LIFE INSURANCE CORPORATION OF INDIA vs Mala Goyal

AGGRIEVED by the order dated 11.12.2007 passed by Delhi State Consumer Disputes Redressal Commission in Appeal No. A-07/742, the Life Insurance Corporation of India (opposite party in the complaint) has filed the present petition purportedly under Section 21(b) of the Consumer Protection Act, 1986 (in short, ''the Act ''). The appeal before the State Commission was also filed by the LIC of India against the order dated 21.8.2007 passed by the District Consumer Forum, Delhi, by which order the said District Forum allowed the complaint filed by the complainant and directed the LIC to pay a sum of Rs. 5,00,000 to the complainant, being the widow of the insured and nominee, besides a compensation of Rs. 25,000 including the cost of proceedings.

THE facts and circumstances which led to the filing of the complaint are amply noted in the orders of the Fora below and need no repetition at our end. However, the basic fact which we may note for deciding this petition are that Mr. Anil Goyal (now deceased), husband of the complainant had made a proposal for taking life insurance policy to the petitioner - LIC on 12.11.2004 under Jeevan Shree-I plan under table and term 162-16(25) for a sum of Rs. 5,00,000 from the Branch Office of LIC at Janak Puri through the present complainant who is claimed to be the agent of the LIC. A premium of Rs. 25,372 was also paid/remitted. However, the Branch Office found the premium deficient by Rs. 73 and, therefore, the life insured was called upon to pay the balance amount. Before making the deficiency in the premium and before the insured had underwritten the policy document, the life assured died on 20.1.2005 i.e. within two months of making the proposal. The claim lodged by the complainant was repudiated by the Insurance Company primarily on the ground that no contract of insurance had come into existence between life proposer Mr. Anil Goel and LIC of India. Complaint filed by the complainant was also resisted on the same ground but the District Forum on consideration of the matter rejected the said plea and held the repudiation unjustified and untenable and accordingly allowed the complaint. The same plea was reiterated before the State Commission but without success. Hence, this petition. We have heard Ms. Harvinder Kaur, Advocate, learned Counsel representing the petitioner and Mr. M.C. Premi, Advocate, learned Counsel representing the respondent and have given our thoughtful consideration to their respective submissions. Going by the undisputed factual position, the moot question, answer to which would decide the fate of this petition, is as to whether on the face of the said facts and circumstances, LIC of India was justified in repudiating the insurance claim on the ground that no contract of insurance came into existence between the proposer Anil Goel and LIC of India. Mrs. Harvinder Kaur has assailed the finding and orders passed by the fora below primarily on the ground that same are not based on the facts and circumstances of the case, evidence and material brought on record and least it being in consonance with the legal position as settled by the Supreme Court and National Commission in number of decisions. The main plank of her submission is that until the insurer underwriter had accepted the proposal made by the proposer and had communicated such existence to the proposer, no contract of insurance can be said to have come into existence. In support of her contention, learned Counsel has heavily relied upon a well celebrated authority of Supreme Court in the case of Life Insurance Corporation of India v. Raja Vasireddy Komalavalli Kamba and Ors., (1984) 2 SCC 719, where the Supreme Court held as under: Mere receipt and retention of premia until after the death of the appellant or mere preparation of the policy document is not acceptance and therefore do not give rise to a contract. The general rule is that the contract of insurance will be concluded only when the party to whom an offer has been made accepts it unconditionally and communicates his acceptance to the person making the offer. Whether the final acceptance is that of the assured or insurers however, depends on the way in which negotiations for insurance have progressed. Mere delay in giving an answer cannot be construed as an acceptance. Though in certain human relationships silence to a proposal might convey acceptance but in the case of insurance proposal, silence does not denote consent and no binding contract arises until the person to whom an offer is made says or does something to signify his acceptance.

SUPPORT is also sought from two decisions of this Commission, one in the case of LIC of India and Another v. Smt. Mumtaz Begum, 1992 (2) CPR 715 (NC), wherein on similar facts and circumstance the Commission held that no contract of insurance came into existence and making of the proposal and remitting the insurance premium is not of much consequence.

COUNSEL for the petitioner-LIC of India strongly contended that though the Hon ''ble Supreme Court decision in the case of Raja Vasireddy Komalavalli Kamba (supra), was pressed into service in support of her contention that no valid contract of insurance came into existence between the life assured and the LIC of India in the case in hand and the State Commission has also referred to the said decision, but strangely the State Commission has on an incorrect interpretation of the legal position laid down in the said decision has taken a contrary view. According to her, the proposal made by the life assured was still under consideration of the LIC of India and it had not been accepted and could not be accepted due to deficiency in payment of the entire amount of the due premium before the death of the deceased on 20.1.2005. Learned Counsel for the respondent-complainant has not disputed the legal position emanating from the Raja Vasireddy Komalavalli Kamba judgment but contended that in the case in hand, the proposal of insurance may be deemed to have been accepted by the LIC of India and a contract of insurance had come into existence. To support his contention, he heavily relied upon the Regulation 4(6) of the Regulations issued by the IDRA, which inter alia provided that the Insurance Company should consider the proposal of insurance with speed and efficiency and all the decisions thereof shall be communicated by it in writing within a reasonable period, not exceeding fifteen days. There cannot be denial of the position that an insurer must consider the proposal of insurance as expeditiously as it may be practicable and communicate its decision either accepting or rejecting the proposal within a reasonable time. In the case in hand the Regulation 4(6) providing a time limit of fifteen days for consideration of the proposal and communicating the decision is considered directory and not mandatory. Even if for the sake of arguments, it is presumed that the Regulation 4(6) is mandatory in nature even then, it is difficult to hold that in absence of any communication of the decision, the proposal made by the life assured will be deemed to have been accepted.

HAVING considered the matter from different angles, we are of the considered view that the State Commission fell into error in appreciating the facts and circumstances of the case and the evidence and material brought on record and dismissing the appeal and confirming the order passed by the District Forum, least it being in conformity merging out from the decision of in the case of Raja Vasireddy Komalavalli Kamba (supra), rendered by the Hon ''ble Supreme Court. In view of the above discussions, we must therefore hold that no concluded contract of insurance came into existence between the life assured and LIC of India on the basis of which the complainant can seek insurance claim.

FOR the above stated reasons, we allow the revision petition and set aside the orders passed by the Fora below. As a consequence, the complaint is dismissed, however, leaving the parties to bear their own costs throughout the proceedings before the three fora. Revision Petition allowed.