1.      This Revision Petition No.1392 of 2012 challenges the impugned order of Andhra Pradesh State Consumer Disputes Redressal Commission, Hyderabad (‘State Commission’, hereafter) dated 09.11.2011. Vide this order, the learned State Commission modified the order dated 18.12.2008 of the East Godavari District Consumer Disputes Redressal Forum, Kakinada (‘District Forum’, hereafter) and allowed in part the Appeal No.463 of 2009 by fixing jointly and severally liability of the Petitioner/OP2 (‘OP2’, hereafter) and Respondent No.1/OP1 (‘OP1’, hereafter) to pay the sum insured to the Respondent No.2/Complainant (‘Complainant’, hereafter).

2.      As per Report of the Registry, there is a delay of 6 days in filing of the Revision Petition. However, as per the Application seeking condonation of delay, there is a delay of 5 days.  For the reasons stated in the Application, the delay is condoned.

3.      Briefly, the facts of the case, as per the Complainant, are that she is the wife of late Shri RV Subrahmanyam who worked as General Secretary, Kandregula Primary Agricultural Co-operative Society. He died on 14.11.2002. During his lifetime, he had taken Jeevan Mitra Double Cover Endowment + Profits+ Accident Benefit policy for Rs.35,000 for 15 years, commencing from 28.10.1998. The policy was linked with Employees Provident Fund Organization (OP-1) wherein it had paid the yearly premium of Rs.2,800 to LIC (OP-2) on his behalf. He would be entitled to payment of Rs.70,000 besides, other benefits from the insurance company. When she preferred the claim, OP-1 sent discharge voucher along with policy bond to OP-2, which in turn informed her that she was not entitled to death benefit, as the premium due for 10/2000 was not paid by OP-1. It is for the PF authorities to pay the premium and it ought to have informed the policyholder if for any reason the amount is not paid. OP-1 ought to have informed the nominee that the policy was in a lapsed state instead of sending discharge voucher etc. Equally, the insurance company ought to have informed OP-1 to revive the policy directing it to pay the amount. As PF authorities failed to issue notice to the assured to pay the premium amount and the OP-2 failed collect the amount from OP-1 even after agreeing collect the same, they cannot now deny the benefits covered under the policy to the nominee. Therefore, she filed a Consumer Complaint before the District Forum claiming Rs.70,000 covered under the policy + bonus with other accident benefits, with interest and costs. 

4.      The OP1 resisted the case. While admitting that assured had taken the LIC policy and it had agreed to collect the premium from out of the provident fund, they paid yearly premium for 10/1998 and 10/1999. Since there was no sufficient amount in the account of the assured for 10/2000 it could not send any premium. As per para 62(3) of EPF Act, the premium should be made out of member's own share of provident fund. It has no power to pay the premium from out of the employer's share of provident fund. The assured had taken several non-refundable advances/withdrawals from out of his own share of provident fund leaving no amount payable towards LIC premium. His transfer to another co-operative society was not informed till submission of application for transfer of his account. Its responsibility to pay the premium to the insurance company was subject to availability of the amount in member's own share of PF. The assured ought to have kept minimum balance in order to deduct LIC premium. He being Secretary, was aware of the consequences. He did not remit the PF amounts collected by him from the salaries and failed to submit the returns. He ought to have paid the amounts and got it renewed. For his lapses his nominees cannot plead deficiency in service on their part. On his transfer he should have submitted Form-13 to get his previous service details, PF amounts and LIC policy details to the new establishment whereupon it could have transferred the amount to his new account if any amount is available. It was sending P.F. yearly balance slips in Form-23 showing the amounts available in his account. He ought to have sent the amount to LIC directly if he intended to get it renewed. It had paid all the eligible/admissible amounts of over Rs. 1 lakh and monthly pension of Rs.1,901 to the Complainant, being his widow. The meagre amount could have been paid by it had the policy been in force. It had lapsed for a considerable period. There was no deficiency in service on its part, and therefore prayed for dismissal of the complaint with costs.

5.      The OP-2 also resisted the claim. While admitting issuance of policy linked with OP-1, it alleged that since premium from 10/2000 onwards were not paid the policy was in a lapsed state. The yearly instalment of Rs. 2,894 becoming due by 28 October every year from 1999 to 2012. The premium for 1998 and 1999 only were paid. Since the premium for the year 2000 was not paid, it was in a lapsed state. When the claim was received, this was informed to her that the assured had taken several loans from his PF making no amount available to pay premium. Had the premium been paid at-least for three years, it could have acquired surrender value. As he paid only for two years, there was not even surrender value. She is not entitled to any amount from the policy.

