Back
2020 Supreme(Online)(NCDRC) 906
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION
PREM NARAIN, PRESIDING MEMBER, C. VISWANATH, MEMBER
LIFE INSURANCE CORPORATION OF INDIA – Appellant
Versus
SHIV MURTI SINGH & ANR. – Respondent
REVISION PETITION NO. 824 OF 2018
For the Appellants/Petitioners: Ms. Meghna Sankhla
For the Respondents: Mr. Rajinder Dhar, Mr. Gyanesh Kumar Singh
For Respondent No.2: Mr. Sartaj Singh
The insurer is bound to honor the assignment of a policy, requiring no consent from the assignor prior to paying the assignee.
Headnote:(A) Consumer Protection Act, 1986 - Section 21(b) - Assignment of Insurance Policy - Dispute regarding payment to the assignee - Appellant assigned insurance policy to the Bank as collateral for loan - No permission sought from Complainant before settling claim with the assignee - State Commission's order disregarded legal assignment principles - Appeal dismissed due to lack of Complainant’s direct benefit from the policy, dismissal of claim. (Paras 6, 11, 12, 13)
(B) Rights of Assignee - Insurer obligated to recognize the assignee - On assignment, assignee holds all rights to the policy benefits, and insurer must comply without dispute unless statutory conditions are unmet. (Paras 10, 11, 12)
Facts of the case:
The Complainant assigned an insurance policy to a Bank as collateral for a loan taken by a third party. The Bank withdrew funds from the policy on loan default without notifying the Complainant. Legal complaints arose regarding responsibilities and rights over the insurance policy.
Findings of Court:
The assignment was valid and enforceable; the State Commission failed to consider the legal implications of the assignment, resulting in an incorrect ruling.
Issues: Was the assignment of the insurance policy valid? Did the Insurance Company have an obligation to inform the Complainant before paying the assignee?
Ratio Decidendi: The court reinforced that once an insurance policy is assigned, the insurer should recognize the assignee without needing further consent from the assignor as per the Act.
Result: Revision petition allowed, State Commission's order set aside, Complaint dismissed.
| Table of Content |
|---|
| 1. filing and background of the case. (Para 1 , 2) |
| 2. initial proceedings and decisions. (Para 3 , 4 , 5 , 6) |
| 3. arguments presented by parties. (Para 7 , 8 , 9 , 10) |
| 4. court's observations on policy assignment. (Para 11 , 12) |
1. The present Revision Petition is filed by the Petitioner under Section 21 (b) of the Consumer Protection Act, 1986 against Order passed by the U.P. State Consumer Disputes Redressal Commission (hereinafter referred to as the “State Commission”) in Appeal No.591/2013 dated 14.12.2017.
2. The Complainant/Respondent No.1 obtained a LIC New Insurance Investment 2002 Policy No.291967097 on 10.07.2002 for a sum of Rs.80,000/- maturing on 10.07.2007 from the Petitioner, Insurance Company/Opposite Party No.1. Mr. Rajender Singh S/o Ram Sundar Singh R/o Village Haider Thana Gaur, District Basti took a loan of Rs.2 lakhs from Respondent No.2/Opposite Party No.2, Punjab National Bank, Lakshmanpur, Basti on 28.07.2003. Respondent No.1/Complainant stood guarantor to the loan by assigning his insurance policy to Respondent No.2 Bank as a surety, vide assignment dated 14.07.2003. The case of the Complainant was that Respondent No.2/Bank did not resort to any coercive measures against the debtor for default in payment of the loan, nor was any attempt made to recover the loan amount from the second guarantor of the debtor, who was a government servant. Conspiring with Respondent No.1/ Insurance Company, Respondent No.2 Bank received the payment of the Complainant’s bond and deposited the same in the account of the debtor Rajender Singh. Respondent No.1 did not seek any permission from the Complainant nor inform him that the said bond was paid to Respondent No.2/Bank. Alleging this to be deficiency in service on the part of the Insurance Corporation, Complainant filed a Consumer Complaint before the District Forum with the following prayer: -
“(a) The Respondent No.1 be directed to pay amount of the policy No.291967097 with all the benefits and from the date of 10.07.2017 till today an interest on the said amount be also paid to the complainant.
(b) The Respondent No.2 be directed to keep safe the policy bond of the complainant and for recovery of its outstanding take an appropriate action.
(c) The complainant be also given the cost of the litigation and compensation from the respondents.
(d) be also grant any other relief as this Hon’ble Forum may deem fit and proper in favour of the complainant.”
3. The Complaint was contested by the Petitioner/Opposite Party No.1 admitting that Respondent No.1/Complainant had taken an insurance policy from them. The Petitioner contended that while standing guarantee, Respondent No.1/Complainant mortgaged the LIC policy, the policy bond was kept in security and a discharge certificate was also given to the Bank giving it right to collect amount from the policy and deposit it into the loan account of the debtor, in case any defect or default was noticed. The Complainant had assigned his policy to Respondent No.2 Bank and directed them to register the assignment in the Petitioner- Corporation’s book/register. Respondent No.1/Complainant and Respondent No.2/Bank had given a notice of assignment to the Petitioner Insurance Company. Upon maturity of the policy the petitioner-Corporation paid sum assured to the assignee i.e. Respondent/Bank on 29.09.2007. Since the entire funds had been transferred to Respondent No.2- Bank, there was no relationship between the Complainant and the Insurance Company as per the Consumer Protection Act, 1986 .
4. Respondent No.2 Bank also contended that the loan of Rs.2 lakhs was given to Rejender Singh on 28.07.2003 on the guarantee of the Complainant to set up a cement mesh and building material industry under Khadi and Village Industries Scheme. Loan was obtained on the guarantee of the Complainant. Loan went into default due to non-payment by the Debtor Rajender Singh and the debtor and the guarantor were repeatedly requested
