Sarala K.K. vs Life Insurance Corporation of India and Others

B.P. Ray, J.—Petitioner''s husband late V.G. Sasindran''s life was insured for Rs. 5,00,000 with effect from 28-3-2003 under Ext. P-1 policy issued by the first respondent Corporation. Ext. P-1 policy provides for quarterly payment of premium. Clause 2 of the terms and conditions of Ext. P-1 policy reads as follows:

Payment of premium.--A grace period of one month but not less than 30 days will be allowed for payment of yearly, half yearly or quarterly premiums. If death occurs within this period and before the payment of the premium then due the policy will still be valid and sum assured paid after deduction of the said premium as also unpaid premiums falling due before the next anniversary of the policy. If the premium is not paid before the expiry of the days of grace, the policy lapses.

Ext. P-1 policy commenced on 28-3-2003. The next date of payment of premium was 28-6-2003. The grace period of one month of payment expired on 28-7-2003. Petitioner''s husband did not pay the premium. He passed away on 29-7-2003. The petitioner''s claim for disbursement of the assured amount was rejected by the respondent Corporation as well as the Insurance Ombudsman on the ground that the policy had lapsed. The petitioner contends that her husband was in intensive care unit from 9-7-2003 and was therefore prevented from remitting the premium for reasons beyond his control.

The maxim lex non cogit ad impossibilia pressed into service by the petitioner provide that a party prevented from doing any act by circumstances beyond his control can do at the first subsequent opportunity. The said principle will not help the petitioner since the premium due on 28-6-2003 was never paid within the grace period. In Jameela Vs. L.I.C. of India, a Division Bench of this Court observed thus:

In law, life insurance is a contract between two parties. The insurer guarantees payment of a sum of money to the person assured or the nominee on the happening of a certain event. It is true that a family is always depending for its subsistence on the income of the breadwinner. During his lifetime the family is looked after by the person concerned. In the event of death, the payment by the insurer provides certain security. Yet the fact remains that the insurer becomes liable only when the prescribed event occurs. The payment becomes due either when the period for which the policy was issued lapses or the assured meets with his end. Otherwise, there is no provision of law or a term of contract which may entitle to assured or the nominee to claim the amount as mentioned in the policy of insurance.

Learned counsel for the petitioner submits that the grace period of one month expired on 29-7-2003 as the month is having 31 days. He further contends that on a reading of Clause 2 of the policy it is abundantly clear that the grace period is for one month not less than 30 days. The grace period can be extended for 31 days. Learned counsel for the Corporation relies on the judgment in Life Insurance Corporation of India Vs. Jaya Chandel, wherein the Apex Court held that the premium cheque received after the grace period of 30 days u/s 64VB is not applicable. National Commission is not justified in its conclusion about applicability of Section 64VB. The Apex Court in Paragraphs 6 and 7 held as follows:

The grace period is one month and, therefore, the State Commission was not justified in holding that the payment was made within the grace period. Condition 3 relates to revival of discontinued policy. A bare reading of the condition shows that it can be revived during the life time of the assured. In the instant case the cheque was admittedly received after the death of the assured. Further the revival takes effect only after the same is approved by the Corporation and is specifically communicated to the life insured. In the present case this is not the situation.

Further Section 43 of the Act reads as follows:

Application of the Insurance Act.- (1) The following Sections of the Insurance Act shall, so far as may be, apply to the Corporation as they apply to any other insurer, namely, Sections 2, 2B, 3, 18, 26, 33, 38, 39, 31, 45, 46, 47A, 50, 51, 52, 110A, 110B, 110C, 119, 121, 122 and 123.

(2) The Central Government shall as soon as may be after the commencement of this Act, by notification in the official gazette, direct that the following sections of the Insurance Act shall apply to the Corporation subject to such conditions and modifications as may be specified in the notification, namely, Sections 2D, 10, 11, 13, 14, 15, 20, 21, 22, 23, 25, 27A, 28A, 35, 36, 37, 40, 40A, 43, 44, 102 to 106 , 110, 111, 113, 114 and 116A.

1[(2A) Section 42 of the Insurance Act shall have effect in relation to the issue to any individual of a licence to act as an agent for the purpose of soliciting or procuring life insurance business for the Corporation as if the reference to an officer authorised by the Controller in this behalf in sub-section (1) thereof included a reference to an officer of the Corporation authorised by the Controller in this behalf.]

(3) The Central Government may, by notification in the official gazette, direct that all or any of the Insurance Act other than those specified in sub-section (1) or sub-section (2) shall apply to the Corporation subject to such conditions and modifications as may be specified in the notification.

(4) Every notification issued under sub-section (2) or sub-section (3) shall be laid for not less than thirty days before both Houses of Parliament as soon as possible after it is issued, and shall be subject to such modifications as Parliament may make during the session in which it is so laid or the session immediately following.

(5) Save as provided in this section, nothing contained in the Insurance Act shall apply to the Corporation.

Section 43 of the Act enumerates the various sections of Insurance Act which have application to the Act and Section 64VB is not one of them. That being so also the National Commission was not justified in its conclusion about the applicability of that provision.

In the instant case, the death was on 31st day. The grace period for payment of premium has to be taken on the 31st day, i.e. upto 29-7-2003 in which event the insurance policy was valid and subsisting at the time of death of the assured. In that view of the matter, the impugned order of the Ombudsman is liable to be set aside.

According to the counsel for the respondent Corporation, as per the terms of the policy, the period for remitting the premium expired on 28-7-2003. When the death occurred, the policy was in a lapsed condition. The parties are governed by the terms of the contract and in order to enforce the terms of the contract, the writ jurisdiction under Article 226 of the Constitution of India cannot be invoked.

Learned counsel for the respondent Corporation has also relied upon the following decisions in Bareilly Development Authority and Another Vs. Ajay Pal Singh and Others, , State of Gujarat and Others Vs. Meghji Pethraj Shah Charitable Trust and Others, , Namakkal South India Transports Vs. Kerala State Civil Supplies Corporation Ltd., in support of his contentions.

According to the counsel for the respondent Corporation, the interpretation and implementation of a clause in a contract cannot be the subject-matter of writ petition filed under Article 226 of the Constitution of India. The decision of the Apex Court reported in State Bank of India and Another Vs. Mula Sahakari Sakhar Karkhana Ltd., was also cited in this regard. The learned counsel for the Corporation wither submitted that since the matter is considered in detail by the learned Insurance Ombudsman, the writ petition is not maintainable. The counsel relied on the decisions reported in Shama Prashant Raje Vs. Ganpatrao and Others, , National Highway Authority of India Vs. Ganga Enterprises and Another, and the unreported judgment dt. 23-8-2011 in W.A. No. 1823/2010.

In my considered view, LIC is the instrumentality of the State and the writ petition challenging the decision of the Ombudsman is maintainable. In the result this writ petition is allowed. The impugned order, Ext. P-8, is set aside. LIC is directed to remit the amount as assured within one month from the date of receipt of a copy of this judgment failing which it will carry interest at the rate of 9% per annum from the date of receipt of a copy of this judgment till the date of payment.

I record my appreciation for the assistance rendered by Amicus Curiae Sri P. Ramakrishnan, learned counsel for the petitioner Sri S. Shyam Kumar and the learned standing counsel for the Corporation Sri Lal George.