National Consumer Disputes Redressal
The Branch Manager, L.I.C. Of India vs Smt. Gousabi on 14 January, 2009
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION, NEW DELHI NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION, NEW DELHI REVISION PETITION NO. 504 OF 2005 (From the Order dated 22.11.2004 in Appeal No. 490 of 2002 of Karnataka State Consumer Disputes Redressal Commission, Bangalore) THE BRANCH MANAGER, L.I.C. OF INDIA PETITIONER VERSUS SMT. GOUSABI RESPONDENT BEFORE: - HONBLE MR. JUSTICE ASHOK BHAN, PRESIDENT HONBLE MR. B.K. TAIMNI, MEMBER FOR THE PETITIONER : MR. D. VARDARAJAN, ADVOCATE. FOR THE RESPONDENT: MR. D.P. CHATURVEDI, ADVOCATE. PRONOUNCED ON : 14.01.2009 O R D E R
ASHOK BHAN J., PRESIDENT Life Insurance Corporation of India (LIC) (hereinafter referred to as the petitioner for short) has filed the present Revision Petition against the Order dated 21.11.2004 passed by the Karnataka State Consumer Disputes Redressal Commission, Bangalore (hereinafter referred to as the State Commission for short) in Appeal No. 490 of 2002 whereby the State Commission has reversed the Order passed by the Uttar Kannada District Consumer Disputes Redressal Forum, Karwar (hereinafter referred to as the District Forum for short). By the impugned Order, the State Commission has directed the petitioner to pay the assured amount under the different policies, which were the subject matter of the Appeal with all consequential benefits within four weeks.
Shri Imamsab Husensab Handur-deceased, husband of the respondent-complainant was employed with the West Coast Paper Mills Ltd., Dandeli as Truck Boy and he took four life insurance policies under the Salary Savings Scheme of the petitioner as per the following details: -
Policy No. Sum Assured Date of Commencement Premium 631388492 Rs.25,000 28-12-1995 Rs.125 (Monthly) 631388463 Rs.50,000 28-12-1995 Rs.228 (Monthly) 631390858 Rs.25,000 14-09-1996 Rs.147 (Monthly) 631390922 Rs.25,000 28-09-1996 Rs.147 (Monthly) In terms of the Salary Savings Scheme authorization letter signed by the deceased, the premium was to be deducted every month from the policyholders salary. In the policy, the deceased had undertaken and declared that he shall be entirely responsible for any consequences on account of non-payment of premium on his policy, in the event of his proceeding on leave without pay, etc. The deceased- Shri Imamsab Husensab Handur died on 25.06.2000.
The respondent being a nominee under the policies claimed the amount. Employer had committed default in payment of premium. In view of the default committed by the employer, the petitioner Insurance Company repudiated the claim of the complainant.
Respondent, thereafter, filed the complaint before the District Forum, Karwar. The District Forum, distinguishing the law laid down in Delhi Electricity Supply Undertaking v. Basanti Devi and Anr. reported in 1999 VIII AD (S.C.) 454, dismissed the complaint. It was held that since the deceased- Shri Imamsab Husensab Handur was on leave without pay, the premium could not be deducted by the employer from the salary of the deceased and remitted to the Life Insurance Corporation. Repudiation of the claim by the LIC was upheld.
Aggrieved against the Order of the District Forum, the respondent filed the appeal before the State Commission. The State Commission by the impugned Order, reversed the Order passed by the District Forum and held that the Basanti Devis case (supra) was fully applicable to the facts of the present case and the District Forum had erred in dismissing the complaint. Hence, this Revision Petition.
Point in issue in the present case is as to whether the ratio of law laid down by the Supreme Court of India in Basanti Devis case (supra) would be applicable even though the husband of the respondent had proceeded on leave without pay. And, whether the employer, who could not deduct the premium from the salary of the employee as he was on leave without pay and remit the same to the LIC being an agent of the LIC, would bind the LIC to pay the assured amount?
