Case analysis- Harshad J Shah vs. LIC of India
Authored By : Sejal Sharma
This case is basically deals with the role of agent for his principle in terms of collection of money and to pay the premium of the policy. This case involves a question that whether the payment of money to the agent means the payment for the policy has done or not and now the insurer is discharged from his liability or not. This case first goes to the State Consumer Protection forum and then aggrieved from its decision, the petition files the petition in the Honorable Supreme Court of India.
Life insurance Corporation (LIC); Agent ; Insurer
Civil Appeal no.7202 & 7203 of 1996. [AIR 19997]
Harshad J.Shah & anr.
Advocate for the petitioner:
Mr. Naresh S. Mathur and Mr. Gopal Singh
L.I.C. of India & ors.
Advocates for the Respondents:
Mr. Harish Salve, Mr. K.K. Sharma, Mr. C.K. Sasi and Mr. Kailash Vasdev.
Name of Bench:-
Honorable Mr. Justice S.C.Agarwal and Honorable Mr. Justice G.B. Pattanaik
In the Honorable Supreme Court of India
4 April 1997
In this case the relationship of the agent and principle, to what extent is correct to do work on behalf of him is major concern and discussed by the two judge bench of the Supreme Court. Here the agent is the person to work on behalf of the principle for some specific and the general purpose. The principle delegates his authority to the agent. The agent has to work in best interest of principle and should never be in conflicting interest. He should not make any secret profit and avoid any conflicting situation within him and principle.
Background of the case:-
The relationship of the principle and the agent are dealt under the law of agency which is based upon the Latin maxim, “Qui facit per allium facit per se” which means “he who does an act through another, does the act himself.” This means that when the person authorizes the other person to do act on behalf of him, he has to do good as he has doing for himself. But this doesn’t means that principle is not liable, form the maxim of the vicarious liability, the principle is also liable for the act done by the agent.
The Mr. Shah has taken the four policies each of the Rupees 25,000/- from the Life Insurance Corporation (LIC) of India. All of the policies gave the double benefit. These all are taken on March 6 1989 by the same insurance broker. And the premium has to pay on the basis of half yearly term. The first half premium was deposited in the 6 September, 1986 and other was due on March 6, 1987 which was not paid. On the 4 June 1986, the broker agent met the insurer and the insurer gave the cheque of Rs. 2,730/- draw from the union bank, Malad, Bombay. This sum was encashed by the son of the broker and this amount of premium was deposited by the broker on the 10 August 1987. But in this meanwhile on the 9 August 1987 the insurer met with the fatal accident. His widow claims the money from all four policies from the LIC. But this claim was repudiated by the LIC. The LIC claims that the policy was repudiated on the basis of the non-payment of premium within the grace period.
So, widow along with the Consumer Education & Research Society filed the case against the LIC and the insurance broker. As she said that the premium of the policy was paid to the broker on behalf of the LIC and before the death of the Mr. Shah. But the LIC contended that the agents were not authorized to collect the premium. So, if the premium is paid to the agent that it is not considered as it is paid to the LIC.
Then this matter goes to the Maharashtra State Consumer Dispute Redressal Commission and it held that for gaining more profits, agents do this type of activities with the knowledge of LIC that there departmental instructions says that the agents are not authorized to collect the premium. And it was held that the LIC was negligent toward its service to policy holder.
Both appellants and the respondents aggrieved by the judgment filled the appeal in the National Commission of Dispute Redressal Commission. It dismissed the Appeal of the appellant and held that the date of cheque was the date on which premium by paid to the LIC and broker was not considered as the agent.
Then the appellants filed the appeal in the Supreme Court.
Issues before the Honorable Supreme Court:-
1.) Whether the payment of the premium by the insured to the general agent of the LIC can be regarded as payment to the insurer so as to constitute a discharge of liability of the insured?
2.) Whether the LIC can be held liable to the basis of the Doctrine Apparent Authority?
The appellant said that the policy cannot be lapse on the basis on non-payment of the premium and it can also be revived by paying the interest on the amount for delayed payment. And as the agent receives the amount of commission on the amount of the premium, so it is within their authority. And lastly it is stated that the LIC comes under the Art. 12 i.e. state so it has to work to mandate the Art.14.
The Respondent said that these types of activities are not under the appointment letter and the grace period of 1 month has been lapsed on 6 April itself. The agent has not any implied and the express authority on behalf of LIC.
Now the 2 judge bench of the Supreme Court held that respondent contention has merit as the LIC has the clear regulations regarding its policies. And these provisions are made in public interest to save them from fraud and LIC is good his job fairly.
Here the doctrine of the Apparent Authority has been highlighted which means that in fact there is no authority involved, means the agent is bound by the third party. The person appears to have the authority in fact have no authority at all.
1.] Indian kanoon,
2.] Case analysis- Harshad j. shah vs. LIC http://www.legalserviceindia.com/legal/article-239-case-analysis-harshad-j-shah-vs-lic-of-india.html
3.] Vivek Kumar Verma, Harsad J. shah vs. LIC of India,