6.      The learned District Forum vide order dated 18.12.2008 passed the following directions:

The points which arise for consideration are:-

1) Whether there was deficiency in service on the part of the opposite parties 1 and 2?

2) Whether the complainant is entitled to the direction sought for?

3) To what relief?

Points No.1 & 2:- The case of the complainant is that her husband Shri R.V. Subrahmanyam obtained a life insurance policy from the 2^nd opposite party and authorized the 1^st opposite party to pay the annual premium from out of balance available with his E.P.F. Account. The policy was obtained in the year 1998 and the life assured died on 14-11-2002. As per the policy conditions she is entitled for Rs. 70,000/- and bonus on the policy. As against the same, the contention of the 2^nd   opposite party is that the policy is in lapsed condition as no premium was paid from 10/2000 onwards and thereby the complainant is not entitled for any amount under the policy. So far as payment of premium from 10/2000 is concerned, the 1^st opposite party categorically admitted that the premium due for 10/2000 was not paid as there was no sufficient amount available. In this regard, the 1^st opposite party contended that the life assured had an account bearing No. AP/22607/01 while he was working in Z. Bhavavaram PACS and he availed various types of loans and thereby there is no sufficient balance available and subsequently in 2/2000, the life assured was transferred to Kandregula PACS and got another account No. AP/22670/3, The account holder has to prefer Form No.13 to get the previous service details, PF amounts and LIC policy details to the new Establishment's Account. The 1^st opposite party in its counter made the following contentions:

"The policy holder got transferred to Kandregula PACCS AP 22670 in 2/2000. In such case he had to prefer form No.13 to get the previous service details, PF amounts and LIC policy details to the new Establishment's Account. He failed to prefer such transfer application immediately. But, in August, 2002, he preferred such application and got his service details, PF amount to the new account. If he had preferred such application to where he got transferred, this office would have immediately transferred the details of previous service and his LIC policy could have been revived from that new account."

On perusal of the above contention of the 1^st opposite party, the policy holder furnished the information about changing of establishment during his lifetime but the 1^st opposite party failed to explain as to why they have not taken steps for revival of the policy after application was made for transfer. The 1^st opposite party failed to explain why they have kept quiet without taking steps for revival of the policy taken by the life assured. At least, the 1^st opposite party would have informed the policy holder about non-availability of the funds by 10/2000 thereby not paying the premium. Without doing so, the 1^st opposite party made the policy lapsed which amounts to deficiency in service on the part of the opposite party No.1.

8. As far as the liability of the 2^nd opposite party is concerned, the learned counsel for the 2^nd opposite party has relied upon a decision reported in 2000(4) ALT 62 (CPA) wherein the Hon’ble National Commission held that in case of a failure on the part of the employer in remitting the premium, the employer is liable for payment of the benefits under the policy. Accordingly, we are of the opinion that the 2^nd opposite party is not liable for the latches on the part of the 1^st opposite party. With regard to the quantum of amount entitled to by the complainant, the policy is clear that in case of death of life assured during the period of policy, the claim has to be settled for double the sum assured plus bonus. The policy was taken for Rs.35.000/- and thereby the complainant is entitled for Rs.70,000/- under the policy and the 1^st opposite party is liable to pay the said sum with interest. Accordingly, the points 1 and 2 are answered in favour of the complainant and against the 1^st opposite party.

 Point No.3:- In the result, the 1^st opposite party is directed to pay the policy amount of Rs.73,000/- with interest at 9% p.a. from the date of complaint till realization. The time for compliance of this order is two months from the date of this order. The complaint against the 2^nd opposite party is dismissed without costs.”

7.      Being aggrieved, the Opposite Party No.1 filed an Appeal before the State Commission.  The State Commission after hearing counsels on behalf of both the parties, vide the impugned order modified the order passed by the District Forum. The State Commission reasoned as below:

“9)  The point that arises for consideration is whether the order of the Dist. Forum is vitiated by mis-appreciation of fact or law?

