DIRECTOR OF INSURANCE, A.P. GOVERNMENT vs G. VIJAYA LAKSHMI

THIS is an appeal preferred by the Director of Insurance Government of Andhra Pradesh, against the order dated 19.9.1997 of the Hyderabad District Forum in O.P. No. 1338 of 1996 allowing the claim of Smt. G. Vijaya Lakshmi, the widow of Sri A. Harikrishna who died in harness on 28.1.1989. The District Forum by its order directed the appellant, who was the opposite party in that O.P., to pay the insurance amount on the basis of the enhanced rate of Rs. 50 /- that was being deducted every month from the salary of the deceased Sri A. Harikrishna from June, 1991 to April, 1996 regularly as per G.O. Ms. No. 43 Finance and Planning (F.W. Admn. Ill) Department dated 28.1.1989.

THE only defence set up by the appellant against the claim of the complainant was that the requisite proposal form was not submitted to the A.P.G.L.I. Department (Andhra Pradesh Government Life Insurance Department i.e. to the Director of Insurance, the appellant herein) by the office in which late Sri A. Harikrishna worked when the enhanced premium of Rs. 50/- per month was deducted for the first time from his salary. It is not in dispute that the enhanced sum of Rs. 50/- was being received month after month from June, 1991 by the appellant''s office. THE District Forum, after discussing the provisions of the G.O. Ms. No. 43 dated 28.1.1989, held that the deduction of the premium amount every month did not depend upon the volition of the employee and that it was to be deducted automatically from the salary bill and that the office in which Sri A. Harikrishna was working was responsible for obtaining the prescribed form and sending it to the appellant''s office and that for the failure of that office the complainant should not be penalised and deprived of the benefit of the deductions admittedly made from the salary of her deceased husband during his life time at the enhanced rate of his increased salary on his promotion as Senior Assistant with effect from 11.7.1990. On that basis the District Forum held as follows : "Inspite of receipt of increased insurance premium as A.P.G.L.I. (Andhra Pradesh Government Life Insurance) authorities have not revised the value of the policy as contemplated under the G.O. (G.O. Ms. No. 43, Finance and Planning (F.W. Admn. Ill) Department dated 28.1.1989), it amounts to deficiency in service on their part. In our view the complainant is eligible to receive the insured amount calculated on the basis of the insurance premium of Rs. 50/-".

The learned Government Pleader contends that inasmuch as the required proposal form was not submitted to the appellant, the appellant was justified in refusing to pay the insurance amount calculated on the basis of the monthly premium of Rs. 50/- and inasmuch as he offered to pay the insurance amount calculated on the basis of the monthly premium of Rs. 20/- which was being deducted prior to the promotion of the deceased Sri A. Harikrishna as Senior Assistant, there was no deficiency in service on the part of the appellant and that the District Forum erred in ignoring this crucial fact. The learned Government Pleader also relies on the decision of the Supreme Court in State of Orissa v. Divisional Manager, LIC & Anr., II (1996) CPJ 31 (SC)=AIR 1996 SC 2519, and contends that under Section 2(1)(o) of the Consumer Protection Act, 1986 (''the Act'' for short) "service" means service of any description "but does not include the rendering of any service free of charge or under a contract of personal service". In our view, the service of insurance cover being rendered by the Government of Andhra Pradesh cannot be considered as a free service or an incident of contract of personal service because the monthly premium was being collected by deducting the same from the salary of late Harikrishna.

The learned Government Pleader further contends that the provision of insurance cover provided by the Government was a welfare measure. He relies on the decision of the Supreme Court in Sub-Divisional Inspector of Post, Vaikam and Others v. Theyyam Joseph and Others, (1996) 8 SCC 489, wherein a two Judges Bench of the Supreme Court held as follows: "India as a sovereign, socialist, secular, democratic republic has to establish an egalitarian social order under rule of law. The welfare measures partake the character of sovereign functions and the traditional duty to maintain law and order is no longer the concept of the State. Directive Principles of State Policy enjoin on the State diverse duties under Part IV of the Constitution and the performance of the duties are constitutional functions. One of the duties of the State is to provide telecommunication service to the general public and an amenity, and so is an essential part of the sovereign functions of me State as a welfare State. It is not therefore, an industry".

But this decision was over-ruled by a three Judge Bench of the Supreme Court in General Manager, Telecom v. A Srinivasa Rao and Others, (1997) 8 SCC 767, relying on the decision of the seven Judges Bench of the Supreme Court in Bangalore Water Supply and C(1978) 2 SCC 213. The three Judges Bench held that the Telecommunication Department of the Union of India was an "industry" within that definition because it was engaged in a commercial activity and the Department was not engaged in discharging any of the sovereign functions of the State. That bench also held that the decisions in Sub-Divisional Inspector of Post, Vaikam and Others v. Theyyam Joseph and Others, (supra), and Bombay Telephone Canteen Employees Association, Prabhadevi Telephone Exchange v. Union of India and Another, (1997) 6 SCC 723, could not be treated as laying down the correct law. In view of this decision, it cannot be held that the A.P. Government Life Insurance Department was performing any sovereign function. Therefore, it must be treated as doing the business of insurance for remuneration because premium is being charged which is being collected by deduction from salary. In fact the reason given for refusing to pay the insurance amount on the basis of monthly premium of Rs. 50/- to the claimant was not that no consideration was received for the service but that proposal form signed by late Harikrishna was no furnished after the premium deduction was increased to Rs. 50/- per month.

