The court held that failing to submit an insurance application precludes entitlement to insurance benefits despite premium inclusion in a loan, affirming bank's actions under the SARFAESI Act were valid.

JUDGMENT

Muralee Krishna S., J.

The petitioners in W.P.(C)No.9933 of 2024 filed this writ appeal under Section 5 (i) of the Kerala High Court Act, 1958, challenging the judgment dated 11.06.2025 passed by the learned Single Judge in that writ petition.

2. The 1^st appellant is the wife, and appellants 2 and 3 are the children of the deceased C.Radhakrishnan Nair, who availed a Housing Loan from the 1^st respondent State Bank of India. As per the pleadings in the writ petition, the loan availed by Sri.C.Radhakrishnan Nair with Account No.HL37487083514 was for Rs.33,44,000/-. Ext.P1 is the arrangement letter dated 23.01.2018 issued by the Bank in respect of that loan. The Housing Loan availed by Sri.C.Radhakrishnan Nair was secured by the SBI Life Insurance Suraksha Loan Account bearing No.37487099568. Ext.P1 arrangement letter admits payment of insurance premium of Rs.1,59,000/-, and it shows the breakup of the loan amount and the insurance premium. Since C.Radhakrishan Nair was working abroad, the documentation for the loan was done through his son Sri.Avinash Radhakrishnan, who did not join as a party to the writ petition, since he is not available in India at present. At the time of availing the loan, Sri.Avinash Radhakrishnan was the power of attorney holder of C.Radhakrishnan Nair. According to the appellants, the EMI of Rs.48,737/- shown in Ext.P1 is inclusive of EMI for Suraksha Loan at the rate of Rs.827/- per month.

2.1. The appellants plead that C.Radhakrishanan Nair was paying the EMIs regularly at the rate of Rs.50,000/- instead of Rs.48,737/-. Due to serious illness, C.Radhakrishnan Nair defaulted the EMIs from September 2021 onwards, and he died on 05.01.2022 after a prolonged treatment. After the death of C.Radhakrishnan Nair, the appellants informed the Bank about the sad demise of C.Radhakrishnan Nair and requested to make available the benefit of Suraksha Insurance and close the loan transaction as per the terms of the insurance. But the 1^st appellant received Ext.P4 communication dated 19.02.2022 from the 2^nd respondent Manager stating that the deceased had not opted for insurance as he had not submitted an application for insurance to the Housing Loan Account No.HL37487083514, and the loan was sanctioned without insurance cover. To that communication, the appellants submitted Ext.P5 explanation dated 02.03.2022 specifying that an additional sum of Rs.1,59,000/- was sanctioned along with the Housing Loan towards one-time insurance premium. Thereafter, the 1^st respondent bank informed the appellants, vide Ext.P6 letter dated 14.03.2022, that the Bank has not accepted the Suraksha Loan.

2.2. It is the further case of the appellants that the 3^rd respondent SBI Life Insurance Company, by Ext.P7 letter dated 18.08.2022, informed the appellants that the 3^rd respondent is unable to locate the Home Loan Insurance in respect of the Home Loan availed by Sri.C.Radhakrishnan Nair. Thereafter, the appellants filed Ext.P8 complaint before the District Consumer Redressal Commission, Palakkad, on 28.12.2023, alleging deficiency of service and for appropriate directions to extend insurance cover to the Home Loan availed by C.Radhakrishnan Nair and also seeking compensation. However, the 2^nd respondent issued Ext.P9 notice dated 17.01.2024 under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (‘ SARFAESI ACT ’ for short), calling upon the appellants to discharge the full liability of Rs.23,78,764/- as on 17.01.2024. To Ext.P9 notice, the appellants, through their counsel