CHAIRMAN, L.I.C. OF INDIA vs A. NARASAMMA

THIS is the Appeal against the Order of the State Consumer Disputes Redressal Commission, Andhra Pradesh at Hyderabad by which they directed the appellant, who is the Chairman of the Life Insurance Corporation of India and who was the respondent in the complaint before the said Commission, to pay Rs. 1 lac to the present respondent, Mrs. A. Narasamma, who was the complainant in that case, within 6 months from the date of the Order. The respondent was also awarded interest at the rate of 12 per cent per annum w.e.f. July 13, 1990 on which date the complaint before the State Commission was filed, till the date of the payment. No order regarding costs was made.

THE facts as appear from the paperbook are that the complainant is widow of late Shri A Lingaiah, who had got insured his life on 7/2/1988 with the Life Insurance Corporation of India (for short L.I.C.) for Rs. 1 lac. THE commencement of the policy was dated back to 7/4/1987 to get lower age benefit in premium. THE yearly premium was Rs. 6,870.00, thus the second yearly premium was due on 7/4/1988. Shri A. Lingaiah and Shri N. Sudhakar were partners in some business. Shri N. Sudhakar had also got insured his life with L.I.C. and his yearly premium was of Rs. 1,657.00. Both of them issued a joint cheque dated May 7, 1988 for Rs. 8,531,50 p. towards the combined premiums payable on their respective policies alongwith interest. On May 25, 1988 a stamped receipt was issued by the Branch Office of the L.I.C, which appears to be at Medak, (Andhra Pradesh). On the same date cheque was sent to the Bank for encashment. It was returned as dishonoured by the Bank on June 8, 1988. THE L.I.C. sent the intimation of Cheque Dishonour Advice by ordinary post to the insured, Shri A. Lingaiah, advising him to pay the premium with interest by August 16, 1988. THE intimation purported to be dated July 21, 1988, but it was-put in the post on 30/7/1988. It was received at the residence of Shri A. Lingaiah on August 1, 1988. However, Shri A. Lingaiah had expired in a bus accident on July 28, 1988 (this date has been taken from the Order of the State Commission but in the counter filed by the Respondent to the memorandum date of the death of Shri A. Lingaiah is given as July 29, 1988). Thus there was no scope for the revival of the policy after the death of the insured. On August 1, 1988 the complainant made a claim on the basis of the policy obtained by her husband. THE L.I.C. repudiated the claim on the ground that the cheque issued by and on behalf of the life assured on May 7,1988 towards the second yearly premium due on April 7, 1988 was dishonoured and therefore the policy had lapsed. (THE policy had infact, lapsed prior to May 7,1988 as the grace period of 30 days for the payment of yearly premium came to end on 6th May, 1988 and that appears to be the reason for paying interest alongwith the unpaid premia). Feeling aggrieved by the repudiation of the claim by the L.I.C. the complainant filed a complaint before the State Commission alleging deficiency in service rendered by the L.I.C. It was also alleged that as a result of the negligence on the part of the Corporation, the policy holder and the consequently the complainant had suffered loss, and injury to the tune of Rs. 2 lacs, i.e. the sum assured by the policy together with accident benefit. It may be mentioned here that the policy was a double benefit one.

The claim was contested by the L.I.C. on various grounds. It was alleged that the complainant cannot be said to be a consumer and the L.I.C. cannot be said to be rendering any service made available to potential users for consideration. The repudiation was sought to be justified on the basis of forfeiture clause contained in the policy which provides that in case the premium was not duly paid the policy shall be void and all claims to any benefit in virtue thereof shall cease and determine. It was also stated that the cheque was dishonoured by the Bank due to lack of sufficient funds in the Bank account of the policy holder.

THE State Commission found that the policy holder and consequently the beneficiary i.e. the claimant was a "consumer" as defined in the Consumer Protection Act, 1986 (for short the '' Act''). However, they further held that the L.I.C. was negligent in discharging its duties. Consequently, the award was made, terms of which have already been given above. Feeling aggrieved the L.I.C. has come to this Commission in appeal. It may be mentioned here that after filing counter to the memorandum of appeal, none appeared for the respondent on the date of final hearing.

LEARNED Counsel for the appellant argued that all the acts and omissions said to have been committed by the L.I.C. as alleged by the complainant, did not constitute "deficiency" in the rendering of service by the L.I.C. We are of the opinion that the said argument has force. The ''deficiency'' has been defined in Clause (g) of Section 2(1) of the Act as follows : "deficiency" means any fault, imperfection, shortcoming or inadequacy in the quality, nature and manner of performance which is required to be maintained by or under any law for the time being in force or has been undertaken to be performed by a person in pursuance of a contract or otherwise in relation to any service. The case of the complainant before the State Commission as well as in the counter to the memorandum of appeal is that the L.I.C. violated certain circulars dated March 30, 1984 and November 7, 1984 issued by the L.I.C. to all its branch offices which provide that on receipt of Cheque Dishonour Advise, the concerned office shall immediately contact the concerned policy holder/party. Before we refer to the binding nature of these circulars which have been relied upon by the State Commission, we may reproduce here the relevant clauses of the policies reproduced in the memorandum of appeal and which have not been controverted by the respondent. "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 Sum Assured paid after deduction of the said premium as also the unpaid premiums falling due before the next anniversary of Policy. If the premium is not paid before the expiry of the days of grace, the policy lapses. If a policy has not lapsed and the claim is admitted in case 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

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 decline 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. xxxxxxxxxxxxxxxxxxxxxxxxxxx

"Forfeiture in Certain Events : In case the premiums shall not be duly paid or in case any condition herein contained or endorsed hereon shall be contravened or in case it is found that any untrue or incorrect statement is contained in the Proposal, Personal Statement, declaration and connected documents or any material information is withheld, then and in every such case but subject to the provisions of Section 45 of the Insurance Act, 1938 where applicable, this policy shall be void and all claims to any benefit in virtue thereof shall cease and determine and all moneys that have been paid in consequence hereof shall belong to the Corporation excepting always in so far as relief if provided in terms of the Privileges herein contained or may be lawfully granted by the Corporation."

