Bombay High Court
The Life Insurance Corporation Of India ... vs Smt. Brazinha D'Souza on 24 June, 1994
Equivalent citations: AIR1995BOM223, 1995(2)BOMCR458, (1994)96BOMLR222, [1995]82COMPCAS440(BOM), 1995(1)MHLJ30, AIR 1995 BOMBAY 223, 1995 (1) BOM CJ 33, 1995 BOMCJ 1 33, (1995) 82 COMCAS 440, (1995) 1 MAH LJ 30, (1995) 2 BOM CR 458
JUDGMENT
1. This appeal is directed against the judgment of the learned Civil Judge, Senior Division, Panaji, dated 29th September, 1989 in Special Civil Suit No. 201 / 87/ A whereby (he learned Judge has allowed the prayer of the plaintiff/ respondent (hereinafter called 'the respondent') and directed the defendants/appellants (hereinafter called 'the appellants') to pay to the respondent a sum of Rs. 50,000/- with 6% interest thereon till the date of payment with costs.
2. The respondent had filed the suit stating that her late husband Andrew Sebastiao D'Souza had insured with Life Insurance Corporation of India, the appellant No. 1, and the proposal was given to them against a receipt for Rs. 3265/- issued by the Mapusa Branch dated 22-7-1981. The said proposal was submitted by the duly authorized agent of the appellants with all the documents and medical report. Thus the policy should have been issued by the appellants in the normal course. The respondent's husband was holder of another policy. However, her husband expired on 25-8-1981 and when the respondent claimed the amount insured she was informed that she was not entitled to get the sum assured as there was no concluded contract because the death had taken place before the acceptance of the proposal and only an amount of Rs. 3265/- paid by her husband would be refunded to the heirs of the respondent's deceased husband.
The appellants have resisted the suit by contending that the mere fact of their having collected the amount of the premium did not signify that there was an acceptance of the proposal made by the deceased husband of the respondent. The said proposal had to be scrutinized by the Goa Underwriting Centre at Margao who would call for any clarification which they would require and only after all the data was available with them they, would have taken a decision if the said proposal was to be accepted or not. The amount of money received from the deceased husband of the respondent had been kept in suspense and a suspense memorandum had been issued to him wherein it had been stated that the payment received was held in suspension and if the same was found in order, then the amount would be adjusted and the premium receipts issued. Only then a contract could be said to have been taken place between the appellants and the deceased husband of the respondent.
3. The learned Judge after framing issues recorded evidence of both the parties and thereupon passed the impugned judgment which is under challenge in this appeal.
4. On behalf of the appellants it was stated that it is not in dispute that the Insurance premium of Rs. 3265/ - was paid by the respondent's late husband on 22-7-1981 and the receipt/suspense memorandum passed on the same day after the amount was realised. The memorandum clearly refers that the payment is held in suspension subject to the payment being found in order. This means that some formalities were to be observed before the payment would become acceptable. Shri Lotlikar, learned counsel for the appellants, has then submitted in this regard that it was an admitted position that no communication was sent by the appellants to the respondent accepting his proposal. It was also an admitted position that no policy of insurance was issued by the appellants in favour of the deceased husband of the respondent. Besides it is nobody's case that any receipt was sent by the Corporation to the deceased husband of the respondent in respect of amount referred to in the suspense memorandum. There is also no dispute that respondent's husband died before the acceptance of the proposal took place. However, the trial Court decreed the plaint on the assumption that the mere payment of premium would amount to the acceptance of the insurance. According to the learned counsel, this was not the correct proposition of law as the matter has been concluded in a decision of the Supreme Court reported in Life Insurance Corporation of India v. Raja Visireddy Komalavalli Samba, AIR 1984 SC 1014. In the aforesaid decision which was also dealing with an insurance proposal and the question of its aceptance in the light of Sections 7 and 8 of the Contract Act, it has been held that the contract of insurance will be concluded only when the party to whom an offer has been made accepts it unconditionally and communicates its acceptance to the person making the offer. The Court further observed that though in certain human relationships silence to a proposal might convey acceptance, however, in the case of 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 its acceptance. Thus more delay in giving an answer cannot be construed as an acceptance, as, prima facie, acceptance must be communicated to the offerer. Similarly 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. The learned counsel further submitted that this judgment appears to have not been placed before the trial Court since it does not make any reference to it. Thus, the learned counsel urged, the judgment of the learned Civil Judge was ex facie bad and clearly violative of the law as laid down by the Supreme Court.
