Thounaojam Nomeeta Alias Ranjeeta devi vs Life Insurance Corporation of India

H.K.K. Singh, J.—The first appeal is against the decree dated 11.9.95 passed by the learned Subordinate judge No. I, Manipur East in Original (Money) Suit No. 153 of 1993 dismissing the suit filed by the present Appellant as Plaintiff.

Heard Mr. M. Lekhendrajit Singh, learned Counsel for the Appellant and also heard Mr. Gogonchandra Tongbram, the learned Counsel for the Respondent/Defendant.

The Plaintiff as an indigent person, through her next friend filed the suit for a sum of Rs. 1 lakh being the sum assured under Life Insurance Policy of her mother. The Plaintiff''s mother Maipakpi Devi died on 29.8.90. The pleaded case of the Plaintiff is that her mother had a policy for a sum of Rs. 1 lakh under the Defendant/Life Insurance Corporation. For that purpose, the mother of the Plaintiff deposited a sum of Rs. 1230/- as first premium on 30.7.90. The term of the policy is for 20 years and premium was to be paid quarterly. According to the Plaintiff, her deceased mother Maipakpi Devi furnished all the relevant particulars for the said policy and the Defendant accepted the contract of insurance and the policy being No. 490197090, was the concerned policy. And on the death of her mother, the matter was reported to the Defendant for payment of the sum assured but no payment was paid. Hence, the suit. The Defendant contested the suit by filing a written statement. The defence taken by the Defendant being that the proposal for insurance had not yet been accepted by the Insurance Company and as such there was no concluded contract of insurance, it was pleaded in the written statement that Maipakpi Devi could not furnish the requisite particulars and while Defendant corporation was examining the proposal and before acceptance of the proposal, the proposor died.

The Trial Court framed the following issues.

(1) Whether the Plaintiff''s mother Moirenthem Ningol Thounaojam Ongbi Maipakpi Devi is a LIC policy holder being No. 490197090 for the proposal sum of Rs. 1,00,000/- by depositing a sum of Rs. 1230/- only as premium on 5.7.90 for a term of 20 years?

(2) Is there any cause of action for filing the suit?

(3) Is the Plaintiff entitled to the reliefs claimed?

After hearing, the Court held that there was no contract of insurance. Thus, dismissed the suit. Hence the present appeal.

Mr. M. Lekhendrajit Singh, learned Counsel for the Plaintiff/Appellant submitted that Maipakpi Devi, the policy holder, had furnished all the necessary particulars and had deposited the first premium amount of Rs. 1230/- on 30-7-90(Exhibit-A/l being the receipt for deposit of the said amount). Accordingly, the policy being No. 490197090 was allotted to her and as such she had nothing more to do. And the Defendant as a token of acceptance of the proposal allotted an insurance policy number. Thus a contract of insurance was completed and as such the learned Trial Court committed an error in holding that contract was not completed. On the other hand, Mr. Gogonchandra Tongram, learned Counsel for the Defendant/Respondent supporting the decree passed by the Trial Court has submitted that the proposal for the Contract of insurance had not been accepted by the Defendant. It was submitted that mere deposit of the amount is not sufficient for creation of the contract of insurance. According to the learned Counsel, the aforesaid proposal even coupled with the deposit of the amount was to be accepted after proper scrutiny of the proposal and only after the acceptance of the proposal the contract of insurance would be completed. Learned Counsel also submits that the policy number stated to have been allotted in favour of the proposer was only a tentative policy number reserved for the proposer to be allotted in case her proposal of policy was accepted and in the present case, the proposal had not yet been accepted and as such there was not concluded contract of insurance.

The only point to be decided in the present case is whether the proposal made by Maipakpi Devi was accepted and the contract of insurance was effected.

In the case at hand, four witnesses were examined on behalf of the Plaintiff, P.W. No. 1 only says that Maipakpi Devi had a life insurance policy. P.W. No. 2 is brother of the said Maipakpi Devi. He deposed that his sister divorced her husband and thus he was staying with her for about 5 years till her death. The witness only says that Maipakpi Devi had a life insurance policy for a sum of Rs. 1 lakh and on her death, he made application for payment of the sum assured. The witness also says that in his application he did not mention the policy number but one of the employee of the Defendant/Corporation searched out the policy number and the employee entered the policy number on the back of the application claiming the amount other P.Ws. did not say anything substantial. Only, P.W. No. 2 Shri Moirangthem Babu Singh says that Maipakpi Devi during her lifetime asked for a sum of Rs. 500/- for payment of her insurance policy and this he paid her a sum of Rs. 500/-. For and on behalf of the Defendant only one witness is examined. He is the Senior Branch Manager of the Imphal Officer of the Life Insurance Corporation. The witness describes regarding furnishing of the detail particulars in the prescribed form by the proposer, amount of insurance cover, need for insurance etc. The witness testifies that on getting satisfactory data, the Corporation accepts the proposal with the same terms and conditions as proposed or with altered terms and conditions as per the rules of the corporation. And if the proposal is accepted it results into a policy and an acceptance letter cum first premium receipt is issued to the proposer communicating therein the decision of the insurer. The witness further states that issuance of acceptance letter signifies the acceptance of the risk on the life and witness further says that the proposal made by the proposer had not yet been accepted. Again the witness says that the policy number cited by the Plaintiff is a provisional number to be allotted in case the proposal of the Plaintiff was accepted after verification.