THE learned Government Pleader also relies on several decisions of the State Commissions and National Commission relating to Provident Fund and contends that the same logic should be applied in the case of premia deductions from the salary. We do not agree. THE National Commission clarified the position in Regional Provident Fund Commissioner, Faridabad v. Shiv Kumar Joshi, I (1996) CPJ 199 (NC)=1996 (1) CPR 82, by differentiating Provident Fund under the General Provident Fund Act, 1925 and Provident Fund collected under Employees'' Provident Funds and Miscellaneous Act, 1952 and the schemes framed there under and holding that in the latter case administrative charges were being collected and thus there was consideration for the services rendered. In the present case also we find that consideration by way of premium was being collected for the service of insurance coverage being rendered. The complainant appeared before us in person. She placed before us the order of the A.P. Administrative Tribunal dated 30.8.1996 in C.A. No. 1700/95 (In re : Vazramma), In Re Vazramma (Order dated 30.8.1996 in C.A. No. 1700/95 of A.P.A.T,), wherein an exactly similar question arose and G.O.Ms. No. 43 dated 28.1.1989 fell for consideration. The Administrative Tribunal held as follows: "It is not disputed by the respondents that an amount of Rs. 60/- was deducted from the salary of the applicant''s husband from 3.9.1989 to 6.6.1992 towards APGLI subscription. The amounts thus dededucted were received by the 1st respondent. The main objection being raised by the respondents for not giving the policy amount to the applicant is that no policy was issued in favour of the applicant''s husband as he had not submitted his proposal in the prescribed form. A perusal of the rules issued in G.O. Ms. No. 43, Finance and Planning dated 28.1.1989 shows that it is the responsibility of the Head of the office to obtain necessary proposal from the employee concerned in the prescribed form and forward it to the District Treasury Officer alongwith the first deduction. When the respondents made the first deduction from the pay of the applicant''s husband, the Mandal Revenue Officer, Munagala should have obtained a proposal from the applicant''s husband in the prescribed form and forwarded it to the Regional Office of the APGLI through the concerned District Treasury Officer. When die responsibility cast on the Head of the office to forward the proposal alongwith the first deduction statement, for any failure to obtain proposal from the applicant''s husband, applicant cannot be made to suffer".

WE are inclined to agree with the view expressed by the Administrative Tribunal in Vazramma''s case (supra). The appellant ought not to have denied the claim of the respondent, in view of the admitted fact that the monthly premium of Rs. 50/- deducted from the salary of late Harikrishna was in fact received in his office from June, 1991 to April, 1996 regularly i.e., for a period of nearly five years without any objection. Having received that amount, the appellant cannot contend that no revised proposal was received after the premium was increased to Rs. 50/- per month. On the very first monthly premium of Rs. 50/- being received, he ought to have seen to it that the revised proposal was received by reminding the Head of the Department in which the deceased late Harikrishna worked. Having received the monthly premium of Rs. 50/- for nearly five years, he is estopped from contending that as the required proposal form was not furnished by the deceased, the complainant could not get the benefit of the higher cover. In Smt. Rajni Patwari v. LIC of India & Anr., III (1997) CPJ 48 (NC)=1997 (2) CPR 254, the National Commission did not countenance repudiation of the claim by the Life Insurance Corporation of India (LIC) on the ground that the policy lapsed because of default in payment of premia from November, 1987 to May, 1988 in view of the admitted fact that it accepted the premia from June, 1988 to December, 1988 and the insured died in December, 1988. The National Commission held as follows: "WE also feel that the LIC cannot be absolved of its responsibility in this case only on the technical ground that the policy had lapsed for want of payment of premiums from November, 1987 to May, 1988. If that was so why did the LIC of India Ltd. accept the premiums from June, 1988 to December, 1988 for a period of six months, and why did they not inform either the insured or his employer that the policy had lapsed and without its revival these premiums are not of any use and, therefore, are returned. WE agree with the view taken by the District Forum that "had the LIC informed the deceased Niranjan Patwari any time between June, 1988 to December, 1988 about the status of policy as lapsed, he might have taken steps to revive it." In the absence of any evidence that he authorised the payment only from June, 1988, it is only fair to accept the assertion of the LIC that they had sent the authorisation letter signed by the deceased, Niranjan Patwari to the employer in time but at the same time it is also true that it is a gross negligence and carelessness on the part of the LIC to have accepted the premiums for 7 months continuously without bringing it to the notice of either the employer or the insured that such premiums were being received on a lapsed policy. In our view, therefore, both the LIC of India Ltd., and M/s. Asian Paints (India) Ltd. respondent Nos. 1 and 2 respectively are guilty of the deficiency of service".

In the present case, the appellant received the higher premia of Rs. 50/- for nearly five years and had he informed the authorities concerned that the revised proposal form signed by the Harikrishna was not sent, that would have been rectified. In the result, we do not find any basis for interfering with the very fair and reasonable view taken by the Hyderabad District Forum in allowing the claim of the respondent herein. We find that pursuant to our order dated 12.2.1998 in F.A.I.A.No. 1250/1997 directing the appellant to deposit by 3.3.1998 the entire amount to which the complainant would be entitled on the basis of premium of Rs. 50/- per month, the appellant deposited in the Hyderabad District Forum Cheque No. PL/50/284781 dated 26.2.1998 for a sum of Rs. 17,096/- drawn in favour of Smt. G. Vijaya Lakshmi, the complainant herein. That cheque has been received by this Commission from the District Forum had it is now handed over to the complainant. The order of the District Forum is confirmed and the appeal is dismissed. No costs. Appeal dismissed.