JUSTICE V.K. JAIN, PRESIDING MEBER (ORAL)

1.      The son of the complainant/petitioner availed an education loan for his son. The loan was sanctioned vide letter dated 29-07-2009. An insurance policy from SBI Life Insurance was taken by him, in order to cover the repayment of the aforesaid loan. An yearly premium of Rs.4,031/- was payable to SBI Life Insurance, in order to keep the said policy alive. The renewal premium was paid in the year 2010 but was not paid in the year 2011. The son of the complainant expired on 26-01-2012 in a road accident. However, the amount payable under the policy was not released on the ground that the renewal premium, which was necessary to keep the policy alive, had not been paid. The case of the complainant is that the premium was payable by the bank and was to be debited to the account in which loan had been taken by his son and, therefore, the bank was deficient in rendering services by not paying the renewal premium and thereby not keeping the insurance policy alive. Since the sum assured under the policy was not released, the complainant approached the concerned District Forum by way of a complaint, seeking payment of the insurance amount along with compensation and cost of litigation.

2.      The complaint was resisted by the opposite parties primarily on the ground that it was for the insured to pay the renewal premium and keep the policy alive. The renewal premium which became due on 26-08-2011 having not been paid by 25-09-2011 which was the last date for its payment the policy lapsed and as a result, there was no valid insurance cover, at the time the son of the complainant expired.

3.      The District Forum having dismissed the complaint, the complainant approached the concerned State Commission by way of an appeal. The appeal, however, came to be dismissed by the State Commission vide impugned order dated 01-08-2014. Being aggrieved from the dismissal of his appeal the complainant is before us by way of this revision petition.

4.      The contention of the learned counsel for the complainant/petitioner is that in fact the policy documents were handed over to the son of the complainant at the time of taking the loan from the bank, the insurance company was chosen by the bank and it was for the bank to keep the policy alive by paying the renewal premium as and when it fell due. This is also his contention that having not paid the renewal premium and having not kept the policy alive the bank was clearly deficient in rendering services to his son.

5.      The learned counsel for the opposite parties has drawn our attention to the forwarding letter dated 27-08-2009, whereby the insurance policy was sent by SBI Life Insurance to late Shri Sumit Minhas, son of the complainant. This letter clearly shows that the insurance policy was delivered to the insured before he consigned the same in favour of the bank. The learned counsel for the opposite party has also drawn our attention to the customer letter dated 10-09-2009 whereby the SBI Life Insurance forwarded the policy duly signed by the policy holder, Sumit Minhas, to the bank on 10-09-2009. We find that the assignment of the policy in favour of the State Bank of India had been signed by the insured on 31-07-2009, when the proposal for taking the insurance cover was submitted to SBI Life Insurance. The endorsement on the policy document was made by SBI Life Insurance on 10-09-2009 as would be seen from the endorsement dated 31-07-2009 on page 157 of the paper book.

6.      What appears from a perusal of these documents is that when the insured approached the State Bank of India for the purpose of taking the education loan, he agreed, obviously at the instance of SBI that he would take a policy of insurance from SBI Life Insurance and even before issue of the policy, he executed an assignment of that policy in favour of the SBI. It was pursuant to this understanding that the proposal form was submitted by the insured on 31-07-2009 along with endorsement dated 31-07-2009. Since no policy had by that time been issued the assignment dated 31-07-2009 does not bear any policy number. The initial premium to SBI Life Insurance was paid on 31-07-2009 on the basis of a voucher signed by the insured, requesting the bank to debit his account and credit the account of SBI Life Insurance by Rs.830/- that being the amount of the insurance premium. Thus, the payment of the first premium was not made by the insured directly to SBI Life Insurance, it was made by SBI, on his request and the said amount was debited to the account which he had opened with the SBI.

7.      The first renewal premium fell due on 26-08-2010, was paid by SBI to SBI Life Insurance and the amount of Rs.830/- was debited to the account of the insured. At that time, there was a debit balance of Rs.2,62,505/- in the account as against sanctioned limit of Rs.3,25,000/-. However, when the second renewal premium fell due on 26-08-2011, no payment was made by the bank to SBI Life Insurance. The learned counsel for the opposite parties has pointed out that on 31-07-2011 itself there was a debit balance of Rs.3,62,599/- in the account of the insured which was more than the limit sanctioned to him. However, we find that the aforesaid amount included interest as well and if the interest debited in the account is excluded, the total debit in the account, on the date second renewal premium fell due on 27-08-2011 was only Rs.3,09,630/-. The limit sanctioned to the insured being Rs.3,25,000/- the bank could still have released about Rs.15,000/- more to him on that date. As far as interest is concerned admittedly it had a moratorium period and the EMIs were payable only after one year of the borrower finishing the course for which the loan was taken by him. It can, therefore, hardly be disputed that if the petitioner bank wanted it could easily have paid the renewal premium to SBI Life Insurance when it fell due on 27-08-2011.

8.      The learned counsel for the opposite parties contends that it was the duty of the insured and not of the bank to pay the renewal premium and keep the insurance policy alive. Ordinarily it would be for the insured to pay the insurance premium and keep the policy alive but when the policy is assigned to a bank, which has not only sanctioned the credit limit to the borrower but has in the past paid the renewal premium, the aforesaid obligation in our view stands shifted from the insured to the assignee bank. Since the insurance policy after having been duly assigned by the insured in favour of the SBI, the SBI was itself in a position to know the date on which the renewal premium was to fall due. That precisely was the reason why the bank paid the first renewal which fell due on 27-08-2010. There is absolutely no evidence of the insured having specifically asked the bank in the year 2010 to pay the first renewal premium which fell due on 27-08-2010. Obviously, the bank on its own paid it since it felt that the policy having been assigned in his favour and a credit limit having been sanctioned to the insured it was for them to pay the renewal premium. There is absolutely no reason why the bank which paid the first renewal premium which fell due on 27-08-2010 on its own should not have paid the second renewal premium which fell due on        27-08-2011, when, the credit limit sanctioned to him by the bank had not been fully utilized by that time and there was a scope for further payment of more than Rs.10000/-.

9.      Not only that the bank failed to pay the renewal premium which fell due on 27-08-2011 it did not ask the insured to pay the said premium on the ground that there being a debit balance in his account the bank will  not be in a position to pay the said renewal premium. No letter in this regard was written by the bank to the insured/borrower asking him to pay the renewal premium to SBI Life Insurance. Considering the past practice of the year 2010, the insured would be justified in believing that the renewal premium due in 2011, will also be paid by the bank, particularly when the credit limit of Rs.3,25,000/- was not fully utilized by him. In fact, the facts and circumstances of the case would show that SBI and SBI Life Insurance have been acting as one and the same entity for the purpose of sanction of the loan and getting the same insured from SBI Life Insurance. This would be evident from the fact that the proposal form itself was filled up and witnessed by one Mr. Narender S. Manral, working with administrative office of SBI in Sector 17 of Chandigarh.

10.    For the reasons stated hereinabove, we are of the view that the opposite party-State Bank of India was negligent in rendering services to the deceased insured by not getting the policy renewed when the second renewal premium fell due on 27-08-2011. As a result the policy which he had taken from SBI Life Insurance lapsed and the insurance company denied the claim lodged by the complainant.

11.    For the reasons stated hereinabove the impugned orders passed by the District Forum and the State Commission are hereby set aside and the respondent-State Bank of India is directed to pay the sum assured by SBI Life Insurance, to the complainant along with interest on that amount at the rate of 9% per annum with effect from three months from the date the claim was lodged by the complainant. In the facts and circumstances of the case there shall be no order as to cost.