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CASE NO.: Appeal (civil)  4806 of 2005

PETITIONER: LIFE INSURANCE CORPORATION OF INDIA                                                      

RESPONDENT: MANI RAM                                                         

DATE OF JUDGMENT: 05/08/2005

BENCH: CJI R.C. Lahoti,C.K. Thakker & P.K. Balasubramanyan

JUDGMENT: J U D G M E N T (@ SPECIAL LEAVE PETITION (CIVIL) No.2795 of 2003)

C.K. Thakker, J.

       Leave granted.

       This 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.   

The short facts giving rise to the present appeal may now be  stated.

       Mani 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 \026 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.  

       The appellant-Insurance Company resisted the claim of the  complainant by filing a written reply.  A preliminary objection was

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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.

       The 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/-.                   Being 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.

       The 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.

       We 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.   The counsel submitted that deposit/payment of premium amount

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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.   Grace 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.

       The 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.

       The question for our consideration, therefore, is whether on  August 2, 1996, the policy could be said to be valid and subsisting.   If the 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.  

       So far 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 28, 1996.   Admittedly, 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.    In 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: 2.      "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

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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.  As we 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.   Since 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.

       The 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.

       In Dharam 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.   The 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 policy.   The 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".  

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The 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.

       In the 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.

       For 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.  

       The 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.