LIFE INSURANCE CORPORATION OF INDIA
THROUGH ITS ADDITIONAL SECRETARY LEGAL, CENTRAL OFFICE, H-39, FIRST FLOOR, NEW ASIATIC BUILDING CONNAUGHT CIRCUS,
NEW DELHI-110001                                         ...........Petitioner(s)
                                                     Versus    
1. SEETA & ANR.
W/O. LT. NAGU GOUDA,R/O. HANDIGADDE, POST BELSE, ANKOLA TALUK,
UTTAR KANNADA DISTRICT
KARNATAKA
2. THE BLOCK EDUCATION OFFICER,
SIRSI TALUK SIRSI
KARNATAKA                                                  ...........Respondent(s)

BEFORE:    
     HON'BLE MR. DR. B.C. GUPTA,PRESIDING MEMBER
     HON'BLE MR. DR. S.M. KANTIKAR,MEMBER

Dated : 13 Feb 2018

 
PER DR. B.C. GUPTA, PRESIDING MEMBER

          This revision petition has been filed under section 21(b) of the Consumer Protection Act, 1986, against the impugned order dated 16.02.2017, passed by the Karnataka State Consumer Disputes Redressal Commission, (hereinafter referred to as “the State Commission”) in First Appeal No. 26/2013, Life Insurance Corporation of India vs. Seeta & Anr., vide which, while dismissing the said appeal, the order dated 09.11.2012, passed by the District Consumer Disputes Redressal Forum, Uttar Kannada at Karwar in Consumer Complaint No. 32/2012, allowing the said complaint, filed by the present respondent, was upheld.

2.      Briefly stated, the facts of the case are that the late husband of the complainant Seeta, Nagu Huliyappa Gouda was working as an Assistant teacher at Lower Primary School, Movinkoppa, Taluka Sirsi. He obtained an insurance policy no. 631714753, T&T: 165-15 dated 12.12.2008 from the OP LIC for a sum assured of Rs. 1.25 lakhs, under the Salary Savings Scheme of the LIC.  The complainant is the nominee of the deceased under the said policy.  As per the scheme of arrangement under the policy, the premium was being deducted every month by the employer of the insured from his salary and was being paid to the LIC.  The premium was received by the LIC till August, 2009.  It is stated that the insured became sick after that date and was on leave.  The premium could not be deducted from his salary, as he was not being paid any such salary during his leave period.  The insured ultimately died on 20.07.2010, following which, the complainant approached the LIC for settlement of the claim, but the same was repudiated on the ground that the policy had already lapsed for non-payment of premium.  The complainant filed the consumer complaint in question, saying that the life assured remained absent from his duty for a few months preceding his death.  However, if the salary of the deceased was not drawn during that period and the premium not deducted and remitted to the OP LIC, the life assured should have been informed about the same and asked to pay the premium himself for the policy.  The complainant filed the consumer complaint in question, seeking directions to the OP LIC to pay the full sum assured to the complainant along with interest @ 12% p.a. and accrued bonus etc. and also to pay cost of Rs. 20,000/- towards general and special damages.

3.      The complaint was resisted by the OP LIC by filing written objections before the District Forum, in which they stated that the premium was deducted from the salary of the insured by the salary disbursing officer i.e. the Block Education Officer, Sirsi.  However, there were ten terminal gaps in the payment of the premium, as the same was neither remitted by the employer nor by the policy-holder himself to the LIC.  The policy was, therefore, in a lapsed condition and hence, the insured sum was not payable to the complainant.  The OP requested that the consumer complaint should be dismissed.

4.      The District Forum, after taking into account the averments of the parties, allowed the complaint and directed both the OPs i.e. the LIC and the Block Education Officer, Sirsi jointly and severally to settle the claim of the complainant by paying to her a sum of Rs. 1.25 lakhs together with accrued bonus and interest @ 9% per annum from 20.07.2010, i.e. the date of death of the insured till realisation.  Being aggrieved against this order of the District Forum, the LIC challenged the same by way of an appeal before the State Commission, but the said appeal having been dismissed vide impugned order, the OP LIC is before this Commission by way of the present revision petition.  The State Commission while passing their order, relied upon a judgment passed by the Hon’ble Apex Court in the case, Chairman, LIC of India vs. Rajiv Kumar Bhaskar, as reported in 2005 AIR SCW 3636.

5.      During admission hearing before us, the learned counsel for the petitioner LIC stated that the insured had taken premature retirement from their organisation on 30.06.2010.  The employer of the petitioner could not be saddled with any liability to pay the amount to him.  The learned counsel has drawn attention to an undertaking to deduct the premium from his salary and remit the same to the OP LIC.  It was also stated therein that the insured shall be liable for any consequences, arising out of the non-deduction or non-payment of the premium to the LIC.  The orders passed by the consumer fora below, therefore, did not reflect a correct appreciation of the facts and circumstances of the case.  The said order should, therefore, be set aside and the consumer complaint should be ordered to be dismissed.

6.      We have examined the entire material on record and given a thoughtful consideration to the arguments advanced before us.

