1. THIS First Appeal is directed against the Order dated 6.5.1993 passed by the Rajasthan State Commission at Jaipur allowing the complaint and directing the Life Insurance Corporation of India, the opposite party to settle the claim of the complainants (legal representatives of late B.S. Mohanot through legally appointed guardian Shri S.R. Mehta) by paying Rs. 2 lakhs, the sum assured of policy Nos. 79364234 & 79364235 issued in favour of Mr. B.S. Mohanot together with interest @ 18% per annum on Rs. 2 lakhs from 1.1.1990 till payment.
2. THE appeal has been filed delayed by a period of 18 days and is accompanied by an application for condonation of delay. Notice was issued on 11.1.1994 to the respondents on the petition for condonation of delay. Reply has been filed. After hearing Counsel for the parties and perusing the affidavits we are satisfied that there was sufficient cause for not filing the appeal with in the period of 30 days. The delay in filing the appeal is condoned and the appeal is entertained.
The facts which are not in dispute lie in a narrow compass and may be first noticed. Shri Baldev Singh Mohanot whose date of birth is admitted to be 22nd of October, 1946, sought to obtain two separate Life Insurance Policies under the "Jeewan Mitra Scheme". Two separate proposal forms bearing Nos. 3032198 and 3031198 were filled in on the 28th day of February, 1986, but in the column No. (iii) of the proposal form (if the policy is to be dated back, indicate such date), the commencement of the risk was specified from 21.4.1985. Alongwith the proposal forms, two cheques in the sum of Rs.3,910/ - and Rs. 3,757.50 representing the yearly premium payable against the said proposal/policies were also forwarded. The proposals were accepted on 7.3.1986 by L.I.C. with the confirmation that the policies would be related back to the date of 21.4.1985 and accordingly acceptance letter and first premium receipts were issued. Two separate policies were issued by the Life Insurance Corporation of India (for short called L.I.C.) on 13.5.1986 and in both the policies it was covenanted that the life insurance risk on the life of Shri B.S. Mohanot commenced from 21.4.1985. The particulars of the two policies issued to the policy holder are as under :
(i). Policy No. 79364234 for Rs. 50,000/ - with risk commencing on 21.4.1985 with an annual premium at Rs. 3,057.50 under Plan and Term 88 -20; (ii). Policy No. 79364235 for Rs. 50,000/ - with an annual premium of Rs. 3,910/ -, the risk commencing on 21.4.1985 under Plan and Term 88 -15. Shri B.S. Mohanot expired on 10.9.1986. Before his death he did not pay the insurance premium which fell due on the 21st of April, 1986. On the demise of Shri Mohanot, a claim was lodged with L.I.C. on the plea that the policies were in full force and effect and the amounts were payable. L.I.C. by its letter dated 22.9.1986 repudiated the claim on the ground that the policies had lapsed on 21.4.1986 as the premiums had not been paid by late Shri B.S. Mohanot before his death.
3. A complaint was filed on 3.4.1991 by the maternal grand -father of the two minor children of late Shri B.S. Mohanot claiming a sum of Rs. 4,46,670/ - as stated in the complaint on account of the alleged failure and negligence of the L.I.C. in settling the claim and deficiency in service. On being noticed L.I.C. filed its detailed version taking preliminary objection of limitation and reiterated that the policies issued to Shri B.S. Mohanot lapsed on account of non -payment of the premium in April, 1986.
4. THE State Commission considered the complaint, versions of the case filed on behalf of the opposite parties, the affidavits and the documents and framed following points for determination:
(1). Whether the complaint which was filed on 3.4.1991 is within limitation? (2). Whether the policies issued to Shri B.S. Mohanot lapsed on account of non -payment of premium of April, 1986 ? (3). Whether the complainants can maintain the complaint ? and (4). If the answers to point Nos. 1 and 2 are against the opposite parties, to what amount the complainants are entitled from the opposite parties arising out of Policy Nos. 79364234 and 79364235?
The State Commission held that the complaint as filed on 3.4.1991 on behalf of the minor complainants against the opposite parties for the settlement of the claim in respect of the two policies issued in favour of the policy holder late Shri B.B. Mohanot, was not barred by limitation. In other words, it is within limitation. On point No. 2 the State Commission came to the conclusion that no premium for April, 1986 was payable and after the payment of the premiums the two policies were issued on 13.5.1986 and as the policies were issued after the payment of premiums, the question of lapsing of the policy does not arise. Question No. 2 formulated was decided against the opposite parties. The State Commission came to the conclusion on question No. 3 that the son and daughter are beneficiaries of the policies and Shri S.R. Mehta was appointed as legal guardian by the District Judge, Bhilwara, vide Order dated 27.11.1987 and, therefore, the complaint as filed on behalf of the minor complainants is properly constituted and they being beneficiaries are entitled to maintain the complaint. On the quantum the State Commission directed the opposite parties to settle the claim of compensation by paying Rs. 2 lakhs together with interest at the rate of 18% per annum on Rs. 2 lakhs from 1.1.1990 till realisation.
