Life Insurance Corporation of India vs SAMPOORAN SINGH

THIS is a Revision Petition against the Order of 17th July, 1991 of the Commission of Union Territory of Chandigarh.

THE facts in brief are that the Respondent Complainant had taken out an insurance policy for Rs. 40,000/- in 1982 for the purpose of payment of estate duty on his only residential house in Chandigarh in the event of his death. THE insured paid five premia from 31st March, 1982 to 9th April, 1985, in all totalling Rs. 11,220/-. THE estate duty on one residential house-owner was abolished in 1985. THE insured, thereafter stopped paying the premium on this policy. The Appellant-Opposite party offered to pay to the insured a surrender value of Rs. 3,35590 ps. of the policy which had now become inoperative due to the abolition of the estate duty. The Respondent-Complainant, however, claimed a refund of the entire sum of premia paid by him viz. Rs. 11,220/- along with interest for a period of 5 years.

The District Forum observed that if the complainant had died during the period while the estate duty was in force, the Insurance Company would have been liable to pay the Estate Duty Authorities the sum of Rs. 40,000/-. This contingency, however, did not occur before the estate duty was abolished on single house owners. In consequence, the insured enjoyed the coverage of risk under the insurance policy for a period of three years and the insurer is entitled to full premia for the said period. The District Forum, therefore, came to the conclusion that the complainant had no justified grievance and dismissed his complaint. However, the Insurance Company was ordered to pay Rs. 3,355-90 ps. to the claimant as agreed by the former in the reply.

THE State Commission in appeal felt that the case called for an equitable and fair settlement. According to the State Commission the Respondent-Appellant did not voluntarily surrender the insurance policy; that the policy became inoperative as a consequence of the Government of India policy decision to abolish estate duty on ''single house'', and that there was no justification for the Appellant Company paying a mere fraction of the amount of premium paid by the insured. THE State Commission felt that in the facts and circumstances of the case the insured was fully entitled to his own money viz. Rs. 11,220/- paid as premium on a policy which had become in fructuous due to the decision of the Govt. of India and not due to any default on the part of the insured and that the element of risk etc. undertaken by the insurer was more than covered by the fact that the Insurance Company had full use of the complainant''s money for nearly a decade. We have heard the parties and gone through the record. THE position that emerges is: 1 With the abolition of estate duty on single house owned by a person the Respondent Complainant ceased to have any insurable interest in the nature of liability to estate duty. Consequently the purpose of coverage under the insurance policy became inoperative and for that reason, it would appear the insured stopped the payment of premia thereafter. As observed by the District Forum for a period of three years before the abolition of the estate duty on ''one house'', the insured had enjoyed the insurance coverage and premia were paid during this period for this coverage. More importantly, as the District Forum had observed if the complainant had died during this period (an event which did not occur) the insurer would have had to pay the full amount of Rs. 40,000/- even though a very small fraction of the premia would have been realised by that time by the insurer. This only underlines the extent of benefit which the insured enjoyed during the period the policy remained effective. THEre is, therefore, no case for refund of the premia paid to the insurer during the period in which the policy remained effective. THE offer of the Appellant insurer to pay the surrender value to the insured on the policy becoming inoperative was really most equitable and fair. More importantly the policy became inoperative due to the act of the State and there was no deficiency on the part of the appellant insured. Again service under an insurance policy can arise only after the occurrence of the contingency viz. the death of the insured in this case. As, however, the purpose of the policy became inoperative due to the act of the State, there should be no deficiency of service on the part of the Appellant Insurance Company. Consequently any dispute between the insured and the insurer as to the amount payable to the insured due to the policy becoming prematurely inoperative cannot be construed as deficiency of service on the part of the insurer.

THE Order of the State Commission is set aside and the Order of the District Forum is confirmed. Order accordingly.