Holding

LIC is liable to pay the insurance claim, with DESU deemed its agent and the endorsement held invalid.

Summary

The Life Insurance Corporation (LIC) offered a Salary Savings Scheme under which Delhi Electric Supply Undertaking (DESU) deducted insurance premiums from its employees' salaries and remitted them to LIC. DESU failed to remit premiums for two months, after which an employee died and his widow claimed the policy benefit, which LIC denied on the ground of non‑payment. The State Consumer Commission ordered DESU to pay the claim and absolved LIC; the National Commission affirmed. On appeal, the Supreme Court held that DESU was an agent of LIC under Section 182 of the Contract Act, not an insurance agent, and therefore LIC remained liable for the policy despite the employer's default. The Court also found the endorsement requiring the employee to inform LIC of non‑remittance to be impracticable and inconsistent with the scheme, and invoked Article 142 and Order 41 Rule 33 to substitute LIC for DESU and award interest and costs.

Issues considered

Whether DESU acted as an agent of LIC for premium collection under the Contract Act.
Whether LIC is liable for the policy despite the employer's failure to remit premiums.
Whether the Salary Savings Scheme endorsement imposing a duty on the employee is valid.
Whether the Consumer Protection Act and Article 142 empower the Court to modify the lower courts' orders.

Legislation cited

Code of Civil Procedure, 1908s. Order 41 Rule 33
Constitution of Indias. Article 142
Consumer Protection Act, 1986s. 18
Indian Contract Act, 1872s. 182, s. 185
Insurance Act, 1938s. 42
Life Insurance Corporation Act, 1956s. 49

Subjects

Agency lawInsurance liabilityConsumer Protection ActSalary Savings SchemeArticle 142Contract ActPremium non‑remittanceInterest award

Judgment

DELHI ELECTRIC SUPPLY UNDERTAKING A
v.
-;?' BASANTI DEVI AND ANR.

SEPTEMBER 28, 1999

[S. SAGHIR AHMAD AND D.P. WADHWA, JJ.] B

Life Insurance Corporation A_ct, 1956 : Section 49.

Insurance Act, 1938 : Section 42.

Life Insurance Corporation of India (Agents) Regulation, 1972 C
Regulation 3(6), 4 and 5.

Consumer Protection Act, 1986 : Section 18.

Contract Act, 1872 : Sections 182 and 18~Agent-Scope of power. ·
D
Life Insurance Corporation-'Salary Savings Scheme'-Employee of
DESU-Policy taken under the Scheme-Premium deducted by DESU but
not remitted to LIC"-Death of employee-Widow's claim under the
policy-Repudiation by LIC-<:omplaint before State Consumer Forum-
Direction by Forum to DESU to make payment to the widow and LIC ·
absolved of the liability-Order of State Forum affirmed by National Con- E
sumer Forum-Appeal before Supreme Court-Held, L1C was wrongly dis-
charged of its liability under the policy-Held DESU was agent of LIC not
under the Insurance Regulations but under Section 182 of the Contract
Act-Direction to LIC to make payment under the policyCosts imposed on
~u F
Constitution of India, 1950 :

Article 142-Supreme Court of India-Doing complete justice to the
parties-Order passed for
G
Code of Civil Procedure, 1908: Order 41-Rule 33-Applicability of

Life Insurance Corporation (LIC) floated a "Salary Savings
Scheme". The Scheme provided that the employer was to deduct premium
from the salary of the employee and remit the same to the LIC. No
individual premium notice was to be given by the LIC to any employee H
219
220 SUPREME COURT REPORTS [1999) SUPP. 3 S.C.R.

A and no receipt was to be given to the employee for the premium received.
It was also provided that in case any employee leaves the employment or
if there was any change in the staff, the employer would inform the LIC.
In case any employee had discontinued with the Scheme or had been
terminated the employer was to notify this fact to the LIC and thereafter
B employer was not responsible for collecting the premiums. An employee
in the Scheme was kept ignorant of the happenings between the LIC and
DESU except that he was to be made aware of deduction of premium from
his salary every month. In all the transactions the employer was to act '·
as agent of the employees and not as agent of the LIC.

