Case: Life Insurance Corporation Of India Vs. Mani Ram

3. Few facts giving rise to the present appeal may now be stated.4. Mani Ram-respondent herein, son of the one Budhu Ram, resident of village Khatehar, Pargana and Tehsil Sadar, District Bilaspur (HP) filed a complaint under Section 12 of the Consumer Protection Act, 1986 (hereinafter referred to as "the Act"), before the District Forum, Bilaspur. In the complaint, it was inter alia alleged by the complainant that his son Ashok Kumar had been insured with the appellant-Insurance Company on August 21,1995 and premium amount of Rs.5215/- was paid on the same day. According to the complainant, the next instalment of premium was due onAugust 21, 1996. Ashok Kumar - insured, however, died in an accident on August 2, 1996 at Barmana as the boundary wall of the D.A.V. School fell on him and he was crushed under the debris. The complainant, in view of the subsisting policy, requested the appellant-Insurance Company to pay the insurance claim amount of Rs.2,50,000/- to the complainant, but under the lame and false excuses, the Insurance Company did not pay the amount. Finally, by a communication dated August 11,1997, the Insurance Company refused to pay any amount. The deceased was unmarried. It was asserted by the complainant that he was the nominee of deceased Ashok Kumar as the father. Since the amount was not paid, the complainant was constrained to approach to District Forum. Accordingly a claim of Rs.2,50,000/- was made along with interest and damages on account of mental torture and financial loss suffered by the complainant.5. The appellant-Insurance Company resisted the claim of the complainant by filing a written reply. A preliminary objection was raised against the maintainability of the complaint on the ground that the policy had lapsed due to non-payment of premium within the prescribed period and hence, the complainant had no right to claim anything. The complaint was, therefore, liable to be dismissed. It was stated that deceased Ashok Kumar was insured with the Insurance Company. It was also admitted that the premium amount was paid to the Insurance Company on August 21, 1995 but the policy holder got the policy effected from a back date, i.e. from April 28, 1995. According to the Insurance Company, therefore, the next premium was due and payable after one year, i.e., on April 28,1996. Giving benefit of grace period of one month, the premium amount was required to be paid latest by May 28, 1996. No premium, however, was paid on April 28, 1996 nor till May 28, 1996 and the policy lapsed. Since the deceased Ashok Kumar met with an accident on August 2, 1996, there was no subsisting policy in favour of the insured inasmuch as it lapsed on May 28, 1996, the Insurance Company could not be held liable and the complainant was not entitled to any amount.6. The District Forum considered the rival contentions of the parties and held that the deceased was assured for Rs.50,000/- on August 21, 1995. It observed that no doubt the policy was back-dated to April 28, 1995, but as the premium was paid on August 21, 1995, next premium became due on August 21, 1996. Since Ashok Kumar met with an accident and died on August 2, 1996, the Insurance Company was liable. It accordingly awarded an amount of Rs.50,000/- with interest @ 12% p.a. and costs of Rs.500/-.7. Being aggrieved by the order passed by the District Forum, both, the complainant as well as Insurance Company filed appeal before the State Commission. The grievance of the Insurance Company was that since the policy lapsed on April 28, 1996, it could not have been held liable for an accidental death of Ashok Kumar on August 2, 1996 and the District Forum had committed an error of law in holding the Insurance Company liable. The grievance of the complainant, on the other hand, was that since Ashok Kumar died due to accidental death, as per the terms and conditions of the Policy, the complainant was entitled to a sum of Rs.2,50,000/- and the District Forum was in error in awarding Rs.50,000/- only. The State Commission heard both the appeals and dismissed them by a common judgment. The State Commission relied upon the decision of this Court in Life Insurance Corporation of India and Another v. Dharam Vir Anand, (1998) 7 SCC 348  : JT (1998) 7 SC 167 .8. The Insurance Company approached the National Commission against the orders passed by the Fora below. The National Commission, however, dismissed the Revision Petition by observing that concurrent findings had been recorded that the policy was subsisting and the Insurance Company was liable under the said policy. According to the National Commission, since the first premium was paid on August 21, 1995, the next premium was due on August 21, 1996.

Court's reasoning:
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)