Raveendran, J. - (1.) The short question that arises for consideration in this appeal is whether in the case of a lapsed life insurance policy, the Life Insurance Corporation of India (the LIC for short) while paying the reduced sum payable by treating it as a paid-up policy is liable to pay interest in regard to premiums paid from the respective dates of payment of premiums to date of settlement.
(2.) A policy of insurance dated 11-3-1994 for an assured sum of Rs. 5 lakhs with risk commencing from 4-12-1993 was issued in regard to the life of K. Thankachan under the money-back policy scheme for a period of 20 years. The premium payable was Rs. 8,306/- every quarter. The conditions of the policy made it clear that the policy will be in force only if the premiums were paid regularly, every quarter, and that if the premium was not paid before the expiry of the grace period provided, the policy will lapse. K. Thankachan paid the premiums till 4-6-1994 and did not pay the premiums thereafter. In August, 1996, he opted for revival of the policy by paying the arrears of premium from 4-9-1994 to 4-6-1996 with interest. Accordingly, the policy was revived and he paid the premium till 4-12-1996. Thereafter, the policy again lapsed from 4-3-1997 as premium was not paid. K. Thankachan died on 5-12-1997 and his widow/nominee (the respondent herein) made a claim for payment of the amount under the policy, by letter dated 1-1-1968.
(3.) Condition No. 4 of the policy contains the exceptions to lapsing of the policy. The portion of the said condition relevant for our purpose, is extracted below :- "4. Non-forfeiture Regulations: If, after at least three full years premiums have been paid in respect of this Policy, any subsequent premium be not duly paid this policy shall not be wholly void, but shall subsist as a paid-up policy for a reduced sum payable on the Date of Maturity or at the Life Assureds prior death provided the paid-up sum assured is not less than Rs. 250. The amount of paid-up assurance for integral number of years premiums paid will be calculated as per Table given below. The policy so reduced shall thereafter be free from all liability for payment of within mentioned premium but shall not be entitled to participate in future profits. The existing bonus additions, if any, will remain attached to the reduced paid-up policy. (Emphasis supplied) ;