Insurance Corporation of India Vs. Mani Ram  Insc 395 (5 August 2005)
R.C. Lahoti, C.K. Thakker & P.K. Balasubramanyan
SPECIAL LEAVE PETITION (CIVIL) No.2795 of 2003) C.K. Thakker, J.
appeal is filed by the Life Insurance Corporation of India ("Insurance Company" for
short) against the order passed by the District Consumer Disputes Redressal
Forum, Bilaspur (Himachal Pradesh), confirmed by the Himachal Pradesh State
Consumer Disputes Redressal Commission, Shimla and also confirmed by the
National Consumer Disputes Redressal Commission, New Delhi.
short facts giving rise to the present appeal may now be stated.
Ram-respondent herein son of one Budhu Ram, resident of village Khatehar, Pargana
and Tehsil Sadar, District Bilaspur (HP) filed a complaint under Section 12 of
the Consumer Protection Act, 1986 (hereinafter referred to as "the
Act"), before the District Consumer Forum, Bilaspur. In the complaint, it
was inter alia alleged by the complainant that his son Ashok Kumar had been
insured with the appellant-Insurance Company on August 21, 1995 and premium amount of Rs. 5215/- was paid on the same day.
According to the complainant, the next instalment of premium was due on August 21, 1996. Ashok Kumar insured, however,
died in an accident on August
2, 1996 at Barmana as
the boundary wall of the D.A.V. School fell on him and he was crushed under the debris. The
complainant, in view of the subsisting policy, requested the
appellant-Insurance Company to pay the insurance claim amount of Rs.2,50,000/-
to the complainant, but under the lame and false excuses, the Insurance Company
did not pay the amount. Finally, by a communication dated August 11, 1997, the Insurance Company refused to
pay any amount. The deceased was unmarried. It was asserted by the complainant
that he was the nominee of deceased Ashok Kumar as the father. Since the amount
was not paid, the complainant was constrained to approach the District Forum.
Accordingly a claim of Rs.2,50,000/- was made along with interest and damages
on account of mental torture and financial loss suffered by the complainant.
appellant-Insurance Company resisted the claim of the complainant by filing a
written reply. A preliminary objection was raised against the maintainability
of the complaint on the ground that the policy had lapsed due to non-payment of
premium within the prescribed period and hence, the complainant had no right to
claim anything. The complaint was, therefore, liable to be dismissed. It was
stated that deceased Ashok Kumar was insured with the Insurance Company. It was
also admitted that the premium amount was paid to the Insurance Company on August 21, 1995 but the policy holder got the
policy effected from a back date, i.e. from April 28, 1995. According to the Insurance Company, therefore, the next
premium was due and payable after one year, i.e., on April 28, 1996. Giving benefit of grace period of
one month, the premium amount was required to be paid latest by May 28, 1996. No premium, however, was paid on April 28, 1996 nor till May 28, 1996 and the policy lapsed. Since the
deceased Ashok Kumar met with an accident on August 2, 1996, there was no subsisting policy in favour of the insured
inasmuch as it lapsed on May
28, 1996, the
Insurance Company could not be held liable and the complainant was not entitled
to any amount.
District Forum considered the rival contentions of the parties and held that
the deceased was assured for Rs.50,000/- on August 21, 1995. It observed that no doubt the policy was back- dated to April 28, 1995, but as the premium was paid on August 21, 1995, next premium became due on August 21, 1996. Since Ashok Kumar met with an
accident and died on August
2, 1996, the Insurance
Company was liable. It accordingly awarded an amount of Rs.50,000/- with
interest @ 12% p.a. and costs of Rs.500/-.
aggrieved by the order passed by the District Forum, both, the complainant as
well as Insurance Company filed appeal before the State Commission. The
grievance of the Insurance Company was that since the policy lapsed on April 28, 1996, it could not have been held liable
for an accidental death of Ashok Kumar on August 2, 1996 and the District Forum had
committed an error of law in holding the Insurance Company liable. The grievance
of the complainant, on the other hand, was that since Ashok Kumar died due to
accidental death, as per the terms and conditions of the Policy, the
complainant was entitled to a sum of Rs.2,50,000/- and the District Forum was
in error in awarding Rs.50,000/- only. The State Commission heard both the
appeals and dismissed them by a common judgment. The State Commission relied
upon the decision of this Court in Life Insurance Corporation of India and
Another v. Dharam Vir Anand, (1998) 7 SCC 348 : JT (1998) 7 SC 167.
