1.       This revision petition has been filed under Section 21(b) of the Act 1986 in challenge to the Order dated 12.03.2015 of the State Commission in appeal no. 273 of 2014 arising out of the Order dated 31.01.2014 of the District Commission in complaint no. 303 of 2009.

2.       We have heard the learned counsel for the finance co. (the petitioner herein) and have perused the record including inter alia the Order dated 31.01.2014 of the District Commission, the impugned Order dated 12.03.2015 of the State Commission and the petition.

No one appears for the complainants (the respondents herein).

3.  Briefly, the finance co. (M/s Mahindra & Mahindra Financial Service Ltd.) had advanced a loan of Rs. 5,00,000/- to the complainants’ father to purchase a vehicle (Mahindra Scorpio Car). One requirement from the end of the finance co. was for the borrower to obtain life insurance. The same was arranged for by the finance co. itself from an insurance co. of its own choice (Kotak Mahindra Old Mutual Life Insurance Limited). The loan agreement executed by the finance co. had an explicit condition that the life insurance cover will start from the date of disbursement of the loan. The relevant condition in the loan agreement is reproduced below, which makes the afore unambiguously clear:

Mahindra Finance has arranged for your loan to be protected through a group life insurance policy arrangement. (Policy Contract No. F1), with Kotak Mahindra Old Mutual Life Insurance Ltd. (Kotak Life Insurance) that will provide you with a life insurance cover to the extent of outstanding principal loan amount of loan taken from Mahindra Finance. In the unfortunate event of the death of an insured borrower during the tenure of the loan, there will be no burden of paying the outstanding loan on such borrower’s family. The aforesaid life insurance cover will start from the date of disbursal of loan to the borrower by Mahindra Finance.

The loan agreement was executed on 15.06.2007, and the loan was disbursed. Thereafter the borrower i.e. the complainants’ father expired on 13.07.2007 due to natural causes.

The insurance co. repudiated the claim vide its letter dated 21.12.2007 on ground that one condition in the insurance policy stipulated that if the death of the insured occurred due to natural causes (and not by accident) within three months from the date of commencement of the insurance cover the claim will not be admissible. The finance co. has not filed the terms and conditions of the insurance cover with its petition. However the relevant extract from the repudiation letter is reproduced below, which refers to the said condition and in the light of the same avers the claim to be inadmissible:

As per Clause 7 of the said Policy Contract titled ‘Death due to natural cause, suicides etc.’ (Para1), claims arising from the death of a member due to any cause other than an accident shall not be payable where such death occurs within 3 months from the date of his/her commencement of cover. However, unfortunately death of the Life Insured occurred due to natural cause on 13.07.2007 with 3 months from the date of commencement of the Risk (15.06.2007). Having regard to the above clause, we find that the subject claim is inadmissible.

The finance co. initiated recovery of its outstanding loan. And it collected an amount of Rs. 60,000/- from the guarantor to the loan towards partial recovery of the outstanding.

The widow of the deceased borrower filed a complaint case, being no. 753 of 2007, before the District Commission. She expired during the pendency of the case and her legal heirs i.e. son and minor daughters were substituted in her stead.

The District Commission vide its Order dated 12.12.2011 allowed the complaint with costs of Rs. 2200/-. It ordered the insurance co. to pay the outstanding loan amount to the finance co. and ordered the finance co. not to recover the outstanding loan amount from the complainant or her legal heirs and to refund the Rs. 60,000/- collected from the guarantor with interest at the rate of 10% per annum from 27.12.2007 i.e. the date of filing of the complaint. 

In passing its Order the District Commission inter alia took cognizance of the one condition in the loan agreement of the finance co. that the “life insurance cover will start from the date of disbursal of loan to the borrower by Mahindra Finance”.

The insurance co. did not agitate the said Order dated 12.12.2011 of the District Commission. Neither did the finance co. agitate the Order.

During the pendency of this case the finance co. forcibly re-possessed the vehicle in question (Mahindra Scorpio Car). It then auctioned it for an amount of Rs. 6,00,000/-.

The son and minor daughters (the complainants herein) filed a complaint case, being no. 303 of 2009, with the District Commission.

The District Commission vide its Order dated 31.01.2014 allowed the complaint. It ordered the finance co. to pay the cost of the Mahindra Scorpio Car or to return a new Car alongwith compensation of Rs. 10,000/- and cost of litigation of Rs. 2,200/-.

