Late Shri G. Munivenkataramana Naidu sent proposal No.671 for taking a life insurance under “Janarakshak Policy” for a sum of Rs.5,00,000/-  with accidental benefits to L.I.C. the Petitioner herein    through its agent  A. Ramachandra Chetty.     Under the policy in the event of death prior to maturity twice the assured amount was to be paid to the  assignee or nominee  or  the legal representatives.  Deceased paid Rs.3,250/- through  cheque with the proposal form on 22^nd May, 2002 and another sum of Rs.11,470/- on 31^st May, 2002 on completion of medical check up.  Thus a total amount of Rs.14,720/- was paid by him towards premium.  Unfortunately, G.Munivenkataramana Naidu died in a road accident on 12^th June, 2002 i.e. within 12 days of filing the proposal, Petitioners had not issued policy till the date of death of proposer.   Complainants - Respondents who are legal heirs of the deceased filed their claim   which was not settled on the ground that the proposal was not complete for want of certain requirements. That as no policy was issued there was no concluded contract between the parties and hence, the Petitioners were not liable to pay the amount to the Respondents.  Aggrieved by this,  Respondents filed complaint before the District Forum.

Petitioners on being served, entered appearance and filed written statement.  It was admitted that  deceased had submitted proposal No.671 on 31^st  May, 2002 by paying  an amount of Rs.3250/- on 22.5.202  and Rs.11,470/- on 31.5.2002 towards deposit under plan and term 91-22 for a sum of Rs.5,00,000/-.   The proposal was not completed for want of certain requirements viz.  (i) re-check of measurements, (ii) fresh agent’s reports, details of income source, and (iii) details of previous policy etc.    The proposer was duly called upon to furnish the details and acceptance of policy.  Since, the details were not furnished, proposal for life insurance was not accepted.  No policy was issued.   There was no concluded contract between the parties and therefore, Petitioners were not liable to pay any amount to the Respondents.  It was prayed that complaint be dismissed as there was no deficiency in service on the part of the Petitioners.

District Forum after taking into consideration the pleadings as well as evidence led by the parties allowed the complaint and directed the Petitioners to pay Rs.10,00,000/- ( double the insured amount ) together with interest @ 9%  from 18.12.2002 till the date of realization and Rs.1,000/- towards litigation expenses to the  Complainants.

Petitioners being aggrieved filed appeal before the State Commission which has been dismissed by the impugned Order.

Counsel for the parties have been heard at length.

Counsel appearing for the Petitioners contends that the Fora below have erred in directing the Petitioners to pay insured amount as there was no concluded contract between the parties.   That as per the judgement of the Supreme Court of India in  Life Insurance Corporation of India vs. Raja Vasireddy Komalavalli Kamba & Ors. - 1984 (2) SCC 719, contract of insurance is complete only  on the acceptance of the  proposal.  That till the acceptance of proposal  and issuance of  the policy and communication of the acceptance of the proposal  binding contract does not come  into existence.  That the communication is complete only when communicated to the person proposing to take the policy.    Mere acceptance  and retention of the  premium was not acceptance of proposal.  As against this, counsel for the Respondents has supported  the judgements of the Fora below for the reasons given therein. 

          It is not disputed before us that  G. Munivenkataramana Naidu had sent a life insurance  proposal for Rs.5,00,000/-.  He died within 12 days  from the date of making  the proposal before the  offer could be accepted.   The proposal was not accepted for want of  certain requirements i.e. (i ) re-check of measurements, (ii) fresh agent’s reports, details of income source, and (iii) details of previous policy etc.   Petitioners had served a notice upon   G. Munivenkataramana Naidu calling upon him to furnish the details  so that life insurance proposal could be accepted.  As no details were furnished, proposal was not accepted and policy was not issued.   Supreme Court  in   Raja Vasireddy Komalavalli Kamba  (supra)  has held that mere receipt and retention of premium is not acceptance of the policy.  The contract of insurance can be termed as concluded only when party to whom an offer has been made accepts it unconditionally  and communicates his acceptance to the person making the offer.   Relevant  observations made in para 14 and 15 of the judgement read as under:

“14. When an insurance policy becomes effective is well settled by the authorities but before we note the said authorities, it may be stated that it is clear that the expression “underwrite” signifies “accept liability under”. The dictionary meaning also indicates that. (See in this connection The Concise Oxford Dictionary, Sixth Edn., p.1267.) It is true that normally the expression “underwrite” is used in marine insurance but the expression used in Chapter III of the Financial Powers of the Standing Order in this case specifically used the expression “underwriting and revivals” of policies in case of Life Insurance Corporation and stated that it was the Divisional Manager who was competent to underwrite policy for Rs 50,000 and above. The mere receipt  and retention of premium until after the death of the applicant or the mere preparation of the policy document 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, p. 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 offeror, 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.’

15. 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. Mere delay in giving an answer cannot be construed as an acceptance, as, prima facie, acceptance must be communicated to the offerer. 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. Whether the final acceptance is that of the assured or insurers, however, depends simply on the way in which negotiations for an insurance have progressed. See in this connection statement of law in MacGillivray & Parkington on Insurance Law, Seventh Edn., p. 94, para 215”.

In the present case, Petitioners had taken certain objections to the proposal.   A communication was sent to the intending insured  requiring him to complete certain requirement.  Before complying with the requirements, the  intending insured  died.  No policy had been issued.  Till the issuance of the police, no binding contract had come into force between the parties.  Merely because the Petitioners retained the sum of Rs.  Rs.3250/- sent along with the proposal form and the amount of  Rs.11,470/-  sent subsequently, does not signify acceptance of the policy.  Petitioners had not accepted the offer made by the intending insured.  Till the acceptance of the offer, no binding contract  had come into existence.  In a recent judgement   in LIC  & Ors. vs. Rakshna Devi – Civil Appeal  No.808  of 2007, the  Supreme Court reiterating the law laid down in

Raja Vasireddy Komalavalli Kamba  (supra), has observed as under:

“A contract under the Contract Act implies offer, acceptance and consideration.  Without acceptance there is no concluded contract.  If before the acceptance the offerer dies, the offer immediately lapses and hence there cannot be any acceptance after his death”.

          The view taken by the For a below run counter to the law laid down by the Supreme Court of India.  Orders passed by the Fora below are set aside,  Revision Petition is allowed and the complaint is ordered to be dismissed with no order as to costs.