10) It is an undisputed fact that the complainant is the nominee under the policy taken by her husband late R. V. Subrahmanyam viz., Jeevan Mitra Double Cover Endowment + Profits + Accident Benefit policy for Rs. 35,000/- for 15 years covering the period from 28.10.1998 to 28. 10. 2013 He being an employee contributed towards provident fund. OP1 agreed to deduct the premium from out of the provident fund contributed by the employee. It is also not in dispute that the assured died on 14.11.2002. Immediately she claimed the amount covered under the policy for which the insurance company repudiated on the ground that premium was not paid due from 10/2000. It was in a lapsed condition. Since it was linked with amounts payable by the Provident Fund Commissioner while addressing a letter to the complainant it has informed that "we are referring the mater to Asst. P.F. Commissioner, Rajahmundry to ascertain the exact reasons for non-remittance of premiums from 10/2000 onwards from the P.F. funds of the above life assured. On hearing from them, we will inform further in this matter" vide Ex. A11.

11) OP1 while admitting that it had agreed to deduct the premium from out of the provident fund account of the deceased however, stated that as there was no amount in his account premium due by 10/2000 could not be paid. It further contended that the deceased during his life time had availed non-refundable advances/withdrawals on various occasions which caused insufficient amount in the member's own share of provident fund for the month of 10/2000. It had given the amounts that were withdrawn by the deceased as under:

1.        12/1996     Natural Calamity advance Rs. 5,000/-

2.        10/1997     Medical Expenditure Rs. 8,900/-

3.        10/1998     LIC Premium Rs. 2,894/-

4.        10/1999     Medical Expenditure Rs. 16,000/-

5.        10/1999     LIC Premium Rs. 2,894/-

It further alleges that under EPF Act, 1952 and the rules framed there under whenever any P.P. member at his own option had taken a policy and has requested the P.P. office to finance the policy from provident fund and the organization has not been provided with any such provision that premium amount can be paid from employee's share of provident fund as per para 62(3) of EPF Act. Therefore it could not pay the premium due for 10/2000. Later he got transferred to Kandregaula Primary Agricultural Co-operative Society being a different P.P. code No. 22670 on 15.7.2000, and the same was not informed. Therefore the P.P. contribution from 2/2000 onwards were accumulated in his new P.P. No. AP/22670/3 and OP1 had no knowledge about his transfer till he submitted an application in August, 2002 for transfer of his account to OP1. Therefore it. had sent the discharge voucher along with policy to the insurance company to pay the benefits covered under the policy in order to credit the same to the policyholder's account. Since there was no amount lying in deposit in his account and the policy having been lapsed, they were not liable to pay the amount. Equally so, the insurance company contended that since premium was not paid it was in a lapsed condition, and therefore it was not liable to pay any amount.”

12) It may be stated herein that OP1 despite the fact that it knew full well that there was no amount lying in his account evident from Ex.B9 ledger copy of the deceased, when it had taken up the responsibility of deducting the amounts from out of the provident fund towards insurance premium did not inform the deceased nor directed him to pay the amount straight to the insurance company. Equally when the insurance company having agreed to receive the amount from OP1 towards premium it did not inform non-receipt of premium from OP1 or intimated the same to the assured directing him to pay the amount in order to see that the policy was not lapsed.

13) The Hon’ble Supreme Court in Chairman, Life Insurance ... vs Rajiv Kumar Bhasker reported in (2005) 6 SCO 188 in cases where Salary Savings Scheme and other schemes of the LIC Of India for all the employees where premium will be automatically deducted from the salary and remitted to the insurance company opined :

“The employer, thus, accepted the sole responsibility to collect the premium from its employees and remit the same by means of one cheque to the Corporation. It is also evident from the tenor of the correspondences passed between the Corporation and the employer that the Scheme was as much as that of the employer as that of the Corporation.

It is not in dispute that for the said purpose a reconciliation statement was sent in the form prescribed by the Corporation and no individual premium notice was required to be sent to any employee and, furthermore, no receipt was to be given therefor. It was also for the employer to inform the Corporation about the changes in the staff as soon as they occurred including the factum of cessation of employment. The concerned employee was never made aware of the correspondence between the Corporation and the employer."