In Basanti Devis case (supra), after referring to the Salary Savings Scheme, Supreme Court of India held that the employer was an agent of LIC as defined under Section 182 of the Contract Act, 1961 and the deduction from the salary of the employee was deemed as valid deduction and payment of the premium. It is the LIC, which is liable to pay the insurance amount even though the employer had failed to remit the premium of the employee to the LIC.
The facts of the present case are:-
LIC had floated Salary Savings Scheme under which the deceased-an employee of the West Coast Paper Mills Ltd., Dandeli (hereinafter referred to as the employer for short), took four insurance policies- three policies in the sum of Rs.25,000/-
each and one for Rs.50,000/- - from the LIC. As per the scheme, the amount of premium was deducted by the employer from the salary of the deceased and remitted to the LIC. It appears that premium for the subsequent months was not sent by the employer to the LIC as the deceased employee had proceeded on leave without pay. After the death of the deceased, respondent wife of the deceased informed the LIC of the death of her husband and requested for payment of the amount due under various policies. LIC repudiated any liability for payment under the policies, as the installments of the premiums were not received by it. According to the LIC, policies had lapsed due to non-payment of the premium.
The repudiation of the claim by the LIC, led the respondent to file a complaint before the District Forum. The complaint was dismissed by the District Forum aggrieved against which, the respondent filed an appeal before the State Commission, which has been allowed by the impugned Order. The State Commission had directed the petitioners to pay the amount assured under different policies with all benefits.
Keeping in view the general need of the average employee for adequate protection of his dependants as well as the desirability of the adequate provision for his own retirement, the LIC floated the Salary Savings Scheme. Under the policy, the Pay Roll Department of the employer was required to deduct the premium, on the employees policy holders authorization, from the employees salary and remit the same regularly to the LIC along with reconciliation statement. The employer had adopted the scheme.
As per terms of the scheme, the employer had to receive the list of premiums to be deducted called demand invoice in duplicate each month on the specified date. One copy of the invoice was to be returned along with the remittance. Second copy was to be retained by the employer for its record. It was necessary for him to inform the LIC when an employee leaves the service or is transferred from one Department to another. Reconciliation Statement, in a specified form, to be supplied by the LIC was to accompany the statement. On receipt of the changes in the invoice, based on the information received from the employer regarding transfer in, transfer out and exits, the LIC was to make changes in the invoice. Deductions made in each month were required to be remitted to the LIC from the date of making of the corrections along with a copy of the invoice and Reconciliation Statement. Cheques were made payable to the LIC. While checking, if the employer found that an item could not be paid, the employer was required to append a note regarding the reasons for non-payment against the item in the remark column. If the employee was transferred from one Department to another, the name of the concerned Department and code number was also required to be sent to the LIC. It was the sole responsibility of the employer to secure premiums from the employees and remit the same by means of one cheque. Conciliation Statement was also to be sent in the form prescribed by the LIC. No individual premium notice was to be sent in the form prescribed by the LIC to any employee and no receipt was to be given to him for the premium received. It is the employer, who was to inform the LIC of all the changes in the staff as soon as they occur. Fact that an employee had left the service of an employer was also to be informed. All these facts have been taken note of by the Supreme Court of India in Basanti Devis case (supra). Reference may be made to paragraphs 4 to 8.
In Basanti Devis case (supra), the employer did not remit the premium to the LIC. It was held by the Supreme Court of India that the employee was kept ignorant of the happenings between the LIC and the employer except that he was made aware of the deductions of the premiums from his salary every month. That it was the duty of the employer to inform the LIC regarding non-payment of the premium and, in turn, a duty was caste on the LIC to inform the employee that his premium had not been remitted.
The LIC had shown its circular titled Salary Savings Scheme Endorsement which was in the following terms: -
9.
