Case Note & Summary
The Supreme Court allowed the appeal filed by the complainant, Ashatai w/o Anand Duparte, against the order of the National Consumer Disputes Redressal Commission (National Commission) which had set aside concurrent findings of the District Forum and State Commission. The dispute arose from a personal loan of Rs. 2,00,000 taken by the appellant's husband, Anand Duparte, from Shriram City Union Finance Ltd. on 27 February 2015. The loan was secured by a group personal accident insurance policy issued by the respondent's sister concern, Shriram General Insurance Company Ltd. The borrower paid the insurance premium of Rs. 400 by demand draft and also paid processing charges of Rs. 2,120. However, the insurance policy was issued only on 30 March 2015, covering the period from 30 March 2015 to 29 March 2016. The borrower died on 17 March 2015, i.e., within 18 days of the loan. The finance company demanded repayment from the appellant, who sought recovery through the insurance policy. The District Forum allowed the complaint, holding that the finance company was negligent in delaying the policy, and directed that no recovery be made from the appellant, with compensation of Rs. 10,000 and costs of Rs. 3,000. The State Commission upheld this order. The National Commission, in revision, set aside the orders, holding that there was no evidence of premium payment or deduction from the loan account. The Supreme Court found that the National Commission had exceeded its limited revisional jurisdiction under Section 21(b) of the Consumer Protection Act, 1986, which permits interference only on grounds of lack of jurisdiction, illegality, or material irregularity. The Court noted that the finance company itself admitted in its revision petition that it had received the demand draft towards premium from the borrower. The Court also observed that the deduction of Rs. 2,120 was towards processing of the composite loan-cum-insurance transaction. Applying Section 64VB(2) of the Insurance Act, 1938, the Court held that risk is covered from the date of payment of premium, and since the premium was paid during the borrower's lifetime, the loan stood secured. The finance company's delay in obtaining the policy constituted deficiency of service. The Supreme Court restored the orders of the District Forum and State Commission, directing that no recovery be made from the appellant and that compensation be paid.
Headnote
A) Consumer Law - Revisional Jurisdiction - Section 21(b) Consumer Protection Act, 1986 - National Commission's revisional power is limited to cases where State Commission lacked jurisdiction, acted illegally or with material irregularity - The National Commission exceeded its jurisdiction by reappreciating evidence and reversing concurrent findings of fact without any jurisdictional error (Paras 3.1-3.3).
B) Insurance Law - Risk Coverage - Section 64VB(2) Insurance Act, 1938 - Risk is assumed from the date premium is paid - Where premium was paid by demand draft, the risk covered from date of payment - Finance company's delay in forwarding premium to insurer does not affect coverage (Paras 3.7-3.8).
C) Consumer Law - Deficiency of Service - Finance company obtaining insurance policy from its sister concern as part of composite loan transaction - Delay of about one month in obtaining policy after receipt of premium constitutes deficiency of service - Concurrent findings of District Forum and State Commission restored (Paras 3.5-3.6, 4).
Issue of Consideration
Whether the National Commission was justified in reversing concurrent findings of the District Forum and State Commission in exercise of its limited revisional jurisdiction under Section 21(b) of the Consumer Protection Act, 1986, and whether the respondent finance company was deficient in service for delaying the issuance of an insurance policy despite receipt of premium from the borrower.
Final Decision
The Supreme Court allowed the appeal, set aside the order of the National Commission dated 30.11.2018, and restored the orders of the District Forum and State Commission. The respondent finance company is directed not to recover any amount from the appellant towards the loan, and to pay compensation of Rs. 10,000 for mental agony and Rs. 3,000 as costs.
Law Points
- Consumer Protection Act
- 1986
- Section 21(b) - Revisional jurisdiction of National Commission is limited to cases of lack of jurisdiction
- illegality or material irregularity
- Insurance Act
- 1938
- Section 64VB(2) - Risk is covered from date of premium payment
- Deficiency of service - Delay in obtaining insurance policy by finance company amounts to deficiency
Case Details
Civil Appeal No. 3962 of 2019 (Arising out of SLP (Civil) No. 4925 of 2019)
Ashatai w/o Anand Duparte
Shriram City Union Finance Ltd.
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Nature of Litigation
Consumer complaint alleging deficiency of service by a finance company in delaying the issuance of an insurance policy after receipt of premium, resulting in denial of insurance coverage upon the borrower's death.
Remedy Sought
The appellant (complainant) sought a direction that the respondent finance company not recover the loan amount from her, and claimed compensation for mental agony and costs.
Filing Reason
The appellant's husband died shortly after taking a personal loan, and the finance company demanded repayment despite the loan being secured by an insurance policy for which premium had been paid; the finance company delayed obtaining the policy, thereby allegedly causing deficiency of service.
Previous Decisions
The District Consumer Disputes Redressal Forum, Nanded allowed the complaint on 27.02.2017, holding deficiency of service and directing no recovery and compensation. The State Consumer Disputes Redressal Commission, Mumbai dismissed the appeal on 19.09.2017. The National Commission allowed the revision petition on 30.11.2018, setting aside the concurrent orders.
Issues
Whether the National Commission was justified in reversing the concurrent findings of the District Forum and State Commission in exercise of its limited revisional jurisdiction under Section 21(b) of the Consumer Protection Act, 1986.
Whether the respondent finance company was deficient in service for delaying the issuance of the insurance policy despite receipt of premium from the borrower.
Whether the risk under the insurance policy was covered from the date of payment of premium under Section 64VB(2) of the Insurance Act, 1938.
Submissions/Arguments
The appellant argued that the loan was secured by an insurance policy, premium was paid, and the finance company's delay in obtaining the policy constituted deficiency of service; the loan should be recovered from the insurance company.
The respondent finance company contended that there was no evidence of premium payment or deduction from the loan account, and therefore no deficiency of service.
Ratio Decidendi
The National Commission, in exercise of its revisional jurisdiction under Section 21(b) of the Consumer Protection Act, 1986, can only interfere if the State Commission lacked jurisdiction, acted illegally, or with material irregularity. It cannot reappreciate evidence to reverse concurrent findings of fact. Under Section 64VB(2) of the Insurance Act, 1938, risk is covered from the date of payment of premium. Where a finance company receives premium but delays obtaining the insurance policy, it is guilty of deficiency of service.
Judgment Excerpts
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.
A perusal of the pleadings and record, would show that both these findings are factually incorrect.
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.
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 than the date on which the premium has been paid in cash or by cheque to the insurer.'
The revisional jurisdiction of the National Commission is a limited jurisdiction, to be exercised in case the State Commission lacked jurisdiction, or acted with illegality or material irregularity.
Procedural History
The appellant filed a consumer complaint before the District Consumer Disputes Redressal Forum, Nanded, which was allowed on 27.02.2017. The respondent appealed to the State Consumer Disputes Redressal Commission, Mumbai, which dismissed the appeal on 19.09.2017. The respondent then filed a revision petition before the National Commission under Section 21(b) of the Consumer Protection Act, 1986, which was allowed on 30.11.2018, setting aside the concurrent orders. The appellant filed the present civil appeal by special leave before the Supreme Court.
Acts & Sections
- Consumer Protection Act, 1986: Section 21(b)
- Insurance Act, 1938: Section 64VB(2)
