1998 JTR(SC) 1057
1999 ACJ 84 ; 1999 1 AllCJ 120 ; 1998 4 AWC 861 ; 1999 1 BomCR(SC) 515 ; 1998 94 CompCas 663 ; 1998 4 CompLJ 389 ; 1998 3 CPJ(SC) 3 ; 1998 DNJ 453 ; 1998 7 JT 167 ; 1999 2 KLT(SN) 20 ; 1999 1 PLR(SC) 328 ; 1998 4 RCR(Civ) 491 ; 1998 5 Scale 584 ; 1998 7 SCC 348 ; 1998 Supp2 SCR 295 ; 1999 1 UJ 56 ; 1999 WBLR 142 ; 1999 8 Supreme 61
1998(8) Supreme 61
Supreme Court of India
(From National Consumer Disputes Redressal Commission)
M.M. Punchhi CJI, G.B. Pattanaik & A.P. Misra, JJ.
Life Insurance Corporation of India & Anr. -Appellants
versus
Shri Dharam Vir Anand -Respondent
Civil Appeal No. 5063 of 1998
(Arising out of SLP (C) No. 10830 of 1998)
Decided on 9-10-1998
Counsel for the Parties :
For the Appellants : Harish N. Salve, Sr. Advocate, K.K. Sharma, C.K. Sasi, Kailash Vasdev, Advocates.
For the Respondent : Amit Chadha and Ms. Redkha Pandey, Advocates.
Important Point
Where Life Insurance policy is back dated, date of commencement of risk as back dated cannot be taken as date of policy for purpose of determination of extent of liability limited in clause of policy agreement when contract specifies date of policy is the determining point.
Act Referred :CONSUMER PROTECTION ACT : S.23, S.12
(A) The Consumer Protection Act provisions referenced, specifically Section 23 read with Section 12, govern the adjudication of disputes concerning contractual terms and their interpretation in the context of insurance policies supplied to consumers. The application of these provisions becomes critical where a policy contains conditional clauses tied to the definition of the policys effective date, particularly in cases involving backdating and exclusions for suicide within a specified period. The statutory framework provides the basis for resolving conflicts between contractual wording and the practical commencement of risk, ensuring that the rights of the insured are balanced against the insurers legitimate interests.
(B) Key legal principles include that (i) when a contract uses multiple distinct expressions, they must be given separate meanings unless the context dictates otherwise; (ii) the date of a policy is distinct from the date on which the risk under the policy commences, especially where the policy is backdated; (iii) clauses in insurance contracts must be construed in their commercial context, and drafting options such as backdating are not to be interpreted as altering the fundamental terms; (iv) the proviso in a clause will only operate if the defined trigger date aligns with the parties actual intention; and (v) where a contract is clear, the court must enforce it as written, irrespective of administrative convenience.
Facts of the case:
The respondent took a life insurance policy on his minor daughter, proposing coverage on 25.3.90 and receiving the policy on 31.3.90. The policy contained Clause 4B, which limited the insurers liability to total premiums paid without interest if the life assured died by suicide or within three years of the policy date. The insured directed that the policy be backdated to 10.5.89, paid premiums from that backdated date, and the policy was issued on 31.3.90. The minor died by suicide on 15.11.92. The insurer denied the full claim relying on Clause 4B, arguing the threeyear period ran from the policy issue date. The District Forum, State Forum, and National Consumer Disputes Redressal Commission all held that the risk commenced on 10.5.89, and therefore the clause did not bar recovery. The appellant insurer challenged this interpretation.
Findings of Court:
The court held that Clause 4B distinctly refers to two different datesthe date on which the risk under the policy has commenced and the date of the policy. The risk commenced on 10.5.89 due to the backdating direction and premium payment, but the policy date remained 31.3.90, the date of issuance. Interpreting the clause with established principles of contract construction, the court concluded that the date of the policy for the purposes of the threeyear exclusion is the date of issue, not the backdated commencement of risk. Consequently, the suicide occurring before 31.3.93 fell within the exclusion period, and the insurers liability was limited to total premiums paid without interest. The forums erred in equating the two dates.
