IN THE HIGH COURT OF HIMACHAL PRADESH SHIMLA RSA No. 23 of 2000. Judgment reserved on 26.4.2010. Date of decision: April 30, 2010 Smt. Saraswati Devi and others. ….Appellants. Versus The Life Insurance Corporation of India and others. ….Respondents. Coram: The Hon’ble Mr. Justice Surinder Singh, J. Whether approved for reporting ?1 Yes. For the appellants : Mr. S.R. Sharma, Advocate. For respondents : Mr. Navlesh Verma, Advocate, for respondents No.1 & 2. Mr. Adarsh Sharma, Advocate, for respondent No.3. Surinder Singh, J : 1. This second appeal was admitted on the following substantial questions of law, vide order dated 21.9.2000: (i) Whether the employer on receipt of Authority Letter Ex.PW3/A for the deduction of premium from the salary is legally bound to remit the same to the Life Insurance Corporation in time? 1 Whether the reporters of Local Papers may be allowed to see the judgment ?. - 2 - (ii) Whether under the Salary Saving Scheme, for no fault of the employee in not remitting the premium as it falls due by the employer to the Life Insurance Corporation, the Corporation is liable to pay the sum assured to the Insured? (iii) Whether under the Salary Saving Scheme on failure on the part of the employer to remit the premium after deduction in time is liable to indemnify the claim of Insured? 2. This second appeal under Section 100 of the Code of Civil Procedure is directed against the judgment and decree dated 6th April, 1998, passed by the learned District Judge, Shimla in Civil Appeal No.97/1 of 1992 whereby the learned First Appellate Court while accepting the aforesaid first appeal filed by the appellants herein set-aside the judgment and decree passed by the learned Senior Sub Judge, Shimla in case No.97/1 of 92, whereby the suit for recovery filed by the appellants was decreed and the respondents No.1 and 2 were held liable to pay Rs.79,778/- with costs pending and future interest @ 6% per annum, subject to the conditions that the - 3 - plaintiffs make good deficiency in court fee within 30 days from the date of decision of the case, failing which, the suit of the plaintiffs shall be deemed to have been dismissed, however, the suit against defendant No.3 (HRTC) was dismissed. 3. Appellants herein were the plaintiffs in the suit filed against the respondent- defendants, hereinafter the parties will be addressed as “plaintiffs” and “defendants” as mentioned in the trial Court. 4. The brief facts giving rise to the present appeal can be stated thus. Rattan Lal, the predecessor-in-interest, of the plaintiffs was employed as a driver with the defendant- Himachal Road Transport Corporation (HRTC). The co-defendant-Life Insurance Company (LIC) had floated a “Salary Saving Scheme”. Under this Scheme the premium of the employee-policy holder was to be deducted every month from his salary and paid to the LIC by his employer. The Scheme could only be implemented after obtaining the - 4 - employer’s consent. The Scheme postulated that no form of individual premium due notice or receipt would be issued by the LIC. In case of withdrawal of any employee, who is a policy holder, from the Scheme or termination of his services, the employer would notify the LIC in writing and would cease to be responsible for collecting such employee’s premiums. In the event of the Life Assured leaving the employment, the said employee or the premium ceases to be so collected and/or remitted to the Corporation, the Life Assured must intimate the fact to the Corporation and in the event of the Salary Saving Scheme being withdrawn from the said employer, the Corporation shall intimate the fact to the Life Assured and all premiums falling due on or after the date of leaving the employment of the said employer or cessation of the collection of the premiums and remittance thereof in the manner aforesaid or withdrawal of the salary saving scheme, as the case may be, shall stand increased by the - 5 - imposition of additional charge for monthly payment that has been waived under the Salary Saving Scheme at 5% of the premium exclusive of any premium charged for double accident benefit or extended permanent disability benefit and any other extra premium charged. During the period in which the premium is remitted to the Corporation through the employer the instalment premium will be deemed to fall due on the 20th day of each month, instead of due date mentioned. 