State Consumer Disputes Redressal Commission
Darly Kochummen vs The Life Insurance Corporation F India on 19 July, 2012
Daily Order
Kerala State Consumer Disputes Redressal Commission Vazhuthacaud,Thiruvananthapuram Complaint Case No. CC/07/5 1. Darly Kochummen Elanthavila Thekkethil Puthen Veedu,Thrippilazhikom P.O,Kundara,Kollam BEFORE: SRI.K.CHANDRADAS NADAR PRESIDING MEMBER PRESENT: ORDER
KERALA STATE CONSUMER DISPUTES REDRESSAL OCMMISSION VAZHUTHACAD, THIRUVANANTHAPURAM
CC.5/07
JUDGMENT DATED: 19..7..2012
PRESENT
SRI.K.CHANDRADAS NADAR : JUDICIAL MEMBER
1. Darly Kochummen, : COMPLAINANTS
W/o late Kochummen,
Elanthavila Thekkethil Puthen Veedu,
Thrippilazhikom.P.O.,
Kundara, Kollam.
2. Manju Kochummen,
D/o late Kochummen,
-do-do-
3. Sinju Kochummen,
D/o late Kochummen,
-do-do-
4. Jinju Kochummen,
S/o late Kochummen,
-do-do-
(By Adv.S.Reghukumar)
Vs.
1. The Life Insurance Corporation f India : OPPOSITE PARTIES
Represented by its Sr.Divisional Manager,
Pattom, Thiruvananthapuram.
2. The Senior Branch Manager,
LIC of India, Branch office,
Kottarakara.
(By Adv.S.S.Kalkura, counsel for OPS 1 and 2)
3. Thomas Panicker, Agent,
LIC of India, Branch office,
Kottarakara.
(By Adv.N.Satheesh kumar, counsel for 3rd OP)
JUDGMENT
SRI.K.CHANDRADAS NADAR : JUDICIAL MEMBER This is a complaint filed under section 17 of the Consumer Protection Act, 1986. The complainants are the wife and children of late Y.Kochummen. The opposite parties are Life Insurance Corporation of India, its Senior Branch Manager, Kottarakara and an agent. Deficiency in service on their part is alleged as below. Late Y.Kochummen was engaged in the business of export of marine products. He was the Proprietor of M/s Jism exports having its Head Office at Kundara and processing factory in Tamil Nadu. He had a business turn over of above Rupees three crores and was an income tax assesse. During his life time Kochummen subscribed to two insurance policies of Rs.1,00,000/- each with the LIC of India. He was promptly remitting the premium. While so considering his increased volume of business and turn over he decided to subscribe to a major insurance policy with the LIC. The 2nd opposite party on getting this information contacted Kochummen through his authorized agent the 3rd opposite party. He suggested plan 048 to Kochummen which has assured value of one crore with accident benefits. The premium term of the policy was 10 years and mode of payment was quarterly. The quarterly premium payable was fixed at Rs.2,63575/-. Kochummen accepted the suggestion on 12.11.03 by submitting proposal and payment of the first premium of Rs.2,63,575/-. Even before the acceptance of premium Life Insurance Corporation had started the initial process on 5.11.03 after ascertaining the financial status and creditworthiness of late Kochummen. Alongwith the first premium Kochummen had submitted required documents including medical fitness certificate issued by an approved doctor of LIC, documentary proof regarding the business of the insured, certificate to prove his date of birth etc,. While Kochummen was awaiting receipt of the policy he met with an accident on 7.12.03 on his way back from Nagercoil to Kollam. Immediately he was rushed to Sanker's hospital, Kollam and admitted in ICU. Inspite of medial care and treatment his life could not be saved and he died on 10.12.03 while under treatment. He was aged 50 years at that time. Postmortem examination was conducted and the police registered a crime against the driver of the vehicle that caused the accident under the provisions of the Indian Penal Code and the Motor Vehicles Act. 2. The complainants are the only legal heirs and dependents of Kochummen. They are entitled to the assured value of the policy plus accident benefits. Accordingly on 10.12.03 the 1st complainant informed the 1st opposite party about the demise of the assured. The 1st opposite party informed her on 23.12.03 that they were not in a position to consider the claim for death benefits under the proposal for Rs.1 crore policy. The 1st complainant sent reply along with copies of premium receipts and requested them to settle the claim. The1stopposite party repudiated the claim of the complainants on the ground that there was no concluded contract and hence they were not liable to pay the assured value. The complainant appealed before the Zonal Manager, Chennai. After a lapse of more than a year on 22.11.05, the zonal office upheld the repudiation of the claim. However the complainants were given option to send representation within a month for reconsideration of their claims by the Chairman at the Central Office of LIC, Bombay. The complainants availed that opportunity and sent detailed representation to the Chairman, Central office, LIC of India, Mumbai. The complainants furnished documents such as police inquest report and final investigation report in Crime No.498/03 of Paripally, police station registered in connection with the accident, as required by the Central office. On 4.11.06 the complainants were informed that the Chairman, Central office, LIC was sticking on with the repudiation of their liability. However as per the very same letter the complainants were informed that they were considering payment of Rs.11 lakhs only towards basic sum assured and Rs.11 lakhs towards double accident benefit and thus a total sum of Rs.22 lakhs as ex-gratia, provided the complainants agreed to receive the said amount in full and final satisfaction of all the claims. The letter was accompanied by a printed format of full and final settlement receipt towards acknowledgment of Rs.22 lakhs. 