TMI Blog2005 (7) TMI 659X X X X Extracts X X X X X X X X Extracts X X X X ..... ife insurance policy for the salaried class employees a proposal wherefor was made to the concerned employers. Although the Scheme as such is not on records of the case, the same has been referred to at some detail in the judgment of this Court in Delhi Electric Supply Undertaking Vs. Basanti Devi and Another [(1999) 8 SCC 229] and we intend to refer thereto in extenso as it throws considerable light on the issue which falls for our determination. The Corporation issued a brochure in relation to the said Scheme wherein it was stated: It is a simple, economical plan whereby your employees may obtain life insurance protection for their families and retirement income for themselves under advantageous conditions which might not be available to them otherwise. This it accomplishes by savings automatically deducted from their pay and remitted to us once a month. This is not a group insurance. Each employee owns his policy individually, is entitled to all its benefits and can continue the policy in the event of any change in employment. Under this plan, you as an employer give facilities to the representatives of LIC to contact your employees to offer life insurance cover to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder your Salary Savings Scheme. 2. * * * 3. It is also understood that no form of individual premium due notice or receipt will be issued by you. 4. It is also understood that the employee policy- holders shall have the right to discontinue participation in the Scheme at any time. If an employee exercises this right or if he is terminated, we will notify you in writing at the office where the remittance is forwarded and thereafter will not be responsible for collecting his premiums. 5. * * * 6. * * * 7. In all transactions made by us pertaining to this Scheme and any policies issued by you thereunder, we shall act as the agent of our employees and not as your agent for any purpose. Yours truly sd/- Signature of employer [Emphasis supplied] The acceptance letter issued by the concerned Branch Manager of the Corporation envisaged that it was for the employer to deduct premium from the salary of the employee and to remit the same to the Corporation. In other words, the responsibility for collection of the premium by deducting the same from the salary of the employee and making over the same to the Corporation was of the employer. Some of the clauses of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Life Insurance Corporation. The employer, thus, accepted the sole responsibility to collect the premium from its employees and remit the same by means of one cheque to the Corporation. It is also evident from the tenor of the correspondences passed between the Corporation and the employer that the Scheme was as much as that of the employer as that of the Corporation. It is not in dispute that for the said purpose a reconciliation statement was sent in the form prescribed by the Corporation and no individual premium notice was required to be sent to any employee and, furthermore, no receipt was to be given therefor. It was also for the employer to inform the Corporation about the changes in the staff as soon as they occured including the factum of cessation of employment. The concerned employee was never made aware of the correspondence between the Corporation and the employer. A circular titled Salary Savings Scheme Endorsement was also issued which is in the following terms: This policy having been issued under the Corporation's Salary Savings Scheme, it is hereby declared that the instalment premium shall be payable at the rate shown in the schedule of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeals before the National Commission which in view of the decision of this Court in Basanti Devi (supra) set aside the order of the State Commission. A Special Leave Petition was filed by Deputy Manager (Finance Adv.), BHEL being Civil Appeal No. 2357 of 2003 wherein a memorandum of cross objection has been filed by the Corporation. The contentions of Mr. G.L. Sanghi, learned senior counsel appearing on behalf of the Corporation are as under: (i) The employer, in view of the Scheme, not being the agent of the Corporation, Basanti Devi (supra) requires reconsideration. (ii) As the policy was issued in the name of the individual employees, in the event of non-payment of the requisite premium either by the employee or the employer, the same would result in lapse of the policy. The claimants Respondents were, therefore, not entitled to the sum assured. (iii) The Corporation being only a commercial undertaking and as in pursuance thereof, it had merely extended the facility of collection of premium payable by the employees through the employer, the same would not make it liable to pay the assured sum in terms of the policy having regard to the default in making payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in terms of Section 49 of the Act; but would mean an agent in ordinary sense of the term. An employer would not be an agent in terms of the said Regulation on the premise that it was not appointed by the Corporation to solicit or procure life insurance business. The employers had no duty to discharge to the Corporation either under the Act or the rules and regulations framed thereunder but keeping in view the fact that the Corporation did not make any offer to the employees nor would directly make any communication with them regarding payment or non-payment of the premium or any other matter in relation thereto or connected therewith including the lapse of the policy, if any, it cannot be said that the employer had no role to play on behalf of the Corporation. In a plain and simple contract of insurance either the Corporation or the agent, on the one hand, and the insured, on the other, is liable to comply with their respective obligations thereunder. In other words, when a contract of insurance is entered into by and between the insurer and the insured no third party would have any role to play, but the said principle would not apply in a case of this nature. In a scheme of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect their better image before the employees. It is well-settled that for the purpose of determining the legal nature of the relationship between the alleged principal and agent, the use of or omission of the word agent is not conclusive. If the employee had reason to believe that his employer was acting on behalf of the Corporation, a contract of agency may be inferred. In Basanti Devi (supra), this Court stated the law thus: Formation of the contract of insurance is between LIC and the employee of DESU. Scheme has been introduced by LIC purely on business considerations and not for any particular benefit of insurance conferred on the employee working in an organisation. Though in the pro forma letter written by DESU to LIC it is mentioned that DESU would be an agent of its employee and not that of LIC but this understanding between LIC and DESU was not communicated or made known to the employee. As far as the employee is concerned he is told that premium will be deducted from his salary every month and remitted by DESU to LIC under an agreement between LIC and DESU. For the employee of DESU, therefore, DESU had implied authority as an agent of LIC to collect premium o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee for all transactions was required to contact his employer only. In view of our findings aforementioned, the Corporation, thus, cannot be permitted to take a different stand so as to make the employee suffer the consequences emanating from the default on the part of the employer. If for some reasons, the employer is unable to pay the salary to the employees, as for example, its financial constraints, the employee may be held to have a legitimate expectation to the effect that his employer would at least comply with its solemn obligations. Such obligations having been undertaken to be performed by the employer at the behest of the Corporation as its agent having the implied authority therefor, the Corporation cannot be permitted to take advantage of its own wrong as also the wrong of its agent. In any event, the employer was obligated to inform the employee that for some reason, he is not in a position to perform his obligation whereupon the latter could have paid the premium directly to the Appellant herein. In South Sydney District Rugby League Football Club Ltd. vs. News Ltd. and Others [177 ALR 611], a similar question came up for consideration. In that case there existed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will be held to have consented if they have agreed to what amounts in law to such a relationship, even if they do not recognize it themselves and even if they have professed to disclaim it But the consent must have been given by each of them, either expressly or by implication from their words and conduct. The significant words, for the present purpose, are if they have agreed to what amounts in law to such a relationship. These I understand as pointing to the fact that, while agency must ultimately derive from consent, the consent need not necessarily be to the relationship of principal and agent itself (indeed the existence of it may be denied) but may be to a state of fact upon which the law imposes the consequences which result from agency. It is consensual, not contractual. So interpreted, this formulation allows the establishment of an agency relationship in such cases as the present. Yet again in Armagas Ltd. vs. Mundogas S.A. [(1986) AC 717], the House of Lords pointed out that even in absence of any express contract of agency in relation to the transaction made with the third party, ostensible authority may be presumed, stating : Ostensible authority comes a ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