The learned Counsel on both sides referred to some decisions of High Courts and the Apex Court in support of their respective submissions. Some of the decisions which are relevant are taken up. In the case of Life Insurance Corporation of India Appellant v. Raja Vasireddy Komalavalli Kamba and Ors. Respondent reported in AIR 1984 SC 1014, the Apex Court held at para No. 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 raise 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 maybe 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 offeree, 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 officer''s.

Again, in the same case at paragraph 14, the Apex Court continued:

Though in certain human relationships silence to a proposal might convey acceptance but in the case of insurance proposal, silence docs 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 offerer. 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.

In the case of Life Insurance Corporation of The Life Insurance Corporation of India and another Vs. Smt. Brazinha D''Souza, it was held that receiving of proposal with premium amount which was kept in suspense for compliance with formalities does not amount to acceptance of proposal. Thus, there was no concluded contract. And it was further held that mere acceptance of the premium amount and issuance of receipt would not mean acceptance of proposal.

Learned Counsel for the Appellant cited the case of Life Insurance Corporation of India, Trivandrum, Appellant v. L. Kamalamma, Respondent reported in AIR 1986 Kerela 215, the head notes are reproduced below:

"A" on 30.12.1976 made a proposal for insurance of his life. The proposal was made in the standard from issued for the purpose by the LIC containing the necessary details of the contract. The proposal was accompanied by cheque for a sum representing the first premium. A receipt was also issued by the Development Officer of the LIC who was the authorised representative. On 31.12.1976 "A" was informed that the amount paid by him was deficient to certain extent. "A" paid the same on 31.12.1976, From the internal correspondence, it was shown that there was still deficiency of small amount. Two sums issued by "A" were held in suspense and it was stated that the amounts were held in suspense to be adjusted if found in order. On 1.1.1977 "A" died unexpectedly. On 18.1.1977 wife of "A" made a claim upon LIC for payment of the contract amount due to her from LIC. LIC repudiated the claim on ground that no contract of insurance had come into existence. Existence of contract was denied on ground that proposal had not been accepted by competent authority. Wife instituted a suit. LIC contested the suit. In the event of deficiency, LIC reserved their right to repudiate their obligations under the contract. However, LIC have not pleaded that the contract was repudiated by reason of any deficiency in the amounts paid. Their plea was that there was no contract at all.

Held, the contract of insurance came into existence during lifetime of deceased.

The subsequent deficiency occurred solely because of the negligence on the part of the LIC, for which neither under the contract nor in equity can "A" be held responsible. The contract was binding on LIC. AIR 1984 SC 1014 Dist.

Again, Anr. case relied upon by the learned Counsel for the Appellant is the case of Life Insurance Corporation of India Vs. Smt. G.M. Channabasemma, In this case, it was held that in a contract of insurance the assured is under a solemn obligation to make full disclosure of material facts which may be relevant for the insurer to take into account while deciding whether the proposal should be accepted or not. While making a disclosure of the relevant facts, the duty of the insured to state them correctly can not be diluted and the Apex Court held the burden of proving that the insured had made false representations and suppressed material facts is undoubtedly on the corporation. And the Apex Court has made reference to Section 45 of the Insurance Act.

In our present case, it is not the case of repudiation of the contract of insurance. But the question is whether the contract of insurance had come into existence. Thus the above case reported in Life Insurance Corporation of India Vs. Smt. G.M. Channabasemma, is not applicable. Again, the case of Life Insurance Corporation of India, Trivandrum Vs. L. Kamalamma, is also not applicable in the present case as the Corporation/Defendant in that reported case detected deficiency in the amount which was also paid by the proposer. Still some more amount was found to be deficiency due to the mistake of the insurer. Thus conduct on the part of the Corporation amounted to acceptance of the proposal.

In the case at hand, the proposal was made on 30.7.90, the memorandum of receipt of the amount (exhibit-A/1) was issued, as per evidence the proposer borrowed Rs. 500/- from one of the witnesses for payment of the amount towards first premium. The proposer died on 29.8.90. Suit filed on 18.9.91. As per evidence produced before the Court, there is no material to infer that the proposal made by Maipakpi Devi was accepted by the corporation/Defendant. The money receipt (Exhibit-A/1) is properly explained by the witness of the Defendant that the same may be treated as a first premium in case the proposal came to be accepted. Again, the policy number cited by the Plaintiffs also explained to be one provisionally reserved to be allotted to the proposer in case the proposal came to be accepted. Thus, in the present case Plaintiff failed to prove that the proposal was accepted by the Defendant/Corporation and as such it cannot be held that there was a contract of insurance. In the absence of existence of many contract of insurance it cannot be held that Maipakpi Devi had an insurance policy.

From the reasons and findings as recorded above, i do not find any ground to interfere with the judgment and decree passed by the learned Trial Court. The appeal is, accordingly, dismissed. No order as to costs.