3. The complainants had no other option but to sign this purported full and final settlement receipt because of acute financial contingencies caused to them by the sad and sudden demise of Kochummen who was the sole breadwinner of the family. The complainants were told by the officers of the LIC that if they were not accepting this proposal of ex-gratia payment within a month, they would take every step to withdraw the offer. Hence the complainants had no other go, but to accept this amount under protest. On 7.12.06 the 1st opposite party sent the sum of Rs.22 lakhs through bank. Since they did not receive the amount in cash from the office of the opposite parties directly, they did not get opportunity to make protest in writing before them. As oral protest was of no avail the complainants lodged protest through registered letter dated 4.3.07 pleading against the full and final settlement receipt. The complainants were under the impression that the payment of Rs.22 lakhs was by way of interim relief. To the letter dated 4.3.07 the 1st opposite party sent reply repudiating the liability under the contract and further stating that they were not liable to make any further payment as the complainants have received Rs.22 lakhs after executing discharge voucher. Regulation 4(6) of the Insurance Regulatory and Development Authority (protection of policy holder's interests) Regulations, 2002 clearly envisages that proposals shall be processed by the insurer with speed and efficiency and all decisions thereof shall be communicated by it in writing within a reasonable period not exceeding 15 days from receipt of proposals by the insurer. In the instant case no such communication was made by opposite parties. The failure to pay the assured sum was absolutely due to the delay, omission and deficiency in service on the part of opposite parties and amounts to unfair trade practice on their part. The act of sending policy certificate by the LIC to the assured is only a procedural formality to be complied by LIC. Unless the policy had come into effect the LIC was not supposed to render any payment on the said policy especially Double Accident Benefit, even if it is termed as an ex-gratia payment. The complainants were hard pressed for money since the debtors of the deceased were harassing them. He was indebted to the SBI to a tune of Rs.42.56 lakhs. With the amount of Rs.22 lakhs and some more amounts raised, the said debt was discharged on 7.2.07. The marriage of one of the daughters of the deceased was held on 27.11.06. The deceased was also indebted to one Mr.Ayya Samy in Tamilnadu. His claim was settled in the Lok adalath for a sum of Rs.5,52,500/-. It was under the above financial constraints the offer of ex-gratia payment was accepted. The complainants sought direction to opposite parties to pay a sum of Rs.95 lakhs as compensation for deficiency in service, delay, coercive bargaining and unfair trade practice allegedly committed by them. Rs.10,000/- is also sought towards costs. 4. Opposite parties 1 and 2 filed joint version . The 3rd opposite party filed separate version. Opposite parties 1 and 2 contend that the complaint is beyond the purview of Consumer Protection Act. The claim is barred by acquiescence and estoppel by conduct. As no policy was issued the complainants cannot claim the status of beneficiaries under the policy. Since they received ex-gratia payment without any protest, there is no consumer dispute to be adjudicated. There is no privity of contract between LIC of India and Kochummen or between the complainants and the LIC of India. The mere submission of any proposal for insurance or payment of any money for consideration of such proposal or retention of such amount by LIC of India cannot create any contract of insurance. Further LIC of India had paid on compassionate considerations ex-gratia amount of Rs.22 lakhs in full and final settlement of all the claims of the complainants and they had received the same without any demur or protest. Hence they are estopped from making any further claim. The financial position of Kochummen as evident from the records submitted by him at the most made him eligible for a maximum insurance cover of rupees 11 lakhs only. In that situation LIC might have issued policy and thus the LIC of India arrived at the amount of Rs.22 lakhs paid as ex-gratia. Thus there is no cause of action for the complaint. The deceased had paid an amount of Rs.263575/- as proposal deposit amount and the receipt for the amount was issued with the specific remark that acceptance of the said sum can not make LIC of India liable for acceptance of any risk. Since the sum proposed for insurance was a very huge amount the underwriting process involved detailed examination of the physical condition of the proponent and his financial status which again demanded examination of various proofs in that regard. Hence the proposal for insurance submitted by Kochummen was under consideration as to whether the risk can be accepted or not or whether a policy of insurance for the said amount can be issued or not. While so the LIC of India received letter dated 10.12.03 informing about the death of the proponent Kochummen that happened on 10.12.03 due to an accident. As per the same letter the settlement of claims under 2 policies with an assured sum of Rs.1,00,000/- each was sought. The wife of Kochummen had also claimed money as if payable under the proposal for insurance submitted by Kochummen. The claims were examined in detail and the claims under the policies already issued were settled. The LIC of India was not able to consider her claim under the proposal. Hence that claim was rejected. The appeals before the Zonal Manager, LIC of India, Chennai and the Chairman, LIC Of India, Mumbai were also rejected. However offer was made for ex-gratia payment of Rs.22 lakhs if the complainants were willing to accept the same in full and final settlement of all their claims. It is obvious that at the time of death of Kochummen no contract of insurance had emanated from the proposal and no policy of insurance had been issued to him. Ex-gratia payment was made though there was no valid contract of insurance between Kochummen and LIC of India.