Insurance Company approached the National Commission against the orders passed
by the Fora below. The National Commission, however, dismissed the Revision
Petition by observing that concurrent findings had been recorded that the
policy was subsisting and the Insurance Company was liable under the said
policy. According to the National Commission, since the first premium was paid
on August 21, 1995, the next premium was due on August 21, 1996.
have heard the learned counsel for the parties. Mr. G.L. Sanghi, learned senior
counsel for the Insurance Company submitted that the Fora below have committed
an error of law in holding that the policy was subsisting. The counsel admitted
that the first premium was paid on August 21, 1995, but in the proposal dated August 19, 1995, a request was made to make the
policy effective with back date from April 28, 1995. The request was granted by the
Insurance Company and the policy was issued. The period of policy was thus from
April 28, 1995 to April 28, 1996.
counsel submitted that deposit/payment of premium amount was not at all
relevant as the policy was for a period of one year from April 28, 1995. It was submitted that the next
premium was due on April
28,1996 and the amount
ought to have been paid.
period of one month was available to the insured and payment ought to have been
made by May 28, 1996. It is not disputed even by the
complainant, submitted the counsel, that no payment was made on or before May 28, 1996. The policy, therefore, lapsed on May 28, 1996. Since the assured died on August 2, 1996, the Insurance Company was not
liable. It was also submitted that the ratio laid down in Dharam Vir Anand does
not apply to the facts of the case.
learned counsel for the respondent, on the other hand, submitted that the
contentions raised by the appellant Insurance Company were considered by the Fora
below and in the light of the facts and circumstances as also the decision of
this Court, orders were passed which call for no interference.
question for our consideration, therefore, is whether on August 2, 1996, the policy could be said to be
valid and subsisting.
reply is in affirmative, obviously, the complainant was entitled to the amount
awarded. If, on the other hand, the policy lapsed, as contended by the
Insurance Company, no claim could have been put forward by the complainant and
the Insurance Company was right in rejecting the claim.
as the factual position is concerned, there is no dispute between the parties.
Deceased Ashok Kumar was insured by the Insurance Company and the first premium
was paid on August 21,
1995. At the request
of the insured, however, the policy was back-dated with effect from April 28, 1995. In our opinion, therefore, the
learned counsel for the Insurance Company is right in submitting that one year
came to an end on April
28, 1996 and the
insured was liable to pay premium on that date as it became due and payable.
Taking into account grace period of one month, premium amount ought to have
been paid latest by May
no such payment was made either in April, 1996 or in May, 1996. We are
impressed by the argument of the learned counsel for the Insurance Company that
in the circumstances, the policy lapsed on May 28, 1996.
this connection, it may be profitable to refer to the terms and conditions of
the policy. The policy stated that the date of commencement was April 28, 1995 and the date of maturity would be April 28, 2010 as it was for a period of fifteen
years. It is further stated that the policy of assurance "shall be subject
to the conditions and privileges" printed on the back of the policy. On
the back of the policy, those conditions and privileges have been printed.
Condition 2 thereof, is material for our purpose and reads thus:
"Payment of premium: A grace period of one month i.e. not less than 30
days will be allowed for payment of yearly, half-yearly, or quarterly premiums
and 15 days for monthly premiums. If death occurs within this period and before
the payment of the premium then due, the Policy will be valid and the sum
assured paid after deduction of the premium as also the unpaid premium/s
falling due before the next anniversary of this Policy. If the premium is not
paid before the expiry of the days of grace, the Policy lapses." (emphasis
supplied) From the above condition, it is abundantly clear that payment of
premium due had to be made within a grace period of one month. If such payment
was made within the said period, the policy would be treated as valid and the
assured would be paid the amount to which he was entitled after deducting the
premium amount. But it was also made clear that if the premium was not paid
before the expiry of the days of grace, the policy would lapse.
have already observed hereinabove, the material date was not the date of
deposit/payment of premium amount which was August 21, 1995, but the date of policy which was April 28, 1995.
it was yearly, the payment was due on April 28, 1996, but the assured was entitled to
grace period of one month up to May 28, 1996. Neither the premium was paid on April 28, 1996 nor on May 28, 1996. As per condition No. 2, policy lapsed on May 28, 1996. In the eye of law, there was no
subsisting policy, on August
2, 1996. Insurance
Company was, therefore, wholly justified in rejecting the claim of the
complainant and no exception can be taken against such a decision.
learned counsel for the respondent no doubt relied on the decision of this
Court in Dharam Vir Anand. The State Commission also referred to the said
decision and observed that the point was covered by the ratio laid down therein
and the complainant was entitled to the benefit of that decision. In our
opinion, however, the submission of the learned counsel for the Insurance
Company is well-founded that it was in the light of the fact-situation of that
case that the Court decided the matter in favour of the complainant.
