A) ABSTRACT / HEADNOTE

The appellants, the deceased’s widow and children, contended that the FPR and associated documentation established a concluded contract obligating LIC to honor the policy claim. The Supreme Court evaluated the validity of LIC’s repudiation of the claim and the concurrent decisions by the District Forum and State Commission in the appellants’ favor, which had been overturned by the National Consumer Disputes Redressal Commission (NCDRC). The apex court ultimately restored the orders of the District Forum and State Commission, reinforcing the principles of consumer protection and contract law.

Keywords: Insurance law, First Premium Receipt, Consumer Protection Act, Concluded Contract, Revisional Jurisdiction

B) CASE DETAILS

i) Judgment Cause Title:
Mrs. Bhumikaben N. Modi & Ors. v. Life Insurance Corporation of India

ii) Case Number:
Civil Appeal No. 270 of 2012

iii) Judgment Date:
May 8, 2024

iv) Court:
Supreme Court of India

v) Quorum:
Justice A.S. Bopanna and Justice C.T. Ravikumar

vi) Author of Judgment:
Justice C.T. Ravikumar

vii) Citation:
[2024] 6 S.C.R. 452 : 2024 INSC 395

viii) Legal Provisions Involved:

• Consumer Protection Act, 1986 – Section 21(b) (Revisional jurisdiction of NCDRC)
• Life Insurance Corporation Act, 1956

ix) Judgments Overruled by the Case (if any):
NCDRC’s decision in Revision Petition No. 3384 of 2006.

x) Case is Related to which Law Subjects:
Consumer Protection Law, Insurance Law, Contract Law

C) INTRODUCTION AND BACKGROUND OF JUDGMENT

The dispute arose after the Life Insurance Corporation of India repudiated a claim submitted by the widow and children of the deceased policyholder, Shri Narendra Kumar Modi. The deceased had completed all formalities for obtaining a life insurance policy, including the submission of the proposal form and payment of the first premium through a cheque, before his untimely death from an accidental electric shock. LIC claimed that the contract was not concluded as the proposal had not been formally accepted before the death of the deceased. The appellants argued that the issuance of the FPR signified acceptance, making the contract binding. The District Forum and State Commission ruled in favor of the appellants, but the NCDRC reversed these decisions.

D) FACTS OF THE CASE

1. The deceased submitted a proposal for a life insurance policy on July 6, 1996, issuing a cheque for the first premium of Rs. 3,388/- on July 9, 1996.
2. The deceased died due to an accidental electric shock on July 14, 1996, before the policy was formally issued.
3. LIC issued an Acceptance-cum-First Premium Receipt dated July 9, 1996, acknowledging the receipt of the premium and the commencement of risk from the date of the receipt.
4. LIC later argued that the policy had not been formally accepted before the death of the deceased and, therefore, denied the claim.

E) LEGAL ISSUES RAISED

1. Whether the issuance of an Acceptance-cum-First Premium Receipt created a presumption of policy acceptance and a binding contract.
2. Whether the NCDRC acted within its limited revisional jurisdiction in overturning concurrent findings of the District Forum and State Commission.

F) PETITIONER/APPELLANT’S ARGUMENTS

1. The appellants contended that the issuance of the FPR and acknowledgment of the premium created a binding contract, obligating LIC to honor the policy.
2. They argued that the deceased’s premium payment and LIC’s issuance of the FPR signified acceptance of the risk by the insurer.
3. They highlighted that LIC’s actions, including issuing the receipt and collecting commission from the agent, demonstrated acknowledgment of the policy.
4. They claimed that LIC’s subsequent repudiation was in bad faith and violated the principles of consumer protection.

G) RESPONDENT’S ARGUMENTS

1. LIC argued that the policy proposal was not formally accepted before the death of the deceased, as no policy document had been issued.
2. It claimed that the FPR explicitly stated that acceptance was subject to the realization of payment and the terms printed overleaf, which were not produced in court.
3. LIC maintained that there was no concluded contract at the time of the deceased’s death, absolving it of any liability.

H) RELATED LEGAL PROVISIONS

1. Consumer Protection Act, 1986 – Section 21(b): Revisional jurisdiction and its limits in interference with concurrent findings.
2. Life Insurance Corporation Act, 1956: Emphasis on the insurer’s obligations and good faith in dealings with consumers.

I) JUDGMENT

a. Ratio Decidendi:
The Supreme Court held that the issuance of the Acceptance-cum-First Premium Receipt, coupled with LIC’s actions, created a presumption of policy acceptance. The court emphasized that revisional powers under Section 21(b) of the Consumer Protection Act are limited and cannot be used to overturn concurrent findings without evidence of jurisdictional error or material irregularity.

b. Obiter Dicta:
The court noted that the term “ex gratia” in such contexts holds no binding legal obligation and cannot substitute a policy claim.

c. Guidelines:

• Revisional jurisdiction under Section 21(b) must be exercised sparingly and within the statutory limits.
• Insurers must demonstrate utmost good faith and avoid ambiguity in policy acceptance processes.
• Acknowledgment of premium payment and related documents should be treated as prima facie evidence of acceptance unless explicitly rebutted.

J) REFERENCES

1. Life Insurance Corporation of India v. Raja Vasireddy Komalavalli Kamba and Ors., [1984] 3 SCR 350
2. D. Srinivas v. SBI Life Insurance Co. Ltd. & Ors., (2018) 3 SCC 653
3. Sudesh Dogra v. Union of India & Ors., (2014) 6 SCC 486
4. Murthy v. State of Karnataka & Others, [2003] Supp. 3 SCR 327
5. Gokal Chand (D) Thr. LRs v. Axis Bank Ltd. and Anr., [2022] 17 SCR 739
6. Consumer Protection Act, 1986
7. Life Insurance Corporation Act, 1956