For the appellant: Ms. D. Borgohain, Advocate
For the respondent: Ms. R.S. Deuri, Advocate
Date of Hearing: 21-01-2020
Date of Judgment: 30-01-2020
J U D G M E N T
BY MRS. JUSTICE DR. INDIRA SHAH, PRESIDENT,
This is an appeal arising out of the final judgment and order dated 20-02-2018 passed by the District Forum, Kamrup, Guwahati, in C.C. No. 10 of 2013, vide which the complaint filed by the appellant, herein, was dismissed.
2. Late Gulesta Begum, wife of the appellant, during her life time, on 03-05-2008 had purchased a life insurance policy under Salary Saving Scheme by remitting two premiums due for the month of May & June, 2008. Premium for the month of July, 2008 was to be deducted from the salary of the policy holder. However, salary for the said month was received in the month of September,2008, after the death of policy holder on 10th of August, 2008. Thus, the premium for the month of July, 2008 remained unpaid.
3. After the death of his wife, the appellant submitted representation before the respondent NO. 2 for settlement of the claim against five numbers of LIC Policy including the policy under Salary Saving Scheme. Legal notice dated 01-02-2012 was also served on behalf of the complainant for release of the life insurance claim of the complainant’s wife. In response to the said legal notice, the respondent Branch Manager, LICI, Morigaon Branch, informed that the premium for the month of July, 2008 was not remitted whereas grace period for the payment of premium under the Salary Saving Scheme is 15 days, keeping the policy in lapsed condition, the life assured expired on 10-08-2008 and as such, the claim made by the nominee of the life assured has not been processed so far. The appellant also submitted representation before the Divisional Office, Guwahati, praying for settlement of the claim. Since there was no response, the appellant filed the complaint. The respondents contested the claim by filing their written version.
4. Heard Ms. D. Borgohain, learned counsel, appearing for the appellant. Also heard Ms. R.S. Deuri, learned counsel, appearing for the respondent.
5. It is submitted by the learned counsel for the appellant that in case of Salary Saving Scheme, premiums are deducted only from the salary and in the case of appellant’s wife, the premium for the month of July, 2008, could not be deposited due to non-receipt of salary prior to her death on 10-08-2008. The premium for all other teachers for the month of July, 2008 was deducted from the salary along with late fee in the month of September, 2008 and the policies of the other teachers are not deemed to have been lapsed whereas in the case of appellant’s wife, it has been considered to have lapsed. The policy has lapsed due to late release of salary from the employer.
6. Relying on the case of Delhi Electric Supply Undertaking Vs Basanti Devi and Anr. , reported in (1999) 8 SCC 229, it is submitted by the learned counsel that in the case of Salary Saving Scheme Policy, the employer collects the premium by deducting it from the salary of the employee and makes payment to the LICI. So far as employee was concerned, the employer was the agent of LICI to collect premium and the LICI is thus liable for default of employer’s failure to deduct premium from salary of employee, resulting in the lapse of the policy.
7. Per contra, learned counsel appearing for the respondent supporting the decision of the District Forum, has submitted that the due date for premium was 07-07-2008, i.e. when the life assured was alive but she failed to pay the premium within the grace period of 15 days as per Salary Saving Scheme Policy. Moreover, at the time of filing the application/proposal form for issuance of Salary Saving Scheme Policy, the appellant’s wife also submitted a duly singed Addendum dated 3-5-2008 (Exhibit A) declaring that she will be entirely responsible for keeping the policy to be issued by the LICI in force by regular payment of premium on due dates. It is also stipulated therein that in the event of non-payment of premium to the LICI by the employer for whatever reason, it shall be the responsibility of the policy holder to make the payment of premium directly to LICI together within any additional charges as applicable for payment to keep the policy in force. But in the instant case, the wife of the appellant failed to pay the premium and thus, the policy lapsed. In clause 6 of the Addendum (Exhbt-A), the appellant’s wife agreed that in the event of lapse policy on account of non-payment of the premium within stipulated time, the liability of the LICI will be limited to the extent of premiums actually received and the Corporation shall not be responsible for any claim beyond this liability as accrued to the said policy at the time when policy was lapsed.
