National Consumer Disputes Redressal
Life Insurance Corporation Of India, vs Smt. Ram Sakhi, on 5 January, 2015
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI REVISION PETITION NO.4150 of 2007 (From the Order dated 02.08.2007 in Appeal No. 1499/2006 of Rajasthan State Consumer Disputes Redressal Commission, Circuit Bench, Jaipur) 1. Life Insurance Corporation of India, Branch Office Bharatpur, Distt. Bharatpur, Rajasthan. 2. Life Insurance Corporation of India, Divisional Office Jeevan Prakash, Ranade Marg, P.B. No. 2, Ajmer- 305 008, Rajasthan. 3. Life Insurance Corporation of India, Northern Zonal Office, Jeevan Bharti, 124, Connaught Circus, New Delhi 110 001. All through Mr. J.C. Ahuja, Asstt. Secretary (L&HPF) ... Petitioners Vs. 1. Smt. Ram Sakhi, W/o Late Shri Mahaveer Singh, R/o Village Kelluri, Post Ronija, Tehsil Nadbai, District Bharatpur, Rajasthan. 2. Government of Rajasthan, through District Collector, Bharatpur, Rajasthan. 3. The Chief Medical & Health Officer, Medical and Health Department, Government of Rajasthan, Sawaimadhopur, Rajasthan. Respondents BEFORE: - HONBLE MR. JUSTICE D.K. JAIN, PRESIDENT For the Petitioners :Mr. Mohinder Singh and Ms. Philomina Thomas, Advocates. For the Respondent No. 1 :Mr. Ritesh Agrawal, Advocate. For the Respondent Nos. 2 & 3 : Ex-parte (Vide order dated 23.04.13) O R D E R
(Pronounced on day of January, 2015) D.K. JAIN, J. PRESIDENT Challenge in this Revision Petition by the Life Insurance Corporation of India, (for short the Insurance Company) is to order dated 02.08.2007 passed by the Rajasthan State Consumer Disputes Redressal Commission, Circuit Bench at Jaipur (for short the State Commission) in Appeal No. 1499 of 2006. By the impugned order, the State Commission has reversed the order dated 13.07.2006, passed by the District Consumer Disputes Redressal Forum, Bharatpur (for short the District Forum) in Complaint No. 294/2003, whereby the complaint filed by Respondent No. 1 against the Insurance Company, the Government of Rajasthan and the Chief Medical and Health Officer, Government of Rajasthan, Respondents No. 2 & 3 herein, was dismissed.
2. The material facts, giving rise to the present Petition are as follows:-
Late Sh. Mahaveer Singh, husband of Respondent No. 1, was an employee of Respondent No. 3 as male nurse. He had obtained an insurance policy from the Insurance Company under the Salary Saving Scheme. Under the said Scheme, the premium was to be deducted from the salary of all the insured employees by the employer and was to be remitted to the Insurance Company through one cheque. Unfortunately, Mahaveer Singh passed away on 30.08.1996. On his death, Respondent No. 1 preferred claim under the said Scheme with the Insurance Company. However, the claim was repudiated on the ground that since the premium for the months of July and August, 1996 in respect of the deceased had not been received from the employer on time, the policy had lapsed. In fact the premium was remitted by the employer to the Insurance Company on 24.12.2002 i.e. after a lapse of six and a half years.
3. Being aggrieved by the decision of the Insurance Company, Respondent No. 1 filed a complaint before the District Forum, inter alia, praying for a direction to the Insurance Company to pay the amount due under the policy along with a compensation of `25,000/-. As stated above, the District Forum dismissed the complaint on the grounds that it was barred by limitation as also there was no deficiency on the part of the Insurance Company in repudiating the claim as the deceased was aware that, being on leave, premium was not deducted from his salary and remitted to the Insurance Company.
4. The first Respondent carried the matter in Appeal to the State Commission. As noted above, the State Commission has overturned the decision of the District Forum and has held that the complaint was not barred by limitation.
It has also been held that on non-receipt of the premium, the Insurance Company was duty bound to give a notice to the employer as well as to the employee regarding default in payment of premium and its failure to do so could not deprive the insured of the benefits under the policy. Consequently, the State Commission allowed the complaint with a direction to the Insurance Company to pay to the first Respondent the assured sum with all other benefits under the policy along with interest @ 9% p.a. from 19.04.2003 till realization. Hence, the present Revision Petition.
