1. By a policy of insurance, dated 14th April 1910, the defendants insured the life of the plaintiff for the sum of Rs. 3,000. The policy was what is generally known as an Endowment Policy. In return for the payment of Rs. 71-13-3 as a premium paid each half-year on 30th March and 30th September for 21 years, the defendants agreed to pay the plaintiff's heirs the sum of Rupees 3,000 if death should take place before the expiration of the period, and the like sum of Rs. 3,000 to the plaintiff himself it ho should survive it. The policy was inter alia subject to the following "privileges and conditions":
Condition No. 3.--Thirty days of grace are allowed for payment of yearly and half-yearly premuims, and 15 days of grace for quarterly and monthly premiums. If payment is not made before expiration of the days of grace, the policy becomes void, and all premiums paid in respect of it will bo forfeited. If any life assured should die within the days of grace and before the payment of the premium, the policy is valid subject to payment of the premium due.
"Condition No. 5.--A policy which has lapsed by nonpayment of the premium may he revived within 12 calendar months from the date on which the unpaid premium became due, if the life assured is still alive, without evidence of health, on payment of the overdue premium or premiums with interest thereon at the rate of eight annas per cent per month or part of a month (with a minimum of 4 annas) and fine of Re. 1 per month or part thereof, on each Rupees 1,000 sum assured, or portion hereof.
"Condition No. 6.--After payment of premiums for two years policies may be surrendered to the company for a cash payment (based on the number of annual premiums paid) on application being made while the policy is in force or within 12 months from the date on which the last unpaid premium became due, if the life assured is still alive, and on payment of all premiums up to the date of application.
"Condition No. 7.--In the case of whole life assurances with a limited number of premiums and of endowment of assurances, after premiums for not less than two years have been paid and on application being made while the policies are in force or within 12 months from the date on which the last unpaid premium became due, if the life assured is still alive, and on payment of all premiums up to the receipt of such application and of interest thereon, the policies will be made paid up for amounts proportionate to the number of annual premuims paid.
2. The plaintiff paid all the premiums payable up to 30th September 1921 and on that date, under the conditions, the policy had not only acquired a surrender value but the plaintiff had in the alternative become entitled to a fully paid-up policy for a proportion of the original sum assured. The plaintiff made default in payment of the premium due on 30th March 1922, and thereupon the defendants wrote to him stating that the policy had lapsed by non-payment of the premium due on 30th March and that it could not under any circumstances be revived after the expiry of 12 months from that date. They then drew his attention to the term of the contract bearing on the point and said that it was still open to him to revive the policy by acting in accordance with that term. There was no reply. The company sent reminders on 31st. August 1922, and on 28th February 1923 with no better result. I may also mention that on 1st November 1922, the defendants forwarded to the plaintiff bonus certificate for Rs. 75 being the bonus allotted to his policy at the company's valuation on 28th February of that, year. It will be seen that all the four letters to which I have referred were written before the expiry of 12 months from the date of default in payment of premium. The plaintiff, who till then evinced no interest, wrote on 25th October 1924, (about 31 months after default) requesting the company to inform him what the most favourable terms were for reviving the policy, so that he might make an effort to pay up the amount due. In reply, the company stated that the policy, which had lapsed so far back as 1922, could not be revived. The subsequent correspondence between the parties may be ignored and the plaintiff brought this action on 16th January 1925. The reliefs claimed in the plaint are;
(1) To declare that the policy is revivable;
(2) to grant an injunction compelling the defendants to treat the policy in all respects as alive and in force or give such other relief as the Court deems fit.
3. The plaintiff failed in his claim in the first Court and he thereupon preferred an appeal to the District Court. The appellate Judge made an order on 23rd December 1926, allowing the plaint to be amended by inserting certain words in prayer (b) after the amendment. That prayer would read thus:
To grant an injunction compelling the defendants to treat the policy in all respects as alive and in force or give such other relief as a direction for the issue by the defendants to the plaintiff of a paid-up policy with all the bonus allotment as the Court deems fit.
4. On these facts, the first question arises, can the plaintiff insist that the policy shall be reinstated? The answer must be decisively in the negative. Condition No. 3 provides that if the premium due is not paid within the days of grace "the policy becomes void and all premiums paid in respect of it will be forfeited." Under Condition No. 5, a policy which has lapsed may be revived within 12 calendar months on payment of the overdue premiums with interest and a specified fine. This condition was clearly not satisfied; the request to revive the policy was made not within 12 months but after about 31 months;
Where it is stipulated the premiums shall be paid by a certain date, they must be so paid or the policy is voidable at the election of the insurers: the Laws of Insurance, by Porter, Edn. 7, p. 93.
