IN THE CONSUMER DISPUTES REDRESSAL COMMISSION, KOTTAYAM

Dated, the 30^th day of October, 2024

Present: Sri. Manulal V.S. President

  Smt. Bindhu R.  Member

Sri.K.M.Anto, Member

C C No. 178/2024 (Filed on 21.05.2024)

O R D E R

Sri. Manulal V.S. (President)

The complaint is filed under Section 35 of the Consumer Protection Act 2019.

The case of the complainant is as follows:

The complainant is the life-assured person of Policy No. 00427083 with the opposite party and the father of the complainant, late P. Paul was the Policy proposer at the time of taking this insurance policy. The Policy proposer of this policy passed away on 04.06.2011. The complainant had informed the same to Muthoot Wealth Management Services (P) Ltd., which was the agent of the opposite party and through them, the complainant was making the payments regularly. They had collected all the required documents at that time.

All premium payment notices were sent to the complainant until 2017, after which the opposite party and their agent stopped. When the complainant inquired about this, the opposite party claimed they had gone paperless. This change led the complainant to miss some payments, resulting in additional interest and fines.

On 19.09.2019, the complainant emailed the Vice President of Customer Service of the opposite party reporting the lack of premium payment notifications. In their response, the opposite party stated that the complainant needed to change the policy ownership, assuming he was not the current owner of the policy.

 As per the certificate issued by the opposite party, the complainant is the life-assured person of the policy and he is entitled to the benefits of the policy. Instead of making necessary changes in their records for intimation about premium payments, they insisted on producing the Legal heir certificate of the deceased Policy proposer. The complainant is the policy owner by default after the death of the policy proposer.

From the year 2020 onwards, opposite party resumed sending premium payment notices to the address of the complainant's father with a mala fide intention by changing the complainant's father as the policyholder from the status of policy proposer without giving any proper notice or intimation to the complainant. The opposite party intended to prevent the complainant from making timely premium payments and thereby disentitle him from policy benefits.

The maturity date of the above-mentioned policy was 31.05.2023. The complainant had submitted all necessary details, including the NEFT form, a cancelled cheque and a copy of the PAN card on 18.04.2023 prior to the maturity date. However, they kept insisting on the legal heir certificate of the proposer.

On 23.07.2023 the complainant submitted a complaint before the Insurance Regulatory and Development Authority of India (IRDAI). With a malafide intention, the opposite party sent an account payee cheque in the name of the policy proposer, knowing that the policy proposer was no more. The opposite party was sure that the policy proposer was no more and that there was no chance for the complainant to encash the cheque they issued. This is a clear wilful negligence, deficiency in service and unfair trade practice.

The complainant, upon non receipt of the policy amount, even after repeated requests, on 21 August 2023, filed a complaint before the Insurance Ombudsman. On 25.03.2024, the Insurance Ombudsman ordered the opposite party to pay the complainant ₹ 4,21,609.78/- (Rupees four lakh twenty one thousand six hundred nine and seventy eight paise only) against the policy amount with interest at 8.75% per annum without considering the compensation or cost, citing the same is not within its power. The opposite party credited the policy amount to the complainant by virtue of the above award from the insurance ombudsman. But to take revenge on the complainant, the opposite party holds 20% TDS on the interest amount claimed to have been paid by them. Delay in the payment of the policy maturity amount was due to the malicious act of the opposite party, hence as per the order of the insurance ombudsman, the opposite party is liable to pay any fine or interest attached to the policy maturity amount without unauthorized deduction. So, deducting TDS from the interest amount payable to the complainant is unlawful. Deduction of TDS is applicable only when the opposite party pays the interest amount on their own without any interference or direction of any lawful authority. To get the refund of TDS, the complainant again has to go through the hassle of the income tax return. The complainant was entitled to the policy amount from the day of its maturity. The ill-motivated intentions of the opposite party caused mental agony and hardship to the complainant, whom the opposite party is liable to compensate in accordance with the provisions provided under the Consumer Protection Act. The deliberate and unlawful withholding of the maturity amount is a deficiency in service by the opposite party. This irresponsible and unlawful act of the opposite party caused a loss of ₹ 1,00,000/-(Rupees one lakh only) to the complainant. Unlawful deduction of TDS from the interest amount payable to the complainant by the opposite party as per the order of the Insurance Ombudsman has to be paid back by the opposite party.