Issues:
Whether the expressions date of the policy and date on which the risk under the policy has commenced in Clause 4B bear the same meaning; and whether the threeyear suicide exclusion period should be calculated from the backdated risk commencement date or from the date of issuance of the policy.
Ratio Decidendi:
Where a policy is backdated, the date of the policy for the purpose of timebased exclusions is the date of issuance, not the risk commencement date. Since Clause 4B uses two distinct expressions, they must be given separate meanings, and the threeyear exclusion runs from the policy issue date, entitling the insurer only to a limited return of premiums.
Result:
The appeal is allowed. The insurers liability is limited to the total amount of premiums paid without interest, and an exgria payment of Rupees three lakhs is ordered to be paid within eight weeks.
(A) The Consumer Protection Act provisions referenced, specifically Section 23 read with Section 12, govern the adjudication of disputes concerning contractual terms and their interpretation in the context of insurance policies supplied to consumers. The application of these provisions becomes critical where a policy contains conditional clauses tied to the definition of the policys effective date, particularly in cases involving backdating and exclusions for suicide within a specified period. The statutory framework provides the basis for resolving conflicts between contractual wording and the practical commencement of risk, ensuring that the rights of the insured are balanced against the insurers legitimate interests.
(B) Key legal principles include that (i) when a contract uses multiple distinct expressions, they must be given separate meanings unless the context dictates otherwise; (ii) the date of a policy is distinct from the date on which the risk under the policy commences, especially where the policy is backdated; (iii) clauses in insurance contracts must be construed in their commercial context, and drafting options such as backdating are not to be interpreted as altering the fundamental terms; (iv) the proviso in a clause will only operate if the defined trigger date aligns with the parties actual intention; and (v) where a contract is clear, the court must enforce it as written, irrespective of administrative convenience.
Facts of the case:
The respondent took a life insurance policy on his minor daughter, proposing coverage on 25.3.90 and receiving the policy on 31.3.90. The policy contained Clause 4B, which limited the insurers liability to total premiums paid without interest if the life assured died by suicide or within three years of the policy date. The insured directed that the policy be backdated to 10.5.89, paid premiums from that backdated date, and the policy was issued on 31.3.90. The minor died by suicide on 15.11.92. The insurer denied the full claim relying on Clause 4B, arguing the threeyear period ran from the policy issue date. The District Forum, State Forum, and National Consumer Disputes Redressal Commission all held that the risk commenced on 10.5.89, and therefore the clause did not bar recovery. The appellant insurer challenged this interpretation.
Findings of Court:
The court held that Clause 4B distinctly refers to two different datesthe date on which the risk under the policy has commenced and the date of the policy. The risk commenced on 10.5.89 due to the backdating direction and premium payment, but the policy date remained 31.3.90, the date of issuance. Interpreting the clause with established principles of contract construction, the court concluded that the date of the policy for the purposes of the threeyear exclusion is the date of issue, not the backdated commencement of risk. Consequently, the suicide occurring before 31.3.93 fell within the exclusion period, and the insurers liability was limited to total premiums paid without interest. The forums erred in equating the two dates.
Issues:
Whether the expressions date of the policy and date on which the risk under the policy has commenced in Clause 4B bear the same meaning; and whether the threeyear suicide exclusion period should be calculated from the backdated risk commencement date or from the date of issuance of the policy.
Ratio Decidendi:
Where a policy is backdated, the date of the policy for the purpose of timebased exclusions is the date of issuance, not the risk commencement date. Since Clause 4B uses two distinct expressions, they must be given separate meanings, and the threeyear exclusion runs from the policy issue date, entitling the insurer only to a limited return of premiums.
Result:
The appeal is allowed. The insurers liability is limited to the total amount of premiums paid without interest, and an exgria payment of Rupees three lakhs is ordered to be paid within eight weeks.
Judgment
G.B. Pattanaik, J.-Leave granted.
This appeal by special leave is directed against the Order of the National Consumer Disputes Redressal Commission, New Delhi dated 30th of March, 1998, dismissing the revision filed by the appellant and confirming the decision of the State Forum, who in turn affirmed the decision of District Forum. The question that arises for consideration in this appeal is whether under Clause 4-B of the policy the date of the policy is the date on which the policy was issued or the date on which the risk under the policy has commenced. The aforesaid question arises under the following circumstances.
