1992 (6) TMI 184 - HC - Companies Law

Summary

Issues Involved:
1. Denial of group insurance scheme benefits by the Corporation.
2. Privity of contract between the petitioner and the Corporation.
3. Interpretation and application of the terms of the master policy.
4. Effect of delayed payment of premium.
5. Entitlement of the petitioner to relief under the policy.

Issue-wise Detailed Analysis:

1. Denial of Group Insurance Scheme Benefits by the Corporation:
The petitioner's husband was covered under two schemes: a superannuation scheme and a group insurance scheme. Upon his death, the company paid the superannuation benefits, but the Corporation denied the group insurance benefits. The Corporation contended that the premium due on July 1, 1989, was paid late on October 27, 1989, and thus, the policy was only effective from the latter date. Since the petitioner's husband died on October 21, 1989, before the policy was effective, the Corporation argued it was not liable for the insurance benefits.

2. Privity of Contract Between the Petitioner and the Corporation:
The Corporation argued that there was no direct contract (privity of contract) between the petitioner and the Corporation, as the contract was between the company and the Corporation. However, the court rejected this contention, stating that the policy explicitly mentioned the employees or their heirs as beneficiaries. Under Indian law, particularly Section 2(a) of the Contract Act, a third party beneficiary can sue for enforcement of the contract, especially in fiduciary contracts like insurance.

3. Interpretation and Application of the Terms of the Master Policy:
The court examined the terms of the master policy, specifically the definitions of "effective date," "annual renewal date," and "entry date." The policy stipulated that premiums were to be paid annually on the renewal date or within 30 days thereafter, and the premium covered all members in service on the effective date or renewal date. The court found that the policy did not permit splitting the premium based on individual members but rather treated it as a single premium for the entire group.

4. Effect of Delayed Payment of Premium:
The premium due on July 1, 1989, was paid late on October 27, 1989. The Corporation accepted the premium but only for the period from October 27, 1989, to June 30, 1990, and refunded the proportionate premium for the period before October 27, 1989, attributing it to the petitioner's husband. The court held that the policy did not allow for such splitting and that the premium, once accepted, should cover the entire period from the annual renewal date. Clause 11 of the general conditions allowed the Corporation to extend the time for premium payment, and once accepted, the premium should be considered effective from the annual renewal date.

5. Entitlement of the Petitioner to Relief Under the Policy:
The court concluded that since the premium was ultimately accepted by the Corporation, it should be considered effective from the annual renewal date, making the policy valid when the petitioner's husband died. Therefore, the petitioner was entitled to the insurance benefits. The court directed the Corporation to make the payments due under the policy within three months, with interest at 18% per annum from the date the amount became due until payment.

Conclusion:
The petition was allowed, and the Corporation was ordered to pay the insurance benefits to the petitioner, along with interest, as the policy was deemed valid at the time of the petitioner's husband's death. The court emphasized that the Corporation's discretion in accepting the premium should not be arbitrary and must align with the policy terms and public interest.