National Consumer Disputes Redressal
Life Insurance Company Of India & Anr. vs Smt. Munesh on 15 July, 2015
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI REVISION PETITION NO. 1966 OF 2008 (Against the Order dated 15/11/2004 in Appeal No. A-601/2004 of the State Commission Delhi) 1. LIFE INSURANCE COMPANY OF INDIA & ANR. ...........Petitioner(s) Versus 1. SMT. MUNESH ...........Respondent(s)
BEFORE: HON'BLE MR. JUSTICE K.S. CHAUDHARI, PRESIDING MEMBER HON'BLE DR. B.C. GUPTA, MEMBER
For the Petitioner : Mr. Mohinder Singh, advocate For the Respondent : Ex-parte
Dated : 15 Jul 2015 ORDER
DATED : 15-05-2014
PER JUSTICE K.S. CHAUDHARI, PRESIDING MEMBER
This revision petition has been filed by the petitioners against the order dated 15.11.2007 passed by the State Consumer Disputes Redressal Commission, Delhi (in short, 'the State Commission') in Appeal No. A-601/04 - Life Insurance Corporation of India Vs. Mrs. Munesh by which, while dismissing appeal, order of District Forum allowing complaint was upheld.
2. Brief facts of the case are that Ashok Kumar obtained policy No.121430844 from the OP/petitioner on 11.10.2001 for Rs.1,00,000/-. Ashok Kumar died on 14.10.2001. Complainant being nominee of Ashok Kumar submitted claim before the OP, but OP repudiated claim. Alleging deficiency on the part of OP, complainant filed complaint before District Forum. OP resisted complaint and submitted that Ashok Kumar died before acceptance of proposal form which was accepted on 15.10.2001and prayed for dismissal of complaint. Learned District Forum after hearing both the parties allowed complaint and directed OP to pay benefits of the policy with 9% p.a. interest. Appeal filed by the petitioner was dismissed by the State Commission vide impugned order against which, this revision petition has been filed.
3. None appeared for the respondent even after publication of notice in the newspaper and respondent was proceeded ex-parte.
4. Heard learned Counsel for the petitioner and perused record.
5. Learned Counsel for the petitioner submitted that as Ashok Kumar died before acceptance of proposal form and there was no concluded contract for issuance of policy, petitioner rightly repudiated the claim, but learned District Forum committed error in allowing complaint and learned State Commission further committed error in dismissing appeal; hence, revision petition be allowed and impugned order be set aside.
6. Perusal of record reveals that premium receipt was issued on 15.10.2001 depicting date of risk from 13.10.2001. Policy in favour of Ashok Kumar was issued on 20.10.2001. Before issuance of policy, there could not have been any concluded contract between the petitioner and Ashok Kumar and as Ashok Kumar died before acceptance of proposal form and before issuance of policy, complainant was not entitled to get insurance policy benefits. Learned Counsel for the petitioner placed reliance on 1984 (2) SCC 719 - Life Insurance Corporation of India Vs. Raja Vasireddy Komalavalli Kamba and ors. in which it was held that :
"Acceptance of insurance proposal - Silence not devoting consent - Binding Contract not arising until the person to whom offer is made signifies acceptance - Acceptance is complete only when communicated to offer-or - Mere receipt and retention of premium is not acceptance".
7. This Commission in II (2010) CPJ 231 (NC) Life Insurance Corporation of India Vs. Gita Sharma held that as insured died within 20 days of encashment of cheque and policy was not issued till that time, no concluded contract came into existence between parties and complainant was not entitled to any benefits under the insurance policy.
8. In the light of aforesaid judgments, it becomes clear that due to absence of concluded contract between the parties on the date of death of Ashok Kumar, complainant being nominee was not entitled to any benefits under the insurance policy and learned District Forum committed error in allowing complaint and learned State Commission further committed error in dismissing appeal and revision petition is to be allowed.
9. Consequently, revision petition filed by the petitioner is allowed and impugned order dated 15.11.2007 passed by the State Consumer Disputes Redressal Commission, Delhi in Appeal No. A-601/04 - Life Insurance Corporation of India Vs. Mrs. Munesh and orders dated 14.6.2004 & 16.7.2004 passed by District forum in Complaint case No. 45/03/5843 & Case No. 45/2003 - Smt. Munesh Vs. Life Insurance Corporation of India are set aside and complaint stands dismissed. There shall be no order as to costs.
