AVM J. RAJENDRA, AVSM, VSM (RETD.), MEMBER

1.      The present First Appeal has been filed under Section 19 of the Consumer Protection Act, 1986 (“the Act”) against the Order dated 25.11.2016 passed by the State Consumer Disputes Redressal Commission, Haryana (hereinafter referred to as “the State Commission”), in Consumer Complaint No. 59 of 2014, wherein the Complaint filed by the Complainant (Respondent herein) was allowed.

2.      For convenience, the parties involved in this matter are referred to as mentioned in the Complaint before the State Commission. "Suman Devi" is recognized as the Complainant (Respondent No. 1 herein), who is the wife and nominee of the deceased Life Assured, Late Shri Manoj Kumar. "The Birla Sun Life Insurance Co. Ltd, through its Manager and Branch Manager" are denoted as the Opposite Party No. 1 & 2 or the Insurer (Appellants/ OPs). Mr “Kamlesh” is acknowledged as the Opposite Party No. 3, an Insurance Agent (Respondent No. 2 herein).

3.      There was a delay of 26 days in filing the present Appeal. For the reasons stated in IA No. 4159 of 2017 vide order dated 22.01.2018, the delay was condoned.

4.      Brief relevant facts of the case, as per the Complainant, are that the husband of the Complainant (the ‘DLA’ for short) obtained a Life Insurance Policy (Dream Endowment Plan) from OP-1 & 2 for 30 years i.e. valid until 29.12.2040, with a sum assured of Rs.35,10,000/-. The annual premium was Rs.10,501.05/-. The DLA paid four installments on time, as outlined below:-

5.      Subsequently, on 08.08.2013, the DLA paid Rs.21,010/- to the Insurance Agent, OP No.3, for revival of the insurance policy and filled up the certificate of insurability (COI). Unfortunately, on 12.08.2013, the DLA was fatally shot in the evening. An FIR was filed under Section 302/34 of the IPC and u/s 25/54/39A of the Arms Act. Due to the severity of the injury caused by the firearm, the DLA succumbed to his injuries and was declared dead on 16.08.2013. Following his demise, the Complainant submitted the death claim with OP-1 & 2 on 19.10.2013. However, her claim was repudiated on 31.03.2014, stating that the policy was not in force at the time of his death. Consequently, OP-1 refunded the premium of Rs. 21,010/-, which the complainant has not yet encashed.

6.      Being aggrieved by the repudiation of claim and deficiency in service on the part of OPs/Insurer, she filed a Consumer Complaint (No. 59 of 2014) before the State Commission, sought insured amount of Rs.35,10,000/- Lacs along with interest @18% p.a. from the date the amount fell due till the date of its actual realization; Rs.2,00,000/- as compensation on account of mental agony and harassment; Rs.50,000/- on account of expenses incurred by the Complainant; and Rs.22,000/- toward litigation expenses.

7.      In their joint reply, OP-1&2/ Insurer contended that the policy was reinstated on 21.08.2013 due to the concealment of true facts by the deceased life assured (DLA). They pointed that although the DLA signed and filled the certificate of insurability on 08.08.2013, the premium was paid on 13.08.2009 through O.P-3. Moreover, the DLA had already sustained a gunshot injury on 12.08.2013, which was not disclosed. They emphasized the fundamental principle governing insurance contracts, 'uberrima fides,' which translates to utmost good faith. According to this principle, if a party does not act in good faith or with complete honesty, they are not entitled to any compensation. The OPs asserted that had they been aware of the injury sustained, the policy might not have been reinstated. They also raised objections concerning jurisdiction and alleged misuse of the legal process and sought the Appeal to be dismissed.

8.      In her reply, OP-3, the Insurance Agent, admitted to receiving the premium and the Certificate of Insurability (COI) on 08.08.2013. However, she claimed that she could not deposit the payment until 13.08.2013. On 08.08.2013, when she visited the office of OP-1&2, the concerned official asked her to return later due to a rush at the office. Subsequently, she deposited the payment on 13.08.2013. OP-3 clarified that she used to collect premiums on behalf of OP- 1&2 based on an understanding with them. She asserted that she was never informed by the Complainant to settle the claim. In addition, OP-3 raised objections about the maintainability of the complaint, including concerns about the accruing cause of action. She sought the dismissal of the complaint based on these grounds.

9.  The learned State Commission partly allowed the complaint with following Order: -

“6. In view of our discussion, complaint is allowed and complainant is held entitled for sum assured along with 09% interest from the date of filing of the complaint till realization. Complainant is also entitled as of compensation for mental and physical harassment to the tune of Rs.21000/- and litigation expenses Rs. 11,000/-. The opposite party Nos.1 and 2 are held liable to pay the amount jointly and severally.”

