IMPORTANT POINT
In computing surrender value of any subsisting bonus, reference ought to be made to stipulations contained in Section 113.

JUDGMENT :

Dr. Dhananjaya Y. Chandrachud, J

1. Leave granted.

2. This appeal arises from a decision of the National Consumer Disputes Redressal Commission [“National Commission”] reversing a judgment of the Maharashtra Consumer Disputes Redressal Commission [“State Commission”].

3. The appellant obtained a policy of life insurance on 11 November 1993. The sum insured was Rs 75,000. The term of the policy was twenty five years. The policy envisaged the payment of a quarterly premium of Rs 775, spread over a hundred quarters during the term of the policy. The last premium was payable on 11 August 2018 and the policy was to mature on 11 November 2018. On 27 May 2001, the appellant took a loan of Rs 15,000 from the Ratnagiri Branch of the Life Insurance Corporation by pledging the policy. In August 2001, the appellant stopped paying the premium. Thereafter, he applied for the refund of the surrender value. The Corporation offered a surrender value of Rs. 2268, after deducting the loan amount and outstanding interest.

4. The appellant filed a complaint before the District Consumer Disputes Redressal Forum, Sangli [“District Forum”]. The District Forum allowed the complaint and directed the respondent to pay an amount of Rs 29,888 together with interest at 9% p.a. with effect from 21 July 2004. The decision of the District Forum was challenged in appeal by the respondent. The State Commission affirmed the decision. In revision, the National Commission reversed the decision, relying on its earlier decision in Branch Manager, LIC of India v A Paulraj, (1996) 2 CPJ 69. The National Commission approved the calculation of cash value of bonus payable in accordance with the surrender value factor.

5. The controversy involved in the present case turns on the interpretation of the provisions of Section 113 of the Insurance Act, 1938[“the Act”] and Clause 7 of the policy document. Section 113 of the Act, as it stood at the material time was in the following terms:

“113. Acquisition of surrender value by policy-

(1) A policy of life insurance under which the whole of the benefits become payable either on the occurrence, or at a fixed interval or fixed intervals after the occurrence, of a contingency which is bound to happen, shall, if all premiums have been paid for at least three consecutive years in the case of a policy issued by an insurer, or five years in the case of a policy issued by a provident society defined in Part III, acquire a guaranteed surrender value, to which shall be added the surrender value of any subsisting bonus already attached to the policy, and every such policy issued by insurer shall show the guaranteed surrender value of the policy at the close of each year after the second year of its currency or at the close of each period of three years throughout the currency of the policy: Provided that the requirements of this sub-section as to the addition of the surrender value of the bonus attaching to the policy at surrender shall be deemed to have been complied with where the method of calculation of the guaranteed surrender value of the policy makes provision for the surrender value of the bonus attaching to the policy: Provided further that the requirements of this sub-section as to the showing of the guaranteed surrender value on a policy shall be deemed to have been complied with where the insurer shows on the policy the guaranteed surrender value of the policy by means of a formula accepted in this behalf by the Authority as satisfying the said requirements: Provided further that the provisions of this sub-section as to the showing of the guaranteed surrender value on a policy shall not take effect until after the expiry of six months from such date as the Authority may, by notification in the official Gazette, appoint in this behalf.

(2) Notwithstanding any contract to the contrary, a policy which has acquired a surrender value shall not lapse by reason of the nonpayment of further premiums but shall be kept alive to the ex