SUPREME COURT OF INDIA
Life Insurance Corporation of India
Vs
Mani Ram
Civil Appeal No. 4806 of 2005
(R.C.Lahoti (CJI) and C.K.Thakker)
05/08/2005
C.K. THAKKER, J.
1. Leave granted.
2. This appeal is filed by the Life Insurance Corporation of India
("Insurance Company" for short) against the order passed by the
District Consumer Disputes Redressal Forum, Bilaspur (Himachal Pradesh),
confirmed by the Himachal Pradesh State Consumer Disputes Redressal Commission,
Shimla and also confirmed by the National Consumer Disputes Redressal
Commission, New Delhi.
3. Few facts giving rise to the present appeal may now be stated.
4. Mani Ram-respondent herein, son of the one Budhu Ram, resident of village
Khatehar, Pargana and Tehsil Sadar, District Bilaspur (HP) filed a complaint
under Section 12 of the Consumer Protection Act, 1986
(hereinafter referred to as "the Act"), before the District Forum,
Bilaspur. In the complaint, it was inter alia alleged by the complainant that
his son Ashok Kumar had been insured with the appellant-Insurance Company on
August 21,1995 and premium amount of Rs.5215/- was paid on the same day.
According to the complainant, the next instalment of premium was due on August
21, 1996. Ashok Kumar - insured, however, died in an accident on August 2, 1996
at Barmana as the boundary wall of the D.A.V. School fell on him and he was
crushed under the debris. The complainant, in view of the subsisting policy,
requested the appellant-Insurance Company to pay the insurance claim amount of
Rs.2, 50,000 /- to the complainant, but under the lame and false excuses, the
Insurance Company did not pay the amount. Finally, by a communication dated
August 11, 1997, the Insurance Company refused to pay any amount. The deceased
was unmarried. It was asserted by the complainant that he was the nominee of
deceased Ashok Kumar as the father. Since the amount was not paid, the
complainant was constrained to approach to District Forum. Accordingly a claim
of Rs.2, 50,000/- was made along with interest and damages on account of mental
torture and financial loss suffered by the complainant.
5. The appellant-Insurance Company resisted the claim of the complainant by
filing a written reply. A preliminary objection was raised against the
maintainability of the complaint on the ground that the policy had lapsed due
to non-payment of premium within the prescribed period and hence, the
complainant had no right to claim anything. The complaint was, therefore,
liable to be dismissed. It was stated that deceased Ashok Kumar was insured
with the Insurance Company. It was also admitted that the premium amount was
paid to the Insurance Company on August 21, 1995 but the policy holder got the
policy effected from a back date, i.e. from April 28, 1995. According to the
Insurance Company, therefore, the next premium was due and payable after one
year, i.e., on April 28,1996. Giving benefit of grace period of one month, the
premium amount was required to be paid latest by May 28, 1996. No premium,
however, was paid on April 28, 1996 nor till May 28, 1996 and the policy
lapsed. Since the deceased Ashok Kumar met with an accident on August 2, 1996,
there was no subsisting policy in favour of the insured inasmuch as it lapsed
on May 28, 1996, the Insurance Company could not be held liable and the
complainant was not entitled to any amount.
6. The District Forum considered the rival contentions of the parties and held
that the deceased was assured for Rs.50,000/- on August 21, 1995. It observed
that no doubt the policy was back-dated to April 28, 1995, but as the premium
was paid on August 21, 1995, next premium became due on August 21, 1996. Since
Ashok Kumar met with an accident and died on August 2, 1996, the Insurance Company
was liable. It accordingly awarded an amount of Rs.50, 000/- with interest @
12% p.a. and costs of Rs.500/-.
7. Being aggrieved by the order passed by the District Forum, both, the
complainant as well as Insurance Company filed appeal before the State
Commission. The grievance of the Insurance Company was that since the policy
lapsed on April 28, 1996, it could not have been held liable for an accidental
death of Ashok Kumar on August 2, 1996 and the District Forum had committed an
error of law in holding the Insurance Company liable. The grievance of the
complainant, on the other hand, was that since Ashok Kumar died due to
accidental death, as per the terms and conditions of the Policy, the
complainant was entitled to a sum of Rs.2,50,000/- and the District Forum was
in error in awarding Rs.50,000/- only. The State Commission heard both the
appeals and dismissed them by a common judgment. The State Commission relied
upon the decision of this Court in Life Insurance Corporation of India and
Another v. Dharam Vir Anand, 8: 8.
