Ramesh Bawri, Member:- The brief facts of the case are that the complainant’s husband insured his life for a sum of Rs.50,000/- and obtained a policy from the Life Insurance Corporation of India (“LIC” in short) under the Salary Saving Scheme (henceforth “the S.S. Scheme”). The insured was employed as a Handling Labourer of the Food Corporation of India (hereinafter “FCI”) by whom the monthly policy premium of Rs.349/- was to be deposited with LIC under the scheme.

 

2. Upon the sudden demise of the insured on 15.12.94 the complainant filed a claim under the Policy with LIC which was turned down on the ground that the policy had lapsed due to default in payment of installment of premium beyond March 1994. On its part FCI informed the complainant that the premium up to June 1994 had been deposited by it with LIC against the said policy. Aggrieved, by the repudiation of her claim the complainant, as legal heir of the insured, filed a complaint before the District Forum, Shillong claiming relief against both LIC and FCI.

 

3. The defence taken by LIC before the Forum was that the last premium was paid on 28.3.94 whereas the insured died on 15.12.94 and as such the claim was not maintainable against them as the Policy had lapsed for non-payment of the premium. On its part FCI shrugged off all liability on the ground that the insured was absent from his duties w.e.f. 21.6.94 till the date of his death on 15.12.94 and for this period no salary became due for payment to him; therefore no amount could either be deducted from his salary or transmitted to LIC against his policy for that period.

 

4. During the course of hearing before the Forum FCI’s counsel Shri. H. Ahmed entered appearance and filed show cause but thereafter failed to appear. No affidavit was filed by FCI nor any other evidence led to prove that no salary became due for payment to the insurance for the period from 21.6.94 as pleaded. Moreover the statement of the complainant which was made under oath to the effect that there were sufficient funds of the insured lying with FCI in the form of leave pay, gratuity, provident fund etc. and which were later on released to the complainant from which the monthly premium could, in any event, have been paid by FCI, remained unrebutted.

 

5. The Forum held that it was FCI which was responsible to make regular payment of the premiums due against the policy executed by its employee and, that it was because of FCI’s failure to do so that LIC had repudiated the claim. The Forum found the FCI negligent and deficient and directed FCI to pay to the complainant the sum assured of RS.50,000/- together with interest at 15% p.a. and damages to the tune of RS.3000/-.

 

6. Aggrieved by the order passed by the Forum, FCI has filed the present appeal. FCI also filed before this Commission copies of the receipt issued by LIC showing payment of the premium against the policy of the insured for the months of April to June, 1994 which LIC had claimed not to have received. FCI also filed its absentee statement of departmentalized labourers for the months June-December 1994.

 

7. We have heard the learned counsels for the Appellant/FCI as well as learned counsels representing the Respondent No.1/Complainant and Respondent No.2 / LIC which w3as the opposite party No.1 before the Forum.

 

8. At the outset Shri.B.P.Dutta, learned counsel for LIC stated before us that the legal issue involved in the present case is now under active consideration by the Honourable Supreme Court which has granted leave to appeal in two SLP’s filed by LIC against orders passed by the Patna High Court and the National Commission in other cases relating to the Salary Saving Scheme. On instruction from his client he has prayed that the instant case be kept in abeyance and decided after the aforesaid SLP’s are disposed of by the Honorable Supreme Court.

 

9. We were unable to accede to this request by the learned counsel for LIC for the simple reason that these are totally unrelated cases even though they may relate to the Salary Saving Scheme and there are no instructions from the Honorable Supreme Court staying the hearing of other cases pending before other Courts and Tribunals. We were also of the opinion that it would not be just and proper to keep the matter pending and as such we took up the case for hearing.

 

10. The real issues which arise for our consideration in this Appeal are (A) whether FCI having introduced the Salary Saving Scheme amongst its employees was required to remit the monthly premium to LIC, whether or not its employee was absent from duty and (B) If FCI was indeed so required to do, whether the claim of the complainant was payable by FCI or LIC or both or neither.

 

11. Before entering into the merits of the case before us, it would be worth while to briefly examine the S.S. Scheme and to see how the Honorable Supreme Court and the National Commission have viewed other disputes arising under the S.S. Scheme. These decisions will be our beacons and authoritatively guide us in reaching our conclusions.