5. WE heard Mr. Kailash Vasdev, learned Counsel for the appellants and Mr. N.S. Mathur, learned Counsel for the respondents herein (complainants). Written submissions on behalf of the complainants have also been filed. The photo copy of the proposal form No. 3032198 dated 28.2.1986 with proposal for the back dating of the policy to 21.4.1985 is on record. The photo copy of the first premium receipt dated 7.3.1986 gives the particulars of the proposer and other material data of the proposal as well as the date of commencement as 21.4.1985. It also records that next premium falls due on 21.4.1986. Photo copy of the proposal review slip regarding policy No. 79364234 is also on record with the date of commencement of the policy as 21.4.1985. The photo copy of the policy docket with special conditions for policy No. 79364234 is also on the record which gives the date of risk as 21.4.1985 in pursuance of the proposal No. 3031198 dated 8.2.1996. It also records when the premium is payable i.e. the stipulated due date in April in every year. Similarly for the other policy the copy of the proposal form No. 3031198 dated 28.2.1986 with proposal for the backdating of the policy to 21.4.1985, copy of the first premium receipt dated 7.3.1986 showing next premium due, copy of the proposal review slip policy No. 79364235 and the copy of the policy docket with special conditions for policy No. 79364235. All these documents establish that the two policies had been backdated with the date of commencement of the risk from 21.4.1985 and the next yearly premium was due to be paid on 21st April, 1986.
6. THE commencement of the risk and dating back of the policy is permissible. The relevant portion in the manual reads as under :
"The Commencement of Risk and Dating Back of Policies. -The Risk under the Corporation''s Policies commences on the date of receipt of the first premium in full or the date of acceptance whichever is the later, but if the acceptance of a Proposal is conditional upon the proposer''s compliance with any requirements, then the risk under the policy will commence on the date on which all the requirements are satisfactorily complied with or on the date of receipt of the first premium in full, whichever is the later. Normally policies (except those effected under Tables 44, 97 and 115) can be dated back, if desired, within the financial year for a period not exceeding three months without any extra charge. However, for Tables 50 and 80 dating back a previous financial year is also allowed in order to enable the life assured to attain majority on the date of deferment. Further, if the policy is under Children''s Deferred Endowment Assurance, New Children Deferred Assurance Plan, Children Anticipated and Deferred Annuity Plans, such policies can be dated back within the financial year for a period of one month only without any extra charge. The policies issued under Deferred Annuity Plans such as Tables 45, 96 and 116 (excluding single premium policies) can also be dated back within the financial year for a period of 15 days only without any extra charge. Policies may be dated back for longer periods, but again within the financial year, provided interest is paid @ 9% p.a. for the period in excess of three months (one month in the case of policies effected under Plans 41, 50, 80, 81, 90) from the date of commencement of policies to the date of payment in the case of first premium subject to minimum interest of Rs. 2/ - and similarly for a period in excess of three months or one month, as the case may be, from the due date of premium to the date of payment in the case of subsequent premiums, if any, paid late subject to a minimum interest of Rs. 2/ - in respect of each such premium. In case of policies under Plan 45,96, and 116 (excluding single premium), interest @ 12% p.a. on each back dated premium subject to minimum of Rs. 5/ - for the period in excess of 15 days is charged. In case of policies issued under Plans Jeevan Shree (Table 112) and Children''s Money Back (Table 113), interest @ 12% p.a. for dating back in excess of one month will be charged.
No interest will be charged if the policies are dated back in the lien months of April, May, July, and August. How ever, this concession will not apply to Children Assurance and Annuity Plans like Tables 41, 50, 80, 81, 92; Deferred Annuity Plans 45, 96, 116 and Plans 101, 112, 113. Under Jeevan Kishor (Table 102) dating back can be allowed only for a period of three months and hence no interest is to be charged thereunder. In the case of policies effected by paying Single Premium and Consideration Amounts (in the case of Annuities), excluding Jeevan Dhara policies (Table 96), the proposer will be required to pay interest @ 9% p.a. subject to a minimum of Rs. 2/ - on the Single Premium or the consideration amount from the date of commencement of risk to the date of payment.
Dating back of policies under Plans 44, 97 and 115 is not allowed."