5. In McKenna v. The City Life Insurance Co. [1919] 2 K.B. 491 the premium payable on 31st July 1915, and all subsequent premiums were unpaid. On 7th August 1916 the plaintiff who was assignee of the policy, offered to pay to the insurers the premiums then in arrear, contending that the 12 months mentioned in the conditions ran from the last of the days of grace, but the insurers refused to accept the premiums. It was held that the last premium became due on the date specified in the policy as that on or before which it was payable, namely 31st July 1915; that the offer on 7th August 1916, to pay the premiums in arrear was consequently too late and that the policy had lapsed. By the conditions of the policy in that case, it was provided as follows;
"Condition No. 2.--Thirty days of grace, without liability to fine, are allowed for the payment of each renewal preminm.
"Condition No. 17.--Any policy which has acquired a surrender value will not immediately lapse if a renewal premium be not paid within the days of grace, but will be kept in force for 12 calendar months from the date upon which the last premium became due the amount of premiums in arrear, together with interest thereon at the rate of 5 per cent per annum, forming a first charge upon the policy. The policy may be reinstated at any time during the said 12 months on payment of the arrear premiums and interest.
6. The question in that case was, whether the 12 months were to be calculated from the 1st day of July mentioned in the policy as the due date or from the end of the 30 days of grace. Scrutton, L.J., who tried the action, thus observes;
In this case I come to the conclusion that a premium becomes due on the day specified in the body of the policy as the day on or before which it is to be paid as a condition of the company's liability to pay the sum insured. I gather that from the wording of the policy; and I notice with some satisfaction that that is the view taken by one of the greatest Judges who has ever sat in commercial causes in this country, Mathew, L. J.
7. This case shows with what strictness the term relating to the payment of premium is enforced. It is unnecessary to refer to further authorities, though I may mention another case, where the point was assumed, though not decided. In Handler v. Mutual Reserve Fund Life Association [1904] 90 L.T. 192, a policy of life insurance was expressed to be conditional upon the payment of the premiums each year within 30 days of their becoming due and the holder of the policy failed to pay a certain premium within those 30 days. Collins, M.R. after stating that the plaintiff had failed to fulfil one of the conditions of the policy, that the premium should be paid within certain limited times, goes on to observe "as the policy had ex hypothesi come to an end." Mathew, L.J. in the same case says thus:
Now the original policy was gone--that is not disputed. According to these terms, it only subsisted so long as the payments were regularly made.
8. It is thus clear that the plaintiff is not entitled to the declaration he seeks that the policy is revivable.
9. As a part of the same question, his counsel argued that the plaintiff was entitled to the return of his premiums. In this claim also, he is bound to fail.
10. In the Tanjore Life Assurance Co. v. Kuppanna Rao [1920] 43 Mad. 333 it was pointed out that when a policy lapses by nonpayment of the premium the assured is not ordinarily entitled to claim a return of the amounts paid, and the following passage from Bunyan on Life Assurance, Edn. 5, is cited:
When the policy is void ab initio, or in any case where the premium has been paid but the risk has not been run, whether this has been owing to the fault, pleasure, or will of the assured, or to any other cause, the premium shall be returned by the insurers, but if the risk has once commenced there shall be no appointment or-return of the premia afterwards.
11. That in this case the risk began to run there can be no question. This relief also must be refused to the plaintiff.
12. Then comes the question: Is the plaintiff entitled to a paid-up policy, that is, the relief claimed for the first time in the plaint as amended? The condition in regard to the granting of paid-up policies is more fully set forth in the company's prospectus than in the policy issued to the plaintiff. In their legal effect the clauses are identical, but I shall reproduce the term as set forth in the prospectus:
Assurances under this system are non for feitable inasmuch as should the policy-holder wish to discontinue the payment of future premiums after premiums for not less than two years have been paid he will be entitled to a fully paid-up policy for such proportion of the ordinal sum assured as the number of the annual premiums actually paid bears to the whole number payable, on application being made while the original policy is in force or within 12 months from the date on which the last unpaid premium became due (if the life assured is still alive) and on payment of all the premiums up to the receipt of such application and of interest thereon. Thus under a ten payment assurance for Rs. 10,000 upon which two annual premiums have been received by the company a paid-up policy for Rs. 2 000 will be issued, should the assured wish to discontinue payment of future promiums.
