Mahanthi Lakshmana Rao and Another Vs. State Bank of India Rep. by Branch Manager Near Kambal Tank, Rajahmundry and Another - Court Judgment

Oral Order:(Per Sri R.Lakshmi Narasimha Rao, Honble Member.)

1. This appeal is directed against the order passed by the District Forum, East Godavari whereby the District Forum has dismissed the complaint holding that the complainant no.1 voluntarily submitted the proposal and had obtained the SBI life insurance policy from the 2^nd opposite party.

2. The facts of the case as stated in the complaint are that the first appellant obtained loan from the first respondent bank under loan account bearing number HL 01593087790. The first appellant also has S/B Account bearing number 01190017291 with first respondent bank. The first respondent bank sanctioned loan in favour of the first appellant to the limit of `3,00,000/- which was released in phased manner from 28-04-2006till 9-8-2006. The first respondent bank without informing the appellants and without obtaining the consent of the first appellant, deducted an amount of `60,000/- and remitted the amount to the account of the second respondent insurance company for the purpose of obtaining insurance policy. The first respondent bank informed the appellant no.1 only on 9-10-2006 that an amount of `60,000/- was paid towards insurance premium from out of the loan account of the first appellant. The first appellant requested the first respondent bank through letter dated 23-10-2006 to cancel the insurance policy. The second respondent insurance company informed the appellants that they did not receive any request for cancellation of the insurance policy from the first respondent bank.

3. The first respondent bank resisted the claim on the premise that the appellant no.1 having agreed to abide with the terms and conditions of the loan, executed relevant documents in favour of the first respondent bank. The appellants voluntarily obtained the SHIELD insurance policy for the sum assured `3,00,000/- and paid the premium of `59,805/- on 6-09-2006. The policy is a single premium policy and the risk commenced from 6-09-2006 with the date of maturity of the policy is 6-09-2021. No paid up value or maturity benefits are available under the policy except the exemption under Section 80 of the Income Tax Act,1881. After the insurance policy is issued , premium cannot be refunded nor policy can be cancelled. Without disclosing the pendency of complaint before the Banking Ombudsman, the appellants filed the complaint. The subject matter of the complainant is not a consumer dispute. The first appellant is the borrower, the second appellant is the guarantor and the first respondent bank is the creditor of the loan transaction.

4. The second respondent insurance company contended that the complaint about unauthorized deduction of amount from the fist appellants account for a Home Loan is not maintainable. The first appellant is not holding home loan insurance policy with the second respondent insurance company. The Shield Policy was assigned to the first respondent bank with effect from 28-10-2006. On assigning the insurance policy, the first respondent bank became owner of the policy and the appellants have no locus standi to maintain the complaint. The Shield Policy was issued on submission of the proposal by the first appellant. The Banking Ombudsman closed the complaint no.3790 as the premium was deducted from the loan amount with the consent of the appellant no.1.

5. The first appellant filed his affidavit and the documents, ExA1 to A11. On the side of the respondents, ExB1 to B10 are marked.

6. Aggrieved by the order of the District Forum, the complainants filed the appeal contending that the appellant no.1 has no financial capacity to pay single premium of `59,800/-, the respondents to develop their business unilaterally took the insurance policy in the name of the first appellant, the appellant no.1 had no intention to take shield policy at the age of 50 years with the maturity period in the year,2021 and that the first respondent bank on its own accord obtained the insurance policy and immediately on coming to know about the huge premium ,the first appellant applied for cancellation of the policy and that on being informed by the first respondent bank that the policy cannot be cancelled unless the loan amount is paid, the appellants sold their house and discharged the loan amount. Even after the loan amount was discharged, the second respondent insurance company issued the Shield Policy in the month of March,2007 in disregard to the appellants application for cancellation of the policy.

7. The point for consideration are:

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

2. To what relief?

8. POINT NO 1: The first appellant is the account holder, having the savings bank account number 01190017291 with the first respondent bank. The entries in the copy of the pass book shows the nature of transactions and the details thereof. The appellants contend that the first appellant availed housing loan from the first respondent bank and the first respondent bank had also admitted the housing loan granted to the first appellant. The second respondent insurance company issued insurance policy in favour of the first appellant for which the second appellant is appointed as nominee. The appellants contend that the first respondent bank misguided them stating that in order to avail housing loan they have to take insurance policy from the second respondent insurance company. The insurance policy issued is Shield Policy. The second respondent insurance company contended that they have issued Shield Policy and not the home loan insurance policy.

