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2009 DIGILAW 404 (UTT)

LIFE INSURANCE CORPORATION OF INDIA v. PRABHAWATI

2009-07-31

C.C.PANT, IRSHAD HUSSAIN

body2009
ORDER (Per : C.C. Pant, Member): This is an appeal by Life Insurance Corporation of India against the order dated 14.08.2007 passed by the District Forum, Dehradun in consumer complaint No. 178/2003. Vide the impugned order, the District Forum has allowed the complaint and directed the opposite party No. 3 appellant to pay the insured sum of Rs. 25,000/- to the complainant within 60 days from the date of the order, failing which the amount was directed to carry interest @ 9% p.a. from the date of filing of the complaint till payment. 2. The facts of the case, in brief, are that one Sh. Ram Achal Singh was an employee of the Executive Engineer, Yamuna Nirman Khand-I, Dehradun – opposite party No. 2 since 01.06.1971. Sh. Ram Achal Singh died on 12.05.1995 and till the said date, he was in service in the said department. During his service, opposite party No. 2 regularly deducted the amount against premium payable under Group Salary Linked Insurance Scheme or G.I.S. On the sudden death of Sh. Ram Achal Singh, his wife Smt. Prabhawati – complainant claimed the insured sum of Rs. 25,000/- with interest and bonus. However, the opposite parties did not pay the insured sum to the complainant. Upon, this, the complainant filed a consumer complaint before the District Forum, Dehradun. The District Forum vide its order dated 14.08.2007 allowed the complaint in the above terms. Aggrieved by the said order, the Life Insurance Corporation of India has filed this appeal. 3. None appeared on behalf of complainant – respondent No. 1. We have heard the learned counsel for the appellant and respondent Nos. 2 to 4 and also perused the material placed on record in the light of the legal aspects of the case. 4. The main contention of the appellant is that the complainant’s husband was insured under the Group Salary Linked Insurance Scheme and not under the Salary Saving Scheme. The learned counsel for the appellant submitted that the case laws, on which the District Forum has relied, relate to the insurance cases pertaining to Salary Saving Scheme. In the present case, the learned counsel argued that the responsibility to deposit the premium was that of the employer of the insured and if the employer has failed in depositing the premium, the policy stands lapsed. The complainant’s husband had died on 12.05.1995. In the present case, the learned counsel argued that the responsibility to deposit the premium was that of the employer of the insured and if the employer has failed in depositing the premium, the policy stands lapsed. The complainant’s husband had died on 12.05.1995. The employer had to remit the deductions made from the salary of April and May, 1995 on or before 20.04.1995 and 20.05.1995 respectively, but the employer remitted the said amount on 08.01.1996. Not only this, the employer had remitted the deduction of the premiums from the salary of the employee for the months of April, May, June, July, August, September and October, 1995 on 08.01.1996. Thus, during this period the policy stood lapsed. Unfortunately, Sh. Ram Achal Singh died during this period on 12.05.1995. Since the policy was not in force, the appellant did not make any deficiency in service by not paying the insured sum. The learned counsel relied upon the decision of the Hon’ble National Commission in the case of Central Coalfields Ltd. Vs. Bandana Mishra and another; II (2007) CPJ 38 (NC), wherein the Hon’ble National Commission has distinguished the Salary Saving Scheme from the Group Salary Linked Insurance Scheme. 5. The learned counsel for respondent Nos. 2 to 4 argued that there is no such condition in the Insurance Scheme that the policy would lapse if the amount of premium is not remitted in time. If the policy had lapsed, then the appellant should have refused to accept the premium, but the appellant has duly acknowledged the receipt of premium vide receipt No. 47368 dated 08.01.1996. 6. We considered the submissions made by the learned counsel. The Group Salary Linked Insurance Scheme was launched by various Government Departments and Organizations for the welfare of their employees. This is somewhat an in-built system for the insurance of an employee. As soon as an employee is appointed he/she joins the duty, he/she gets and insurance cover for his/her life. The employer deducts a certain amount as premium from his/her salary. There is no option for the employee whether to join the scheme or not to join. He/she is made a member of the scheme compulsorily. The employee knows that he/she has been given the insurance cover under the Group Insurance Scheme, as known in common parlance. To operate the scheme, there is some arrangement between the employer and the Life-Insurance Corporation of India. He/she is made a member of the scheme compulsorily. The employee knows that he/she has been given the insurance cover under the Group Insurance Scheme, as known in common parlance. To operate the scheme, there is some arrangement between the employer and the Life-Insurance Corporation of India. A certain percentage of premium so deducted is adjusted towards the insurance covering the risk, while the remaining amount is deposited as saving of the employee. As a matter of fact, the employee is ignorant of the internal mechanism of the scheme and its operation. The employer takes out a master policy from the insurance company, which covers all the employees. So the relationship between the insurance company and the employer is that of the insurer and the insured. Therefore, the contention of the learned counsel for the appellant that the case laws relied upon by the District Forum relate to Salary Saving Scheme, is tenable. 