ASHATAI W/O ANAND DUPARTE versus SHRIRAM CITY UNION FINANCE LTD. on 16 April 2019

58

SUPREME COURT REPORTS [2019] 6 S.C.R. 58

[2019] 6 S.C.R.

AASHATAI W/O ANAND DUPARTE

v.

SHRIRAM CITY UNION FINANCE LTD.

(Civil Appeal No. 3962 OF 2019)

B

APRIL 16, 2019

[UDAY UMESH LALIT AND INDU MALHOTRA, JJ.]

Consumer Protection Act, 1986:

Deficiency in service – Complainant-appellant’s husband tookCpersonal loan from the Finance Company and Finance Companysecured the loan by issuance of an insurance policy by its sisterconcern – Payment of insurance policy premium by thecomplainant’s husband and Finance Company received a DemandDraft for the same – Thereafter, death of complainant’s husband –Issuance of notice by Finance Company to complainant for paymentDof the loan instalments – Legal notice by complainant to the FinanceCompany to recover the loan through the insurance policy –However, Finance Company denied having received the premiumamount and that the amount was deducted from the loan amounttowards processing fee and stamp charges – Consumer complaintEby appellant alleging deficiency in service – Allowed by the DistrictForum as also State Commission, however, set aside by the NationalCommission – On appeal, held: Husband of the appellant had paidthe insurance premium by a Demand Draft in favour of the InsuranceCompany – Finance Company in the revision petition filed beforethe National Commission, itself admitted that it had received theFDemand Draft from the complainant’s husband towards payment ofthe insurance premium; and that it had deducted an amount towardsprocessing of the loan, and payment of stamp charges – FinanceCompany however delayed in forwarding the amount to theInsurance Company for obtaining the insurance policy – Thus, thereGwas a clear deficiency of service by the Finance Company –Furthermore, the risk would be covered from the date of payment ofthe insurance premium – Loan was secured from the date on whichthe insurance premium was paid – Premium having been paid bythe appellant’s husband during his life-time, the loan was to be H

adjusted from the insurance policy – In view thereof, order passedby the National Commission set aside – Finance Company to paycompensation and costs to appellant – Insurance Act, 1938 – s.64VB (2).

s. 21 (b) – Revisional jurisdiction – Exercise of, by theNational Commission – Held: Revisional jurisdiction of the NationalCommission is a limited jurisdiction, to be exercised in case theState Commission lacked jurisdiction, or acted with illegality ormaterial irregularity.

Allowing the appeal, the Court

HELD: 1.1 The National Commission, in exercise of itsrevisional jurisdiction, set aside the concurrent findings of theDistrict Forum and State Commission. The revisional jurisdictionof the National Commission is a limited jurisdiction, to beexercised in case the State Commission lacked jurisdiction, oracted with illegality or material irregularity. [Para 3.1][64-F-G]

Galada Power and Telecommunication Limited v. UnitedIndia Insurance Company Limited & Anr. (2016) 14 SCC161 ; Rubi (Chandra) Dutta v. United India InsuranceCo. Ltd. (2011) 11 SCC 269 : [2011] 3 SCR 977– referred to.

1.2 The National Commission has allowed the RevisionPetition of the respondent-Finance Company on two grounds;first, that the appellant had failed to produce any evidence toprove that the insurance premium was paid to the respondent-Finance Company; and second, that there was no evidence toprove that the respondent-Finance Company deducted theinsurance premium from the loan account. The respondent-Finance Company in the Revision Petition filed before theNational Commission, has itself admitted that it had received theDemand Draft from the appellant’s husband towards payment ofthe insurance premium. Hence, the first ground on which theNational Commission has set aside the order of the StateCommission is factually incorrect. With respect to the secondground, the respondent-Finance Company has admitted that ithad deducted an amount of Rs. 2,120/- towards processing of the A

B

C

D

E

FG

H

A

B

C

D

E

FG

H

Aloan, and payment of stamp charges. However, it was contendedby the Respondent-Finance Company that this deduction was notmade towards payment of the insurance premium. A perusal ofthe documents shows that the Respondent-Finance Company wasproviding a loan facility to the borrowers, which was secured byan insurance policy issued by its own sister concern. It was aBcomposite inter-linked transaction. The Cover Note issued bythe sister concern shows that the beneficiary of the insurancepolicy is the respondent-Finance Company. Thus, the deductionof Rs. 2,120/- from the loan account was towards processing ofthe composite transaction. [Paras 3.2, 3.4][65-C-F; 66-A-F]

