Ashatai vs Shriram City Union Finance Ltd.

CIVIL APPEAL NO.3962 OF 2019 (Arising out of SLP (Civil) No. 4925 of 2019)

Ashatai w/o Anand Duparte …Appellant

versus

Shriram City Union Finance Ltd. …Respondent

JUDGMENT

INDU MALHOTRA, J.

Leave granted.

1. The present Civil Appeal has been filed to challenge the Order

dated 30.11.2018 passed in Revision Petition No. 472 of 2018

by the National Consumer Disputes Redressal Commission Signature Not Verified Digitally signed by MUKESH KUMAR (hereinafter referred to as “the National Commission”). Date: 2019.04.16 13:42:58 IST Reason: 1

2. The factual matrix in which the present case has been filed is

as under :

2.1. The Complainant/Appellant’s husband Late Anand

Duparte had obtained a personal loan of Rs. 2,00,000/­

on 27.02.2015 from the Respondent – Finance

Company.

The personal loan was advanced on 27.02.2015 after

executing the loan agreement, and completing all legal

formalities.

The Respondent – Finance Company secured the loan

by issuance of an insurance policy by its sister concern

i.e. M/s Shriram General Insurance Company Ltd., on

behalf of the Borrower.

In the Cover Note of the said policy, the Insured was

shown as: M/s Shriram City Union Finance Ltd. i.e. the

Respondent – Finance Company.

The insurance policy was a Group Insurance Policy

issued to various borrowers, including the Appellant’s

husband, whose name was at Serial No. 263 of the list. 2.2. The loan was to be serviced by the Appellant’s husband

in 48 monthly instalments of Rs. 7,933/­ each. The 1 st

loan instalment of Rs. 7,933/­ was paid on 07.03.2015

vide Cheque No. 433931.

2 2.3. The Appellant’s husband admittedly paid the premium

of the insurance policy. The Respondent – Finance

Company received a Demand Draft of Rs. 400/­ from

the Appellant’s husband towards the insurance

premium. The Group Insurance Policy was issued from

30.03.2015 to 29.03.2016.

2.4. On 17.03.2015 i.e. within 18 days after obtaining the

loan, the Appellant’s husband suddenly passed away. 2.5. The Respondent – Finance Company issued a notice to

the Appellant for payment of the loan instalments. 2.6. The Appellant requested the Respondent – Finance

Company to recover the loan through the insurance

policy.

2.7. A Legal Notice dated 16.12.2015 was addressed by the

Appellant to the Respondent – Finance Company,

requesting that the loan amount be recovered from the

Insurance Company.

2.8. The Respondent – Finance Company replied to the Legal

Notice on 29.01.2016, and denied having received the

Demand Draft of Rs. 400/­ from the deceased husband

of the Appellant. It was further contended that the

amount of Rs. 2,120/­ was deducted from the loan

amount towards processing fee and stamp charges.

3 2.9. The Appellant filed a Consumer Complaint before the

District Consumer Disputes Redressal Forum, Nanded. The Appellant submitted that after the loan was

sanctioned on 27.02.2015, the amount was credited to

the loan account after deducting the insurance

premium. The Respondent – Finance Company obtained

the insurance policy from its sister concern on

30.03.2015. Had the insurance policy been issued when

the loan was advanced, the amount would have been

recovered through the insurance policy. There was

therefore a deficiency of service by the Respondent –

Finance Company in delay in obtaining the insurance

policy from its sister concern. The Respondent –

Finance Company was not entitled to recover the loan

from the Appellant.

The Appellant prayed that the Respondent – Finance

Company be restrained from recovering the loan

amount from her, since the recovery was wrong and

unreasonable, and prayed for payment of compensation. 2.10. The District Forum allowed the Consumer Complaint

filed by the Appellant vide Order dated 27.02.2017. It

was held that since the Appellant’s husband had paid

4 the 1st loan instalment on 07.03.2015, it could be

presumed that all the loan formalities had been

completed by that date. This proved that the Appellant’s

husband had paid the insurance premium soon after

the loan was sanctioned. The Respondent – Finance

Company had been negligent in obtaining the policy

late, since it had forwarded the premium amount to the

Insurance Company after a delay of about 1 month. As per Section 64 VB (2) of the Insurance Act, 1938 1

the risk was covered from the date of payment of

insurance premium.

