Madras High Court
Visalatchi vs The Presiding Officer on 2 December, 2010
Author: S.Nagamuthu
Bench: S.Nagamuthu
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT DATED: 02/12/2010 CORAM THE HONOURABLE MR.JUSTICE S.NAGAMUTHU W.P.(MD).No.7377 of 2006 1.Visalatchi 2.A.Sankara Subbu 3.A.Sivanantham ... Petitioners vs. 1.The Presiding Officer, Labour Court, Tirunelveli. 2.The Management, Nellai Cotton Mills Ltd., Sankar Nagar-627 357, Tirunelveli Taluk & District. 3.The Regional Provident Fund Commissioner, Tirunelveli-11. 4.The Divisional Manager, Life Insurance Corporation of India, Palayamkottai-627 002. ... Respondents PRAYER Writ Petition is filed under Article 226 of the Constitution of India praying for the issue of a Writ of Certiorarified Mandamus, to call for the records in C.P.14/2001, dated 19.04.2005 from the file of the first respondent and to quash the award passed in C.P.14/2001, dated 19.04.2005, so far as relating to the rejection of the claim against the respondents 3 and 4 and direct the respondents 3 and 4 to pay the insurance amount as claimed by the petitioners with interest at 18% per annum. !For Petitioners ... Mr.J.Ashok ^For Respondent No.2 ... No Appearance For Respondent No.3 ... Mr.K.Murali Shankar For Respondent No.4 ... Mr.C.Godwin ****** :ORDER
****** The petitioners are the legal heirs of one Mr.S.S.Arumugam, who was working as a Cleaner in the second respondent Nellai Cotton Mills Limited. While he was in the said service, a Group Insurance Scheme was floated by the Insurance Company. There was an agreement reached between the Life Insurance Corporation of India and the second respondent, under which, a Group Insurance Policy was issued in the name of the second respondent covering the life risk of the employees, viz., the workmen of the second respondent. Mr.S.S.Arumugam, being an employee, was covered by one such Group Insurance Policy. The deductions from the wages of Mr.S.S.Arumugam were duly done by the second respondent and paid to the Life Insurance Corporation of India till 01.12.1998. As per the Group Term Insurance Rules, the said contract shall be valid only for one year. However, it is renewable every year. In this case, beyond 01.12.1998, the second respondent did not deduct any amount from the wages of Mr.S.S.Arumugam as well as from the other persons, who were covered by the said policy and did not pay the same to the Life Insurance Corporation of India. Thus, on or after 01.12.1998, there was no group insurance policy in force. Mr.S.S.Arumugam died on 13.08.1999. The petitioners, being the legal heirs of Mr.S.S.Arumugam, made a claim for the amount assured. The same was not paid. Therefore, they filed C.P.No.14 of 2001 before the Labour Court, Tirunelveli.
2. Before the Labour Court, it was contended by the petitioners that as per the agreement entered into between the Life Insurance Corporation of India and the second respondent, it was the bounden duty of the second respondent to deduct the amount from the wages of Mr.S.S.Arumugam and other employees and to pay the same to the Life Insurance Corporation of India. Though the second respondent failed to do the same, still the fourth respondent, Life Insurance Corporation of India is liable to pay the amount assured. According to the learned counsel appearing for the petitioner, the second respondent was acting as the Agent of the Life Insurance Corporation of India and since there was failure on the part of the second respondent, the Life Insurance Corporation of India alone is liable to pay, because the failure was that of its agent.
3. It was contended before the Labour Court by the Life Insurance Corporation of India that the insurance policy is essentially a contract. Since it expired and there was no policy beyond 01.12.1998, the Insurance Company is not liable to pay the amount assured. It was further submitted that in the matter of "Salary Savings Scheme", the employer acts as the Agent of the Life Insurance Corporation of India, whereas in the Group Term Insurance Scheme, the employer is not acting as the Agent of the Life Insurance Corporation of India. Therefore, according to the Life Insurance Corporation of India, the said Corporation is not liable to pay any amount as per the lapsed policy.
4. Having considered the above matters, the Labour Court found that the petitioners are entitled for Rs.35,000/-, which was assured by the policy. But the said payment should be made only by the second respondent, viz., the employer of the deceased. The Labour Court further held that the Life Insurance Corporation of India is not at all liable to pay the said amount.
5. Challenging the said award, the petitioners are now before this Court with the present Writ Petition.
6. I have heard the learned counsel appearing for the petitioners and the learned counsel appearing for respondents 3 and 4. There is no representation for the second respondent. I have also perused the records carefully.