C An employee of Delhi Electric Supply Undertaking (DESU), the
husband of the respondent, took an Insurance Policy under the aforesaid
Scheme on January 28, 1992 for a sum of Rs. 50,000 and paid premiums
for two months to the LIC. Premium for the third month was deducted
by DESU from the salary of the employee and remitted to the LIC.
D However, premium deducted for subsequent two months by DESU was
not re.mitted by it to the LIC. In the meantime, the employee died on
August 17, 1992 and the widow's claim under the policy was repudiated
by the LIC on the ground that the policy has lapsed since default had
been committed in payment of premium. The employee's widow filed a
complaint under Section 18 of the Consumer Protection Act, 1986 before
E the State Commission which directed DESU to pay a sum of Rs. 50,000
and interest at the rate of 15% per annum from December 17, 1992 till
the date of payment. However, it absolved the insurer, LIC, of any liability.
On appeal, the National Commission affirmed the order passed by the
State Commission. In appeal to this Court by DESU, a Circular titled
F "Salary Savings Scheme Endorsement" was brought to the notice of this
Court the provisions whereof were in conflict with the terms of the scheme.
It provided that when an employee leaves the employment of the employer
or his premium ceased to be collected and/or remitted to the LIC this
fact should be intimated by the employer to the LIC. In such a case
premium was payable with an extra charge.
G
Disposing the appeal, this Court

HELD : 1. In the circumstances of the case Life Insurance Corpora-
tion was wrongly discharged of its liability under the insurance policy
H taken out by the employee. [230-E]
- DELHI ELECTRIC SUPPLY UNDERTAKING v. BASANTI DEVI 221

2. The Salary Savings Scheme Endorsement is in conflict with the A
terms of the Scheme. Considering the conditions as to how premium is to be
deducted from the salaries of the employees and remitted to the LIC by
DESU by one cheque for all the employees with the reconciliation statement
it is not possible for any employee to know if the amount of the premium
deducted from his salary has been remitted or not. An employee is not being
given any separate premium notice nor is he given any receipt for the
B
premium received. If a condition is now placed on the employee that it is he
who is to intimate the LIC ifthere is no remittance of the premium deducted
by DESU it will be too onerous a condition to be of any validity. Considering
the Scheme, such a condition cannot be imposed on an employee. It is
impracticable. A purposive interpretation has to be given to the endorse- c
ment. Since payment of premium after deducting from the salary of the r
employees is between DESU and LIC, it will not be for the employee to
intimate the LIC about non-remittance of the premium. [229-D-E-F-G]

3. It is a matter of common knowledge that Insurance companies D
employ agents. When there is no insurance agent as defined in the Regula-
tions and the Insurance Act, general principles of the law of agency as
contained in the Contract Act are to be applied. In the present case, DESU
is not procuring or soliciting any business for the LIC. DESU is not an
insurance agent within the meaning of Insurance Act and the Regulations
but DESU is certainly an agent as defined in Section 182 of the Contract E
Act. Mode of collection of premium has been indicated in the scheme itself
and employer has been assigned the role of collecting premium and remit-
ting the same to LIC. As far as employee as such is concerned, employer
will be agent of the LIC. [232-A; B; CJ
F
4. Under Section 185 no consideration is necessary to create an
agency. In this case, there was no obligation cast on the employee to pay
premium directly to LIC. Under the agreement between LIC and DESU,
premium was payable to DESU who was to deduct every month from the
salary of employee and to transmit the same to LIC. DESU had, therefore,
implied authority to collect premium from the employee on behalf of LIC. G
There was, thus, valid payment of premium by the employee. Authority of
DESU to collect premium on behalf of LIC is implied. In any case, DESU
had ostensible authority to ~.IJllect premium from the employee on behalf of
LIC. So far as the employee is concerned DESU was agent of LIC to collect
premium on its behalf. Though in the proforma letter written by DESU to H
222 SUPREME COURT REPORTS [1999] SUPP. 3 S.C.R.