The District Forum held that there was deficiency of

service on the part of the Respondent – Finance

Company. It was ordered that the Respondent – Finance

Company shall not recover any amount from the

Appellant towards the loan obtained by her deceased

husband; and ordered compensation of Rs. 10,000/­

towards mental agony, and Rs. 3,000/­ towards Costs.

1 Section 64VB (2) – For the purposes of this section, in the case of risks for which premium can be ascertained in advance, the risk may be assumed not earlier than the date on which the premium has been paid in cash or by cheque to the insurer.

Explanation – Where the premium is tendered by postal money­order or cheque sent by post, the risk may be assumed on the date on which the money­order is booked or the cheque is posted, as the case may be.

5 2.11. The Respondent – Finance Company challenged the

Order of the District Forum before the State Consumer

Disputes Redressal Commission, Mumbai. The State Commission dismissed the Appeal vide

Order dated 19.09.2017. It was held that since the

insurance premium was deducted from the loan

account of the Appellant’s husband, the District Forum

had rightly allowed the Consumer Complaint. 2.12. Aggrieved by the Order of the State Commission, the

Respondent – Finance Company filed a Revision Petition

before the National Commission u/S. 21 (b) of the

Consumer Protection Act, 1986.

The National Commission set aside the Order passed

by the State Commission, and allowed the Revision

Petition filed by the Respondent – Finance Company

vide Order dated 30.11.2018.

The National Commission held that the Appellant –

Complainant had taken a contradictory stand regarding

payment of the insurance premium in her Legal Notice

dated 16.12.2015. She had stated that a Demand Draft

of Rs. 400/­ was received by the Respondent – Finance

Company from her husband. However, there was no

document evidencing receipt of the said Demand Draft

6 by the Respondent – Finance Company towards

payment of premium.

It was further held that there was no evidence of any

deduction of the insurance premium from the loan

account either. The Respondent – Finance Company

could not be held to be negligent in rendering services. 2.13. Aggrieved by the final Order dated 30.11.2018 passed

by the National Commission, the Appellant has filed the

present Civil Appeal.

3. We have heard learned Counsel for both parties, and perused

the pleadings on record.

3.1. The National Commission, in exercise of its revisional

jurisdiction, has set aside the concurrent findings of the

District Forum and State Commission, by the impugned

Order dated 30.11.2018.

The revisional jurisdiction of the National Commission

is a limited jurisdiction,2 to be exercised in case the

State Commission lacked jurisdiction, or acted with

illegality or material irregularity. 3 Section 21(b) reads as follows :

“call for the records and pass appropriate orders in any consumer dispute which is pending before or has been decided by any State Commission where it appears to the National Commission that such State Commission has

2 Galada Power and Telecommunication Limited v. United India Insurance Company Limited & Anr., (2016) 14 SCC 161.

3 Rubi (Chandra) Dutta v. United India Insurance Co. Ltd., (2011) 11 SCC 269. 7

exercised a jurisdiction not vested in it by law, or has failed to exercise a jurisdiction so vested, or has acted in the exercise of its jurisdiction illegally or with material irregularity.” (emphasis supplied)

3.2. The National Commission has allowed the Revision

Petition of the Respondent – Finance Company on two

grounds; first, that the Appellant had failed to produce

any evidence to prove that the insurance premium was

paid to the Respondent – Finance Company; second,

that there was no evidence to prove that the Respondent

– Finance Company deducted the insurance premium

from the loan account.

3.3. A perusal of the pleadings and record, would show that

both these findings are factually incorrect. With respect to the first ground, the Respondent –

Finance Company in paragraph 4(c) of the Revision

Petition filed before the National Commission, has itself

admitted that it had received the Demand Draft from

the Appellant’s husband towards payment of the

insurance premium.