(K.S. CHAUDHARI)
PRESIDING MEMBER
DATED : 15.05.2014
PER DR. B.C. GUPTA, MEMBER
This revision petition has been filed under section 21(b) of the Consumer Protection Act, 1986 against the impugned order dated 15.11.2007, passed by the Delhi State Consumer Disputes Redressal Commission (for short 'the State Commission') in Appeal No. A-601/04, "Life Insurance Corporation of India (L.I.C.) versus Munesh", vide which, while dismissing the appeal, the order passed by the District Forum in complaint case No. 45/03/5843 dated 14.06.2004, allowing the said complaint, was upheld.
2. I am writing this order separately since I am not in agreement with the draft order recorded by learned brother, Mr. Justice K.S. Chaudhari, Presiding Member.
3. Brief facts of the case are that Madan Pal, s/o Phoolwa obtained LIC insurance policy No. 121430844 from the petitioner LIC for ` 1 lakh on 11.10.2001. The complainant / respondent Munesh is the nominee of the said Madan Pal. On the first premium receipt issued by the LIC, the date of commencement of risk has been mentioned as 13.10.2001 and the date of maturity of the Policy is stated to be 13.10.2026. However, the said receipt is stated to have been issued on 15.10.2001. On the Insurance Policy, the date of commencement of policy has been stated to be 13.10.2001 and the date of maturity is stated to be 13.10.2026 and the last date of payment of premium is 13.10.2025. The said policy has been issued on 20.10.2001 as per the stamp on the policy. The complainant, being nominiee of Madan Pal submitted claim before the OP, but the OP repudiated the claim on the ground that Madan Pal died on 14.10.2001, whereas the first premium receipt was issued on 15.10.2001, and hence there was no concluded contract between the parties. The complainant filed the consumer complaint in question, alleging deficiency in service on the part of the OP. The said complaint was allowed by the District Forum vide their order dated 14.06.2004 and the petitioner/OP was directed to pay all benefits of the policy as well as interest @9% p.a. on the amount due alongwith ` 1,000/- as compensation and ` 250/- as cost of litigation. An appeal filed against this order before the State Commission was dismissed vide impugned order dated 15.11.2007. It is against this order that the present petition has been made.
4. The basic issue involved in the present case is whether the version of the LIC that the policy was issued after the death of the deceased is to be believed, or the claim is to be allowed, depending upon the own version of the LIC, stated on the first premium receipt as well as the policy in question that the date of commencement of the Policy/risk is 13.10.2001.
5. The learned counsel for the petitioner vehemently argued that the first premium receipt has been issued by the LIC on 15.10.2001 whereas Madan Pal died on 14.10.2001. Since on the date of issue of the first premium receipt, Madan Pal was no longer alive, the contract does not come into effect between the parties. The insurance policy was issued on 20.10.2001, because the LIC was not aware about the death of the deceased. The learned counsel stated that they had received the amount of premium on 11.10.2001, but a copy of the proposal form was not available in their office. The learned counsel has drawn our attention to judgement of Hon'ble Supreme Court in "Life Insurance Corporation of India versus Raja Vasireddy Komalavilli Kamba & Ors." [as reported in 1984 AIR (SC) 1014], in which it has been stated that a binding contract does not come into play until the person to whom offer is made, signifies acceptance. The learned counsel has also drawn our attention to order of this Commission in "Life Insurance Corporation of India versus Gita Sharma" [as reported in II (2010) CPJ 231 (NC)], in which it has been stated that the encashment of cheque for premium does not amount to a concluded contract between the parties. The learned counsel argued that revision petition should be allowed and the impugned order be set aside.
6. I have examined the entire material on record and given a thoughtful consideration to the arguments advanced before us. The facts of the case as admitted by both the parties are that Madan Pal died on 14.10.2001. The LIC have stated in their written statement before the District Forum that Madan Pal had deposited the amount of ` 4289/- as premium on 11.10.2001 with the Branch office of the LIC for consideration of proposal on his life. It is also clear that the first premium receipt has been issued on 15.10.2001, whereas the date of commencement of risk has been stated to be 13.10.2001 on the said receipt. The insurance policy has been issued on 20.10.2001, whereas the date of commencement of policy has been stated to be 13.10.2001 on the said policy. During the course of arguments before us, the learned counsel for the LIC was asked to clarify how the date of commencement of policy has been stated to be 13.10.2001 and the date of commencement of risk has been stated to be 13.10.2001, when according to the version of the LIC, the risk under the policy was accepted by the OP on 15.10.2001 at 10:30 PM. However, the learned counsel for the LIC could not clarify as to how the date 13.10.2001 has been put on the policy as well as the first premium receipt. The material placed on record also does not clarify anywhere how the LIC have themselves declared the date of commencement of policy/risk as 13.10.2001.