A LIC it is mentioned that DESU would be an agent of its employee and not
that of the LIC but this understanding between the LIC and DESU was not
communicated or made known to the employee. For employee of DESU,
therefore, DESU had implied authority as an agent of LIC to collect
premium on its behalf and then pay to LIC. There is nothing on the record
to show that the deceased employee was ever made aware of the fact that
B DESU was not acting as agent ofLIC. Now it could he said that DESU would
not be liable as an agent of its principal, i.e., LIC and also it was rendering
service of collecting the premium and remitting the same to LIC free of any
cost to the employee. As to what is the arrangement between the LIC and
DESU, the employee is not concerned. In these circumstances DESU cannot
C perhaps be held liable under the Act. The widow of the deceased did not
pursue the remedy against LIC. However she can not be left high and dry in
this legal rigmarole when it is clear that as far as employee was concerned
he did pay the premium and it was the fault of the agent of LIC. i.e. DESU
in not remitting the premium in time. In these circumstances LIC was
D wrongly discharged of its liability under the insurance policy taken out by
the employee. [232-D-E-F; 233-C-D-E-F-G]

Harshad J. Shah & Anr. v. LIC of Indif,l & Ors., [1997] 5 SCC 64,
distinguished.

E State of Orissa v. Divisional Manager, LIC & Anr., [1996] 8 SCC 655,
referred to.

5. Under Article 142 of the Constitution of India this Court in
exercise of its jurisdiction may pass such decree or make such order as
F is necessary for doing complete justice in any case or matter pending
before it. In the present case all the parties are before this Court. In order
to do complete justice between the parties without ignoring the substantive
rights of any of the parties conferred upon it by any law_it is necessary
to pass an appropriate order. Further strength can also be drawn from
the provisions of Rule 33 of Order 41 of the Code of Civil Procedure.
G Conditi\IDS as laid in provision of Order 41 Rule 33 are satisfied in the
present case. It is directed that LIC shall pay to the widow of deceased
employee the insurance amount of Rs. 50,000 with interest at the rate of
15% per annum from December 17, 1992 till payment, thus substituting
Life Insurance Corporation of India for Delhi Electric Supply Undertak-
H ing, as ordered by the State Commission and upheld by the National
DELHI ELECTRIC SUPPLY UNDERTAKING v. BASANTI DEVI [D.P. WADHWA, J.] 223

Commission. For suffering which the widow of deceased had to undergo A
for the default committed by DESU in not remitting the premium to LIC,
it is directed that DESU will pay Rs. 25,000 towards cost of these proceed-
ings. (234-C; 236-H; 237-A-B-C; 235-E-FJ

Supreme Court Bar Association v. Union of India, [1998] 4 SCC 409
and Mahant Dhangir & Anr. v. Madan Mohan & Ors., [1987) Supp. SCC B
528, relied on.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 6113 of
1995.

From the Judgment and Order dated 13.1.95 of the National Con-
c
sumer Disputes Redressal Commission, New Delhi in FA. No. 129 of 1994.

R.K. Maheshwari for the Appellant.

Ranjan Mukherjee for the Respondents. D
Subodh Markandaya, R.N. Sharma, Ms. Feroza Hano and Ms. Chitra
Markandaya for Insurance Co. for the Respondent.

The Judgment of the Court was delivered by
E
D.P. WADHWA, J. 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,
F
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 G
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.

LIC floated a "Salary Savings Scheme" under which Bhim Singh, an H
224 SUPREME COURT REPORTS [1999] SUPP. 3 S.C.R.

A employee of DESU took an insurance policy for an amount of Rs. 50,000
with the UC. 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 UC. It appears that premium for the subsequent
B 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 UC of the death of her
husband and requested for payment of the amount due under the policy.
1
LIC disclaimed any liability for payment under the policy as the instalments
C of premium after June, 1992 were not received by it. UC, 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 Commis-
sion against LIC and DESU with the result as aforesaid.

D 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 :

E "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 fro111 their pay and remitted to us once a
month.
F
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 repre-
G
sentatives 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
H Corporation by one cheque by the employer. This ensures, for the
DELHI ELECTRIC SUPPLY UNDERTAKJNG v. BASANTI DEVI [D.P. WADHWA, J.j 225

employee regular payment, monthly, of his premiums at conces- A
sional 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 make 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 B
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 :
c
"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.
D
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 '.he cooperation by
E
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 F
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? G

Yours very truly,

(Branch Manager)"

The employer in response has to reply as per the specimen in the brochure,, H
226 SUPREME COURT REPORTS [1999) SUPP. 3 S.C.R.