2. The respondent took a policy of Life Insurance on the life of his minor daughter Kumari Rajan Anand. The proposal was submitted on 25.3.90 and the policy was issued on 31.3.90. The policy contained a Clause, Clause 4-B which reads as follows:
Clause 4-B
“Notwithstanding anything mentioned to the contrary, it is hereby declared and agreed that in the event of death of Life assured occurring as a result of intentional self-injury, suicide or attempted suicide, insanity, accident other than an accident in a public place or murder at any time on or after the date on which the risk under the policy has commenced but before the expiry of three years from the date of this policy, the Corporation’s liability shall be limited to the sum equal to the total amount of premiums (exclusive extra of premiums, if any), paid under the policy without Interest. Provided that in case the Life Assured shall commit suicide before the expiry of one year reckoned from the date of this policy, the provisions of the Clause under the heading “Suicide” printed on the back of the policy.”
3. The insurer called upon the insured to indicate whether the policy is to be back-dated and if so, the date from which it should be dated back. The Insured indicated that the policy should be dated back to 10.5.89 and the premium for the period 10.5.89 till 25.3.1990 was accordingly paid. The policy was issued to the Insured on 25.3.90. The minor girl whose life had been insured under the policy committed suicide on 15.11.1992. The respondent thereafter lodged a claim for payment of the entire sum for which life of the deceased had been insured. The Corporation gave a reply to the respondent that his claim for the full sum assured could not be entertained as the assured had committed suicide within three years of the date of the issue of policy and Clause 4-B of the policy would be attracted. The respondent then filed a complaint under Section 12 of the Consumer Disputes Act contending inter alia that the risk under the policy having commenced w.e.f. 10.5.89 and the assured having committed suicide on 15.11.92, Clause 4-B will not apply and therefore, the entire sum for which the life of the minor girl had been insured should be paid to the respondent together with the Bonus and interest which accrued due. The appellant took the stand before the District Forum contending that though risk under the policy has commenced w.e.f 10.5.89 but the date of the policy is 31.3.90 and therefore, death of the assured having occurred before expiry of three years from the date of the policy, the liability of the Corporation shall be limited to the sum equal to the total amount of premium paid under the policy as per Clause 4-B of the terms of policy. The District Forum however rejected the contention of the appellant and being of the view that the policy in the eye of law having commenced w.e.f. 10.5.89, the three years period under Clause 4-B of the policy would run from the said date and not from the date of issuance of the policy and, therefore, the Corporation cannot have a limited liability as per Clause 4-B of the policy. The said view of the District Forum was upheld in appeal by the State Forum as well as in revision by the National Forum and hence the present appeal.
3. Mr. Salve, the learned Senior Counsel appearing for the appellant submitted that Clause 4B itself has used the two expressions namely “the date on which the risk under the policy has commenced” and “the date of the policy” and therefore, the said two expressions cannot have the one and the same meaning. According to Mr. Salve, the date of the policy is the date on which the policy is issued though for the purpose for giving certain tax relief the Insurer has allowed the proposal to have the policy dated back w.e.f 10.5.89 and on such an interpretation being given and the assured having committed suicide before the expiry of three years of the date of the policy, Clause 4-B is squarely attracted and, therefore, the Corporation will have a limited liability. Mr. Salve, the learned Senior Counsel further contended that if the expression “the date of the policy” and the expression “the date on which the risk under the policy has commenced” is given one and the same meaning then in a case where a policy is dated back, the proviso in Clause 4B will not operate and such a situation would not have been intended by the parties to the agreement. According to Mr. Salve, while construing a policy of insurance which is nothing but an agreement between the parties the commercial practice cannot be ignored and, therefore, the dating back of the policy being merely to confer certain relief in tax to the Insured the date of the dating back cannot be held to be the date of the policy itself.
4. Mr. Chadha, the learned counsel appearing for the respondent on the other hand submitted that the Insured having being called upon to indicate as to whether the policy should be dated back and if so, to indicate the date with effect from which such dating back is to operate and the Insured having indicated the same and thereafter the entire premium from the date from which the policy commenced having been paid by the Insured and accepted by the Insurer, there is no reason to construe the date of the policy to be the date on which the policy was issued. According to Mr. Chadha, the date of the policy must be held to be the date on which the policy has commenced and on being construed in this manner the death of the assured having taken place after three years from the date of the policy, Clause 4-B will not be attracted and, therefore, the appellant-Company will be liable to pay the entire sum for which the life has been insured together with interest thereon and the Forums under the Act did not commit any error in allowing the claim of the respondent.
5. Having examined the rival submissions and having examined the policy of insurance which is nothing but a contract between the parties and having considered the expressions used in Clause 4-B of the terms of policy we are persuaded to accept the submissions made by Mr. Salve, the learned Senior Counsel appearing for the appellant. In construing a particular Clause of the Contract it is only reasonable to construe that the words and the terms used therein must be given effect to. In other words one part of the Contract cannot be made otiose by giving a meaning to the policy of the contract. Then again when the same Clause of a contract uses two different expressions, ordinarily those different expressions convey different meaning and both the expressions cannot be held to be conveying one and the same meaning. Bearing in mind the aforesaid principle of construction, if Clause 4-B of the terms of policy is scrutinized, it becomes crystal clear that the date on which the risk under the policy has commenced is different from the date of the policy. In the case in hand undoubtedly the date on which the risk under the policy has commenced is 10.5.89 but the date of the policy is 31st of March, 1990 on which date the policy had been issued. Even though the Insurer had given the option to the Insured to indicate as to whether the policy is to be dated back and the Insured indicated that the policy should be dated back to 10.5.89 and did pay the premium for that period, thereby the risk under the policy can be said to have commenced with effect from 10.5.89 but the date of the policy still remains the date on which the policy was issued i.e. 31st of March, 1990. The death of the life assured having occurred as a result of suicide committed by the assured before the expiry of three years from the date of the policy, the terms contained in Clause 4-B of the policy would be attracted and, therefore, the liability of the Corporation would be limited to the sum equal to the total amount of premium paid under the policy without interest and not the entire sum for which the life had been insured. The Forums under the Consumer Protection Act committed gross error in construing Clause 4-B of the policy and giving the same meaning to the two expressions in the aforesaid Clause 4-B namely “the date on which the risk under the policy has commenced” and “the date of the policy”. The construction given by us to the provisions contained in Clause 4-B get support, if the proviso to Clause 4-B is looked into. Under the proviso if the life assured commits suicide before expiry of one year reckoned from the date of the policy then the provisions of the Clause under the heading “suicide” printed on the back of the policy would apply. In a case therefore a policy is dated back for one year prior to the date of the issue of the policy the proviso contained in Clause 4-B cannot be operated at all. When parties had agreed to the terms of the contract it is impermissible to hold that a particular term was never intended to be acted upon. The proviso to Clause 4-B will have its full play if the expression “the date of the policy” is interpreted to mean the date on which the policy was issued and not the date on which the risk under the policy has commenced. In the aforesaid premises we are of the considered opinion that under Clause 4-B of the policy the date of the policy is the date on which the policy had been issued and not the date on which the risk under the policy had commenced by way of allowing dated back. In view of our aforesaid construction to Clause 4-B, in the case in hand the respondent in law would be entitled to only the sum equal to the total amount of premium paid under the policy without any interest inasmuch as the death of the life assured has occurred before the expiry of three years from the date of the policy i.e. 31.3.1990. Even though we have construed the provisions of Clause 4-B as aforesaid but so far as the amount of compensation payable to the respondent is concerned we find from the letter of the Corporation dated 2.2.1995 that the Claims Review Committee has examined the facts of the case and had decided to pay a sum of Rupees two lacs on ex-gratia basis and we see no reason why the respondent should not be entitled to receive the said amount together with the interest thereon. The said offer of the Corporation having been made on 2nd of February, 1995 and more than three and half year having been elapsed since then, we think that the Corporation-appellant should pay a total sum of three lacs to the respondent-claimant in full satisfaction of the claim of the respondent and this amount should be paid within eight weeks from today. This appeal is disposed of accordingly.
(C.R.) Order accordingly.
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Parallel Citations of other Journals :
Life Insurance Corporation of India v. Shri Dharam Vir Anand, 1998(8) Supreme 61
00033