This policy having been issued under the Corporations Salary Savings Scheme, it is hereby declared that the installment premium shall be payable at the rate shown in the schedule of the policy so long only as the life assured continues to be an employee of his present employer, whose name is stated in proposal and premiums are collected by the said employer out of the salary of the employee and remitted to the Corporation without any charge. In the vent of the Life Assured leaving the employment of the said employer or the premium ceasing to be so collected and/or remitted to the Corporation, the Life Assured must intimate the fact to the Corporation and in the event of the Salary Savings Scheme being withdrawn from the said employer, the Corporation shall intimate the fact to the Life Assured and all premiums falling due on and after the date of his leaving employment of the said employer, or cessation of collection of the premium and remittance thereof in the manner aforesaid, or withdrawal of the Salary Savings Scheme as the case may be, shall stand increased by the imposition of the additional charges for the monthly payment that has been waived under the Salary Savings Scheme at 5% of the premium exclusive of any premium charged for Double Accident benefits or extended Permanent Diability Benefits and any other extra premiums charged.
During the period in which premium is remitted to the Corporation through the employer, the installment premium will be deemed to fall due on the 20th day on each month instead of the due date within mentioned.
After taking note of the facts referred to in paragraphs 4 to 8 of Basanti Devis case (supra) and, thereafter, to the circular titled Salary Savings Scheme Endorsement, the Supreme Court of India, giving purposive interpretation to the scheme in para 10, held as under:-
10.
The endorsement shows that the premium deducted by DESU from the salaries of the employees and remitted to the LIC is without any charge. When the employee leaves the employment of the said employer or his premium is ceased to be collected and/or remitted to the LIC this fact is to be intimated by the employee to the LIC. When the Scheme (Salary Savings Scheme) is withdrawn it is the LIC, which intimates that facts to the employee whose life has been insure. Then premium is payable with an extra charge. This endorsement is in conflict with the terms of the Scheme as spelled out in the Brochure. Considering the conditions as to how premium is to be deducted from the salaries of the employees and remitted to the LIC by the DESU by one cheque for all the employees with the reconciliation statement. It is not possible for any employee to know if the amount of premium deducted from his salary has been remitted or not. An employee is not being given any separate premium notice nor is he given any receipt for the premium received. If a condition is now placed on the employee that it is he who is to intimate the LIC if there is no remittance of the premium deducted by DESU it will be too onerous a condition to be of any validity. Considering the Scheme such a condition cannot be imposed on an employee. It is impracticable. A purposive interpretation has to be given to the endorsement and it has to be held that since payment of premium after dedicating from the salary of the employees is between DESU and LIC, it will not be for the employee to intimate the LIC about non remittance of the premium.
(Emphasis supplied) A reading of the above noted paragraph shows that the payment of premium after deducting from salary is between the employer and LIC and it is not for the employee to intimate the LIC about non-remittance of the premium. In the present case, though the deceased had proceeded on leave without pay, a duty was caste on the employer to inform the LIC that the premium from the salary of the deceased was not being deducted and remitted as he had proceeded on leave. Thereafter, the LIC could have asked the deceased to pay the premium. At no stage did the deceased come to know that the premium was not paid because the premium amount was not deducted from his salary. The deceased was kept ignorant of this fact. No notice was issued to the employee about the non-deduction or non-remittance of the premium. The employee could be held responsible for the consequences on account of non-payment of premium only if he was made aware of the fact that the premium was not being paid and that he was required to pay the same himself. It was the duty of the employer to inform the LIC about the non-payment of the premium because the deceased had proceeded on leave without pay and the LIC would have made an employee aware of the fact that the premium was not being paid. Only then, the employee could be held responsible for the consequence of non-payment of premium under the policy.
Salary Savings Scheme was floated by the LIC for the benefit of an average employee. The duty was caste on employer to deduct the premium and pay the same to the LIC and it was the employer who was keeping all the accounts. It was duty of the employer to remit the premium after deducting it from the salary of an employee and the employee was, at no stage, involved in the remittance of the premium to the employer. A purposive interpretation was given by the Supreme Court of India to the Scheme. Keeping in view the purposive interpretation given by the Supreme Court of India, it has to be held that the point involved in the present case is concluded in the Basanti Devis case (supra) and the LIC is liable to pay the sum assured under the four policies to the respondent wife being the nominee/legal heir.
For the reasons stated above, we find no merit in this Revision Petition and dismiss the same leaving the parties to bear their own costs.
(ASHOK BHAN J.) PRESIDENT ..
(B.K. TAIMNI) MEMBER