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High Court Of Calcutta
Before Mr. Justice Girish Chandra Gupta
MADHUMITA SARKAR - Appellant
Versus
ORIENTAL INSURANCE COMPANY LTD. - Respondent
W. P. 10869 (W) Of 2004
Decided On : 11/22/2006
INSURANCE - TERMINATION OF CONTRACT - POWER UNDER CLAUSE 5 - REQUIREMENTS - PRESUMPTION OF RECEIPT - REBUTTAL - WRIT PETITION - MAINTAINABILITY - ARBITRARY REFUSAL TO PAY CLAIM.
Fact of the Case:
The insurer purported to cancel a Janata Personal Accident Insurance Policy issued to the deceased, Chinmoy Sarkar, during his lifetime, on the ground that all long-term JPA policies with a sum insured higher than Rs. 1 lakh issued prior to May 1, 1999, had been canceled with effect from September 19, 2002, as per the direction of the Head Office. The insurer claimed to have sent a cancellation notice and a refund voucher to the deceased's address, but the widow, Madhumita Sarkar, alleged that the cancellation was never communicated to the deceased and that the insurer arbitrarily refused to pay the sum assured upon his death.
Finding of the Court:
The court held that the insurer failed to comply with the requirements of Clause 5 of the policy, which entitled the insurer to terminate the contract by providing a written notice and refunding the proportionate amount of the premium. The court found that the proportionate premium was not refunded to the deceased during his lifetime and that the alleged cancellation notice was not posted in the ordinary course of business. The court also held that the insurer's subsequent attempts to communicate the cancellation to the deceased after his death were legally inconsequential. The court further held that the writ petition was maintainable as the insurer's refusal to pay the claim was arbitrary and unreasonable.
Issues: (a) Did the respondent in exercise of power under Clause 5 terminate the contract? (b) Whether the writ petition is maintainable? (c) To what relief if any is the petitioner entitled?
Ratio Decidendi: 1. The insurer's failure to refund the proportionate premium during the deceased's lifetime rendered the termination of the contract ineffective. 2. The alleged cancellation notice was not posted in the ordinary course of business, and there was no satisfactory proof of its receipt by the deceased. 3. The insurer's subsequent attempts to communicate the cancellation to the deceased after his death were legally inconsequential. 4. The insurer's refusal to pay the claim was arbitrary and unreasonable, as it failed to comply with the requirements of Clause 5 of the policy and the principles of natural justice. 5. A writ petition is maintainable where the refusal to pay an insurance claim is arbitrary and unreasonable, as it involves the violation of Article 14 of the Constitution.
Final Decision: The court quashed the insurer's refusal to pay the claim and directed the insurer to pay the sum assured of Rs. 10 lakhs with interest at the rate of 10% per annum from the date of the deceased's death until payment. The amount was to be deposited in a fixed deposit in the joint names of the petitioner and her two minor daughters, with the petitioner entitled to withdraw the monthly interest for her maintenance and the maintenance of the minor children. The fixed deposit was to be automatically renewed until the younger daughter attained majority, and the fund was to be ultimately distributed equally among the joint-holders or their heirs.
( 1 ) THE admitted facts of the case briefly stated are as follows. Chinmoy sarkar, aged about 43 years, took out a Janata Personal Accident insurance Policy, for a sum of Rs. 10 lakhs, for the period between 31st march, 1998 and 30th March, 2010. His wife Srimati Madhumita Sarkar was appointed nominee. Chinmoy Sarkar died in a car accident on 25th june, 2003 leaving him surviving his widow Shrimati Madhumita Sarkar and two minor daughters: Antarlina Sarkar born on 4th October, 1996 and somrupa Sarkar born on 6th August, 2001. On 30th June, 2003 the respondent/insurance company was duly intimated about the aforesaid death. On 29th July, 2003 by a letter she requested the insurance company to arrange for payment of the sum assured.
( 2 ) ON 1st August, 2003 the insurer purported to write a letter addressed to the deceased Chinmoy Sarkar that as per the direction of the Head Office vide their letter dated 29th August, 2002 all the Janata personal Accident policies for a sum above Rs. 1,00,000/- issued prior to 1st May, 1999 had been cancelled with effect from 19th September, 2002. It was alleged that the deceased had already been informed about the same. Should the deceased however have not received such information he was once again being told that he should claim refund of the proportionate premium. It would only be proper to notice the contents of the letter dated 1st August, 2003 in extenso : -
"this is to inform you that as per direction of our H. O. , New delhi vide their letter dated 29. 08. 2002, we have cancelled all Long term JPA Policies with Sum Insured higher than 1 Lacs and issued prior to 1st May, 1999 with effect from 19. 09. 2002. This was already informed to you by our office. However, if you have not received cancellation of the explained Policy so far, we are once again sending a policy cancellation endorsement and a set of refund voucher for Rs. 1875. 00 (Rupees One thousand eight hundred seventy five only) in duplicate. "
( 3 ) BY a letter dated 1st September, 2003 also addressed to the deceased the insurer purported to forward a cheque for a sum of rs. 1,875/- presumably on account of refund of the premium which naturally could not have been accepted because the recipient was already dead. The payment of the sum assured was in the circumstances refused by a letter dated 18th November, 2003 on the ground that the policy had already been cancelled on 19th September, 2002.
( 4 ) ALLEGING arbitrariness amongst others, the widow has come up before this Court, invoking the writ jurisdiction, praying for quashing of the refusal to pay and for a direction upon the insurer to pay the sum assured Rs. 10 lakhs together with interest at the rate of 18 % p. a.
( 5 ) THE insurer in its affidavit-in-opposition has admitted that the policy was issued to the deceased which according to them contained Clause 5 which provides as follows : -
"the company may at any time by notice in writing cancel this policy, provided that the company shall in that case return to the insured the then last paid premium less a prorata part thereof for the portion of the current insurance period which shall have expired. Such notice shall be deemed sufficiently given if posted addressed to the insured at the address last registered in the company's books and shall be deemed to have been received by the insured at the time when the same would be delivered in the ordinary course of post. "
( 6 ) THE case in the affidavit-in-opposition is that since the policy was cancelled, during the existence of the life assured, the question of making any payment does not arise. In Paragraph-16b of their affidavit they have also alleged that the petitioner cannot have any personal knowledge as regards the cancellation of the policy during the lifetime of her husband. It would be appropriate to notice Paragraph-16b of the affidavit-in-opposition which reads as follows : -
"i submit that the petitioner in his petition has
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