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Shashi Gupta (Smt) v. Life Insurance Corporation Of India And Another
Factual and Procedural Background
Vijay Kumar Gupta purchased a life insurance policy from the Life Insurance Corporation of India (LIC) on 1 April 1989 for a basic sum assured of ₹1,00,000 with a Double Accident Benefit (DAB) rider. After paying two annual premiums, the third premium fell due on 1 April 1991 and was not paid within the one-month grace period, causing the policy to lapse on 1 May 1991. Gupta was assassinated on 30 May 1991 in Chandigarh.
His widow, the present appellant, claimed (i) the basic sum assured plus bonuses and (ii) an additional ₹1,00,000 under the DAB clause. LIC paid ₹1,13,925 on 19 July 1991, characterising the payment as ex gratia and limited to the basic sum assured plus accrued bonus. Dissatisfied, the widow approached the State Consumer Disputes Redressal Commission and, on appeal, the National Consumer Disputes Redressal Commission. Both fora declined to award the additional DAB amount. She then appealed to the Supreme Court of India.
Legal Issues Presented
- Whether the term “full sum assured” in LIC’s circular dated 16 October 1987, which relaxes the lapse condition when only two premiums have been paid, includes the Double Accident Benefit amount in addition to the basic sum assured.
- What effect, if any, LIC’s subsequent circular dated 4 January 1991—excluding DAB payments under lapsed policies and describing such payments as purely ex gratia—has on the appellant’s claim.
Arguments of the Parties
Appellant’s Arguments
- The phrase “full sum assured” in the 16 October 1987 circular should be read to encompass the DAB rider, not merely the basic sum assured.
- The circular expressly limits the concession “to the basic sum assured only” for certain plans (Multipurpose Plan and Jeevan Mitra), implying that for all other plans—such as the policy at hand—the concession is broader and therefore includes DAB.
Respondent (LIC)’s Arguments
- “Full sum assured” means exactly the basic sum assured of ₹1,00,000; the adjective “full” merely confirms that LIC will pay the entire basic sum notwithstanding that only two premiums were paid.
- LIC’s circular of 4 January 1991 clarifies that DAB is not payable under any plan when admitting claims on lapsed policies and that any such payments are strictly ex gratia.
Table of Precedents Cited
No precedents were cited in the provided opinion.
Court’s Reasoning and Analysis
The Court first compared the competing interpretations of the 16 October 1987 circular. Finding both readings “reasonably possible,” it invoked the well-established principle of adopting the construction that favours the insured, thereby furthering the protective purpose of life-insurance contracts.
However, the Court then examined LIC’s subsequent circular of 4 January 1991, which explicitly disallowed DAB payments on lapsed policies and characterised any payment under the lapse-relaxation scheme as ex gratia. Although this later circular had not been presented to either the State Commission or the National Commission, its existence could not be ignored by the Supreme Court.
Balancing the contractual position, the later circular, and the equitable considerations arising from the policy-holder’s untimely death at a young age leaving a widow and three children, the Court refrained from ordering the full DAB amount. Instead, in the “interest of justice,” it directed LIC to make an additional ex gratia payment of ₹50,000.
Holding and Implications
APPEAL ALLOWED IN PART. LIC must pay the appellant an additional ex gratia amount of ₹50,000 within one month; there is no order as to costs.
Implications: The decision results in a monetary relief tailored to the specific equities of the case, without creating a binding precedent on the interpretation of LIC’s circulars or the availability of DAB under lapsed policies. Future claims will continue to depend on the wording of LIC’s circulars and the facts of each case.
B.L Hansaria, J.— The appellant is the widow of one Vijay Kumar Gupta, who had obtained a policy for an assured sum of Rs 1 lakh from the respondent, Life Insurance Corporation of India (hereinafter “the Corporation”). The policy was obtained on 1-4-1989 and two yearly premiums had been paid by 1-4-1991. As the third annual premium could not be paid within the grace period of a month thereafter, the policy lapsed on 1-5-1991. It however so happened that the policy-holder was assassinated on 30-5-1991 at Chandigarh. A claim for the sum assured, along with an additional sum equal to the sum assured, was lodged, as the policy covered ‘DAB’ (Double Accident Benefit) also. The Corporation paid a sum of Rs 1,13,925 on 19-7-1991 which according to it was by way of ex gratia payment, and taking a compassionate view the basic sum assured (Rs 1 lakh), together with bonus which had accrued (the total of which came to Rs 1,13,925) was paid. The grievance of the appellant is that under the terms of the policy, an additional sum equal to the sum assured was payable because of the death of the policy-holder was in an accident. The respondent's stand, however, is that under the policy no further amount is payable to the appellant.
2. Under normal circumstances, a policy lapses unless three instalments are paid. The Corporation, however, relaxed this condition vide its circular dated 16-10-1987, according to which if the death of the assured were to occur after two premiums have been paid within three months of the due date of the next unpaid premium, “the full sum assured together with the declared bonuses” would be paid. Shri Rao, appearing for the respondent-Corporation, contends that the expression “full sum assured” would really mean the sum assured, which is Rs 1 lakh in the present case. According to the learned counsel, the word ‘full’ has been used because despite two premiums having been paid, by force of the aforesaid circular, the full amount assured was required to be paid, which otherwise would not have been so. Shri Mohan, however, draws our attention to the further provision in the aforesaid circular according to which for policies issued under Multipurpose Plan and Jeevan Mitra Plan, the concession visualised in the circular will be given with regard to the basic sum assured only. This indicates, according to the learned counsel, that for other policies concession is not confined to the basic sum assured.
3. As both the aforesaid interpretations are reasonably possible, we would accept the one which favours the policy-holder, as the same advances the purpose for which a policy is taken and would be in consonance with the object to be achieved for getting lives assured. Had this been the only material before us, we would have ordered the respondent to pay a further sum of Rs 1 lakh, but then Shri Rao brings to our notice a subsequent circular of the Corporation dated 4-1-1991 which clarifies what was held out in the circular of 16-10-1987. Para 5 of the second circular states that no DAB is payable under any plan for the claims admitted under the provisions of the circular even in those cases where the claim is considered to the extent of the full sum assured. This para further states that the payments under lapsed policies are purely on ex gratia basis.
4. From the impugned orders before us, it, however, appears that the subsequent circular was not brought to the notice of either the State Consumer Disputes Redressal Commission or the National Commission. Shri Rao submits that it was on record, which is denied by Shri Mohan. Be that as it may, in the facts and circumstances of the case which includes the death of Vijay Kumar at the height of his youth at the hands of terrorists and his having been survived of his widow and three children, we are of the view that the interest of justice demands some further payment to be made to the appellant, which we quantify as Rs 50,000. We, therefore, order that a further sum of Rs 50,000 be paid to the appellant by the respondent on ex gratia basis. This would be done within a month.
5. The appeal is allowed accordingly. No order as to costs.
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