A relevant paras of which we quote :
"Dear Sir,

Re. : Salary Savings Scheme
P.A. Code No ..........
B
In order to make the benefits of your Salary Savings Scheme
available to our employees, we agree to make the pay roll deduc-
tions authorised in writing by our employees, in amounts sufficient
to pay the premiums included under your Salary Savings Scheme.

c 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
D 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......... .
E
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.
F
Yours truly

Signature of employer"

Thereafter an acceptance letter is issued by the Branch Manager.
G 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 :

H "(a) The employer will receive list of premiums to be deducted
DELHI ELECTRIC SUPPLY UNDERTAKING v. BASANTI DEVI [D.P. WADHWA,J.] 227

called as demand invoice in duplicate each month on the A
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.
B
(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.
c
(e) The Corporation will make changes in the invoice based on
the information received from the employer regarding Trans-
fer in, Transfer out and Exits.

(f) Deductions made in each months will have to be remitted to D
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 send it along with the copy of invoice with Recon-
ciliation Statement drawn in the form suggested in ( d) above
to the appropriate Branch Office. While checking out state- E
ment 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 F
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 imme-
diately as soon as they occur. The employer need not wait to
incorporate those in the Invoice. The changes communicated
G

-._ to us through invoice are received date and the names of
,--
employees continue to appear in the wrong invoice in the
meanwhile." H
228 SUPREME COURT REPORTS [1999] SUPP. 3 S.C.R.

A After the Scheme is thus accepted as applicable to the employees a
letter is addressed by the employer to each of the employee informing him
of the Scheme and telling him as under :

"Realising that an adequate savings and protection scheme will
mean so much to you and your family we have arranged for the
B benefits of the Salary Savings Scheme of the Life Insurance Cor-
poration of India for all employees who desire its privilege. The
premium will be automatically deducted from your Salary once a
month and remitted to the Life Insurance Corporation."

C It is, thus, the sole responsibility of DESU to collect premium from all the
employees and remit the same by means of one cheque. A reconciliation
statement is also to be sent in the form prescribed by the LIC. No
individual premium notice is to be sent by LI C to any employee and no
receipt is to be given to him for the premium received. It is the DESU
-
which is to inform LIC of all the changes in the staff as soon as they occur,
D so also the fact when any employee leaves the service of DESU. An
employee is kept ignorant of the happenings between LIC and DESU
except he is made aware of deduction of premium from his salary every
month.

We have also been shown a circular titled 'Salary Savings Scheme
E Endorsement', which is as under :

"This policy having been issued under the Corporation's Salary
Savings Scheme, it is hereby, declared that the instalment premium
shall be payable at the rate shown in the schedule of the policy so
F long only as the life assured continues to be an employee of his
present employer, whose name is stated in proposal and premiums
are collected by the said employer out of the salary of the employee
and remitted to the Corporation without any charge. In the event
of the Life Assured leaving the employment of the said employer
or the premium ceasing to be so collected and/or remitted to the
G Corporation, the Life Assured must intimate the fact to the Cor-
poration and in the event of the Salary Savings Scheme being
withdrawn from the said employer, the Corporation shall intimate
the fact to the Life Assured and all premiums falling due on and
after the date of his leaving employment of the said employer, or
H cessation of collection of the premiums and remittance thereof in
DELHI ELECTRIC SUPPLY UNDERTAKING v. BASANTI DEVI [D P. WADHWA, J.] 229

the manner aforesaid, or withdrawal of the Salarr Savings Scheme A
as the case may be, shall stand increased by the imposition of the
additional charges for the monthly payment that has been waived
under the Salary Savings Scheme at 5% of the premium exclusive
of any premium charged for double Accident benefits or extended
Penp_anent Disability Benefits and any other extra premiums B
charge.