8. The Insurance Company approached the National Commission against the orders
passed by the Fora below. The National Commission, however, dismissed the
Revision Petition by observing that concurrent findings had been recorded that
the policy was subsisting and the Insurance Company was liable under the said
policy. According to the National Commission, since the first premium was paid
on August 21, 1995, the next premium was due on August 21, 1996.
9. We have heard the learned counsel for the parties. Mr. G.L. Sanghi, learned
senior counsel for the Insurance Company submitted that the Fora below have
committed an error of law in holding that the policy was subsisting. The
counsel admitted that the first premium was paid on August 21, 1995, but in the
proposal dated August 19, 1995, a request was made to make the policy effective
with back date from April 28, 1995. The request was granted by the Insurance
Company and the policy was issued. The period of policy was thus from April 28,
1995 to April 28, 1996. The counsel submitted that deposit/payment of premium
amount was not at all relevant as the policy was for a period of one year from
April 28, 1995. It was submitted that the next premium was due on April 28,
1996 and the amount ought to have been paid. Grace period of one month was
available to the insured and payment ought to have been made by May 28, 1996.
It is not disputed even by the complainant, submitted the counsel, that no
payment was made on or before May 28, 1996. The policy, therefore, lapsed on
May 28, 1996. Since the assured died on August 2, 1996, the Insurance Company
was not liable. It was also submitted that the ratio laid down in Dharam Vir
Anand does not apply to the facts of the case.
10. The learned counsel for the respondent, on the other hand, submitted that
the contentions raised by the appellant Insurance Company were considered by
the Fora below and in the light of the facts and circumstances as also the
decision of this Court; orders were passed which call for no interference.
11. The question for our consideration, therefore, is whether on August 2,
1996, the policy could be said to be valid and subsisting. If the reply is in
affirmative, obviously, the complainant was entitled to the amount awarded. If,
on the other hand, the policy lapsed, as contended by the Insurance Company, no
claim could have been put forward by the complainant and the Insurance Company
was right in rejecting the claim.
12. So far as the factual position is concerned, there is no dispute between
the parties. Deceased Ashok Kumar was insured by the Insurance Company and the
first premium was paid on August 21, 1995. At the request of the insured,
however, the policy was back-dated with effect from April 28, 1995. In our
opinion, therefore, the learned counsel for the Insurance Company is right in
submitting that one year came to an end on April 28, 1996 and the insured was
liable to pay premium on that date as it became due and payable. Taking into
account grace period of one month, premium amount ought to have been paid
latest by May 28, 1996. Admittedly, no such payment was made either in April,
1996 or in May, 1996. We are impressed by the argument of the learned counsel
for the Insurance Company that in the circumstances, the policy lapsed on May
28, 1996.
13. In this connection, it may be profitable to refer to the terms and
conditions of the policy. The policy stated that the date of commencement was
April 28, 1995 and the date of maturity would be April 28, 2010 as it was for a
period of fifteen years. It is further stated that the policy of assurance
"shall be subject to the conditions and privileges" printed on the
back of the policy. On the back of the policy, those conditions and privileges
have been printed. Condition 2 thereof, is material for our purpose and reads
thus:
2. "Payment of premium: A grace period of one month i.e. not less than
30 days will be allowed for payment of yearly, half-yearly, or quarterly
premiums and 15 days for monthly premiums. If death occurs within this period
and before the payment of the premium then due, the Policy will be valid and
the sum assured paid after deduction of the premium as also the unpaid
premium/s falling due before the next anniversary of this Policy. If the
premium is not paid before the expiry of the days of grace, the Policy
lapses." $ * (emphasis supplied)
14. From the above condition, it is abundantly clear that payment of premium
due had to be made within a grace period of one month. If such payment was made
within the said period, the policy would be treated as valid and the assured
would be paid the amount to which he was entitled after deducting the premium
amount. But it was also made clear that if the premium was not paid before the
expiry of the days of grace, the policy would lapse. As we have already
observed hereinabove, the material date was not the date of deposit/payment of
premium amount which was August 21, 1995, but the date of policy which was
April 28, 1995. Since it was yearly, the payment was due on April 28, 1996, but
the assured was entitled to grace period of one month up to May 28,1996.
Neither the premium was paid on April 28, 1996 nor on May 28, 1996. As per
condition No. 2, policy lapsed on May 28, 1996. In the eye of law, there was no
subsisting policy, on August 2, 1996. Insurance Company was, therefore, wholly
justified in rejecting the claim of the complainant and no exception can be
taken against such a decision.
