An employer who is authorized to collect premium from employees under a Salary Savings Scheme is an agent of the insurance company for the purpose of collecting premium.

D.P. Wadhwa, J.—On a complaint filed by Basanti Devi, widow of Bhim Singh, under Section 18 of the Consumer Protection Act, 1986 (‘Act’ for short) the State Commission by its judgment dated November 10,1993 directed the Delhi Electric Supply Undertaking (DESU) to pay a sum of Rs. 50,000/- with interest at the rate of 15% per annum from December 17,1992 to the complainant till the date of payment. Life Insurance Corporation (‘LIC for short), the insurer was, however, absolved of any liability. By the impugned judgment dated January 13,1995 by majority (2 : 1) National Consumer Disputes Redressal Commission (‘National Commission’ for short), on appeal, affirmed the order of the State Commission. DESU is the constituent of Delhi Municipal Corporation, a body corporate under the Delhi Municipal Corporation Act, 1957. Both the National Commission and the State Commission are constituted under the Consumer Protection Act, 1986.

2. LIC floated a “Salary Savings Scheme” under which Bhim Singh, an employee of DESU took an insurance policy for an amount of Rs. 50,000/- with the LIC. Insurance policy was to commence on January 28,1992. Bhim Singh had paid Rs. 636/- as premium for two months to the LIC. Premium for the third month was payable by March 29, 1992. The amount of the premium was deducted by the DESU from the salary of Bhim Singh and remitted by it to the LIC. It appears that premium for the subsequent months was deducted by DESU from the salary of Bhim Singh but was not remitted to LIC. In the meantime Bhim Singh died on August 17, 1992. Bansati Devi, widow of Bhim Singh informed LIC of the death of her husband and requested for payment of the amount due under the policy. LIC disclaimed any liability for payment under the policy as the instalments of premium after June, 1992 were not received by it. LIC, therefore, repudiated claim of Basanti Devi. LIC said that since default had been committed in payment of premium the policy taken out by Bhim Singh lapsed. This led Basanti Devi to file a complaint before the State Commission against LIC and DESU with the result as aforesaid.

3. Before we consider the rival contentions it would be appropriate to understand the “Salary Savings Scheme” of LIC. During the course of arguments we were given a brochure on the Scheme. It is addressed to the employer telling it the advantages of the Scheme. This is how the Scheme has been explained :

“It is a simple, economical plan whereby your employees may obtain life insurance protection for their families and retirement income for themselves under advantageous conditions which might not be available to them otherwise. This is accomplished by savings automatically deducted from their pay and remitted to us once a month.

This is not a group insurance. Each employee owns his policy individually, is entitled to all its benefits and can continue the policy in the event of any change in employment.

Under this plan, you as an employer give facilities to the representatives of the LIC to contact your employees to offer life insurance cover to them. Premium amounts, if an employee agrees to insure under this plan, are to be deducted every month from the employee’s salary, in the same manner as the employee’s provident fund. All the amounts so collected are paid to the Corporation by one cheque by the employer. This ensures, for the employee regular payment, monthly, of his premiums at concessional rates. Deduction of premium from the salary or wages of an employee and its remittance to the Life Insurance Corporation is so beneficial that the recently amended Payment of Wages Act and the Minimum Wages Act make it legally permissible for an employer to do so. On your part, all that the plan involves is a little extra accounting which you will surely consider worthwhile because of the...”

The scheme then lists the advantages both for the employer and the employee. A specimen of the letter addressed by the Branch Manager, LIC to the employer is as under :