D. P. Wadhwa, J. - (1.) On a complaint filed by Basanti Devi, widow of Bhim Singh, under Section 18 of the Consumers Protection Act, 1986 ('Act' for short) the State Commission by its judgment dated November 10, 1993 directed the Delhi Electric Supply Undertaking (DESU) to pay a sum of Rs. 50,000/- with interest at the rate of 15% per annum from December 17, 1992 to the complainant till the date of payment. Life Insurance Corporation ('LIC' for short), the insurer was, however, absolved of any liability. By the impugned judgment dated January 13, 1995 by majority (2:1) National Consumer Disputes Redressal Commission ('National Commission' for short), on appeal, affirmed the order of the State Commission. DESU is the constituent of Delhi Municipal Corporation, a body corporate under the Delhi Municipal Corporation Act, 1957. Both the National Commission and the State Commission are constituted under the Consumer Protection Act, 1986.
(2.) LIC floated a "Salary Savings Scheme" under which Bhim Singh, an employee of DESU took an insurance policy for an amount of Rs. 50,000/- with the LIC. Insurance policy was to commence on January 28, 1992. Bhim Singh had paid Rs. 636/- as premium for two months to the LIC. Premium for the third month was payable by March 29, 1992. The amount of the premium was deducted by the DESU from the salary of Bhim Singh and remitted by it to the LIC. It appears that premium for the subsequent months was deducted by DESU from the salary of Bhim Singh but was not remitted to LIC. In the meantime Bhim Singh died on August 17, 1992. Basanti Devi, widow of Bhim Singh informed LIC of the death of her husband and requested for payment of the amount due under the policy. LIC disclaimed any liability for payment under the policy as the instalments of premium after June, 1992 were not received by it. LIC, therefore, repudiated claim of Basanti Devi. LIC said that since default had been committed in payment of premium the policy taken out by Bhim Singh lapsed. This led Basanti Devi to file a complaint before the State Commission against LIC and DESU with the result as aforesaid.
(3.) Before we consider the rival contentions it would be appropriate to understand the "Salary Savings Scheme" of LIC. During the course of arguments we were given a brochure on the Scheme. It is addressed to the employer telling it the advantages of the scheme. This is how the Scheme has been explained:- "It is a simple, economical plan whereby your employees may obtain life insurance protection for their families and retirement income for themselves under advantageous conditions which might not be available to them otherwise. This it accomplishes by savings automatically deducted from their pay and remitted to us once a month. This is not a group insurance. Each employee owns his policy individually, is entitled to all its benefits and can continue the policy in the event of any change in employment. Under this plan, you as an employer give facilities to the representatives of the LIC to contact your employees to offer life insurance cover to them. Premium amounts, if an employee agrees to insure under this plan, are to be deducted every month from the employee's salary, in the same manner as the employee's provident fund. All the amounts so collected are paid to the Corporation by one cheque by the employer. This ensures, for the employee regular payment, monthly, of his premiums at concessional rates. Deduction of premium from the salary or wages of an employee and its remittance to the Life Insurance Corporation is so beneficial that the recently amended Payment of Wages Act and the Minimum Wages Act makes it legally permissible for an employer to do so. On your part, all that the plan involves is a little extra accounting which you will surely consider worthwhile because of the. . . . ." The Scheme then lists the advantages both for the employer and the employee. A specimen of the letter addressed by the Branch Manager, LIC to the employer is as under:- "Dear Mr. Employer, The Salary Savings Scheme of Life Insurance Corporation has proved of considerable value to many organisations and which we believe will be of keen interest to you and your employees. The general need on the part of the average employee for more adequate protection of his dependents is recognised as well as the desirability of his adequate provision for his own retirement. The Scheme is very simple. All that we need is the co-operation by your pay-roll department. They have to make the deductions of the premium on the employee policy holder's authorisation and remit them regularly to LIC along with a Reconciliation Statement. Your employee will, I am confident, appreciate the benefits of your Salary Savings Scheme. It will be a practical demonstration of your personal interest in the welfare of those who help to make your company successful. Moreover, it is in tune with the present social trend. May discuss the matter with you with a view to working out details Yours very truly, (Branch Manager)" The employer in response has to reply as per the specimen in the brochure, relevant paras of which we quote:- "Dear Sir, Re.:Salary Savings Scheme P. A. Code No.--- In order to make the benefits of your Salary Savings Scheme available to our employees, we agree to make the pay roll deductions authorised in writing by our employees, in amounts sufficient to pay the premiums included under your Salary Savings Scheme. 2. ********** 3. It is also understood that no form of individual premium due notice or receipt will be issued by you. 4. It is also understood that the employee policy-holders shall have the right to discontinue participation in the scheme at any time. If an employee exercises this right or if he is terminated, we will notify you in writing at the office where the remittance is forwarded and thereafter will not be responsible for collecting his premiums. 5. and 6. ********** 7. In all transactions made by us pertaining to this Scheme and any policies issued by you thereunder, we shall act as the agent of our employees and not as your agent for any purpose. Yours truly Signature of employer" Thereafter an acceptance letter is issued by the Branch Manager. Enclosure to this letter shows that it is for the employer to deduct premium from the salary of the employee and to remit the same to the LIC. Responsibility for collection of the premium by deducting from the salary of the employee and making over the same to the LIC is of the employer. Some of the clauses in the enclosure we quote: "(a) The employer will receive list of premiums to be deducted called as demand invoice in duplicate each month on the specified date. (b) One copy of the invoice is to be returned along with the remittance. The second copy is to be retained by the employer for his record. (c) It is necessary to inform the LIC when an employee leaves the service or is transferred from one department to another. (d) Reconciliation Statement in a specified form to be supplied by the LIC will accompany the Statement. (e) The Corporation will make changes in the invoice based on the information received from the employer regarding Transfer in, Transfer out and Exits. (f) Deductions made in each month will have to be remitted to us within a week from the date of making deductions along with a copy of invoice and a Reconciliation Statement. Make your cheque payable to the Life Insurance Corporation of India and stand it along with the copy of invoice with Reconciliation Statement drawn in the form suggested in (d) above to the appropriate Branch Office. While checking out statement if you find that an item cannot be paid, rule through the item on the original statement and note the reason for non-payment against the item in the Remark column. If you find that an addition is to be made, make the addition at the end of the statement giving policy number, Name, amount and the reason for addition. If the employee is transferred from one department to another, the names of the concerned departments and code number must be stated. (g) In order to bring the invoices up-to-date, it is desirable that the employer informs us of all the changes in the staff immediately as soon as they occur. The employer need not wait to incorporate those in the invoice. The changes communicated to us through invoice are received date and the names of employees continue to appear in the wrong invoice in the meanwhile." ;