D.o.F:09/6/2009                                       (1)

D.o.O:31/10/2011

IN THE CONSUMER DISPUTES REDRESSAL FORUM, KASARAGOD

                                             CC.NO.130/2009

                         Dated this, the 31st     day of October  2011

PRESENT:

SRI.K.T.SIDHIQ                   : PRESIDENT

SMT.P.RAMADEVI             : MEMBER

SMT.BEENA.K.G                : MEMBER

 The Nileshwar Service Co-op Bank Ltd                              

Nileshwar PO. ,Kasaragod , represented by its Secretary   :      Complainant

K.K.Kumaran, S/o (late) Kunhiraman,

R/at Mannampuram , Po. Nileshwar,

 Hosdurg, Kasaragod.

(Adv.K.Janardhanan, Hosdurg)

The Manager,

LIC of India, Kozhikode Divisional Office,                                :         Opposite  party

Kozhikode  Divisional Office, P&GS Branch, Calicut.

 (Adv.P.V.Jayaraj,Kasaragod) 

                                                   ORDER

SRI.K.T.SIDHIQ     : PRESIDENT

Case of the complainant is as follows:

   Complainant is the Nileshwar Service Co-op bank represented by its Secretary.  The complaint is filed on behalf of Sri. Kunhambu C, died on 31/8/2008 who was working as the Asst. Secretary of the  Bank at the time of death.  The complainant’s  bank and the opposite party entered  into an agreement of Group Gratuity Life Assurance as per Master policy No.3826.  The complainant’s bank was regularly paying the premium amount to opposite party.  The deceased Kunhambu C was the subscriber of that policy.  As per terms and conditions in the agreement,  the entire liability  of the bank for payment of gratuity to its employees has been taken over by the LIC insuring  their lives.  In the event of death of an employee while in service the opposite party is legally bound to pay to his  dependants the maximum amount eligible as gratuity based on the salary that the employee was drawing  at the time of his death, irrespective of the length of service hold by such employees  In this case the eligible amount payable is `580360/-.  The opposite party furnished the statement of accounts dated 1/7/2006 as per which the amount due for  payment to the deceased was `580360/-.  But the opposite party has paid only `229310/- which is in short of `351050/- of the  actual amount payable to the dependants of the deceased Kunhambu C.  Though the complainant sent letters demanding  the balance  amount many  times.  The opposite party has not paid any amount.  Hence the complaint is filed alleging deficiency in service on the part of opposite party.

2.  According to the opposite party the Group Gratuity Pure Endowment Scheme to the complainant bank has issued and the scheme commenced on 1/7/1973.  It is an endowment group gratuity scheme taken by the bank for the gratuity benefits of the employees of the bank.  Members of the said scheme  are only beneficiaries and not parties to  the contract.  The gratuity of the member is payable at the time of retirement /death .  The peculiarity of this  scheme is that if the employees dies while in service the gratuity equal  to the surrender value of the accrued amount in the name of the particular employee plus life cover term insurance for future service gratuity subject to a maximum of  `3.50 lakhs will be payable to the dependants. LIC of India did not  agree to  take the entire  gratuity liability of the members.  LIC of India is acting as a third party and  administer  scheme and conducting  valuation of the gratuity  liability of the Bank.  Liability of the LIC is only upto the contribution made by the master policy holder based on the salary at the time of renewal of the scheme.  It is not  based on the salary  at he time of retirement/death.  As per the death intimation received from the master policy holder the death gratuity  is settled and `229313/- is paid.  It is settled as per the terms , conditions and rules of the scheme.  The group gratuity Pure Endowment  Scheme was commenced on 1/7/1973 with the  complainant Bank. Under the scheme the employer shall make yearly contribution to LIC so as to cover the gratuity liability of each employee to effect a pure endowment plan.  The yearly contribution to be made depends upon the salary as on the date of renewal of the scheme.  The scheme is so structured as to get  the eligible gratuity amount accumulated on the date of retirement as such the  yearly contribution varies taking into account the  increase in salary every year as also the interest earned on contribution to cover the future service gratuity  ie the difference between the accumulated amount each year and gratuity payable on the date of retirement based on the salary on Annual Renewal Date.  One year renewable group term assurance is also provided subject to conditions under the scheme.  Premium for giving this life cover is also collected along with the contribution on each renewal date.  In the event of an  unfortunate death  of an  employee the difference between the accumulated amount and gratuity to be paid had  the employee been in service till the normal retirement date in addition to the accumulated amount.  As per policy conditions the corporation  by giving notice to the master policy holder has the right to  restrict the life cover so granted if necessitated. At the time of inception of the scheme maximum life cover insurance granted for  future service gratuity was  ` 175000/- .  On review of the scheme in June 2008 it was observed that the LIC of India  had paid an amount of  `366929/- as death cover during the preceding five years in addition to the accumulation  in the name of the employee who died during the period.  Though the corporation had paid ` 366929/- as death benefit,  the total term insurance premium collected under the scheme for that period was only `202089/-.  The claim experience  being  quite  unfavorable , the Corporation was constrained to restrict the life cover of ` 20,000/-.  This is well within the right of corporation as per provisions in the master policy.  The  insurance  cover  is given under one year Renewable Term Assurance (OYRTA)  It was communicated to the master policy holder  letter  dated  11/7/2008 and  the policy was renewed on 19/7/2008 collecting premium for  life cover upto a maximum amount of ` 20,000/-.  Thus from 1/7/08 onwards  the bank is entitled to get death cover benefits only upto a maximum  of ` 20,000/- in addition to the  accumulation in  the event of the unfortunate death of any  member while in service of the master policy holder. Accordingly in Nov.2008 they received death claim  intimation  of  Sri.C. Kunhambu who expired on 31/8/08 along with  necessary claim papers.  Hence  the claim is settled  taking the maximum term insurance payable at `.20,000/- and accordingly  paid  `229313/-.  The  opposite party  has acted  only as per the terms and conditions of policy and hence there is no deficiency in service  on the part of opposite party.  Therefore according to opposite party  complaint is liable to be dismissed.