10.    Being aggrieved by the impugned order of the State Commission, the OP-1 & 2 (Appellant herein) filed this present Appeal no. 576 of 2017 with the following prayer:

i.  Quash and set aside the impugned order dated 25.11.2016 in C.C. No. 59 of 2014 in passed by the State Consumer Disputes Redressal Commission, Haryana, Panchkula.

ii.  Pass such other and further orders as Hon'ble National Commission may consider just and proper in the light of the facts and circumstances of the present case, and in the interest of justice.

11.    In the Appeal, the Appellant mainly raised following issues:

(a)  The State Commission failed to acknowledge that the Life Assured (LA) died by the time the policy was reinstated. This pivotal fact that the fatal accident had already occurred when the renewal premium was paid, and this crucial information was concealed at the time of policy revival, was ignored.

(b) The State Commission ignored the settled legal position as held by the Hon'ble Supreme Court in Harshad J Shah vs. LIC of India [111(1997) CPJ 9(SC)] that premium paid to the agent could not be considered as having been paid to Insurer.

(c) The finding that if the Respondent No.2 was not specifically authorized to collect premium, then why premium deposited on 13.08.2013 before the death of the LA on 16.08.2013 was accepted and policy was reinstated on 21.08.2013 is untenable. Respondent No.2 did not disclose the incident and consequent death of the LA. There was no occasion or reason for the Appellant to refuse to accept the premium from her.

(d) The State Commission misunderstood Section 186 and 196 of the Indian Contract Act, 1872 and wrongly concluded that Respondent No. 2 had authority to receive premium. It also failed to note that no premium receipt was given on 08.08.2013 when it was collected. The receipt was issued on 13.08.2013, after the fatal incident. In terms of Section 237 of the Act of 1872, it's evident that the Appellant didn't lead LA to believe that Respondent No. 2's actions were within the agent's authority.

(e) The State Commission overlooked a fundamental legal question that if an agent violates statutory provisions by collecting premium and subsequently fails to deposit with the insurer, the agent is solely responsible, not the insurer.

12.    On being served notice on Appeal, the Respondent No. 1 has not filed any reply. She filed written synopsis and reiterated the facts. Respondent No. 2, the Insurance Agent was not represented and vide order dated 14.09.2023 she was placed ex-parte.

13.    In his arguments, the learned counsel for the Appellants reiterated the grounds stated in the Appeal and strongly contended that the policy was reinstated after the death of the DLA, and this crucial fact was concealed when the renewal premium was paid, along with the Certificate of Insurability, by Respondent No. 1. This was cited as a reason for rightful repudiation of the claim by the insurer. He emphasized that the policy lapsed on 19.03.2013 and was revived on 21.08.2013. As DLA died on 16.08.2013, the policy was not in force at the time of his death, justifying the repudiation of the claim. He argued that the Respondent No. 2, the Insurance Agent, was not specifically authorized by them to collect the premium on their behalf. Moreover, the premium amount was deposited with the Appellant Company only after the accident, making Respondent No. 1 ineligible for any claim benefit. He cited Section 64 VB (4) of the Insurance Act, 1938, “where an insurance agent collects a premium on a policy of insurance on behalf of insurer, he shall deposit with, or dispatch by  post to the insurer, the premium so collected in full without deduction of his commission within 24 Hours of the collections excluding Bank and Postal Holidays.”

14.    The Counsel for the Appellants have placed reliance upon the following judgments to support their arguments: -

a. Hrshad J. Shah Vs. LIC of India (Supra).

b. Shrikant Murlidhar Apte vs. LIC (RP No. 634 of 2012).

c. LIC of India vs. Raja Vasireddy Komalvalli Kamba & Ors. (1984) 2 SCC 719.

d. Branch Manager, LIC Of India Vs Venu, Revision Petition No. 44 of 2009, decided on 15.10.2014.

e. Reliance Life Insurance Company Limited and Anr. Vs. Rekhaben Nareshbhai Rathod, (2019) 6 SCC 175.

f. Ashish Kumar Vs. Baldev Singh Rohal & Ors., RP No. 3767 of 2008, Decided on 25.11.2013.

g. Tarikh Export House Vs. United India Insurance Company Ltd. [2010] 1 CPR(NC) 159.

h. Branch Manager, LIC. of India and Anr. vs. Smt. Saraswati Devi, RP No. 2140 of 2013, Decided on 02.12.2014.

i. Life Insurance Corporation of India Vs. Hemlata Garg, RP No. 3180 of 2008, Decided on 17.05.2018.

