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CASE NO.: Appeal (civil)  1089 of 2008

PETITIONER: Life Insurance Corporation of India

RESPONDENT: Jaya Chandel

DATE OF JUDGMENT: 07/02/2008

BENCH: DR. ARIJIT PASAYAT & P. SATHASIVAM

JUDGMENT: JUDGMENT

CIVIL APPEAL NO.  1089          OF 2008 (Arising out of SLP (C) No.12792 of 2005)

Dr. ARIJIT PASAYAT, J.

1.      Leave granted.

2.      Challenge in this appeal is to the order passed by the  National Consumer Disputes Redressal Commission (in short the  "National Commission") dismissing the Revision Petition filed by  the appellant.  Challenge before the Commission was to the order  passed in appeal by the Himachal Pradesh State Consumer  Disputes Redressal Commission, Shimla (in short the ’State  Commission’) which in turn had upheld the order passed by the  District Forum, Shimla (in short the ’District Forum’).

       Background facts in a nutshell are as follows:

One Karan Singh Chandel (hereinafter referred to as the  ’deceased’) had taken a Life Insurance Policy and was insured for  a sum of Rs.1,50,000/-.  The annual premium payable was  Rs.12,821/-.  The policy was taken on 28.3.1994.  The annual  premium which was to be paid on or before 28.3.1995 was not  paid.  In terms of the policy, the same became inoperative after  one month.  The insured died on 1.7.1995.  A cheque drawn on  Jogindra Cooperative Bank Ltd. for an amount of Rs.12,821/-  purportedly on account of premium along with late fee of  Rs.189/- was issued by one Prakash Chand Thakur on  27.6.1995.  The same was received on 12.7.1995.  According to  the claimant i.e. widow of the deceased, the cheque was issued  before the death of the insured and therefore, the appellant could  not have repudiated the claim.  

3.      The stand of the present appellant was that the policy had  lapsed due to non-payment of premium in time.  This plea was  not accepted by the District Forum on the ground that the  cheque was claimed to have been issued on 12.7.1995, but is  presumed to have been received earlier than that date. The State  Commission held that in any event the amount was received  within the grace period and therefore, the claim could not have  been repudiated.  Accordingly the appeal filed by the appellant  was dismissed.  The National Forum dismissed the Revision  holding that Section 64-VB of the Insurance Act, 1938 (in short  the ’Insurance Act’) was applicable where the premium is  tendered by postal money order or cheque sent by post and the

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risk may be assumed on the date on which the money order is  booked or the cheque is posted, as the case may be.  Therefore, it  was held that there was revival. It did not accept the stand of the  appellant that the revival was not a matter of right.

4.      In support of the appeal, learned counsel for the appellant  submitted that the District Forum, the State Commission and  the National Commission failed to notice certain relevant factors.   It was not explained as to why the cheque was issued by Prakash  Chand Thakur and not by the insured. This is sufficient to show  that subsequently a cheque was issued to regularize the policy.   Further the cheque was received on 12.7.1995 much after the  death and this itself is sufficient to show that the cheque was not  issued prior to the death of the insured.  The extract of the  receipt register has been filed which shows that the cheque was  received on 12.7.1995.  The State Commission came to the  conclusion that the cheque was issued during the grace period.   This is also factually incorrect because the grace period is 30  days, the premium was due on 28.3.1995 and the cheque was  issued much beyond the grace period.  Additionally, Section 64- VB does not apply to the appellant.  In this context Section 43 of  the Life Insurance Corporation Act, 1956 (in short the ’Act’) has  relevance.  Reference is also made to Condition 2 of the policy.

5.      In reply learned counsel for the claimant submitted that it  is not Condition 2 of the policy which is applicable, but Condition  no.3 which is applicable.  It is stated that no adverse inference  can be drawn because the insured had not signed the cheque  and merely because the cheque was received after the death of  the deceased that does not entitle the appellant to refuse a  genuine claim.  

Conditions 2 & 3 of the policy read as follows:

"2. Payment of premium: A grace period of one  month but 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 still be valid and the sum  assured paid after deduction of the said  premium as also the unpaid premiums falling  due before the next anniversary of the Policy. If  premium is not paid before the expiry of the  days of grace the Policy lapses. If the Policy  has not lapsed and the claim is admitted  incase of death under a Policy where the mode  of payment of premium is other than yearly,  unpaid premiums if any falling due before the  next Policy anniversary shall be deducted from  the claim amount."

"3. Revival of discontinued Policies: If the  Policy has lapsed it may be revived during the  life time of the Life Assured, but within a  period of 5 years from the date of the first  unpaid premium and before the date of  maturity, on submission of proof of continued  insurability to the satisfaction of the  Corporation and the payment of all the arrears  of premium together with interest at such rate  as may be fixed by the Corporation from time  to time compounding half yearly.  The  Corporation reserves the right to accept or

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decline the revival of discontinued policy.  The  revival of a discontinued policy shall take effect  only after the same is approved by the  Corporation and is specifically communicated  to the life assured."

6.      The grace period is one month and therefore the State  Commission was not justified in holding that the payment was  made within the grace period.  Condition 3 relates to revival of  discontinued policy.  A bare reading of the condition shows that  it can be revived during the life time of the assured.  In the  instant case the cheque was admittedly received after the death  of the assured.  Further the revival takes effect only after the  same is approved by the Corporation and is specifically  communicated to the life insured.  In the present case this is not  the situation. Further Section 43 of the Act reads as follows: 43.     Application of the Insurance Act. (1) The following section of the Insurance Act  shall, so far as may be, apply to the  Corporation as they apply to any other insurer,  namely:-Sections 2, 2B, 3, 18, 26, 33, 38, 39,  31, 45, 46, 47A, 50, 51, 52, 110A, 110B,  110C, 119, 121, 122 and 123. (2)     The Central Government shall as soon as  may be after the commencement of this Act, by  notification in the Official Gazette, direct that  the following sections of the Insurance Act  shall apply to the Corporation subject to such  conditions and modifications as may be  specified in the notification, namely:-Sections  2D, 10, 11, 13, 14, 15, 20, 21, 22, 23, 25, 27A,  28A, 35, 36, 37, 40, 40A, 43, 44,102 to 106,  107 to 110, 111, 113, 114 and 116A.

1[(2A)]Section 42 of the Insurance Act shall  have effect in relation to the issue to any  individual of a licence to act as an agent for  the purpose of soliciting or procuring life  insurance business for the Corporation as if  the reference to an officer authorised by the  Controller in this behalf in sub-section (1)  thereof included a reference to an officer of the  Corporation authorised by the Controller in  this behalf.] (3)     The Central Government may, be  notification in the Official Gazette, direct that  all or any of the Insurance Act other than  those specified in sub-section (1) or sub- section (2) shall apply to the Corporation  subject to such conditions and modifications  as may be specified in the notification. (4) Every notification issued under sub-section  (2) or sub-section (3) shall be laid for not less  than thirty days before both Houses of  Parliament as soon as possible after it is  issued, and shall be subject to such  modifications as Parliament may make during  the session in which it is so laid or the session  immediately following. (5)     Save as provided in this section, nothing  contained in the Insurance Act shall apply to  the Corporation."

7.      Section 43 of the Act enumerates the various Sections of

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Insurance Act which have application to the Act and Section 64- VB is not one of them.  That being so also the National  Commission was not justified in its conclusion about the  applicability of that provision.   

8.      Looked at from any angle the orders passed by the District  Forum, the State Forum and National Commission cannot be  maintained and are set aside.

9.      Appeal is allowed.  There shall be no order as to costs.