Case: Life Insurance Corporation Of India Vs. Mani Ram

abundantly clear that payment of premium due had to be made within a grace period of one month. If such payment was made within the said period, the policy would be treated as valid and the assured would be paid the amount to which he was entitled after deducting the premium amount. But it was also made clear that if the premium was not paid before the expiry of the days of grace, the policy would lapse. As we have already observed hereinabove, the material date was not the date of deposit/payment of premium amount which was August 21, 1995, but the date of policy which was April 28, 1995. Since it was yearly, the payment was due on April 28, 1996, but the assured was entitled to grace period of one month up to May 28,1996. Neither the premium was paid on April 28, 1996 nor on May 28, 1996. As per condition No. 2, policy lapsed on May 28, 1996. In the eye of law, there was no subsisting policy, on August 2, 1996. Insurance Company was, therefore, wholly justified in rejecting the claim of the complainant and no exception can be taken against such a decision.15. The learned counsel for the respondent no doubt relied on the decision of this Court in Dharam Vir Anand. The State Commission also referred to the said decision and observed that the point was covered by the ration laid down therein and the complainant was entitled to the benefit of that decision. In our opinion, however, the submission of the learned counsel for the Insurance Company is well-founded that it was in the light of the fact-situation of that case that the Court decided the matter in favour of the complainant. 16. In Dharam Vir Anand, the complainant had taken a policy of insurance on the life of his minor daughter. The policy was issued on March 31, 1990. The risk under the policy was, however, back-dated at the request of the complainant taking advantage of the option given to him in that regard by the Insurance Company which was May 10, 1989 and the premium was paid. On November 15, 1992, the assured committed suicide. The complainant lodged a claim which was refuted by the Company. The question before this Court was whether on that date i.e. November 15, 1992, the policy was subsisting or not? If the date of issuance of policy was to be taken into account, the policy was subsisting. But if back-date would be considered as relevant and material, three years were over and there was no subsisting policy. The Court considered Clause 4-B of the policy which read as under:- "4-B. Notwithstanding anything mentioned to the contrary, it is hereby declared and agreed that in the event of death of life assured occurring as a result of intentional self-injury, suicide or attempted suicide, insanity, accident other than an accident in a public place or murder at any time, on or after the date on which the risk under the policy has commenced but before the expiry of three years from the date of this policy, the Corporations liability shall be limited to the sum equal to the total amount of premiums (exclusive extra of premiums, if any), paid under the policy without interest. Provided that in case the life assured shall commit suicide before the expiry of one year reckoned from the date of this policy, the provisions of the clause under the heading "Suicide" printed on the back of the policy". (emphasis supplied) 17. The Court observed that Clause 4-B made it crystal clear that the date on which the risk under the policy commenced was different from the date of the policy. The Court took into consideration two expressions, viz., "the date on which the risk under the policy has commenced" and "the date of the policy". The Court held that since two expressions were used which obviously referred to two different periods, effect must be given to both of them. If the contention of the Insurance Company that the relevant date was the date on which the risk under the policy had commenced alone would be considered, the second expression ("the date of the policy") would become redundant. The Court noted the argument on behalf of the Insurance Company that the second date had a limited application for the purpose of giving certain tax relief but negatived it. It was further observed by this Court that in construing contractual clauses, the words and terms therein must be given effect to and a part of the contract cannot be rendered meaningless while construing and interpreting the other part of the same contract. According to the Court, when the parties agree to the terms of the contract, it was not open to content that a particular term was never intended to be acted upon. Accordingly, this Court held that on November 15, 1992, the policy was in existence and the respondent-claimant was entitled to the amount. 