The Life Insurance Corporation of India, Trivandrum Vs. Mrs. Prasanna Devaraj, and an unreported decision of this Court in O.P. No. 31421 of 2002 dated 8.6.2005 and contended that since assured died pending acceptance of proposal for policy, the contract of insurance had not come into force as on date of death of the assured and, therefore, benefits under the policy are not available to the legal heirs. L.I.C.''s Manual for Finance and Accounts Department is produced by the counsel for L.I.C. where acceptance of foreign currency, cheques/drafts, etc., are dealt with in Clauses 1 and 2 as follows:

(1) Cheques/drafts, etc., which are drawn in foreign currency cannot be accepted at the cash counter, since no receipt can be issued till the proceeds of the foreign currency instruments have been duly realised in Indian rupees. However, an acknowledgment may be given by Inward Department, if such an instrument is received by hand delivery.

(2) When the demand draft/cheques are received by the Cash Section in foreign currency, through the remittances received register, accounting entries shall not be passed in the books of accounts. Entries shall be passed in the Cash Book only after proceeds are realised in Indian rupees and credited to our bank account (No. I or III, as the case may be) by the bankers, i.e., on receipt of necessary credit advice from the bank.

From the above it is clear that premium received through foreign cheque can be credited in the account of the person only in Indian rupee, that too, only after realisation of benefit from the foreign bank. In view of this condition, it cannot be said that the premium was paid on the date the foreign cheque was delivered. There is no provision to accept premium in foreign exchange because the premium amount payable in this case was Rs. 27,662. However, counsel for petitioners raised a contention that rupee equivalent of the cheque collected was Rs. 28,276 and the difference according to the petitioners, is attributable to the extra charges recovered by L.I.C. for advancing of policy date from the date of proposal. However, the counsel for L.I.C. denied the same and contended that foreign cheques are received on recovery basis at prevailing exchange rate which is fluctuating and on collection and after adjustment of premium amount in rupee terms excess, if any, will be kept as a deposit in the assured''s account for being appropriated towards the next premium amount. In any case there is nothing to indicate that the'' proposal was to accept the policy with any back date. In other words, unless the proposal is accepted by L.I.C. which happens in terms of the Manual of Accounts only on crediting the first premium amount in rupee, it cannot be said that the contract of insurance has come into force and as held by the Supreme Court in the above two decisions. However, it is seen that in the first decision of the Supreme Court referred to above, in spite of holding that there is no policy, the court directed payment of 50 per cent of the policy amount. In this case also it is seen that L.I.C. prima facie did not reject the claim when they issued Exh. P5 dated 14.8.1999 because the proposal was to consider the claim. Further, it is stated in Exh. P5 that the Divisional Office of L.I.C. was considering payment on ex gratia basis. This would go to indicate that wide discretion is left with L.I.C. to make payment even in the cases where there is no technical acceptance of proposal and issuance of policy. Besides all these, the recovery of a foreign cheque to a large extent depends on the method adopted by the beneficiary to recover the amount. Obviously the assured had the credit balance in his foreign account because the cheque got promptly paid as and when presented by L.I.C.''s bank. More than three weeks time was taken to recover the amount from the foreign bank probably because L.I.C.''s bank did not take any quick steps for recovery. Further, L.I.C. has no case that the proposal was defective or unacceptable for any other reason. In other words, but for the immediate death of the assured, there would have been no problem about the policy. The Senior Divisional Manager who declined ex gratia payment also has not stated any reason to do it. I feel in order to maintain goodwill which is required for L.I.C, they have to be considerate in situations like this.

Therefore, I feel this is a fit case to award ex gratia payment to the petitioners. In the circumstances and in view of the provision for grant of ex gratia payment for death even in cases where policies are not issued, I feel petitioners are entitled to 50 per cent of the policy amount. In the circumstances, O.P. is partly allowed directing L.I.C. to make an ex gratia payment of Rs. 2,50,000 (rupees two lakh fifty thousand) to the petitioners within a period of one month from the date of production of copy of this judgment.