An agency can be created expressly or by necessary implication. It may be true that the employers in response to tire proposal made by the Corporation stated that they would act as agents of their employees and not that of the Corporation. But, the expression "agent" in such circumstances may not mean to be one within the meaning of the Life Insurance Corporation of India (Agents) Regulation, 1972 made in terms of Section 49 of the Act; but would mean an agent in ordinary sense of the term. An employer would not be an agent in terms of the said Regulation on the premise that it was not appointed by the Corporation to solicit or procure life insurance business. The employers had no duty to discharge to the Corporation either under the Act or the rules and regulations framed thereunder but keeping in view the fact that the Corporation did not make any offer to the employees nor would directly make any communication with them regarding payment or non-payment of the premium or any other matter in relation thereto or connected therewith including the lapse of the policy, if any, it cannot be said that the employer had no role to play on behalf of the Corporation.

In a plain and simple contract of insurance either the Corporation or the agent, on the one hand, and the insured, on the other, is liable to comply with their respective obligations thereunder. In other words, when a contract of insurance is entered into by and between the insurer and the insured no third party would have any role to play, but the said principle would not apply in a case of this nature. In a scheme of this nature, the employers were to make all endeavours to improve the service conditions of the employees and discharge its social obligations towards them. So far as the employees are concerned, they could not approach the insurer directly, and, thus, for all intent and purport they were to treat their employers as 'agents' of the Corporation. The Scheme clearly and unequivocally demonstrates that not only the contract of insurance was entered into by and between the employee and the insurer through the employer but even the terms and conditions of the policy were to be performed only through the employer. In that limited sense, the employers would be the agents of the insurer. In Bowstead & Reynolds on Agency, Seventeenth Edition at page 307, it is stated:

Where a person, by words or conduct, represents or permits it to be represented that another person has authority- to act on his behalf, he is bound by the acts of that other person with respect to anyone dealing with him as an agent on the faith of any such representation, to the same extent as if such other person had the authority that he was represented to have, even though he had no such actual authority."

Section 182 of the Indian Contract Act, 1872 reads as under:

“ ‘Agent’ and principal defined _ An 'agent' is a person employed to do any act for another, or to represent another in dealings with third persons. The person for whom such act is done, or who is so represented, is called the 'principal'."

The Supreme Court had relied earlier decision of DESU case and extracted the proposition enunciated therein in the following terms:

It is well-settled that for the purpose of determining the legal nature of the relationship between the alleged principal and agent, the use of or omission of the word agent is not conclusive. If the employee had reason to believe that his employer was acting on behalf of the Corporation, a contract of agency may be inferred.

In Basanti Devi (supra), this Court stated the law thus:

“Formation of the contract of insurance is between LIC and the employee of DESU. Scheme has been introduced by LIC purely on business considerations and not for any particular benefit of insurance conferred on the employee working in an organisation. Though in the pro forma letter written by DESU to LIC it is mentioned that DESU would be an agent of its employee and not that of LIC but this understanding between LIC and DESU was not communicated or made known to the employee. As far as the employee is concerned he is told that premium will be deducted from his salary every month and remitted by DESU to LIC under an agreement between LIC and DESU. For the employee of DESU, therefore, DESU had implied authority as an agent of LIC to collect premium on its behalf and then pay to LIC. There is nothing on the record to show that Bhim Singh was ever made aware of the fact that DESU was not acting as an agent of LIC. Rather in the nature of the Scheme, the employee was made to believe that it is the duty of the employer though gratuitously cast on him by LIC to collect premium by deducting from the salary of each employee covered under the Scheme every month and to remit the same to LIC by means of one consolidated cheque. Now it could be said that DESU would not be liable as an agent of its principal, i.e., LIC and also it was rendering service of collecting the premium and remitting the same to LIC free of any cost to the employee. As to what is the arrangement between LIC and DESU the employee is not concerned. In these circumstances DESU cannot perhaps be held liable under the Act.”

Their Lordships' also considered the cessation of employment where the employee takes up the job with another employer and where for some reason it was not in a position to perform its obligation where upon later could have paid the premium directly to the insurance company.

14)      Coming to the facts when OP1 had agreed to deduct the amounts and when it could not deduct, in view of the fact that there was no amount lying in his provident fund account, OP1 ought to have informed the assured that there was no amount sufficient to pay towards premium, and he can as well pay the same, and equally the insurance company having failed to receive the amount from OP1 ought to have informed the assured to pay the amount informing that OP1 which had undertaken to pay the amount failed to pay the same. There is undoubtedly deficiency in service on the part of both the opposite parties. By applying the principle laid down by the Hon’ble Supreme Court in the decision cited above, necessarily both the opposite parties are jointly and severally liable to pay the amount due under the policy, lest the very purpose for which such benefits are conferred would be defeated.