During the period in which premium is remitted to the Cor-
poration through the employer, the instalment, premium will be
deemed to fall due on the 20th day on each month instead of the
due date within mentioned." C

The endorsement shows that the premium deducted by DESU from
the salaries of the employees and remitted to. LIC is without any charge.
When the employee leaves the employment of the said employer or his
premium is ceased to be collected and/or remitted to the LIC this fact is D
to be intimated by the employee to the LIC. When the Scheme (Salary
Savings Scheme) is withdrawn it is the LIC which intimates that fact to the
employee whose life has been insured. Then premium is payable with an
extra charge. This endorsement is in conflict with the terms of the Scheme
as spelled out in the Brochure. Considering the conditions as to how
premium is to be deducted from the salaries of the employees and remitted E
to the LIC by the DESU by one cheque for all the employees with the
reconciliation statement it is not possible for any employee to know if the
amount of the premium deducted from his salary has been remitted or not.
An employee is not being given any separate premium notice nor is he
given any receipt for the premium received. If a condition is now placed F
on the employee that it is he who is to intimate the LIC if there is no
remittance of the premium deducted by DESU it will be too onerous a
condition to be of any validity. Considering the Scheme such a condition
cannot be imposed on an employee. It is impracticable. A purposive
interpretation has to be given to the endorsement and it has to be held that
since payment of premium after deducting from the salary of the employees G
is between DESU and LIC, it will not be for the employee to intimate the
LIC about non remittance of the premium .

.In Harshad, J. Shah and Another v. L.I.C. of India and Others, [1997]
5 SCC 64 this Court referred to Halsbury's Law of England, Volume 25, H
230 SUPREME COURT REPORTS [1999] SUPP. 3 S.C.R.
•.-.
A page 254, para 460, whish is as under :
"Under the law governing contracts of insurance the premium
may be paid by the assured to the insurers or to an insurance agent
acting on behalf of the insurers and if the agent has authority to
receive it the payment binds the insurers. The authority need not
B be an express authority; it may be implied from the circumstances."

In this case premium was collected by the agent, who was not 1authorised
to do so a~d did not deposit the same in turn with the LIC within the
prescribed period. On August 9, 1987 the insured met with a fatal accident
c and he died the same day. On the following day, i.e., August 10, 1987, the
amount of the premium was deposited by the agent with the LIC. The claim ,.,.
was repudiated by the LIC on the ground that the policy had lapsed on
account of non-payment of the premium. The matter having come in appeal
from the order of the National Commission this Court upheld the conten-
tion of the LIC that the agent was not authorised to collect tpe premium
D
on behalf of the LIC as the letter of his appointment as well as Regulation
8( 4) of the Life Insurance Corporation of India (Agents) Regulations, 1972
expressly prohibited the agent from collecting the premium on behalf of
the LIC. When it was submitted that the LIC was liable on the basis of
doctrine of apparent authority of the agent to collect premium and reliance
E was placed on Section 237 of the Contract Act this Court said that in the
complaint that was filed no such case was set up that LIC, by its conduct,
had induced the policy holders, including the insured, to believe that the
agent was authorised to receive the premium on behalf of the LIC and
further that there was no material on the record to support such a submis-
sion. In these circumstances this Court found itself unable to uphold the
F
claim of the appellant, the complainant.

We were also referred to another decision of this Court in State of
Orissa v. Divisional Manager, LIC and Another, [1996) 8 SCC 655. Facts of
the case have not been set out but what we can discern from the judgment
G is that a complaint was filed before the State Commission claiming
damages against the LIC. State Commission awarded the damages and
appeal was filed by the LIC before the National Commission where the
National Commission directed that the State of Orissa be impleaded as a
party respondent. National Commission thereafter awarded damages
H against the State of Orissa in the sum. of rupees one lakh. This Court

_,,.
DELHI ELECTRIC SUPPLY UNDERTAKING v. BASANTI DEVI (D.P. WADHWA, J.] 231

. accepted the plea of the State of Orissa that it was not liable under the A
Act as it was not rendering any serv::e for which it could be made liable.
This Court referred to the definition of 'services' as contained in Section
2(1)(o) of the Act and held that it was not in dispute that the claimant was
Government servant and was bound by the service conditions and that the
State was rendering him services free of charge and as such Government
servants have been excluded from the purview of the Act to claim any
B
damages against the State under the Act. The appeal of the State of Orissa
was, therefore, allowed.

