CHAIRMAN, LIFE INSURANCE CORPORATION AND ORS. versus RAJIV KUMAR BHASKER

Citation: [2005] SUPP. 1 S.C.R. 867 · Decided: 28-07-2005 · Supreme Court of India · Bench: ASHOK BHAN · Disposal: Disposed off

Judgment (excerpt)

CHAIRMAN, LIFE INSURANCE CORPORATION AND ORS. 
A 
v. 
RAJIV KUMAR BHASKER 
JULY 28, 2005 
(ASHOK BHAN AND S.B. SINHA, JJ.] 
B 
Contract Act, 1872-Sections 182, 185 and 186-Scheme floated by 
Insurance Corporation envisaging employer to deduct monthly insurance 
premium from salaries of employees and remitting the same to the C 
Corporation-Lapse of Insurance policy on account of failure to deduct 
insurance premiums by employer for some reasons-Writ petitions/Cases filed 
by claimants before High Courts/Consumer Courts-Courts holding that 
Insurance Corporation and employers are jointly liable to pay the claimants-
Correctness of-Held, under the Scheme, the terms and conditions of the 
insurance policy between the employee and the insurer were to be performed D 
only through the employer-Hence, the employer would be the treated as an 
agent of the insurer-Insurance Corporation, being a 'State' under Article 
I 2 of the Constitution of India, cannot be allowed to get itself discharged 
form the contractual obligations in the event of default of the employer-Life 
Insurance Act, 1956. 
Appellant-Insurance Corporation floated a "Salary Savings Scheme" 
envisaging individual life insurance policy for salaried class employees. Under 
the Scheme, an employer has to deduct insurance premium from the salaried 
E 
of the employees and remit the same to the Corporation by one cheque. Further, 
under the Scheme, no individual premium due notice or receipt would be issued F 
to the employee. The employers failed to deduct the premium from t~e salary 
of the employee for some reasons. On failure to get the assured amount form 
the Corporation on maturity or on death of an employee, the claimants filed 
writ petitions and complaints before High Courts and consumer courts for 
deficiency in service. The Courts, following the decision of this Court in Delhi 
Electric Supply Undertaking v. Basanti Devi and Anr., [1999) 8 SCC 229 G 
allowed the writ petitions/complaints of the claimants. 
The Corporation, in appeal to the Court, contended that the insurance 
policy was issued in the name of the individual employee and hence it would 
867 
H 
868 
SUPREME COURT REPORTS [2005] SUPP. I S.C.R. 
A lapse on non~payment of the insurance premium either by employee or 
employer; that it is not liable to pay the assured amount on the ground of 
default committed either by the employee or by the employer; that under the 
Scheme, the employer acted as an agent of the employee and not of the 
Corporation and hence, the decision of this Court in Basanti Devi requires 
reconsideration. 
B 
c 
The employer, contended that it could not be jointly held liable to pay 
the assured amount to the claimants as the contract of insurance is between 
the insurer and the insured. 
Disposing of the appeals in favour of the claimants, the Court 
HELD: I.I. An employer would not be an agent in terms of the Life 
Insurance Corporation oflndia (Agents) Regulation, 1972 on .the premise that 
it was not appointed by the Corporation to solicit or procure life insurance 
business. The employers had no duty to discharge to the Corporation either 
D under the Life Insurance Corporation Act, 1956 or the rules and regulations 
framed thereunder but keeping in view the fact that the Corporation did not 
make any offer to the employees nor would directly make any communication 
with them regarding payment or non-payment of the premium or any other 
matter in relation thereto or connected therewith including the lapse of the 
policy, if ~:my, it cannot be said that the employer had no role to play on behalf 
E of the Corporation. [877-D, E) 
1.2. Under the Scheme, the employers were to make all endeavours to 
improve the service conditions of the employees and discharge its social 
obligations towards them. The employees could not approach the insurer 
clirectly, and, thus, for all intent and purport they were to treat their employers 
F as agents of the Corporation. The Scheme clearly and unequivocally 
demonstrates that not only the contract of insurance was entered into by and 
between the employee and the insurer through the employer but even the terms 
and conditions of the policy were to be performed only through the employer. 
In that limited sense, the employers would be the agents of the insurer. If the 
G employee had reason to believe that his employer was acting on behalf of the 
Corporation, a contract of agency may be inferred. The contention of the 
Corporation 

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