9. It is contended on behalf of the appellants that the appellant no.1 is working as conductor and he had no financial capacity to take insurance policy by paying single premium of `59,815/-. And that the first respondent bank misrepresented them that the premium is `7,000/-. The limit of the loan sanctioned by the first respondent bank to the first appellant is `3,00,000/-. The first respondent bank released out of the loan amount sanctioned, a sum of `1,00,000/- on 28-04-2006, an amount of `1,00,000/- on 22-05-2006, `75,000/- on 30-06-2006 and `25,000/- on 9-08-2006. Though the policy is a single premium, the first respondent bank stated that the first appellant has paid the first premium of `59,815/-. In its reply dated 10-04-2007 to the notice of the appellants, the first respondent bank informed the first appellant about the nature of the premium and date of payment as under:

“That your client voluntarily out of confidence reposed by him in SBI Life Insurance, took the policy under SHIELD Policy of the sum assuredRs.3,00,000/-and accordingly your client made payment of Rs.59,815/- towards the first premium on 6-09-2006”.

10. Admittedly, the first appellant obtained housing loan from the first respondent bank. The first respondent bank has not denied the first appellants statement that it had exceeded the limit of the loan for the purpose of facilitating the second respondent insurance company to issue the insurance policy. The first respondent bank has not filed any document to show that the amount sanctioned as loan did not exceed the limit prescribed thereof.

11. The Policy is issued on payment of single premium. It contains the recital to the effect that the first installment premium was received from the first appellant. The premium is deducted from the loan account of the first appellant on two occasions, at the first instance a sum of `36,190/- and at the latter stage an amount of `23,620/- totaling `59,810/-. According to the first appellant the last installment of the loan amount, `25,000/- was released on 9-08-2006 and in contrast to the payment of the premium by collecting the amount in installments on two occasions, the first respondent bank has in the reply notice attempted to shift the burden on the first appellant stating that he has paid the premium of “of `59,815/- towards the first premium on 6-09-2006”.

12. The cumulative effect of all these facts would manifest the deficiency in service on the part of the first respondent bank, for the first respondent bank had not shown any agreement for enhancement of the loan facility, the cause for not deducting the amount towards the premium at one instance, from the loan account of the first appellant as also the reason for its inaction regarding the application dated 23-10-2006 requesting it to cancel the policy as he was proceeding to sell his house to discharge his liability to first respondent bank . The first respondent bank has not mentioned about the assignment of the insurance policy in its favour. The matter of the assignment of the insurance policy in favour of the first respondent bank came to the surface for the first time by the revelation made in its written version by the second respondent insurance company.

13. The appellant no.1 in his affidavit has not denied the fact of assignment of the insurance policy in favour of the first respondent bank. The second respondent insurance company pleaded that “the shield policy no.160002841001 is assigned to State Bank of India, Rajahmundry with effect from 28-10-2006. Assignment is a means whereby the beneficial interest, right and title under a Policy get transferred from Assignor to Assignee. On Assigning the Policy, the assignor loses his right over the poicy and the Assignee gets the right and becomes the owner of the Policy. Thus, in the instant case, the complainant has no locus to complain against the O.P.No.2 regarding any of the policies”.

14. The endorsement on the insurance policy and the first appellants as also the manager of the first respondent bank signing it asserting the assignment in favour of the first respondent bank would disentitle the appellants claiming any amount as the first appellant parted his interest in the policy and the first respondent bank became the owner of the insurance policy. The deficiency in service on the part of the first respondent bank can only be looked into in the complaint and not anything else in respect of the insurance policy. As aforementioned, the first respondent bank rendered deficiency in service in not informing the first appellant about obtaining the Shield Policy instead of the Housing loan insurance policy and the quantum of the premium required therefore as also the increasing the sanction limit of the loan amount. The first respondent bank is liable to pay an amount of `20,000/- to the first appellant for the mental tension and inconvenience he suffered on account of the deduction of the amount from his loan account toward the premium of Shield Policy.

15. In the result, the appeal is allowed. The order of the District Forum is set aside. Consequently, the complaint is allowed. The first respondent bank directed to pay an amount of `20,000/- together with costs of `2,000/-to the first appellant. The complaint against the second respondent insurance company is dismissed without costs. Time for compliance is four weeks.