LIC is a body corporate constituted under the Life Insurance Cor-
poration Act, 1956. It has framed regulations under Section 49 of the Act c
called the Life Insurance Corporation of India (Agents) Regulation, 1972.
In view of the amendment by the Life Insurance Corporation (Amend-
ment) Act, 1981 these Regulations are now known as Rules under the
authority of the Central Government. Under clause (b) of Regulation 3
'agent' means a person who has been appointed under Regulation 4.
Procedure for appointment and qualifications of the agents have been
D.
given in Regulations 4 and 5. Agent may be appointed for the purpose of
soliciting or procuring life insurance business for the LIC. A person cannot
be appointed as an agent unless he possesses a valid licence issued under
Section 42 of the Insurance Act, 1938. Section 42 talks of licensing of
insurance agent. Under this section the Controller or an officer authorised E
by him in that behalf is authorised to issue a license to an individual to act
as an insurance agent for the purpose of soliciting or procuring insurance
business. We are not concerned here with the qualifications or disqualifica-
tion of an insurance agent or other provisions regulating his employment
under the Insurance Act. LIC (Agents) Regulations prescribe the service
conditions and functions of the insurance agents. Under Regulation 8 every
F
agent shall solicit or procure new life insurance business which shall not
be less than the minimum prescribed in the regulations and shall endeavour
to conserve the business already secured.

In Harshad, J. Shah's case this Court was concerned with an G
insurance agent appointed under Section 42 of the Insurance Act and his
appointment under the Regulations for the purpose of soliciting or
procuring life insurance business for the LIC and the Regulations and his
conditions of service did not authorise him to collect premium on behalf
~~ H
232 SUPREME COURT REPORTS [1999] SUPP. 3 S.C.R.

A In the present case we are not concerned with the insurance agent.
It is not the case of the LIC that DESU could be permitted as an insurance
agent within the meaning of Insurance Act and the Regulations. DESU is
not procuring or soliciting any business for the LIC. DESU is certainly not
an insurance agent within the meaning of aforesaid Insurance Act and the
B Regulations but DESU is certainly an agent as defined in Section 182 of
the Contract Act. Mode of collection of premium has been indicated in the
scheme itself and employer has been assigned the role of collecting
premium and remitting the same to LIC. As far as employee as such is
concerned, employer will be agent of the LIC. It is a matter of common
knowledge that Insurance Companies employ agents. When there is no
C insurance agent as defined in the Regulations and the Insurance Act,
general principles of the law of agency as contained in the Contract Act
are to be applied.

Agent in Section 182 means a person employed to do any act for
. D another, or to represent other in dealings with third person and the person
for whom such act is done, or who is so represented, is called the principal.
Under Section 185 no consideration is necessary to create an agency. As
far as Bhim Singh is concerned, there was no obligation cast on him to pay
premium direct to LIC. Under the agreement between LIC and DESU,
premium was payable to DESU who was to deduct every month from the
E salary of Bhim Singh and to transmit the same to LIC. DESU had,
therefore, implied authority to collect premium from Bhim Singh on behalf
of LIC. There was, thus, valid payment of premium by Bhim Singh.
Authority of DESU to collect premium on behalf of LIC is implied. In any
case, DESU had ostensible authority to collect premium from Bhim Singh
F on behalf of LIC. So far as Bhim Singh is concerned DESU was agent of
LI C to collect premium on its behalf.

In the brochure which we have referred to above, there is no com-
munication from the LIC to the employee that DESU is not its agent. Here
agent does not mean insurance agent whose appointment is under the
G statute. When in para 7 of the letter addressed by the employer to the LIC
•
it is mentioned that the employer shall act as agent of the employees and
not agent of the LI C for any purpose, it is not referring to statutory agent
being the insurance agent. Insurance agent is of LIC who appoints it and
not of the employee in the present case. In the anncxure to the letter from
H the LIC to the employer all responsibility is cast on the DESU to collect
DELHI ELECTRIC SUPPLY UNDERTAKINGv. BASANTI DEVI [D.P. WADHWA, J.} 233
the premium from all the employees under the Scheme and to remit the A
same to LIC. Under the Scheme, there is no role of the insurance agent.
He does not bring any business for the LIC. Scheme is introduced by the
LIC itself.