15.    The learned Counsel for the Respondent No. 1 reiterated the fact of case and emphasized that acceptance of premium by the Appellant Company on 13.08.2013 and reinstatement of the policy on 21.08.2013 prove that Respondent No. 2 was indeed their authorized agent. There was no scope for policy to be reinstated otherwise. He argued that an insurance agent is an employee of the insurer, operates under a license/ authorization and sells its products, and earns a commission. Therefore, the argument that she was not an employee of the insurer is baseless. He highlighted the principle of good faith and stated that the insured had paid the premium amount in good faith on 08.08.2013. Any failure by the agent or the Appellant Insurance Company to handle the transaction should not penalize the innocent widow who acted sincerely in good faith.

16.    We have examined the pleadings and associated documents placed on record and rendered thoughtful consideration to the arguments advanced by the learned Counsels for both the parties.

17.    The primary issue in this case revolves around the validity of the life insurance policy, which was reinstated after the insured's death. The central question is whether the insurance policy was legitimately reinstated and whether the agent, who collected the premium on behalf of the insurance company, had authorization to do so. This issue is mainstay to determining the insurance insurer’s liability to pay the claim to the widow (Respondent No. 1).

18.    The main contention of the Appellants while refuting the claim is the legitimacy of the insurance policy's reinstatement. It was forcefully argued that the deceased policyholder was not even alive when the policy was reinstated, making the revival itself invalid. They questioned the authority of the insurance agent (Respondent No. 2) to collect premium on their behalf, stressing that the premium was deposited only after the insured's fatal accident. The Appellants contend that these circumstances justify the repudiation of the claim and absolve them of any liability. On the other hand, the Counsel for Respondent No. 1 asserted the validity of the policy reinstatement and emphasized the agent's status as an authorized representative of the company. Further, invoking the principle of good faith, he asserted that the payment of premium was made in time and the widow should not be made to suffer due to lapses on the part of the agent or the insurer.

19.    The State Commission in its Order dated 25.11.2016 made the following observations:

 “6. However there is no dispute as far as the opinion expressed by Hon'ble National Commission and State Commission, Haryana in the aforesaid case laws is concerned, but, O.P.Nos.1 and 2 cannot derive any benefit from them because facts of the present case are altogether different. It does not lie in the mouth O.P.Nos.1 and 2 that O.P.No.3 was not authorized to collect premium. If it was so then why premium deposited by her on 13.08.2013 before death of DLA on 16.08.2013 was accepted and policy was re-instated on 21.08.2013. The Objection should have been raised there and then that she accepted premium without any authority and that is why policy cannot be revived. As per section 186 of Indian Contract Act,1872 (In Short "Act") an authority can be expressed or implied. As per section 196 if any act done by one person on behalf of another person and is owned by other person then it could be presumed that the said act has been ratified. So it cannot be alleged that O.P.No.3 was not having authority to receive premium. However the claim cannot be rejected on the ground that the latest state of health was not disclosed. As per facts mentioned above it is clear that DLA submitted renewal form Ex.R-3 on 08.08.2013 and made payment to O.P.No.3 on that very day. He told his state of health on the said date. Even otherwise it cannot be expected that if a person is submitting renewal form on any given date then he should produce certificate about his health of the said date. One or two days are normally taken for submitting such like form. More so O.P.Nos.1 and 2 could have asked O.P.No.3 to produce DLA to know about his health. Why they did not ask her about this fact is no-where explained. Instead of raising any such objection O.P.Nos.1 and 2 accepted the premium and re-instated the policy on 21.08.2013. Ex.R-3 dated 08.08.2013 is bearing signatures of Manoj i.e. DLA. It is no where proved that this form is not bearing signature of Manoj and was prepared later on i.e. after receiving the injury. This is a question of fact and it was the duty of the O.Ps. to prove that this form is ante dated. Even if it is doubtful then benefit of doubt is to be given to the consumer. This fact proves that Manoj Kumar (since deceased) paid premium on 08.08.2013 and submitted the form on that very day. It is not possible for every insured to verify that whether agent has deposited the form in time or not. So, it cannot be opined that there was any fault on the part of the DLA or that O.P.Nos.1 and 2 are not liable to pay sum assured and that complainant can ask for compensation only from O.P.No.3. Had the insurance policy being not revived then it could have been a different matter. It is internal matter in between them, complainant cannot be held liable. In LIC Vs Girdharilal's (supra) case agent had no authority to accept premium on behalf of LIC, in Ashwani Kumar Vs. Baldev Singh's (supra) case the premium was deposited by the agent after the death of insured, whereas in the present case the same was deposited before his death and policy was renewed on 21.08.2013. In Tarikh Exports House and Anr. Vs. UIIC's (supra) case the insurance company succeeded to prove that accident took place on 24.06.2000 and cheque was given on 26.06.2000, whereas in the present case it is clearly proved that not only by renewal form EX.R-3 but also as per statement of O.P.No.3 that the premium was paid on 08.08.2013 much before the incident and death of DLA. So these arguments are of no avail and it cannot be opined that complainant is not entitled for compensation.”

