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TMI Blog1984 (3) TMI 424X X X X Extracts X X X X X X X X Extracts X X X X ..... ndents filed a suit in the Subordinate Court of Sub-Judge being original suit No. 2 of 1964 on 10th January, 1964. The short facts leading to this case are: One Late Raja Vasireddi Chandra Dhara Prasad (hereinafter referred to as a 'deceased') died intestate on 12th January, 1961. He had filled a proposal for insurance for Rs, 50,000 on 27th December, 1960. There was medical examination by the doctor on the life of the deceased on 27th December, 1960. The deceased had issued two cheques for ₹ 300 and ₹ 220 respectively in favour of the appellant as first premium. Cheque for ₹ 300 was encashed by the appellant on 29th December, 1960. Cheque for ₹ 220 was dishonoured three times and finally encashed on 11th January, 1961. As mentioned hereinbefore, the deceased died on the day following i.e. on 12th January, 1961. On 16th January, 1961, the widow of the deceased, respondent No. 1 herein, wrote to the appellant intimating the death of the deceased and demanded payment of ₹ 50,000. The Divisional Manager, Masulipatam Branch, denied liability on behalf of the appellant Corporation on 28th January, 1961. Thereafter there was correspondence between ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mounted in those circumstances in law to an acceptance of the proposal of the deceased. It was further alleged that the appropriation of the amounts by the Corporation towards the first premium by the deceased was only consistent with the acceptance of the proposal. The case of the plaintiffs further was that in this case the first premium was not only received by the Corporation completely on 11th January, 1961 but it was also appropriated by it in its accounts and the said premium amount was received by the Corporation without any demur or qualification and that in any event the Corporation must be deemed to have waived by its conduct the formality, if any, of sending communication of its acceptance of the proposal. In the premises, the plaintiffs claimed the said amount along with interest at six per cent per annum from the date of refusal of payment till the date of payment of the demand. Written statement was filed on behalf of the appellant. In the said written statement, after setting out the facts, it was denied that the payment of the first premium amounted to acceptance of the proposal and the allegation about the assurance given to the deceased as alleged in the plain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... office at Guntur. Shri Brahmandrao Ramiah Assistant Divisional Manager of the Life Insurance Corporation office at Madras was also examined as the second witness of the defendants. He had further stated that the proposal form was sent from the office at Guntur to the Divisional office at Masulipatam, and Ex. B-1 to B-4 and B-8 were sent in this connection. He further stated that according to the financial powers Standing order, it was the Divisional Manager who was competent to accept a proposal for ₹ 50,000 Ex. B-13 is the copy of the Standing order. The purpose of review slip Ex. B-4 was to enable the Divisional officer to assess the risk and take a decision according to the deponent. In this connection we may refer Ex. B-14 which is the Life Insurance Corporation of India's Proposal Review Slip regarding proposal in the case of the deceased. The endorsement therein of the assistant Divisional Manager read as follows: NOTES AND DECISION : may be accepted at O.R. WITH E.D.B. Shri Brahmandrao Ramiah had further stated that the papers were scrutinised by him in addition to the scrutiny by the concerned clerks. He stated that the endorsement marked as Ex. B-14 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the deceased was for some reason or other not accepted by the Divisional office by the time the deceased had died. The Trial Court therefore held that there was no concluded valid insurance contract between the deceased and the Corporation. The Trial Court further noted that it was significant that the case set out in the plaint and the basis of the claim made in the notices sent to the Corporation was not that the proposal was as a matter of fact accepted by the Divisional Manager, on the other hand, claim was that it should be deemed to have been accepted. Considering the evidence and the averments, the Learned Subordinate Judge came to the conclusion that the accounts do not show the position alleged by the plaintiffs- respondents that the amounts paid were appropriated towards the premium and the Trial Court was of the opinion that encashing of the cheques and the want of any further action to be done by the deceased did not themselves create a contract of insurance between the deceased and the Corporation. The Trial Court was of the opinion that the proposal must be accepted by the Divisional Manager and that alone could give rise to a valid contract of insurance which neve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oncussed contract. The High Court was of the view that having regard to the conduct of the parties, there was a concluded contract. The High Court took the view that Ex. B-13 dealing with Chapter III of the Financial Powers did not categorically deal with the acceptance of proposals. The High Court was of the view that the Corporation had not filed any evidence of any order prohibiting other officers one step below in rank, in this case the Assistant Divisional Manager, to exercise the power of Divisional Manager. In our opinion, the High Court was in error in appreciating the facts and the evidence in this case. We cannot accept the High Court's criticism with the averment in the written statement that there was not sufficient pleading that there was no concluded contract and non- acceptance of the proposal was not sufficient averment that the Divisional Manager was the only competent authority to accept the proposal. The High Court, in our opinions was also wrong in its view about the powers of the different authorities under Chapter III of the Standing order, 1960 dealing with the financial powers. Indeed there was no evidence that the Assistant Divisional Manager had acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Though in certain human relationships silence to a proposal might convey acceptance but in the case of insurance proposal silence does not denote consent and no binding contract arises until the person to whom an offer is made says or does something to signify his acceptance. Mere delay in giving an answer cannot be construed as an acceptance, as, prima facie, acceptance must be communicated to the offeror. The general rule is that the contract of insurance will be concluded only when the party to whom an offer has been made accepts it unconditionally and communicates his acceptance to the person making the offer. Whether the final acceptance is that of the assured or insurers, however, depends simply on the way in which negotiations for an insurance have progressed. See in this connection statement of law in MacGillivray Parkington on Insurance Law, Seventh Edition page 94 paragraph 215. Reference in this connection may be made to the Statement of law in Halsbury's Laws of England 4th Edition in paragraph 399 at page 222. Having regard to the clear position in law about acceptance of insurance proposal and the evidence on record in this case, we are, therefore, of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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