5. Mr. Sardessai, learned counsel appearing for the respondent, has however contested the stand taken by the appellants. According to the learned counsel, the fact of acceptance of the proposal made by the deceased husband of the respondent could be inferred from the deposition of the representative of the appellants, D.W. 1 Madhukar Golatkar, who at the relevant time was the Manager of New Business Department of the Life Insurance Corporation, Panaji. According to the learned counsel the said witness has admitted during the cross-examination that the issuance of the policy in this case had been withheld only on account of the non-revival of the previous policy which policy was subsequently revived. This means, the learned counsel urged, that once the proposal was complete and the agent has recommended the acceptance of the proposal, the circumstance that the acceptance had not been communicated to the insured person and the policy remained to be issued only because of certain technical difficulties which were ultimately found to be non-existent and the matter was cleared could not defeat the claim of the respondent on the ground that non-acceptance of the proposal was complete and therefore such acceptance was not communicated to the insured person. The learned counsel contended that the deposition of Madhukar Golatkar clearly shows that the proposal was in fact accepted but the policy was not issued and withheld only on account of non-revival of the previous policy of the deceased. Thus the withholding was done under the impression that the proposed policy had not been revived. However, this was a wrong impression because the previous policy was very much alive in respect of the fact that the same had nothing to do with the new policy in question. The learned counsel further says that all the formalities regarding the new policy had been complied with and only the issuance of the policy remained delayed just on account of the wrong impression created by the appellants. The learned counsel tried to distinguish the judgment of the Supreme Court relied by the appellants on the ground that in that case the formalities for the acceptance of the proposal had not been wholly satisfied by the insured and even the money paid by the insured could no! be realized immediately because one of the cheques had bounced. In the instant case it is seen that the premium amount had been realized by the appellants and it is not the appellants' case at all that they have had any difficulty to realize the amount of the premium paid by the insured. This shows that the policy proposal had to be deemed as accepted and completed. The learned counsel then urged that here was " a case of a valid proposal wherein consideration had been already recovered and there was acceptance of the same. All that was required to complete the contract was only the communication of this acceptance to the insured person. It was further contended by the learned counsel that once he had discharged his duties with regard to the payment of the consideration and the acceptance of the money, the burden of proving that the proposal was not accepted as well as the reasons for its non-communication to the insured would lie on the appellants. The learned counsel again urged that the payment of the premium and its acceptance by the appellants had been construed by them as acceptance of the proposal. In this respect the learned counsel has invited my attention to Section 8 of the Contract Act according to which performance of the conditions of the proposal or the acceptance of any consideration for a reciprocal promise which may be offered with a proposal is an acceptance of the proposal. Now and with regard to the communication of the acceptance, the learned counsel stated that this was a duty entirely to be complied with by the appellants if the respondent had proved the deemed acceptance of the proposal by the appellants. It was for the appellants to establish that because there were more formalities to be satisfied the acceptance was not actually completed. According to the learned counsel, the memorandum of suspension/ receipt issued by the appellants does not reflect any impediment coming on the way of complete acceptance of the proposal. The said memorandum does not speak of any other conditions to be complied or fulfilled by the insured. All that it speaks is that if payment is found in order then the amount would be adjusted towards the premium due and the policy would be issued. The learned counsel therefore urged that it was not the case of the appellants that the payment was found not to be in order. Thus the communication of the acceptance being the duty of the appellants, which duty they failed to discharge, the mere fact of the communication having not been done or the policy having not been issued could not be held as affecting the very existence of a complete contract in this case. The learned counsel again invited my attention to provisions of S. 3 of the Contract Act which deals with the communication, acceptance and the revocation of proposals and reads that the communication of proposals, the acceptance of proposals and the revocation of proposals and acceptances, respectively, are deemed to be made by any act or omission of the party proposing, accepting or revoking, by which he intends to communicate such proposal, acceptance or revocation, or which has the effect of communicating it. This provision therefore, according ,to the learned counsel, clearly shows that the communication need not be necessarily done in writing. It could be oral also or inferred from other acts or facts or even from the, circumstances of the case. Thus with regard to the communication aspect the very acceptance of consideration had to be construed as per the deeming provisions of the Contract Act. The learned counsel argued that if there was a valid contract between the appellants and the deceased husband of the respondent he would be entitled to the policy and merely because the appellants slept over the premium money paid they could not take advantage of their fault by failing to perform their part in the contract to the detriment of the insured. The learned counsel then contended that the judgment of the Supreme Court relied upon by the appellants had not considered the provisions of Section 3 of the Contract Act and has dealt with only its Section 8.