18. In the instant case, Condition 2 expressly provided the period during which the payment was to be made. it also in no uncertain terms stated that if premium was not paid before the expiry of grace period, the policy would lapse. In our view, the ratio in Dharam Vir Anand would support the Insurance Company rather than the complainant. If all the terms and conditions of the policy (contract between the parties) have to be kept in mind and given effect to, acceptance of argument on behalf of the complainant would make the last part of Condition 2 redundant, otiose and inoperative; and a court of law cannot construe a document in the manner suggested by the counsel for the complainant. As the premium was due on April 28, 1996 and was not paid till May 28, 1996, the policy lapsed. The Fora below hence, committed an error of law in allowing the complaint of the respondent herein and the orders are liable to be set aside.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]12. So far as the factual position is concerned, there is no dispute between the parties. Deceased Ashok Kumar was insured by the Insurance Company and the first premium was paid on August 21, 1995. At the request of the insured, however, the policy was back-dated with effect from April 28, 1995. In our opinion, therefore, the learned counsel for the Insurance Company is right in submitting that one year came to an end on April 28, 1996 and the insured was liable to pay premium on that date as it became due and payable. Taking into account grace period of one month, premium amount ought to have been paid latest by May 28, 1996. Admittedly, no such payment was made either in April, 1996 or in May, 1996. We are impressed by the argument of the learned counsel for the Insurance Company that in the circumstances, the policy lapsed on May 28, 1996.From the above condition, it is abundantly clear that payment of premium due had to be made within a grace period of one month. If such payment was made within the said period, the policy would be treated as valid and the assured would be paid the amount to which he was entitled after deducting the premium amount. But it was also made clear that if the premium was not paid before the expiry of the days of grace, the policy would lapse. As we have already observed hereinabove, the material date was not the date of deposit/payment of premium amount which was August 21, 1995, but the date of policy which was April 28, 1995. Since it was yearly, the payment was due on April 28, 1996, but the assured was entitled to grace period of one month up to May 28,1996. Neither the premium was paid on April 28, 1996 nor on May 28, 1996. As per condition No. 2, policy lapsed on May 28, 1996. In the eye of law, there was no subsisting policy, on August 2, 1996. Insurance Company was, therefore, wholly justified in rejecting the claim of the complainant and no exception can be taken against such a decision.15. The learned counsel for the respondent no doubt relied on the decision of this Court in Dharam Vir Anand. The State Commission also referred to the said decision and observed that the point was covered by the ration laid down therein and the complainant was entitled to the benefit of that decision. In our opinion, however, the submission of the learned counsel for the Insurance Company is well-founded that it was in the light of the fact-situation of that case that the Court decided the matter in favour of the complainant.In the instant case, Condition 2 expressly provided the period during which the payment was to be made. it also in no uncertain terms stated that if premium was not paid before the expiry of grace period, the policy would lapse. In our view, the ratio in Dharam Vir Anand would support the Insurance Company rather than the complainant. If all the terms and conditions of the policy (contract between the parties) have to be kept in mind and given effect to, acceptance of argument on behalf of the complainant would make the last part of Condition 2 redundant, otiose and inoperative; and a court of law cannot construe a document in the manner suggested by the counsel for the complainant. As the premium was due on April 28, 1996 and was not paid till May 28, 1996, the policy lapsed. The Fora below hence, committed an error of law in allowing the complaint of the respondent herein and the orders are liable to be set aside.13. In this connection, it may be profitable to refer to the terms and conditions of the policy. The policy stated that the date of commencement was April 28, 1995 and the date of maturity would be April 28, 2010 as it was for a period of fifteen years. It is further stated that the policy of assurance "shall be subject to the conditions and privileges" printed on the back of the policy. On the back of the policy, those conditions and privileges have been printed. Condition 2 thereof, is material for our purpose and reads"Payment of premium: A grace period of one month i.e. not less than 30 days will be allowed for payment of yearly,or quarterly premiums and 15 days for monthly premiums. If death occurs within this period and before the payment of the premium then due, the Policy will be valid and the sum assured paid after deduction of the premium as also the unpaid premium/s falling due before the next anniversary of this Policy. If the premium is not paid before the expiry of the days of grace, the Policy lapses." (emphasis supplied)