1997 (4) TMI 501 - SC - Indian Laws

Summary

Issues Involved:
1. Whether payment of premium to a general agent of LIC can be regarded as payment to the insurer.
2. Whether the insurance policies lapsed due to non-payment of the half-yearly premium within the grace period.
3. Whether the doctrine of apparent authority applies in this case.

Detailed Analysis:

1. Payment of Premium to General Agent:
The core issue is whether the payment of premium by the insured to the general agent of the LIC can be considered as payment to the insurer. The insured had given a bearer cheque for Rs. 2,730/- to the agent on June 4, 1987, which was deposited with LIC on August 10, 1987, after the insured's death on August 9, 1987. The LIC argued that the agent was not authorized to collect premiums, citing the Life Insurance Corporation of India (Agents) Regulations, 1972, and the conditions of the agent's appointment letter, which explicitly prohibited agents from collecting premiums on behalf of the LIC.

The Supreme Court held that the agent did not have express or implied authority to collect premiums on behalf of the LIC. The regulations and appointment conditions clearly restricted agents from such actions, and thus, the payment made to the agent could not be considered as payment to the LIC.

2. Lapse of Insurance Policies:
The second issue concerned whether the policies lapsed due to non-payment of the premium within the grace period. The policies stipulated that if the premium was not paid before the expiry of the grace period, the policy would lapse. The premium was due on March 6, 1987, and the grace period expired on April 6, 1987. Since the premium was not paid within this period, the policies lapsed.

The appellants argued that the policies could be revived upon payment of interest for the delayed premium. However, the court noted that the revival of lapsed policies required proof of continued insurability and payment of all arrears along with interest, which was not possible as the insured had died before the premium was deposited with the LIC.

3. Doctrine of Apparent Authority:
The appellants invoked the doctrine of apparent authority, arguing that the LIC, by its conduct, had induced policyholders to believe that agents were authorized to collect premiums. However, the court found no evidence to support this claim. The complaint filed before the State Commission did not allege that the LIC had induced the insured to believe that the agent was authorized to collect the premium. Furthermore, the receipt of the premium by the LIC on August 10, 1987, did not imply that the LIC had accepted the agent's authority to collect the premium.

The court emphasized that the LIC had made express provisions in its regulations and appointment conditions to prevent agents from collecting premiums, which were statutory in nature and published in the Gazette. Therefore, the doctrine of apparent authority could not be invoked in this case.

Conclusion:
The Supreme Court upheld the decision of the National Commission, concluding that the agent in receiving the bearer cheque was not acting as an agent of the LIC. However, considering the circumstances, the court directed the LIC to refund the entire amount of premium paid on the four insurance policies to the appellant along with interest at 15% per annum from the date of receipt of the premium amounts. Additionally, the LIC was ordered to pay Rs. 10,000/- as costs to the appellants. The appeals were disposed of accordingly.