5. Claim 048 is limited payment endowment assurance plan. The sum assured can be decided only after assessing financial position capacity to pay premium and physical condition of the proponent and the premium payable can be arrived at only after the underwriting process of the proposal for insurance is completed. LIC of India is collecting deposit amount only along with the proposal. The deposit sum will normally be equal to the premium that may become payable quarterly when a policy may be issued for a sum equal to the sum proposed. In this case a sum of Rs.263575/- was collected as proposal deposit and kept in suspense account and was never adjusted towards premium. It is incorrect to say that late Kochummen had remitted the said amount of Rs.263575/- on 12.11.03. He remitted an amount of Rs.1,80,000/- on 12.11.03 and Rs.83575/- on 17/11/03. It is incorrect to say that even before the acceptance of the premium LIC had started its initial process on 5.11.03 after ascertaining the financial status and credit worthiness of late Kochummen. He had submitted the proposal for insurance dated 5.11.03 to the Kottarakara branch office of LIC of India only on 14.11.03 and the same was registered on 15.11.03. Thereafter the proposal was forwarded to the divisional office which was received there on 17.11.03. Since he did not submit the copy of the income tax returns for the assessment year 03-04, details of the financial status in personal financial questionnaire, copies of profit and loss account, balance sheet etc. as on 31.3.03 in respect of his business, he was requested to do the same and he submitted the same on 8.12.03. The proponent in the meanwhile met with a car accident on 7.12.03. On knowing the accident either the complainant or any other relative had submitted the proof for income without disclosing the accident details of the life proposed to defraud the opposite parties. Contrary to the declaration in the proposal, in the normal course as per the financial details submitted by late Kochummen, had he been alive the proposal was to be under written finally for the maximum insurance cover for Rs.11 lakhs only.
6. The allegations that the complainants did not get any opportunity to make protest etc are false . Ex-gratia payment of Rs.22 lakhs was sent to the Federal bank for credit to the SB account of the 1st complainant as per her request by way of cheque dated 18.12.06 and the cheque was encashed and credited in her SB account on 22.12.06. The acceptance of the amount was without any demur or protest. The allegation that oral protest was made and the 2nd opposite party told the complainants that protest would be intimated to the central office is false. There was no delay or deficiency of any kind on the part of the LIC of India in underwriting the proposal for insurance made by late Kochummen. There was no unfair trade practice, omission and commission or deficiency in service on the part of LIC of India. There is no cause of action for the complainants. They are not entitled to any relief and the complaint is liable to be dismissed. The complaint is vexatious and frivolous. Hence compensatory costs may be allowed to them.
7. The 3rd opposite party contended that being an agent of opposite parties 1 and 2 he had no knowledge of details of proposal and what transpired after the submission of the proposal. At the request of the proponent he had supplied all the pamphlets as well as the details of various policy schemes and the proponent at his own convenience free will and choice took a decision and told the 3rd opposite party that he was intending to subscribe for plan 048. Thus the proponent on his own choice and free will had submitted the proposal. In other respects the 3rd opposite party supports the contentions of opposite parties 1 and 2 or pleads ignorance about the allegations.
8. The first complainant was examined as PW1. Exts.A1 to A15 were marked on the side of the complainants. One witness was examined on the side of the opposite parties. Exts.B1 to B43 were marked on their side. The arguments on both sides were heard in detail. On the rival contentions raised the following disputed questions arise for decision in this case:
1) Whether there is a concluded contract of insurance between deceased Kochummen and the opposite parties as alleged. In other words whether privity of contract existed between Kochummen and the opposite parties at the time of his death on 10.12.03.?
2) Whether the acceptance of Rs.22 lakhs in full and final settlement of the claims offered as ex-gratia bars the complainants from raising any further claim?
3) Whether there is any other ground on which the complaint becomes unsustainable?
4) Reliefs and costs?