Hence, this complaint is filed by the complainant praying for an order to direct the opposite party to pay an amount of              ₹ 1,00,000/- (Rupees one lakh only) towards the loss to the complainant and to pay an amount of ₹ 1,00,000/- (Rupees one lakh only) towards compensation to the complainant. It is further prayed to direct the opposite party to pay an amount of                 ₹ 6,185.54/- (Rupees six thousand one hundred eighty five and fifty four paise only) towards the unlawful deduction in the name of TDS to the complainant.

Upon notice from this Commission, the opposite party appeared before this Commission and filed a version contending as follows:

The allegations in paragraphs 1 to 9 are the allegations before the Insurance Ombudsman, which the Ombudsman considered and as admitted by the complainant, an award was passed by the Ombudsman. The allegations are only a repetition of the already awarded complaint before the Ombudsman and cannot be reconsidered before this Commission. As admitted by the complainant, the opposite party has already complied with the award of the Insurance Ombudsman.

The Insurance Ombudsman had directed the opposite party to pay the complainant the Maturity Benefit under the ICICI Pru Save'n'Protect Policy no. 00427083 and to pay the due amount of ₹ 4,21,609.78/- (Rupees four lakh twenty one thousand six hundred and nine and seventy eight paise only) with interest thereon @8.75% per annum.

        Towards the financial detriment of the complainant, the Ombudsman has held that he is entitled to interest at 2% over and above the bank rate as per Rule 17 (7) of the Insurance Ombudsman Rules, 2017, read with Proviso 14. 2. (iv) of the IRDAI Protection of Policy holders Interests Regulations 2017. The complainant has thus redressed his grievance and towards the financial loss suffered by the complainant, interest above the bank rate was also awarded.

The allegation in the complaint that the complainant had submitted the PAN card is false. The PAN Card of the complainant was not updated in the records of the company as he was not the policy holder/owner under the subject policy and in the absence of PAN, the opposite party has deducted TDS 20% on the interest amount awarded by the court and has paid the same to the Government. The complainant can take credit for the tax deducted while filing his income tax return. The opposite party has already paid an amount of ₹ 4,46,351.92/- (Rupees four lakh forty six thousand three hundred and fifty one and ninety two paise only) to the complainant, which includes the amount of                 ₹ 4,21,609.78/- (Rupees four lakh twenty one thousand six hundred nine and seventy eight paise only) and interest of ₹ 30,927.68/- (Rupees thirty thousand nine hundred twenty seven and sixty eight paise only) less a deduction of 20% TDS on the interest.

Despite receiving the amount with interest and having redressed his grievance, the complainant has again approached this commission, alleging deficiency in service. The Ombudsman already considered the alleged deficiency of service and an award was also passed, which was honored by the opposite party. The complainant is only trying to obtain unjust enrichment.

While deducting TDS, the opposite party only acted in accordance with the statutory provisions of the Income Tax Act. All payments made are subject to tax deduction at source (TDS) as per the prevailing Income Tax Laws. Section 194A of the Income Tax Act, 1961 outlines the provisions for deduction of tax at source on interest payments made to residents in India.

The Income Tax Act requires the payee to deduct TDS for all interest payments in excess of ₹ 5,000/- (Rupees five thousand only). The interest payable to the complainant is ₹ 30,927.68/- (Rupees thirty thousand nine hundred twenty seven and sixty eight paise only) and the opposite party is statutorily required to deduct TDS. The Income Tax Act does not provide any exception to interest on payments made under orders of the Ombudsman. No financial loss has been caused to the complainant by deducting the TDS, as the complainant can avail of the credit for the TDS deducted during the filing of the ITR return.

The allegation in the complaint alleging delay in payment is only a repetition of the allegation before the Ombudsman, for which the Ombudsman also awarded interest at 2% above the bank rate. The complainant cannot approach authorities one after the other and seek compensation and interest again and again for the same cause of action. The complainant is not entitled to any compensation for the delay in paying the maturity amount, as the said financial loss was already compensated by the Ombudsman by paying interest. The complainant is only trying to forum shop and obtain unjust enrichment, which should not be allowed. The complaint ought to be dismissed as cost.

