:1: IN THE HIGH COURT OF JUDICATURE AT BOMBAY IN THE HIGH COURT OF JUDICATURE AT BOMBAY IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION ORDINARY ORIGINAL CIVIL JURISDICTION ORDINARY ORIGINAL CIVIL JURISDICTION APPEAL NO. 309 OF 2005 APPEAL NO. 309 OF 2005 APPEAL NO. 309 OF 2005 IN IN IN SUIT NO. 1486 OF 1983 SUIT NO. 1486 OF 1983 SUIT NO. 1486 OF 1983 Life Insurance Corporation of India ..Appellants versus Omana Purshothaman Nair widow of late K. R. Purshothaman Nair & Anr. ..Respondents Mr. Joel D’souza with Mr. O. Mohandas i/b. Little & Co. for the Appellants. Ms. Asha Nair i/b. Mr. Mahesh Menon & Co. for the Respondent No.1. CORAM : S. A. BOBDE & CORAM : S. A. BOBDE & CORAM : S. A. BOBDE & A. A. SAYED, JJ A. A. SAYED, JJ A. A. SAYED, JJ. DATE : 18TH MARCH, 2009 DATE : 18TH MARCH, 2009 DATE : 18TH MARCH, 2009 P.C. P.C. P.C. . This is an appeal by the Life Insurance Corporation of India against the judgment and order dated 21.10.2004 in Suit No. 1486 of 1983. 2. The appellants have preferred this Appeal against the judgment and decree of the learned Single Judge in terms of prayer clause (c) for a sum of Rs.98,934/- with interest thereon at the rate of :2: 12% per annum on Rs.80,000/- or at such other rate of interest per annum on Rs.80,000/-. The respondent is the widow of one K. R. Purushothaman Nair, who died on 21.5.1981 in a motor car accident. The question in this appeal is whether on the date of his death there was a concluded contract of insurance between the said K. R. Purushothaman Nair and the appellants. 3. The deceased had submitted a proposal for insurance on 2.5.1981 along with a cheque which was received by the appellants. On this date the appellants issued a suspense memorandum stating that the amount has been received and held in a suspense account and further that if the amount is found in order the amount would be adjusted and an official receipt will be issued. This suspense memorandum was issued in pursuance of the proposal which was earlier submitted on 20.4.1981. 4. On 18.5.1981 the brother in law of the deceased submitted a school leaving certificate as proof of date for the proposal. On 21.5.1981 the said Purshottaman Nair expired in an accident. On 22.6.1981 the appellants issued a policy bearing No. 16933974 though the deceased had expired on :3: 21.5.1981. The respondent No.1 apparently informed the LIC of his demise on 27.7.1981 after the policy had been issued. 5. As stated earlier, the respondent No.1 sued on the policy for insurance, her claim having been rejected earlier by the appellants. After evidence was recorded, the learned Single Judge decreed the suit holding in effect that there was a concluded contract before 18.5.1981 i.e. presumably on 2.5.1981 and therefore the respondent No. 1 is entitled to the amount for which the deceased was insured. The contention on behalf of the respondent No.1 was that there was a concluded contract on 2.5.1981 in view of the suspense memorandum, the appellant having received the amount of premium. The contention on behalf of the appellant was that there was no concluded contract since the deceased passed away on 21.5.1981 before the appellants accepted the contract on 22.6.1981 by issuing a policy. The learned Single Judge apparently gave much weightage to the event of 18.5.1981 where the brother in law of the deceased is said to have submitted the school leaving certificate to the appellant. The learned Single Judge came to the conclusion on that basis that after 18.5.1981 there :4: was no impediment for concluding the contract of insurance and insured party cannot be made to suffer due to any internal delays and /or defects in procedure in issuing the policy, which is a formal expression of contract which had already come into existence prior to the death of the proposer. In the judgment, the learned Single Judge has however not specified the precise date on which the contract came into existence. 