9. Point Nos.1and 3: - Kochummen the late husband of the 1st complainant and the father of the other complainants was a business man. He was the Proprietor of M/s Jism exports having its head office at Kundara. During his life time he subscribed to two insurance policies issued by opposite parties 1 and 2. On his death these two policies were honoured by the opposite parties and payment of the insured sums was effected. There is no dispute regarding those policies in this case. The dispute relates to an insurance proposal for Rs. one crore submitted by Kochummen and decided to subscribe considering the alleged increase in volume of his business. It is alleged that the 3rd opposite party an agent of opposite parties 1 and 2 suggested plan 048 to Kochummen. The policy had an assured value of Rs. one crore with accident benefits. The premium for the policy was payable quarterly for 10 years. The quarterly payment was fixed at Rs.263575/-. It is admitted that he paid initially Rs.263575/-. The allegation is that he paid the 1st premium on 12.11.03. Opposite parties 1 and 2 contend that an amount of Rs.1.8 lakhs was paid as per Ext.B7 on 12.11.03. But deceased Kochumman paid the balance amount of Rs.83575/- only on 17.11.03 as per Ext.B7(a). These are styled proposal deposit receipts. Ext.B7(a) bears the date 12.11.03. -15.35(indicating the time?). It appears that the said payment was also on the same date. So for the purpose of deciding this case it can be safely assumed that deceased Kochummen paid amount sufficient to satisfy the 1st quarterly of the insurance premium on 12.11.03. Ext. B7 and B7(a) are only proposal deposits and admittedly no insurance policy was issued on the basis of these proposal deposits. It is also specifically stated in Exts.B7 and B7(a) that "acceptance of this deposit does not make the corporation liable for acceptance of risk". It is also not disputed that such amounts would be kept in a separate account by the LIC termed suspense account and would be finally credited towards the 1st premium payable under the policy once it decides to issue policy on the basis of the proposal submitted by a person. It is seen from Ext.B12 that the proposal was signed by the deceased on 5.11.2003. Ext.B1 which also refers to the proposal is undated. Along with the proposal Ext.B8 Auditor's report of Jisma Exports,s, Kollam, Ext.B9 income and expenditure account of M/s Thiruvamcottu Financiers Kundara East for the year that ended on 31st March 1997 and Ext.B10 series of Saral forms(copies) submitted by the deceased before the Income Tax department are also seen to have been submitted. He also submitted his personal financial questionnaire which is Ext.B11 which also bears the date 5.11.03
10. While the proposal was under the consideration of opposite parties 1 and 2, Sri.Kochummen met with an accident on 7.12.03 on his way back from Nagercoil to Kollam. The injuries proved to be fatal and he succumbed to his injuries on 10.12.03 despite best efforts by the doctors at Sanker's Hospital, Kollam. The 1st complainant claimed the insured sum of Rs.1 crore, on the allegation that on the acceptance of the 1st premium opposite parties 1 and 2 were bound to issue the insurance policy within 15 days. Had that been done there would have been valid insurance policy in existence at the time of death of Kochummen. The claim was turned down by opposite parties 1 and 2 which was confirmed by the zonal office and later by the central office, LIC of India. However the complainants were offered ex-gratia payment of Rs.22 lakhs which is alleged to have been accepted under protest. The main relief of Rs.95 lakhs is claimed in the complaint for the deficiency in service, delay, coercive bargaining and unfair trade practice allegedly committed by the opposite parties. The deficiency in service alleged as indicated earlier was the failure to issue policy within 15days based on the 1st premium/proposal deposit, deposited as provided by Regulations. The coercive bargaining and unfair trade practice are alleged with reference to ex-gratia payment of Rs.22 lakhs. It is important to notice at once that the complainants have thus practically given up their contention that there was a concluded contract between deceased Kochummen and opposite parties 1 and 2 for if that was the case the complainants were entitled to the assured sum of Rs.1 crore. However it is inappropriate to base any conclusion on the said fact alone. Detailed analysis of Judicial decisions submitted before this Commission is necessary, before analysing the remaining facts to see whether there was a concluded contract of insurance between the parties. The argument that it is to be deemed that there was a concluded contract of insurance is based on Regulation 4(6) of the insurance Regulatory and Development Authority (protection of policy holders interests) Regulations 2002. The said regulation reads: "proposals shall be processed by the insurer with speed and efficiency and all decisions there of shall be communicated by it in writing within a reasonable period not exceeding 15 days from the receipt of proposals by the insurer". Violation of this Regulation is precisely the deficiency in service alleged. The argument advanced by the learned counsel for opposite parties 1 and 2 based on the very same regulations is that the regulations define a proposal to mean a form to be filled in by the proposer for insurance, for furnishing all material information required by the insurer in respect of a risk in order to enable the insurer to decide whether to accept or decline, to undertake the risk and in the event of acceptance of the risk to determine the rates, terms and conditions of a cover to be granted. He also pointed out that the word "material" for the purpose of the Regulation means and include all important, essential and relevant information in the context of underwriting the risk to be covered by the insurer. According to opposite parties 1 and 2 certain details were required for underwriting the insurance proposal and further details called for were received by the LIC of India only on 8.12.03 one day after the proposer met with an accident on 7.12.03. The contention further is that someone, on his behalf might have submitted details without disclosing the material fact that the health status of the proposer had changed as he was involved in a major accident. The learned counsel also contended that in the case of an insurance proposal silence does not denote consent and no binding contract arises until the person to whom an offer is made says or does something to signify his acceptance. Mere delay in giving an answer cannot be construed as an acceptance as, prima-facie acceptance must be communicated to the offeror. The general rule is that the contract of insurance will be concluded only when the party to whom an offer has been made accepts it unconditionally and