The complainant filed proof affidavit in lieu of chief examination and exhibits A1 to A17 were marked from the side of the complainant. There is no oral evidence from the side of the opposite party. The documents produced by the opposite party are marked as Exhibits B1 and B2.

We would like to consider the following points on evaluation of the complaint, version and evidence on record.

1. Whether there is any deficiency in service or unfair trade practice on the part of the opposite party?
2. If so, what are the reliefs and costs?

For the sake of convenience we would like to consider the point number 1 and 2 together.

The specific case of the complainant is that he was the life assured under the policy ICICI Pru Save'n' Protect from 02.05.2003 and his father was the proposer. His father passed away on 04.06.2011. The policy was matured on 31.05.2023. Though the complainant had submitted all required documents for receiving maturity benefits, the opposite party sent Exhibit A14  account payee cheque towards the maturity benefit in his father's name.

Upon non receipt of the policy amount, he filed a complaint before the insurance Ombudsman vide Exhibit A15 complaint. The Insurance Ombudsman, by Exhibit A17 order, directs the opposite party to pay the complainant ₹ 4,21,609.78/- (Rupees four lakh twenty one thousand six hundred nine and seventy eight paise only) against the policy amount with interest @ 8.75% per annum without considering the compensation or cost, citing the same is not within the power of the Ombudsman.

According to the complainant, the opposite party credited the policy amount to the complainant by virtue of Exhibit A17 award by the insurance Ombudsman but to take revenge, the opposite party illegally deducted 20% TDS on the interest amount claimed to have been paid by them. The complainant alleges that the delay in payment of the policy maturity amount and the illegal deduction of TDS from the interest amount payable to the complainant is a deficiency in service and unfair trade practice on the part of the opposite party.

The complaint was resisted by the opposite party, contending that the Ombudsman had already considered the alleged deficiency of service, and an award was also passed, which was honored by the opposite party. The complainant is only trying to obtain unjust enrichment. The opposite party had only acted in accordance with the statutory provisions of the Income Tax Act while deducting TDS.

The first question to be answered in this case is whether, after passing the order by the insurance ombudsman, the remedy of filing a complaint before the District Commission is maintainable. It is undisputed that the Insurance Ombudsman has passed the Exhibit A17 award in favour of the complainant. According to the opposite party, the complainant is only trying to obtain unjust enrichment.

Hon'ble Kerala State Consumer Dispute Redressal Commission  In Life Insurance Cooperation vs.  G. Devadas (Appeal No. 844/2016 dated 14.03.2023) has held as under        "  9.  The appellants submitted that the District Commission should have considered the order dated 29.02.2016 of the Insurance Ombudsman (Exbt.B3) dismissing his complaint and that the respondent should not have approached the District Commission after the dismissal of the complaint by the Insurance Ombudsman. The learned counsel further submitted that the observations in the award were not considered by the District Commission.  In this connection, the following rules of the Insurance Ombudsman Rules are relevant here:

"16(2): If the recommendation of the Ombudsman is acceptable to the complainant, he shall send a communication in writing within 15 days of receipt of the recommendation, stating clearly that he accepts the settlement as full and final."

17(8): "The award of the Insurance Ombudsman shall be binding on the insurers…"

Thus, the award of the Insurance Ombudsman is binding on the insurer, whereas it is not so in the case of the complainant. The order of the Insurance Ombudsman is not binding on the complainant unless he agrees to the award passed by the Ombudsman. There is no case that the respondent accepted the award in writing as per Rule 16(2). He has the option to reject the award and seek other legal remedies.  Thus Ombudsman's award does not prejudice in any way, the complainant's right to seek legal remedy against the action of the insurers complained against, as per normal process of law. 

