This Article is written by Divya K. (currently pursuing BBA LLB in Symbiosis Law School)
Table of Contents
CHAIRMAN, LIFE INSURANCE CORPORATION
RAJIV KUMAR BHASKAR
In the present case, Chairman, Life Insurance is the petitioner and Rajiv Kumar Bhaskar is the respondent. This case is related to the creation of the agency. Agency can be defined as a contractual relationship between two parties where one-party delegates his work to the other and the other party acts on behalf of the first. Contract of agency can be created by express appointment or implied consent, conduct, necessity, or ratification. In this case, the contract of agency was created by implied consent and by way of conduct. “According to sec 187, an authority is said to be implied when it is to be inferred from the circumstances of the case, and things spoken or written, or the ordinary course of dealing, may be accounted circumstances of the case.”The current article would study if there was a principal-agent relationship between LIC and employer and if they are liable to pay the amount of insurance to the victim’s heirs.
FACTS OF THE CASE:
The life insurance corporation started a ‘Salary Saving Scheme’ which was a life insurance policy for the employees that would help them secure their family’s future and enable them with retirement income in exchange for just a particular amount to be deducted from their salary every month. This scheme was proposed to the employer and not the employees directly. Under this plan, the employer had to deduct the premium amount from the employees’ salary and send all the amounts collected by way of a single check to the corporation. For some reason, the employer did not deduct the premium from the concerned employee and as a result, the policy lapsed. After the death of the employee, his heirs and legal representatives filed a writ petition in the high court or filed applications before the District Consumer Forum under the Consumer Protection Act, 1986. The forum and the high court held both the corporation and employer liable to pay the concerned employee for lack of efficiency in their service. Not satisfied with the decree, the corporation filed a special leave petition for cross-examination in the Supreme court.
The petitioners hold certain contentions against the respondents:
- The petitioner claims that the employer is not the agent of the corporation.
- The policy was not issued in the name of individual employees and non-payment resulted in the lapse of the policy and thus the corporation is not liable to pay.
- The employer was the agent of the employees and not of the corporation so it cannot be held liable to pay the assured money.
- RESPONDENT’S ARGUMENTS:
The respondents display the following arguments:
- The respondents argue that there was a tripartite contract in which the corporation approached the employee with the proposal of a salary saving scheme for his employees and it was the employer who first agreed and then it was introduced to the employees. Employers were deducting the premium from the salary of the employees and there was no direct communication between the employees and the corporation.
- Indeed, the employer designated himself as the agent of the employees and the employer had no duty towards the corporation but when noticed, the corporation did not offer to the employees directly and there was no direct communication between the corporation and the employees regarding payment or non-payment of premium or lapse of the policy. It was the employer who was collecting premium and sending to the corporation so it cannot be said that the employer had nothing to do on behalf of the corporation.
The present case had the following issue:
- Will the employer be considered as the agent of the corporation even though he wrote explicitly that he will act as employees’ agent?
- Is the corporation liable to pay the assured amount?\
The court observed whether the corporation and the employer were in the principal-agent relationship. Section 182 under Indian Contract Act, 1872 defines the term agent. “An agent is a person employed to do any act for another or to represent another in dealings with third persons.”It defines principal as the person who is represented or for whom such act is done. Section 226 and 227 is also observed as it explains how far the principal is bound by the acts of the agent. It is observed that if the agent does an act that is well within his authority, then the principal along with the agent will be liable for acts of the agent.
The court decided in favour of the respondent. it said that since major of the premium was collected by the employer and was sent by him to the corporation, for an employee, the employer acted as an agent of the corporation. It is a known fact that insurance companies employ agents and when the definition of an insurance agent is not provided under the Insurance Act, the universal principle of the law of agency written under the Indian Contract act is found applicable. Thus, both the employer and corporation are liable to pay.
As per the Indian Contract Act, 1872, it is not necessary that the agency can be created only by written/ express method, it can also be created by implied consent and by way of conduct. In the present case, the employer explicitly mentioned that he is the agent of employees but by way of conduct, it was evident that he acted as the agent of the corporation. The corporation kept no communication with the employees. It was the employer who introduced the scheme in front of the employees and he collected all the premium and sent it collectively to the corporation. Such kind of conduct implies that the employer acted as the agent of the corporation.
“Section 226 states that Contracts entered into through agent, and obligations arising from acts done by an agent, may be enforced in the same manner and will have the same legal consequences as if the contracts had been entered into and the acts done by the principal in person.” Section 227 provides that the principal will be liable for the acts of the agent as long as he is acting within his authority. Here, it was because of the default in payment y the employer that the employee does not get the assured amount of the scheme. Since the employer is the agent of the corporation and his acts are well within his authority, the corporation will be vicariously held liable for the acts committed by the employer and has to pay the assured amount to the concerned employee.
The case of Chairman, Life Insurance Corporation Vs Rajiv Kumar Bhaskaris quintessential in explaining that the term ‘agent’ doesn’t need to be present to determine the legal relationship of principal and agent. The conduct of the person is enough to determine if he is the agent of the concerned person. Both the principal and the agent will be liable for the acts done by the agent.
About the publisher:
 Chairman, Life Insurance Corporation Vs Rajiv Kumar Bhaskar, 2006 ACJ 204.
 Indian Contract Act, 1872, § 187, No. 9, Acts of Parliament, 1872 (India).
 Id. § 182.
 Id. § 226.