PER VINEETA RAI, PRESIDING MEMBER

1.         This revision petition has been filed by Birla Sun Life Insurance Company Ltd., Petitioner herein and OP-2 before the District Consumer Disputes Redressal Forum at Dharwad (for short the District Forum) being aggrieved by the order of the Karnataka State Consumer Disputes Redressal Commission (for short the State Commission) which had dismissed its appeal and confirmed the order of the District Forum, directing it to pay Respondent No.1, Complainant before the District Forum, the insured amount of Rs.4,79,659/- besides Rs.500/- as costs of litigation.  Syndicate Bank, which was also OP-1 before the District Forum and Respondent No.2 herein, had been directed to pay Rs.5000/- for deficiency in service, which order had been confirmed by the State Commission.  However, the present revision petition has only been filed by the Petitioner/Insurance Company.

2.         The facts of the case are that one Smt. Ratnavva (hereinafter referred to as the life assured) had taken a life insurance policy on 23.07.2007 from the Petitioner/Insurance Company/OP-2 for a sum of Rs.4,99,180/-.  The premium under the policy was payable once in a quarter i.e. Rs.23,140/- for the first quarter and also additional sum of Rs.1631/- which was to be kept in the suspense account.  Subsequently the second and third quarterly premiums which became due on 23.10.2007 and 23.01.2008 were not paid and therefore the policy lapsed. However, when the life assured paid an amount of Rs.44,649/- on 23.06.2008 in respect of the above two quarterly installments after deducting the amount in suspense account, the policy was revived.  Again in the quarter where the premium was due on 23.04.2008 onwards, it remained unpaid and therefore the policy again lapsed.  To revive the same, the life assured sent cheque no. 627669 dated 26.08.2008 for Rs.69,420/- in respect of two quarterly premiums which were due from 23.04.2008 and the said cheque was received by the Petitioner/Insurance Company/OP-2 on 30.09.2008.  The Petitioner/Insurance Company/OP-2 issued a receipt on that date subject to “realization of the cheque”.  It also sent a computer generated letter on 06.10.2008 stating that the policy stood revived w.e.f. 05.10.2008 and asked for continued payment of the premium.  The said letter was issued on the presumption that the payment would be made through cheque and no problems would be faced with its realization.  However, later on the same date i.e. 06.10.2008 the Syndicate Bank/OP-1 informed the Petitioner/Insurance Company/OP-2 that the said cheque had been dishonoured due to insufficient funds. The Petitioner/Insurance Company/OP-2 was informed that the life assured had passed away on 06.10.2008 and, therefore, when the claim was made on 05.12.2008 for the settlement of the policy amount, since the cheque had been dishonoured and therefore premium was not paid as per the terms and conditions of the policy, the Petitioner/Insurance Company/OP-2 did not indemnify the claim and treated the policy as having lapsed.  Being aggrieved by this action, a complaint was filed by the Respondent No.1 (daughter of the life assured as nominee in the insurance policy) holding both Syndicate Bank/OP-1 and Petitioner/Insurance Company/OP-2 guilty of deficiency in service.  It was contended that the action of the Bank in wrongly informing the Insurance Company that the cheque was dishonoured for want of sufficient funds when admittedly there were adequate funds in the account of the life assured amounted not only to deficiency in service but also gross negligence and it was this misinformation that led to the repudiation and non-payment of the insurance policy without any basis whatsoever.   The Petitioner/Insurance Company/OP-2 also committed deficiency in service by first sending a computer generated letter on 06.10.2008 informing the life assured that the policy had been revived and thereafter even though it received information about the dishonouring of the cheque from the Syndicate Bank/OP-1 on 03.10.2008, it did not inform the life assured about the same till several weeks later i.e. 07.01.2009.  If the information had been intimated to the life assured even over telephone on 03.10.2008 on which date she was alive, she could have sorted out the matter with the Syndicate Bank/OP-1.

3.         The District Forum after hearing the parties and on the basis of evidence produced before it allowed the complaint and directed the Petitioner/Insurance Company/OP-2 to pay Respondent No.1/Complainant the insured amount of Rs.4,79,659/- after deducting the money already paid with costs of Rs.500/-.  Syndicate Bank/OP-1 was directed to pay Rs.5000/- as compensation for deficiency in service within one month from the date of receipt of copy of that order, failing which the amount would carry interest @ 6% per annum from the date of that order till its realization.    

