29^th day of November 2014

                                     C.C.134/10 filed on 12/3/10

Complainants:       1. Bindu, W/o.Asokan,  Chembara, P.O.Vallachira,

                                 Thrissur. 

                             2. Bindhovan C Asokan, S/o.Asokan, Chembara,

                                 P.O.Vallachira, Thrissur.     

                             3. Aswaghosh C Asokan, S/o.Asokan, Chembara,

                                 P.O.Vallachira, Thrissur.

                             (By Adv.N.S.Ramesh, Thrissur)

Respondents:        1. State Bank of India, Vallachira branch, rep. by

                                 Branch Manager, P.O.Vallachira, Thrissur.

                             2. State Bank of India Main Branch, Thrissur rep. by

                                 Manager, Thrissur.

                             (By Advs.H.L.Sitaraman&R.Srinivasan, Thrissur for

                             R1&R2)

                             3. Managing Director, SBI Life Insurance Co. Ltd.,

                                 Kapas Bhavan Plot No.3-4 sector No.10, C.B.D

                                 Belapur NaviMumbai.

                             (By Adv.Jecko Joy, Thrissur)

                                                O R D E R

By  Smt.Padmini Sudheesh, President:

          The facts of the case are that the husband of 1^st complainant and father of 2^nd and 3^rd complainants  late Asokan had availed a loan from 1^st respondent.  The loan had an insurance coverage of Rs.7,00,000/- for five years of 3^rd respondent.  The deceased Asokan forced to take such a policy only due to  compulsion of 2^nd respondent as a free condition for sanctioning loan.  The said Asokan has assigned the policy in  favour of 2^nd respondent.  According to the complainants as well as the terms and conditions  the loanee need not repay the loan amount if death has happened to him during the period.  Towards security of loan Asokan was compelled to mortgage landed property in favour of the bank.  2^nd respondent was compelled late Asokan to take such an insurance policy.  It was only to cover  risk of loan amount that is why bank got assigned the policy in their name.  Otherwise there was no need to assign the policy in the name of bank.  Hence it was the duty of the bank to pay the future instalments of the policy in time and  to be debited from the account of Mr.Asokan.  That is the practice also.  For that purpose bank is keeping assigned policy certificate under their custody.  Unfortunately Asokan was died on 2/10/09 following a motor vehicle accident.  According to petitioner in such situation bank is not entitled to get the remaining loan amount from Asokan or from his  assets or from the legal heirs.  Hence it was the duty of the bank to keep such insurance policy of late Asokan alive.  The bank has to collect the insurance amount from 3^rd respondent and credit it to the loan amount.  The very purpose of the said insurance policy was  for  the same.  But the bank was not prepared for it.  But on 10/10/09 the 1^st petitioner got an intimation from 3^rd respondent stating that the said insurance policy was lapsed due to non-payment of premium  in spite of  several demand.  It was the duty of 1^st and 2^nd respondents to pay the future instalments of insurance policy which has to be credited from the account of late Asokan.  The lapse of insurance policy was happened only due to the negligence on the part of 1^st and 2^nd respondents.  So 1^st and 2^nd respondents are liable to pay the insurance amount to complainants or to credit in the loan.  The bank has no right to take action against complainants.  Hence the complaint.

          2. The counter averments of 1^st respondent are that this respondent has already initiated the proceedings under Securitization Act and issued notice under Section 13(2) of the Act to repay the amount due to the bank within the statutory period of 60 days.  But complainant did not pay amounts.  It is true that late Asokan availed credit facility of Rs.7,00,000/- from 1^st respondent.  It is false to say that the said limit had an insurance coverage for Rs.7,00,000/- for a period of five years  under policy  issued by 3^rd respondent.  It is not correct to state that the said  Asokan was forced to take such a policy by compulsion  from this respondent as a precondition for  sanctioning the limit.  Sri.Asokan out of his  free will and own volition applied for a life policy attracted by the scheme.  This respondent is only a  corporate agent for marketing the insurance products of 3^rd respondent.  It is incorrect that the loanee need not repay the loan amount if  death happened to him during the  subsistence  of the loan account.  2^nd respondent had no connection with loanee as the loan was availed   from  this respondent branch.  The  assignment of policy  does not cast any obligation or duty  on the part of the bank to pay the future instalments of the policy.  There was no duty on the part of 1^st respondent to pay future instalments on the said policy.  It is the duty of insured to keep the policy live to get the benefit of the policy.  If the policy is not  current and premiums are not paid as per the policy terms  the policy will lapse and the assigner will not get any benefit out of the lapse policy.  There was no instruction from the account holder to debit from his account or pay any amount.  It is incorrect to state that bank is not entitled to get the remaining loan amount from Sr.Asokan or his  assets.  There is no deficiency in service from this respondent.  Hence dismiss.