 3.  After filing the version documents of both sides marked since they have no oral evidence.

   On the side of complainant the following documents are marked Ext.A1  copy of Master policy No.G.I 3826 dtd 15/9/1973.  Ext.A2 GGPE cost and benefits schedule pertaining to the employees of complainant Bank. Ext.A3- Endorsement attached to  forming part of master policy No.GGI 3826.  On the side of opposite party following documents are marked Ext.B1-copy of letter dtd 11/7/2008 issued by opposite party to complainant.  Ext.B2- copy of a  communication issued by opposite party to complainant intimating the premium amount. Ext.B3 – copy of  communication  issued by opposite party to complainant dtd 10/7/08 intimating the premium. Ext.B4-copy of  communication dtd25/6/09 issued by opposite party to complainant requesting  the renewal  and payment of the premium.  Ext.B5-  copy of GGPE cost and benefits schedule.  B6-Copy of letter dtd 7/7/10 issued by complainant to opposite party for conversion of  GG life assurance policy to group  gratuity  costs accumulation scheme. B7- Copy of resolution No.479 of  complainant bank dtd 7/7/2010.

Both sides heard and the documents perused.

4.The issues to be settled in this case are:

1.   Whether there is any deficiency in service on the part of opposite party?

2.   If so what relief as to order and costs?

5.Issue No.1

  The learned counsel for the complainant Sri. Janardhanan submits that  Sri.Kunhambu  expired on 31/8/2008 and during  that period the prevailing scheme was Group Gratuity Life Assurance scheme .  As per that the opposite party is liable to pay gratuity amount  for a period of 34 years had he been alive till date of super annuation.  According to him the last drawn salary of deceased Sri.Kunhambu was ` 29045/-.  Hence LIC is  liable to pay the amount   in view of Part II Sec 1 Pure Endowment.   As per  that the sum assured under the assurance shall be an amount equal to ½ a months salary of the member as  on the entry date or the annual renewal date, as the case may be for each year of service upto the normal retirement date subject to a maximum of 20 months salary.  According to him as per the policy the gratuity amount  is no where having  a  ceiling  limit of `350,000/- so the amount due from opposite party is  ` 29045x15/26 x34 years of service ` 569729.  But the opposite party   is paid only ` 229313/-.  So  the balance amount is `340416/-.

6.   According to  the learned counsel for complainant  the non payment of balance amount is a  deficiency in service on the part of opposite party.

  But according to the learned counsel for opposite party Sri.P.V.Jayaraj the Group Gratuity Life Assurance scheme has no bearing  on the amount to be paid by the  employee ie the complainant to their employees under the payment of gratuity Act.  The policy is only an endowment  scheme.  It nowhere stipulates that the entire gratuity due to the employee will be  paid by the LIC.

    According to  opposite party the benefits payable to an employee(beneficiary) who died whilst in service is  explained in schedule II Part III of the policy. It is as follows:

   In the event of death of the member before Normal retirement date whilst in the service of the company, there shall become  payable  an amount  which shall be told of

(1)         The sum assured under the term insurance if any, in force on the date of death of the member

(2)          Total amount of premium paid under the Pure  Endowment effected in respect of  him.

7.   The learned counsel for opposite party submits that formerly the Term Insurance for the coverage of death was ` 175000/- and since it is found economically not  viable to opposite party the same is reduced to  20,000/- and the  premium  is also reduced and the complainant was paying the premium in the reduced rate without any objection.

8.    Further it is seen that the  complainant  themselves requested opposite party to  convert their scheme to group Gratuity Cash Accumulation scheme which is more beneficial to them.

      In view of the above it is clear that the amount paid by opposite party `229313/- is the actual amount due from them towards the settlement of the claim as per the  policy issued to the complainant.

   Therefore we hold that there is no deficiency in service on the part of opposite party and the complaint is therefore liable to be dismissed.

  The complaint is  dismissed without costs.

Exts:

A1 dtd 15/9/1973 copy of Master policy No.G.I 3826.

A2 -GGPE cost and benefits schedule .

A3- Endorsement .

B1-copy of letter dtd 11/7/2008 issued by opposite party to complainant.

B2- copy of a  communication issued by opposite party to complainant

B3 – dtd 10/7/08 copy of  communication  issued by opposite party to complainant

B4- dtd 25/6/09 -copy of  communication issued by opposite party to complainant

B5-  dtd 7/7/10 copy of GGPE cost and benefits schedule   

B6-Copy of letter issued by complainant to opposite party

B7- Copy of  resolution No.479 of  complainant bank dtd 7/7/2010.

Sd/                                              Sd/                                       Sd/

MEMBER                                      MEMBER                            PRESIDENT

                                      /Forwarded by Order/

                                    SENIOR SUPERINTENDENT