7. The State Commission in their well-reasoned order have made it clear that when LIC received the premium on 11.10.2001, a concluded contract had come into effect between the parties. The premium was accepted in cash and the receipt was issued by the agent on 11.10.2001. The State Commission have further stated that even if the LIC issued the first premium receipt on 15.10.2001, the contract should conclude on the day when the insurance agent accepted the amount. Moreover, the Insurance Policy as well as the first premium receipt mentioned the date of commencement of policy/risk as 13.10.2001. This view of the State Commission is supported by a recent order pronounced by this Commission in "ICICI Prudential Life Insurance Co. Ltd. versus Bimal Kanta Kharab" [as reported in I (2013) CPJ 155 (NC)] in which it has been held that commencement of risk is to be taken from the date of issue of the cheque and not from the date of the policy.
8. In so far as, the citations referred by the petitioners are concerned, the facts in these cases are different from those in the present case. In "LIC versus Gita Sharma" (supra), although the premium had been received and the insured died within 20 days of encashment of cheque, but the policy had not been issued at all.
9. In the case of "Life Insurance Corporation of India versus Raja Vasireddy Komalavilli Kamba & Ors." (supra) the deceased had issued two cheques for ` 300/- and ` 220/- respectively in favour of the LIC as first premium. The cheque for ` 300/- was encashed by the LIC on 29.12.1960. However, the cheque for ` 220/- was dishonoured three times and finally got encashed on 11.01.1961. The deceased died on the following day, i.e., on 12.01.1961. The widow of the deceased made claim for payment on 16.01.1961, but the LIC denied liability for the same, saying that the amount received from the deceased was lying in the suspense account of the LIC and was not adjusted towards the premium, since the proposal was not considered, the terms of acceptance were not fixed and the premium amount required for the proposal was not calculated. In those circumstances, there was no liability on the part of the LIC and the party had no right to claim and there was no cause of action.
It is evidently clear from the above version that the facts of the present case are totally different from the facts of the case, "Life Insurance Corporation of India versus Raja Vasireddy Komalavilli Kamba & Ors." (supra). In the present case, the policy has been duly issued and the date of the commencement of the policy/risk as 13.10.2001, has been mentioned by the LIC itself, whereas the policy was not issued in the case mentioned above. The petitioner cannot, therefore, take shelter under the decisions taken in the two cases quoted above.
9. It is further stated that the Hon'ble Supreme Court in "Mrs. Rubi (Chandra) Dutta Vs. M/s. United India Insurance Co. Ltd. [II (2011) 11 SCC 269]" made it very clear that the revisional powers derived from section 21(b) of the Consumer Protection Act, 1986 can be exercised only, if there is some prima-facie jurisdictional error in the impugned order. In the present case, looking at the concurrent findings of the State Commission and the District Forum, we do not find any jurisdictional error or perversity in the same, which may merit interference at the revisional stage.
10. To conclude, the facts of the case make it very clear that as per the own version of the LIC declared on their own documents, i.e., the Insurance Policy and the first premium receipt, the date of commencement of policy/risk is 13.10.2001, whereas the insured died on 14.10.2001. Even on a specific query made during arguments, the petitioner could not clarify as to how and why the date 13.10.2001 had been put by the LIC on the first premium receipt and the policy document. For the failure of the LIC to explain how the date 13.10.2001 was put on their own documents, there is no alternative but to accept the version of the complainant that they are entitled to be paid the claim in question, because the death took place after the commencement of the policy / risk. I have no reason to differ with the concurrent findings of the State Commission and the District Forum on this score. The orders passed by the State Commission and District Forum are, therefore, confirmed and the present petition is ordered to be dismissed with no order as to costs.
(DR. B.C. GUPTA)
MEMBER
DATED : 15.05.2014
PER JUSTICE K.S. CHAUDHARI
In R.P. No. 1966 of 2008 - Life Insurance Co. Ltd. Vs. Smt. Munesh arguments were heard on 24.2.2014 by our Bench. Judgment was dictated by Hon'ble Mr. Justice K.S. Chaudhari, Presiding Member and sent for approval to Hon'ble Dr. B.C. Gupta Member. Hon'ble Dr. B.C. Gupta sent dissenting judgment. As Members of the Bench differ in their opinion, the matter may be placed before Hon'ble President, NCDRC under Section 20(i)(iii) of the C.P. Act for appropriate directions. The legal issue arises in this revision petition is as under:
Whether petitioner is liable to make payment of sum assured where first premium receipt issued on 15.10.2001 indicating that risk commences from 13.10.2001 and policy was issued on 20.10.2001, whereas assured died on 14.10.2001.