7. The learned counsel appearing for the petitioners would, at the outset, rely on a judgment of the Hon'ble Supreme Court in Delhi Electric Supply Undertaking v. Basanti Devi reported in AIR 2000 SC 43. I have very carefully gone through the said judgment. That was a case where the Hon'ble Supreme Court had to deal with the "Salary Savings Scheme" of Life Insurance Corporation of India. After having extensively gone through the nature of the Scheme, more particularly, the fact that the policy is taken under the said Scheme in the name of the employee, in which, the employer had nothing to do with, the Hon'ble Supreme Court took the view that the employer is acting as the Agent of Life Insurance Corporation of India and, therefore, for the failure of its own Agent to deduct the money from the wages of the employee, the Life Insurance Corporation of India alone can be held responsible. The Hon'ble Supreme Court further proceed to say that as per the Scheme, though the contract was entered into between the Life Insurance Corporation of India and the employee, as per the agreement under the Scheme, the employer has agreed to deduct the amount from the wages of the employee and to pay the same to the Life Insurance Corporation of India. The Hon'ble Supreme Court also took note of the fact that even under the Scheme, the Life Insurance Corporation of India has requested the employer only to allow its representatives to meet the employees and to enter into contract. Thus, from these terms and conditions of the Scheme, the Hon'ble Supreme Court held that the employer is only an Agent of the Life Insurance Corporation of India and in such view of the matter, the Hon'ble Supreme Court directed the Life Insurance Corporation of India to pay the amount assured. The Hon'ble Supreme Court, in paragraph No.14 of the said judgment, has held as follows:-
"14. We do not think decision of this Court in Harshad J. Shah v. L.I.C. of India, (1997) 5 SCC 64 : (1997 AIR SCW 2395 : AIR 1997 SC 2459) has any application in the present case before us. Formation of the contract of insurance is between LIC and the employee of DESU. Scheme has been introduced by the LIC purely on business considerations and not for any particular benefit of insurance conferred on the employee working in an organisation. Though in the pro forma letter written by DESU to LIC it is mentioned that DESU would be an agent of its employee and not that of the LIC but this understanding between the LIC and DESU was not communicated or made known to the employee. As far as employee is concerned he is told that premium will be deducted from his salary every month and remitted by DESU to LIC under an agreement between LIC and DESU. For employee of DESU, therefore, DESU had implied authority as an agent of LIC to collect premium on its behalf and then pay to LIC. There is nothing on the record to show that Bhim Singh was ever made aware of the fact that DESU was not acting as agent of LIC. Rather in the nature of the scheme, the employee was made to believe that it is the duty of the employer though gratuitously cast on him by the LIC to collect premium by deducting from the salary of each employee covered under the scheme every month and to remit the same to LIC by means of one consolidated cheque. Now it could be said that DESU would not be liable as an agent of its principal, i.e., LIC and also it was rendering service of collecting the premium and remitting the same to LIC free of any cost to employee. As to what is the arrangement between the LIC and DESU employee is not concerned. In these circumstances DESU cannot perhaps be held liable under the Act. But then the question arises if the widow of Bhim Singh can be left high and dry in this legal rigmarole when it is clear that as far as Bhim Singh was concerned he did pay the premium and it was the fault of the agent of LIC, i.e., DESU in not remitting the premium in time. In these circumstances LIC was wrongly discharged of its liability under the insurance policy taken out by Bhim Singh. Now LIC is not aggrieved of the orders passed by the State Commission and the National Commission and when DESU had been held liable to pay an amount equivalent to the insurance policy of Bhim Singh, Basanti Devi also felt satisfied and did not pursue its remedy against LIC. All the three, i.e., DESU, LIC and Basanti Devi are before us and we have heard learned counsel for the LIC as to why LIC was not liable under the policy of insurance. Proceedings have arisen under the Act, which was enacted to provide protection to the interests of the consumers and under Section 3 provisions of the Act shall be in addition to and not in derogation of the provisions of any other law for the time being in force. In these circumstances we do not think we should deprive Basanti Devi of her right, which admittedly she has, holding on the one hand DESU is not liable and on the other hand her not challenging the order of the State Commission discharging LIC."
8. Similar view has been taken subsequently by the Hon'ble Supreme Court in Chairman, LIC v. Rajiv Kumar Bhasker reported in 2005(6) SCC 188.
9. But, in our case, there is no direct contract between the Life Insurance Corporation of India and the employee, viz., Mr.S.S.Arumugam. A close reading of the Scheme, which is produced for the inspection of this Court, would go to show that the contract is only between the Life Insurance Corporation of India and the employer, viz., the second respondent. The policy was taken only in the name of the second respondent and not in the name of Mr.S.S.Arumugam. As per the Scheme, a group insurance policy is taken in the name of the employer and similarly, the premium amount is to be paid only by the employer to the Life Insurance Corporation of India. Of course, as per the Scheme, the said amount may be deducted from the wages of the employee. Here, the employer, viz., the second respondent is not acting as the Agent of the Life Insurance Corporation of India, as it is done in the case of "Salary Savings Scheme". To put it precisely, there is a basic difference between these two Schemes. Under the Salary Savings Scheme, the contract is between the Life Insurance Corporation of India and the employee, where the employer acts as an Agent, whereas in the Group Term Insurance Scheme, the contract is between the Life Insurance Corporation of India and the employer alone. The employee has got nothing to do with the Insurance Company. There is no contract between the Life Insurance Corporation of India and the employee. Therefore, it cannot be said that the employer is acting as the Agent of the Life Insurance Corporation of India. Therefore, it is crystal clear that when there is no such principal and agent relationship between the Life Insurance Corporation of India and the employer, for the default committed by the employer, viz., the second respondent, the Life Insurance Corporation of India cannot be in any manner held responsible. That is the reason why, the Labour Court has rightly exonerated the Life Insurance Corporation of India. For the default committed by the employer, viz., the second respondent, the Labour Court has directed the second respondent alone to pay the amount to the petitioners. When the employer himself is not aggrieved by the said Award, in my considered opinion, it is not open for the petitioners to challenge the same, because they are in no manner aggrieved by the Award. In such view of the mater, I do not find any merit in the Writ Petition.
10. In the result, this Writ Petition fails and the same stands accordingly dismissed. No costs.
SML To
1.The Presiding Officer, Labour Court, Tirunelveli.
2.The Management, Nellai Cotton Mills Ltd., Sankar Nagar-627 357, Tirunelveli Taluk & District.
3.The Regional Provident Fund Commissioner, Tirunelveli-11.
4.The Divisional Manager, Insurance Corporation of India, Palayamkottai-627 002.