Mrs. Hiralaxmi, Widow of Mansukhlal Kothari and Others Vs. Life Insurance Corporation of India and Another - Court Judgment

Excerpt:
- maharashtra village police act (46 of 1967)sections 5, 6 & 15: [swatanter kumar, c.j., a.p. lavande & smt. vasanti a. naik, jj] powers of police patil held, section 15 clearly states the varied powers that are vested in the police patil. he is vested with the power to call and examine witnesses, record their statements and search for concealed articles. such are the powers given to the police patil under the provisions of the village police act. the powers vested in the police patil under the provisions of the village police act are relatable to the duties and functions for which the police patil is appointed. to give meaning to these powers beyond the scope of the duties would be an approach not quite permissible in law. the duties, functions and powers of the police patil under.....orderper p.s. patankar, j. 1. in this petition under article 226 of the constitution of india, the petitioners are praying for a writ of mandamus directing the respondent no. 1 life insurance corporation of india to pay a sum of rs. 1 lakh along with interest at the rate of 18% from the date of the death of the insured till payment on the ground that there was a concluded contract between the parties in respect of the two insurance policies. the question, in short, involved is whether there was a concluded contract between the parties. a few facts are as under :-- petitioners nos. 2 to 7 are the sons and daughters and petitioner no. 1 is the widow of one late mansukhlal kothari. mansukhlal kothari had given proposal for two insurance policies for a sum of rs. 1,00,000/- on 14th august,.....

Judgment:
ORDER

Per P.S. Patankar, J.

1. In this petition under Article 226 of the Constitution of India, the petitioners are praying for a writ of Mandamus directing the respondent No. 1 Life insurance Corporation of India to pay a sum of Rs. 1 lakh along with interest at the rate of 18% from the date of the death of the insured till payment on the ground that there was a concluded contract between the parties in respect of the two Insurance Policies.

The question, in short, involved is whether there was a concluded contract between the parties.

A few facts are as under :--

Petitioners Nos. 2 to 7 are the sons and daughters and petitioner No. 1 is the widow of one late Mansukhlal Kothari. Mansukhlal Kothari had given proposal for two insurance policies for a sum of Rs. 1,00,000/- on 14th August, 1987. He also sent a cheque dated 18th September, 1987 for a sum of Rs. 4,169.25. Respondent No. 1accepted it and encashed it on 21st September, 1987. Mansukhlal Kothari died of heart attack on 28th November, 1987. The petitioner No. 3 by a letter dated 18th February, 1988 addressed to the Senior Divisional Manager, informed about the death of Mansukhlal. When the petitioners requested the Agent about the claim he informed them that an intimation was received on 7-12-1987 that the policies were declined as Mansukhlal was suffering from Hernia. The petitioners thereafter entered into correspondence with respondent No. 1 and ultimately sent a letter through their Advocate dated 13th May, 1988 making the claim. However, the claim was not settled. Hence, this petition.

2. It is the contention of the petitioners that when the cheque was encashed on 21st September, 1987, the proposal was accepted and the concluded contract has taken place between the parties. Mansukhlal died thereafter and hence the respondent No. 1 is liable to pay under those two policies. It is further submitted that in view of section 64-VB of the Insurance Act, 1938, the risk is deemed to have been undertaken the moment the first premium was received by the respondent No. 1. In the present case, the said premium was received by the respondent No. 1 when the cheque was encashed on 21st September, 1987 and hence the respondent No. 1 is liable to make the payment.

3. As against this, it is contended on behalf of the respondent No. 1 that no concluded contract has taken place between the parties. There was no acceptance of the first premium by encashing the cheque on 21st September, 1987. It was only initial deposit. The non-acceptance of the proposal was communicated by letter dated 7th December, 1987. It was also mentioned in the said letter that refund of deposit shall be made. The said letter also shows that the amount of Rs. 4,169.25 was taken towards the deposit. It has been denied that any receipt was issued to Mansukhlal accepting as payment of premium. It has been pointed out that it is the practice of the respondent No. 1 to issue a deposit memorandum pending finalisation of acceptance of proposal. The provisions of section 64-VB of the Insurance Act, 1938 are not applicable in the case of life Insurance in view of section 43(5) of the Life Insurance Corporation Act, 1956. The said provision declares which provisions of the Insurance Act, 1938 are attracted and section 64-VB is not mentioned therein. It is also contended that the object of section 64-VB of the insurance Act, 1938 is that premium should be received in advance before any risk of insurance is undertaken. It is not that receipt of premium means the risk is undertaken or attached. It is submitted that the risk is undertaken by the Insurer only after the concluded contract takes place between the parties. Reliance is placed in that respect on the judgment of the Supreme Court reported in A.I.R. 1984 S.C. 1014, Life Insurance Corporation of India v. Raja Vasireddy Komalavalli Kumba and others. The practice of Life Insurance Corporation is also pointed out i.e. issuance of Challan-cum-Suspense Memorandum for Proposal Deposit. The Prospectus issued by the Life Insurance Corporation to the general public mentions about this and clarifies that the amount forwarded at the time of proposal is only deposit and not payment of premium.