6. Having heard the parties it appears that the issue is no more res integra. In Life Insurance Life Insurance Life Insurance Corporation of India vs. Raja Vasireddy Komalavalli Corporation of India vs. Raja Vasireddy Komalavalli Corporation of India vs. Raja Vasireddy Komalavalli Kamba & Ors. [AIR 1984 S.C. 1014] Kamba & Ors. [AIR 1984 S.C. 1014] Kamba & Ors. [AIR 1984 S.C. 1014] the Supreme Court in a similar set of facts came to the conclusion that there cannot be said to be a concluded contract unless the party to whom an offer has been made accepts it unconditionally and communicates its acceptance to the person making offer. In that case the Insurance Company had accepted the first premium and it was contended that the payment and acceptance of the first premium amounted to acceptance of the proposal. The case of the Insurance Company was that the amounts were not encashed and credited towards the premium account but were only kept in deposit in suspense account as :5: above. Their Lordships observed in paragraphs 13 and 14 as follows: "13. ....The mere receipt and retention of premium until after the death of the applicant or the mere preparation of the policy document is not acceptance. Acceptance must be signified by some act or acts agreed on by the parties or from which the law raises a presumption of acceptance. See in this connection the statement of law in Corpus Juris Secundum, Vol. XLIV page 986 wherein it has been stated as :- "The mere receipt and retention of premiums until after the death of applicant does not give rise to a contract, although the circumstances may be such that approval could be inferred from retention of the premium. The mere execution of the policy is not an acceptance; an acceptance, to be complete, must be communicated to the offerer, either directly, or by some definite act, such as placing the contract in the mail. The test is not intention alone. When the application so requires, the acceptance must be evidenced by the signature of one of the company’s executive officers." 14..... The general rule is that the contract of insurance will be concluded only when the party to whom an offer has been made accepts it unconditionally and communicates his acceptance to the person making the offer. Whether the final acceptance is that of the assured or insurers, however, depends simply on the way in which negotiations for an insurance have progressed...". Similarly, in Mrs. Hiralaxmi & Ors. vs. Life Mrs. Hiralaxmi & Ors. vs. Life Mrs. Hiralaxmi & Ors. vs. Life Insurance Corporation of India & Anr. [ 2000 Insurance Corporation of India & Anr. [ 2000 Insurance Corporation of India & Anr. [ 2000 :6: Company Cases Vol. 101 page 29], Company Cases Vol. 101 page 29], Company Cases Vol. 101 page 29], a Division Bench of this Court followed the judgment of the Supreme Court in LIC vs. Raja Varsireddy Komalavalli Komba and observed as follows : "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 later. Therefore, this supports the case of respondent No.1 that it is the practice of Life Insurance Corporation 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 December 7, 1987, of the Life Insurance Corporation 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 the 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 respondent No.1. Considering the above position, it is not possible for us to accept that there was any concluded contract between the parties." A similar view has been taken by a Single Judge of this Court in The Life Insurance Corporation of The Life Insurance Corporation of The Life Insurance Corporation of India & Anr. vs. Smt. Brazinha D’souza [AIR 1995 India & Anr. vs. Smt. Brazinha D’souza [AIR 1995 India & Anr. vs. Smt. Brazinha D’souza [AIR 1995 Bombay 223] Bombay 223] Bombay 223]. :7: 7. It is thus clear that in the present case the learned Single Judge committed an error in holding that there was a concluded contract on 18.5.1981 and even before. The issue of the suspense memorandum cannot be said to be an absolute and unqualified acceptance as required by Section 7 of the Contract Act. There is no subsequent event during the proposer’s lifetime which can be construed as an unqualified and absolute acceptance of the contract of assurance. From the facts no other inference is possible except that there was no concluded contract of insurance between the appellants and the respondent No.1 on the date of demise of the insurer i.e. 21.5.1981. Though the Appellants accepted the offer on 26.6.1981 by issuing the policy, it cannot be said that a valid contract came into existence even on that day since the proposer had expired. The appeal is therefore allowed. The judgment in Appeal is hereby set aside. The Respondent No.1 is directed to bring back and deposit in this court the amount which she has been permitted to withdraw under an Order dated 11.4.2005 within a period of twelve weeks from today, till then the injunction contained in the :8: order dated 11.4.2005 shall remain in force. The appellants shall be at liberty to withdraw the amount, if it is deposited. 8. At this stage, the learned counsel for the respondent No.1 applies for stay of this order, application for stay is rejected. (S. A. BOBDE, J.) (S. A. BOBDE, J.) (S. A. BOBDE, J.) (A. A. SAYED, J.) (A. A. SAYED, J.) (A. A. SAYED, J.)