BRANCH MANAGER, LIFE INSURANCE CORPORATION OF INDIA vs V. NARAYAN RAJU

THE Life Insurance Corporation, the opposite party in C.D. Case No. 135 of 1994 the District Forum, Rayagada, is the appellant represented through its officers. THE respondent is the complainant before the District Forum claimed compensation on the benefits of an insurance policy alleging deficiency in service of Insurance Corporation. THE complainant was brother of one V. Radha Krishna Raju who submitted a proposal for insuring his life for a sum of rupees one lakh on 31.3.95. It is alleged that he paid the initial premium of Rs. 2,390/- together with an amount of Rs. 290/- under appropriate receipts for the proposed policy. THE complainant was described as the nominee of the life to be assured. Unfortunately the said V.R.K. Raju died on 24.9.93. THE complainant approached the Life Insurance Corporation for payment of the sum assured under the proposal but since no payment was made, he approached the District Forum for redressal. A show-cause was filed by the present appellants in which it was admitted that a proposal was submitted by V.R.K. Raju for insuring his life for one lakh of rupees and that a sum of Rs. 2,390/- and another sum of Rs. 290/- was also deposited for the aforesaid purpose. But it was stated that the proposal was not accepted because of adverse reports were received during enquiry and before acceptance of the policy, the proposer appears to have died.

THE District Forum after hearing both parties, came to a conclusion that since there was no completed contract between the proposer and the Insurance Corporation, the life of the proposer cannot be said to have been insured nor the assured amount was payable. It, however, directed a compensation of Rs. 20,000/- to be paid saying that there was delay in consideration of the proposal and the aforesaid amount would compensate the aforesaid deficiency. We have heard the learned Counsel appearing for the appellants and so also the learned Counsel appearing for respondent No. 1. It is elementary that the policy of insurance is a contract between the Life Insurance Corporation and the life assured. A contract begins to operate when an offer is accepted. By submitting the proposal form, the proposer kept it open to the Life Insurance Corporation whether or not to accept the same. Admittedly the proposer died before acceptance of the policy. Before acceptance of the proposal, the proposer was not a consumer as defined in the Act as he was not availing of any service for consideration. As he died before acceptance of the proposal, there could be no contract between the parties. Since there is no policy of contract, the L.I.C. cannot be saddled with any liability on account of the death of the proposer. The District Forum has rightly Held that there was no completed contract but he went wrong in observing that the L.I.C. was guilty of deficiency in service because of the delay in consideration of the proposal. The award of compensation against the L.I.C. in this case is, therefore, not supportable. We, therefore, allow this appeal and set aside the impugned order. The amount of premium and the further sum of Rs. 290/- said to have been paid by the proposer should now be refunded to the complainant who was his nominee in the proposal form together with interest at the rate of 12% per annum from the date of deposit till the date of refund. It may further be noted that the payment of the aforesaid amount to the complainant will in effect be complete discharge of liability so far as the L.I.C. is concerned and the complainant would receive the money as the trustee of the persons who are entitled to the money after the death of the proposer. Appeal allowed.