5. The Revision Petition was heard by a Bench comprising Mr. Justice K.S. Chaudhari (Judicial Member) and Dr. B.C. Gupta (non-Judicial Member). The Learned Judicial Member came to the conclusion that since the claim preferred was repudiated by the Insurance Company vide their letter dated 28.10.1997, the complaint filed on 03.07.2003, i.e. after 5 years 8 months of repudiation of the claim, was clearly barred by limitation. On merits, the Learned Member held that since the employer had admittedly deducted the premium for the months of July and August 1996 on 24.12.2002 and remitted it to the Insurance Company, which was not accepted, the Insurance Company was not responsible to make payment under the policy as it had lapsed. Accordingly, the Learned Member allowed the Revision Petition filed by the Insurance Company. However, the Learned non-Judicial Member, disagreeing with the view taken by the Learned Judicial Member, has come to the conclusion that letter dated 28.10.1997 issued by the Insurance Company to Respondent No. 1 could not be treated as a letter of repudiation. According to the Ld. Member, the claim was finally repudiated by the Insurance Company vide their letter dated 19.04.2003 and therefore, the complaint was filed within the period of limitation. On merits, the Learned non-Judicial Member has taken the view that the policy in question having been obtained under the Salary Savings Scheme, it was the responsibility of the employer to ensure that the premium was deducted and remitted to the Insurance Company on time and therefore, no default could be attributed to the deceased. The Learned Member was also of the view that the policy, in question, could not be treated as lapsed without a due notice about the default by the Insurance Company to the employer as well as to the employee. The Learned Member also observed that even if the Insurance Company was not at fault, as they did not receive the premium in question on time, still under Order 41 Rule 33 of the Code of Civil Procedure, 1908, the employer will be responsible for making the payment to the legal representatives of the insured. Thus, the Learned non-Judicial Member concluded that the Revision Petition preferred by the Insurance Company was liable to be dismissed.
6. As there was difference of opinion amongst the Learned Members, the Bench made reference under Section 20 (1A) (iii) of the Act. Ld. Judicial Member formulated the following questions for the opinion of the third member:-
1.
Whether complaint filed on 3.7.2003 for insurance benefits is within limitation when insured died on 30.8.1996 and claim was repudiated by the LIC on 28.10.1997?; and
2. Whether LIC is liable to make payment under policy when premium for July and August, 1996 was not paid in time so policy lapsed and premium was deducted by employer on 24.12.2002 after death of insured which was not adjusted by the LIC?
7. However, the Learned non-Judicial Member framed the following questions for reference:-
1.
The Insurance Policy in question, has been issued under the Salary Savings Scheme of the LIC, according to which the premium is to be deducted by the employer from the salaries of all employees, covered under the Policy and then to be paid to the LIC with one single cheque. In case of failure to deduct the premium for any reason whatsoever, whether the fault can be attributed to the employee or his family and whether they should suffer for the consequences of non-deduction of such premium?
2. Whether the Policy in question, had lapsed due to non-receipt of premium by LIC in time, although the LIC was duty bound to send notice to the insured in accordance with section 50 of the Insurance Act, 1938 and the provisions of their own Manual for Policy Servicing Department No. 14, Salary Saving Scheme, LIC of India. As per this Manual, before lapse, notices were required to be issued to the employer and the employee on prescribed forms number 5227 and 5228 respectively?
3. Whether the consumer complaint filed on 03.07.2003 is within limitation? Whether the letter dated 14.03.2003 from LIC to complainant is the letter of repudiation, or earlier letter dated 28.10.1997 is letter of repudiation?
4. Even if the Policy had lapsed due to non-receipt of premium by the LIC in time, the employer should be directed to make payment of claim to the complainant, as per order 41 rule 33 of the CPC, and there should be no necessity of filing another set of proceedings against the employer by the complainant.
8. That is how the matter has now come up before me as the third Member.
9. I have heard Mr. Mohinder Singh, Advocate appearing on behalf of the Insurance Company and Mr. Ritesh Agrawal, Advocate representing Respondent No. 1/Complainant.
10. Primarily two questions arise for consideration, viz. (i) whether the complaint filed on 03.07.2003 was barred by limitation and (ii) whether or not the Insurance Company was justified in repudiating the claim on the ground that the subject policy had lapsed qua the deceased?
11. In order to answer the first question, what needs to be examined is whether the cause of action to file the complaint arose on 28.10.1997, when the claimant/complainant was informed that since at the time of the death of the insured the policy lapsed as premium from July 1996 had not been paid, nothing was payable under the policy or on 19.04.2003, when the Insurance Company, in response to claimants letter dated 19.03.2003, had intimated her that nothing was payable under the policy and she should not correspond further about it. For the sake of ready reference, the material portions of the said two letters are extracted below:-
Letter dated 28.10.97 .. Kindly fulfill the following requirements marked with (√) as soon as possible so that death claim should be considered without delay..
Policy was not in continuation at the time of death of insured and the said policy has lapsed from 7/96 as such at present nothing is payable under this policy. Please also refer to para 9.
