Life Insurance Corporation of India vs Shashi Gupta

THIS is an appeal filed by the Life Insurance Corporation of India (for short the Corporation) and its Branch Manager at Chandigarh who were Opposite Parties in the complaint which was filed by the present Respondent Smt. Shashi Gupta before the State Consumer Disputes Redressal Commission, Union Territory of Chandigarh at Chandigarh. By the impugned order the State Commission had ordered the Corporation to pay the accident benefit amounting to Rs. 1.00 lakh with interest at the rate of 12% per annum from 20th November, 1991 till the date the amount is paid. The date of November 20,1991 was arrived at after allowing three months as reasonable time to the Corporation for the settlement of claim.

THE facts as appear from the record are that Shri Vijay Gupta had obtained a life insurance policy for Rs. 1.00 lakh on his life on 1st April, 1989 from the Corporation and has designated his wife Smt. Shashi Gupta, the present Respondent, as nominee of the policy. THE type of assurance was 25 years money back policy with profits (with accident benefit). Annual premium was fixed at Rs. 5,787.90 which was payable in one instalment on the 1st of April every year. Shri Vijay Gupta had paid two instalments of premium on that policy i.e. in 1989 and 1990 but did not pay the annual premium which fell due on 1st April, 1991. Unfortunately, he was gunned down by the terrorists /militants on 10th May, 1991 in front of his house in Chandigarh. On 6th June, 1991 his widow i.e. the Complainant wrote in the matter to the Corporation which acted with reasonable promptness and sent to her a cheque for Rs. 1,13,925/- on 19th July, 1991 in full settlement of the claim. THE discharge certificate is at page 19 of the paper book. THE break of the amount is given as follows : Out of the above amount Rs. 5,787.90 as annual unpaid premium was Rs. 87.10 as late fee were deducted. After having received the amount of Rs. 1,13,925/- the complainant addressed a communication to the Corporation on 20th August, 1991 asking for the payment of accident benefit amounting Rs. 1.00 lakh plus interest thereon in terms of the accident benefit clause of the policy. This claim was resisted by the Appellant herein and thereupon the Complainant approached the State Commission with a complaint under the Consumer Protection Act, 1986 for the recovery of Rs. 1,25,000/- including accident benefit of the policy equal to the sum assured plus 18% interest and for the award of farther compensation on account of mental agony and family distress as the Opposite Parties had failed to make the payment by adopting unreasonable attitude.

The Opposite Parties i.e. the present Appellants contested the complaint. According to them the premium of the policy which was due on 1st April, 1991 was ot paid and therefore, the policy had lapsed without acquiring any value as per the conditions laid down in the policy. However, they took a lenient view and made some relaxations. The claim for basic sum assured inclusive of bonus was paid to the Complainant purely on ex-gratia basis. According to the Opposite Parties even the claim for the basic sum assured as per policy contract was not payable under the policy and therefore, the question of consideration of accident benefit claim did not arise under the lapsed policy. The Complainant in the complaint has relied upon a certain circular issued by the Corporation. About it, the plea of the Opposite Parties is that it only contains administrative instructions for making relaxation subject to the satisfaction on certain points and then considering payment of the basic sum assured on ex-gratia basis and on that ground lenient view was taken while making payment on exgratia basis to the Complainant. As noticed in the beginning of this order the State Commissions overruled the objections of the Corporation and granted the relief to the Complainant.

FEELING aggrieved of that order the Opposite Parties have filed this appeal. The learned Counsel for the Appellants rightly argued that the circular about relaxation which has been relied upon by the Complainant-Respondent does not help her for receiving accident benefit under the policy. The relevant portion of the circular reads as follows : "At present the Policies which/have run for three years acquire Surrender Value with a corresponding vested right to Paid-up value. Consequently, within a period of three years from the date of commencement of risk, if the premiums are not paid within the Days of Grace of the due premium, the Policy lapses and nothing is payable there under. The matter has been reviewed and in order to provide relief to the claimants in cases where death takes place after the Days of Grace in the third year after payment of two full years'' premium, it has now been decided to give the following relaxations in the matter of settlement of Death Claims arising by the death of the Life Assured on or after 1-10-1987. After at least two full years premiums have been paid under a Policy : (a) If the death of the Life Assured were to occur after expiry of Days of Grace but within three months of the due date of the first unpaid premium, consideration of claim to the extent of the full Sum Assured together with the declared bonuses subject to recovery of the unpaid premiums. "

(Emphasis added) In the present case the assured had paid the first two premiums in full. His death had occurred after the expiry of ''days of grace'' but within three months of the due date of the first unpaid premium. Thus under the relaxation clause the Complainant was only entitled to the extent of full sum assured together with the declared bonuses subject to recovery of the unpaid premium. To ascertain the sum assured we will have to look at the policy, a copy of which is at pages 16 to 18 of the paper book. In the column meant for sum assured the amount given is Rs. 1,00,000.00. Thus the sum assured under the policy was only Rs. 1,00,000.00. Though in terms of the policy accident benefit was also available on the death of the life assured but that additional sum equal to the sum assured under the policy will not fall under the term ''sum assured''.

THE said circular relied upon by the Complainant itself shows that the payments are made only on ex-gratia basis and not as of right. THE relevant portion of that circular reads as follows : "If the competent authority is satisfied that the claim is otherwise admissible, the above referred relaxations may be allowed and the claim may be admitted on ex-gratia basis by the authority competent to decide admission and Payment of Claim by Death under Policies of less than 3 years duration. THE extent of the competent authority will jbe as provided under Chapter II, Item I (b) /(ii) of the (Financial Powers) Standing."

It is a settled principle that an ex-gratia payment cannot be claimed as a matter of right. It is purely in the discretion of the competent authority of the Corporation whether to sanction such payment or not. It may be mentioned here that before the State Commission the Corporation relied upon certain circular dated 16th December, 1987 addressed by the L.I.C.''s Chandigarh Divisional Office to its Branch Managers. That circular laid down : "Further, we may inform you that certain relaxations have been given vide CO. Circular No. 281/23 dated 15-10-87. THEse are the administrative instructions and have not become part of Forfeiture Regulations. THE claim in such cases is to be settled on Exgratia basis. As such, no DAB claim is to be considered where premiums have not been paid for full three years."

THE State Commission came to the opinion that the language of the circular dated 16th December, 1987 was clear and there was no ambiguity therein and therefore, it was not open to a subordinate authority to nullify the relaxations allowed by the Central Office of the Corporation. THE Divisional Office did not lay down any new relaxation, it only tried to clarify the circular issued by the Central Office. We find that the clarification is in consonance with the circular of the Central Office. If the Divisional Office had tried to restrict in any way the circular about the relaxation issued by the Central Office, the Central Office would have rescinded the circular of the Divisional Office long time back. We have sympathy with the widow but sympathy cannot override the law. The Complainant is entitled only to benefit to which she is entitled under the circular containing relaxation. As discussed above she is not entitled to anything more than the amount already paid to her. For the reasons given above we accept the present appeal, set aside the order of the State Commission and dismiss the complaint filed by the Complainant. We make no order as to costs. Appeal allowed. Complaint dismissed.