4. It is first to be noted that the reliance of the petitioners on section 64-VB of the Insurance Act, 1938 for contending that risk is undertaken by the Life Insurance Corporation when the cheque was encashed on 21-9-1987 is not well-founded for more than one reason. First, section 43 of the Life Insurance Corporation Act provides for application of the Insurance Act. It specifically mentions which sections of the Insurance Act, 1938 are attracted in case of life insurance policies. Section 64-VB isnot one of them. Even assuming that the said provision of section 64-VB of the Insurance Act, 1938 or the spirit underlying thereof is attracted, even then it cannot be said that mere encashment of the cheque sent along with the proposal attaches risk. In other words, it cannot be said that a concluded contract between the parties took place. What section 64-VB provides is that no insurer shall assume any risk unless the premium is received in advance or is guaranteed to be paid by the assured in such manner and within such time as may be prescribed. Sub-section (2) thereof makes it clear that in case where the premium can be in advance, the risk may be assumed not earlier than the date on which the premium has been paid in cash or by cheque to the insurer. It is clear that the object of the said section is to secure advance payment of premium by the Insurance Company before the assumption of risk. Section 64-VB(1) places a prohibition upon the insurer that unless and until it receives payment of premium or the same is guaranteed to be paid in a particular manner and within a particular time as prescribed in advance, there can be no assumption of risk. Thus, it is clear that mere encashing the cheque sent along with the proposal cannot amount to be a concluded contract between the parties and it cannot be said that the insurer has assumed risk because of the encashment of the cheque. The Apex Court in A.I.R. 1984 S.C. 1014, Life Insurance Corporation of India v. Raja Vasireddy Komalavalli Kumba and others has observed -

'14. Though in certain human relationships silence to a proposal might conveyacceptance but in the case of insurance proposal, silence does notdenote consent and no binding contract arises until the person to whoman offer is made says or does something to signify his acceptance. Meredelay in giving an answer cannot be construed as an acceptance, as,prima facie, acceptance must be communicated to the offerer. Thegeneral rule is that the contract of insurance will be concluded only whenthe party to whom an offer has been made accepts it unconditionally andcommunicates his acceptance to the person making the offer. Whether thefinal acceptance is that of the assured or insurers, however, depends simplyon the way in which negotiations for an insurance have progressed.'

it was held in the said case that mere receipt or retention of premium even for a longtime cannot give rise to a contract.

5. In the present case, the Prospectus issued by the Life Insurance Corporation to the public is produced. Clause 43 says that payment of an advance deposit shall be generally equal to the First Premium. Clause 47 deals with when the proposal is declined, etc. then the deposit is to be refunded. Clause 50 says that the risk under the Corporation's Policies commences on the date of receipt of the First Premium in full or the date of Acceptance, whichever is the later. Therefore, this supports the case of the respondent No. 1 that it is the practice of L.I.C. to accept the deposit of a sum of money generally equal to the first premium along with the proposal and the risk commences after it is accepted as a first premium in full or the policy is accepted, whichever is later. However, mere acceptance of deposit cannot commence the risk. Even the letter dated 7-12-1987 of L.I.C. shows that the amount of Rs. 4,169.25 was accepted as deposit and the said deposit is to be refunded as the policy was declined. The petitioners have in fact failed to produce the alleged receipt issued by respondent No. 1 as first premium. It is stated in the petition that the amount was taken as first premium. This has been denied by the respondent No. 1. Considering the above position, it is not possible for us to accept that there was any concluded contract between the parties.

6. The learned Counsel for the petitioners has submitted that the proposal was sent on 14-8-1987 and the cheque on 19-9-87. It was encashed on 21-9-87 and the policy was declined on 7-12-87 i.e. after the death of Mansukhlal on 28-11-87. He submitted that in view of the long and unreasonable delay in declining the policies it should be assumed that they were accepted by the respondent No. 1 and it has assumed the risk. In the present set of provisions it will not be possible for us to accept this. However, we consider this as a legitimate grievance and feel that a provision ought to be made in the Prospectus of L.I.C containing a deeming provision i.e. if a policy is not declined, Say within a period of one month or so from the encashment of the cheque, it should be deemed to have been accepted by the L.I.C and the risk assumed.

7. With these observations, Rule is discharged. No order as to costs.

8. Rule discharged.