communicates his acceptance to the person making the offer. Whether the final acceptance is that of the assured or insurers however depend simply on the way in which negotiations for an insurance have progressed. This is the law laid down by the Hon'ble Supreme Court of India in LIC of India vs Raja Vasireddy Komalavalli Kamba and others 1984 STPL (LE) 11606 SC. It is also held in the said decision that 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 raised a presumption of acceptance. In LIC of India vs. Bhoomikaben .M. Modi and others 2011 STPL (CL) 111 NC, the National Consumer Disputes Redressal Commission, New Delhi reiterated the above view holding that it is well settled law that a contract is complete only on its acceptance and if death intervenes between the proposal and its acceptance, then the proposal itself gets extinguished. No contract can either be entered into or concluded with a deceased person by acceptance of his offer after his demise. Mere receipt and retention of premium until after the death of the applicant or even the mere preparation of the policy is not acceptance. In LIC of India vs Gita Sharma II (2010) CPJ 231 (NC), the National Consumer Disputes Redressal Commission considered the question whether a concluded contract came into existence when the insured died within 20 days of encashment of the cheque. It was held that no concluded contract came into existence between the parties and the orders of the Fora below were set aside holding that encashment of the cheque was wrongly considered as concluded contract by them. The same view is taken in Elsa Tony Philip vs. Manager LIC of India and others 2009 STPL(CL) 479 NC. In G.Padmavathi Amma vs.Divisional Manager LIC of India 1997-Laws (NCD)-2-49 (1997 CPJ -3-512 the State Commission and in LIC of India vs. Annamma 1999 (3) KLT 142, the Hon'ble High Court of Kerala held that silence or receipt and retention of premium cannot construed as acceptance. In LIC of India Vs. Jamuna and others 2011 STPL(CL) 1480 NC the Insurance co. had taken certain objections to proposal and communication was sent in that regard. The intending insured died before complying with their requirements. The NCDRC held that till issuance of policy no binding contract had come into force. Identical situation was considered in Consumer Protection Association vs Chairman, LIC of India 1996 Laws (NCD)-11-6 (1996-CPJ 03-178) and it was held that no concluded contract of insurance arose. In LIC of India vs. Rashmi H Tanwani 2004 -LAWS (NCD)-12-62 (2005 CPJ-1-598) the proposer was medically examined on 6.11.97, ECG taken on 11.11.97 and its report was collected by the Development Officer , LIC of India on 18..11.97. On that date the proposor died. It was held that there was no concluded contract or deficiency in service on the part of the LIC. In LIC of India vs. Gurnam Singh 2007 - Laws NCD-8-74, the contract of insurance was not finalized within one month. By that time the proposer died. The National Commission upheld the repudiation of the claim.
11. The meaning of the term suspense account is explained by the Hon'ble High Court of Kerala in LIC of India vs. Prasanna Devraj 1994 (2) KLT 541. It was held that in common parlance the term suspense account means an account in which the amount is held in deposit in favour of the person who remitted it and may be refunded in future, if the same is not appropriated or utilized for the purpose for which it was remitted. There is a crucial distinction between the making of the contract and the commencement of the risk as the former commonly preceded the latter. As there was no consensus ad idem between the parties it was held that there was no concluded contract of insurance in the said case.
12. Contrary view is seen taken in SBI Life Insurance Co.Ltd. vs. Smt.Asha Lata Parida and another 2010 CTJ 753 (CP)(NCDRC). The learned counsel for the complainants relied on the said decision rendered by the National consumer Disputes Redressal Commission. In the said decision deficiency in service was considered in the context of Regulations 2(1) (g) and Section 2(1) (o) of the 2002 Regulations referred to earlier. It was decided thus: "opposite party No.1 admittedly kept the proposal pending without taking a decision regarding acceptance or otherwise as required by para 8 of the aforesaid operational procedure for over 8 months and it was for the first time that through the repudiation letter dated 29.12.95 it came forward with the plea that the matter was at the stage of proposal due to medical requirements. At this juncture Regulation 4(6) of the Insurance Regulatory And Development Authority(Protection of policy holder's interests) Regulations, 2002 framed by IRDA need be referred to. These regulations apply to all proposals for grant of a cover, either for life business, or for general business except marine insurance. Said Regulation 4(6) provides that 'the proposal shall be processed by the insurer with speed and efficiency and all decisions thereon shall be communicated by it in writing within a reasonable period not exceeding 15 days from receipt of proposal by the insurer'. Opposite party No.1 can not take advantage of the inaction of its concerned official(s) in keeping the proposal pending for a long time of more than 8 months to the detriment of the deceased and/or the complainant". Two important aspects of the case require mention. Firstly the husband of the complainant had taken house building loan of Rs.12,50,000/- from the 2nd opposite party bank and it was at the instance of the bank the borrower proposed to cover the loan against the risk of death under 'SBI life Super Surakhya for House Loan Borrowers of SBI' for the sum equivalent to loan amount including interest as per EMI schedule during the tenure of the loan. Secondly there was unusual delay of more than 8 months in processing the proposal and communicating the decision to the proposed insured. Regulation 4(6) was applied in the said context to hold that the 1st opposite party was guilty of gross deficiency in service. In Radhamani Amma vs LIC of India and others 2012 (1) CPR 109, a decision rendered by this Commission, it was found that the case of the LIC that it did not receive the proposal form till the death of the deceased and it received the proposal only after the death of deceased was totally unbelievable. So also a policy that had ripened to be made had been suppressed on coming to know of the death of the proposer through the complainant. Deficiency in service was found under the above circumstances. In LIC of India vs Kamalamma 1986 KHC 92, the Hon'ble High Court of Kerala took a view contrary to the decisions referred to earlier and held that any positive act indicating an intention to create a contract shall amount to acceptance of offer and where premium is accepted and receipt is issued though policy was not issued a binding contract arises.