15. The learned counsel for the respondent no doubt relied on the decision of
this Court in Dharam Vir Anand. The State Commission also referred to the said
decision and observed that the point was covered by the ration laid down
therein and the complainant was entitled to the benefit of that decision. In
our opinion, however, the submission of the learned counsel for the Insurance
Company is well-founded that it was in the light of the fact-situation of that
case that the Court decided the matter in favour of the complainant.
16. In Dharam Vir Anand, the complainant had taken a policy of insurance on the
life of his minor daughter. The policy was issued on March 31, 1990. The risk
under the policy was, however, back-dated at the request of the complainant
taking advantage of the option given to him in that regard by the Insurance
Company which was May 10, 1989 and the premium was paid. On November 15, 1992,
the assured committed suicide. The complainant lodged a claim which was refuted
by the Company. The question before this Court was whether on that date i.e.
November 15, 1992, the policy was subsisting or not? If the date of issuance of
policy was to be taken into account, the policy was subsisting. But if
back-date would be considered as relevant and material, three years were over
and there was no subsisting policy. The Court considered Clause 4-B of the
policy which read as under:-
"4-B. Notwithstanding anything mentioned to the contrary, it is
hereby declared and agreed that in the event of death of life assured occurring
as a result of intentional self-injury, suicide or attempted suicide, insanity,
accident other than an accident in a public place or murder at any time, on or
after the date on which the risk under the policy has commenced but before the
expiry of three years from the date of this policy, the Corporation's liability
shall be limited to the sum equal to the total amount of premiums (exclusive
extra of premiums, if any), paid under the policy without interest. Provided
that in case the life assured shall commit suicide before the expiry of one
year reckoned from the date of this policy, the provisions of the clause under
the heading "Suicide" printed on the back of the policy". $ *
(emphasis supplied)
17. The Court observed that Clause 4-B made it crystal clear that the date on
which the risk under the policy commenced was different from the date of the
policy. The Court took into consideration two expressions, viz., "the date
on which the risk under the policy has commenced" and "the date of
the policy". The Court held that since two expressions were used which
obviously referred to two different periods, effect must be given to both of
them. If the contention of the Insurance Company that the relevant date was the
date on which the risk under the policy had commenced alone would be
considered, the second expression ("the date of the policy") would
become redundant. The Court noted the argument on behalf of the Insurance
Company that the second date had a limited application for the purpose of
giving certain tax relief but negatived it. It was further observed by this
Court that in construing contractual clauses, the words and terms therein must
be given effect to and a part of the contract cannot be rendered meaningless
while construing and interpreting the other part of the same contract.
According to the Court, when the parties agree to the terms of the contract, it
was not open to content that a particular term was never intended to be acted
upon. Accordingly, this Court held that on November 15, 1992, the policy was in
existence and the respondent-claimant was entitled to the amount.
18. In the instant case, Condition 2 expressly provided the period during which
the payment was to be made. it also in no uncertain terms stated that if
premium was not paid before the expiry of grace period, the policy would lapse.
In our view, the ratio in Dharam Vir Anand would support the Insurance Company
rather than the complainant. If all the terms and conditions of the policy
(contract between the parties) have to be kept in mind and given effect to,
acceptance of argument on behalf of the complainant would make the last part of
Condition 2 redundant, otiose and inoperative; and a court of law cannot
construe a document in the manner suggested by the counsel for the complainant.
As the premium was due on April 28, 1996 and was not paid till May 28, 1996,
the policy lapsed. The Fora below hence, committed an error of law in allowing
the complaint of the respondent herein and the orders are liable to be set
aside.
19. For the reasons stated above, the appeal deserves to be allowed and is
accordingly allowed. The orders passed by all the three Commissions are hereby
set aside. The learned counsel for the appellant-Insurance Company, however,
stated that the assured died in 1996 and the District Forum upheld the claim of
the complainant in December, 2000. He fairly stated that the amount was not
'very high' and has also been paid and the Insurance Company was not so serious
about the amount, but since the question of law had been wrongly decided, the
Insurance Company had to approach this Court so that the law is settled.
Therefore, though we hold the orders not to be in accordance with law and we
set aside them, but we direct that no recovery will be effected from the
respondent-complainant pursuant to this order.
20. The appeal is allowed to the extent indicated above. In the facts and
circumstances of the case, however, there shall be no order as to costs.