The submission of Mr. Kailash Vasdev, the learned Counsel for the LIC is that the principle of back dating an insurance policy is accepted as a norm for issue of policies the World over and that back dating is done for the benefit of the policy holder because the policy -holder then avails of the following benefits:
(i). of lower age premium. The lower the age, the premium will be lesser. The more the age, the premium will be more; (iv). the Income Tax benefit of the whole premium paid in a particular financial year; (iii).by ensuring that the next premium falls in a particular month in contemplation of some incentives and/or gain expected so that the next premium may be paid out of those benefits; (iv). of seasonal business gains so that premium may be paid out of all those seasonal incomes and as such the date of next premium may be managed accordingly. (v). to obtain a particular policy which is available upto a particular age only.
7. ON the other hand the submission of Mr. N.S. Mathur relying on Section 2(11) of the Insurance Act, 1938 is that the back dating part of the contracts for life insurance fall beyond the definition of life insurance business as set out in Section 2(11) and are contrary to Public Policy as the contingent event as neither death nor the happening of any contingency dependent on human life can occur during the back dated period. Hence, no premium by way of consideration can be said to be payable for a contract which is incapable of performance.
8. SECTION 2( 11) of the Insuranee Act read s as follows:
"Life Insurance business means the business of effecting contracts of insurance upon human life, including any contract whereby the payment of money is assured on death (except death by accident only) or the happening of any contingency dependent on human life, and any contract which is subject to payment of premiums for a term dependent, on human life and shall be deemed to include - (a). the granting of disability and double or triple indemnity accident benefits, if so provided in the contract of insurance; (b). the granting of annuities upon human life; and (c). the granting of superannuation allowances and annuities payable out of any fund applicable solely to the relief and maintenance of persons engaged or who have been engaged in any particular profession, trade or employment or of the dependents of such persons."
Policy of insurance, in our view, is a contract of insurance and the terms thereof have to be strictly construed. The policy of insurance is required to be construed by collecting the intention of the parties from the language employed. The Courts and Tribunals cannot make a new contract, however reasonable, if the parties to the contract have not made it themselves. The very basis on which the contract for insurance came into force rests on the proposals of the insured to relate it back to 21.4.1985. The first premium receipts and the acceptance of the proposals both specify the commencement of risk from 21.4.85. Both the policies covenanted that the life insurance risk on the life of Shri Mohanot commenced on 21.4.1985. The first premium receipt specifically informed the life insured that the next premium fell due on 21.4.1986. Admittedly the second yearly premium was not paid by the life insured before his death and thus in terms of policy it lapsed. The finding of the State Commission that deceased was not informed that he was required to pay another instalment of premium on 21.4.1986 because of back dating of policies is clearly against the record.
The commencement of the risk and back dating of policies is accepted as a norm for issue of policies as there are certain benefits accruing to the policy holders as stated by the Counsel for LIC. The relevant portion of the material pertaining to back dating of the policies and the terms and conditions, thereof, has been extracted above. The two policies in this case are under Plan and Term 88 -20 and Plan & Term 88 -15 and it is open to the insured to seek and obtain policy from a back date. It is true that the Jeewan Mitra Scheme Policies came into existence w.e.f. 1.7.1985, but there is no limitation or prohibition that the back dating of the policies could not be effected with effect from 21.4.1985. In our view, the back dating of an insurance policy could be done at the request of the insured, in accordance with the principles and terms of back dating a policy irrespective of the commencement of a scheme of insurance. In this case it does not make any material difference whether the back dating is related back to 21.4.1985 or 1.7.1985 as the death occurred on 10.9.1986. The parties, as well as the successor -in -interest of the insured are bound by the contract of insurance as it is governed by the terms of the policy where there is an unqualified acceptance of the proposal of back dating the policy w.e.f. 21.4.1985. It is by a deeming fiction that the contract of insurance commenced from 21.4.1985 with all consequences attached to it as if the contract of insurance came into existence with effect from 21.4.1985.
9. THE deeming provision means that the deemed state of affairs should be taken to be existing on the relevant date. It was ruled by the Supreme Court in "M. Venugopal v. L1C" 1994 (2) SCC 232 :
"The effect of a deeming clause is wellknown. Legislature can introduce a statutory fiction and Courts have to proceed on the assumption that such state of affairs exists on the relevant date. In this connection, one is often reminded of what was said by Lord Asquith in the case of as Esat End Dwellings Co. Ltd. v. Fisbury Borough Council, that when one is bidden to treat an imaginary state of affairs as real, he must surely/ unless prohibited from doing so/ also imagine as real the consequences and incidents which inevitably have flowed from it -one must not permit his "imagination to boggle" when it comes to the inevitable corollaries of that state of affairs."
10. THE necessary incident in this case is that the second premium fell down on 21.4.1986 and the consequences of its non -payment is that the policy lapsed w.e.f. 21.4.1986. The L1C was thus not negligent or deficient in service in repudiating the claim as the view of L1C is sound in law after having arrived at on consideration of all relevant material.
In the result the appeal is allowed and the order of the State Commission is set aside and the complaint dismissed, leaving the parties to bear own costs. Appeal allowed.