13. No doubt Regulation 4(6) referred to earlier casts an obligation upon the insurer to process a proposal for insurance with speed and efficiency and to communicate all decisions there on in writing within reasonable period not exceeding 15 days from the receipt of proposal by the insurer. But the law laid down by the Supreme Court based on the provisions of the Contract Act overrides the Regulations. A contract is concluded only when a proposal is accepted and contract of insurance stands on a special footing . A contract of insurance should be accepted and acceptance should be communicated to the insured. In fact the complainants have no case that there was a concluded contract of insurance between deceased Kochummen and opposite parties 1 and 2. The very prayer is for compensation based on the alleged deficiency in service on the part of opposite parties 1 and 2. Even the decisions relied on by the complainants are no authority for the proposition that if no decision is communicated within 15 days mentioned in Regulation, a concluded contract of insurance would arise. So also it is obvious that whether there was deficiency in service is a question of fact to be decided on the facts and evidence available.
14. No doubt the proposal submitted by deceased Kohummen is dated 5.11.03. But the case of opposite parties 1 and 2 is that Kochummen submitted the proposal at the Kottarakara branch office of LIC only on 14.11.03 and the same was registered on 15.11.03. Then it was forwarded to the Divisional office and it was received in the Divisional office on 17.11.03. Opposite parties 1 and 2 further contended that since the proponent did not submit copy of income tax return for the assessment year 2003-04, the details of financial status in personal financial questionnaire, the copies of profit and loss account, balance sheet etc as on 31.3.03 he was requested to submit the same and these details were submitted only on 8.12.03. Ext.B2 shows that X-ray report of the deceased was on 10.11.03. Ext.B3 shows that computerized treadmill test was also conducted only on 10.11.03. So it is obvious that proposal along with these documents showing the health status of Kochummen were at any rate submitted only after 10.11.03. Ext.B.27 is the copy of letter sent by the Branch Manager, LIC of India, Kottarakara requesting the deceased to submit copy of income tax returns filed for the assessment year 2003-04 and computation of income tax statement for the assessment year 2003-04, personal financial questionnaire signed by the party etc. The letter is dated 17.11.03. According to opposite parties 1 and 2 these details were submitted only on 8.12.03 one day after the date on which Kochummen met with an accident. According to opposite parties 1 and 2 Ext.B10 copy of income tax return for the assessment year 2003-04 clearly supports their argument. Ext.B10 series are copies of income tax returns filed for various previous years and the last one referred to is dated 28.11.03. It bears the receipt seal affixed by the income tax office ward-2, Quilon having the date 1.12.03. This document clearly shows that details were in fact called for by opposite parties 1 and 2 and it could have been furnished only after 1.12.03. Then even the period of 15 days prescribed by Regulation 4(6) had not expired before the death of Kochummen was in fact communicated to opposite parties 1 and 2. So there can be no deficiency in service on the part of opposite parties 1 and 2.
15. It is also interesting to notice that in Ext.B10 income tax return the deceased had disclosed taxable income of Rs.1,31,836/-. Of course standard deduction and other eligible deductions will have to be added to reach the total income. But the income declared before the income tax authorities bear no comparison with Ext.B11 answer to personal financial questionnaire, in which he had declared an income of Rs.85 lakhs from various sources for the year 2002-03. In the proposal form also he had declared an income of Rs.39 lakhs under the head business, profession. As per Ext.B8 auditor's report as on 31.3.02 the assets and liabilities of Jisma exports were the same. As on 31.3.03 also the assets and liabilities were the same. So it is quite obvious that the deceased had not truthfully disclosed his assets and liabilities to opposite parties 1 and 2. It is further interesting to notice that the Kottarakara branch manager had recommended acceptance of the proposal as seen from Ext.B28 dated 15.11.03. But in view of Ext.B10 and the seal of income tax authorities that it was submitted only 1.12.03, it cannot be said that the Branch Manager had examined the income tax return as on 31.3.03. At any rate Ext.B28 is only a recommendation which was to be accepted by the Divisional office or the central office as the case may be and there is nothing unusual if they found sufficient particulars lacking and called for further particulars. In short on an analysis of the facts and circumstances available we are inclined to hold that no deficiency in service on the part of opposite parties 1 and 2 can be found as alleged.
