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LIFE INSURANCE CORPORATION OF INDIA Versus RAJA VASIREDDY KOMALLAVALLI KAMBA & OTHERS

C.A. 2197 OF 1970 - Dated:- 27-3-1984 - MUKHARJI, SABYASACHI AND ERADI, V. BALAKRISHNA, JJ. Dr. YS Chitale, V. G. Shanker, KL Hathi, Ms. Sadhana, DK Chhaya, MK Arora and Mrs. H. Wahi for the appellant. T. S. Krishnamoorthi Iyer, KR. Choudhry and KS. Choudhary for the respondents. JUDGEMENT SABYASACHI MUKHARJI, J. This appeal is by a certificate granted on 18th September, 1970 by the High Court of Andhra Pradesh under Article 133(1) (a) of the Constitution as it stood at the relevant time against .....

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ge being original suit No. 2 of 1964 on 10th January, 1964. The short facts leading to this case are: One Late Raja Vasireddi Chandra Dhara Prasad (hereinafter referred to as a 'deceased') died intestate on 12th January, 1961. He had filled a proposal for insurance for Rs, 50,000 on 27th December, 1960. There was medical examination by the doctor on the life of the deceased on 27th December, 1960. The deceased had issued two cheques for ₹ 300 and ₹ 220 respectively in favour .....

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Masulipatam Branch, denied liability on behalf of the appellant Corporation on 28th January, 1961. Thereafter there was correspondence between the parties between 1st February, 1961 to 23rd December, 1963 wherein the respondents-plaintiffs had claimed the payment and the appellant had denied liability for the same. On the 10th January, 1964, the plaintiffs filed the suit in the court of Subordinate Judge, Masulipatam. It was alleged in the plaint after setting out the facts which have been set o .....

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the Corporation that the payment of the first premium would amount to the acceptance of the proposal and advised the deceased to pay the first premium in full. It was, further, stated that the said two cheques were encashed and the appellant had duly appropriated the amount and credited in the accounts towards the premium payable by the deceased. Therefore, it was stated that the deceased had fulfilled his part of the insurance contract and the appellant-Corporation by its overt acts of encashin .....

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d authority to settle the claim of the plaintiffs- respondents and to pay the amount. The contention of the Corporation that the proposal was not accepted and as such there was no concluded insurance contract between the deceased and the Corporation, was untenable, according to the plaintiffs. It was alleged that with full knowledge of the completion of all the preliminaries, the Corporation had encashed the cheques issued towards the first premium and therefore it was the case of the plaintiffs .....

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in its accounts and the said premium amount was received by the Corporation without any demur or qualification and that in any event the Corporation must be deemed to have waived by its conduct the formality, if any, of sending communication of its acceptance of the proposal. In the premises, the plaintiffs claimed the said amount along with interest at six per cent per annum from the date of refusal of payment till the date of payment of the demand. Written statement was filed on behalf of the .....

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iability of the appellant. It was further stated that the averments in the plaint that the defendant Corporation cashed the above two cheques and appropriated the amounts and credited these in the account towards premium payable for the proposal were false. It was stated that on the death of the deceased, the amount covering two cheques were lying in the deposit and in the suspense account of the Corporation and was not adjusted towards the premium since the proposal was not considered, the term .....

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set out in detail those issues but the important and main issue was whether there was a concluded valid insurance contract between the deceased and the Life Insurance Corporation of India. Both documentary and oral evidence were adduced at the Trial. The respondents-plaintiffs examined Shri R.V. Bhupala Prasad, son of the deceased and the Corporation on its behalf examined Shri Jagannadhachari, the Superintendent of the Corporation branch at Guntur. He also produced ex. B-4, the review slip, pre .....

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epted and the risk covered. He had produced the account books, namely; deposit account book and the first premium account book of the Branch office at Guntur. Shri Brahmandrao Ramiah Assistant Divisional Manager of the Life Insurance Corporation office at Madras was also examined as the second witness of the defendants. He had further stated that the proposal form was sent from the office at Guntur to the Divisional office at Masulipatam, and Ex. B-1 to B-4 and B-8 were sent in this connection. .....

