VIJAY LAXMI DHIR vs LIFE INSURANCE CORPORATION OF INDIA

THE complainant, wife of deceased Ashok Kumar Dhir, has submitted that the deceased had on 30th March, 2000 submitted proposal for taking a life insurance policy for a sum of Rs. 20 lakh, for which the mode of premium was half-yearly. He had paid Rs. 82,790 and a further sum of Rs. 1,320 on 31st March, 2000 towards initial proposal deposit.

ON receipt of proposal, he was medically examined. It is contended that by letter dated 3.6.2000, the Branch Manager of the LIC at Hyderabad informed the deceased that the proposal submitted by him had been accepted by the Central Office of the Corporation. In this view of the matter, there was a concluded contract between the deceased and the LIC, as the proposal along with premium had been accepted. Ashok Kumar Dhir, aged about 47 years, suddenly expired on 7.6.2000. On the claim being made by the complainant officers of the opposite party did not cooperate and surprisingly she received a letter dated 4th September, 2000 from the LIC that the heirs of the deceased were entitled to get refund of the amount of Rs. 84,110 i.e. the initial deposit made the deceased after deducting the medical fee incurred by the Corporation. It is contended that the act of the LIC in repudiating the claim after duly accepting the proposal of the deceased vide letter dated 3.6.2000, is wholly illegal. It is submitted that the deceased was the only earning member of the family with large income and because of the unjustified refusal, complainants, who are the heirs of the deceased, are suffering. It is, therefore, prayed that opposite parties be directed to pay Rs. 20 lakh along with interest and costs. As against this, it is contended on behalf of the LIC that the medical reports submitted along the proposal revealed that the health of the deceased was substandard. As per the rules, proposal along with medical reports was referred to the Central Office, Mumbai for appreciation of the risk. After verifying the reports, the central office proposed to give insurance to the deceased if he was ready to pay health extra premium @ Rs. 27 per Rs. 1,000 of the sum assured. It is also submitted that the deceased along with the agent B.N. Chari visited the Branch Office of the LIC on 2.6.2000 for enquiring about the proposal. At that stage, he was informed that the proposal could be accepted if he was ready to pay health extra premium at the rate of Rs. 27 per Rs 1000 the sum assured. Thus, there was a counter offer for extra premium, for acceptance of proposal under Term 112-20 (12). To this proposal, the deceased did not agree. Instead, he gave a letter on the same day duly signed by him for consideration of fresh policy of endowment plan for 10 years under Table and Term 14-10 and stated that about the extra premium he would take decision to take the policy or not. Thus, the contract of life insurance never came into existence.

FURTHER , original letter dated 2nd June, 2000 signed by the deceased is produced at Annexure R-2 which is as under: �To The Sr. Divisional Manager, L.I.C. of India, Office Hyderabad. Dear Sir, Re: Proposal on my life for 20 lakh. I am surprise to find from the heavy extra loaded amount on the policy, life proposed. I want to know your consideration for endowment for 10 years time. Kindly intimate me what would be extra in that case, On receiving your reply, I shall decide whether to take the policy or not. Thanking you, Yours faithfully, Sd /xxxxxxxxxxx (Ashok Kumar Dhir) 2.6.2000"

"On the left side, there is an endorsement by the Branch Manager to the following effect� PL address a letter to life proposed. Suitably calculate. Forward this letter to Do. Sd/xxxxxxxxxxx B.M."

THE question which requires determination is whether there was a concluded contract accepting the proposal or whether it was at the stage of consideration. For this purpose, the relevant evidence on record is the originalproposal review slip dated 30th March, 2000 which, inter alia, contains the following endorsement. "Health Extra (Rs.): 2,700. Special Reports: TASA Age: 47 Age at Maturity: 67 Sum under consdm: Rs.20,00,000 Call for � ECG, CBC, ESR, SAM-12, BST, TELE REPORTS Re-submitted to ZUS, with party''s request letter for change of plan and terms. Sd/xxxxxx 9/6 G.U.N. Decision"

REINSURANCE: Check for Re-insurance: "Please send Annexures ''C and ''D'' for arranging Reinsurance to be sent to D.O. after completion. Sd/xxxxx AO(NB) CW/Asstt" "Accept under T/T. 14/10 for a S.A. of Rs. 20 lakh with Cl. V extra Sd/xxxxx 27/6 S.A."