8. It is further submitted by the learned counsel appearing for the respondent that in the Life Insurance Act and Rules, famed under the Act, there is no provision as to informing or calling the insured policy holder to pay the default premiums or to revive the lapsed policy. Moreover, there was no agreement between the respondents and the Secretary of Borthodoloi Goon L.P. Centre to the effect that the respondents had to inform the insured or the Secretary of the Unit about the default in payment of premiums or to revive the lapsed policy. Therefore, the respondents no way can be held liable or responsible in any manner.
9. The issue whether the Life Insurance Corporation of India can be held liable for the payment of insurance claim, which has lapsed on account of non-payment of installment, squarely arose in the case of Delhi Electric Supply Undertaking Vs Basanti Devi & Anr. (Supra) and it was held that the position of the employer in relation to the employee, is that of an agent for the LICI to collect the premium from the salaries of the insured and remit the same. A reconciliation statement is also to be sent in the form prescribed by LICI. No individual premium notice is to be served by LICI to any employee and no receipt is to be given to him for the premium received. It is not possible for any employee to know if the amount of premium deducted from his or her salary, has been remitted or not. It was observed in para 11 and 12 of the judgment as under;-
11. In the present case we are not concerned with the insurance agent. It is not the case of LIC that DESU could be permitted as an insurance agent within the meaning of the Insurance Act and the regulations. DESU is not procuring or soliciting any business for LIC. DESU is certainly nor an insurance agent within the meaning of the aforesaid Insurance Act and the regulations but DESU is certainly an agent as defined in Section 182 of the Contract Act. The mode of collection of premium has been indicated in the Scheme itself and the employer has been assigned the role of collecting premium and remitting the same to LIC. As for as the employee as such is concerned, the employer will be an agent of LIC. It is a matter of common knowledge that insurance companies employ agents. When there is no insurance agent as defined in the regulations and the Insurance Act, the general principles of law of agency as contained in the Contract Act are to be applied.
12. Agent in Section 182 means a person employed to do any act for another, or to represent another in dealing with third persons and the person for whom such act is done, or who is so represented, is called the principal. Under Section 185 no consideration is necessary to create an agency. As far as Bhim Singh is concerned, there was no obligation cast on him to pay premium direct to LIC. Under the agreement between LIC and DESU, premium was payable to DESU who was to deduct every month from the salary of Bhim Singh and to transmit the same to LIC. DESU had, therefore, implied authority to collect premium from Bhim Singh on behalf of LIC. There was, thus, valid payment of premium by Bhim Singh. The authority of DESU to collect the premium on behalf of LIC is implied. In any case, DESU had ostensible authority to collect premium form Bhim Singh on behalf of LIC. So far as Bhim Singh is concerned, DESU was an agent of LIC to collect the premium on its behalf.
10. The ratio laid down in the aforesaid case was reiterated in the case of Basanta Manjari Das vs LICI, LICI Vs Pushpa Devi Yadav 2005 1 CPJ 593, LIC vs L. Satheesh 2007 2 CPR 160.
11. As per Salary Saving Scheme, premiums are deducted only from the salary and admittedly in the case of appellant’s wife, the premium for the month of July, 2008 could not be deposited due to non-receipt of salary prior to her death on 10-08-2008, whereas the premiums for all others teachers for the month of July, 2008, were deducted from their salary along with late fee in the month of September, 2008 and the policies in respect of all other teachers are not deemed to have lapsed. The insured admittedly died in the month of August and the salary for the month of July, 2008 was received in September, 2008, after her death.
12. The insured was issued the policy under Salary Saving Scheme and it was agreed that premium payable to the insurer would be deducted from the salary of the insured. The insured in such circumstances, cannot be held responsible for keeping the policy in force. The insurer accepted the premiums for all other teachers for the month of July. 2008, deposited in the month of September, 2008. The name of the appellant’s wife was simply struck off in the premium invoice.
13. In view of the principle enunciated by the Apex Court in Basanti Devi & Anr (Supra) and different High Courts, we find and hold that the deceased was not responsible for non-deduction and non-payment of premium for the policy. Accordingly, the impugned judgment and order is hereby set-aside. The LICI is directed to pay the amount due under the policy in question after deducting the arrear premium within three months with effect from the date of receipt of copy of this judgment. Appeal is accordingly allowed.
14. Send down the lower court record along with a copy of this judgment to the District Forum, Kamrup.