 

12. Delhi Electric Supply Undertaking –vs- Basanti Devi and Anr (AIR 2000 SC 43) is the leading case on claims under the Salary Saving Scheme of the LIC. There the Honorable Supreme Court has held that under the Salary saving Scheme of LIC it is the sole responsibility of the employer to collect premium from all the employees and remit the case to LIC by means of one cheque. A reconciliation statement is also to be sent in the form prescribed by LIC, no individual premium notice is to be sent by LIC to any employee and no receipt is to be given to him for the premium received. Also it is the employer who is to inform LIC of all the changes in the staff as soon as they occur so also the fact when any employee leaves its service. An employee is kept ignorant of the happenings between LIC and the employer except that he is made aware of deduction of premium from his salary every month.

 

13. In para 6 of the aforesaid judgment, while dealing with the Salary Saving Scheme, the Honorable Supreme Court has clearly held as follows:

 

“Considering the conditions as to how premium is to be deducted from the salaries of the employees and remitted to the LIC by the DESU by one cheque for all the employees with the reconciliation statement it is not possible for an employee to know if the amount of the premium deducted from his salary has been remitted or not. An employee is not being given any separate premium notice nor he is given any receipt for the premium received. If a condition is now placed on the employee that it is he who is to intimate the LIC if there is no remittance of the premium deducted by DESU it will be too onerous a condition to be of any validity. Considering the scheme such a condition cannot be imposed on an employee. It is impracticable. A purposive interpretation has to be given to the endorsement and it has to be held that since payment of premium after deducting from the salary of the employees is between DESU and LIC. It will not be for the employee to intimate the LIC about non-remittance of the premium”.

 

14. In the case of Union of India –vs- Rajeshwari and others [І (1994) CPJ 5 (NC) ] which too was a case of repudiation of claim by LIC on the ground that the Policy under the Salary Saving Scheme has lapsed for non payment of premium, the National Commission held in para 7 as follows :

 

“IN these appeals we need not decide if Union of India (Southern railway) or the Corporation is guilty of negligence in the rendering of service. The facts remain that the assured had taken a policy under the Salary Saving Scheme and the premium of the policy was to be deducted by the employer from the salary and it was to be remitted to the Corporation. Similarly, the corporation was to intimate the employer about the policy of insurance and authorisation for deducting the premium. The said intimation was conveyed by the Corporation to the Employer long after the policy had been issued. As noticed earlier the notice had been issued in October, 1989. On the basis of the facts in the present case the assured cannot be held guilty of non-payment of the due payment. The fault is either of the Corporation or the employer. That matter can be settled between them. As far as the widow, Smt. Rajeshwari is concerned she is entitled to the maturity amount under the policy being the nominee under the policy”.

 

15. We must also bear in mind that the scheme has been explained by LIC itself in the following words:

 

“It is a simple, economical plan whereby your employees may obtain life insurance protection for their families and retirement income for themselves under advantageous conditions which might not be available to them otherwise. This is accomplishes by Savings automatically deducted from their pay and remitted to us once a month.”

 

The keywords are “protection” and “automatic”. In keeping with the objective of the Scheme it must be ensured that their families are protected and not made to suffer by denying their just claims based on technicalities.

 

16. Looking at the merits of the case against the above backdrop we find that no evidence has been led by FCI either before the Forum or before us to prove its contention that the insured was absent from duty between the period of 21.6.94 till his death on 15.12.94 and hence the ground taken by FCI that it could not deduct the premium from the salary of the insured and remit the same to the LIC cannot be accepted at face value. However, even assuming that the insured was absent, in our considered view it was the duty of FCI to continue to remit the premium to LIC as long as the insured was in its employ which he admittedly was. In any event the bare minimum that was required of FCI was to inform the insured that it had not remitted the premium from the month from July 1994 onwards so that the insured could have taken steps to make the payments and save the policy from becoming lapsed, which too FCI failed to do.

 

17. Much argument was made to show that the premium had been paid by FCI upto June’94 and not only upto March’94 as claimed by LIC. But this, in our opinion, is besides the point as, in any event, FCI admits that it had not deposited the premiums for the month of July – November’94.

