SHAHIDA BEGAM vs Life Insurance Corporation of India

THIS appeal under Section 15 of the Consumer Protection Act, 1986 (hereinafter referred to as the Act of 1986) has been filed by the appellant-complainant against the order dated 20.2.2004 passed by the learned District Forum, Jhalawar in Complaint Case No. 37/2003 by which the complaint of the appellant-complainant was dismissed.

IT arises in the following circumstances: On 17.10.2003, the appellant-complainant filed a complaint under Section 12 of the Act of 1986 before the learned District Forum, Jhalawar stating inter alia that her husband Shakir Ali (hereinafter referred to as "the deceased") was working in the office of the respondent No. 3 Manager, Rajasthan State Road Transport Corporation (for short "the Corporation"), Jhalawar and on 28.8.1999, deceased secured two insurance policies under salary saving scheme bearing Nos. 181164159 and 1811234 of Rs. 50,000 each from the office of the respondent No. 1 Manager, Life Insurance Corporation of India (for short "the LIC"), Jhalawar and the premium of both the policies was Rs. 303 and Rs. 497 p.m. respectively and the amount of premium of these two insurance policies was to be deducted from the salary of the deceased and thereafter, it was to be sent to the LIC by the Corporation-employer (respondent Nos. 3 and 4). The further case of the appellant-complainant was that deceased fell ill in the month of December, 1999 from the disease of jaundice and he died on 7.11.2000. The further case of the appellant-complainant was that during the period of illness, deceased did not attend office of the respondent No. 3 Corporation and for that reason, his salary was not drawn and when salary was not drawn, payments of the premium of his two insurance policies were also not sent by the Corporation-respondent Nos. 3 and 4 to the LIC. The further case of the appellant-complainant was that a written request was made by the deceased before the respondent No. 4 General Manager of the Corporation that since his salary was not being drawn, therefore, payments of premium of his two insurance policies were also not being made to the LIC, therefore, payments of premium of his two insurance policies be made to the LIC from his night allowance, but the same was not done by the respondent No. 4. Since the payments of premium of two insurance policies were not made by the respondent No. 4 to the LIC, therefore, deceased became defaulter in making payments of premium of insurance policies and, therefore, benefit of the aforesaid two insurance policies was not given to the appellant-complainant by the LIC, on death of the deceased. The further case of the appellant-complainant was that even the respondent No. 1 Manager of the LIC did not inform the deceased during his life time about default committed by the respondent Nos. 3 and 4 (Corporation) in paying the amounts of premium of his two insurance policies and according to the appellant-complainant, the respondent No. 1 for the first time informed through letters dated 8.8.2002 and 27.8.2002 about the default. Thereafter, the complainant-appellant met with the employees of the Corporation (respondent Nos. 3 and 4) as well as of LIC (respondent Nos. 1 and 2), but the benefit of the aforesaid two insurance policies was not made available to her on the ground that the said policies had lapsed because of non-payment of premium of these two insurance policies for some months. Hence, this complaint. A reply was filed by the respondent Nos. 1 and 2 (LIC) admitting the fact that two insurance policies were issued to the deceased under salary saving scheme and as per terms of the Scheme, the amount of premium was to be deducted by the employer (in the present case Corporation-respondent Nos. 3 and 4) and, thereafter, the same was to be sent by them to the LIC (respondent Nos. 1 and 2). Since the amount of premium of the aforesaid two insurance policies of the deceased was not sent by the respondent Nos. 3 and 4 Corporation to the LIC (respondent Nos. 1 and 2), therefore, deceased had become defaulter. IT was further submitted by the respondent Nos. 1 and 2 (LIC) that the complainant-appellant has herself admitted the fact that since no salary was being paid to the deceased, therefore, deductions from his salary were also not being made, therefore, in these circumstances, a request was made by deceased to the respondent No. 4 General Manager of the Corporation for making the payments of premium of the aforesaid two insurance policies to the LIC from his night allowance, meaning thereby deceased was aware during his lifetime that payments of premium of his two insurance policies from his salary were not being made to the LIC. Hence, it was submitted that since deceased had become defaulter, therefore, complainant-appellant was not entitled to get benefit of the two insurance policies of the deceased and the present complaint deserves to be dismissed. A separate reply was filed by the respondent Nos. 3 and 4 (Corporation) on 19.12.2003 denying the fact that deceased had ever approached the respondent No. 4 for making payments of premium of two insurance policies from his night allowance and, therefore, there was no fault on the part of the respondent No. 4. IT was further submitted by the respondent Nos. 3 and 4 (Corporation) that since in the month of December, 1999 deceased fell ill and he was on medical leave, therefore, his salary bills were not prepared and when salary bills were not prepared, deductions from his salary were not made and when deductions were not made, amounts of premium of insurance policies were not sent by the Corporation to LIC. Therefore, in these circumstances, the respondent Nos. 3 and 4 (Corporation) cannot be held guilty or liable and the present complaint deserves to be dismissed. After hearing both the parties, the learned District Forum, Jhalawar through impugned order dated 20.2.2004 dismissed the complaint of the appellant-complainant holding inter alia that the fact that the deceased made a request to the respondent No. 4 General Manager of Corporation that the payments of premium of insurance policies be made to the LIC from his night allowance, has not been proved and established by the complainant-appellant and, further, since both the insurance policies of the deceased had lapsed because of non-payments of premium of these two insurance policies to LIC, therefore, complainant-appellant was not entitled to the relief sought for. Aggrieved from the said order dated 20.2.2004 passed by the learned District Forum, Jhalawar, this appeal has been filed by the appellant-complainant. In this appeal, the following submissions have been made by the learned Counsel appearing for the appellant-complainant: (i) That in the case of insurance policy under salary saving scheme, the liability of making payment of premium of LIC is that of the employer (in the present to Corporation, respondent Nos. 3 and 4) because the employer works here as an agent and when the employer, Corporation (respondent Nos. 3 and 4) have not made payments of premium of two insurance policies of the deceased to the LIC (respondent Nos. 1 and 2), for that, the deceased or complainant-appellant should not suffer as it was the bounden duty of the Corporation-employer to make payments of premium of insurance policies to the LIC.