From the terms and conditions referred to above it is evident that grace period of one month is allowed for payment of yearly premium after due date. If the premium is paid within one month after the expiry of grace period, the policy can be revived on payment of the unpaid premium plus late fee of 50 np, in the case of policies issued on or after September 9, 1972 no matter what the amount of premium may be. (This is contained in Manual 3 Policy Holders Servicing Department as reproduced by the State Commission.) According to the instructions issued by the L.I.C. to all its Branch Offices in March, 1984 and November, 1984 where a cheque is dishonoured, the dishonoured cheque shall be presented for the second time. If it bounces for the second time also, the Branch Offices are instructed to initiate immediate steps and send Cheque Dishonour Advice to the party calling upon him to tender fresh payment in cash or by Demand Draft. The State Commission also relied upon the Branch Inspection Questionnaire which provide that the expected time lag for initiation of action in respect of preparation of Cheque Dishonour Advice is two days after receipt/entry in the C.D. Register. On the basis on these instructions the State Commission has held that those instructions were violated by the L.I.C. as the dishonoured cheque was received back by the L.I.C. from the Bank on June 8,1988 while the intimation of Cheque Dishonoured Advice was not send to Shri A. Lingaiah within two days or within a reasonable period thereafter and the intimation was sent in the end of July, 1988, by which time the insured, Shri A. Lingaiah had died and thus he could not give a cheque to get the policy revived. We have not been able to understand how the complainant can take benefit of the said departmental Manual and circulars issued by the L.I.C. to its Branch Offices. These circulars and mannuals confer no right on the Policy Holders these are only for regulating the internal working of the various Branches of the L.I.C. and their main object and purpose is to place ideal guidelines for the Branch offices so as to tone up their efficiency in serving the policy holders. These guidelines have not been issued under any law nor has the L.I.C. undertaken to observe those guidelines in pursuance of any contract or otherwise in relation to the service to the policy holders.

AS noticed earlier, the policy had lapsed when the premium was not paid within the grace period. Here we may cite Ahmedunnisa Bagum v. LLC. of India, Hyderabad, AIR 1981 AP 50 wherein it was remarked: From the aforesaid discussion devoted to the limitations and conditions for the revival of lapsed policies and the relevant rulings on the subject, the following principles emerge: (1) Revival of a lapsed policy is'' a privilege or concession granted to the policy holder subject to certain limitations. (2) The said limitations are : (a) the revival could only be during the lifetime of the assured and not after his death; (b) within a period of five years from the due date of the first unpaid premium; (c) before the date of maturity; and (d) the conditions relating to the payment of the premium due on the lapsed policies should be complied with. (3) The revival of a policy is not a matter of right and it would not automatically follow even after the fulfilment of the conditions laid down in the policy. (4) The revival operates as a new contract and the rights and liabilities do not begin to run until the new terms and conditions are accepted and complied with.

Thus the revival of the lapsed policy could not have been claimed by Shri A. Lingaiah as of right. The policy could have been revived only after the L.I.C. had accepted the delayed premium with interest. AS the policy was not revived during the life time of Shri A. Lingaiah it could not be revived after his death.

IN fact the whole fault lies with the insured, Shri A. Lingaiah. He did not pay the premium due even within the grace period allowed under the policy. After the expiry of the grace period a Cheque for Rs. 8,531.50p was sent by Shri N. Sudhakar, partner of Shri A. Lingaiah in respect of the premia due on his policy as well as on the policy taken by Shri A. Lingaiah. Either of the partners did not satisfy themselves that there was sufficient fund in the Rank Account for the encashment of the cheque. The cheque was sent by the L.I.C. to the Bank for encashment on May 25, 1988. Even up to that date the partners did not provide sufficient funds with the Bank to enable it to encash the cheque. As there were insufficient funds in the Bank Account, the Bank had dishonoured the cheques. Therefore the claimant cannot be permitted to say that even if the insured was negligent in performing his duties, the Bank ought to have observed the guidelines and their non observation would amount to ''deficiency'' in the rendering of service by the L.I.C. Before we part with this order, we may mention here that the State Commission has also considered Section 139 of the Negotiable Instruments Act in their Order. We are of the opinion that it has no relevance to the present case. It only provides that if a person issues a cheque in payment of any liability and it is dishonoured for lack of funds, he shall be deemed to have committed an offence. The payee or holder in due course is required to give 15 days'' notice demanding payment of the amount and only if there is default in payment of the amount, the person is liable to be prosecuted, the L.I.C. was not intending to take any action to prosecute Shri A. Lingaiah and therefore, it was not bound to inform him about the dishonour of the cheque within 15 days of its being dishonoured. For the foregoing reasons we hold that in present case the L.I.C. is not guilty of any "deficiency" in the rendering of service by the L.I.C. to Shri A. Lingaiah as contemplated by the Act.

Consequently, we accept the present appeal, set aside the Order of the State Commission and dismiss the complaint filed by the present opposite party. In the circumstances of this case, we make no order as to costs. Appeal accepted.