Challenge in this appeal is to the order dated 17.2.2005 passed by the Karnataka State Consumer Disputes Redressal Commission, Bangalore (in short, ‘the State Commission’) in complaint case no. 159 of 2002. By the impugned order, the State Commission has allowed the complaint filed by the respondents herein with a direction to the opposite party/appellant-LIC to pay a sum of Rs.5 lakh with interest @ 9% per annum from the date of filing of the petition till realization to the complainants, besides awarding a cost of Rs.2000/-.

2.      We have heard Mr. Ashok Kashyap, learned counsel representing the appellant-LIC and Mr. S.K. Sharma, learned counsel representing the respondent/complainant and have given our thoughtful consideration to their submissions.

3.      The consumer dispute raised before the State Commission related to the non-settlement of an insurance claim under LIC policy claimed to have been taken by Sh. Ashok Kumar, husband of the complainant. LIC repudiated the claim primarily on the ground that no contract of insurance had come into being and in any case acceptance of the proposal was not communicated to the insured during his lifetime. The complaint filed by the complainant was also resisted on the same ground. The State Commission, however, going by certain admitted facts, viz., that the above-named Ashok Kumar had made a proposal for insurance and had also paid a premium amount of Rs.26,727/- on 31.1.2002 held that the contract of insurance will be deemed to have come into existence by observing as under:-

“ As stated earlier OP has received the proposal form and accepted the premium amount of Rs.26,727/- on 31.1.02. After the acceptance of the premium the only formality to be followed is issuance of the policy. In the instant case the insured died after the acceptance of the premium and therefore, repudiation if any on the ground that t he insurance policy has not been issued is not justified. Filing of the proposal form and the payment of premium is an offer and the acceptance of payment of premium and the receipt of proposal form is an acceptance. If that is so, from the conduct of the parties, it is seen that there is a concluded contract between the parties. If the premium has been received by the insurance company subject to certain conditions and the same has been communicated to the insured then it could be said that non fulfilling of the conditions will not result in concluded contract. In this case there are no such conditions for acceptance of the proposal form after the receipt of the premium. The National Commission in The New India Assurance Co. Ltd. Vs. M/s Triveni Overseas Ltd. in First Appeal no. 57/01 dt. 25.10.02 following the decision of the Supreme Court in case of General Assurance Society Ltd. Vs. Chandmull Jain and anr. Reported in AIR 1966 SC 1644 has held that if the insurance company retains the premium after the receipt of the proposal form there is an acceptance of the proposal and therefore, there is a concluded contract between the parties and as such the insurance company is not justified in repudiating the claim. The facts in this case are identical to the facts involved in this case. No doubt, the National Commission has remanded the said matter to this Commission to determine the compensation payable confirming the view taken by this Commission that there is concluded contract between the parties. Following the said decision we are of the view that the complaint filed by the complainant is to be allowed ”

4.      Mr. Kashyap would assail the impugned order as wholly erroneous and in any case not in consonance with the settled legal position. He submits that the State Commission has overlooked the settled legal position in regard to the acceptance of an insurance proposal. In this connection, he has referred to the case of Raja Vasireddy Komalavalli Kamba & Ors. [AIR 1984 Supreme Court 1014] and also the recent decision of this Commission rendered in R.P. No.1170 of 2006 titled as Manoj Balmukund Aggarwal vs. LIC of India. On a consideration of the same, we find that the facts and circumstances in hand are no different than which were noticed by this Commission in its above referred decision. In that case also, the proposer had died after making the proposal and paying the insurance premium but before acceptance of the proposal by the underwriter and before it was communicated to the proposer. In the case in hand, after making the proposal and paying the first premium on 31.1.2002, the proposer, Mr. Ashok Kumar admittedly died on 5.2.2002. Mr. Kashyap has produced office record of the LIC in order to show that as on the date of death of the proposer on 05.2.2002 and even subsequently, the proposal was still under consideration of the LIC authorities and had not been accepted. In this case, he has invited our attention to the remarks dated 06.2.02, 08.2.02, 27.2.02 and lastly 11.3.02. A perusal of the same would show that the concerned officer in the first instance had made a reference to the DMR (Divisional Medical Refree), who in turn directed the matter to be referred to the underwriter of ZUS (Zonal Section).  The Assistant Secretary, Accounts  Department when being informed about the death of Ashok Kumar, made a remark that there was no necessity for the proposal for being further referred to the Zonal section in view of the death of the proposer itself. This should not leave any doubt in anybody’s mind that the proposal made by the proposer remained under consideration of the appellant-LIC Authorities and was not accepted at any point of time, to say the least before the death of the proposer on 05.2.2002.

5.      Per contra Mr. Sharma, learned counsel for the respondent contends that it was due to the default/delay of the appellant-LIC that the proposal made by the proposer was not accepted. In any case, his submission is that non-acceptance/refusal of the proposal should have been communicated to the proposer within 15 days of making the proposal. In this connection, he heavily relies upon the guidelines issued by IRDA Regulations 2002 (Policy Holder’s Protection of Interest). No doubt these regulations cast a mandate on the LIC to take expeditious action on the proposal of the insurance but in our view the said regulation will have no bearing on the face of the facts and circumstances of the present case because proposer had died within one week of making the proposal.  In these circumstances, IRDA Regulations would have no application and it cannot be assumed that the proposal was accepted by the LIC. In our view, having regard to the settled legal position, the State Commission has grossly erred in recording the finding that by making the proposal and by paying the premium alone, the contract of insurance had come into being and the acceptance of the proposal was a mere formality. The order passed by the State Commission is legally unsustainable and required to be set aside. However, since the proposal was not accepted by the LIC, the LIC must refund the amount of premium, i.e., Rs.26,727/- received by them and should also pay some reasonable interest because money has remained with them for about 8 years.

6.      In the result, the appeal is allowed and the impugned order passed by the State Commission is hereby set aside. The complaint will be deemed to have been dismissed. However, going by the offer made by the LIC to the complainant, we direct the LIC to refund the premium amount of Rs.26,727/- with interest @ 6% per annum w.e.f. 01.2.2002 till its payment.