(ii) That, in case, payments of premium of insurance policies were not made to the LIC, since the deceased had already approached the respondent No. 4 General Manager of the Corporation with the request that payments of premium of insurance policies be made to LIC from his night allowance, therefore, from that point of view also, deceased should have not been treated defaulter. Hence, it was prayed that this appeal be allowed and impugned order of the learned District Forum be quashed and set aside and the respondents be directed to give benefit under the aforesaid insurance policies of the deceased, to the complainant-appellant.

On the other hand, the learned Counsel appearing for the respondents have supported the impugned order dated 20.2.2004 passed by the learned District Forum, Jhalawar.

WE have heard the learned Counsel appearing for the appellant-complainant as well as the learned Counsel appearing for the respondents and gone through the entire materials available on record. There is no dispute on the point that under the salary saving scheme, two insurance policies were issued by the LIC (respondent Nos. 1 and 2) to the deceased and the amount of premium of both the insurance policies was to be deducted from the salary of the deceased by the Corporation (respondent Nos. 3 and 4), who were employer of the deceased and, thereafter, the same was to be sent by them to the LIC. There is also no dispute on the point that in the month of December, 1999, deceased became ill and since he was on leave on medical ground, therefore, his salary bills were not prepared and when salary bills were not prepared, deductions were not made and when deductions were not made, the amounts of premium of insurance policies of the deceased were not sent by the Corporation-respondent Nos. 3 and 4 to the LIC for some months.

THERE is also no dispute on the point that deceased died on 7.11.2000. There is also no dispute on the point that as per terms and conditions of the policy, if premiums are not paid and default is committed in making payments of the premium of the insurance policy, the policy has to be treated as lapsed. There is also no dispute on the point that since salary bills of the deceased were not prepared for some months as he was on medical leave, therefore, deductions from his salary towards premium of the insurance policies were not made and when deductions were not made, the premium of the insurance policies of the deceased was not sent by the respondent Nos. 3 and 4 Corporation to the LIC and because of non-payment of premium of insurance policies for some months, deceased was declared defaulter and his insurance policies were treated as lapsed by the LIC.

