Skip to content


T.G. Rajan Vs. the Asiatic Government Security Life Assurance Co., Ltd. - Court Judgment

LegalCrystal Citation
SubjectInsurance
CourtChennai
Decided On
Reported in(1938)2MLJ1020
AppellantT.G. Rajan
RespondentThe Asiatic Government Security Life Assurance Co., Ltd.
Cases ReferredStuart v. Freeman
Excerpt:
.....august, 1933. the defendant company wrote to the assured that the premium was not paid within the days of grace allowed and that according to them the last day of grace expired on the 1st of august, and they therefore desired him to furnish them with a declaration of good health in order to revive the policy which according to them had lapsed. 4. the defendants state that the deceased failed to pay the quarterly premium due on the 3rd of july, 1933, within the days of grace allowed by the rules of the company, namely, 30 days from and inclusive of the due date and the policy no. the deceased however paid the amount of the said premium to defendants' bankers at madras on the 31st day from the due date but as the said payment was thus late by one day the defendants called upon the..........of grace are allowed in case of monthly premiums. if the premium be not paid within the days of grace, policy will lapse and be null and void.10. revival of lapse policies: a policy lapses to the company by nonpayment of premium due within the days of grace allowed, but it may be revived within one year from the date on which the unpaid becomes due, on production of evidence satisfactory to the directors as to the health and habits of the assured and on payment of, all arrears, together with a penalty of annas four per month or part thereof on each rs. 500 sum assured.2. the quarterly premium due on the 3rd july, 1933, was paid by the assured on the 2nd august, 1933. the defendant company wrote to the assured that the premium was not paid within the days of grace allowed and that.....
Judgment:

Venkataramana Rao, J.

1. This is an action for the recovery of a sum of Rs. 5,000 and interest payable on a life policy issued by the defendant company on the life of Thiruvengadatha Aiyangar the father of the plaintiff in July, 1923. Under the terms of the policy the premium had to be paid quarterly during the whole period of the life of the assured on the third day of every July, October, January and April. The policy witnessed that provided the company received the premiums as set out in the schedule thereunder the company would on due proof of the occurrence of the event described in the schedule, of the age of the life assured, and of title, pay to the person to whom the assurance was granted, or his executors, administrators or assigns, the sum assured stated in the schedule. The event mentioned in the schedule was the death of the assured and as already stated, the premiums were to be paid quarterly on the dates specified above. The policy further provided that the policy and the sum thereby assured should be subject to the conditions endorsed thereon. On the back of the policy are endorsed certain rules under the heading privileges and conditions and Rules Nos. 9 and 10 are relevant for the purpose of this case. They are as follows:

9. Days of Grace: Thirty days of grace are allowed for the payment of annual, half-yearly and quarterly premiums while only fifteen days of grace are allowed in case of monthly premiums. If the premium be not paid within the days of grace, policy will lapse and be null and void.

10. Revival of Lapse Policies: A policy lapses to the company by nonpayment of premium due within the days of grace allowed, but it may be revived within one year from the date on which the unpaid becomes due, on production of evidence satisfactory to the Directors as to the health and habits of the assured and on payment of, all arrears, together with a penalty of annas four per month or part thereof on each Rs. 500 sum assured.

2. The quarterly premium due on the 3rd July, 1933, was paid by the assured on the 2nd August, 1933. The defendant company wrote to the assured that the premium was not paid within the days of grace allowed and that according to them the last day of grace expired on the 1st of August, and they therefore desired him to furnish them with a declaration of good health in order to revive the policy which according to them had lapsed. The assured accordingly sent a declaration of health which was accepted and the assured paid the next quarterly premium due in October and died thereafter oft the 5th of November, 1933. The plaintiff as son and heir brings this suit for the recovery of the amount due under the policy, the assured having died intestate. The plaintiff was forced to bring this action as the defendant company declined to pay the amount on the ground that the declaration of health furnished by the assured was false to the knowledge of the assured and therefore the policy must be deemed to have been forfeited by reason of the falsity of the declaration and the plaintiff was therefore not entitled to claim anything. The case of the plaintiff is that the amount of the premium was paid in time in accordance with the terms of the policy and there was no lapse, but the assured, acting on the incorrect and untrue representation made by the defendant company, furnished them with the declaration of health and as the policy had not in fact lapsed, the plaintiff is entitled to the amount claimed. The defendant company in their answer persist in their contention that the policy had lapsed. Their plea in regard thereto is thus set out in paragraphs 4 and 11 of their written statement:

4. The defendants state that the deceased failed to pay the quarterly premium due on the 3rd of July, 1933, within the days of grace allowed by the rules of the company, namely, 30 days from and inclusive of the due date and the policy No. 445 thereby became lapsed to the company. The deceased however paid the amount of the said premium to defendants' bankers at Madras on the 31st day from the due date but as the said payment was thus late by one day the defendants called upon the deceased to furnish to them a declaration of good health in accordance with their rules and the deceased complied with the defendants' requirement by sending them a declaration of good health dated 18th August, 1933.

11. The defendants submit that in any case the deceased having accepted the calculation of the defendants and complied with their requirements by sending the declaration of good health, the plaintiff is estopped from contending that there was no lapse.

3. The main question therefore for decision is whether the policy had lapsed. Two issues have been raised in regard thereto which are issues Nos. 1 and 2, namely:

1. Was the premium due on 3rd July, 1933, paid beyond the days of grace and was there a lapse of the policy on such account?

2. Is the plaintiff estopped from contending that there was no lapse for the reason alleged in paragraph 11 of the written statement?

4. It is the contention of the plaintiff that he is entitled to pay the amount of the premium on the 2nd of August, because it was the last day of the thirty days of grace allowed under Rule No. 9 relating to the privileges and conditions set out above. It is the contention of the defendant that the last day of grace fell on the 1st of August because according to them the day of computation for the days of grace begins from 3rd July and the risk commences from the midnight of 2nd July. The question really turns upon the language of the policy. According to the terms of the policy the quarterly premium for the quarter commencing in July, 1933, was payable on 3rd July. That is the date given in the Schedule to the policy. A privilege has been accorded to the assured for his benefit by giving thirty days of grace to avoid the policy lapsing. Therefore these days of grace must prima facie be deemed to be in addition to the date already provided in the body of the policy. The language of the policy itself indicates the difference in idea between the two dates, the one being the day on which the amount becomes due and the other being the day up to which the amount of the premium is payable. Therefore the day of grace must be computed from the next day after the due date. It is as if the policy had stated that thirty days of grace were allowed from the due date for the payment of annual, half-yearly and quarterly premiums. Therefore, according to the plain meaning deducible from the language of the policy it seems to be clear that the day following the due date must be the first day of grace. In construing these policies two principles have to be kept in view. Rule No. 9 confers a privilege and also imposes a forfeiture or penalty. It is a settled rule of construction that provisions relating to forfeiture should be construed in favour of the assured and against the company. Again, another well-recognised principle is that where the computation is for the benefit of the person affected as much time should be given as the language admits of and where it is to his detriment the language should be considered as strictly as possible. The principle was so stated by Lord Esher in construing a provision of the English Bankruptcy Act of 1890 in In re North: Ex parte Hasluck (1895) 2 Q.B. 264 but the same principle is also applicable to contracts. According to the plea of the defendant the assured will not get 30 days of grace but only 29 because he was entitled to pay the premium, until the last business hour on the 3rd of July. It would certainly operate to his detriment if the due date is not excluded. The expression 'days of grace' appears to have been taken from the law relating to law merchant where it has a well-recognised connotation. The expression in that law means that certain days are allowed to the acceptor of a bill or the maker of a note in which to make the payment in addition to the time contracted for by the bill or note itself, Originally such time was allowed by custom as, a matter of grace or favour. Subsequently custom hardened into law and was confirmed or established as such in many countries by legislation - vide the English Bankruptcy Act, Section 14 and the Negotiable Instruments Act, Section 22. The rule of computation, where the matter is not provided for by legislation, has always been that the day upon which the negotiable paper becomes due and payable is not to be counted and the, following day is the first day of grace. The same principle seems to have been adopted in the insurance law. Vide Macgillivray's Law of Insurance 1912 Ed., at p. 248, on the object and meaning of the days of grace in an insurance policy.) There appears to be no reported cases on the point but I find the judgment of Lord Justice Scrutton in McKenna v. City Life Assurance Co. (1919) 2 K.B. 491 instructive. In that case a question arose on the construction of the terms of a life policy as to when the premium became due within the meaning of a condition in the polity. In order to appreciate the relevancy of the case it is necessary to give two or three conditions which were considered by the learned Judge. Under the terms of the policy the company covenanted that if the assured should 'on or before the last day of every succeeding January, April, July and October thereafter until the death of the assured pay to the company the premium of 3' the defendants would pay the sum so insured upon the death of the assured. By the conditions of the policy it was provided as follows:

Condition 2:

Thirty days of grace, without liability to fine, are allowed for the payment of each renewal premium.

Condition 3:

This policy shall not lapse by non-payment of any renewal premium before the expiration of three calendar months from the day on which such premium shall be due.

Condition 17:

Any policy which has acquired a surrender value will not immediately lapse if a renewal premium be not paid within the days of grace but will be kept in force for twelve calendar months from the date Upon which the last premium became due.

5. The assured paid all the premiums upon the policy down to and including the premiums payable on 30th April, 1915, at which date the policy had acquired under the terms of the conditions a surrender value. Subsequently the assured died. The legal representative was in doubt whether to claim the surrender value or to go on paying the premiums. On 7th August, 1916, she decided to continue the premiums and tendered the amount in arrear through her solicitor which the company declined to take. The question therefore was whether she had a right to pay the premiums. The exact language used in the condition was 'from the date upon which the last premium became due'. If the twelve months were taken from July 31st when the last premium became due, the tender on 7th August, 1916, was more than twelve months but it was contended that if the days of grace were taken into consideration it would be within time. On the exact language of the policy Lord Justice Scrutton decided that the premium must be deemed to have become due only on the 31st July. The learned Judge puts the question thus:

When did the premium become due? Did it become due within the meaning of the policy on 31st, July or 30th August

6. The date 'August 30' is very significant because it is the last day of grace according to condition No. 2 of the policy being thirty days excluding the 31st July. This is how the learned Judge interpreted Condition No. 2 of the policy thus indicating that the day following the due date is the first day of grace. The condition relating to the days of grace which Lord Justice Scrutton was construing was the same as that in the policy in question. Then the learned Judge proceeds thus:

A similar question might have arisen under the Bills of Exchange Act, but there it is expressly provided that 'the bill is due and payable on the last day of grace'. In this case I come to the conclusion that a premium becomes due on the day specified in the body of the policy as the day on or before which it is to be paid as a condition of the company's liability to pay the sum assured.

7. He then refers to the judgment of Lord Justice Mathew in Stuart v. Freeman (1903) 1 K.B. 47 as to the correct meaning of the term 'Days of grace' thus. He said:

'In my opinion the correct view as to the days of grace allowed by the terms of this policy is that if payment is made within the time mentioned it is to be taken to have been made on the day appointed for payment, and is to have the same effect as if it had been made on that day', thereby drawing a distinction between the date up to which the premium continued payable and the date when it became due.

8. This decision, so far as it goes, supports my view. I hold in this case that the last day of grace fell on the 2nd August, 1933, and the payment was made in accordance with the terms of the policy and the policy did not lapse.

9. Mr. Krishnaswami Aiyangar has not been able to cite any authority in support of the position he contended for and he also conceded that no question of estoppel arises in the view I have taken, and other issues also do not arise. The plaintiff will therefore be entitled to judgment for the amount claimed with interest and costs. But the decree will not issue until the plaintiff produces a succession certificate entitling him to claim the amount. Time for producing the succession certificate, two months.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //