Kerala High Court
Life Insurance Corporation Of India, ... vs L. Kamalamma on 16 January, 1986
Equivalent citations: AIR1986KER215, [1987]61COMPCAS472(KER), AIR 1986 KERALA 215, (1986) KER LT 347 (1986) ACJ 510, (1986) ACJ 510
Author: T. Kochu Thommen
Bench: T. Kochu Thommen
JUDGMENT Kochu Thommen, J.
1. The appellant, the Life Insurance Corporation of India (the "L.I.C.") is the first defendant in a suit for recovery of money allegedly due under a contract of insurance. Gopalakrishnan Unnithan made as per Ext. B3 dated 30-12-1976 a proposal for insurance on his life. The proposal is made in the standard form issued for the purpose by the L.I.C. containing the necessary details of the contract. The proposal was accompanied by cheque dated 30-12-1976 for a sum of. Rs, 725.80 representing the first premium payable under the contract. Ext. A1 dated 30-12-1976 is the receipt issued by the Development Officer of the L.I.C. who is described as the authorised representative. Ext. Al reads :
"While acknowledging your remittance of Rs. 725.80 (Rupees seven hundred and twenty-five and paise eighty only) by cheque, 1 wish to inform you that the official receipt will be issued by Life Insurance Corporation of India, Kayamkulam Branch.
Immediate reference to the above Branch should be made if Corporation's official receipt is not received by you within two weeks.
Cheque No. O/16 No. 350084 Date : 30-12-76 , ....."
Ext Al was issued at Kayamkulam. On the next day, that is on 31-12-1976, Unnithan was informed that the amount paid by him was deficient to the extent of Rs. 15.60 and was called upon to make good the deficiency. Admittedly the deficiency arose on account of an arithmetical error made by the office of the L.I.C. This amount was paid on 31-12-1976. Exts. B8 and B9 are two counterfoils produced by the defendants alleged to be the carbon copies of receipts issued for Rs. 725.80 and Rs. 15.60. We shall have occasion to refer to these documents presently. However the fact is that payment of these two sums on 30th and 31st December, 1976 is admitted by the defendants.
2. At about 1 A.M. on 1-1-1977 Unnithan died unexpectedly. Ext. B5 dated 31-12-1976 is a carbon copy of an internal correspondence between the Trivandrum and Kayamkulam offices of the L.I.C. It shows that on 31-12-1976 the Trivandrum Divisional Office informed the Kayamkulam Branch Office of the L.I.C. that the premium paid was still deficient by Rs. 3.10. Although Ext. B5 is dated 31-12-1976 there is no evidence as to when it was despatched by the Trivandrum Office and whether the Kayamkulam Office had sent any communication to the deceased or his legal representative regarding the balance amount. By letter dated 18-1-1977 the plaintiff, who is the wife of the deceased, made a claim upon the L.I.C. for payment of the contract amount due to her from the L.I.C. in her capacity as the legal representative and nominee of the deceased. To this the L.I.C. replied by Ext. A2 dated January 1, (sic) 1977 repudiating the claim on the ground that no contract of insurance had come into existence. The ground stated for denying the existence of the contract is that the proposal had not been accepted by competent authority. Consequently the plaintiff instituted the present suit which was decreed by the Court below stating that the evidence on record clearly proved that the contract of insurance had come into existence and that the L.I.C. was liable to settle the plaintiffs claim.
3. Counsel for the appellant Shri E. Subramani submits that the cheque paid by the deceased on 30-12-1976 for a sum of Rs. 725,80 together with the balance amount of Rs. 15.60 had been held in suspense as evidenced by Exts. B8 and B9. This shows that the proposal was in suspended animation pending consideration and final decision.
Before any such decision could be made the deceased had died. In the circumstances no contract had come into existence. Counsel further refers to Ext. B5 dated 31-12-1976 which shows that the first premium had not been paid in full. Counsel relies upon Ext. B12 which is the standing order in 1960 containing provisions relating to the competence of various authorities.' Ext. B12 shows that in respect of contract of insurance for Rs. 50,000/-the competent authority was the Assistant Divisional. Manager, whose office is at Trivandrum and therefore the Branch Manager or the Development Officer at Kayamkulam had no competence to enter into any contract of insurance for a like sum. Counsel also refers to the decision of the Supreme Court in L.I.C. of India v. R. Vasireddy, AIR 1984 SC 1014.
4. Counsel for the respondent-plaintiff Shri. K.C. John submits that the decision of the Supreme Court has no application to this case, for, unlike in that case, the facts of this case clearly establish the unqualified acceptance of the proposal made by the plaintiffs deceased husband. The documentary as well as the oral evidence would indicate that the Branch Manager and the Development Officer at Kayamkulam held themselves out as the officers authorised to act on behalf of the L.I.C. They demanded and accepted a,sum of Rs. 725.80 on 30-12-1976 in terms of Ext. B3 stating that that was the correct amount of the first premium, and issued Ext. A1 receipt therefor. Subsequently on the following day, the third defendant informed the plaintiffs husband that an arithmetical error had been committed by the L.I.C. office resulting in a deficiency of Rs. 15.60 in the amount demanded for the first premium payable under Ext. B3. This sum was also paid in cash and accepted by the L.I.C. Counsel says that Ext. B5 dated 31-12-1976 which is alleged to be the carbon copy of an internal correspondence between the Trivandrum and the Kayamkulam offices of the L. I.C. showing that there was a further deficiency of Rs. 3.10 was not communicated to the plaintiffs husband or to her. In any case assuming that there was still ah arithmetical error, that error was committed by the L.I.C.'s office and the plaintiffs husband was in no way responsible for it. If such an error had in fact occurred and the sum of Rs. 3.10 remained payable, such sum could be adjusted against the amount due to her under the contract. But to repudiate the contract altogether or to say that the contract had never come into effect is to ignore facts clearly indicating the existence of a binding contract between the parties in terms of which the amount claimed by the plaintiff is payable by the L.I.C.