This type of endorsement is on the basis of the proposal prepared under Table and Term 14-10 which was sent to the Central Office by the Branch Office of the opposite party.

LEARNED Counsel for the complainant submitted that as the premium was accepted by the Insurance Company and the proposal was accepted after verification of the medical report the contract of insurance came into existence and in support of his said contention reliance is sought on the judgment rendered by the Apex Court in General Assurance Society Ltd. v. Chandumull Jain and Anr., (1966) 3 SCR 500.

AS against this, the learned Counsel for the Insurance Company submitted that there was not concluded contract. The Head Office, after verification, had accepted the proposal on condition that extra premium of Rs. 27 per Rs. 1,000 was required to be taken before the grant of the policy. As the deceased was not prepared to pay the same, he had made a counter proposal, before that counter proposal could be finalised, the deceased expired. And, therefore, there is no concluded contract. In support of this contention, the Insurance Company has brought on record letter dated 3.6.2000 written by the Branch Manager to the deceased, which is as under: "Re. : Proposal No. 2021 dated 30.3.2000 submitted for Plan and Term of 112-20 (12) for Rs. 20.00 lacs. Your proposal was accepted by our Central Office with Health Extra of @ Rs. 27.00 per thousand. Today, we have received your letter dated 2.6.2000 to consider the proposal under 14-10 (ENDOWMENT). Your request to consider the proposal (amended) under 14-10 is being referred to our HIGHER OFFICE. As soon as we hear from them, it will be communicated to you."

IN support of this letter, the Branch Manager has filed an affidavit stating that the deceased along with the Agent, Shri B.N.Chari, visited his office on 2.6.2000 for enquiring progress made on his proposal and that he informed that proposal can be accepted subject to willingness of Shri Ashok Kumar Dhir to pay health extra premium. To this, he was informed that the deceased was not agreeable and instead requested to consider the proposal under endowment plan for 10 years.

FROM the affidavits which are brought on record it is not possible to hold that there was any concluded contract accepting the proposal made by the deceased. Evidence, on the contrary, establishes that the deceased was asked to pay extra premium which he declined and made a counter offer. Before the counter offer could be finalised, the deceased expired on 7.6.2000. In support of its contention, learned Counsel for the Insurance Company rightly referred to the decision in L.I.C. of India v. Raja Vasireddy Komalavalli Katnba and Ors., AIR 1984 SC1014, wherein the Apex Court negatived similar contention and discussed the law on the subject as under: "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 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 raises a presumption of acceptance. See in this connection the statement of law in Corpus Juris Secundum, Vol. XLIV page 980 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. Mere delay in giving an answer cannot be construed as an acceptance as, prima facie, acceptance must be communicated to the offeror. 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 Mc Gillivray & Parkington on Insurance Law, Seventh Edition page 94, paragraph 215."

AS against this, learned Counsel for the complainant contended that the letter dated 2.6.2000 sought to be relied upon by the Insurance Company is fabricated. In our view, it would be difficult to accept the said contention, as, on the face of it, the letter appears to be signed by the deceased. The signature of the deceased is similar to other admitted signatures of the deceased. There is nothing on record to doubt that the deceased had not signed the said letter. It is true that other parts of the letter are written by somebody else, and, thereafter, the deceased had signed the same. We do not find any force in the submission of the learned Counsel for the complainant that the decision rendered by the Apex Court in Chandumull Jain (supra) lays down any law contrary to what has been held in L.I.C. v. Raja Vasireddy Komalavalli Kamba and Ors. (supra). In that case, the Apex Court arrived at the conclusion that there was proposal and letter of acceptance followed by cover notes. The Court held that during the time policy is issued the cover note operates and the relations of the parties are governed by its terms and conditions, if any, but, more usually by the terms and conditions of the policy bargained for and to be issued. In that view of the matter, the ratio laid down in the said judgment would not be applicable to the facts of the present case.

CONSIDERING the aforesaid law and facts of the case, it is apparent that there was no concluded contract, as the Insurance Company had not signified unconditionally acceptance of the proposal. The letter dated 2.6.2000 issued by the Branch Manager reveals that it was at the stage of counter proposal or subject to acceptance by the proposer to pay the additional Rs. 27 per Rs. 1,000 for the amount of insurance coverage.

IN this view of the matter, there is no substance in this complaint and is, therefore, dismissed. There shall be no order as to costs.