16. Point No.2: - As per Ext.B18 letter dated 4.11.06 the first complainant was informed that opposite parties 1 and 2 may consider payment of a sum of Rs.22 lakhs as ex-gratia(Rs.11lakhs as basic sum assured and Rs.11 lakh as DAB) provided she agreed to receive the said amount in full and final satisfaction of her claims under the unconcluded contract under proposal No.8984. She was told that if she desired to accept the aforesaid payment, she had to give consent to that effect and return the enclosed receipt duly stamped and signed by her jointly with all the claimants so as to enable the insurance company to make the payment by crossed or account payee cheque. Accordingly Exts.B19 and B20 receipts were sent to the insurance company . In Ext.B19 it is specifically stated that the amount was received in full and final settlement of the claim of the complainants in respect of the unconcluded contract under the proposal referred to. Along with the receipt Ext.B21 certificate issued from the Taluk Office, Kottarakara showing the legal heirs of the deceased was also sent. It was accordingly cheque was sent to the complainants for Rs.22 lakhs which was admittedly received by them in their account. While opposite parties 1 and 2 contend that the receipt of ex-gratia payment by the complainants debars them from claiming any further amount, it is the case of the complainants that the payment was accepted under compelling circumstances. The compelling circumstances were that Kochummen was indebted to several persons including SBI commercial branch, Kollam. Ext.A10 is the copy of letter acknowledging receipt of Rs.30,90,812/- sent by the State Bank of India commercial branch, Kollam dated 7.2.07. Further according to the complainants money had to be raised for the marriage of one of the daughters of deceased Kochummen. Ext.A11 is produced to show that the marriage of the 3rd complainant was solemnized on 27.11.06. Further the deceased was indebted to Ayyasamy of Nagapatanam. The matter was considered in Lok Adalath held on 10.2.07 in the sub court, Kottarakara and Rs.552500/- was paid to him. Ext.A12 receipt is produced to prove the same. Thus under the financial constraints the complainants were compelled to accept to the so called ex-gratia payment. So they contend that acceptance of the ex-gratia amount under compelling circumstances does not debar them from claiming further amount due under, the proposed contract of insurance or for the deficiency in service. In support of their arguments, the learned counsel for the complainants relied on the decision of the NCDRC in National Insurance Co. Ltd. vs Vasavi Traders I (2008) CPJ 487 NC wherein the complainant was constrained to sign discharge voucher due to financial crisis and later complaint was filed for the balance amount. It was held that the complainant was entitled to relief. The learned counsel also relied on the decision of the NCDRC in United India Insurance Co.Ltd. vs. Gangadharan 2002 CTJ 48. There also it was held that when receipt was given by the complainant due to financial hardship and not on account of his free will and he was compelled to sign the discharge voucher, the State Commission was right in interfering with the matter. On the contrary the learned counsel for the opposite parties relying on P.Ramanatha Aiyar's Law Lexicon pointed out that an ex-gratia payment is made by one who recognizes no legal obligation to pay but who makes payment to avoid greater expenses as in the case of a settlement by an insurance company to avoid costs of suit. It is a payment without legal consideration. Ex-gratia means, out of grace, as a matter of grace favor or indulgence; gratuitous. Reliance is also placed on the General principles of Insurance Law by E.R.Hardy Ivamy 4th Edn p.471. He also argued relying on the decision of the NCDRC in Proper Engineering Works vs Export Credit Guarantee Corporation of India 2007 STPL(CL) 825 that after having accepted the ex-gratia amount in full and final settlement a protest letter written by the complainant after a lapse of time would be of no avail. In the decision referred to the protest letter was sent after a period of 3 months. It was held that the respondent cannot be faulted for any deficiency in service. The learned counsel urged that the offer to pay ex-gratia amount was clearly accepted by the complainants. That was acceptance by conduct also and there was no reservation in signifying the acceptance. Hence the complainants are barred from claiming further amount. The learned counsel also relied on the decision of the Hon'ble Supreme court in Bhagwati Prasad Pawan Kumar vs. Union of India 2006 KHC 747. I have referred to Ext.B18 letter offering the ex-gratia amount. The complainants were free to accept the amount in full and final settlement or reject the same. There is absolutely no circumstance to show that the opposite parties had compelled acceptance of the amount. The allegation is that circumstances that prevailed among the complainants as a result of the business conducted by the deceased and otherwise compelled them to receive the amount and discharge the debts. But in this case as I have found they had actually no claim on the basis the unconcluded contract. Nor was there any deficiency in service on the part of the opposite parties. Hence really the question whether the complainants are entitled to claim any further amount does not arise. There is really no estoppel as contended by the learned counsel for the opposite parties as they have not relied on any representation by the complainants and suffered detriment.
