Case: Life Insurance Corporation Of India Vs. Raja Vasireddy Komallavalli Kamba &amp; Others

of the Corporation. On the other hand, there was a general statement that there was no concussed contract. The High Court was of the view that having regard to the conduct of the parties, there was a concluded contract. The High Court took the view that Ex. B-13 dealing with Chapter III of the Financial Powers did not categorically deal with the acceptance of propos als. The High Court was of the view that the Corporation had not filed any evidence of any order prohibiting other officers one step below in rank, in this case the Assistant Divisional Manager, to exercise the power of Divisional Manager.7. In our opinion, the High Court was in error in appreciating the facts and the evidence in this case. We cannot accept the High Courts criticism with the averment in the written statement that there was not sufficient pleading that there was no concluded contract and non- acceptance of the proposal was not sufficient averment that the Divisional Manager was the only competent authority to accept the proposal. The High Court, in our opinions was also wrong in its view about t he powers of the different authorities under Chapter III of the Standing order, 1960 dealing with the financial powers. Indeed there was no evidence that the Assistant Divisional Manager had accepted the proposal on the contrary he his deposi tion as we have indicated before had stated otherwise. He had stated that the purpose of review slip was to enable the Divisional Manager to asses the risk and take a decision. He had never stated that he had taken a decision to accept the propos al. The allegation that there was assurance on behalf of the field officer and local agent to the deceased that the payment of first premium would amount to the acceptance of the proposal cannot also be accepted firstly because factually it was not proved and secondly because there was no evidence that such could have been the deposition in law.When an insurance policy becomes effective is well-settled by the authorities but before we note the said authorities, it may be stated that it is clear that the expression "underwrite" signifies accept liability under.8. The dictionary meaning also indicates that.(See in this connection The Concise oxford Dictionary Sixth Edition p. 1267.)9. It is true that normally the expression "underwrite" is used in Marine insurance but the expression used in Chapter III of the Financial powers of the Standing order in this case specifically used the expression "underwriting and revivals" of policies in case of Life Insurance Corporation and stated that it was the Divisional Manager who was competent to underwrite policy for Rs 50, 000 and above.10. 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.11. See in this connection the statement of law in Corp us Juris Secundum, Vol. XLV 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 offeror, 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 companys executive officers."12. Though in certain human relationships silence to a proposal might convey acceptance but in the case of insurance proposal silence does not denote consent and no binding contract arises until the person to whom an offer is made say s or does something to signify his acceptance. Mere delay in giving an answer cannot be construed as an acceptance, as, prima facie, acceptance must be communicated to the offeror. 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.See in this connection statement of law in MacGillivray &Parkington on Insurance Law, Seventh Edition page 94 paragraph 215.13. Reference in this connection may be mad e to the Statement of law in Halsburys Laws of England 4th Edition in paragraph 399 at page 222.14. Having regard to the clear position in law about acceptance of insurance proposal and the evidence on record in this case, we are, therefore, of the opinion that the High Court was in error in coming to the conclusion that there was a concluded contract of insurance between the deceased and the Life Insurance Corporation and on that basis reversing the judgment and the decision of the learned Subordinate Judge.15. The appeal must, therefore, be allowed. We however record that in view of the fact that such a long time has elapsed and further in view of the fact that principal amount together with interest amounting to about Rs. 85, 000/- have already been paid to the wife of the deceased and his children, the Life insurance Corporation in this case does not insist on the full repayment of the sum paid and counsel on behalf of the Life Insurance Corp oration has stated that they would accept if half of what has been received by the respondents, namely principal together with interest is paid back to the Corporation. We order accordingly that the respondents will therefore pay back half of the actual amount received both of the principal together with interest within three months from this date.16

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

Explanation:
1[ds]In our opinion, the High Court was in error in appreciating the facts and the evidence in this case. We cannot accept the High Courts criticism with the averment in the written statement that there was not sufficient pleading that there was no concluded contract and non- acceptance of the proposal was not sufficient averment that the Divisional Manager was the only competent authority to accept the proposal. The High Court, in our opinions was also wrong in its view about t he powers of the different authorities under Chapter III of the Standing order, 1960 dealing with the financial powers. Indeed there was no evidence that the Assistant Divisional Manager had accepted the proposal on the contrary he his deposi tion as we have indicated before had stated otherwise. He had stated that the purpose of review slip was to enable the Divisional Manager to asses the risk and take a decision. He had never stated that he had taken a decision to accept the propos al. The allegation that there was assurance on behalf of the field officer and local agent to the deceased that the payment of first premium would amount to the acceptance of the proposal cannot also be accepted firstly because factually it was not proved and secondly because there was no evidence that such could have been the deposition in law.When an insurance policy becomes effective is well-settled by the authorities but before we note the said authorities, it may be stated that it is clear that the expression "underwrite" signifies accept liabilityis true that normally the expression "underwrite" is used in Marine insurance but the expression used in Chapter III of the Financial powers of the Standing order in this case specifically used the expression "underwriting and revivals" of policies in case of Life Insurance Corporation and stated that it was the Divisional Manager who was competent to underwrite policy for Rs 50, 000 andmere 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 ofin this connection the statement of law in Corp us Juris Secundum, Vol. XLV page 986 wherein it has been statedmere 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 offeror, 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 companys executivein certain human relationships silence to a proposal might convey acceptance but in the case of insurance proposal silence does not denote consent and no binding contract arises until the person to whom an offer is made say s or does something to signify his acceptance. Mere delay in giving an answer cannot be construed as an acceptance, as, prima facie, acceptance must be communicated to the offeror. 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.See in this connection statement of law in MacGillivray &Parkington on Insurance Law, Seventh Edition page 94 paragraphin this connection may be mad e to the Statement of law in Halsburys Laws of England 4th Edition in paragraph 399 at pageregard to the clear position in law about acceptance of insurance proposal and the evidence on record in this case, we are, therefore, of the opinion that the High Court was in error in coming to the conclusion that there was a concluded contract of insurance between the deceased and the Life Insurance Corporation and on that basis reversing the judgment and the decision of the learned Subordinate Judge.