Moreover as per Section 3 of the Consumer Protection Act, 1986 (corresponding section 100 of Consumer Protection Act, 2019), the reliefs available to the consumer are in addition to and not in derogation of any other law for the time being in force.  The complainant has exercised this right and we do not find any illegality in filing the complaint before the District Commission despite a dismissal order by the Insurance Ombudsman.  Being a separate and independent proceeding, it was for the District Commission to decide whether to consider or accept any of the observations in the award. "

State Consumer Disputes Redressal Commission Punjab, in Hardish Sandhu vs New India Assurance Company (First Appeal No.813 of 2022   decided on 06.12.2023 ) has held as under

" 15. The complainant had raised the claim to the OPs for reimbursement but it was denied. Thereafter the complainant had approached the Insurance Ombudsman. The arguments raised by learned counsel representing the OP are that the remedy before the Insurance Ombudsman had already been availed and subsequently the complaint was filed before the District Commission which was not maintainable. The remedy was available under Article 226 of the Constitution of India by way of filing writ petition but said remedy was not availed. The same issue was there before the Hon'ble National Commission in the case titled as "Ravi Kumar Vs. United India Insurance Company Limited" 2020 NCJ 508 as well as before Delhi State Consumer Disputes Redressal Commission in case titled as "M/s Udit Safar Resorts Private Limited Vs. Oriental Insurance Co. Limited" 2018(4) CLT 613 as relied by learned counsel for the Appellant/Complainant.

In those cases also, after availing the remedy before the Insurance Ombudsman, the award was received. It was held in said cases that after passing of the award by the Insurance Ombudsman, the complaint was maintainable before the Consumer Court as the decision of the Insurance Ombudsman was not binding on the complainant and even thereafter also the complaint was maintainable. In said cases, it was also held that in case the complainant had accepted the amount out of compulsion, then also the complainant was not stopped from raising the issue for additional demand. In view of above, it is apparent that after approaching the Insurance Ombudsman, still the claim was maintainable before the District Commission". Therefore, we are of the opinion that this complaint is maintainable before this Commission.

Another question is to decide whether the complainant has succeeded in proving any deficiency in services or unfair trade practice on the part of the opposite party. It is proved by Exhibit A1, which is the photocopy of the ICICI Pru Save'n Protect policy, that the policy was issued by the opposite party in the name of Mr. Don Paul as the life assured. Exhibit A1 further proves that the opposite party has insured the life of the complainant for 20 years from 31.05.2003 to 31.05.2023. The maturity date of the policy is 31.05.2023. Exhibit A4 series proves that all the notices for the premium payment were sent by the opposite party to the complainant until 2017. Exhibit B1, which is the proposal form, proves that the proposer, P. Paul, proposed the name of the complainant as the life to be assured. Therefore, it is evident that the proposer, to take a life insurance policy from the opposite party in the name of the complainant, submitted Exhibit B1 proposal form with the opposite party.

On maturity of the Exhibit A1 policy, though the complainant had submitted all necessary details, including the NEFT form, a cancelled cheque and a copy of the Pan card on 18.04.2023, the opposite parties insisted on producing the legal heirship certificate of the proposer. On 08.07.2023, the opposite party vide Exhibit A13 e-mail demanded the legal heir certificate and passport to process the request of the complainant. Therefore, it is proved that even after accepting Exhibit B1 proposal form and issuing Exhibit A1 policy, the opposite party maintained their records incorrectly, listing the proposer in the B1 proposal form as the life assured under Exhibit A1 policy. This is an apparent deficiency in service on the part of the opposite party.

When the complainant submitted a complaint before the Insurance Regulatory and Development Authority of India, vide Exhibit A12, the opposite party issued Exhibit A14 account payee cheque in the name of the policy proposer. After demanding the legal heirship certificate of the deceased proposer, issuance of an account payee cheque in the name of the deceased proposer amounts to gross negligence on the part of the opposite party and amounts to deficiency in service. The insurance ombudsman has already found that the unreasonable and arbitrary stand taken by the opposite party in denying the complainant's claim is a classic example of gross deficiency of service. The complainant received the maturity benefit of the insurance policy with interest @ 8.75 %, i.e., including interest @ 2% over the bank rate by virtue of the A17 award by the insurance ombudsman. It is important to note that after obtaining insurance services from the opposite party, the complainant had to endure considerable difficulty, repeatedly approaching different authorities to receive the maturity benefit of the policy.