The finance co. appealed before the State Commission, seeking setting aside of the Order of the District Commission. The complainants i.e. the son and minor daughters also appealed before the State Commission, seeking enhancement in compensation. The State Commission vide its Order dated 12.03.2015 dismissed both appeals.

The finance co. preferred the instant revision before this Commission.

4.  We note that taking life insurance was a mandatory requirement imposed by the finance co. for grant of loan. The loan agreement was executed as per the standard draft of the finance co. itself, in which the complainants’ father had not asked for any addition or subtraction (and neither was he in any position to ask for any changes as it was the standard draft used by the finance co.). In the loan agreement it was clearly mentioned that the finance co. (M/s Mahindra & Mahindra Financial Services Ltd.) had arranged for life insurance from a specific insurance co. (Kotak Mahindra Old Mutual Life Insurance Limited) and that the insurance cover will start from the date of disbursal of the loan. The borrower i.e. the complainants’ father had no say in respect of the particular insurance co. from which his life insurance was taken. At the time of executing the loan agreement he took the condition in the loan agreement (that the insurance cover will start from the date of disbursal of the loan) at face value. There were no exclusions or provisos to the said condition in the loan agreement. In such facts and situation if there was a condition in the insurance policy, which was separately issued by the insurance co., that in case of natural death within three months no claim will be admissible, this inconsistency with the condition in the loan agreement that the insurance cover will start from the date of disbursal of the loan cannot be held against the borrower-insured. The negative burden of the inconsistency and conflict between the conditions in the loan agreement and in the insurance policy will most obviously lie on the finance co. and the insurance co., and not on the borrower-insured.

5.  The insurance co. is not a party in this case. As such we are not expounding on its conduct. In respect of the finance co., the petitioner herein, deficiency and  unfairness & deception are writ large. It made obtaining of life insurance a mandatory requirement for grant of loan. It used its own standard draft for executing the agreement (in which the borrower had no say). It then arranged for insurance from a specific insurance co. of its own choice. The two, the finance co. (M/s Mahindra & Mahindra Financial Services Ltd.) and the insurance co. (Kotak Mahindra Old Mutual Life Insurance Limited) were ‘juristic siblings’. In doing its business of loaning the finance co. also provided the business of insurance to the insurance co. of its choice. It imbibed an explicit condition in its loan agreement that the insurance cover will commence from the date of disbursement of the loan, with no exclusions or provisos of any nature including specifically that the insurance cover will be adversely affected if the death occurs due to natural causes within three months. The premium was factored into the borrower-insured’s charges to the finance co. As such, both, the finance co. and the insurance co., were working in tandem, with the each getting its respective business. But there was patent conflict in their respective conditions. If the terms and conditions of the insurance co. were not within the control of the finance co., it had no reason or right to write in its own loan agreement that the insurance cover will start from the date of disbursement of the loan. The finance co., which mandated the insurance, factored in the premium and selected the insurance co., remained totally unmindful of the wrongful rejection of the insurance claim by the insurance co. but went ahead with the collection of its outstanding loan. Even when the legal heirs of its borrower were being denied the insurance claim contrary to the express condition mentioned in the loan agreement, the finance co. did nothing to rectify the conflict for which it itself was responsible but went ahead with collecting its outstanding loan with capricious opacity to the fact of itself having mandated insurance and itself having charged the premium therefor to its borrower and itself having made the borrower to understand that the insurance cover will commence from the date of disbursement of the loan. 

6.  There appears to be no error in the District Commission’s Order dated 12.12.2011 in complaint no. 753 of 2007 whereby the insurance co. has been ordered to settle the outstanding loan amount with the finance co. and the finance co. has been ordered to refund the amount collected from the guarantor with interest. The District Commission has inter alia correctly taken the cognizance of the relevant condition in the loan agreement. This does not need any elaboration since neither the insurance co. nor the finance co. has challenged this Order.