20.    It is undisputed that the husband of the Complainant (‘DLA’) had obtained the subject Life Insurance Policy from OP-1 & 2 for 30 years i.e. valid until 29.12.2040, with Rs.35,10,000/- as the sum assured. The annual premium was Rs.10,501.05/-. The DLA had paid four installments from 29.12.2010 to 15.07.2012. Thereafter, the DLA paid Rs.21,010/- to the Agent of the insurer (OP-3) on 08.08.2013, for revival of the policy and handed over the Certificate of Insurability (COI). Four days later, on 12.08.2013, the DLA was fatally shot in the evening hours. An FIR was filed u/s 302/34 of the IPC and u/s 25/54/39A of Arms Act. Due to the severity of the injury sustained, the DLA died on 16.08.2013. Following his demise, the Complainant submitted the death claim to OP-1 & 2 on 19.10.2013. However, her claim was repudiated on 31.03.2014, stating that the policy was not in force at the time of his death. Consequently, OP-1 refunded the premium of Rs. 21,010/-, which the complainant has not yet encashed. Respondents No. 1 & 2 contended that the LA was already dead by the time the policy was reinstated, by keeping them in dark about he being critically injured. It was due to such concealment the renewal was done and, therefore the repudiation of the claim is in order. They relied on the order of Hon'ble Supreme Court in Harshad J Shah vs. LIC of India [111(1997) CPJ9(SC)]. Also, Respondent No.2 was not specifically authorized to collect premium, and she deposited only 13.08.2013 after he was injured and before he died on 16.08.2013, without disclosing the fact. Therefore, the policy reinstated on 21.08.2013 is not tenable. There was no reason for the Appellant to refuse to accept the premium from her. OP-3 admitted to receiving the premium and the Certificate of Insurability (COI) from the LA on 08.08.2013. She could not deposit the premium till 13.08.2013. When she visited the office of OP-1&2 on 08.08.2013, the official concerned asked her to return later due to rush. She subsequently deposited the premium on 13.08.2013. OP-3 clarified that she used to collect premiums on behalf of OP- 1 & 2 based on an understanding with them.

21.    It is uncontested position that the deceased insured never concealed any fact whatsoever. It is also admitted position that he paid the premium to the Agent (OP-3) who regularly collected these premiums dues on behalf of the Petitioners/OP-1&2. As on the date when he paid the premium and handed over the certificate of insurability, there was no objection whatsoever as regards reinstatement of insurance policy already issued to him. It is only after a few days that he sustained a gunshot injury on 12.08.2013, critically injured and died on 18.08.2013. In the interim, the Agent (OP-3) had deposited the premium paid by the DLA on 08.08.2013 with OP-1 and 2 on 21.08.2013. In any case, the LA having done his due had no further mandate in this regard. OP-3 had expressly stated that she went to OP-1&2 to deposit the premium paid by the insured on 08.08.2013. However, due to rush in the office of OP-1 and 2, it could not be deposited. Therefore, it was bona fide transaction wherein the LA had paid the dues as required and handed over the certificate of insurability as well as required and the facts are uncontested and undisputed. There was also no scope for the LA to inform OP-1 or 2 about any injuries sustained by him as he suffered critical gunshot injuries. Even if there was some ambiguity in the matter, as per settled principles, the benefit of doubt should go to the LA who fulfilled all his obligations.

22.    In view of the foregoing deliberations, we see no reason to interfere with the orders passed by the learned State Commission.

23.    At the same time, the Hon’ble Supreme Court in DLF Homes Panchkula Pvt. Ltd. Vs. D.S. Dhanda, in CA Nos. 4910-4941 of 2019 decided on 10.05.2019 has held that multiple compensations for singular deficiency is not justifiable. Therefore, the award of Rs.21,000/- to the Complainant by the State Commission towards physical and mental harassment, over and above the component of interest already awarded is untenable. Considering the entire facts and circumstances of the case, the Order of the State Commission dated 25.11.2016 in CC No.59/2014 is modified as below:

ORDER

1. The Appellants /Opposite Parties are directed to pay the sum assured to the Respondent No.1/Complainant along with simple interest @ 9% per annum from the date of filing of the Complaint till complete payment, within one month from the date of this Order. In the event of delay beyond one month, the interest applicable shall be @ 12% for such extended period.

2. The Appellants/Opposite Parties are also directed to pay Rs.30,000 to the Respondent No.1/Complainant as costs of the litigation.

3. The Order for payment of Rs.21,000 to the Respondent No.1/Complainant towards compensation for mental and physical harassment is set aside.

24.    The First Appeal No.576 of 2017 is accordingly disposed of.  All pending application, if any, also stand disposed of accordingly.

25.    The Registry is directed to release the Statutory Deposit amount, if any due, in favour of the Appellant as per law, after compliance of this order.