Point No.4: In view of the conclusions arrived at while discussing point numbers 1 to 3 it is only to be held that the complainants are not entitled to any relief. Hence the complaint is liable to be dismissed. In the result the complaint is dismissed and having regard to facts and circumstances of the case without costs.
SRI.K.CHANDRADAS NADAR : JUDICIAL MEMBER
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APPENDIX
Witness for the Compalinant
PW1 : Darly Kochummen
Witness for the Opposite parties
RW1 : N.Chandrasekharan
Exts. for Complainant
Ext.A1 : copy of proposal deposit receipt
Ext.A2 : copy of proposal deposit receipt
Ext.A3 : copy of letter from LIC of India to the complainant
Ext.A4 : copy of letter from the complainant to the Zonal Manager
Ext. A5 : copy of letter from LIC of India to the complainant
dtd.22.11.05
Ext. A 6 : copy of letter from the complainant to the Chairman,
Central office, LIC of Inddia
Ext. A 7 : copy of letter from LIC of India to the complainant dtd.
4.11.06
Ext. A 8 : copy of letter from the complainants to the Sr. Branch
Manager dtd. 4.3.07
Ext.A9 : copy of letter from LIC of India to the complainant
Ext.A10 : copy of letter from SBI to the complainant dtd.7.2.07
Ext.A11 : Wedding letter of complainant's daughter
Ext.A12 : Receipt dtd.10.2.07
Ext.A13(a) : copy of plaint filed by Sri.C.A.Ayya Swamy
Ext.A13(b) : original summons issued by Hon'ble Sub court,
Kottarakara.
Ext.A15 : copy of order in OA No.20/2005 dated23.1.07
Exts. for Opposite Party
Ext.B1 : Annexure B
Ext.B2 : Report of X-ray
Ext.B3 : Computerised treadmill test
Ext.B4 : Report from PRS hospital
Ext.B5 : Letter from Jisma Exports to Sr.divisional Manager
Ext.B5(a) : receipt
Ext.B6 :copy of letter from LIC of India
Ext.B7 :Proposal deposit
Ext.B7(a) : Proposal deposit receipt
Ext.B8 : Auditors report
Ext.B9 : Income and Expenditure account for the year ended 31st
March 97
Ext.B10 series :Form No.2D
Ext.B11 :Personal Financial questionnaire
Ext.B12 :Proposal for insurance on own life
Ext.B13 :copy of letter from the complainant to the Zonal Manager
Ext.B14 : copy of letter dtd. 22.11.05 from LIC of India to the complainant
Ext.B15 : copy of letter dtd. 25.2.06 from LIC of India to the complainant
Ext.B16 :copy of letter form the complainant to the Chairman, LIC of India
Ext.B17 ; FIR
Ext.B17(a) : report form Thomas
Ext.B18 : copy of letter to the complainant from LIC of India
dtd.4.11.06
Ext.B19 : Receipt
Ext.B20 : Death claim
Ext.B21 : Certificate from Taluk Office, Kottarakara
Ext.B22 : copies of unconcluded contract under proposal 8984
Ext.B23 : copy of Proforma D
Ext.B24 : letter from LIC , Secretart (CRM) to Sr.Divisional
Manager,LIC of India
Ext.B25 : copy of letter from LIC of India to the complainant
dtd.20.5.04
Ext.B26 : Proforma B
Ext.B27 : copy of letter dated 17.11.03
Ext.B28 : Annexure A
Ext.B29 : ReceiptExt.B30 :
Ext.B29(a) : Receipt from Dr.R.N.Ramesh
Ext.B29(b) : Receipt from PRS hospital
Ext.B29( c) : Receipt from PRS hospital
Ext.B30 : X-ray report
Ext.B 31 : copy of letter dtd.10.12.2003 from Sri.C.B.Prasad
Ext.B32 :copy of proposal decision
Ext.B33 : copy of letter dtd.16.12.03 from LIC of India
Ext.B34 : copy of letter dtd. 20.12.03 from LIC of India
Ext.B35 :Proposal review slip
Ext.B36 :unconcluded contract under proposal No.898478H/2003-04
Ext.B37 :copy of letter dated12.10.06 from LIC of India
Ext.B38 : Notes and Decisions
Ext.B39 : copy of letter dated 8.3.01 form LIC of India, central office
Ext.B40 :copy of letter dated 23.11.2002
Ext.B41 :copy of letter dated 2.5.2005
Ext.B42 : Underwriting Mnual
Ext.B43 : :copy of letter dated 22.7.2003
Ext.B44 : :copy of letter dated 15.3.2007
SRI.K.CHANDRADAS NADAR : JUDICIAL MEMBER
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[ SRI.K.CHANDRADAS NADAR] PRESIDING MEMBER