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LIFE INSURANCE CORP. OF INDIA VS GIRDHARI LAL P. KESARWANI & ANR,2009

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CITATIONNCDRC 1794.REVISION PETITION NO. 900 OF 2007
DATE OF JUDGMENT14TH JAN 2009
COURTNATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION (NCDRC)
APPELLANTLIFE INSURANCE CORP. OF INDIA
RESPONDENTGIRDHARI LAL P. KESARWANI & ANR
BENCHMR. JUSTICE ASHOK BHAN, PRESIDENTHON’BLE MR. B.K. TAIMNI, MEMBER

INTRODUCTION

The case of “Life insurance Corp. of India vs Girdhari Lal P. Kesarwani & Anr. 2009 resolved a complicated legal issue pertaining to liability of Life Insurance Corporation of India to pay the benefit amount if the insured fails to pay the premium of insurance and specifically it deals with whether premium given to agent or in other words premium received by agents will be considered as premium paid to insurance company. The case came to light when Late Shailesh G Kesarwani (son of the respondent) who had purchased an insurance policy from LIC with profit and accidental benefit in the sum of Rs.25,000/- on 28.03.1996. in which he had to pay a premium in installments in each quarter. Shailesh paid three instalments and paid fourth instalments to agents which he deposited after the death of Shailesh. LIC denied the payment of accidental benefit amount to Girdhari Lal Kesarwani (NOK of Shailesh) aggrieved of the acts of LIC, Girdhari Lal filed complaint against LIC in district Forum and district forum ruled in favour of Girdhari Lal , aggrieved  of the decision of district forum LIC approached to State commission which upheld the decision of district forum, again not being satisfied by decision of state commission LIC filed revision petition in NCDRC which ruled in favour of LIC.

FACTS OF THE CASE

Shailesh G Kesarwani son of Girdhari Lal P Kesarwani (respondent)had purchased a life insurance policy with profit and accidental benefit in the sum of 25000/- from Life Insurance Corporation Of India (Hereinafter LIC) on 28 Mar 1996. The premium was fixed at a rate of Rs.324/- per quarter. Late Shailesh as subscribed paid the first, second and third instalments of the premium in March, June and September, 1996, respectively. Shailesh paid the fourth installment to Smt. Kamal Sharma who was the agent of the LIC and later Shailesh died on 08.03.1997. Smt. Kamal Sharma deposited the premium after the death of Shailesh on 18.03.1997. Girdhari Lal Kesarwani (father of Sailesh) informed LIC about the death of Shailesh on 11.08.1997 and requested for reimbursement of the assured amount under the policy, but the insurer denied by stating that policy was lapsed due to non-payment of premium. Respondent approached the District Forum with a complaint claiming the amount assured. 

The District Forum decided the complaint and ruled in favour of respondent and directed the petitioner to pay the maturity amount of the policy worth Rs.25,000/- along with bonus and requisite interest as per the terms and conditions of policy and cost of Rs.2,000/-.

The petitioner being aggrieved by order of District forum filed the appeal before the State Commission, which was dismissed SCDRC, Nagpur vide order in Appeal No. 1556 of 2001. Aggrieved by the order of the state commission, LIC filed a revision petition in the National Consumer dispute resolution commission (NCDRC).

ISSUES RAISED

  1. Whether a premium received by an agent of LIC will be considered as payment of premium to LIC.?
  2. Whether the insurance company was liable to pay the accidental benefit amount?

CONTENTIONS OF APPELLANT 

  1. The appellant accepted the issuance of the above said policy in the name of Shailesh G Kesarwani but denied the fact that the fourth instalment of premium was paid by the deceased or on his behalf, consequently the policy had lapsed. Appellant denied that Smt. Kamal Sharma had paid the premium on 18.03.1997. It was also submitted that this fact had been conveyed to the respondent vide letter dated 06.01.2000 
  2. The appellant stating Agent Regulations 1972 submitted that the agent has no authority to receive the premium. The agent accepts the premium as an agent of the customer and not of the insurer.
  3. The appellant submitted by relying on judgement pronounced by Hon’ble Supreme Court of India in case of  Harshad J. Shah & Anr. v. L.I.C. of India & Ors.,1997. wherein Hon’ble bench after considering a similar contention arising under similar circumstances, held that an agent has no authority to accept the premium on behalf of LIC and that the deposit made by the agent after the death of the deceased would not entitle the claimant to get the amount insured under the policy.
  4. Appellant thus on the basis of above facts prayed for dismissal of order passed by state dispute redressal commission.