C

1.3 The deceased husband of the appellant had fulfilled hispart of the transaction, by depositing Rs. 400/- by way of theDemand Draft towards the insurance premium, and also thecharges of Rs. 2,120/- towards processing of the loan transaction.The respondent- however delayed in forwarding the amount toDthe Insurance Company for obtaining the insurance policy. Hence,there was a clear deficiency of service by the respondent-FinanceCompany in delay in obtaining the insurance policy from its sisterconcern. [Paras 3.5, 3.6][66-F-H]

1.4 The risk would be covered from the date of payment ofEthe insurance premium. The loan was secured from the date onwhich the insurance premium was paid. The premium having beenpaid by the appellant’s husband during his life-time, the loan wasto be adjusted from the insurance policy. The NationalCommission erroneously set aside the order passed by the StateCommission on factually incorrect grounds. The appellant hasFmade out a clear case of deficiency of service on the part of therespondent-Finance Company. The order passed by the NationalCommission is set aside. The respondent-Finance Company isdirected to pay compensation of Rs. 50,000/-, and costs ofRs. 25,000/- to the appellant. [Paras 3.7, 3.8, 4, 5][67-C-G]

GCase Law Reference

H

ASHATAI W/O ANAND DUPARTE v. SHRIRAM CITY UNIONFINANCE LTD.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 3962of 2019.

From the Judgment and Order dated 30.11.2018 of the NationalConsumer Disputes Redressal Commission, New Delhi in RevisionPetition No. 472 of 2018.

Amol Nirmalkumar Suryawanshi, Adv. for the Appellant.

Amit Sharma, Sourabh Leekha, Ms. Kapil Dua, Deepak Goel,Advs. for the Respondent.

The Judgment of the Court was delivered by INDU MALHOTRA, J. Leave granted.

1. The present Civil Appeal has been filed to challenge the Orderdated 30.11.2018 passed in Revision Petition No. 472 of 2018 by theNational Consumer Disputes Redressal Commission (hereinafter referredto as “the National Commission”).

2. The factual matrix in which the present case has been filed isas under :

2.1. The Complainant/Appellant’s husband Late Anand Dupartehad obtained a personal loan of Rs. 2,00,000/- on 27.02.2015from the Respondent – Finance Company.

The personal loan was advanced on 27.02.2015 afterexecuting the loan agreement, and completing all legalformalities.

The Respondent – Finance Company secured the loanby issuance of an insurance policy by its sister concern i.e.M/s Shriram General Insurance Company Ltd., on behalf ofthe Borrower.

In the Cover Note of the said policy, the Insured wasshown as: M/s Shriram City Union Finance Ltd. i.e. theRespondent – Finance Company.

The insurance policy was a Group Insurance Policyissued to various borrowers, including the Appellant’s husband,whose name was at Serial No. 263 of the list.

2.2. The loan was to be serviced by the Appellant’s husband in 48monthly instalments of Rs. 7,933/- each. The 1[st] loan A

B

C

D

E

F

G

H

Ainstalment of Rs. 7,933/- was paid on 07.03.2015 vide ChequeNo. 433931.

2.3. The Appellant’s husband admittedly paid the premium of theinsurance policy. The Respondent – Finance Companyreceived a Demand Draft of Rs. 400/- from the Appellant’sBhusband towards the insurance premium. The GroupInsurance Policy was issued from 30.03.2015 to 29.03.2016.

2.4. On 17.03.2015 i.e. within 18 days after obtaining the loan,the Appellant’s husband suddenly passed away.

2.5. The Respondent – Finance Company issued a notice to theAppellant for payment of the loan instalments.

C

2.6. The Appellant requested the Respondent – Finance Companyto recover the loan through the insurance policy.

2.7. A Legal Notice dated 16.12.2015 was addressed by theAppellant to the Respondent – Finance Company, requestingthat the loan amount be recovered from the InsuranceCompany.

D

2.8. The Respondent – Finance Company replied to the LegalNotice on 29.01.2016, and denied having received theDemand Draft of Rs. 400/- from the deceased husband ofEthe Appellant. It was further contended that the amount ofRs. 2,120/- was deducted from the loan amount towardsprocessing fee and stamp charges.

2.9. The Appellant filed a Consumer Complaint before the DistrictConsumer Disputes Redressal Forum, Nanded.

F

The Appellant submitted that after the loan wassanctioned on 27.02.2015, the amount was credited to theloan account after deducting the insurance premium. TheRespondent – Finance Company obtained the insurance policyfrom its sister concern on 30.03.2015. Had the insurance policybeen issued when the loan was advanced, the amount wouldhave been recovered through the insurance policy. There wastherefore a deficiency of service by the Respondent – FinanceCompany in delay in obtaining the insurance policy from itssister concern. The Respondent – Finance Company wasnot entitled to recover the loan from the Appellant.