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ceased. The endorsement therein of the assistant Divisional Manager read as follows: "NOTES AND DECISION : may be accepted at O.R." WITH E.D.B. Shri Brahmandrao Ramiah had further stated that the papers were scrutinised by him in addition to the scrutiny by the concerned clerks. He stated that the endorsement marked as Ex. B-14 was initialled by him. He further stated that the letters 'DM' were also written by him indicating that the papers should go to the Divisional Manager o .....

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Financial Powers). Chapter III of the Standing order dealt with the powers of the different authorities for, inter alia, 'Underwriting and Revivals of Policy'. The relevant portion of the said Standing order read as follows:- "Nature of Power Authority Extent of Financial power (up to and Including) Rs. 1. Underwriting and Revivals: (a) Standard lives and revival on original terms Section Head Supdt or J.O. A.S.O. , A.D.M., D.M. 2,000 5,000 10,000 25,000 1,00,000 (Sum Proposed) ( -d .....

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cond instalment of the premium falls due on a date calculated from such date of commencement of risk. Learned Trial Judge was of the opinion that the documents in this case coupled with evidence on behalf of the Appellant- Corporation established that the proposal sent by the deceased was for some reason or other not accepted by the Divisional office by the time the deceased had died. The Trial Court therefore held that there was no concluded valid insurance contract between the deceased and the .....

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ffs- respondents that the amounts paid were appropriated towards the premium and the Trial Court was of the opinion that encashing of the cheques and the want of any further action to be done by the deceased did not themselves create a contract of insurance between the deceased and the Corporation. The Trial Court was of the opinion that the proposal must be accepted by the Divisional Manager and that alone could give rise to a valid contract of insurance which never happened in this case. The T .....

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In the result, the suit filed by the respondents-plaintiffs was dismissed with costs. Being aggrieved by the said decision, the plaintiffs-respondents field appeal in the High Court. The appellants before the High Court also filed civil miscellaneous petition praying that in the circumstances stated in the affidavit filed therewith the High Court might be pleased to direct the Life Insurance Corporation to produce certain documents viz., proposals, review slips and proposal dockets and the conne .....

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ance of proposal and like other contracts, the contract of insurance was complete by offer and acceptance. In coming to this conclusion the High Court relied on the alleged adjustment and the endorsement of the review slip recommending that the proposal "may be accepted" made on the relevant file by the Assistant Divisional Manager. Relying on certain other documents which were called for, for the first time by the High Court relating to certain other cases where only the Assistant Div .....

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ontract. The High Court took the view that Ex. B-13 dealing with Chapter III of the Financial Powers did not categorically deal with the acceptance of proposals. The High Court was of the view that the Corporation had not filed any evidence of any order prohibiting other officers one step below in rank, in this case the Assistant Divisional Manager, to exercise the power of Divisional Manager. In our opinion, the High Court was in error in appreciating the facts and the evidence in this case. We .....

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Indeed there was no evidence that the Assistant Divisional Manager had accepted the proposal on the contrary he his deposition as we have indicated before had stated otherwise. He had stated that the purpose of review slip was to enable the Divisional Manager to asses the risk and take a decision. He had never stated that he had taken a decision to accept the proposal. The allegation that there was assurance on behalf of the field officer and local agent to the deceased that the payment of first .....

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in this connection The Concise oxford Dictionary Sixth Edition p. 1267.) It is true that normally the expression "underwrite" is used in Marine insurance but the expression used in Chapter III of the Financial powers of the Standing order in this case specifically used the expression "underwriting and revivals" of policies in case of Life Insurance Corporation and stated that it was the Divisional Manager who was competent to underwrite policy for ₹ 50,000 and above. T .....

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to a contract, although the circumstances may be such that approval could be inferred from retention of the premium. The mere execution of the policy is not an acceptance; an acceptance, to be complete, must be communicated to the offeror, either directly, or by some definite act, such as placing the contract in the mail. The test is not intention alone. When the application so requires, the acceptance must be evidenced by the signature of one of the company's executive officers." Thou .....

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