Justice K.S. Chaudhari
Member
Registrar, I/c
DATED : 19.09.2014
JUSTICE AJIT BHARIHOKE, PRESIDING MEMBER
Briefly put the undisputed facts relevant for the disposal of this revision petition are that life assured Madan Pal applied for life insurance policy of Rs.1,00,000/- on 11.10.2001 and paid the requisite insurance premium. The insurance company, however, issued the premium receipt on 15.10.2001 wherein the date of commencement of risk was mentioned as 13.10.2001. The insurance policy was issued on 20.10.2001 wherein date of commencement of policy was mentioned as 13.10.2001. Unfortunately, the life assured died on 14.10.2001. The insurance claim filed by his widow, the respondent herein, was rejected on the plea that the contract of insurance had not been concluded before the death of life assured and the petitioner insurance company was not liable to pay the insurance cover amount. The District Forum, vide its order dated 14.06.2004, repelled the stand taken by the petitioner and directed it to pay :
"i.) All benefits of the policy No.121430844 to the respondent as per law;
ii.) Interest on the amount due to the respondent at the rate of 9% p.a. from 14.01.2003 (date of filing the petition) till realization;
iii.) A sum of Rs.1000/- as compensation and Rs.250/- as cost of l itigation."
2. Feeling aggrieved, the petitioner preferred an appeal before the State Commission which was dismissed vide impugned order dated 15.11.2007. The revision petition was heard by two Members Bench comprising of Presiding Member Justice K S Chaudhari and Dr. B.C.Gupta, Member. Justice K.S.Chaudhari on perusal of the record came to the conclusion that since the life assured died on 14.10.2001 before the acceptance of proposal form, no concluded contract came into existence and relying upon the judgment of Supreme Court in the matter of Life Insurance Corporation of India Vs. Raja Vasireddy Komalavalli Kamba and Ors 1984 (2) SCC 719, allowed the revision petition, set aside the orders of the foras below and dismissed the complaint.
3. Hon'ble Member Dr. B.C.Gupta on the contrary took the view that foras below were right in allowing the complaint and granting relief to the respondent / complainant. The basis of his finding is that the insurance premium was received by the agent of the insurance policy on 11.10.2001. Therefore, the State Commission was right in holding that irrespective of the fact, the premium receipt was issued on 15.10.2001, the contract of insurance is deemed to have been concluded on the day on which the insurance agent accepted the amount. Hon'ble Member Dr. B.C.Gupta has also highlighted that even as per the insurance policy, the policy commenced w.e.f. 13.10.2001 and as per the premium receipt dated 15.10.2001, the risk commenced w.e.f.13.10.2001. In the light of the said observation, Hon'ble Member concluded that by all means the date of commencement of policy / risk being 13.10.2001, the foras below were justified in allowing the complaint because the life assured died on 14.10.2001.
4. Since as the members of the Division Bench came to different conclusions, the matter has been referred to me under section 20 (1A) (iii) of the Consumer Protection Act, 1986 for giving opinion on the following point of difference:
"(i) Whether petitioner is liable to make payment of sum assured where first premium receipt issued on 15.10.2001 indicating that risk commences from13.10.2001 and policy was issued on 20.10.2001, whereas assured died on 14.10.2001."
5. In order to find answer to the point of difference referred for opinion, it is necessary to determine the date on which the contract of insurance between the petitioner and the life assured came into existence. This question came up for decision before the Supreme Court in the matter of Life Insurance Corporation of India Vs. Raja Vasireddy Komalavalli Kamba and Ors (supra), wherein it was held that till the issuance of policy, no binding contract comes into existence between the parties. The relevant observations of the Supreme Court in the said matter are reproduced as under:
"When as 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 expression "underwrite" signifies 'accept liability under'. The dictionary meaning also indicates that (See in this connection The Concise Oxford Dictionary Sixth Editiion, 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 raises a presumption of acceptance.
See in this connection the statement of law in Corpus Juris Secundum. Vol.XLV 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 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 offer or, 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."
6. The said judgment was followed by coordinate Bench of this Commission in the matter of LIC of India Vs. Geeta Sharma II (2010) CPJ 231 (NC).
7. In view of the above noted legal position, it is clear that life insurance contract comes into existence when the proposal submitted by the life assured is accepted by the competent authority. Admittedly, in the instant case, the proposal submitted by the assured Madan Pal was accepted by the competent authority on 15.10.2001, consequent upon which, the cash receipt dated 15.10.2001 was issued followed by the insurance policy issued on 20.10.2001. Undisputedly, Madan Pal, proposer, died on 14.10.2001 before the acceptance of proposal. Therefore, acceptance has no meaning at all because the life assured at the time of acceptance of proposal was no more alive and there could be no valid contract with the dead person. Thus, I agree with the findings of Hon'ble Justice K.S.Chaudhari.