4.         While the Syndicate Bank/OP-1 accepted the order of the District forum, the Petitioner/Insurance Company/OP-2 filed an appeal before the State Commission, which dismissed the same by observing as follows :-

            “OP No.2 has produced a letter dated 27.09.2008 addressed to Smt. Rathnavva stating that her policy has ceased to be in force.  When the policy was reviewed, it is to be deemed that it relates back to the date of expiry and that; policy was in force.  When Smt. Rathnavva died, consequently the complainant will be entitled to the assured sum under the policy.  If the cheque was dishonoured for insufficient funds even though there was a sufficient balance in the SB account of Smt. Rathnavva the insured the OP No.1 and 2 was negligent in performing their duties.  Therefore the DF has rightly come to the conclusion in allowing the complaint of the complainant directing the appellant /OP No.2 to pay a sum of Rs.4,79,659/- with cost of Rs.500/- and OP No.1 Bank to pay a sum of Rs.5,000/- as compensation to the complainant for deficiency in service.  Viewed from any angle, we do not find any good grounds to entertain this appeal.”

            Hence the present revision petition.

5.         Ms. Meenakshi Midha, Counsel for the Petitioner/Insurance Company/OP-2, Mr. L.M. Sheelvant, Counsel for Respondent No.1/Complainant, and Mr. M.R. Shridhar, Counsel for Bank/OP-1 were present and made submissions.     

6.         Counsel for the Petitioner/Insurance Company/OP-2 contended that the Fora below erred in holding it guilty of deficiency in service whereas it was the Syndicate Bank/OP-1 which was responsible for giving misinformation because of which the claim was repudiated.  Regarding the allegation of Respondent No.1/Complainant that the Petitioner/Insurance Company/OP-2 could have informed about the dishonouring of the cheque on 03.10.2008 itself, Counsel for the Petitioner/Insurance Company/OP-2 stated that this information was received from the Syndicate Bank/OP-1 late in the evening of 03.10.2008 and it came to notice only on the next working day i.e. on 06.10.2008 just a few hours after the routine computer generated letter accepting the premium amount had issued.  Unfortunately, the life assured also died on the same date.  It was further contended that sending a routine letter of acceptance of the claim on 06.10.2008 was only a bonafide lapse and did not amount to deficiency in service.  Counsel for the Petitioner/Insurance Company/OP-2 cited a judgment of the Hon’ble Supreme Court in National Insurance Co. Ltd. Vs. Seema Malhotra And Ors. [(2001) 3 SCC 151] in support of Petitioner’s case that if an insuree fails to pay premium or when the cheque issued by him on the policy towards the premium is returned dishonoured by the Bank, the insurer need not perform his part of the promise.  The corollary is that the insured cannot claim performance from the insurer in such a situation.  In the instant case, the facts are squarely covered by the above judgment of the Hon’ble Supreme Court.   

7.         Counsel for Syndicate Bank/OP-1 on a query from us fairly conceded that the Bank without properly verifying the account of the life assured had indeed wrongly informed the Petitioner/Insurance Company/OP-2 that the cheque was dishonoured because of insufficient funds whereas the actual fact is that there were adequate funds available in the account of the life assured to honour the cheque towards premium. 

8.         We have considered the submissions made by learned Counsel for both parties and have also gone through the evidence on record, including the orders of the Fora below.  It is not in dispute and in fact has been admitted by the Syndicate Bank (OP-1 before the State Commission) that without properly verifying the account of the life assured it had supplied wrong information to the Petitioner/Insurance Company/OP-2 that the premium cheque had to be dishonoured because of insufficient funds.  It was this misinformation emanating from the Syndicate Bank/OP-1 that was solely the cause for repudiation of the claim by the Petitioner/Insurance Company/OP-2.  In our view, the State Commission should have taken this fact into consideration while determining the liability of the two opposite parties, qua each other. 

9.         We, therefore, remand the case to the State Commission to consider the matter afresh in the light of the above admitted facts.  The parties are directed to appear before the State Commission on 17.04.2014.