Holding

A discontinued LIC policy can be revived only after corporate approval and communication before the assured’s death, and Section 64‑VB does not apply; therefore the claim could be repudiated.

Summary

Karan Singh Chandel purchased a LIC life insurance policy on 28‑03‑1994. The annual premium due on 28‑03‑1995 was not paid and the policy lapsed after a one‑month grace period. The insured died on 01‑07‑1995. A cheque for the premium and late fee was issued on 27‑06‑1995 but was only received by LIC on 12‑07‑1995, after the death. LIC repudiated the claim; the consumer forums held the claim could not be repudiated, relying on Section 64‑VB of the Insurance Act. The Supreme Court held that the grace period was one month, the cheque was received after death, revival of a discontinued policy requires corporate approval and specific communication before the assured’s death, and Section 64‑VB does not apply to LIC under Section 43 of the LIC Act. Consequently, the lower orders were set aside and the appeal was allowed.

Issues considered

Whether a lapsed life insurance policy can be revived when the premium cheque is received after the death of the assured.
Whether Section 64‑VB of the Insurance Act, 1938 applies to the Life Insurance Corporation of India.
Whether the premium was paid within the statutory grace period.
Whether the consumer forums erred in holding that the claim could not be repudiated.

Legislation cited

Insurance Act, 1938s. 64-VB
Life Insurance Corporation Act, 1956s. 43

Subjects

life insurancepolicy lapserevival of discontinued policygrace periodSection 64-VBConsumer Disputes Redressalinsurance lawclaim repudiation

Judgment

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[2008] 2 S.C.R. 559

---'- LIFE INSURANCE CORPORATION OF INDIA A
v.
JAYA CHANDEL
(Civil Appeal No. 1089 of 2008)
FEBRUARY 7, 2008
B
[DR. ARIJIT PASAYAT AND P. SATHASIVAM, JJ.]

;. Insurance Act, 1938 - Revival of discontinued Policies
- Claim of - Cheque for annual premium of lapsed LIC Policy
along with late fee issued before the death of insured but d
received by L/C Corporation after death of insured -Held:
Discontinued policy could be revived only after Policy was
approved by Corporation and it was communicated to the
insured - On 'tacts, cheque was received after the death of
insured - Payment was made much beyond the grace period
D
-A/sos. 64 VB was not applicable - Thus, Order by the forums
below that claim could not have been repudiated set aside.
K obtained a LIC policy on 28.3.1994 and failed to
pay annual premium on or before 28.3.1995. In terms of
the policy, the same became inoperative after one month. E
. One P issued cheque for annual premium with late fee on
27.6.1995. The insured died on 1.7.1995 and the cheque
was received on 12.7.1995. The appellant-Life Insurance
. Corporation of India repudiated the claim. The widow of
the deceased filed a claim petition. The District Forum, F
'·
"' the State Consumer Disputes Redressal Commission and
the National Consumer Disputes Redressal Commission
held that the claim could not have been repudiated. Hence
the present appeal.
Allowing the appeal, the Court G

)' HELD: 1.1 In terms of the conditions of the Life
Insurance policy the grace period is one month and
therefore the State Commission was not justified in
559 H
A
I

560 SUPREME COURT REPORTS [2008] 2 S.C.R

A
,,.._
holding that the payment was made within the grace
period. Condition 3 relates to revival of discontinued
policy. A bare reading of the condition shows that it can
be revived during the life time of the assured. In the instant
case, the cheque was admittedly received after the de~th
B of the assured. Further the revival takes· effect only after
the same is approved by the Corporation and is
specifically communicated to the life inSL!red. In the instant
case, this was not the situation. [Para 6] [563-E, F] A

1.2 Section 43 of the Life Insurance Corporation Act,
c 1956 enumerates the various Sections of Insurance Act
which have application to the Act and section 54.:.ve of
the Insurance Act, 1938 is not one of them. That being so
also the National Commission was not justified in its
conclusion about the applicability of that provision.
D [Para 7] [564-G; 565-A]
1.3 The orders passed by the District Forum, the State
Consumer Disputes Redressal Commission and the
National Consumer Disputes Redressal Commission
cannot be maintained and are set aside. [Para 8] [565-A, ·B]
E -
CRIMINALAPPELLATE JURISDICTION: Criminal Appeal
No. 1089 of 2008.
From the final Order dated 17.1.2005 of the National
Consumer Disputes Redressal Commission, New Delhi in R.P.
F No. 2068 of 2001. ,/
~