6. Although appalling and quite impressive in its able formulation it is difficult for me to appreciate the whole line of arguments propounded by the learned counsel for the respondent. To be seen at the very outset that the respondent herself has not made any averment in the plaint of the suit that the proposal made by her deceased husband has been actually accepted by the Insurance Company. On the contrary the whole stand taken by her learned counsel appears to be that the said acceptance is to be deemed or presumed in the facts and circumstances of the case. This by itself is sufficient to infer that prima facie there was no concluded contract in the instant case. On the other hand admittedly the alleged acceptance by the appellants of the amount of Rs. 3625 could not be construed as payment of the premium but only as some sort of advance deposit to be adjusted towards the premium which would become due only after the proposal was accepted and the policy was issued as per the very memorandum of suspension issued by the appellants to the insured. In his evidence the appellants' witness Golatkar has clearly stated that although the proposal was originated from Panaji Office the same had been submitted to the Head Office in Margao for their approval and that the Margao Office was to approve the proposal and issue the policy. He has further stated that after the proposal was submitted the Head Office had asked to undergo a medical examination and for that purpose he informed the insured through the agent. He has also clarified that there was no prescribed time within which the policy should be issued after the acceptance of the proposal and that everything would depend upon various factors. This shows that the mere fact of the proposal having been received by the appellants along with the money deposited and kept in suspense could not be held as an acceptance of the proposal which had been withheld on account of formalities which were necessary to be complied with. As it was observed by the Supreme Court in the aforesaid judgment relied by the appellants the mere receipt and retention of the premium until after the death of the applicant does not give rise to a contract although the circumstances may be such that approval could be inferred from retention of agreement. An acceptance is to be complete and must be communicated to the offerer. Acceptance must be signified by some act or acts agreed by the parties or from which the law raised presumption of acceptance. In the instant case even if it is to be presumed that the Insurance Company acted on a wrong impression and delayed the acceptance of the proposal this means that still under that impression the Company did not accept the insured proposal. Rightly or wrongly the said delay could not be const rued or deemed in the facts of the case as a deemed acceptance of the insured proposal. This much appears to have been acknowledged also by the learned trial Judge although in his findings he has obviously somersaulted while applying the law to facts, under his consideration. The learned Judge appears to accept the position that there is a valid contract of insurance between the parties which can be in force only after the receipt by the insured of an intimation of the Company that the risk was covered. However, the learned Judge was certainly wrong in holding that once the amount was accepted and the receipt issued by the Insurance Company it would automatically follow that the liability had been accepted by the Company and the insured need not wait for any format communication stating that the said proposal had been accepted. In this respect the learned Judge was clearly in error when he held that the acceptance of the premium amount and the issuance of the receipt would mean the acceptance of the proposal because, according to him, the appellants calling the acknowledgment of the money as suspense memorandum would only mean a kind of jugglery in words.
7. In the result this appeal is allowed. The judgment and the decree of the learned Civil Judge is accordingly quashed and set aside and the suit of the respondent is hereby dismissed. There will be however no order as to costs.
8. Appeal allowed.