          3. Counter averments of 3^rd respondent in brief are that the complaint is  against 1^st and 2^nd respondents.  There is not even a whisper against this respondent.  The complainants admitted that the policy was in a lapsed condition as on the date of death due to nonpayment of premium.  1^st, 2^nd and 3^rd respondents are separate and distinct legal entities and one  cannot bind the other by  their acts of commission or omission .  This respondent is an unnecessary party   to the complaint.  The insurance cover was not  available on the date of death.  Sri.Asokan had applied for Shield Plan and accordingly a policy was issued for a sum of Rs.7,00,000/-.  The frequency of premium was  annual.  The policy was assigned to SBI which is duly admitted by complainants.  Notice of assignment was sent to this respondent and updated  the same in their  records.  The renewal premium due on 28/3/09 was not received and  as a result the policy was in a lapsed condition with effect from that date.  There is no  contractual  obligation  with this respondent.  The insurance cover was not  active as on the date  of death of insured as the premiums were not paid.  Since the policy was lapsed this respondent is not liable to pay any amount.  Hence dismiss.

          4. No counter filed by 2^nd respondent.

          5. Points for consideration are that :

1) Whether there was any deficiency in service  committed by respondents?

2) If so reliefs and costs ?

          6. Evidence consists of oral testimony of PW1, Exhibits P1 to P3, X1 to X3 and R1 to R9.

          7. Points: It is the case that the husband of 1^st petitioner and the father of others Sri.Asokan had availed a loan from 1^st respondent and the loan had an insurance coverage of Rs.7,00,000/- for five years as policy of 3^rd respondent.  According to complainants the insured was forced to take the policy only due to compulsion from 2snd respondent.  The  said Asokan had assigned the policy in favour of 2^nd respondent and according to complainants as well as the terms and conditions of the policy the loanee need not repay the loan amount if death is caused to him during the period of loan.  The 1^st respondent taken the contention that there was no compulsion from any body to join the policy.  The insured at his own free will and own volition joined the policy.  According to 1^st respondent the late Asokan availed credit facility of  Rs.7,00,000/- from 1^st respondent and he out of  his free will and by attracting the scheme joined the policy.  3^rd respondent the insurance company filed their version by stating that the policy was lapsed and there was no policy at the time of death of the insured.  So they are not liable to indemnify the complainant.

          8. The brother of late Asokan was examined as PW1 and he deposed in tune with his case.  It is the definite version  that without compulsion from bank they will not  join the policy.  The condition was that if the insured was died during the policy period the due amount will be paid by the insurance company to the bank.  The bank did not do so but started to take coercive action against them.  It is the case of complainant that since the policy was assigned to the bank it is the duty of the bank to keep the policy alive.  It is also the duty of the insurance company to clear off the amount due from the complainant because there is insurance coverage existing.  Exhibits P1 to P3 documents are marked from complainants and Exhibit P1 is the copy of lawyer notice.  In the said notice also all the claims of complainants were  stated.  In the said notice also it is the case of complainant  that it was the duty of 1^st and 2^nd respondents to pay the premium in time and to  keep the policy alive.  In the reply notice the bank has taken the view that the  said Asokan assigned the policy in favour of 1^st and 2^nd respondents as  security for the loan availed by him.  The said  assignment was duly and properly registered by 3^rd respondent.  According to them it is the duty of insured to pay the premium promptly and regularly on the due dates.  So it can be seen that it is the case of respondents that since the policy was lapsed the complainants are liable to repay the  amount  or the respondents can take legal action. 

