TMI Blog2010 (12) TMI 824X X X X Extracts X X X X X X X X Extracts X X X X ..... icy holder. - 1024 of 2010(C) - - - Dated:- 14-12-2010 - T.R. Ramachandran Nair, J. REPRESENTED BY : S/Shri E.K. Nandakumar and Jayasanker Nambiar, Counsel, for the Petitioner. Shri Jayachandran, J (party-in-person), for the Respondent. Shri S.B. Premachandra Prabhu, Amicus Curiae. [Judgment]. This writ petition is filed by the petitioner challenging the order passed by the Insurance Ombudsman, viz. the first respondent herein. The award passed by the Ombudsman has been produced as Ext.P7. The petitioner is an insurance company incorporated under the Companies Act, 1956 and is duly licensed to carry life insurance business under a valid registration certificate issued by the Insurance Regulatory Development Authority. 2. The second respondent herein is a policy holder. The policy in question is a life insurance policy. It is a twenty year level term plan and Ext.P1 is the copy of the policy document. The date of the policy is 30-6-2006 and the mode of payment of the premium amount is annual. The schedule shows that the model premium payable is Rs. 4,810/-. 3. The dispute between the parties arose in the following circumst-ances : In terms of the po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nted out that there cannot be any estoppal against the law and the tax is sought to be collected in terms of the provisions of the Finance Act alone. In the year 2006 the Company decided not to pass on the tax liability and from 2009 onwards they took a policy decision in the matter. The tax component is sought to be collected in addition to the premium amount. My attention was invited to the proceedings of the Insurance Ombudsman, Bhubaneswar in a similar matter wherein the view taken is that the service tax liability is that of the consumer. 7. These arguments were opposed by Shri S.B. Premachandra Prabhu, by relying upon the whole concept of Life Insurance, the conditions generally adopted and the principles applicable in this regard. It is pointed out that the principles under the Contract Act are applicable, and hence the terms of contract cannot be varied unilaterally. 8. Learned counsel for the petitioner also invited my attention to the term in the policy under the heading General Provisions and the specific heading Governing Laws and Jurisdiction stating that the policy is governed and construed according to the laws of the Republic of India and the Parties shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that Ext.P2 amounts to violation of the terms of the contract. As the policy was effective from 22-6-2006, any decision taken by the insurer to impose service tax from May 1, 2009 will not apply to him. 10. In the objections filed by the petitioner, it is maintained that the service tax is payable by the insured. 11. Along with the additional counter affidavit filed the second respondent has produced Ext.R2(b), copy of the payment acknowledgment dated 30-6-2008 issued to him by the petitioner. Therein, in the Note item 10 reads as follows : Service Tax is applicable on the risk cover fund related charges under Section 65(105)(xx) of Finance Act, 1994 as amended by Finance (No. 2) Act, 2004 and Section 65(105)(zzzzf) of Finance Act, 2008, is deducted from the funds at the applicable rates. 12. Learned counsel for the petitioner mainly relied upon the decision of the Apex Court in All India Federation of Tax Practitioners case [2007 (7) S.T.R. 625] wherein the concept of service tax has been emphasised in para 7 as follows : In the light of what is stated above, it is clear that Service Tax is a VAT which in turn is destination based consumption tax in the sens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dmull Jain and and Another (AIR 1966 SC 1644). It was held thus in para 11 : A contract of insurance is a species of commercial transactions and there is a well-established commercial practice to send cover note even prior to the completion of a proper proposal or while the proposal is being considered or a policy is in preparation for delivery Documents like the proposal, cover note and the policy are commercial documents and to interpret them commercial habits and practice cannot altogether be ignored In other respects there is no difference between a contract of insurance and any other contract except that in a contract of insurance there is a requirement of uberima fides, i.e. good faith on the part of the assured and the contract is likely to be construed contra proferentem that is against the company in case of ambiguity or doubt. A contract is formed when there is an unqualified acceptance of the proposal. Acceptance may be expressed in writing or it may even be implied if the insurer accepts the premium and retains it. In the case of assured, a positive act on his part by which he recognises or seeks to enforce the policy amounts to an affirmation of it. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Corporation of India and others (2007) 13 SCALE 329, wherein the statement of law explained in All India General Insurance Company Ltd. and another v. S.P. Maheswari (AIR 1960 Madras 484) was approvingly referred to in para 17, which reads as follows : A Division Bench of the Madras High Court in S.P. Maheswari (supra) upon taking into consideration the history of insurance laws in United States of America, in England and in India stated :- (10) One great principle of insurance law is that a contract of insurance is based upon utmost good faith Uberrima fides; in fact it is the fundamental basis upon which all contracts of insurance are made. In this respect there is no difference between one contract of insurance and another. Whether it be life or fire or marine the understanding is that the contract is uberrima fides and though there may be certain circumstances from the peculiar nature of marine insurance which require to be disclosed, and which do not apply to other contracts of insurance, that is rather an illustration of the application of the principle than a distinction in principle. From the very fact that the contract involves a risk and that it purports to shif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or example, in the purchase of goods. It is called as a Unilateral contract , since only the insurer makes an enforceable promise. The life insurance contract is also a Conditional contract because the promise of the insurer is conditioned on the timely payment of premiums subsequent to the first by the insured. This is a condition precedent to the continuance of the contract under its original promise. These conditions are termed as of two types, viz. either precedent or subsequent. A condition precedent must be satisfied before legal rights and duties are created or continued whereas a condition subsequent must be fulfilled in order to prevent the extinguishment of rights and duties already created by a contract. On payment of premium a condition precedent has been satisfied. A life insurance contract is said to be a contract of adhesion meaning thereby that the terms of the contract are not arrived at by mutual negotiations between the parties as in the case of ordinary contracts. The Insurer has various types of policies to suit various needs and a person who applies for a policy of life insurance must accept one of these which may be most suitable to him. 21. In the ligh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contract was complete when the parties mutually agreed for the terms as evident from Ext.P1 wherein the premium amount has been fixed as Rs. 4810/-. The second respondent was led to believe also that there is no other liability for him by way of any additional amount. As rightly pointed out by the second respondent and learned Amicus Curiae that once the terms have thus been agreed upon and the premium amount has been fixed, it cannot be varied unilaterally by the Company. It has been specifically pleaded by the second respondent in Ext.P5 that the amount of Rs. 495.43 in the form of service tax was not loaded at the time when the policy became effective, though service tax was there. The premium amount of Rs. 4810/-, according to the second respondent, include service tax which was finalised as per as per the calculation of the agent of the petitioner which was acceptable to him and accordingly the proposal was submitted. The Ombudsman in Ext.P7 award has stated that it was not specifically mentioned by the petitioner in the reply that at the time of submitting the proposal, premium was not arrived at as inclusive of service tax and other expenses, by the agent. This is significan ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
