Main object of LIC Act is to ensure absolute security to policy-holder: Apex Court comes to aid of aggrieved widow & children of man who died due to electric shock; asks LIC to pay total outstanding amount in 2 months
Justices A.S. Bopanna and C.T. Ravikumar [08-05-2024]

Read Order: Mrs. Bhumikaben N. Modi &Ors v. Life Insurance Corporation of India [SC- Civil Appeal No.270 of 2012]

Tulip Kanth 

New Delhi, May 13, 2024: While restoring an order allowing the consumer complaint of the aggrieved family members of a deceased policy-holder, the Supreme Court has held that the NCDRC’s interference with an order of the State Commission in exercise of its limited revisional power was without rhyme or reason when the latter had not acted illegally or with materially irregularity. 

The appellants, in this case, are the widow and the children of one Shri Narender Kumar Kantilal Modi (deceased) who met with an accidental death due to electric shock in the year 1996. Prior to his death, the deceased submitted a proposal form for Life Insurance Policy and issued a cheque of Rs. 3,388 towards premium on 09.07.1996 through a cheque. 

After the death of the deceased the appellants herein claimed benefits based on Insurance Policy. Even after 14 months since the death of the policy holder, the respondent did not give any benefit and as such the appellants were constrained to cause legal notice. The stand of the respondent for repudiating the claim was that the proposal submitted by the deceased was not accepted and therefore there was no concluded contract between the deceased and the respondent. In fact, the respondent had blocked his policy and issued Acceptance-cum-First Premium Receipt.

Aggrieved by the repudiation, the appellants herein approached the District Forum by filing a complaint in terms of Section 11 of the Consumer Protection Act, 1986. The District Forum allowed the complaint and directed the respondent to pay total outstanding amount payable to the appellants as per terms and conditions of Insurance Policy along with interest at the rate of 12% per annum till realization within 30 days from the date of receipt of the copy of the order. Further, it was directed to pay Rs. 5000 to the appellants towards compensation for mental agony and harassment as also Rs. 2000 towards costs. The appeal before the Top Court was filed challenging the order of the National Consumer Disputes Redressal Commission, New Delhi  (NCDRC). As per the impugned order, the NCDRC allowed revision petition filed by the Life Insurance Corporation of India, the respondent herein and reversed the concurrent orders of the forums below passed in favour of the appellants herein and dismissed their complaint.

The contention of the appellants before the District Forum was that the respondent had accepted the first premium amount and issued Acceptance-cum-First Premium Receipt and in view of the nature of the receipt issued the respondent could not have repudiated the claim and wriggled out of the liability to assume the risk.

The Division Bench of Justice A.S. Bopanna and Justice C.T. Ravikumar went through the impugned order and noticed that for reversing the concurrent orders and dismissing the complaint, the NCDRC assigned the reason that mere receipt and retention of the premium until after the death of the deceased-applicant or even the mere preparation of the policy and its blocking would not amount to acceptance of the proposal for insurance policy. To arrive at such conclusions, it relied on the decision of this Court in Life Insurance Corporation of India v. Raja Vasireddy Komalavalli Kamba and Ors.[LQ/SC/1984/91] . 

Even after dismissing the complaint, the NCDRC took note of the offer made by the respondent to the appellant for payment of an amount of Rs 1 Lakh ex-gratia vide the memo of the revision petition, and issued a specific direction to the respondent to pay a sum of Rs. 1 Lakh to the appellant by way of ex-gratia.The issue before the Bench was how could an order carrying a specific direction for payment, even by way of ex-gratia, be issued in a complaint after dismissing the same.

The Bench made it clear that the jurisdiction of the NCDRC under the Act is provided under Section 21 thereof.Sub- clause (i) of Section 21 (a) deals with the original jurisdiction of NCDRC to entertain complaints and Sub-clause (ii) thereof deals with appeals against orders of the State Commission. 

In light of the factual position, the Bench opined that the NCDRC had failed to bestow proper consideration of the factual position which consequently led to the mis-application of the decision in Raja Vasireddy Komalavalli Kamba’s case (supra). It was observed that NCDRC had misdirected itself in considering the relevant question involved, which was rightly considered by the District Forum. Next, the Bench considered the issue of whether circumstances obtained in this case carried clear presumption of the acceptance of the policy by the insurer, as has been obligated under the decision in D. Srinivas v. SBI Life Insurance Co. Ltd. &Ors. [LQ/SC/2018/240] 

In Annexure B receipt of the first premium, it was specifically stated that the acceptance of payment would place the Corporation on risk with effect from the date of the said Acceptance- cum-First Premium Receipt, subject to the realization of the amount in cash and the terms and conditions of acceptance printed overleaf. It was further noted that what is printed overleaf is not on record as the same was not produced, though it should be a part of Annexure B. “Thus, the entire circumstances discussed based on the documents in the orders of the District Forum and the State Commission hereinbefore in this judgment, in the light of the decision in D. Srinivas’s case (supra) constrain us to hold that the proposal was accepted”, the Bench said.

The Bench also did not find any material irregularity or illegality in the conclusions drawn with regard to the acceptance of proposal by the District Forum which was confirmed by the State Commission with reasons. 

Noting that there was an incongruity in the contentions and the documents, the Bench noticed that the stand of the respondent was that the policy was prepared on 15.07.1996 and the First Premium Receipt was issued earlier. Moreover, in paragraph 6 of the order of the State Commission, the next premium date was shown as due as 28.12.1996. The name and address of Narendra Kumar Kantilal Modi and the policy number were also specifically entered therein.

Moreover, in the absence of anything suggesting that the State Commission had acted in the exercise of its jurisdiction illegally or with materially irregularity, interference with an order of the State Commission confirming the order of the District Forum, in exercise of the limited revisional power under Section 21 (b) of the Act, by NCDRC, was without rhyme or reason and couldn't be sustained.

“Before the year 1956, life insurance business was in the hands of private companies which were operating mostly in urban areas. The avowed objects and reasons of the Life Insurance Corporation Act, 1956 would reveal that the main object and reason is to ensure absolute security to the policy-holder in the matter of his life insurance protection”, the Bench said.

Thus, setting aside the impugned order and restoring the order of the District Forum, the Bench granted two months’ time to the respondent to effect payment in terms of the order thus restored.