Life Insurance Corp Of INDIA And Anr vs. Chanda Rani And Others

Facts

The petitioner, Life Insurance Corporation of India (LIC), challenges an award by the Permanent Lok Adalat (Public Utility Services), Sangrur. The award directed LIC to pay Rs. 20,00,000/- with interest to respondents-applicants, the legal heirs of Madan Gopal, a deceased LIC agent. Madan Gopal was insured under a Group Insurance Master Policy for Rs. 20,00,000/-. The annual premium was initially Rs. 7670/-, deducted from his commission. In October 2021, the premium was revised to Rs. 14,396/- including GST. Madan Gopal issued a cheque for the differential amount of Rs. 6726/-, which was dishonoured due to insufficient funds. LIC claims the policy lapsed as the balance premium was not deposited before his death on 13.11.2021. The Lok Adalat found sufficient funds in Madan Gopal's account to cover the premium.

Held

The Court held that the Permanent Lok Adalat correctly appreciated the facts and applied the principles of natural justice, equity, and fairness. The Lok Adalat found that the revised premium was communicated on 11.10.2021, and the cheque for the differential amount was dishonoured on 13.10.2021. Crucially, the respondents presented an account statement (Ex. A4) showing a balance of Rs. 47,485/- in Madan Gopal's agency earnings account as of 21.10.2021, which was more than sufficient to cover the differential premium of Rs. 6726/-. The Court agreed with the Lok Adalat that LIC had sufficient funds available and was at fault for not deducting the premium from the agent's commission/incentive as per its own instructions (Ex. A2). The lapse was therefore on the part of the insurer, not the insured. The benevolent nature of the scheme, which did not require a separate cheque, further supported this. The discretion exercised by the Lok Adalat was found to be well-guided and not illegal or perverse. The writ petition was dismissed.

Key Issues

1. Whether the Permanent Lok Adalat erred in holding that the insurance policy remained in force despite the dishonour of the cheque for the differential premium amount, considering the alleged insufficient funds in the deceased agent's account at the time of premium revision? (Question of mixed law and fact, concerning contract of insurance and payment of premium). Contentions: Petitioner (LIC): Argued that the dishonoured cheque for the differential amount of Rs. 6726/- indicated insufficient funds, causing the insurance contract to cease to exist as of the agent's death, and therefore, the claim was rightly repudiated. Respondents-Applicants: Contended that Madan Gopal had sufficient commission/incentive in his account to cover the revised premium, and LIC was at fault for not deducting it as per their internal instructions and for withholding the cheque. They relied on the account statement (Ex. A4) showing a balance of Rs. 47,485.45/- in his agency earnings account as of 21.10.2021.