Vir Anand, the complainant had taken a policy of insurance on the life of his
minor daughter. The policy was issued on March 31, 1990. The risk under the policy was,
however, back- dated at the request of the complainant taking advantage of the
option given to him in that regard by the Insurance Company which was May 10, 1989 and the premium was paid. On November 15, 1992, the assured committed suicide. The
complainant lodged a claim which was refuted by the Company.
question before this Court was whether on that date i.e. November 15, 1992, the
policy was subsisting or not? If the date of issuance of policy was to be taken
into account, the policy was subsisting. But if back-date would be considered
as relevant and material, three years were over and there was no subsisting
Court considered Clause 4-B of the policy which read as under:- "4-B.
Notwithstanding anything mentioned to the contrary, it is hereby declared and
agreed that in the event of death of life assured occurring as a result of
intentional self-injury, suicide or attempted suicide, insanity, accident other
than an accident in a public place or murder at any time, on or after the date
on which the risk under the policy has commenced but before the expiry of three
years from the date of this policy, the Corporation's liability shall be
limited to the sum equal to the total amount of premiums (exclusive extra of
premiums, if any), paid under the policy without interest. Provided that in
case the life assured shall commit suicide before the expiry of one year
reckoned from the date of this policy, the provisions of the clause under the
heading "Suicide" printed on the back of the policy". (emphasis
supplied) The Court observed that Clause 4-B made it crystal clear that the
date on which the risk under the policy commenced was different from the date
of the policy. The Court took into consideration two expressions, viz.,
"the date on which the risk under the policy has commenced" and
"the date of the policy".
Court held that since two expressions were used which obviously referred to two
different periods, effect must be given to both of them. If the contention of
the Insurance Company that the relevant date was the date on which the risk
under the policy had commenced alone would be considered, the second expression
("the date of the policy") would become redundant. The Court noted
the argument on behalf of the Insurance Company that the second date had a
limited application for the purpose of giving certain tax relief but negatived
it. It was further observed by this Court that in construing contractual
clauses, the words and terms therein must be given effect to and a part of the
contract cannot be rendered meaningless while construing and interpreting the
other part of the same contract. According to the Court, when the parties agree
to the terms of the contract, it was not open to contend that a particular term
was never intended to be acted upon. Accordingly, this Court held that on November 15, 1992, the policy was in existence and
the respondent-claimant was entitled to the amount.
instant case, Condition 2 expressly provided the period during which the
payment was to be made. It also in no uncertain terms stated that if premium
was not paid before the expiry of grace period, the policy would lapse. In our
view, the ratio in Dharam Vir Anand would support the Insurance Company rather
than the complainant. If all the terms and conditions of the policy (contract
between the parties) have to be kept in mind and given effect to, acceptance of
argument on behalf of the complainant would make the last part of Condition 2
redundant, otiose and inoperative; and a court of law cannot construe a
document in the manner suggested by the counsel for the complainant. As the
premium was due on April
28, 1996 and was not
paid till May 28, 1996, the policy lapsed. The Fora below
hence, committed an error of law in allowing the complaint of the respondent
herein and the orders are liable to be set aside.
the reasons stated above, the appeal deserves to be allowed and is accordingly
allowed. The orders passed by all the three Commissions are hereby set aside.
The learned counsel for the appellant-Insurance Company, however, stated that
the assured died in 1996 and the District Forum upheld the claim of the
complainant in December, 2000. He fairly stated that the amount was not 'very
high' and has also been paid and the Insurance Company was not so serious about
the amount, but since the question of law had been wrongly decided, the
Insurance Company had to approach this Court so that the law is settled.
Therefore, though we hold the orders not to be in accordance with law and we
set aside them, but we direct that no recovery will be effected from the
respondent-complainant pursuant to this order.
appeal is allowed to the extent indicated above. In the facts and circumstances
of the case, however, there shall be no order as to costs.