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TMI Blog2023 (4) TMI 609X X X X Extracts X X X X X X X X Extracts X X X X ..... payments are not made in time, the policy may lapse and to revive this policy interest has to be paid under the terms of the contract. The overdue premium interest is, therefore, linked to the obligation of timely payment of premium. The Commissioner committed an error in concluding that the relationship stands terminated upon lapse of a policy and, therefore, no interest can be charged for reviving it. The Commissioner also committed an error in concluding that since the rate of interest is not uniform, it cannot be considered as interest . Section 65B(30) of the Finance Act 1994, which defines interest, does not impose any condition that the interest that has to be charged has to be at a uniform rate. The manner in which interest has to be paid is governed by the terms of contract agreed between the parties. The department cannot, therefore, urge that since uniform rate of interest has not been levied, the amount collected would not partake the character of interest but would be in the nature of administrative/processing fee. In this view of the matter it would not be necessary to examine the contention advanced by the learned counsel for the appellant that the extended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e contracts that govern the relationship between an insurer and a policy holder. Life Insurance service means any service provided to a policy holder by any person carrying on life insurance business. Life Insurance business means the business of effecting contracts of insurance on human life. An insurer provides these services against a consideration paid by the policy holder in the form of a premium. The policy may be offered against a single premium paid at the time of taking out the policy but generally premiums are paid periodically over a length of time as life insurance contracts are generally long-time contracts. As in any other contract, non-payment of consideration has implications in terms of the continuity of the contract and so a contract for life insurance also provides for late payment of premium, though this would entail payment of interest. According to the appellant, as life insurance is long-term and is intended to provide risk cover and savings avenue for the policy holder, future obligations under the contract would inter alia depend on the nature of the policy and the time for which the premiums had been paid by the policy holder before the default. 5. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the relevant portion of the Key Feature Document and it is as follow: What happens if I delay my Premium payment? You have a grace period of 30 days (15 days in case of monthly Premium payment mode) from the Premium due date, during which you can pay the Premiums without any Interest. During the grace period, the Insurance cover continues. If the Life Insured dies during this period, we will pay the death benefit after deducting due Premium. If you do not pay the Premium within the grace period, and your Policy has acquired a Surrender Value, then your insurance cover will be reduced proportionately in the ratio of the Premiums received by us to the Premiums payable. However, if your Policy has not acquired a Surrender Value, the insurance and rider (if any) cover shall lapse and no benefit will be available on the expiry of the grace period. We may restore the benefits of the lapsed Policy if you pay all due Premiums within two years from the due date of the first unpaid Premium with late fee and/or Interest. You will be required to produce evidence of Insurability of Life Insured at your own cost. However, if a Policy, under Reduced Paid Up Mode, is not r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany will be entitled to deduct from the benefits payable under the Policy, the Premium due but not received from the Policyholder during the Grace Period. 8. LAPSE Subject to Section 10 of this Policy, if Premium Is not received within the Grace Period, the Policy shall lapse. 9. REVIVAL OF POLICY 9.1 You can request the Company to revive a lapsed provided: i) You give Us a written request within 3 (Three) years from the due date of payment of Premium ( Revival ) ii) You produce evidence of insurability, at Your cost. which is acceptable to the Company, and, iii) You pay all overdue Premiums together with an interest on the Premiums at such rates as may be determined by Us. 9.2 Revival of a lapsed Policy is at the absolute discretion of the Company. 9.3 The revival of the Policy shall take effect only after it is approved by the Company and communicated to the Policyholder in writing. Upon revival, the Company shall pay all the benefits that become due and payable under the Policy. xxxxxxxxx 11. TERMINATION OF POLICY This Policy shall terminate upon the happening of any of the following events: i) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat it can be revived and a policy which stands terminated cannot be revived. The rights and obligation of the parties under the contract do not come to an end on lapse of the policy as the policy holder has an option to revive the policy on payment of premium with interest. This requirement of payment of interest for revival of a lapsed policy flows from the policy contract. A policy holder is under an obligation to make timely payments of the premium and if such payments are not made in time, the policy may lapse and to revive this policy interest has to be paid under the terms of the contract. The overdue premium interest is, therefore, linked to the obligation of timely payment of premium. The Commissioner committed an error in concluding that the relationship stands terminated upon lapse of a policy and, therefore, no interest can be charged for reviving it. The Commissioner also committed an error in concluding that since the rate of interest is not uniform, it cannot be considered as interest . Section 65B(30) of the Finance Act 1994, which defines interest, does not impose any condition that the interest that has to be charged has to be at a uniform rate. 14. The basis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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