G

ASHATAI W/O ANAND DUPARTE v. SHRIRAM CITY UNIONFINANCE LTD. [INDU MALHOTRA, J.]

The Appellant prayed that the Respondent – FinanceCompany be restrained from recovering the loan amount fromher, since the recovery was wrong and unreasonable, andprayed for payment of compensation.

2.10. The District Forum allowed the Consumer Complaint filedby the Appellant vide Order dated 27.02.2017. It was heldthat since the Appellant’s husband had paid the 1[st] loaninstalment on 07.03.2015, it could be presumed that all theloan formalities had been completed by that date. This provedthat the Appellant’s husband had paid the insurance premiumsoon after the loan was sanctioned. The Respondent –Finance Company had been negligent in obtaining the policylate, since it had forwarded the premium amount to theInsurance Company after a delay of about 1 month.

As per Section 64 VB (2) of the Insurance Act, 1938[1]the risk was covered from the date of payment of insurancepremium.

The District Forum held that there was deficiency ofservice on the part of the Respondent – Finance Company.It was ordered that the Respondent – Finance Company shallnot recover any amount from the Appellant towards the loanobtained by her deceased husband; and ordered compensation of Rs. 10,000/- towards mental agony, and Rs. 3,000/- towardsCosts.

2.11. The Respondent – Finance Company challenged the Orderof the District Forum before the State Consumer DisputesRedressal Commission, Mumbai.

The State Commission dismissed the Appeal vide Orderdated 19.09.2017. It was held that since the insurancepremium was deducted from the loan account of theAppellant’s husband, the District Forum had rightly allowedthe Consumer Complaint.

1 Section 64VB (2) – For the purposes of this section, in the case of risks for whichpremium can be ascertained in advance, the risk may be assumed not earlier than thedate on which the premium has been paid in cash or by cheque to the insurer.Explanation – Where the premium is tendered by postal money-order or cheque sentby post, the risk may be assumed on the date on which the money-order is booked orthe cheque is posted, as the case may be.

A

B

C

D

E

F

G

H

A2.12. Aggrieved by the Order of the State Commission, theRespondent – Finance Company filed a Revision Petitionbefore the National Commission u/S. 21 (b) of the ConsumerProtection Act, 1986.

The National Commission set aside the Order passedby the State Commission, and allowed the Revision Petitionfiled by the Respondent – Finance Company vide Order dated30.11.2018.

B

The National Commission held that the Appellant-Complainant had taken a contradictory stand regardingCpayment of the insurance premium in her Legal Noticedated 16.12.2015. She had stated that a Demand Draft ofRs. 400/- was received by the Respondent – FinanceCompany from her husband. However, there was nodocument evidencing receipt of the said Demand Draft bythe Respondent – Finance Company towards payment ofDpremium.

It was further held that there was no evidence of anydeduction of the insurance premium from the loan accounteither. The Respondent – Finance Company could not beheld to be negligent in rendering services.

E

2.13. Aggrieved by the final Order dated 30.11.2018 passed bythe National Commission, the Appellant has filed the presentCivil Appeal.

3. We have heard learned Counsel for both parties, and perusedthe pleadings on record.F

3.1. The National Commission, in exercise of its revisionaljurisdiction, has set aside the concurrent findings of theDistrict Forum and State Commission, by the impugned Orderdated 30.11.2018.

The revisional jurisdiction of the National Commissionis a limited jurisdiction,[2] to be exercised in case the StateCommission lacked jurisdiction, or acted with illegality ormaterial irregularity.[ 3]

G

2 Galada Power and Telecommunication Limited v. United India Insurance CompanyLimited & Anr., (2016) 14 SCC 161.H3 v. United India Insurance Co. Ltd.

3 Rubi (Chandra) Dutta v. United India Insurance Co. Ltd., (2011) 11 SCC 269.

Section 21(b) reads as follows :

“call for the records and pass appropriate orders inany consumer dispute which is pending before or hasbeen decided by any State Commission where it appearsto the National Commission that such State Commissionhas exercised a jurisdiction not vested in it by law, orhas failed to exercise a jurisdiction so vested, or hasacted in the exercise of its jurisdiction illegally or withmaterial irregularity.”