We do not think decision of this Court in Harshad, J. Shah and B
Another v. L.I.C. of India and Others, [1997] 5 SCC 64 has any application
in the present case before us. Formation of the contract of insurance is
between LIC and the employee of DESU. Scheme has been introduced by
the LIC purely on business considerations and not for any particular
benefit of insurance conferred on the employee working in an organisation.
Though in the pro forma letter written by DESU to LIC it is .mentioned C
that DESU would be an agent of its employee and not that of the LIC but
this understanding between the Lie and DESU was not communicated or
made known to the employee. As far as employee is concerned he is told
that premium will be deducted from its salary every month and remitted
by DESU to UC under an agreement between LIC and DESU. For D
employee of DESU, therefore, DESU had implied authority as an agent
of LIC to collect premium on its behalf and then pay to LIC. There is
nothing on the record to show that Bhim Singh was ever made aware of
the fact that DESU was not acting as agent of LIC. Rather in the nature
of the scheme, the employee was made to believe that it is the duty of the
employer though gratuitously cast on him by the LIC to collect premium E
by deducting from the salary of each employee covered under the scheme
every month .and to remit the same to LIC by mean of the consolidated
cheque. Now it could be said that DESU would not be liable as an agent
of its principal, i.e., LI C and also it was rendering service of collecting the
premium and remitting the same to LIC free of any cost to employee. As F
to what is the arrangement between the LIC and DESU employee is not
concerned. In these circumstances DESU cannot perhaps be held liable
under the Act. But then the question arises if the widow of Bhim Singh
can be left high and dry in this legal rigmarole when it is clear that as far-
as Bhim Singh was concerned he did pay the premium and it was· the fault
of the agent of LIC, i.e., DESU in not remitting the premium in time. In G
these circumstances LIC was wrongly discharged of its liability under the
insurance policy taken out by Bhim Singh. Now LIC is not aggrieved of the
orders passed by the State Commission and the National Commission and
when DESU had been held li:able to pay an amount equivalent to the
insurance policy of Bhim Singh, Basanti Devi also felt satisfied and did not H
234 SUPREME COURT REPORTS [1999) SUPP. 3 S.C.R.

A pursue its remedy against LIC. All the three, i.e., DESU, LIC and Basanti
Devi are before us and we have heard learned counsel for the LIC as to
why LIC was not liable under the policy of insurance. Proceedings have
arisen under the Act, which was enacted to provide protection to the
interests of the consumers and under Section 3 provisions of the Act shall
B be in addition to and not in derogation of the provisions of any other law
for the time being in force. In these circumstances we do not think we
should deprive Basanti Devi of her right, which admittedly she has, holding
on the one hand DESU is not liable and on the other hand her not
challenging the order of the State Commission discharging LIC.
I

C Under.Article 142 of the Constitution of India this Court in exercise
of its jurisdiction may pass such decree or make such order as is necessary
for doing complete justice in any care or matter pending before it. In
Supreme Court Bar Association v. Union of India, (1998] 4 SCC 409 this
Court was considering the scope of Article 142. The question before it was
D whether the Supreme Court can while dealing with contempt proceedings
exercise power under Article 129 of the Constitution or under Article 129
read with Article 142 of the Constitution or under Article 142 of the
Constitution to debar a practicing lawyer from carrying on his profession
as lawyer for any period whatsoever. This Court explained its powers under
Article 142 as under : (Para 47).
E
"The plenary powers of this Court under Article 142 of the
Constitution are inherent in the Court and are complementary to
those powers which are specifically confmed on the Court by
various statutes though are not limited by those statutes. These
F powers also exist independent of the statutes with a view to do
complete justice between the parties. These powers are of very
wide amplitude and are in the nature of supplementary powers.
This power exists as a separate and independent basis of jurisdic-
tion apart from the statutes. It stands upon the foundation and the
basis for its exercise may be put on a different and perhaps even
G wider footing, to prevent injustice in the process of litigation and
to do complete justice between the parties. This plenary jurisdic-
tion is, thus, the residual source of power which this Court may
draw upon as necessary whenever it 'is just and equitable to do so
and in particular to ensure the observance of the due process of
H law, to do complete justice between the parties, while administer-
DELHI ELECTRIC SUPPLY UNDERTAKING v. BASANTIDEVI (D.P. WADHWA, J.] 235