          9. It is the definite case of complainants that the deceased Asokan  had joined the policy only on the compulsion of bank.  Otherwise he will not join the policy.  During the pendency Asokan was died and according to complainants they need not repay loan amount because the death is happened during the period of loan.  It is also their claim that only to recover risk  of loan amount the bank got assigned the policy in their name.  Otherwise there was no need to assign the policy in their name.  Since the policy was assigned in the name of bank it was the duty of bank to keep the policy alive.  In the present case the deceased Asokan was  a young man and he died in a motor accident and  is a very unfortunate thing.  The bank did not even think about the sudden death of Asokan at the time of taking  loan.  These kind of practices are widely existing in the country.  At the time of taking loan the bank is suggesting  to join in SBI Life Insurance and accepting huge amount as premium.  If an unfortunate accident was happened they are trying to escape from their liability by saying reasons which cannot be foreseen by the consumer.

          10. The 3^rd respondent is the SBI Life Insurance Company which everybody knows is a sister concern of SBI.  It is the case of 3^rd respondent that  Asokan had applied for shield plan  and accordingly a policy with a date of commencement of policy as 28/3/08 for a sum assured of Rs.7,00,000/-.  This respondent has taken the contention that the insured Asokan had joined in a policy of 3^rd respondent.  But this is not so because he had joined the policy only under the compulsion of SBI when he was availed loan for Rs.7,00,000/-.  According to 3^rd respondent the sum assured was Rs.7,00,000/-.  It is the loan amount taken by him from SBI.  3^rd respondent is trying to make the things simple and to  white wash the things.  It is their contention that since the policy was lapsed  because of non payment of premium the insured  is not liable  to get the policy benefits.  3^rd respondent has produced Exhibits R3 to R9 documents.  Exhibit R4 is the policy issued to late Asokan.  Regarding death benefits it is stated that in the   event of death of life assured whilst the policy is in full force the sum assured  will be paid to the beneficiary.  With regard to premium payments also this is the provision.  As stated earlier it is the duty of bank to keep the policy alive.  If the policy was not alive  it is a default of SBI.    Exhibit R5 is a letter from Asokan to SBI life insurance  showing the assignment of policy.  As per the document the policy had assigned  to SBI for valuable consideration.  The original policy document is also  sent to 3^rd respondent.  This document  confirmed the case of complainants that they  have no liability at all to keep the policy alive and to  enquire about the policy because it was assigned to SBI much earlier.  It is important to know that the original policy document was also sent to 3^rd respondent as per Exhibit R4.  As per Exhibit R6 original policy document returned to SBI by SBI Life Insurance.  In this circumstance it was the duty of 3^rd respondent to intimate the bank if the bank failed to keep the policy alive by payment of due premiums.  It is found that grave deficiency in service committed b y respondents.

          11. In the result the complaint is allowed and the respondents are directed to credit the benefits covered by the policy of 3^rd respondent to the loan account of late Asokan and also pay Rs.2,000/- (Rupees Two thousand only) as costs to the complainants within a month from the date of receipt of copy of this order.  The bank is restrained from initiating any coercive action in the loan  transaction until the respondents are crediting the benefits covered by the policy.  Since no compensation is sought by complainants we are unable to order the same.

          Dictated to the Confidential Assistant, transcribed by her, corrected by me and pronounced in the open Forum this the  29^th  day of  November  2014.

                                                                   Sd/-

                                                          Padmini Sudheesh, President.

          Sd/-

                                                          Sheena.V.V, Member.

          Sd/-

M.P.Chandrakumar, Member

                             Appendix

Complainant’s Exhibits:

Ext.P1 Copy of lawyer notice

Ext.P2 Reply notice

Ext.P3 Lr. dt. 27/1/10

Complainant’s witness :

PW1 – Janardhanan.C.B.

Respondents Exhibits   :

Ext.R1 Notice dt.8/3/10

Ext.R2 Office copy of sanction of loan

Ext.R3 Copy of proposal form

Ext.R4 Policy issued to Asokan

Ext.R5 Lr. dt.7/1/08

Ext.R6 Lr. dt.4/4/08

Ext.R7 Renewal premium intimation

Ext.R8 Copy of lr. dt.30/12/09

Ext.R9 Copy of lr. dt. 28/1/10

Ext.X1 Letter of arrangement

Ext.X2 Agreement of loan cum hypothecation

Ext.X3 Guarantee agreement

                                                               Id/-

                                                          President