8. However, some aspects of the case are still unanswered. Undisputedly, the petitioner insurance company has failed to refund Rs.4289/-, the premium received alongwith the proposal form. Although the petitioner insurance company was justified in repudiating the claim on the ground of death of life assured prior to acceptance of the proposal form, the petitioner had no right to retain the insurance premium paid alongwith the proposal form. Therefore, the equity and justice demands that petitioner must pay to the respondent the premium amount of Rs.4289/- with 12% interest thereon from the date of issue of repudiation letter.
9. One other aspect in this case needs to be addressed. On perusal of the pleadings of the parties and the record, particularly the receipt of the premium amount and the insurance policy, it transpires that there is a mis-match between the date on which the insurance proposal was accepted by the competent authority and the date of commencement of risk. Although the proposal was accepted by the competent authority on 15.10.2001 in the receipt as also the insurance policy, the date of commencement of risk is mentioned as 13.10.2001. The life assured had applied for the insurance for a term of 25 years and was required to pay premium for full 25 years term had he been alive. By mentioning the date of commencement of risk earlier to the date on which the proposal was accepted, the insurance company has reduced the term of risk insurance by the time consumed in considering and accepting the insurance proposal. When learned counsel for the petitioner was confronted with this anomaly, he could not give satisfactory explanation. The above noted mis-match about the date of commencement of risk and the date on which the proposal was accepted could be intentional or otherwise. But the fact remains that such a situation reduces the period of risk coverage to the life assured by the time consumed between submission of the proposal form with premium and the acceptance of the proposal by the concerned authority. This in my considered view works to the disadvantage to the consumer and amounts to unfair trade practice if it is being followed on regular basis. Therefore, I deem it necessary to direct the petitioner insurance company to ensure that in future, in all cases in which the assured takes term insurance, the date of commencement of risk / policy should be the date on which the proposal is accepted and the insurance contract comes into force.
10. In view of the discussion above, the revision petition is partly allowed and the orders of the foras below are modified to the extent that petitioner is directed to pay to the respondent a sum of Rs.4289/- with 12% interest thereon from the date of issue of repudiation letter till the date of payment alongwith directions detailed in para 9 of the order.
11. A copy of this order be sent to Insurance Regulatory Development Authority (I.R.D.A.) with the request to consider issuing necessary directions to all the insurance companies dealing in term life insurance policies.
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(AJIT BHARIHOKE, J.) PRESIDING MEMBER DATED :- 15.07.2015 PER JUSTICE K.S. CHAUDHARI & DR. B.C. GUPTA, MEMBER In R.P. No. 1966 of 2008 - Life Insurance Co. Ltd. Vs. Smt. Munesh arguments were heard on 24.2.2014 by our Bench. Judgment was dictated by Hon'ble Mr. Justice K.S. Chaudhari, Presiding Member and sent for approval to Hon'ble Dr. B.C. Gupta Member. Hon'ble Dr. B.C. Gupta sent dissenting judgment. . As Members of the Bench differed in their opinion, the matter was placed before Hon'ble President, NCDRC under Section 20(i)(iii) of the C.P. Act for appropriate directions. Hon'ble President referred the matter to Hon'ble Mr. Justice Ajit Bharihoke. Hon'ble Mr. Justice Ajit Bharihoke agreed with the judgment delivered by Hon'ble Mr. Justice K.S. Chaudhari, Presiding Member to the extent that there could be no valid contract with the dead person, but further observed that premium of Rs.4289/- received from the deceased along with proposal form is to be returned to the complainant along with interest.
Taking into account the view expressed by Hon'ble Mr. Justice Ajit Bharihoke revision petition stands partly allowed and the orders of the Fora below are modified to the extent that petitioner is directed to pay to the respondent a sum of Rs.4289/- with 12% interest thereon from the date of issue of repudiation letter till the date of payment and the petitioner insurance company to ensure that in future, in all cases in which the assured takes term insurance, the date of commencement of risk/policy should be the date on which the proposal is accepted and the insurance contract comes into force. A copy of this order be sent to Insurance Regulatory Development Authority (I.R.D.A.) with the request to consider issuing necessary directions to all the insurance companies dealing in term life insurance policies.
......................J K.S. CHAUDHARI PRESIDING MEMBER ...................... DR. B.C. GUPTA MEMBER