Writ petition against Rural Postal Life Insurance Company challenging orders upholding a nominee's claim. Court held contract was concluded when acceptance was posted, applying Supreme Court precedent.
Writ petition dismissed being devoid of merits with costs.
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THE HON’BLE SRI JUSTICE V.V.S.RAO AND
THE HON’BLE SRI JUSTICE G.KRISHNA MOHAN REDDY
WRIT PETITION No.12139 of 2006
ORDER: (per Hon’ble Sri Justice G.Krishna Mohan Reddy)
This writ petition is filed assailing the order dated 27.3.2006 made in F.A.No.197 of 2006 on the file of the A.P. State Consumer Disputes Redressal Commission, Hyderabad (for short ‘State Commission’) confirming order passed in C.C.No.93 of 2005 on the file of the District Consumer Forum (for short ‘District Forum’) at Adilabad upholding the plea of the 1st respondent to pay amount under Rural Postal Life Insurance Policy in the name of her son K.Anil Kumar following his death on 10.12.2003. Therefore, the validity of the policy and correspondingly the orders passed are in question in the writ petition.
The writ petitioners are the appellants/opposite parties and the 1st respondent is the respondent/complainant before the State Commission.
The 1st respondent filed the consumer case being C.C.No.93 of 2005 before the District Forum against the petitioners herein. According to her, her son K.Anil Kumar had obtained Rural Postal Life Insurance policy during his lifetime on 14.11.2003 paying an amount of Rs.153/- towards first premium for an assured sum of Rs.50,000/-, which was accepted by the 2nd petitioner on 8.12.2003, following which the 2nd petitioner issued policy No.AP-HR-ADB-EA-2274. The policy holder died on 10.12.2003 due to drowning in Kadam River where he went for picnic along with other school children. After the death of the
policy holder, the 1st respondent being the nominee under the policy put-forth her claim before the petitioners submitting relevant requisites on 11.3.2003, but the 2nd petitioner denied the claim on the ground that the policy holder expired on 10.12.2003 before receiving the acceptance memo sent by them on 8.12.2003 and thus, the contract was not materialized and further holding that the 1st respondent was entitled to the amount of Rs.153/-paid by the deceased towards the first premium. Thereby the 1st respondent approached the District Forum at Adilabad by filing the Consumer Case being C.C.No.93 of 2005 praying to direct the petitioners to pay the policy amount of Rs.50,000/- covered by the policy with interest at 18% per annum and compensation of Rs.20,000/-.
According to the 1st respondent, she is entitled for the entire amount covered by the policy following the death of the policy holder and there was deficiency of service and unfair trade practice on the part of the opposite parties by discarding her eligible claim. The petitioners refuted the claim of the 1st respondent on the ground that the deceased got no knowledge about the acceptance of the proposal submitted by him as he died before he could receive it and as such, the contract was not materialized and rightly the claim was rejected.
The District Forum after conducting necessary enquiry, upheld the claim of the 1st respondent on the ground that there was offer from the policy holder and acceptance from the petitioners and hence there was concluded contract by 8.12.2003, by which date the policy holder was alive and hence his life was assured and the policy was in force by the date of his death and rejected the claim of the 1st respondent as unjustified. Consequently, aggrieved by the said order, the petitioners
approached the State Commission by filing F.A.No.197 of 2006, where the same questions as raised before the District Forum were raised, but the appeal was dismissed upholding the findings of the District Forum. Hence this writ petition.
Learned counsel for the petitioners would contend that by virtue of Section 4 of the Indian Contract Act, 1872, ‘the communication of acceptance of a proposal is complete when it comes to the knowledge of the person to whom it is made’ and as such when the policy holder died before receiving the communication of acceptance of the proposal, the question of contract becoming conclusive would not arise at all as laid down by the Supreme Court in LIFE INSURANCE CORPORATION OF INDIA Vs RAJA VASIREDDY KOMALAVALLI KAMBA[1] . Though the same proposition was brought to the notice of the State Commission, that factor was not considered. Therefore the impugned order passed by the State Commission confirming the order passed by the District Forum is liable to be set aside.
Therefore, it has to be seen as to whether the contract of insurance was completed while the life assured was alive and the rejection of claim on the ground that by the time the communication reached the destination, the life assured was no more is tenable and whether the impugned order is sustainable or not.
Section 4 of the Indian Contract Act, 1872, which is relevant, reads:
“Communication when complete:
The communication of a proposal is complete when it comes to the knowledge of the person to whom it is made. The communication of an acceptance is complete; as against the proposer, when it is put in a course of transmission to him so as to be out of the power of the
acceptor; as against the acceptor, when it comes to the knowledge of the proposer.
The remaining part of the section speaks about communication of revocation and effect of it which is not relevant here.