The relevant extract is set out herein below for ready

reference :

“That sometime in the month of March 2015, a request for availing the Personal Accidental Insurance Policy from Shriram General Insurance Company Limited (hereinafter referred to as the ‘Insurance Company’) was received 8 from Late Sh. Anand Duparte alongwith the Demand Draft towards the payment of the insurance premium, whereupon the same was forwarded to ‘Insurance Company’ and after carrying out their due diligence, the Group Personal Accidental Insurance Policy was thereon issued by ‘Insurance Company’.” (emphasis supplied)

Hence, the first ground on which the National

Commission has set aside the Order of the State

Commission is factually incorrect. 3.4. With respect to the second ground, the Respondent –

Finance Company has admitted that it had deducted an

amount of Rs. 2,120/­ towards processing of the loan,

and payment of stamp charges.

However, it was contended by the Respondent –

Finance Company that this deduction was not made

towards payment of the insurance premium.

A perusal of the documents shows that the

Respondent – Finance Company was providing a loan

facility to the borrowers, which was secured by an

insurance policy issued by its own sister concern viz.

M/s Shriram General Insurance Company Limited. It

was a composite inter­linked transaction. The Cover Note issued by M/s Shriram General

Insurance Company Limited, shows that the beneficiary

9 of the insurance policy is the Respondent – Finance

Company viz. M/s Shriram City Union Finance Ltd. The Cover Note further shows that the Group

Insurance Policy dated 30.03.2015 was issued to 280

borrowers, with the loan amounts mentioned against

their respective names.

Thus, the deduction of Rs. 2,120/­ from the loan

account was towards processing of the composite

transaction.

3.5. The deceased husband of the Appellant had fulfilled his

part of the transaction, by depositing Rs. 400/­ by way

of the Demand Draft towards the insurance premium,

and also the charges of Rs. 2,120/­ towards processing

of the loan transaction.

3.6. The Respondent – Finance Company however delayed in

forwarding the amount to the Insurance Company for

obtaining the insurance policy, which was issued on

30.03.2015 for the period 30.03.2015 to 29.03.2016. Hence, there was a clear deficiency of service by the

Respondent – Finance Company in delay in obtaining

the insurance policy from its sister concern. 3.7. Section 64VB(2) of the Insurance Act, 1938 provides

that :

“For the purposes of this section, in the case of risks for which premium can be ascertained in advance, the risk may be assumed not earlier 10 than the date on which the premium has been paid in cash or by cheque to the insurer.”

It is the admitted position that the deceased husband

of the Appellant had paid the insurance premium by a

Demand Draft in favour of the Insurance Company.

This has been acknowledged in paragraph 4(c) of the

Revision Petition filed by the Respondent – Finance

Company, as referred to above.

As a consequence, the risk would be covered from the

date of payment of the insurance premium. The loan

was secured from the date on which the insurance

premium was paid. The premium having been paid by

the Appellant’s husband during his life­time, the loan

was to be adjusted from the insurance policy. 3.8. The National Commission has erroneously set aside the

Order passed by the State Commission on factually

incorrect grounds.

The Appellant has made out a clear case of deficiency

of service on the part of the Respondent – Finance

Company.

4. In view of the aforesaid discussion, the Order dated

30.11.2018 passed by the National Commission in Revision

11 Petition No. 472 of 2018 is hereby set aside. The Civil Appeal

is allowed.

5. The Appellant – widow has been unnecessarily dragged

though legal proceedings on account of deficiency of service

by the Respondent – Finance Company. We deem it

appropriate to direct the Respondent – Finance Company to

pay Compensation of Rs. 50,000/­, and Costs of Rs.

25,000/­ to the Appellant.

All pending Applications, if any, are accordingly disposed of. Ordered accordingly.

.....................................J. (UDAY UMESH LALIT)

.…...............………………J. (INDU MALHOTRA)

New Delhi, April 16, 2019

12