The petitioner Co-operative Society had contracted with the respondent Life Insurance Corporation for making provision for the gratuity liability of the petitioner towards its employees. The understanding between the petitioner and the respondent Corporation, as evidenced by Ext.P3 communication, envissaged, inter alia, that in the event of death of an employee while in service, a sum equal to the gratuity that the deceased employee would have earned, had he completed his entire period of service, would be settled by the Corporation as gratuity. The said letter also indicated that in the event of an employee leaving service, before completing the normal span, such exit being beyond the control of the Corporation, the Corporation would refund premiums received on his behalf along with interest. Pursuant to Ext.P3 understanding, Ext.P4 policy came to be issued to the petitioner, the conditions mentioned in the policy were later amended by an endorsement, as noted in Ext.P5, which indicates that notwithstanding anything contained in the Rules of the Scheme and Master Policy to the contrary, the Corporation's liability would be limited to the benefits assured under the term assurance effected upto a ceiling of Rs.1,75,000/- per member, subject to the terms and conditions applicable to them, and benefits payable as per the Gratuity Act, 1972, for the past service benefits at the rate of 15 days wages for every year of completed service with a ceiling of Rs.3,50,000/- as premiums are calculated on this basis only. By virtue of the endorsement, therefore, the terms of Ext.P4 Master Policy stood amended to the extent contemplated in the endorsement. The petitioner was faced with a situation where an employee died while in service. After making the payments to the employee, as contemplated under the payment of Gratuity Act, the petitioner approached the respondent Corporation for getting a reimbursement of the amounts paid to the employee by way of gratuity. In response to the request of the petitioner, the respondent Corporation paid an amount of Rs.1,75,000/- towards life cover and Rs.92,281/- towards gratuity. This payment was made under cover of Ext.P7 letter dated 07.07.2009. Aggrieved by the amounts received from the respondent Corporation, to the extent it excluded an amount of Rs.82,719/-, the petitioner approached the 1st respondent claiming a reimbursement of the differential amounts by Ext.P8 representation dated 17.07.2009. The respondent Corporation, however, maintained its stand that it had effected all the payments that were due in terms of the Master Policy issued to the petitioner. Complaints filed by the petitioner before the respondent also did not yield any positive response from the respondent Corporation. Thereafter, the petitioner approached the Ombudsman for the redressal of the grievance, it was informed by Ext.P12 communication that the petitioner preferred by the Ombudsman could not be maintained, in view of the fact that petitioner was only a facilitator and not an insured person. This led the petitioner to approach this Court through the present writ petition seeking a declaration that the 1st respondent Corporation is bound to pay the petitioner Society the entire amount payable under the payment of Gratuity Act to its employees. There is also a prayer for quashing Exts.P9 and P11 as also for a direction to the respondent Corporation to pay the balance amount requested by the petitioner Society, together with interest thereon, as per Exts.P8 and P10 representations.
2. A counter affidavit has been filed on behalf of the respondent Corporation wherein it is stated that there are various Schemes that are floated by the respondent Corporation in connection with the coverage of the gratuity liability of employers. The petitioner in the writ petition had opted for the Pure Endowment Scheme where individual costing method was adopted. It is pointed out that the premium amount for each individual is calculated taking into account his salary, age and other factors and, under the Scheme, the gratuity is settled to the Master Policy Holder according to the salary on the previous renewal date and not the salary as on date of termination of service, subject to a maximum ceiling which will not be above the amount quoted in the cost and benefit schedule. It is accordingly, that in the case of the petitioner Society, and in respect of the employee in question who died while in service at prior to his date of retirement, the respondent Corporation effected a payment of Rs.1,75,000/- towards life cover and Rs.92,281/- only towards premium collected.
3. I have heard Sri.Gopalakrishnakurup, the learned Senior counsel for the petitioner and Sri.P.B.Sahasranaman, the learned Standing counsel for the respondent Corporation and Sri.T.M.Raman Kartha, the learned counsel appearing for respondents 2 and 3.