 

18. FCI also filed for the first time before this Commission a photocopy of a letter in a standard printed Form No. 3549 (Revised) addressed to it and purportedly signed by the insured. This letter is undated and no steps have been taken by FCI to prove its authenticity. It is addressed to the District Manager, FCI, Shillong and reads as follows:

 

“Dear Sir,

 

            I have taken out a Life Insurance Policy with Life Insurance Corporation of India and I desire to pay premium by deduction from salary every month. I request you to kindly arrange to deduct and pay to the Life Insurance Corporation of India the premium amount stated below from my salary due this month and also to continue to deduct and pay such amount every month till further advice. I agree that your liability will be confined to making arrangements fro deduction of premium fro salary whenever this can be made and remitting the amount to the Corporation in time. I shall be entirely responsible for any consequence on account of non-payment on premium on my policy for reason beyond your control such as in the event of proceeding on leave without pay or my drawing advance salary without deduction of premium or my canceling this authorization for deduction of premium or my leaving your employment. In any such case it will be my responsibility to make arrangement for remittance of premium directly to the Corporation to prevent my policy from getting into a lapsed condition.”

 

19. Even if this letter were to be taken as authentic, in our opinion, keeping in mind the nature of the S.S.Scheme and in the light of the decision of the Honorable Supreme Court in DESU –vs- Basanti Devi (Supra), the responsibility imposed therein upon the employees is too onerous to be practical or valid and requires to be read down. Under the Scheme, it is not possible for any employee to know if the amount of the premium deducted from his salary has been remitted or not. The liability of FCI can therefore be taken to have ceased only if due intimation had been given to the employee would have been responsible and expected to make direct [payment of the premium to LIC.

 

20. As discussed, we are of the view that once an employer has introduced the Salary Saving Scheme of LIC amongst its employees, it is duty bound to make payment of the premium every month by the due date to LIC, regardless whether any salary has accrued to the employee or not and whether such premium has been deducted from his salary or not. However, in cases where no salary adequate to cover the premium accrues to an employee during a particular month, the employer may, in lieu of such payment, send an intimation to the employee that premium for the month had not been remitted by it for the aforesaid reason and such intimation would absolve the employer of its responsibility to remit the premium to LIC. However, when the premium is neither remitted by the employer nor is any intimation sent to the employee as afore-stated, the employer would be deemed to be in default and the employee could not be made to suffer any adverse consequences, such as repudiation of a claim on the ground of non-payment of premium leading to the lapsing of the Life Insurance Policy.

 

21. If the FCI was not in a position to implement the Salary Saving Scheme amongst its employees fairly and efficiently it ought not to have embarked upon implementing the Scheme half-heartedly, thereby putting the interest of its employees and their legal heirs in jeopardy, which has happened in the instant case.

 

22. It is also necessary to notice that the FCI has also not denied the statement of the Complainant that, in any event, sufficient funds belonging to the Insured were lying with FCI from which FCI could have easily paid the premium for the 5months amounting to a paltry sum of RS.1,745/-.

 

23. We are thus of the view that FCI was negligent in failing to remit to LIC the monthly premium for the months of July to November 1994 on the account of the insured.

 

24. The matter does not, however, rest here. Under the S.S. Scheme, in our view, it was also the duty of LIC to inform the policy holder either directly or through his employer FCI about non-payment of the monthly premium and also to send him intimation that the policy had lapsed. If such notice had been sent, in all likelihood the Policy Holder would have taken steps to remit the premium and to revive the Policy, in accordance with Condition No. 3 of the Standard Life Insurance Policy of LIC which provides for revival of discontinued policies and reads thus:

 

“Revival of discontinued Policies:- When the premium is not paid within the days of grace the policy lapses. It may be revised during the life time of the Life Assured, but within a period of 5years from the date of the first unpaid premium and before the date of maturity on submission of proof of continued insurability to the satisfaction of the Corporation and the payment of all the arrears of premium together with interest as such rate as may be prevailing at the time of the payment but not exceeding 9% per annum compounding half yearly”.

 

25. In the present case even LIC admittedly failed to intimate the Insured about non-payment of the premium to enable him to take steps for its payment if so required, nor informed him that the policy had lapsed. Only after the Insured died and the Complainant wife filed a complaint, LIC summarily rejected the claim on the plea that the [premium from July’94 to Nov’94 had not been paid. It was not correct on the part of LIC to sit quietly without informing the Insured that the due premium had not been deposited and, when the time to make payment of the claim came, to repudiate the claim on the ground of non-payment of the premium. Such repudiation without any prior intimation pointing out the insured person’s failure to deposit the premium and without any intimation that the policy had lapsed, cannot be sustained.

 

26. We recall her the observations of the national Commission in Rajani Patwari v. LIC of India and Anr., [ ІІІ (1997) CPJ 48 NC ] where in Para 3 it observed that “We also feel that the LIC cannot be absolved of its responsibility in this case only on the technical ground that the policy had lapsed for want of payment of premiums…. We agree with the view taken by the District Forum that had the LIC informed the deceased …. About the status of Policy as lapsed, he might have taken steps to revive it”.

 

27. Furthermore, both FCI and LIC are instrumentalities of the State are required to be more concerned about the welfare of them citizens of the country. They ought not to have left the complainant in the lurch more particularly when the Insured was an uneducated person employed as a labourer. We recall here the observations made in AIR 1988 SC 719 (National Insurance Co. Ltd., -vs- Jugal Kishore and others) by the Honorable Supreme Court where it emphasized that instrumentalities of the State are obliged to conduct their business fairly.

 

28. In view of the above discussion, we are of the opinion that, whatever may be the case, the widow of the insured cannot, to borrow the very words of the National Commission, ‘be left high and dry in this legal rigmarole’ (See AIR 2000 SC 43, Para 14) and she is entitled to receive full payment in terms of the Policy.

 

29. The question which arises now is – who is to pay the amount due under the policy to the complainant? Will it be FCI or LIC? To us the answer is clear from the decision of the Honorable Supreme Court in DESU –vs- Basanti Devi (Supra). There it has been clearly held in para 11 as follows:

 

“Mode of collection of premium has been indicated in the scheme itself and employer has been assigned the role of collecting premium and remitting the same to LIC. As far as an employee as such is concerned the employer will be an agent of LIC”.

 

30 The Honorable Supreme Court has further observed at Para 14 of the same judgment, under similar circumstances, that the employer “cannot perhaps be held liable under the Act”.

 

31. It is well settled that, if for any negligent act of any agent loss is caused to a third party, the principal is liable. In a number of cases the National Commission has based its decisions on the law of contract and held that no liability lay on the agent and it is the principal who is answerable. (See Indian Airlines, Delhi –vs- S.N. Sethi and Ors, in Landmark Judgments on Consumer Protection’ Pg. 16). In the light of the binding decisions of the Honorable Supreme Court and National Commission referred to above, it is the crystal clear that FCI would not be liable under the Act being only an agent of its principal Viz. LIC, particularly as it was rendering service of collecting the premium and remitting the same to LIC free of any cost to the employee. It is LIC, the Principal, which would be held liable for making the payment under the Policy.

 

32. In the result, in view of the above discussion, while we uphold the finding of the Forum regarding negligence on the part of FCI in depositing the premiums against the insured’s policy for the months of July 1994 to Nov 1994, at the same time we set aside the direction for payment of compensation and interest but FCI as contained in the order dated 9.5.97 passed by the District Forum, Shillong in Complaint No. 13 (S) 1996. Instead we direct that LIC shall pay to the Complainant the sum assured of Rs.50,000/- together with interest at 15% per annum from the date of institution of the complaint in the District Forum till payment thus substituting LIC for FCI as ordered by the District Forum.

 

33. For the suffering which the complainant had to undergo for the default committed by FCI in not remitting the premium to LIC we direct that FCI will pay to the Complainant the sum of RS.3,000/- already awarded as damages by the District Forum.

 

34. LIC and FCI are however at liberty to sort out between themselves if FCI is liable to compensate LIC in any manner for its default in depositing the premium. In the interest of justice, as far as the Complainant is concerned she is to get the money due to her from LIC.

 

35. The records reveal that the appeal was admitted upon deposit a sum of Rs 25,000/- by FCI through cheque dated 28.8.00 which has been duly received by the learned counsel for the Respondent No. 1. As a consequence of this order, LIC will deduct this sum of Rs.25,000/- from the amount payable by it to the Complainant / Respondent No. 1 in terms of this order and reimburse this amount of Rs. 25,000/- to FCI.

 

36. The appeal stands disposed of accordingly.

 

37. before parting with the case we would also urge upon FCI and all other employers who have introduced the Salary Saving Scheme of LIC amongst their employees that if they are unable to operate the scheme efficiently and truly for the benefit of their employees, they should perhaps desist from extending the scheme further so that the dependents of their employees may not be lulled into a false sense of security, only to be rudely woken up one day to be told that their just claims had been rejected on some ground or the other for no fault of their own, thereby defeating the very objective of life Insurance.