7. The Salary Saving Scheme is certainly different from the Group Insurance Scheme. As a matter of fact, the policy under Salary Saving Scheme is just like the general insurance policy, wherein every employee takes out his won policy with different insurance amount depending upon his/her potential for making adequate saving from his/her salary for the payment of premium. The only difference between a general policy and a policy under this scheme is that the insurance company has authorized the employer to deduct the premium from the employee’s salary and to remit the same by a single cheque. No premium receipts or premium due notices are issued by the Corporation. There is an incentive for the employees, who participate in this scheme, that they have to pay less premium as compared to the premium for a general policy for the same amount. As soon as an employee exists from this scheme for any reason he/she can pay the premium directly to the Corporation, but the premium amount is enhanced by the Corporation by 5%. 8. The Hon’ble Supreme Court in the case of Delhi Electric Supply Undertaking Vs. Basanti Devi and another; III (1999) CPJ 15 (SC), has dealt in detail the issue as to whether the insurance company can be held liable to pay the insurance amount if the employer had faulted in remitting the premium amount deducted from employee’s salary under the Salary Saving Scheme. Basanti Devi and another; III (1999) CPJ 15 (SC), has dealt in detail the issue as to whether the insurance company can be held liable to pay the insurance amount if the employer had faulted in remitting the premium amount deducted from employee’s salary under the Salary Saving Scheme. The Hon’ble Supreme Court has observed in the case that DESU was certainly not an insurance agent within the meaning of Life Insurance Corporation Act and Life Insurance Corporation of India (Agents) Regulation, 1972 because Insurance Agents are appointed under Regulations 4 and 5 read with Section 42 of the Insurance Act, 1938. The purpose of appointing such agents is soliciting or procuring life insurance business. DESU was not procuring of soliciting any business for the LIC and, therefore, DESU was not an insurance agent. But the Hon’ble Supreme Court has further observed that DESU was certainly an agent as defined under Section 182 of the Contract Act. In Salary Saving Scheme itself, mode of collection of premium has been indicated and employer has been assigned the role of collecting premium and remitting the same to LIC. As far as employee as such is concerned, employer will be an agent of LIC. Thus, the relationship between the LIC and the employer is that of a “Principal” and “Agent”. The Principal is liable for anything done by the Agent. Thus, if the employer had deducted the premium from employee’s salary and has not remitted it to LIC, then it will be deemed that the employee has paid the premium as per mode of payment under the scheme and his/her policy can not be treated as lapsed. The LIC shall have to pay the insurance amount in such case. 9. But in the case of Group Salary Linked Insurance Scheme, the relationship between the LIC and the employer is that of the insurer and the insured, and this relationship shall continue so long as the premium is being paid regularly and the policy is alive. As soon as the employer fails to deposit the premium, the policy gets lapsed and by the fiction of law, the aforesaid relationship ceases. 10. In the instant case, the employer – respondent No.2 had not deposited the premium amount for the months of April, May and June, 1995 on the due dates. The amount was deposited on 08.01.1996. As soon as the employer fails to deposit the premium, the policy gets lapsed and by the fiction of law, the aforesaid relationship ceases. 10. In the instant case, the employer – respondent No.2 had not deposited the premium amount for the months of April, May and June, 1995 on the due dates. The amount was deposited on 08.01.1996. Thus, for the period from 20.04.1995 to 07.01.1996, the policy was not in force. During this period, on 12.05.1995, the complainant’s husband Sh. Ram Achal Singh had died. Since the policy was not in force, the LIC did not pay the insured sum. In our view, the LIC has not made any deficiency in service by doing so because on 12.05.1995, the policy stand lapsed. Therefore, this appeal deserves to be allowed. The deficiency in service was made of the employer – respondent No. 2. Therefore, the respondent No. 2 is liable to pay the insured sum to the complainant alongwith the amount due as savings and interest thereon, as was payable by the LIC. Earlier also, this Commission has expressed the same view in its order dated 31.01.2008 passed in First Appeal No. 270/2006; Senior Branch Manager, Pension & Group Insurance Unit Vs. Smt. Kalawati Devi and another. However, from the legal point of view, a piquant situation may arise in that eventuality. The complainant has not challenged the impugned order on the ground that the employer be held liable to pay the insurance amount and, therefore, the order of the District Forum has become final. Now, if the insured’s appeal is allowed and the insurer is absolved of its liability, the complainant will be left high and dry in this legal rig-marole. Enlightened from the decision of the Hon’ble Supreme Court in the case of Basanti Devi (supra), we draw our strength from the provisions of Rule 33 of Order 41 of Code of Civil Procedure and modify the impugned order by substitution opposite party No. 2 – Executive Engineer, Yamuna Nirman Khand-I, Dehradun for the opposite party No. 3 – Life Insurance Corporation of India (appellant before us). The impugned order is also to be modified in respect of the amount awarded by the District Forum. 11. Accordingly, the appeal is allowed. The impugned order is also to be modified in respect of the amount awarded by the District Forum. 11. Accordingly, the appeal is allowed. Order impugned dated 14.08.2007 of the District Forum is modified and the opposite party No. 2 – Executive Engineer, Yamuna Nirman Khand-I, Dehradun (respondent No. 2 in this appeal) is directed to pay the insured sum of Rs. 25,000/- to the complainant alongwith the amount due as savings and interest etc., as way payable by the LIC under the Scheme, together with interest @ 7% p.a. on the total amount payable from the date of filing of the complaint till payment and Rs. 2,000/- as litigation expenses. The appellant is absolved of its liability to pay any amount to the complainant.