ing justice according to law. There is no doubt that it is an A
indispensable adjunct to all other powers and is free from the
restraint of jurisdiction and operates as a valuable weapon in the
hands of the Court to prevent "clogging or obstruction of the
stream of justice". It, however, needs to be remembered that the
powers conferred on the Court by Article 142 being curative in
nature cannot be construed as powers which authorise the Court
B
to ignore the substantive rights of a litigant while dealing with a
case pending before it. This power cannot be used to "supplant"
substantive law applicable to the case or cause under consideration
of the Court. Article 142, even with the width of its amplitude,
cannot be used to build a new edifice where none existed earlier, c
by ignoring express statutory provisions dealing with a subject and
thereby to achieve something indirectly which cannot be achie_ved
directly. Punishing a contemner advocate, while dealing with a
contempt of court case by suspending his licence to practice, a
power otherwise statutory available only to the Bar Council of
D
India, on the ground that the contemner is also an advocate, is,
therefore, not permissible -in exercise of the jurisdiction under
Article 142. The construction of Article 142 must be functiorial!y
informed by the salutary purposes of the article, viz., to do complete
justice between the parties. It cannot be otherwise. As already
noticed in a case of contempt of Court, the contemner and the E
Court cannot be said to be litigating parties."

I_n the present case all the parties are before us which have been
heard. The order which we propose to make is in tune with the principles
laid by this Court in Supreme Court Bar Association case and in order to
F
do complete justice between the parties without ignoring the substantive
rights of any of the parties conferred upon it by any law.

In our approach we can also draw strength· from the provisions of
Rule 33 of Order 41 of the Code of Civil Procedure which is as under :
G
"33. Power of Court of Appeal - The Appellate Court shall have
power to pass any decree and make any order which ought to have
been passed or made and to pass or make such further or other
decree or order as the case may require, and this power may be
exercised by the Court notwithstanding that the appeal is as to part H
236 SUPREME COURT REPORTS (1999) SUPP. 3 S.C.R.

A only of the decree and may be exercised in favour of all or any of
the respondents or parties, although such respondents or parties
may not have filed any appeal or objection and may, where there
have been decrees in cross-suits or where two or more decrees are
passed in one suit, be exercised in respect of all or any of the
-
decrees, although an appeal may not have been filed against such
B decrees:

Provided that the Appellate Court shall not make any order
under Section 35-A, in pursuance of any objection on which the
· Court from whose decree the appeal is preferred has omitted or
C refused to make such order."

This provision was explained by this Court in Mahant Dhangir & Anr.
v. Madan Mohan & Ors., [1987) Supp. SCC 528 in the following words :

"The sweep of the power under Rule 33 is wide enough to deter-
D mine any question not only between the appellant and respondent,
but also between respondent and co-respondents. The appellate
court could pass any decree or order which ought to have been
passed in the circumstances of the case. The appellate Court could
also pass such other decree or order as the case may require. The
words "as.the case may require" used in Rule 33 of Order 41 have
E been put in wide terms to enable the appellate court to pass any
order or decree to meet the ends of justice. What then should be
the constraint. We do not find any. We are not giving any liberal
interpretation. The rule itself is liberal enough. The only constraint
that we could see, may be these : That the parties before the lower
F court should be there before the appellate Court. The question
raised must properly arise out of. the judgment of the lower court.
If these two requirements are there, the appellate Court could
consider any objection against any part of the judgment or decree
of the lower court. It may be urged by any party to the appeal. It
is true that the power of the appellate Court under Rule 33 is
G
discretionary. But it is a proper exercise of judicial discretion to
determine all questions urged in order to render complete justice
between the parties. The Court should not refuse to exercise that
discretion on mere technicalities." '

H Conditions as laid in provision of Order 41 Rule 33 are satisfied in
DELHI ELECTRIC SUPPLY UNDERTAKING v. BASANTI DEVI [D.P. WADHWA, J.J 237

the present case. When circumstances exist which necessitate the exercise A
of discretion conferred by Rule 33, the Court cannot be found wanting
when it comes to exercise its powers.

We, therefore, direct that LIC shall pay to Basanti Devi insurance
amount of Rs. 50,000 with interest at the rate of 15% per annum from
December 17, 1992 till payment, thus substituting Life Insurance Corpora- B
tion of India for Delhi Electric Supply Undertaking, as ordered by the State
Commission and upheld by the National Commission.

For suffering which Basanti Devi had to undergo for the default
committed by DESU in not remitting the premium to LIC we would direct
that DESU will pay cost of these proceedings, which we quantity at Rs. c
25,000.

The appeal stands disposed of accordingly.

T.N.A. Appeal disposed of.