This appeal has been filed by the appellant M/s. ICICI Prudentail Life Insurance Co. Ltd. against the order dated 23.12.2014 of the State Consumer Disputes Redressal Commission,  Maharashtra, (in short ‘the State Commission’) passed in Complainant No.CC/11/334.

2.      Brief facts of the case are that Vijay Vasant Salvi had taken a housing loan from respondent No.2.  He also filled a proposal form on 24.06.2011 for obtaining insurance under Group Insurance Policy for home loanees from the appellant.  Mr. Vijay Vasant Salvi expired on 29.07.2011 and by that time the proposal was not accepted and no policy was issued by the appellant.  However, the insurance claim was filed by the nominee who is the complainant/respondent No.1 in the present case.  The claim was repudiated vide letter dated 11.10.2011 on the ground that the proposer did not come forward for medical tests and therefore, the proposal was not accepted and no policy issued before his death. 

3.      Aggrieved by the repudiation of the claim, the complainant has filed consumer complaint bearing No.CC/11/334 before the State Commission.  The complaint was resisted by the appellant by filing the written statement.  The grounds taken in the repudiation letter were reiterated, however, the State Commission vide its order dated 23.12.2014 allowed the complaint as under:-

 “1)     Complaint is partly allowed.

2)      Opponent no.1 is directed to settle the claim of Rs.26,43,038/- as claim payable under Home Assurance Policy and forward these proceeds to the opponent no.2 under intimation to the complainant.  Opponent no.2 is directed to adjust these claim against the unpaid balance loan amount and issue No Dues Certificate to the complainant. 

3)      Both the opponents are directed to comply this order within 90 days from the date of this order.  Failure shall result payment of Rs.1,000/- per day to the complainant till compliance.

4)    Opponent no.1 is directed to pay an amount of Rs.1,00,000/- for mental agony and distress to the complainant.

5)    Opponents shall bear their own costs and pay an amount of Rs.25,000/- as costs of litigation to the complainant.

6)      Certified copies of this order be furnished to the parties.”

4.      Hence the present appeal.

5.      Heard the learned counsel for the parties and perused the record.

6.      Learned counsel for the appellant stated that the proposal form was filled on 24.06.2011.  On 25.06.2011, the appellant wrote to the proposer to get the medical tests, so that the policy could be issued.  However, the proposer did not take any interest and never appeared for medical examination and therefore, no policy could be issued.  In the meanwhile, proposer was admitted in the hospital on 25.7.2011 and finally expired on 29.07.2011 after undergoing heart surgery which is evident from the discharge summary given by the K.E.M. Hospital dated 29.7.2011.  Learned counsel argued that due to non-availability of the medical record about the proposer, the proposal was not accepted by the Insurance Company, therefore, no policy was issued before the death of the proposer.  Thus, there is no concluded contract between the insurer and the proposer and therefore, no liability arises on the part of the Insurance Company in the present case.  It is true that there is no mention of the medical examination to be undertaken by the proposer in the proposal form, however the master policy taken by the respondent No.2 from appellant has the provision that Insurance Company can change the norms for examining the person who is to be insured and accordingly the medical examination of the proposer was required.  In support of his argument, learned counsel referred to the following judgments:-

1.     Elsa Tony Phillip Vs. LIC of India and Ors., I (2009) CPJ 18 (NC).  It has been held that:-

“3.   Admittedly, neither acceptance of the proposal was communicated nor policy was issued to Tony Phillip by the respondent- Insurance Company.  Considering the ratio of the said decision of Supreme Court, mere encashment of cheque given towards first premium is not enough to conclude that a contract had come into existence between the parties.  Decision in RP No.702 of 2003, LIC & Ors. V. Smt. Raksha Devi, decided on 20.10.2005 is of no help to the appellant.  Impugned order, thus, does not suffer from any legal infirmity and the appeal deserves to be dismissed being without merit. ”

2.    Ajay Singh Bhambri Vs. Axis Bank and Anr., I (2014) CPJ 544 (NC).  It has been held that:-

3.     Life Insurance Corporation of India Vs. Raja Vasireddy Komalavalli Kamba & ors., AIR 1984 SC 1014.  It has been held that:-

13.      The mere receipt and retention of premium until after the death of the applicant or the mere preparation of the policy documents is not acceptance.  Acceptance must be signified by some act or acts agreed on by the parties or from which the law raises a presumption of acceptance.  See in this connection the statement of law in Corpus Juris Secundum, Vol. XLIV page 986 wherein it has been stated as:-

“The mere receipt and retention of premiums until after the death of applicant does not give rise to a contract, although the circumstances may be such that approval could be inferred from retention of the premium.  The mere execution of the policy is not an acceptance; an acceptance, to be complete, must be communicated to the offerer, either directly, or by some definite act, such as placing the contract in the mail. The test is not intention alone.  When the application so requires, the acceptance must be evidenced by the signature of one of the company’s executive officers.”

14.  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.

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.”

7.      It was further pointed out by the learned counsel for the appellant Insurance Company that no claim of death be entertained within 45 days from the initiation of the policy except if the death has occurred due to an accident by sustaining injury due to violent external and visible means.  Terms and conditions of the policy No.4 reads as under:-

          “The Death benefit shall not apply in the event of death of a Member due to a cause other than accident within a period of 45 days from the date of issuance of the Life Cover and in whose respect the Company had not required further evidence of health at the time of commencement of Life Cover.  However, the Company shall return the Premium paid after deducting the expenses towards the issuance of the Life Cover.  For the purpose of the above clause, the accident must be caused by violent, external and visible means.”

8.      On the other hand, learned counsel for the respondent No.1/complainant stated that in the present case the premium was accepted by the Insurance Company and therefore, the risk is covered from the date of receipt of the premium.  The learned counsel mentioned that in D. Srinivas Vs. SBI Life Insurance Co. Ltd. & Ors.,  Civil Appeal No.2216 of 2018, decided on 16.2.2018, Hon’ble Supreme Court has allowed the insurance claim in a matter where also the policy was not issued and the finding of the National Commission in a majority judgment was that there was no concluded contract and the insurance claim was rejected.  The Hon’ble Supreme Court has held that it is the duty of the insurance company to take the decision on the proposal form within a reasonable time.  Learned counsel referred to the following portion of the judgment of the Hon’ble Supreme Court in D. Srinivas Vs. SBI Life Insurance Co. Ltd. & Ors. (supra):-

“10. In cases of loan amount exceeding Rs.7.5 lacs, the provision in the policy is as under:

Where the loan Amount Exceeds Rs.7.5 Lacs “As I am willing to join for life insurance cover from SBI Life Insurance Co. Ltd. subject to my under-going the medical examination and satisfying the health underwriting criteria of the Company, I authorise the Bank to debit my  7 account for the standard gross premium plus any additional premium that may be required by SBI Life based on medical underwriting. I also note that in the event of SBI Life Insurance Co. Ltd. not being in a position to accept my life insurance for any reason whatsoever, the initial premium amount remitted by the Bank would be refunded and credited back to my account.”

11. It is clear from the above that the proposer was willing to join the life insurance coverage from the respondent insurance company subject to his undertaking medical examination and for his willingness he authorized the bank to debit his account for payment of the premium. This clearly implies that medical examination was to take place prior to the premium being debited from the bank account of the proposer. The specific condition in the policy is that in case the loan amount exceeds Rs.7.5 lacs the medical examination was compulsory. If the medical examination was compulsory for such cases it should have been done along with filing of the proposal form before the payment of the premium. If the proposal was not accepted for any reason the premium would have been credited to the account of the proposer. The premium has been refunded after 23.2.2011. From this, it is clear that the insurance company had not rejected the proposal before 23.2.2011.

15. It is an admitted fact that the premium was paid on 29.09.2008. That it was only in 18.01.2011 that the respondent insurance company informed the appellant that the policy was not accepted by them. We are unable to fathom the reason for such excessive delay in informing the appellant, which cannot be excused. We are of the opinion that the rejection of the policy must be made in a reasonable time so as to be fair and in consonance with the good faith standards. In this case, we cannot hold that such enormous delay was reasonable. Moreover, it is borne from the records that the premium was only re-paid on 24.02.2011, after a delay of more than one year five months. If we consider above aspects, it can be reasonably concluded that the insurer is only trying to get out of the bargain, which they had willfully accepted. From the aforesaid circumstances we can easily conclude that the policy was accepted by the insurer.

16. In the circumstances, there is no reason to believe that there was no complete contract. There is clear presumption of the acceptance of the proposal in favour of the proposer. Therefore, the majority view of the Commission would not sustain.

9.      Learned counsel for the respondent No.1/complainant mentioned that the appellant insurance company is mainly relying on the judgment of Hon’ble Supreme Court in Life Insurance Corporation of India Vs. Raja Vasireddy Komalavalli Kamba & ors. (supra). The Hon’ble Supreme Court has also referred this judgment in the judgment in D. Srinivas Vs. SBI Life Insurance Co. Ltd. & Ors. (supra) and has observed the following:-

“12. Our attention has been drawn to the case of LIC v. Raja Vasireddy Komalavalli Kamba and Ors., (1984) 2 SCC 719, wherein this Court has clearly stated that the acceptance of an insurance contract may not be completed by mere retention of the premium or preparation of the policy document rather the acceptance must be signified by some act or acts agreed on by the parties or from which the law raises a presumption of acceptance.

13. Although we do not have any quarrel with the proposition laid therein, it should be noted that aforesaid judgments only laid down a flexible formula for the court to see as to whether there was clear indication of acceptance of the insurance. It is to be noted that the impugned majority order merely cites the aforesaid judgment, without appreciating the circumstances which give rise to a very clear presumption of acceptance of the policy by the insurer in this case at hand. The insurance contract being a contract of utmost good faith, is a two-way door. The standards of conduct as expected under the utmost good faith obligation should be met by either party to such contract.”

10.    Learned counsel further stated that the State Commission has already considered all the issues raised by the Insurance Company in the present appeal and has allowed the complaint.  The State Commission has also observed that under Section 64VB of the Insurance Act 1938, the risk is covered from the date of receipt of the premium by the Insurance Company.  

11.    It is also contended by the learned counsel for the complainant that the alleged letter written for medical examination was never received by the proposer and no proof has been filed by the appellant in this regard.  It was also stated by the learned counsel that the alleged letter advising proposer for medical examination does not bear any date and therefore, the contention that it was sent on 25.6.2011 is not substantiated from the record.  This letter has been produced only to justify the delay in taking the decision on the proposal form.  Learned counsel further relied upon the judgment of this Commission in Life Insurance Corporation of India Vs. Savitri Devi, RP No.2211 of 2018, decided on 27.08.2018, which reads as under:-

12.   I have carefully considered the arguments advanced by both the learned counsel for the parties and have examined the material on record.  In the present case, the proposal form was filled on 24.06.2011 and the proposer died on 29.7.2011.  It is the claim of the Insurance Company that they asked the proposer to undergo medical examination, however, he did not appear for the same and therefore, the proposal was not accepted and the policy was not issued.  It is surprising that the letter allegedly written on 25.6.2011 for undertaking medical examination does not bear any date and therefore, it becomes doubtful.  The second letter dated 18.8.2011 has been sent by the appellant to the proposer for complying with the earlier request of medical examination. It is also surprising that this letter does not give any reference to earlier letter and it has been drafted as if the appellant knew about the death of the proposer, though it has been written by the appellant allegedly without knowing the death of the proposer. Moreover, proposal form does not indicate any medical examination and even the master policy does not mention any clear direction for medical examination.  Clearly, the right of the Insurance Company to insure a person or to reject the proposal is also there and this right is mentioned in the master policy.  Whether these letters are believed or not, the fact remains that the proposal was filed on 24.06.2011 and the proposal was not accepted till the death of the proposer on 29.7.2011 and no policy was issued.  The question to be decided in the present appeal is whether the Insurance Company is liable to pay insurance claim in the facts and circumstances of the present case.  Hon’ble Supreme Court in Life Insurance Corporation of India Vs. Raja Vasireddy Komalavalli Kamba, (supra), has observed that delay in approving the proposal does not mean that the contract has been concluded.

13.    Learned counsel for the respondent/complainant mainly relied upon the judgment of the Hon’ble Supreme Court in D. Srinivas Vs. SBI Life Insurance Co. Ltd. & Ors. (supra), wherein the Hon’ble Supreme Court has allowed the insurance claim and the majority judgment of this Commission has been set aside agreeing with the minority judgment substantially.  The Hon’ble Supreme Court in D. Srinivas Vs. SBI Life Insurance Co. Ltd. & Ors. (supra), has observed that the judgment of the Apex Court in Life Insurance Corporation of India Vs. Raja Vasireddy Komalavalli Kamba, (supra) gives flexibility to the courts to assess whether the contract could be considered as concluded or not in a given set of facts and circumstances.  It is seen that in D. Srinivas Vs. SBI Life Insurance Co. Ltd. & Ors. (supra) case, the proposal was filed on 29.09.2008 and death of the proposer occurred on 17.12.2009 and thus, there was a huge delay of more than one year in taking decision on the proposal of the proposer. In contrast to the facts of that case, in the present case the death has occurred after about a month from the date of proposal.  Thus, the cases are not comparable. 

14.    From the above, it is clear that the judgment of Life Insurance Corporation of India Vs. Raja Vasireddy Komalavalli Kamba, (supra), has not been overruled, rather, it is to be seen whether there was any clear indication of acceptance of the proposal. From the examination above, it has been seen that the facts of the two cases are quite different and the judgment of D. Srinivas Vs. SBI Life Insurance Co. Ltd. & Ors. (supra) cannot be directly applied in the case in hand.  The learned counsel for the respondent has also relied upon the judgment of this Commission in Life Insurance Corporation of India Vs. Savitri Devi (supra), but in this case also the delay is more than one year when the LIC did not take the decision.  Hence, this case is also not comparable to the facts of the present case. 

15.    The claim of the respondent/complainant is otherwise also not payable because if the death occurs within 45 days of commencement of the policy, as per condition No.4 then claim is not payable if the death has not been caused due to any accident by violent external and visible means.  In the present case, the death claim is within 45 days from the commencement of the policy and the death has not occurred due to an accident caused by violent external and visible means.  In fact, the death has occurred due to heart surgery and the proposer was admitted in the hospital.  This is evident from the discharge summary released by the K.E.M. Hospital dated 29.7.2011.  Thus, the death has not occurred due to any accident caused by violent external and visible means, rather, it has been caused due to heart disease.  In such situation, the claim does not become payable.

16.    Though I had given the minority judgment in First Appeal No.560 of 2012, SBI Life Insurance Co. Ltd. vs. D. Srinivas & Ors.,, decided on 12-08-2016 (NC), which has been upheld by the Hon’ble Supreme Court in D.Srinivas Vs. SBI Life Insurance Co. Ltd. & Ors.(supra), but in my view the present case cannot be compared with D.Srinivas Vs. SBI Life Insurance Co. Ltd. & Ors.(supra) as the death has occurred within 40 days of the filing of the proposal form.  In this case I would place heavy reliance on the judgment of Hon’ble Supreme Court in Life Insurance Corporation of India Vs. Raja Vasireddy Komalavalli Kamba, (supra) and would conclude that the policy contract was not concluded between the insurer and the proposer.

17.    Section 64VB of the Insurance Act, 1938,  reads as under:-

“64 VB. No risk to be assumed unless premium is received in advance. (1) No insurer shall assume any risk in India in respect of any insurance business on which premium is not ordinarily payable outside India unless and until the premium payable is received by him or is guaranteed to be paid by such person in such manner and within such time as may be prescribed or unless and until deposit of such amount as may be prescribed, is made in advance in the prescribed manner.

(2) For the purposes of this section, in the case of risks for which premium can be ascertained in advance, the risk may be assumed not earlier than the date on which the premium has been paid in cash or by cheque to the insurer.

Explanation. - Where the premium is tendered by postal money-order or cheque sent by post, the risk may be assumed on the date on which the money-order is booked or the cheque is posted, as the case may be.

(3) Any refund of premium which may become due to an insured on account of the cancellation of a policy or alteration in its terms and conditions or otherwise shall be paid by the insurer directly to the insured by a crossed or order cheque or by postal money-order and a proper receipt shall be obtained by the insurer from the insured, and such refund shall in no case be credited to the account of the agent.

(4) Where an insurance agent collects a premium on a policy of insurance on behalf of an insurer, he shall deposit with, or despatch by post to, the insurer, the premium so collected in full without deduction of his commission within twenty-four hours of the collections excluding bank and postal holidays.

(5) The Central Government may, by rules, relax the requirements of sub-section (1) in respect of particular categories in insurance policies.

[(6) The Authority may, from time to time, specify, by the regulations made by it, the manner of receipt of premium by the insurer.]”  

18.    This Section only cautions the Insurance Companies that they will not cover any risk without receiving the premium.  Section does not confirm the reverse of this that if the premium has been paid the risk is automatically covered.

19.    Based on the above discussion, I find merit in the appeal and accordingly FA No.107 of 2015 is allowed.  The order dated 23.12.2014 of the State Commission passed in Complaint Case No.11/334 is set aside and the complaint stands dismissed.