P.S. Patwalia, Indra Sawhney for the Appellant.
Pragati Neekhra, Suryanarayana Singh and Dharmendra
Kumar Sinha for the Respondent.
G
The Judgment of the Court was delivered by
Dr: ARIJIT PASAYAT, J. 1~ Leave granted. <
2. Challenge in this appeal is to the order passed by the /

National Consumer Disputes Redressal Commission (in short
H
~

LIFE INSURANCE CORPORATION OF INDIA v. JAYA 561
CHANDEL [PASAYAT, J.]

~"· the "National Commission") dismissing the Revision Petition A
filed by the appellant. Challenge before the Commission was
to the order passed in appeal by the Himachal Pradesh State
Consumer Disputes Redressal Commission, Shimla (in short
the 'State Commission') which in turn had upheld the order
passed by the District Forum, Shimla (in short the 'District B
Forum').
Background facts in a nutshell are as follows:
J
One Karan Singh Chandel (hereinafter referred to as the
'deceased') had taken a Life Insurance Policy and was insured c
for a sum of Rs.1,50,000/-. The annual premium payable was
Rs.12,821/-. The policy was taken on 28.3.1994. The annual
. premium which was to be paid on or before 28.3.1995 was not
paid. In terms of the policy, the same became inoperative after
:
one month. The insured died on 1. 7 .1995. A cheque drawn on
D
Jogindra Cooperative Bank Ltd. for an amount of Rs.12,821 /-
purportedly on account of premium along with late fee of Rs.189/
... - was issued by one Prakash Chand Thakur on 27 .6.1995. The
same was received on 12.7.1995. According to the claimant
i.e. widow of the deceased, the cheque was issued before the
death of the insured and therefore, the appellant could not have E
repudiated the claim.

3. The stand of the present appellantwas that the policy
had lapsed due to non-payment of premium in time. This plea
""" was not accepted by the District Forum on the ground that the
F
"" cheque was claimed to have been issued on 12.7.1995, but is
presumed to have been received earlier than that date. The State
Commission held that in any event the amount was received
within the grace period and therefore, the claim could not have
been repudiated. Accordingly the appeal filed by the appellant
G
was dismissed. The National Forum dismissed the Revision
y holding that Section 64-VB of the Insurance Act, 1938 (in short
the 'Insurance Act') was applicable where the premium is
-., tendered by postal money order or cheque sent by post and the
risk may be assumed on the date on which the money order is
H
I~

562 SUPREME COURT REPORTS [2008) 2 S.C.R.

,>_ '
A booked or the cheque is posted, as the case may be. Therefore,
it was held that there was revival. It did not accept the stand of ....
the appellant that the revival was not a matter of right.
I

4. In support of the appeal, learned counsel for the appellant
submitted that the District Forum, the State Commission and
B the National Commission failed to notice certain relevant factors.
It was not explained as to why the cheque was issued by Prakash
Chand Thakur and not by the insured. This is sufficient to show ,(
that subsequently a cheque was issued to regularize the policy.
Further the cheque was received on 12.7.1995 much after the
c death and this itself is sufficient to show that the cheque was
not issued prior to the death of the insured. The extract of the
receipt register has been filed which shows that the cheque was
received on 12. 7 .1995. The State Commission came to the
conclusion that the cheque was issued during the grace period. ('
D This is also factually incorrect because the grace period is 30
days, the premium was due on 28.3.1995 and the cheque was
issued much beyond the grace period. Additionally, Section 64-
VB does not apply to the appellant. In this context Section 43 of
the Life Insurance Corporation Act, 1956 (in short the 'Act') has
E relevance. Reference is also made to Condition 2 of the policy.
5. In reply learned counsel for the claimant submitted that
it is not Condition 2 of the policy which is applicable, but
Condition no.3 which is applicable. It is stated that no adverse
inference can be drawn because the insured had not signed
..
F the cheque and merely because the cheque was received after ?"
the death of the deceased that does not entitle the appellant to
refuse a genuine claim.
Conditions 2 & 3 of the policy read as follows:
G "2. Payment of premium: A grace period of one month but
not less than 30 days will be allowed for payment of yearly, -r
half -yearly or quarterly premiums and 15 days for monthly
premiums. If death occurs within this period and before /,.,._
the payment of the premium then due, the Policy will still
H be valid and the sum assured paid after deduction of the
LIFE INSURANCE CORPORATION OF INDIA v. JAYA 563
CHANDEL [PASAYAT, J.]