CONTENTIONS OF REPONDENT 

  1. The respondents contended that payment was made through agent Smt. Kaml Sharma, who identified herself as the agent of LIC. Late Shailesh subscribed to policy on being briefed by agents only.
  2. Respondents also submitted that a receipt of acknowledgement of payment is given by agents. All the policies are generally subscribed by the general masses on the assurance made by the agent that subscribers will not have to visit the LIC office again and again in order to pay the premium. Agents on their behalf will do this part.
  3. Respondents contended that since the premium was paid on time, it was an agent of LIC who did not deposit the same. They shall suffer for the failure of agents of the insurer and thus the insurer shall pay the accidental benefit amount.  

JUDGEMENT

  1. The National Consumer Dispute Redressal commission while deciding the case completely concluded on the basis decision of supreme court in case  Harshad J. Shah & Anr. v. L.I.C. of India & Ors. AIR 1997 Supreme Court 2459.
  2. Commission while relying on the issues decided in Harshad case (supra) in which it was held that there was no implied authority by the LIC authorising its agents to collect premium on behalf of the LIC.
  3. Commission was of the opinion that agents are not authorised to collect any money or accept any risk on behalf of the LIC and they can collect so only if they are expressly authorised to do so.
  4. On being asked by the commission to the counsel of both appellant and respondents, Amicus Curiae fairly conceded that the aforesaid Judgment still holds the field. Thus, in view of the law laid down by the Supreme Court in Harshad case (supra) , the commission accepted the petition and set aside the order passed by the state commission.

ANALYSIS

  1. Authority of agents to collect premiums. – The case looked upon the various rules and regulations of LIC and even appointment letters given by LIC to agents, which prohibits agents from collecting the premium from the insurer. LIC also submitted that agents are not allowed to collect the premium unless specifically authorised.
  2. Apparent Liability of LIC. – Liability of LIC will only arise when the agents who are authorised to collect premium failed to deposit the premium. In this case Smt. Kamal Sharma was not authorised to collect premium hence Liability of LIC to pay the amount is absolved.
  3. Misrepresentation- With due respect to the decision of Supreme court and Commission in this case, one point which I Think is missed while deciding the case is Misrepresentation. Generally, Agents misrepresent themselves as authorised agents to collect premium. Though it is on part of subscriber to enquire into all conditions, yet it is pertinent to consider that there are cases of misleading and misrepresentation. Agents shall clearly tell the subscriber about the prohibition of collection of premium by them and they are only the facilitator.
  4. Generally, these cases come to picture the person to whom it was misrepresented had left for heavenly abode. Hence, in such cases where the soul had already departed, such cases shall be dealt with justice, equity and good conscience along with some sympathetic actions. Precedent, Procedure and rules shall not be taken into account in a very strict sense as the facts of every case may differ. 
  5. Court’s Final Verdict – The case ultimately held that the decision of the SCDRC was incorrect in deciding the case. NCDRC absolving the liability of the insurer to pay the accidental benefit amount accepted the petition.

CONCLUSION

In conclusion, the case of Life insurance Corp. of India vs Girdhari Lal P. Kesarwani & Anr. 2009, sets a crucial legal precedent in the realm of determining the authority of agents to collect premiums on behalf of the insurer. It clearly sets rules that the insurer is not liable to pay the benefit amount if the policy has lapsed due to failure in payment of premium. Also, Insurer is not liable to pay accidental benefit amount to insured if there is a failure on part of an agent who was not authorised to collect premium.

REFERENCES

  1. https://indiankanoon.org/
  2. Indian Contract Act 1872.

This Article is written by Dhirendra Singh student of PES Modern Law College, Pune ; Intern at Legal Vidhiya.

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