Rajiv Khosla vs Union Of India & Ors.
2010 Latest Caselaw 1816 Del

        IN THE HIGH COURT OF DELHI AT NEW DELHI

                               W.P.(C) 5702/1999

                                            Reserved on : 5th March 2010
                                            Decision on: 7th April 2010

      RAJIV KHOSLA                                    ..... PETITIONER
                               Through: Mr. K.C. Mittal with
                               Ms. Ruchika Mittal and
                               Mr. Sujeet Kumar Singh, Advocates

                      versus


       UNION OF INDIA & ORS.             ..... RESPONDENTS
                     Through: Mr. Shankar N. Sinha, Advocate
                     for R-2 and 3

        CORAM: JUSTICE S. MURALIDHAR

               1. Whether Reporters of local papers may be
                  allowed to see the order?                       No
               2. To be referred to the Reporter or not?          Yes
               3. Whether the order should be reported in Digest? Yes

                               ORDER

07.04.2010

1. The Petitioner is an advocate practising in the Delhi Courts. He has

challenged, by this petition, a clause in the "Jeevan Kishor Policy" of the

Life Insurance Corporation of India (LIC), (Respondent No.2 herein)

whereunder LIC is not obliged to make payment if the assured dies prior

to the „deferred date‟.

2. The Petitioner took a Jeevan Kishor Policy for his daughter

Ms. Aprajita Khosla for a sum of Rs.1,00,000/- by a policy No.120312578

dated 14th October 1994. Yearly premium of Rs.5,533/- was payable for

14 years thereafter. The Petitioner paid premium for two consequent years

i.e. 1994-1995 and 1995-1996. The Petitioner‟s daughter expired on 11th

September 1996 in unfortunate circumstances and thereafter premium was

not paid.

3. The Petitioner sent a letter dated 20th December 1996 to the LIC

informing them of the death of his daughter and asking for the claim under

the policy to be settled. When no response was received, the present

petition was filed. The petitioner states that payment was not made on

account of the following clause in the policy, which he challenges in the

present petition:

"This Policy shall stand cancelled in Case the Life Assured shall die before the Deferred Date and in such event provided the Policy is then in full force, a sum of money equal to all the premiums paid without any deduction whatsoever, shall become payable to the person entitled to the Policy moneys."

4. The reply by the LIC to the present petition raised a preliminary

objection that the Petitioner ought to have filed a civil suit since he

essentially seeks to enforce a contractual obligation. It is submitted that

claim has been repudiated in terms of the conditions of the contract. Even

to challenge any particular clause of a contract, the petitioner ought to

have filed a civil suit. Reliance is placed on the judgments of the Supreme

Court in Food Corporation of India v. Jagannath Dutta AIR 1993 SC

1494; Divisional Manager, National Insurance Co. Ltd., Ahmedabad v.

Manguben AIR 1987 224 (Guj) and Shardaben Kantilal Panchal v. Life

Insurance Corporation of India AIR 1989 1 (Guj). It is not denied that

the relevant clause of the Jeevan Kishor Policy denied payment of the

assured sum if the death of the insured occurred during the waiting period.

In other words, if the death of the insured occurs within a period of two

years of the commencement of the policy, only the premium paid till that

date was payable and nothing more. The reply of the LIC to the specific

ground challenging validity of the deferred payment clause reads as

under:-

"It is trite proposition that contract of life insurance is a special contract and life insurance business is a business in risk, as it deals with uncertain life. Accordingly, every life insurer has to deal with the risk and uncertainty based on actuarial presumptions and assumptions while undertaking the risks and carving out the exceptions and exclusions. There is no legal compulsion on any one to effect an insurance policy, if the terms and conditions are not upto his liking. But, however, having taken an insurance policy willingly and consciously, and thereby entering into binding insurance contract, the same cannot be challenged subsequently on the alleged grounds, and that too by invoking the writ jurisdiction of this Hon‟ble Court, without taking recourse to civil suit, as per the settled law and judicial precedents."

5. In its rejoinder, the Petitioner has contended that at the time of the

taking of the policy such a condition was not known. The policy itself was

usually sent much later, even after payment of the first premium. In any

event, as long as the premium was paid, it was not open to the LIC to

repudiate the claim and defer payment. It is pointed out that the deferred

date in the instant case is 14th October 1996 and the Petitioner‟s daughter

who was approximately 11 years old, died on 11 th September 1996. It is

contended on behalf of the petitioner that the classification of life

insurance policies into those payable only after the deferred date and those

without such limitation was arbitrary.