(emphasis supplied)

3.2. The National Commission has allowed the Revision Petitionof the Respondent – Finance Company on two grounds; first,that the Appellant had failed to produce any evidence to provethat the insurance premium was paid to the Respondent –Finance Company; second, that there was no evidence toprove that the Respondent – Finance Company deductedthe insurance premium from the loan account.

3.3. A perusal of the pleadings and record, would show that boththese findings are factually incorrect.

With respect to the first ground, the Respondent –Finance Company in paragraph 4(c) of the Revision Petitionfiled before the National Commission, has itself admitted thatit had received the Demand Draft from the Appellant’shusband towards payment of the insurance premium.

The relevant extract is set out herein below for ready reference :

“That sometime in the month of March 2015, a requestfor availing the Personal Accidental Insurance Policyfrom Shriram General Insurance Company Limited(hereinafter referred to as the ‘Insurance Company’)was received from Late Sh. Anand Duparte alongwiththe Demand Draft towards the payment of the insurancepremium, whereupon the same was forwarded to‘Insurance Company’ and after carrying out their duediligence, the Group Personal Accidental InsurancePolicy was thereon issued by ‘Insurance Company’.”

(emphasis supplied)

A

B

CD

E

F

G

H

A

Hence, the first ground on which the National Commissionhas set aside the Order of the State Commission is factuallyincorrect.

3.4. With respect to the second ground, the Respondent – FinanceCompany has admitted that it had deducted an amount ofRs. 2,120/- towards processing of the loan, and payment ofstamp charges.

B

However, it was contended by the Respondent – FinanceCompany that this deduction was not made towards paymentof the insurance premium.

C

A perusal of the documents shows that theRespondent – Finance Company was providing a loan facilityto the borrowers, which was secured by an insurance policyissued by its own sister concern viz. M/s Shriram GeneralInsurance Company Limited. It was a composite inter-linkedtransaction.

D

The Cover Note issued by M/s Shriram GeneralInsurance Company Limited, shows that the beneficiary ofthe insurance policy is the Respondent – Finance Companyviz. M/s Shriram City Union Finance Ltd.

The Cover Note further shows that the Group InsurancePolicy dated 30.03.2015 was issued to 280 borrowers, withthe loan amounts mentioned against their respective names.

E

Thus, the deduction of Rs. 2,120/- from the loan accountwas towards processing of the composite transaction.

3.5. The deceased husband of the Appellant had fulfilled his partof the transaction, by depositing Rs. 400/- by way of theDemand Draft towards the insurance premium, and also thecharges of Rs. 2,120/- towards processing of the loantransaction.

F

G3.6. The Respondent – Finance Company however delayed inforwarding the amount to the Insurance Company forobtaining the insurance policy, which was issued on 30.03.2015for the period 30.03.2015 to 29.03.2016.

Hence, there was a clear deficiency of service by theRespondent – Finance Company in delay in obtaining theHinsurance policy from its sister concern.

3.7. Section 64VB(2) of the Insurance Act, 1938 provides that :

“For the purposes of this section, in the case of risksfor which premium can be ascertained in advance, therisk may be assumed not earlier than the date on whichthe premium has been paid in cash or by cheque to theinsurer.”

It is the admitted position that the deceased husband ofthe Appellant had paid the insurance premium by a DemandDraft in favour of the Insurance Company. This has beenacknowledged in paragraph 4(c) of the Revision Petition filedby the Respondent – Finance Company, as referred to above.

As a consequence, the risk would be covered from thedate of payment of the insurance premium. The loan wassecured from the date on which the insurance premium waspaid. The premium having been paid by the Appellant’shusband during his life-time, the loan was to be adjusted fromthe insurance policy.

3.8. The National Commission has erroneously set aside the Orderpassed by the State Commission on factually incorrectgrounds.

The Appellant has made out a clear case of deficiencyof service on the part of the Respondent – Finance Company.

4. In view of the aforesaid discussion, the Order dated 30.11.2018passed by the National Commission in Revision Petition No. 472 of 2018is hereby set aside. The Civil Appeal is allowed.

5. The Appellant – widow has been unnecessarily draggedthough legal proceedings on account of deficiency of service by theRespondent – Finance Company. We deem it appropriate to direct theRespondent – Finance Company to pay Compensation of Rs. 50,000/-,and Costs of Rs. 25,000/- to the Appellant.

6. All pending Applications, if any, are accordingly disposed of.

7. Ordered accordingly.

Nidhi Jain

Appeal allowed.

A

B

C

D

E

F

G

H