7.  There also appears no error in the District Commission’s Order dated 31.01.2014 in complaint no. 303 of 2009 and in the State Commission’s impugned Order dated 12.03.2015 in appeal no. 273 of 2014 (which is the subject-matter herein) whereby in concurrent findings the finance co. has been ordered to pay the cost of the subject vehicle or to return a new vehicle alongwith compensation of Rs. 10,000/- and cost of litigation of Rs. 2,200/-. It is noteworthy that there is nothing on record to show that any notice was served on the legal heirs i.e. son and minor daughters of the deceased borrower before re-possessing the vehicle. The due process of re-possession was not followed. There is also nothing on record to show that notice of auction and opportunity to watch their interest in the auction was served on the legal heirs i.e. son and minor daughters of the deceased borrower. The re-possession and the auction, both, were undertaken without following the due procedure and as such cannot be termed to have been lawfully undertaken. And in any case as has been rightly seen by the two fora below when ultimately the liability to pay the outstanding loan was of the insurance co. and not of the legal heirs of the deceased borrower the question of the finance co. having any right over the subject vehicle did not arise. The award made by the District Commission and as upheld by the State Commission is an attempt to put the legal heirs of the deceased borrower in the same position as was obtaining before the vehicle was unlawfully re-possessed and unlawfully auctioned and that too in respect of an outstanding loan which had to be met by the insurance co. and not by the legal heirs of the deceased borrower. It bears significance that re-possession without notice and auction without notice itself vitiate the re-possession and auction and are sufficient in themselves to hold the re-possession and auction both to be illegal. The decision of the District Commission in complaint no. 753 of 2007 that the liability to repay the loan was of the insurance co. and not of the legal heirs of the deceased borrower further reinforces the case of the complainants.

8.  We may also clarify that the cause of action for the two complaints, no. 753 of 2007 and no. 303 of 2009, were different and separate. The cause for the first complaint was principally in respect of the wrongful repudiation of the insurance claim by the insurance co. It was filed by the widow of the deceased insured. Both the finance co. and the insurance co. were opposite parties. The cause for the second complaint was in respect of the illegal seizure and illegal auction of the subject vehicle. It was filed by the son and minor daughters of the deceased borrower. Only the finance co. was the opposite party (the insurance co. had no locus re the illegal seizure and illegal auction). As such the argument advanced by the finance co. that the same cause of action was agitated in the two complaints is erroneous, and such contention has been rightly dismissed by the State Commission vide its impugned Order.

9.  The Act 1986 is for better protection of the interests of consumers, in a fight which is recognizedly amongst unequals often. In the present case, we have a pan India company, with wherewithal, on the one side, and a common ordinary consumer, without wherewithal, on the other side.

10. The acts of the finance co. have been deficient and unfair & deceptive. Both terms ‘deficiency’ and ‘unfair trade practice’ are plainly defined in the Act itself (section 2(1)(g) and section 2(1)(r)). In respect of ‘unfair trade practice’ we may elaborate that the list provided under section 2(1)(r) of the Act 1986 is illustrative and not comprehensive or exhaustive. As such, an unfair method or unfair or deceptive practice, as may be judiciously determined on facts and reason after fair and objective appraisal of the evidence and material on record, would qualify as ‘unfair trade practice’ within the meaning of section 2(1)(r) .

11. The ‘unfair trade practice’ inherent in the functioning of the finance co. can simply not be blissfully ignored with apathy. It has to be addressed, it has to be remedied, and curative steps are certainly needed to avert the recurrence of the same kind of prejudice & trouble and loss & injury that may be caused to honest bonafide consumers for reasons which are certainly not attributable to them.

12. We therefore deem it appropriate and necessary to make the following directions:

(i)      The impugned Order dated 12.03.2015 of the State Commission is sustained. The same shall be complied with by the finance co. through its chief executive (i.e. the chairman or managing director or director in-charge of the affairs of the company or director in-charge of the subject-matter, whichever member of the board of directors he may be) within six weeks.

(ii)      The insurance co. through its chief executive is ordered under section 39(1)(g) of the Act 2019 (corresponding section 14(1)(f) of the Act 1986) to forthwith discontinue such ‘unfair trade practice’ as is evinced in this case and to file a report-in-compliance with the District Commission within three months.

(iii)     For the ‘unfair trade practice’ per se, a cost of Rs. 1,00,000/- is imposed on the finance co. through its chief executive out of which Rs. 50,000/- shall be deposited in the ‘Consumer Legal Aid Account’ of the District Commission and Rs. 50,000/- shall be paid to the complainant no. 1 by way of ‘payee’s a/c only’ bank draft within six weeks.

13.     In case of failure or omission to comply with the directions contained in para 12 above, the District Commission shall undertake execution, for ‘enforcement’ and for ‘penalty’, as per the law.

14.     The Registry is requested to send a copy each of this Order to the parties in the revision and to their learned counsel as well as to the District Commission immediately. The stenographer is also requested to upload this Order on the website of this Commission immediately.