5. Said Shri Rattan Lal (deceased) opted for the said Scheme and desired to pay the premium from his salary every month and he requested his employer vide Ext.PW-3/B to deduct the premium from his monthly salary and also to continue to deduct and pay such amount every month till further advice. His letter was forwarded to the LIC through HRTC Local Unit. The defendant-Insurance Company issued a policy on the receipt of the premium and the monthly deduction was to commence from the salary payable in the - 6 - month of August, 1987 and by the same document further monthly deductions were required to be made by the employer of the deceased out of the salary of the employee every month and remit it to the office mentioned therein. Admittedly this arrangement was made on 23.6.1987. 6. Said Shri Rattan Lal took the policy on his life from the defendants No.1 and 2 and paid the premium for the months of June and July from his own pocket vide receipt No.273617 dated 18.5.1987. Insurance policy No. 160047840 was issued in his favour. The sum assured was Rs.40,000/-. The policy provided that in the event of life insured dying in accident, his nominees would be paid double the sum assured. The plaintiffs who are the widow and minor children of the life insured were also named as nominees. 7. Rattan Lal aforesaid died on 16.9.1987 in an accident. Plaintiffs approached the defendant-Insurance Company through its Manager but there was no positive response. - 7 - Ultimately, a legal notice was served upon them, which proved to be an exercise in futility. Ultimately, the plaintiffs filed the suit for mandatory injunction directing the defendants to pay the amount due on the insurance policy, as per its terms. They also impleaded their employer (HRTC) as co- defendant, who had agreed to deduct the premium amount from the salary of the deceased. 8. The defendants resisted and contested the claim filed by the plaintiffs. The Insurance Company questioned the maintainability of the suit in their written statement and further that the requisite court fee amount was not levied on the amount recovered, vis-a-vis pleaded no cause of action and according to them no premium amount was paid for the months of June and July by the deceased during his life time but admitted having received the premium for the months of August and September, through defendant- HRTC by making the deduction from the salary - 8 - of the deceased on 8th October, 1987, i.e., after the death of the policy holder, by that time the policy had lapsed on account of the above contingency. Therefore, their case was that they were not liable to pay the policy amount. 9. The defendant-HRTC took up the preliminary objection of limitation and mis- joinder of parties. They admitted that the deceased purchased the policy from the defendants-Insurance Company and it was also admitted that the deceased had given the instructions to defendant-HRTC to deduct the premiums from his salary as aforesaid. Thus an amount of Rs.221.70 was deducted from his salary and paid to the Insurance Company. 10. On the rival claims, the parties were at issues as follows: (1) Whether the plaintiff is entitled to the relief claimed? OPP. (2) Whether suit is not properly valued for the purpose of court fee and jurisdiction? OPD. - 9 - (3) Whether the plaintiff has no cause of action against defendant No.1? OPD1. (4) Whether the defendant No.3 is not a necessary party? OPD. (5) Whether suit is barred by limitation? OPD3. (6) Whether there is no privity of contract between the plaintiffs and defendant No.3? OPD-3. (7) Whether suit is not properly constituted? OPD-3. (7-A) Whether the plaintiff is entitled to the double amount of the Policy as alleged? OPP. 8. Relief. 11. After the complete trial, the suit filed by the plaintiffs was decreed for recovery of Rs.79,778/- with costs pending and future interest @ 6% per annum, subject to the plaintiffs depositing the requisite court fee within 30 days from the date of decision and the suit against defendant No.3 was dismissed. 12. The defendant-LIC felt aggrieved by the judgment and decree passed by the learned - 10 - trial Court, thus challenged it in appeal before the learned District Judge. The learned District Judge reversed the judgment and decree passed by the learned trial Court and dismissed the suit of the plaintiffs precisely on the grounds that the policy had lapsed during the life time of the deceased, policy holder because of non-deposit of the instalment by due date or even within the grace period, as such the plaintiffs were not entitled to any benefit under the policy. 13. Against the judgment and decree of reversal passed by the learned District Judge in Civil Appeal No.64-S/13 of 1996 decided on 6.4.1998, this second appeal has been filed. 