7.      It is a fact admitted by both the parties that the insurance policy in question was obtained by the husband of the complainant under the Salary Savings Scheme from the OP LIC.  As per the scheme of arrangement, the deduction of premium was to be made by the employer and get it remitted to the OP LIC.  However, since the insured took leave from his office due to his illness, the deduction of premium could not be made from the salary, as the salary is stated not to have been paid during the period of absence from duty.  The main question that arises for consideration, therefore, is whether the claim was still payable to the complainant, even when the deduction of premium was not made by the employer from the salary of the deceased and hence, the same could not be deposited with the LIC, as a result of which, the policy was in a lapsed condition.

8.      The matter has been considered in a catena of judgments passed by Hon’ble Supreme Court and this Commission from time to time.  In an order passed by this Commission on 11.03.2015 in Revision Petition No. 3016/2008, Smt. Meenakshi Popat Kambhoje & Ors. Vs. Life Insurance Corporation of India & Anr., it was held by majority judgment that the LIC was liable to pay the claim to the claimant, even in the wake of the fact that the premium was not deducted by the employer in time and paid to the LIC.  In the said order, reliance was placed on the order passed by the Hon’ble Supreme Court in Chairman, LIC of India vs. Rajiv Kumar Bhaskar (supra), in which, it has been stated that the Salary Savings Scheme provides for a tripartite agreement between the employer, the employee and the LIC.  The employee could not approach the insurer directly and for all intents and purposes, the employer was acting as an agent of the LIC.  It has also been stated that the LIC shall have a duty to inform the employee, in case of non-payment of premium for any reason whatsoever.  It has been mentioned in the Manual for Policy Servicing Department no. 14 – Salary Savings Scheme issued by the LIC on 31.12.1990, in para 13.4 that the fault in payment of the premium should be intimated to the party.  It has further been mentioned in para 16 and 17 of that Manual as follows:-      

“16. DEFAULT AND FINAL LAPSE NOTICE:

While posting the Group Ledger, any default in payment of premia should be communicated to the employer on a special form No. 5227.  If the premiums remain unpaid for 6 months, a lapse intimation on the prescribed form No. 5228 should be sent to the employee.  A lapse Register is also to be maintained for preparing statistics in respect of lapses.
 
17.       STRAY DEFAULT OF PREMIUMS:

In case of stray default for any reason, the defaulted premiums can be allowed to remain pending for collection later on.  Further, premiums as and when received should be credited towards the months for which deduction has been made instead of towards an earlier default or instead of holding all collections in deposit till the full arrears are received.”

9.      It was further stated that although an undertaking was given by the insured that he shall be responsible for payment of premium, when the premium was not deducted by the employer, but a plain perusal of the salient features of the Salary Savings Scheme indicate that the employer as well as the LIC could not escape their responsibility of informing the insured, in case of default in the payment of premium.  In the order, Smt. Meenakshi Popat Kambhoje & Ors. Vs. Life Insurance Corporation of India & Anr. (supra), reliance has also been placed on Section 50 of the Insurance Act, 1938, in which it has been mentioned that a notice shall be given to the policy-holder, informing him of the options available before the expiry of three months of the date on which, the premium in respect of the policy of life assured was payable.

10.    In the order passed by the Hon’ble Apex Court in Delhi Electric Supply Undertaking vs. Basanti Devi & Anr., (1999) 8 SCC 229, it has been stated as follows:-

“It is, thus, the sole responsibility of the DESU to collect premium from all the employees and remit the same by means of one cheque. A reconciliation statement is also to be sent in the form prescribed by the Life Insurance Corporation. No individual premium notice is to be sent by the Life Insurance Corporation to any employee and no receipt is to be given to him for the premium received. It is the DESU which is to inform the Life Insurance Corporation of all the changes in the staff as soon as they occur, so also the fact when any employee leaves the service of the DESU. An employee is kept ignorant of the happenings between the Life Insurance Corporation and the DESU except that he is made aware of deduction of premium from his salary every month.”

11.    In the above judgment, the Hon’ble Apex Court directed that the LIC should pay the insured amount to the complainant with interest and in the process, they modified the order passed by the State Commission and the District Forum, by which the employer had been directed to make payment of the insured amount.

12.    Taking into account the judgments delivered by the Hon’ble Supreme Court in Chairman, LIC of India vs. Rajiv Kumar Bhaskar (supra)Delhi Electric Supply Undertaking vs. Basanti Devi & Anr. (supra) and , it is made out that it was the primary duty of the employer to have deducted the premium out of the salary of the deceased insured.  In case, they were not able to do so, on account of non-payment of the salary, it was the duty of the employer as well as the LIC to provide appropriate information to the insured, who could have then taken the requisite steps to ensure that the policy did not lapse for non-payment of the premium.  We, therefore, do not find any infirmity, illegality or jurisdictional error in the orders passed by the consumer for a below and the same are upheld.  The present revision petition is ordered to be dismissed in limine.  There shall be no order as to costs.