THE question for consideration is whether in the facts and circumstances just narrated above, the deceased should be treated as defaulter or not or whether because of non-payment of premium of insurance policies issued under salary saving scheme for some months, both the insurance policies of deceased had lapsed or not.

THE learned Counsel for the appellant-complainant has placed reliance on the decision of the Hon''ble Supreme Court in Delhi Electric Supply Undertaking v. Basanti Devi, III (1999) CPJ 15 (SC)=VIII (1999) SLT 279=(1999) 3 CPR 91 (SC). In the case of Basanti Devi (supra), employer''s failure to remit to LIC the premium collected under "salary saving scheme" was examined by the Hon''ble Supreme Court. In that case, there was an agreement between LIC and Delhi Electric Supply Undertaking ("DESU"). Under the said agreement, premium payable by employees of DESU was deducted every month from their salary under "Salary Saving Scheme". Premium so collected was paid by DESU to LIC. Thus, DESU has implied authority on behalf of LIC to collect premium from its employees. Though DESU was not an insurance agent within the meaning of the Insurance Act, it was certainly an agent as defined in Section 182 of the Contract Act, 1872. Mode of collection of premium was indicated in the scheme itself and DESU was assigned the duty of collecting premium from its employees and paying the same to LIC. In the said case, the DESU failed to pay to LIC the premium collected from a certain employee. The employee died. When insurance claim was made, LIC refused to make payment on the ground that the premium collected by DESU from the deceased employee was not paid by DESU to LIC. Hence, policy of the deceased employee was no longer in force. The Hon''ble Supreme Court noticed that there was no obligation cast on the employee to pay his premium directly to LIC. The premium was payable by the employees to DESU by deduction every month from their salary and DESU paid over the same to LIC. As DESU had implied authority to collect premium from its employees on behalf of LIC, there was valid payment of premium by the employees. The Hon''ble Supreme Court accordingly held that it was the fault of DESU as agent of LIC in not paying over the premium to LIC after collecting the same from the employees in time. LIC could not be discharged from its liability under the insurance policy taken out by the deceased employee. According to the Hon''ble Supreme Court, widow of the deceased employee should not be deprived of her right under the insurance policy.

In our considered opinion, the facts of that case and the facts of the present case stand distinguished. In that case, the premium was collected from the salary of the deceased-employee by DESU, but the same was not sent to the LIC, while in the present case, since the deceased was on medical leave and his salary bills were not prepared, therefore, no deductions from his salary towards premium of insurance policies were made and when this being the position, the Corporation-employer (respondent Nos. 3 and 4) was not in a position to send premium of the insurance policies of the deceased to the LIC. No doubt as per Scheme, the amount of premium of insurance policies of deceased was to be deducted from his salary every month by the employer-Corporation (respondent Nos. 3 and 4) and, thereafter, it was to be sent by them to the LIC, but since salary bills of the deceased were not prepared, therefore, no question of paying the amount of premium of insurance policies of deceased by the employer-Corporation (respondent Nos. 3 and 4) to the LIC, arises. Had employer-Corporation respondent Nos. 3 and 4 not sent the amount of premium of insurance policies of the deceased to LIC after deducting from his salary, the position would have been different one. Hence, the ruling relied upon by the learned Counsel for the appellant-complainant in the case of Basanti Devi (supra) would not come to help to the appellant-complainant.