15) The correspondence filed in this regard would undoubtedly show that both opposite parties were aware that amounts were not being credited, and at no point of time neither of the parties had informed the same to the assured so that the policy might not be in a lapsed condition. Due to these acts the complainant a nominee was denied benefits under the policy taken by her husband.

16) When the claim was dismissed as against the insurance company the complainant did not prefer any appeal as the order was passed against OP1 to pay the amount. The insurance company could not have preferred the appeal as the order went in its favour. Technical rules of CPC cannot be applied to the proceedings under the Consumer Protection Act. In order to give effect of law laid down by the Hon’ble Supreme Court in the above cited decision, we are of the opinion while allowing the appeal in part, we also fix joint and several liability on the insurance company to pay the benefits covered under the policy.

17) In the result the appeal is allowed in part modifying the order of the Dist. Forum by filing joint and several liability on the insurance company to pay Rs.70,000/- covered under the policy wiith interest @ 9% p.a., from the date of complaint viz.. 10.1.2008 till the date of realisation. However, in the circumstances of the case parties are directed to bear their own costs. Time for compliance four weeks.”

8.      It is against this order that this revision petition has been filed. Counsel for both the Parties were heard on 20.10.2023 and Order was reserved. The Respondent No.2/Complainant was proceeded ex-parte vide order dated 06.06.2017.

9.      The learned counsel for the Petitioner reiterated the grounds stated in the Revision Petition which were already taken in the Written Version filed before the District Forum and vehemently argued that while admitting issuance of policy linked with OP-1 it alleged since premium from 10/2000 onwards were not paid the policy was in a lapsed condition. The yearly instalment of Rs. 2,894 becoming due by 28^th October every year from 1999 to 2012. The premium for the years 1998 and 1999 were only paid. Since the premium for the year 2000 was not paid it was in a lapsed condition. He contended that the State Commission erred in applying the principle of Basanti Devi Vs. DESU (Supra) and Chairman, LIC Vs. Rajiv Kumar Bhaskar (Supra). He relied upon the judgment of LIC Vs. Mangai & Anr, RP No.2514/2005 decided on 27.11.2009 by NCDRC.

10.    The learned Counsel for the Respondent No.1/OP-2 reiterated the facts of case and objections raised and argued that LIC premium could not be paid for the month of 10/2000 as there was no balance in PF Account and sufficient contribution was not remitted for the financial year 2000-01. The Policy Holder/ Member got transferred to another establishment M/s. Kanregula PACCS on 15.02.2000 and this transfer was not informed to Respondent No.1 at that stage but informed belatedly in August 2002.  He was further argued that the balance in the PF Account having been exhausted by the policy holder/member by availing various non-refundable advances and not remitting the contribution and nor informing Respondent No.1 about change of the employer/ provident fund account since 15.02.2000 non-availability of funds in PF account for payment towards premium is solely due to fault of the deceased policy holder/member.  It is further averred that LIF has not sent any communication about the non-remittance of the premium to the policy holder or to it.  The concept of Agency as laid down in the case of DESU Vs. Basanti Devi and LIC vs. Rajiv Kumar Bhasker is applicable in the present case.  He further averred that the judgment of LIC of India vs. Mangai & Anr. is not a good law and not applicable in strict sent to the present case.

11.    After a examination of the pleadings and orders of the learned District Forum and State Commission and considering the arguments put forth by the learned Counsels for both the parties, it is apparent that both the OP No.1 and 2 were aware that amounts were not being credited and at no point of time neither of the parties had informed the same to the assured to take steps so as to not to allow to policy into a lapsed state. Due to this reason, the Complainant was denied benefits under the policy taken by her husband. The learned State Commission passed a well-reasoned order dated 09.11.2011. The State Commission rightly applied the principles of law laid down by the Hon’ble Supreme Court in Basanti Devi Vs. DESU and LIC Chairman Vs. Rajiv Kumar Bhaskar (Supra) reproduced above. Thus, I do not find any illegality, infirmity or irregularity in the impugned order dated 09.11.2011 passed by the learned State Commission.

12.    In view of the foregoing discussion, the Revision Petition No.1392 of 2012 is dismissed for being devoid of merit. 

13.    There shall be no order as to costs.  All pending Applications, if any, stand disposed of accordingly.