' .......\ said premium as also the unpaid premiums falling due A
before the next anniversary of the Policy. If premium is not
paid before the expiry of the days of grace the Policy
lapses. If the Policy has not lapsed and the claim· is
admitted incase of death under a Policy where the mode
of payment of premium is other than yearly, unpaid B
premiums if any failing due before the next Policy
anniversary shall be deducted from the claim amount."
"3. Revival of discontinued Policies: If the Policy has lapsed
it may be revived during the life time of the Life Assured,
but within a period of 5 years from the date of the first C
unpaid premium and before the date of maturity, on
submission of proof of continued insurability to the
satisfaction of the Corporation and the payment of all the
arrears of premium together with interest at such rate as
may be fixed by the Corporation from time to time D
compounding half yearly. The Corporation reserves the
right to accept or decline the revival of discontinued policy.
The revival of a discontinued policy shall take effect only
after the same is approved by the Corporation and is
specifically communicated to the life assured." E
6. The grace period is one month and therefore the State
Commission was not justified in holding that the payment was
made within the grace period. Condition 3 relates to revival of
discontinued policy. A bare reading of the condition shows that
--" ., it can be revived during the life time of the assured. In the instant F·
case the cheque was admittedly received after the death of the
assured. Further the revival takes effect only after the same is
approved by the Corporation and is specifically communicated
to the life insured. In the present case this is not the situation.
G
Further Section 43 of the Act reads as follows:
43. Application of the Insurance Act.
(1) The following section of the Insurance Act shall, so far
as may be, apply to the Corporation as they apply to any H
564 SUPREME COURT REPORTS [2008] 2 S.C.R.

A other insurer, namely:-Sections 2, 28, 3, 18, 26, 33, 38, J .• ,
l--
39, 31, 45, 46, 47A, 50, 51, 52, 110A, 1108, 110C, 119,
121, 122 and 123.
(2) The Central Government shall as soon as may be after
tne commencement of this Act, by notification in the Official
8 Gazette, direct that the following sections of the Insurance
Act shall apply to the Corporation subject to such conditions
and modifications as may be specified in the notification, l
namely:-Sections 20, 10, 11, 13, 14, 15, 20, 21, 22, 23,
25, 27A, 28A, 35, 36, 37, 40, 40A, 43, 44,102 to 106, 107
c to 110, 111, 113, 114 and 116A.
1[(2A)]Section 42 of the Insurance Act shaH have effect in
relation to the issue to any individual of a licence to act as
an agent for the purpose of soliciting or procuring life
insurance business for the Corporation as if the reference
D
to an officer authorised by the Controller in this behalf in
sub-section (1) thereof included a reference to an officer
of the Corporation authorised by the Controller in this
behalf.]

E (3) The Central Government may, be n_otification in the
Official Gazette, direct that all or any of the Insurance Act
other than those specified in sub-section ( 1) or sub-section
(2) shall apply to the Corporation subject to such conditions
and modifications as may be specified in the notification.
F (4) Every notification issued under sub-section (2) or sub-
section (3) shall be laid for not less than thirty days before
both Houses of Parliament as soon as possible after it is
issued, and shall be subject to such modifications as
Parliament may make during the session iri which it is so
G laid or the session immediately following.
(5) Save as provided in th.is section, nothing contained in ~ .c
the Insurance Act shall apply to the G?rporation."
7. Section 43 of the Act enumerates the various Sections
H of Insurance Act which have application to the A_ct and S~ction
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LIFE INSURANCE CORPORATION OF INDIA v. JAYA 565
CHANDEL [PASAYAT, J.]

-"' .\ 64-VB is not one of them. That being so also the National A
Commission was not justified in its conclusion about the
applicability of that provision.
8. Looked at from any angle the orders passed by the
District Forum, the State Forum and National Commission
cannot be maintained and are set aside. B
9. Appeal is allowed. There shall be no order as to costs.
N-.J. Appeal allowed .

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