4. On a consideration of the facts and circumstances of the case and submissions made across the Bar, I note that in the instant case, the petitioner Society had opted for the Group Gratuity Life Assurance Scheme that was floated by the respondent Corporation pursuant to the assurance of the respondent Corporation contained in Ext.P3 letter that in the event of death of an employee while in service a sum equal to the gratuity the deceased employee would have earned, had he completed his entire period of service, would be settled by the respondent Corporation as gratuity. It is relevant to note that in Ext.P3 itself there is a further eventuality that is dealt with namely, that of an employee leaving service before completing the normal span, where the respondent Corporation is expected to refund only the premium received on behalf of the employees together with interest. It appears that when the master policy was issued, it contained a clause under Part III dealing with benefits which stated as follows:
“3. On death before normal Retirement date:
In the event of death of the Member before Normal Retirement Date Whilst in the service of the Company, there shall become payable an amount, which shall be the total of
(i) The sum assured under Term Insurance, if any, in force on the date of death of the Member and
(ii) Total amount of premiums paid under the Pure Endowment effected in respect of him.”
5. Thereafter, there was an endorsement effected to the policy on 28.11.2009, which read as follows:
“ENDORSEMENT GGPE MP No:45836 Notwithstanding anything contained in Rules of the Scheme and Master policy to the contrary, the Corporation's liability is limited to:
The benefits assured under the term assurance effected are subject to a ceiling of Rs.1,75,000/- per member subject to the terms and conditions applicable to them And Benefits payable as per the Gratuity Act, 1972, for the past service benefits @ of 15 days wages for every year of completed service with a ceiling of Rs.3,50,000/- as premiums are calculated on this basis only.
And “Normal Retirement Date” shall mean in respect of each member the date on which he/she completes the age of 58 years. The premiums are calculated and benefits are paid taking this age into account.
Manager (P&GS) This should be pasted and kept as part of the Master policy document”
6. No doubt, it is contended by the respondent Corporation that this endorsement would not have effected of altering the terms of the policy insofar as the employee in question was concerned since he had expired before the date of the endorsement. I note however, that the endorsement is in the nature of non-obstante clause and deals with the liability of the respondent Corporation and is intended to form part of the Master Policy document. It has to be borne in mind that the contract in questions is one of insurance and therefore one that is entered into uberrimae fide. The assurance of the respondent corporation through Ext.P3 communication, the Master Policy document and the subsequent endorsement have, therefore, to be read together to gather the intention of the parties. When so read, it is apparent that the endorsement was necessitated only to correct an obvious mistake in the policy document to the extent it went against the assurance contained in Ext.P3 communication. The mere fact that the endorsement was dated subsequent to the date of death of the employee, in the instant case, cannot absolve the respondent corporation from discharging its obligations to the petitioner society in terms of the understanding between them. In the instant case, while under cover of Ext.P7, the respondent Corporation paid amounts of Rs.1,75,000/- towards life cover and Rs.91,281/- towards refund of premium in respect of the deceased employee, the said payment appears to have been made in line with the Scheme that was contemplated for employees leaving service before completing their normal span. No doubt, similar conditions were made even in respect of the employees dying before the normal retirement date in Ext.P4 policy but that condition, as already noted above, stood modified by the endorsement noted above. In that view of the matter, I feel that the respondent Corporation may not be justified in denying the payments that were assured, subject to a maximum of Rs.3,50,000/- as contemplated under the payment of Gratuity Act, to the petitioner Society in respect of the deceased employee.
Resultantly, Exts.P9 and P11 orders of the respondent Corporation are quashed and the respondent Corporation is directed to effect the payment of the differential amount of Rs.82,719/-, together with interest thereon at 9% per annum from 07.07.2000 till the date of payment, to the petitioner society, forthwith. The writ petition is allowed as above.
A.K.JAYASANKARAN NAMBIAR JUDGE mns