(1) K. S. RADHAKRISHNAN. J. :- Order of the Insurance Ombudsman (Maharashtra and goa), at Mumbai, dated 15th February, 2005, rejecting claim of the petitioners for payment of sum assured under the Stepping stone Policies was challenged before this Court. Learned Single Judge found no infirmity in the order passed by the Insurance Ombudsman and dismissed the petition. Aggrieved by the same, this appeal has been preferred.
(2) SHORT facts which are necessary for disposal of this appeal are stated as follows:-2. 1 Smt. Sapna Premal Jhaveri, applied for two Stepping Stone Policies for a sum assured of Rs. 1 lakh each, with additional personal Accident Benefit and Dreaded Disease riders for Rs. 1 lakh each under Proposal Nos. 239463425 and 239463417. Proposer filled in proposal form for the Policies on 10. 8. 2004 and initial payments were remitted to Mumbai General Office. Payment receipt was issued on 12. 8. 2004. Smt. Sapna Premal Jhaveri, unfortunately died due to a road accident on 15. 8. 2004 at ahmedabad. Premal Jhaveri, husband of the life insured, intimated the said fact to max New York Insurance Company Ltd. , mumbai on 24. 8. 2004, and requested for settlement of death claim. Insurance Company rejected the claim stating that life assured had expired before the cases were under-written and the Policy issued and hence, they were not in a position to further process the proposals and complete the contract. The payment of premium was also returned by the Insurance Company. 2. 3 Claimants submitted before the Insurance ombudsman that two proposals were submitted by the proposer on 10. 8. 2004 and the premium was received on behalf of the Insurance Company on 12. 8. 2004. It was contended that submission of proposal form with the consideration i. e. premium amount is a pre-requisite to set up the first step in a contract and therefore, once the amount has been received, the contract is complete and Insurance Company is bound to honour the claim. Insurance Company has taken up the stand that as per Point No. 3 on page 6 of the proposal form, the receipt of the completed proposal and initial payment does not create any obligation upon the Insurance Company to under-write the risk and the Company shall not be liable until it has under-written the risk and issued the Policy. Insurance Company has taken up the stand that they had neither under-written the risk nor issued the Policy and therefore, there was no completed contract. The stand taken by the Insurance Company was accepted by the Insurance Ombudsman, so also by the learned single Judge.
(3) WE have perused the terms of the proposal, especially point No. 3, which reads as follows:-
"receipt of the completed proposal and initial payment does not create any obligation upon the company to underwrite the risk. The company shall not be liable until it has underwritten the risk and issued the policy. "
Further, in the payment acknowledgment form itself there is a specific stipulation under Note (2), which reads as follows: -"receipt by the company of the completed proposal and initial payment towards proposal does not create any obligation on the part of the company to under-write the risk, and company shall not be liable until such time it has under-written the risk and issued the Policy. "
(4) WE are of the view that the above mentioned conditions are very specific, which calls for no interpretation. No materials have been produced before us to show that Company had under-written the risk and had issued the Policy in favour of the insured. Since the above conditions were not satisfied, in our view, there was no completed contract between the parties.
(5) LEARNED Counsel for the claimants placed reliance on the decision of the Supreme Court in Bharat Petroleum Corporation Ltd. v. Great Eastern Shipping Co. Ltd.- (2008) 1 SCC 503 : (AIR 2008 SC 357) and submitted that general rule is that an offer is not accepted by mere silence on the part of the offeree, yet it does not mean that an acceptance always has to be given in so many words. Learned Counsel submitted that offeree's silence, coupled with his conduct, which takes the form of a positive act, would constitute an acceptance - an agreement sub silentio, as held by the Supreme Court.
(6) WE find it difficult to accept the above proposition, especially in the facts of this case. On the other hand, the decision of the apex Court in Life Insurance Corporation of india v. Raja Vasireddy Komalavalli kamba and Ors.- (1984) 2 SCC 719 is more apt to the facts of this case. The apex Court had an occasion to consider the scope and ambit of Life Insurance Corporation of India Standing Order, 1960 and expressed the view that mere receipt arid retention of premium until after the death of the insured or mere preparation of the policy document is not acceptance and therefore, do not give rise to a contract. The Court opined that mere filing of a proposal form for insurance and depositing the first premium with the insurance Company do not create a binding contract between Insurance Company and the proposer so as to enable the heirs of the proposer after his death to claim the amount covered under the proposed Policy. It is apt to extract the dictum laid down by the Supreme Court, which is as under:-
"14. When an insurance policy becomes effective is well-settled by the authorities but before we note the said authorities, it may be stated that it is clear that the expression 'underwrite' signifies 'accept liability under'. The dictionary meaning also indicates that (see 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 Rs. 50,000 and above. The mere receipt and retention of premium until after the death of the applicant or the mere preparation of the policy document is not acceptance. Acceptance must be signified by some act or acts agreed on by the parties or from which the law raises a presumption of acceptance. See in this connection the statement of law in Corpus Juris Secuhdum, vol. XLIV, page 986 wherein it has been stated as: the mere recteipt and retention of premiums until after the death of applicant does not give rise to a contract, although the circumstance 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 offerer, 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. 15. Though in certain human relationships silence to a proposal might convey acceptance but in the case of insurance proposal, silence does not denote consent and no binding contract arises until the person to whom an offer is made says or does something to signify his acceptance. Mere delay in giving an answer cannot be construed as an acceptance, as, prima facie, acceptance must be communicated to the offerer. The general rule is that the contract of insurance will be concluded only when the party to whom an offer has been made accepts it unconditionally and communicates his acceptance to the person making the offer. Whether the final acceptance is that of the assured or insurers-,'however, depends simply on the way in Which negotiations for an insurance have progressed. See in this connection statement of law in Mac Gillivray and parkington on Insurance Law, Seventh Edition, page 94, paragraph 215. "
(7) APPLYING the above principles to the facts of the present case as well as keeping in mind the relevant portions extracted by us in the earlier part of the judgment, we are of the view that mere fact that proposal f
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orm was submitted along with the first premium would not conclude contract between the parties, unless the Insurance Company has taken steps to underwrite the risk and issue Policy to the insured. In the absence of any material to show that Insurance Company had underwritten the risk and issued policy to the insured, there was no concluded contract between the parties. We therefore, fully endorse with the view expressed by the Insurance Ombudsman as well as the learned Single Judge. Appeal lacks merit and is dismissed. (8) LEARNED Counsel appearing for the claimants submitted that he has already deposited the first premium and the same be returned to him. Learned Counsel for the insurance Company has submitted that cheque was returned unencashed. If that be so, Insurance Company is directed to revalidate the cheque and forward the same to the party concerned at the earliest. Appeal dismissed.