13. Plaintiff's counsel argued under this heading (although the plaint, even as amended does not ask for relief on this basis) that the client is entitled to be paid the surrender value. In regard to the claim to a paid-up policy the provisions of Clause 7 have not been fulfilled. The application was not made within 12 months. It must be deemed to have been made on a view most favourable to the plaintiff on 23rd December 1926, when the amendment was ordered, that is to say, about 57 months after the default. Then again there has been no compliance of that part of the clause which requires that all premiums in arrear with interest shall be paid. The amount has not been tendered, it has not been brought into Court and the plaintiff even now does no more than merely express himself willing to make the payment on some future date. I need not pursue the inquiry, how far the doctrine that there is no place in mercantile contracts for the presumption that time is not of the essence of the contract applies to the plaintiff's claim, first, to a paid-up policy, secondly, in the alternative, to a cash payment, representing the surrender value; for granting, that time is not of the essence, each party has a eight to have the contract performed within a reasonable time, according to the circumstances of each case. It is impossible to hold that the claim to a paid-up policy, which must be deemed to have been made for the first time after the suit was filed and after the lapse of more than four years from the date of default comes within the rule of "reasonable time." The claim to surrender value was made only during the course of the argument in this Court in second appeal, that is about nine years after default. The plaintiff, even granting as I have said that time is not of the essence, can get no relief in the circumstances.
14. Mr. K. P. Ramakrishna Aiyar next argues that the terms (vide Conditions Nos. 6 and 7) requiring that as regards any claim to a paid-up policy or surrender value, application should be made within 12 months, are really stipulations for forfeiture in the nature of penalties and should be relieved against. For this position he relies upon Steedman v. Drinkle [1916] 1 A.C. 275. In that case, certain land was agreed to be sold for 16,000 dollars of which 1,000 dollars were paid on signing the agreement and the balance was payable in six annual instalments on the 1st December of each year. The agreement provided that if the purchaser should make default in any of the payments the vendor should be at liberty to cancel the agreement and to retain as liquidated damages the payments already made. Default having been made in the payment of the first instalment the vendor cancelled the agreement. It was held that the forfeiture of the money paid was a penalty from which relief should be granted on proper terms. I fail to see how this case applies. The amount that under the agreement was to be forfeited there was the amount of the instalments already paid. In the present case there is no doubt a clause of forfeiture, but that clause is Clause 3; and what does that say?
If payment is not made before expiration of the days of grace, the policy becomes void and all premiums paid in respect of it will be forfeited.
15. This is not the forfeiture I am asked to relieve against. Indeed as I have shown the clause that the policy shall lapse or that the premiums shall not be returned--each of them is strictly enforced. The premiums therefore become forfeited under that clause and no part of the premiums can be recovered. Forfeiting of the premiums is Under Clause 3 and no other clause. Clauses 6 and 7 do not relate to forfeiture but confer special advantages upon the insured. Those advantages he can claim only on fulfilling certain conditions. The plaintiff has not fulfilled them and can get no relief under those clauses.
16. Assuming that Clauses 6 and 7 are stipulations for forfeiture, I cannot hold that they are stipulations in the nature of penalties against which relief ought to be granted. What may be construed as a penalty in the case of an ordinary loan is not necessarily a penalty in the case of a Chit Fund transaction. That is the effect of Vaithinatha Iyer v. Govindaswami A.I.R. 1922 Mad. 67. It is there pointed out that in a case of a stake-holder of a chit his relation to the subscribers being of a special nature, special necessity exists justifying stringent provisions to protect his interest. The learned Judges observe:
Without punctual payments by the individual subscribers, the stake-holder could not discharge his liabilities to the successful bidders as they arose.
17. Such remarks will apply with greater force to a contract of insurance. I am unable to hold that the conditions of the policy (in the language of that judgment) are unreasonable or are such as the parties might not naturally recognize should regulate the exceptional relations between them. The plaintiff therefore fails in his action and the suit is dismissel.
18. As regards costs I must say a word. I cannot help feeling that the Insurance Company would have done well by not insisting on their technical rights and refunding to the plaintiff some portion of the large sum of Rs. 1,712-8-0 received as premia. That, in the circumstances would be proper, was indicated by the trial Judge himself. He points out that in 1922 and 1923 the plaintiff was suffering from a malady which affected his mind. I therefore direct that as regards the costs in the two Courts below each party shall bear his own; but in the second appeal the plaintiff shall pay the defendant's costs.