1994 (8) TMI 309 - HC - Indian Laws

Summary

Issues Involved:
1. Whether the acceptance of the cheque accompanying the proposal form amounts to acceptance of the proposal and a concluded contract of insurance.
2. The role and authority of the insurance agent in the acceptance of the insurance proposal.
3. The implications of the "Suspense Memorandum" (Ext. A1) in determining the acceptance of the proposal.
4. The necessity of communication of acceptance for a valid insurance contract.

Issue-Wise Detailed Analysis:

1. Acceptance of Cheque and Concluded Contract:
The primary issue is whether the acceptance of the cheque that accompanied the proposal form constitutes the acceptance of the proposal, thereby creating a concluded contract of insurance. The court examined whether the mere encashment of the cheque and issuance of a receipt (Ext. A1) signified an unconditional acceptance of the insurance proposal. The court held that the encashment of the cheque and the issuance of Ext. A1, which was a "Suspense Memorandum," did not amount to an acceptance of the proposal. The amount was held in a "suspense account" and not adjusted towards the premium, indicating that the proposal was not yet accepted by the insurer.

2. Role and Authority of Insurance Agent:
The court addressed the role of the insurance agent, Shri Davis Thomas, who advised the deceased to remit the premium amount and assured that the issuance of the policy was a mere formality. The court clarified that the agent's role was limited to soliciting insurance business and that he was not authorized to make binding statements on behalf of the insurer. Consequently, the insurer was not bound by the agent's conduct or statements regarding the acceptance of the proposal.

3. Implications of "Suspense Memorandum" (Ext. A1):
The court analyzed the "Suspense Memorandum" (Ext. A1), which indicated that the amount received was held in suspense and would be adjusted if the payment was found in order. The court interpreted this to mean that the amount was not treated as the first premium and that the receipt did not signify acceptance of the proposal. The court distinguished this case from the precedent set in LIC of India v. Kamalamma by noting that in Kamalamma's case, the amount was treated as the premium, whereas in the present case, it was not.

4. Necessity of Communication of Acceptance:
The court emphasized the importance of communication of acceptance for a valid insurance contract. It cited legal principles from authoritative sources, including Mac-Gillivray and Parkington on Insurance Law, which state that a binding contract of insurance requires an offer and an unconditional acceptance communicated to the offeror. The court found that there was no communication of acceptance from the insurer to the deceased, and thus no concluded contract existed. The court also referenced the Supreme Court's decision in LIC of India v. R. Vasireddy, which affirmed that mere retention of premiums without communication of acceptance does not constitute a binding contract.

Conclusion:
The court concluded that there was no concluded contract of insurance between the defendant-Corporation and the deceased before his death. Consequently, the insurer was not liable to pay the amount claimed by the plaintiff. The appeal was allowed, and the judgment and decree of the learned Sub Judge were set aside, resulting in the dismissal of the suit. The parties were directed to bear their own costs throughout.