14. It has been argued by Shri S.R. Sharma, learned Counsel for the plaintiffs that the learned District Judge has ignored the fact that the deceased had authorized his employer vide Ext.PW-3/B for making deduction from his salary commencing from August, 1987 which was duly received in the office on 30.7.1987. Two instalments for the - 11 - months of June & July were already paid by Rattan Lal at the time of signing the proposal. The next instalments for the subsequent months were required to be deducted from the salary of the policy holder, in case his employer failed to remit the premium in time from the monthly salary of the deceased, to the Insurance Company for that the plaintiffs cannot be penalized. The learned Counsel put reliance on the judgment of the Apex Court in Delhi Electric Supply Undertaking versus Basanti Devi and another (1999) 8 SCC 229 and submitted that in the circumstances aforesaid, although factually the HRTC was not an Insurance Agent and received no consideration from the defendant-Insurance Company, but legally it was an implied agent of the LIC qua the employee policy holder under Section 182 of the Contract Act. Therefore, where the employer has failed to remit the amount deducted from the salary, the defendant-Insurance was liable to pay the - 12 - insurance amount to the heir of the deceased employee. 15. Contra, the learned Counsel for the defendants supported the impugned judgment and decree passed by the learned first appellate Court. 16. I have examined the rival contentions of the parties and have carefully gone through the record. 17. The perusal of insurance policy Ext.RW- 1/A shows that it was issued on 20th July, 1987 and it was effective with effect from 23rd of June, 1987 and two installments of the premium amount were admittedly paid to the tune of Rs.445.40 paise vide Ext.PW-1/A, i.e., for the month of June and July, 1987. Rattan Lal aforesaid had authorized his employer vide Ext.PW-3/B to deduct the further instalment payable in August, 1987 on 23.6.1987, which was received in the office on 23.7.1987. Thereafter it was the responsibility of the employer, i.e., defendant-HRTC to deduct the amount of the premium from his monthly - 13 - salary from August, 1987 onwards. DW-2 Davinder Singh, Bill Clerk of the HRTC stated that the installment of the premium for the month of August, 1987 was not deducted despite the fact that they had received the authority letter Ext.PW-3/B and admitted a lapse committed by HRTC. But however, stated that they had sent two instalments, one for the month of August and another for September, which were received by the office of LIC in the month of October, 1987. These were deducted from the salary of Rattan Lal for the respective months. This means that the employer had deducted the amount from the salary of the deceased for the month of August, 1987 to the tune of Rs.222/- and this was the last premium which was paid during the life time of the deceased. Once it is held so, the plaintiffs are entitled to receive amount of policy. 18. In Delhi Electric Supply Undertaking’s case supra, the Supreme Court dealt with similar type of salary Scheme on almost - 14 - identical facts where the deceased was an employee of Delhi Electric Supply Undertaking (DESU) who had died during the existence of the policy and his employer was required to deduct the premium from the salary of the employee- insured and remit the same to the LIC. It was held that the employer acted as an agent of the policy holder under Section 182 of the Contract Act, therefore, where the employer had failed to remit to LIC premium, by deducting it from the salary of the employee, the LIC was liable to pay the insurance amount to the heir of the deceased with interest. Therefore, in these circumstances, even if defendant-HRTC on the receipt of the authority letter Ext.PW-3/B for the deduction of the premium from the salary committed lapse as alleged, but HRTC was legally bound to remit the same to the Life Insurance Company. There was no fault or control of the employee on his employer to further see if the premium was sent in time to the LIC. - 15 - 19. In view of the above facts proved on record under the “Salary Saving Scheme” on failure on the part of the employer to remit the premium after deduction in time, is liable to be indemnified by the insured. 20. For the foregoing reasons, the judgment and decree passed by the learned District Judge in Civil Appeal No.64-S/13 of 1996 decided on 6.4.1998, is set aside and that of the Senior Sub Judge passed in Civil Suit No.97- 1 of 1992 decided on 13.8.1996 is hereby restored. Consequently, the suit filed by the plaintiffs stands decreed, whereas the suit against defendant No.3 stands dismissed. The deficiency in the court fees, if not already made good, be made good within 30 days from today, failing which the suit of the plaintiffs shall be deemed to have been dismissed. The substantial points are accordingly answered. April 30, 2010 (Surinder Singh),J. (Rc/Pds)