TMI Blog2006 (5) TMI 493X X X X Extracts X X X X X X X X Extracts X X X X ..... the life of K. Thankachan under the 'money back policy' scheme for a period of 20 years. The premium payable was ₹ 8,306/- every quarter. The conditions of the policy made it clear that the policy will be in force only if the premiums were paid regularly, every quarter, and that if the premium was not paid before the expiry of the grace period provided, the policy will lapse. K. Thankachan paid the premiums till 4.6.1994 and did not pay the premiums thereafter. In August, 1996, he opted for revival of the policy by paying the arrears of premium from 4.9.1994 to 4.6.1996 with interest. Accordingly, the policy was revived and he paid the premium till 4.12.1996. Thereafter, the policy again lapsed from 4.3.1997 as premium was not paid. K. Thankachan died on 5.12.1997 and his widow/nominee (the respondent herein) made a claim for payment of the amount under the policy, by letter dated 1.1.1968. 3. Condition No.4 of the policy contains the exceptions to lapsing of the policy. The portion of the said condition relevant for our purpose, is extracted below :- 4. Non-forfeiture Regulations: If, after atleast three full years premiums have been paid in respect of this P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 64]. 7. An appeal was filed by the LIC before the Kerala State Consumer Disputes Redressal Commission contending that it was not liable to pay interest from the date of receipt of the premiums, and the decision in Harshad J. Shah (supra) did not require payment of such interest. The Commission allowed the appeal in part, on 31.3.1999. It held that the direction to pay interest from the dates of payment of premium was in accordance with the decision in Harshad J. Shah (supra) and did not call for interference. The rate of interest was, however, reduced from 15% to 12% per annum. The revision filed by LIC against the order of the State Commission was rejected by the National Commission on 2.11.1999, on the ground that order of the State Commission did not suffer from any illegality or jurisdictional error. The said order is challenged in this appeal. 8. At the outset, what should be noticed, is that the amount that is paid by LIC in regard to a lapsed policy, is not refund of the premiums paid on various dates , but a reduced lump sum (calculated as per condition no. 4 of the policy) instead of the assured sum. When what is paid by LIC is not refund of premiums, the question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 997 prior to the date of maturity. Therefore the reduced sum as a paid up policy became due and payable without any interest on 5.12.1997. The claim was settled by payment of ₹ 113,750/- on 26.3.1998, within three months from the date of intimation of death. Therefore, under the contract, no interest is payable by LIC. 11. Where a statute provides for payment of interest, such interest will have to be paid in accordance with the provisions of such statute. Admittedly there is no enactment, or rules made under any enactment, either relating to contracts in general or insurance in particular, which provides for payment of interest in regard to amount payable under such a policy. 12. Let us now consider the provisions of Interest Act, 1978 ('Act' for short) which deals with payment of interest upto the date of suit/claim. The Act was enacted to consolidate and amend the law relating to the allowance of interest in certain cases. The objects and reasons states that the Act was enacted to prescribe the general law of interest in a comprehensive and precise manner, which becomes applicable in the absence of any contractual or statutory provision specifically dealing w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o date of settlement of claim, does not find support from any of the provisions of the Act. 13. Even assuming that interest can be awarded on grounds of equity, it can be awarded only on the reduced sum to be quantified and paid from the date when it becomes due under the policy (that is on the date of death of the assured) and not from any earlier date. We do not propose to examine the question as to whether interest can be awarded at all, on equitable grounds, in view of the enactment of Interest Act, 1978 making a significant departure from the old Interest Act (of 1839). The present Act does not contain the following provision contained in the proviso to section (1) of the old Act : interest shall be payable in all cases in which it is now payable by law. How far the decisions of this Court in Satinder Singh v. Umrao Singh etc. [AIR 1961 SC 908] and Hirachand Kothari (D) by LRs. v. State of Rajasthan Anr. [1985 Supp SCC 17] and the decision of the Privy Council in Bengal Nagpur Railway Co. Ltd., vs. Rultanji Ramji [AIR 1938 PC.67], holding that interest can be awarded on equitable grounds, all rendered with reference to the said proviso to section (1) of old Interest Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t before this Court. The question that arose for consideration of this Court in that case was whether the payment of premium in respect of a life insurance policy by the insured to the general agent of the LIC can be regarded as payment to the insurer so as to constitute a discharge of liability of the insured. This Court answered the said question in the negative. No other question was raised or considered by this Court. Consequent to its decision, the appeal was disposed of by this Court with the following directions : For the reasons aforementioned, we are unable to uphold the claim of the appellants. No ground is made out for interfering with the decision of the National Commission that Respondent 3 in receiving the bearer cheque for ₹ 2730 from the insured was not acting as an agent of the LIC. But keeping in view the facts and circumstances of the case we direct the LIC to refund the entire amount of premium paid to the LIC on the four insurance policies to Appellant 2 along with interest @ 15% per annum. The interest will be payable from the date of receipt of the amounts of premium. [Emphasis supplied] What requires to be noticed in that case, is that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interpreted as a general principle of law laid down by this court. 17. We, therefore, allow this appeal and hold that the LIC is not liable to pay any interest on the sum of ₹ 1,13,750/-. 18. However, we find that the following order had been passed on 7.8.2000 while granting leave : Learned Solicitor General has placed on record copy of the communication received by the instructing counsel dated 26th July, 2000, according to which amount payable to the respondent, as per directions of the Consumer Disputes Redressal Commission, have already been paid. It is submitted that irrespective of the result of the appeal, the amount which stands paid, shall not be sought for any adjustment, in the peculiar facts and circumstances of the case and no relief would be sought in that behalf against the respondent. It is submitted that the question of law involved in the case is of great importance and likely to arise in other cases. In view of it, this decision does not render the respondent liable to refund any amount already received in pursuance of the order of the consumer forum, even though we have held that the respondent is not entitled to any interest on ₹ 1,13 ..... 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