LIC told to pay for employers' default

The Supreme Court today held that the Life Insurance Corporation would be liable to pay insured amounts even if employers did not deduct any premium from wages.

The court thus dismissed LIC's appeals against the judgments of some high courts and consumer forums which had fixed a liability on it if employers did not deduct premia from salaries.

A Bench consisting of Justice Ashok Bhan and Justice SB Sinha said the scheme was a tripartite agreement between LIC, an employer and an employee.

According to the arrangement, the employer will deduct the premium and pay it to the corporation. These cases arose when premia were not deducted and paid to concerned corporations.

The Supreme Court said the corporation, according to its letters to employers, had clearly thrust the responsibility to collect the premium on employers.

The employers had acted as agents of the corporation. Therefore, it could not say that "in the event of default on the part of the employer, it may get itself discharged from its contractual obligations in a cavalier manner".

The judgment further declared that the corporation could not be allowed to make employees suffer because of default by employers. "The corporation cannot be permitted to take advantage of its own wrong as also the wrong of its agent," the court said.

It added, "In any event, the employer is obliged to inform the employee that for some reason, he is not in a position to perform his obligation, whereupon, the employee could have paid the premium directly to the corporation."