6. An additional affidavit has been filed on 21st May 2002 on behalf of the

LIC. It is denied that the Jeevan Kishor Policy was meant only for the

middle income/higher income class. It is submitted that it was a flexible

policy where the minimum and maximum amount that could be insured

was Rs.20,000/- and Rs.50,00,000/- respectively. It is explained that the

premium is a multiple of the tabular rate paid depending upon the desired

sum assured and age of the assured. It is further explained that in the case

of children it is not practically possible to obtain any medical report or

special report, which would indicate the future expected mortality in

respect of life. It is explained that as any medical examination is unlikely

to reveal an authentic and reliable insight into the health status of a child,

the LIC of India, in order to safeguard adverse undertaking of risks,

imposes certain restrictions under the Jeevan Kishor Plan before the risk

on the child commences. This is explained to be the rationale behind the

imposition of "deferred date" or "waiting period". According to the LIC,

the "waiting period" acts as a guard against likely moral hazard involving

the lives of innocent insured children, who might fall a prey to the greed of

the human desire to make a fast buck. The policy is meant for every strata

of the society and is not meant only for the elite and gentry.

7. This Court has heard Mr. K.C. Mittal, learned counsel appearing for the

Petitioner and Mr. Shankar N. Sinha, learned counsel appearing for the

LIC. Learned counsel for the Petitioner at the outset made a statement that

the Petitioner is not interested in the payment of the policy amount at this

stage and is only interested in the law being clarified for the future. This

is a fair gesture on the part of the Petitioner.

8. The stand of the LIC as extracted in the above paragraphs does not

sufficiently explain the need for deferring the payment under policy for

children for two years. It appears to this Court that once the LIC accepts

the contract by offering to insure even the life of a child, then it obviously

does do so irrespective of the age of the child. While insurance business is

largely dependent on the analysis of risk, it is not possible to accept the

submission of the LIC that the "deferred date" clause became necessary

only on the basis of the risk that may be faced by the LIC. If the LIC

chooses to insure children and collects premia, there is no justification for

negativing a claim on the basis that payments thereunder should stand

postponed to a "deferred date". There is no justification for imposition of a

deferred date on the apprehension that such waiting period is necessary to

prevent "moral hazards" involving the life of children.

9. This Court does not find merit in the submission that the Petitioner

ought to have filed a suit and not a writ petition to challenge the

aforementioned clause of the contract. The facts not being in dispute, this

Court has only to examine if the clause in question is a reasonable one. In

ABL International Ltd. v. Export Credit Guarantee Corporation of India

Ltd. (2004) 3 SCC 553, the Supreme Court explained that even in matters

of contract, the High Court under Article 226 is not powerless to entertain

the writ petition and interfere, if it finds that by enforcing such a clause in

the contract, LIC would be acting unfairly or unreasonably.

10. In a further additional affidavit filed by the LIC on 28th April 2003,

the information relating to number of Jeevan Kishor Policies issued from

1990-1991 to 2001-2002 including the ages of the victims have been

given. Given the large number of Jeevan Kishor Policies issued [which

stood at 471000 as of 2001-02], the actual claims in respect of children in

the age group of eleven years for the years 1999-2000, 2000-2001 and

2001-2002 are 39, 55 and 53 respectively. The figures are comparable for

other age groups upto 15 years. By no means can it be argued that there

will be far too many claims against the LIC if the "deferred date" clause is

not incorporated. Given the number of claims being made on a yearly

basis on account of the deaths of children under the Jeevan Kishor Policy,

this Court holds that the LIC is not acting fairly or reasonably in insisting

that no claim will be entertained for two years after the commencement of

the policy.

11. For all the above aforementioned reasons the writ petition deserves to

be allowed. It is directed that claims made hereafter under the Jeevan

Kishor Policy will not be repudiated by the LIC on the ground that they

have been made before the "deferred date" subject, of course, to other

conditions being satisfied. In other words, it is clarified that this decision

is prospective and will not result in reviving claims that have already been

rejected under the said „deferred date‟ clause.

12. The writ petition is allowed in the above terms with no order as to

costs.

S. MURALIDHAR, J.

th 7 April, 2010 ps