Life Insurance Corporation of India vs NIRMALA

THE short question involved in this appeal relates to payment of paid-up value of the Life Insurance Policy, which had lapsed. THE District Forum, Patiala vide order dated August 20,1996 directed for lump-sum payment of Rs.15,000/- including Rs. 9,300/- the paid-up value and interest thereon to Nirmala widow of Raju, the insured. THE direction was given to the Life Insurance Corporation to pay the amount and this appeal is by the Insurance Corporation.

ON January 28, 1991 the Life Insurance Policy was purchased by Raju, husband of the complainant Nirmala. It was for a sum Rs. 50,000/-. The premium was payable quarterly in the months of January, April, July and October of every year. For non-payment of the premium for the quarter October, 1992 the policy lapsed. Subsequently, on October 12,1993 the policy was revived. Again the policy lapsed in January, 1994 and was not got revived. Raju died on December 17,1994. The Corporation was informed. Inspite of the protected correspondence the amount insured was not paid that the complaint was filed before the District Forum. The Life Insurance Corporation contested the complaint inter-alia on several preliminary objections, the complainant was not a consumer as defined, the Forum has no jurisdiction to entertain the complaint, more so when the claim was repudiated. Civil Court had the jurisdiction, disputed questions of facts were involved all the legal heirs of the deceased were not impleaded. On merits, it was stated that the complainant was a nominee in the policy but as such she was not a consumer. The factum of issuing of the insurance policy was admitted. It was also admitted that Raju died on December, 17,1994. As per intimation of the death received, Raju had died of cancer. The policy stood lapsed that paid- up value of Rs. 9,300/- which was only payable after scrutiny of the necessary requirements of the complainant. Legal notice from the Advocate was received. It was denied that Rs.50,000/- was payable. The complainant was asked to furnish documents including hospital records. It was only after processing of the claim that the paid- up value could be paid. The complaint was alleged to be false and frivolous. The complainant produced her own affidavit whereas Sh. S.D. Sharma, Assistant Administrative Officer of the Life Insurance Corporation submitted his affidavit. Certain documents (correspondence) between the Corporation and the complainant were referred to Annexures Rl to R7. In Annexure R7 reference was made to the death of Raju in Rajindra Hospital, Patiala. Annexure R6 is the insurance policy and other letters are asking for details of the claim. Mr. B.J. Singh, Advocate, learned Counsel for the Corporation has argued that present case cannot be held to be a case of deficiency in rendering service as for want of full particulars about the illness of Raju, the claim could not be settled. There is fallacy in this argument. When intimation of death was communicated to the Corporation and further information that deceased was hospitalised in Rajindra Hospital, rest was only a matter of investigation, if any, required to be conducted by the Corporation regarding previous illness of the complainant. Non-settlement of the claim within a reasonable period say 3/4 months without any sufficient cause per se amounts to deficiency in rendering service. In the case where some investigation is required to be made, 3/4 months'' time is reasonable that the Corporation should finalise the claim. Simply prolonging the investigation by indulging into correspondence, will not save the Corporation.

Learned Counsel for the Corporation relying upon the decision of the Supreme Court in AIR 1962 Supreme Court 814 argued that if sufficient material is collected that the insured had concealed his previous ailment at the time of taking insurance policy even the premium paid is not required to be refunded. Further reference is made to Annexure A5, where information was asked for from the complainant and the matter was being delayed. This contention in the facts of the present case cannot be accepted. It is not a case of refund of any premium paid after holding that the policy was void or illegal from the very inception, rather the admitted case is that the policy lapsed, on account of non-payment of the premium which entitled the insured either to get it at his sweet Will or for his legal heirs to get it after his death the paid-up value. The Corporation did not collect any material on the basis of which a valid repudiation of the claim could be made. The deficiency is writ large in the circumstances and District Forum was right in directing the appellant Corporation to make payment of the paid-up value of the policy i.e. Rs. 9,300/-. Mr. B.J. Singh, learned Counsel for the Corporation relying upon the decision of the Supreme Court in "New India Insurance Co. v. Adarsh Bazar Wholesale and Retail Corporation and Consumer Store Ltd., III (1996) CPJ 8 (SC)" has argued that compensation in the form of interest more than @ 12% per annum should not be allowed in the case of Life Insurance Corporation. Accepting the same, we direct the Life Insurance Corporation to pay a sum of Rs. 9,300/- with 12% per annum interest thereon w.e.f. March 16,1994 (allowing three months'' time from the date of death of the deceased to settle the claim) till payment. Order of the District Forum is modified to that extent, while accepting the appeal. There will be no order as to costs. Appeal disposed of.