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16. In Deokar Exports Pvt. Ltd. vs. New India Assurance Company Ltd. , I (2009) CPJ 6 (SC), Hon'ble Supreme Court has observed thus :-

"11. A policy of insurance is a contract based on an offer (proposal) and an acceptance. The appellant made a proposal. The respondent accepted the proposal with a modification. Therefore, it was a counter proposal. The appellant had three choices. The first was to refuse to accept the counter - proposal, // 9 // in which event there would have been no contract. The second was to accept either expressly or impliedly, the counter proposal of the respondent (that is respondent's acceptance with modification) which would result in a concluded contract in terms of the counter proposal. The third was to make a counter proposal to the counter proposal of the respondent in which event there would have been no concluded contract unless the respondent agreed to such counter proposal. But the appellant definitely did not have the fourth choice of propounding a concluded contract with a modification neither proposed nor agreed to by either party. If the appellant did not agree to the policy covering the period 26.8.1988 to 25.8.1989 instead of the period 12.3.1988 to 12.9.1989, the result would never create an insurance contract effective from 30.6.1989 or any other date".
"One late Raja Vasireddi Chandra Dhara Prasad died intestate on 12th January, 1961. He had filled a proposal for insurance for Rs.50,000/ on 27th December, 1960. There was medical examination by the doctor on the life of the deceased on 27th December, 1960. The deceased issued two cheques being the consideration towards the first premium of Rs.300 and Rs.220 respectively which were encashed by the appellant on 29th December, 1960 and 11th January, 1961. On 16th January, 1961, the widow of the deceased wrote to the appellant intimating the death of the deceased and demanded a payment of Rs.50,000. The Divisional Manager, Masulipatam Branch denied liability on behalf of the appellant on 28th January, 1961. Thereafter there was correspondence between the parties between 1st February, 1961 and 23rd December, 1963. On 10th January, 1964, the respondents filed a suit in the Court of Subordinate Judge, Masulipatam. The Trial Court dismissed the suit holding, inter alia, that there was no concluded contract, that the proposal was not accepted by the Divisional Manager for some reason or the other by time the deceased had died, that neither the encashment of the two cheques created a contract of insurance, in appeal, the High Court after ordering // 11 // certain other additional documents set aside the Trial Court judgment. Hence, the appeal by the Corporation after obtaining the special leave.
"1. Having regard to the clear position in law about acceptance of insurance proposal and the evidence of record in this case, it is clear that the High Court was in error in coming to the conclusion that there was a concluded contract of insurance between the deceased and the Life Insurance Corporation.
2. Though in certain human relationship silence to a proposal might convey acceptance but 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 his acceptance. Mere delay in giving an answer cannot be construed as an acceptance, as, prima facie, acceptance must be communicated to the offer or 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.