If policy is under Salary Saving Scheme and premium is being deposited regularly then please submit the details of the monthly/employers name and address and premium deductions in the enclosed form No. K/AJ/142 for the period from 7/96 to 8/96 alongwith Challan amount, treasury token No., Date/Name of treasury/Bank. (Emphasis supplied).
Letter dated 19.04.2003 ..That we had earlier informed you by letter dated 28/10/97 that nothing is payable as the policy has lapsed. We also sought deduction details for months of 7/96 and 8/96 from you. You have sent the details of deductions for the months of 7/96 and 8/96 through aforesaid letter.
After a perusal, it is found that premiums for the months of 7/96 and 8/96 were deducted on 24/12/02 that is after 6 and half years of the death of the insured which is not adjustable. In such a situation, policy remains lapsed and nothing is payable. Please dont further correspond in this regard. (Emphasis supplied)
12. It is manifest from communication dated 28.10.1997 that although in the letter there was an observation to the effect that since the policy in question had lapsed from July 1996 and nothing was payable thereunder, yet it is plain from the highlighted portion of the said letter that the Insurance Company did ask the claimant to submit full details of premium deducted by the employer of the insured, its name and address, etc. with requisite proof of deposit. The letter clearly suggests that the Insurance Company was still open to examining the claim after the requisite information was furnished by the claimant.
It seems that upon receipt of the said letter from the Insurance Company, the claimant - Respondent No. 1 approached the employer to furnish the information sought for by the Insurance Company. On receiving the said information, the same was forwarded by her to the Insurance Company.
It is true that the said information did not have any material effect on the stand of the Insurance Company relating to the lapse of the policy on account of non-receipt of the premium for the months of July and August 1996, nevertheless it is evident from the latter/communication that issue of claim in respect of the policy was finally closed by the Insurance Company only on 19.04.2003, when the first Respondent was advised not to correspond further on the issue. I am of the opinion that since, on its own showing, the Insurance Company had shut its door to the claimant only on 19.04.2003, the cause of action to file the complaint arose on that date. Hence, the complaint, filed on 03.07.2003, was within the period of limitation. I hold accordingly.
13. Answer to the second question also need not detain me for long. Here again only paragraphs 13.4 and 16 of the Manual for Policy Servicing Department (No. 14) issued by the Insurance Company itself, for administering the Salary Saving Scheme need to be interpreted. The said paragraphs read as follows:-
13.4 LOSS OF PAY: Default in payment of premia should be intimated to the party and arrears of premia should be called for. If the number of premiums unpaid are 6, lapse action should be taken.
14.
15.
16.
DEFAULT AND FINAL LAPSE NOTICE:
While posting the Group Ledger any default in payment of premia should be communicated to the employer on a special form No. 5227. If the premiums remain unpaid for 6 months, a lapse intimation on the prescribed form No. 5228 should be sent to the employee. A lapse Register is also to be maintained for preparing statistics in respect of lapses.
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14. It was vehemently argued by Mr. Mohinder Singh that occasion to send intimation to the party, regarding default in payment of premia in terms of paragraph 13.4, would arise only when the defaults in payment of premiums exceed six. According to the Learned Counsel as in the instant case the defaults were only for two months, during which period the insured died, no intimation under the said two paragraphs was required to be sent to the employer.
I am unable to persuade myself to agree with the Learned Counsel. It is clear from a conjoint reading of the said paragraphs and in particular from the language of paragraph 16, that default in payment of the premia has to be communicated to the employer on a prescribed form, while posting the group ledger, which exercise obviously has to be from month to month. Further, the question of lapse of a policy arises only when the premiums remain unpaid for 6 months and intimation in that behalf was required to be sent, in another prescribed form, to the concerned employee.
Admittedly, intimation under both the provisions was neither sent to the employer nor to the employee. It was a clear lapse on the part of the Insurance Company, which, undoubtedly amounted to deficiency in rendering service by it to the insured. I am therefore, of the considered opinion that there was a clear breach of the terms and conditions of the policy issued under the Salary Saving Scheme, which was in the nature of a contract, by the Insurance Company and therefore, it was not justified in repudiating the claim preferred by Respondent No. 1, on the demise of her husband.
15. Both the questions, enumerated above, are answered accordingly. Having reached the said conclusion, I do not propose to dwell on the scope and applicability of Order 41 Rule 33 Code of Civil Procedure, 1908, on facts at hand. 16. The Revision Petition shall now be placed before the Bench, comprising the two Members who had heard the case, for pronouncing the final order in accordance with the opinion of the majority of the Members.
17. The Reference is answered accordingly.
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(D.K. JAIN, J.) PRESIDENT ar/Yd