The insurer did not breach any duty regarding promised returns or commission payments under the Insurance Act.

1. The complainants who are mother and son, obtained two separate ULIP Policies namely Allianz Bajaj Unit Gain Policies for Rs.50 lacs each paying annual premium of Rs.10 lacs each for the first three years of the policies. In July 2007, they received a statement of account which disclosed that the value of their investment at that time was Rs.25,65,810.3. The case of the complainants is that the policies were taken through an agent of the insurer namely Mr. Prakash D.M. who had promised annual return of 30% to them while selling the policies. Since even the principal amount paid by them had reduced as per the statement supplied to them, the complainants sought refund of the amount which they had paid along with interest on that amount.

2. The case of the insurer is that as per the proposal form submitted by the complainants, the fund allocation proposed by them was 20% in equity fund, 20% in debt fund, 30% in cash fund and 30% in balanced fund but the policy holder could always change the allocation as per his choice. According to the insurer, the complainants had exercised the option to shift their shares to 100% equity as against 20% envisaged in the original proposal and this was done on 11.4.2008. After surrendering the policies on 17.9.2009, the complainants approached the concerned State Commission by way of two separate Consumer Complaints.

3. The complaints were opposed by the insurer primarily on the ground that there was no deficiency on their part in rendering services to the complainants and that the value of the investments made by the complainants had reduced to Rs.26,29,700 on account of the valuation prevailing at that time.

4. The State Commission allowed the Consumer Complaints to the extent that the insurer was directed to pay Rs.3,70,300 to the complainants in each case along with interest at the rate of 9% per annum, compensation quantified at Rs.1 lac and the cost of litigation quantified at Rs.5,000.

5. Being aggrieved from the order passed by the State Commission, the insurer is before this Commission by way of these two separate appeals.

6. The first grievance of the complainants is that the insurer had paid 40% of the first year premium to the agent as commission which the insurer was not entitled to pay. Reliance in this regard is placed upon the provisions contained in S.40A of the Insurance Act .

7. The relevant provisions of S.40A of the Insurance Act have been quoted in para 9 of the impugned order and read as under:
9. S.40 - A Insurance Act , 1938 reads as follows:
40A. (1) No person shall pay or contract to pay to an insurance agent, and no insurance agent shall receive or contract to receive by way of commission or remuneration in any form in respect of any policy of life insurance issued in India by an insurer after the 31st day of December, 1950, and effected through an insurance agent, an amount exceeding - (a) where the policy grants an immediate annuity or a deferred annuity in consideration of a single premium, or where only one premium is payable on the policy, two percent of that premium, (b) where the policy grants a deferred annuity in consideration or more than one premium, seven and a half percent of the first year's premium, and two percent of each renewal premium payable on the policy, and (c) in any other case, thirty - five percent of the first year's premium, seven and a half percent of the second and third year's renewal premium, and thereafter five percent of each renewal premium payable on the policy:
Provided that in a case referred to in Clause (c), an insurer, during the first ten years of his business may pay to an insurance agent and an insurance agent may receive from such an insure