It is pertinent to note here that this provision envisages that the communication of an acceptance is completed as against the proposer, when it is put in a course of transmission to him so as to be out of the power of the acceptor, whereas it also contemplates that it is complete as against the acceptor when it comes to the knowledge of the proposer.
In LIC v. RAJA VASIREDDY KOMALAVALLI KAMBA (1 supra), in that case one late Raja Vasireddi Chandra Dhara Prasad who died intestate on 12th January 1961 filled a proposal for insurance for Rs.50,000/- on 27th December 1960 before the appellant therein and issued two cheques being the consideration towards the first premium for RS.300 and Rs.220 respectively which were encashed by the appellant on 29th December 1960 and 11th January 1961. On 16th January 1961, the widow of the deceased wrote to the appellant intimating the death of the deceased and demanded the payment of Rs.50,000/- under the policy, but the Divisional Manager, Masulipatnam branch denied the liability on behalf of the appellant on 28th January 1961 on the ground that the deceased died before the offer was accepted and communicated to him. Thereby a question arose as to whether there was concluded contract to uphold the claim of the widow of the deceased.
The Supreme Court observed while holding that there was no concluded contract as the deceased died before the offer was
accepted and communicated, “The mere receipt and retention of premium until after the death of the applicant or the mere preparation of the policy document is not acceptance.” The Supreme Court also held “The acceptance must be signified by some act or acts agreed on by the parties or from which the law raises a presumption of acceptance following a quotation from statement of law in Corpus Juris Secundum, Vol.XLV page 986 which reads:
The mere receipt and retention of premiums until after the death of applicant does not give rise to a contract, although the circumstances may be such that approval could be inferred from retention of the premium. The mere execution of the policy is not an acceptance; an acceptance, to be complete, must be communicated to the offeror, either directly, or by some definite act, such as placing the contract in the mail. ………………………...”
Therefore, by virtue of the observations made by the Supreme Court, it is enough if there was some act of communication to the offerer either directly or by some definite act, such as placing the acceptance in the relevant mode of communication to complete the factum of contract. This principle is well applicable here because the acceptance of the offer was sent by post to the deceased prior to his death. Thereby the fact that the acceptance was sent by post is sufficient compliance for concluding the contract.
The District Forum and the State Commission rightly held that as the Policy holder paid the premium on 14.11.2003 and the proposal was accepted and the relevant policy bond and passbooks were dispatched on 8.12.2003, the contract was materialized and the mere fact that the insured died on 10.12.2003 before the policy was communicated would not be a ground to
reject the claim. On the consideration of the merits, we find no grounds to interfere with the order of the State Commission and ultimately the writ petition deserves to be dismissed.
For the foregoing reasons, the writ petition is dismissed, being devoid of merits, with costs.
______________ (V.V.S.RAO, J) ________________________________ (G.KRISHNA MOHAN REDDY, J) Date: 4.4.2012 DA
THE HON’BLE SRI JUSTICE V.V.S.RAO AND
THE HON’BLE SRI JUSTICE G.KRISHNA MOHAN REDDY
WRIT PETITION No.12139 of 2006
4.4.2012
IN THE HIGH COURT OF JUDICATURE OF ANDHRA PRADESH AT HYDERABAD
THE HON’BLE SRI JUSTICE V.V.S.RAO AND THE HON’BLE SRI JUSTICE G.KRISHNA MOHAN REDDY
WRIT PETITION No.12139 of 2006
Date: 4.4.2012
Between:
Union of India, rep. by the Superintendent of Post Offices, Adilabad Division, Adilabad & another.
.. Petitioners
And
Smt.K.Uma Mohan & others.
.. Respondents
the Supreme Court held “The general rule is that the contract of insurance will be concluded only when the party to whom an offer has been made, accept it unconditionally and communicates his acceptance to the person making the offer”. The Apex Court further observed “Mere delay in giving an answer cannot be construed as an acceptance; as prima facie acceptance must be communicated to the offerer”.
[1] AIR 1984 SC 1014
2 issues framed by the court
Whether the meaning of Section 4 of the Indian Contract Act, 1872 precludes a contract of insurance from being concluded where the nominee died before receiving the communication of acceptance.
Whether the rejection of claim on the ground that the policy holder died before the acceptance was received is tenable.
Colour shows how this judgement treated each authority
LIFE INSURANCE CORPORATION OF INDIA Vs RAJA VASIREDDY KOMALAVALLI KAMBAApplied¶12
LIC v. RAJA VASIREDDY KOMALAVALLI KAMBA [1]
AIR 1984 SC 1014Referred¶43
1 provisions across 1 enactments
Union of India, rep. by the Superintendent of Post Offices, Adilabad Division, Adilabad
another
Smt.K.Uma Mohan
V.V.S.RAO
G.KRISHNA MOHAN REDDY
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