Due to the deficiency of service from the opposite party the complainant had to run pillar to post to obtain the benefit of the service availed by him from the opposite party by paying a consideration for the same. It is pertinent to note that the complainant is entitled to compensation for the deficiency in service on the part of the opposite party. However, in Exhibit A17, the insurance ombudsman did not allow compensation for the mental agony and incurring convenience costs to the complainant due to the deficiency of the opposite party, stating that the Ombudsman has no power to award such compensation. One of the relief sought by the complainant is compensation. As per section 31(d) of the Consumer Protection Act 2019, the District Consumer Dispute Redressal Commissions have the power to award compensation to the consumer for any loss or injury suffered by the consumer due to the negligence of the opposite party. Here, in the case on hand, due to the negligent act of the opposite party, the complainant suffered much mental agony and hardship. Therefore, we are of the opinion that the opposite parties are liable to pay compensation to the complainant under the provisions of the Consumer Protection Act 2019 for the deficiency of service on their part.

Another contention of the complainant is that the opposite party illegally deducted TDS on the interest amount. According to the opposite party, they have deducted TDS in accordance with the provisions of section 194 of the Income Tax Act.

The relevant part of the section is reproduced below, 194A. Interest other than "Interest on securities."

Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any income by way of interest other than income by way of interest on securities shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force"

The Honourable High Court of Kerala in W.P.(C)  Nos. 15133/2010, 15341 & 3275 of 2011 & 3060 of 2013( decided on  11th day of April, 2017) has held that" 26. To conclude, the court holds that interest accrued on an awarded compensation is a revenue receipt, subject to tax deduction under Section 194A(3)(ix) of the Act. But the computation of the interest should not be lump sum in the year the tax paid, rather, it should be spread even across from the year the claim arises till the year the compensation is paid."

In light of the above discussions, we allow this complaint in part and pass the following order.

1. We hereby direct the opposite party to pay a compensation of ₹ 25,000/- (Rupees twenty five thousand only) to the complainant for the deficiency in service on their part.
2. We hereby direct the opposite party to pay ₹ 3,000/- (Rupees three thousand only) as the cost of this litigation.

Pending Application(s), if any, are automatically disposed of as being rendered infructuous.

Pronounced in the Open Commission on this the 30^th day of October, 2024

Sri. Manulal V.S, President  Sd/-

    Smt. Bindhu R.  Member    Sd/-

Sri. K.M. Anto, Member      Sd/-

APPENDIX :

Exhibits from the side of the Complainant :

A1    -       Copy of policy certificate issued by the  opposite party 

                dated 03.06.2003.

A2    -       Copy of welcome letter from  opposite party  dated

                03.06.2003.

A3    -       Copy of first payment receipt issued by  opposite party 

                dated 31.05.2003.

A4    -       Copy of premium payment notice and receipts issued

by  Muthoot Wealth Management Service (P) Ltd.,

A5    -       Copy of postal receipt dated 13.07.2019.

A6    -       Copy of e-mail sent by Akhil Kumar dated 21.08.2019.

A7    -       Copy of e-mail sent to the  opposite party dated

19.09.2019.

A8    -       Copy of e-mail sent by the opposite party dated

23.03.2020.

A9    -       Copy of premium payment receipt issued by the 

opposite party  dated 03.01.2020.

A10  -       Copy of premium payment notice and receipt issued by

                the  opposite party  in years 2020, 2021 and 2022.

A11  -       Copy of acknowledgment about receiving account

                details and NEFT form dated 18.04.2023.

A12  -       Copy of complaint before the Insurance Regulatory and

Development Authority of India dated 23.07.2023.

A13  -       Copy of the e-mail reply received from the  opposite

                party  dated 07.08.2023.

A14  -       Copy of the cheque issued by the  opposite party dated

                09.08.2023.

A15  -       Copy of the complaint filed before the Hon’ble   

                Insurance Ombudsman, Ernakulam dated 21.08.2023.

A16  -       Copy of e-mail from the  opposite party  dated  

                20.10.2023.

A17  -       Copy of award issued by the Hon’ble Insurance

                Ombudsman, Ernakulam dated 25.03.2023.

Exhibits from the side of the Opposite Parties :  

B1    -       Copy of application form of ICICI Prudential  

B2    -       Copy of proceedings before the Insurance Ombudsman.

By Order,

sd/-

                                                                                                     Assistant Registrar