5. No policy has admittedly been issued in the present case. The question, however, is not whether a policy of insurance has been issued -- a contract of insurance can come into existence even without a policy -- but whether a binding contract has come into existence.
"....Indeed there is no legal necessity, in non- marine insurance, to have a policy at all, writing is necessary in marine insurance, but, in other forms of insurance writing is not, it seems, necessary, even if the period of the insurance extends beyond a year. Any positive act therefore indicative of an intention to create a contract may be sufficient acceptance; for example receipt of the premium without demur or qualification or conduct precluding the insurers from disputing receipt of the premium. Even a demand for the premium may be sufficient. An acceptance may, however, be conditional (unless the form of a prior acceptance precludes the imposition of a new condition), and in such a case performance of the condition operates as the initiation of the contract."
(Halsbury's Laws of England, Vol. 22, 3rd Edn., page 206).
6. Evidence of DW 2 who is the Assistant Divisional Manager shows that the third defendant was competent to issue Ext. A1 receipt. Ext. Al itself shows that the third defendant signed it as the authorised representative. Ext. Al was an unconditional receipt in the sense that the only qualification that it contained was that it was an acknowledgement of receipt of the amount which would he accompanied by an official receipt issued by the Kayamkulam Branch. But there was no qualification in the acceptance of the amount tendered as the first premium. In law therefore Ext. A1 evidenced an unconditional acceptance of a tender made in payment of the premium due under the contract, the offer of which was contained in Ext. B3. Ext. B3 was accepted without qualification by Ext. A1 acknowledgment of the amount demanded and paid as the first premium. It is true that owing to the arithmetical error of the L.I.C.'s office -- an error which was not prompted or caused or induced by the deceased -- the balance amount of Rs. 15.60 was demanded, tendered and accepted in cash on31-12-1976. These facts clearly indicate that on 30-12-1976 and at any rate on 31-12-1976 there was a concluded contract of insurance.
7. Exts, B8 and B9 do not change the position. These are counterfoils of documents dated 30-12-1976 and 31-12-1976 stating that the two sums received from the deceased, that is Rs. 725.80 and Rs. 15.60, had been held in suspense. This is what they say :
"Suspense Memorandum :
Payment as shown alongside has been received and held in suspense. If the payment is found in order the amount will be adjusted and Corporation's Official Receipt issued."
There is no evidence that Exts. B8 and B9 had been communicated to the deceased or to the plaintiff. No question regarding these two documents had been put to PW1 in her cross-examination on behalf of the defendants. Apart from the interested testimony of the defendants, there is no reliable evidence to show that these documents had been sent to the plaintiff or the deceased. Assuming that they did reach the plaintiffs husband before his death, even so, they do not make any difference for the reason that all that they stated was that the amounts were held in suspense to be adjusted if found in order. That only meant that the total amount paid by the deceased was accepted subject to the amount being correct. In the event of deficiency, the defendants reserved their right to repudiate their obligations under the contract. The defendants have not pleaded that the contract was repudiated by reason of any deficiency in the amounts paid. Their plea is that there was no contract at all. It is one thing to say that there was a breach of contract, but a totally different thing to deny that a contract has come into existence at all. Ext. B5 is an internal correspondence and therefore has no binding effect on any outside person. All that it indicates is that there was still a further deficiency of Rs. 3.10. This deficiency had occurred solely because of the negligence on the part of the defendants, for which neither under the contract nor in equity can the deceased be held responsible. The defendants cannot take advantage of their own fault. Ext. B12 is the standing order of 1960 regulating the internal arrangement of the L.I.C. as regards the competence of its officers. There is no case that Ext. B12 had been published in the gazette or that the contents had been communicated to the deceased. There is no evidence to show that the deceased was aware that the authority of the Branch Officers was limited or that the contract was subject to the final approval of any higher authority. Ext. B12 can therefore have no impact on the efficacy of the contract.
8. DW 3 who is the Branch Manager admits in cross-examination that Ext. B3 proposal was registered and the amount tendered was accepted in the belief that it was the correct amount. He also accepts the deficiency as one of clerical error committed by the L.I.C.'s office. Significantly the cheque paid by the deceased was cashed immediately on receipt of it; DW 2 admits that defendants 2 to 4 acted within the limit of the authority. He further says that no action had been taken against these officers by the L.I.C. for acting in excess of authority.
9. We are satisfied that the evidence in this case conclusively proves the existence of a contract during the life of the deceased Unnithan. The contract, in our view, is binding on the first defendant-appellant.
10. The decision of the Supreme Court in L.I.C. of India v. R. Vasireddy, AIR 1984 SC 1014 does not help the appellant, for the facts of that case clearly indicated the total absence of a contract. The facts of this case, however, speak to the contrary.
11. We are satisfied that the learned Judge who had the advantage of seeing the witnesses, watching their demeanour and studying the evidence, came to the right conclusion. The appeal is accordingly dismissed with costs.