THE learned Counsel appearing for the appellant-complainant has further placed reliance on the decision of the State Consumer Disputes Redressal Commission, Madhya Pradesh in Life Insurance Corporation of India through Branch Manager & Others v. Smt. Mulema Singh & Others, III (2001) CPJ 555=2001 (2) CPR 148, where it was observed that in a salary saving scheme policy, if salary earned was not sufficient to remit monthly premium to LIC it is the duty of employer to intimate life assured that reasons for non-remittance of premium and to pay the same directly and default on part of employer amounts to deficiency in service. In our considered opinion, the facts of that case and the facts of the present case stand on different footing. That authority would come to help only when salary earned was not found sufficient to remit premium to LIC. In the present, salary bills of the deceased were not prepared at all for some months and, therefore, question of salary earned did not arise. Apart from this, it was the case of the complainant-appellant that deceased had himself intimated to the respondent No. 4 General Manager of the Corporation that since his salary was not being drawn, therefore, premium of insurance policies be made to LIC from his night allowance. However, this fact has not been established or proved by the complainant-appellant by producing any reliable and cogent evidence. Hence, the ruling in the case of Smt. Mulema Singh (supra) would also not be helpful to the appellant-complainant.

THE learned Counsel for the appellant-complainant has further placed reliance on the decision of the Meghalaya State Consumer Disputes Redressal Commission, Shillong, in District Manager, Food Corporation of India. Shillong v. Smt. Maiti Mazar & Others, III (2004) CPJ 506=2004 (3) CPR 21, where it was held that it was the duty of the FCI to continue to remit premium even if employee was absent from duty. In our considered opinion, with due respect, keeping in mind the law laid down by the Hon''ble Supreme Court in the case of Basanti Devi (supra), the liability of the employer comes into picture only when salary bill is prepared and deduction is made. Since in the present case, salary bills of the deceased were not prepared at all for some months and no deductions from his salary towards premium of insurance policies were made, therefore, no question of sending payment of premium of insurance policies of deceased to the LIC by the employer-Corporation (respondent Nos. 3 and 4) arises and, thus, the employer-Corporation (respondent Nos. 3 and 4) could not be held responsible for non-payment of premium of insurance policies of deceased to LIC. Hence, the above authority in the case of Smt. Maiti Mazar (supra) would also not come to help the appellant-complainant, in view of the law laid down by the Hon''ble Supreme Court in the case of Basanti Devi (supra).

THUS, in view of the discussion made above, it is held that no doubt premium of two insurance policies of the deceased issued under salary, saving scheme was to be deducted from his salary by the employer-Corporation (respondent Nos. 3 and 4) and, thereafter, it was to be sent by them to the LIC (respondent Nos. 1 and 2), but since no salary bills of the deceased were prepared for some months and no deductions from his salary towards premium of insurance policies were made, therefore, in such a situation, the question of sending premium of insurance policies of deceased to LIC by the Corporation-respondent Nos. 3 and 4 does not arise and they could not be held responsible for not sending the premium of insurance policies of the deceased to LIC for the period for which salary of deceased was not drawn. Had Corporation-respondent Nos. 3 and 4 not sent the premium of insurance policies of deceased to LIC, after deducting from his salary, the position would have been different one. Furthermore, had the appellant-complainant established or proved the fact by producing reliable evidence that deceased had informed the respondent No. 4 General Manager of the Corporation that payment of premium of insurance policies to LIC be made from his night allowance, the position would have been different one to some extent.

THUS, in the facts and circumstances just narrated above, as per terms and conditions of the policies, if on account of non-payment of premium of insurance policies to LIC for some months, the deceased was declared defaulter and his policies were treated as lapsed by LIC, no illegality or irregularity has been committed by the LIC (respondent Nos. 1 and 2) in doing so and the findings of the learned District Forum that since both the insurance policies of deceased have lapsed because of non-payment of premium of these two insurance policies to LIC (respondent Nos. 1 and 2), therefore, the complainant-appellant was not entitled to the relief sought for under these two insurance policies, are liable to be confirmed one. For the reasons stated above, no interference is called for with the impugned order of the learned District Forum, Jhalawar dated 20.2.2004 as it does not suffer from any basic illegality or infirmity and this appeal deserves to be dismissed. Accordingly this appeal filed by the appellant-complainant is dismissed. Appeal dismissed.