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GAUHATI HIGH COURT
M. C. PATHAK, C. J. AND K. LAHIRI, JJ.
Life Insurance Corporation of India and others -Appellant
Versus
Omprakash Agarwalla -Respondent
Letters Patent Appeal No.5 of 1974
Decided On : 07-05-1976
INSURANCE - POLICY - NON-FORFEITURE SYSTEM - PREMIUM PAYMENT - LATE PAYMENT - INTEREST - ACCEPTANCE OF PREMIUM BY INSURER - REINSTATEMENT OF POLICY - ENTITLEMENT TO FULL SUM ASSURED - INSURANCE ACT, 1938, SEC. 50.
Fact of the Case:
The insured paid the premium for an endowment assurance policy with an accident benefit clause until August 1963. In August 1964, the insured deposited the premium with the insurer's banker within six months from the due date. However, the insurer claimed that the policy lapsed due to non-payment of the premium and offered a paid-up policy for a reduced sum assured. The insured filed a suit claiming the full sum assured.
Finding of the Court:
The court held that the insurer was obligated to give notice to the insured under Section 50 of the Insurance Act, 1938, informing them of the options available upon the lapsing of the policy. Since no such notice was given, the policy could not be considered lapsed. The court also found that the insurer accepted the late payment of the premium within six months from the due date, reinstating the policy under the non-forfeiture system A. Therefore, the insured was entitled to the full sum assured, subject to the deduction of interest for late payment.
Issues: 1. Whether the insurer was obligated to give notice to the insured under Section 50 of the Insurance Act, 1938, informing them of the options available upon the lapsing of the policy. 2. Whether the insurer accepted the late payment of the premium within six months from the due date, reinstating the policy under the non-forfeiture system A.
Ratio Decidendi: 1. Section 50 of the Insurance Act, 1938, requires the insurer to give notice to the policyholder informing them of the options available upon the lapsing of the policy, unless these options are set forth in the policy. In this case, the options were incorporated in the policy, and therefore, no notice under Section 50 was required. 2. The non-forfeiture system A in the policy provided that the benefits of the policy would be protected for six months from the due date of the unpaid premium, notwithstanding the default. The insurer accepted the late payment of the premium within this six-month period, reinstating the policy. Therefore, the policy could not be considered lapsed.
Final Decision: The court affirmed the decree passed by the learned single judge with the modification that the sum of Rs. 4.46 p. as interest would be deducted from the decretal amount. The plaintiff was entitled to costs throughout as decreed by the learned single judge.
PATHAK, C. J.:- This Letters Patent Appeal arises out of the judgment of the learned single judge.
2. Plaintiff-respondent Omprakash Agarwalla is the son of Mangilal Agarwalla, who died on 21st July, 1965. During his lifetime Mangilal Agarwalla insured his life under endowment assurance scheme with accident benefit clause with the National Insurance Company Limited for a sum of Rs. 5,000 under proposal No. 51099 dated 31-7-55. Mangilal Agarwalla obtained the policy bearing No. 651669 and the, date of commencement was 28-8-55, from the National Insurance Company Limited. The made of payment of premium was yearly and the premium was payable on the 28th day of August, each year. The annual premium was Rs. 254.11 as (Rs. 254.69 p.). The policy was of automatic non-forfeiture system A. Plaintiff Omprakash Agarwalla was nominated to receive the money secured by the policy. The business of the National Insurance Company Limited was taken over by the Life Insurance Corporation of India and the number of the policy of Mangilal Agarwalla remained the same.
3. Mangilal Agarwalla regularly paid all the premiums due upto August, 1963 on account of the said insurance policy. He also deposited the premium of Rs. 254.69 p. being the premium due in August, 1964 on 12-12-64 with the defendants banker United Bank of India Ltd., Nowgong under bankers memo No. 179478 dated 12-12-64. Mangilal Agarwalla wrote to the defendant-Life Insurance Corporation of India, a letter dated 15th January, 1965 (copy of which is Ext. 9) to the following effect:
"Dear Sir,
Your Ref:- Ag./Tp/HG dated 23rd July, 1964.
Our Ref. :- Policy No. 651669.
I regret to write to you that in spite of your repeated letters addressed to the Officer-in-charge, Assam Branch Unit, Gauhati, they have not yet sent me any official receipt in respect of the premiums paid (1961 to 1963) nor they have transferred the accounts of the above policy to yourself though more than six months has been passed.
Further I beg to inform you that the premium due on August 1964 has already been paid with the United Bank of India Ltd., Nowgong Branch vide their receipt No. R. 179478 dated 12-12-64.
I therefore request you to kindly look into the matter personally so that the premium receipts due are sent to me without any further delay and secondly call the records to H. O. for future service and oblige.
Thanking you.
Yours faithfully,
Sd. Mangilal Agarwalla."
4. In reply to the above letter dated 15th January, 1965, the Assistant Divisional Manager of the Life Insurance Corporation of India (Unit: National Insurance Company) sent the following reply (vide Ext. 10) to Mangilal Agarwalla under No. Prem/C/Gc/SC. dated 9th February, 1965 :
"Dear Sir,
Ref.- Pol. No. 651669-Own.
In reply to your letter dated 15-1-1965 please note that the above policy account has already been transferred to us and the yearly premium upto that due August 63 stands paid.
In case of non-receipt of the receipt please treat this letter as an acknowledgment.
The sum paid on 12-12-64 to the United Bank of India Ltd., Nowgong has not yet been refunded to us. However, we are writing to our Assam Office in this regard and on receipt from them we shall make adjustment against the due August 64."
5. No further communication between the parties has been produced and on 21st July, 1965 Mangilal Agarwalla died.
6. Omprakash Agarwalla then made a demand on the Corporation for payment of the money under the policy to him in his capacity as nominee. The Claims Department of the Corporation informed the plaintiff Omprakash that the total amount due to him under the policy was Rs. 2,563 inasmuch as the policy became a paid-up policy for nonpayment of the premium due in August, 1964. The defendant-Corporation refused to pay the entire sum under the policy and therefore Omprakash Agarawalla filed the suit on 16-7-68 in the Court of the Assistant District Judge, Nowgong, claiming a decree for Rs. 5,500. The suit was contested by the Life Insurance Corp
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