ICICI PRUDENTIAL LIFE INSURANCE CO. LTD. vs KEMPANNA CHETTY

This revision petition has been filed by ICICI Prudential Life Insurance Co. Ltd. against the order dated 17.08.2012 of the State Consumer Disputes Redressal Commission, Karnataka, (in short ''the State Commission''), wherein the appeal filed by the petitioner against the order dated 05.07.2012 of the II Additional District Consumer Disputes Redressal Forum, Seshadripuram, Bangalore, (in short ''the District Forum'') has been dismissed.

Brief facts are that complainant/respondent Mr. Kempanna Chetty had taken insurance policy vide policy No.01476954 under "Save-N-Protect Plan" for a term of 15 years from April 2005 with mode of monthly payment of Rs.15,834/- as premium. Due to non-payment of premium timely, the policy lapsed 9 times with the last date of lapsing as 01.07.2010 and finally on 31.03.2011 the respondent paid Rs.1,59,506/- to the petitioner seeking reinstatement of the policy. The request of reinstatement of the policy was rejected by the petitioner and the amount deposited was refunded. Then the respondent surrendered the policy. On surrender, the petitioner paid Rs.4,56,225/- to the petitioner as surrender value of the policy. Dissatisfied with this surrender value, the respondent filed a consumer complaint before the District Forum, which allowed the complaint and passed the following order on 05.07.2012:-

"Complaint is allowed in part.

The Ops are directed to pay Rs. two lakhs to the complainant within 60 days from the date of this order.

OPs are directed to pay Rs.3,000/- as advocate fee to the complainant.

OPs are further directed to pay interest on Rs.2,00,000/- at 12% per annum from the date of order till the date of payment/realization.

OPs are directed to pay the above ordered amount within 60 days from the date of this order.

The OPs are directed to send the above ordered amount to the complainant directly by way of DD/cheque with intimation to this forum."

Aggrieved with the above order of the District Forum, the petitioner preferred an appeal before the State Commission, which was dismissed vide it order dated 17.08.2012.

Hence this revision petition.

On 27.11.2015 this Commission has passed the following order:-

"Respondent has been duly served by Dasti notice. Affidavit in furtherance of Dasti notice has also been filed.

Since, respondent has been duly served through Dasti notice and as there is no appearance on behalf of respondent since morning, respondent is proceeded exparte. List on 18.02.2016 for admission hearing."

We heard the learned counsel for the petitioner and perused the records carefully.

Learned counsel for the petitioner argued that surrender value of the policy is governed by Clause 4 of the policy contract, which reads as follows:- "4. Guaranteed Surrender Value:

If premiums are paid for at least three consecutive years, the Policy acquires a surrender Value which is equal to thirty five percent of the premiums paid, excluding the premiums paid during the first year of the policy, all extra premiums paid and the premiums paid for the supplementary benefits. The cash value of the guaranteed additions and vested bonuses will also be allowed. The Policy which has acquired a Surrender Value can be surrendered The Surrender shall extinguish all the rights, benefits and interests under the Policy."

Learned counsel mentioned that the calculation of payment of surrender value has been arrived at as follows:-

"* Total Premium Paid: Rs.994266/- (apart from Rs.15950/- paid towards reinstatement of the policy, which was refunded separately).

* First Year Premium: Rs.201708/-

* Premium excluding First year Premium:

Rs.994266 - Rs.201708/- = Rs.792518/-

* 35% of Rs.792518/- = Rs.277381/-

* Surrender Amount paid = Rs.456225/- (including cash value of the guaranteed bonus and vested bonus)."

Learned counsel for the petitioner further argued that policy is a contract between the insurer and the insured based on trust. As per this contract, the respondent is bound by the terms and conditions of the policy and in this regard Clause 4 of the policy is binding on the respondent. Both the fora below have not appreciated this aspect of the policy and have erred in awarding additional amount of Rs.2,00,000/- over and above the surrender value already paid by the petitioner to the complainant/respondent.

We have carefully considered the arguments advanced by the learned counsel for the petitioner and have perused the terms and conditions of the policy in detail. In respect of payment of premiums the following is mentioned:-

"Payment of premiums:

(i) Premiums are payable on the due dates and at the rate mentioned in the Policy Certificate or at such altered rate as would be payable in terms of Condition 1(ii) of the General Conditions of this Policy Document.However, a grace period of not more than 30 days, where the mode of payment of premium is other than monthly and not more than 15 days in the case of monthly mode is allowed.The benefits payable on death/critical illness under this policy will be paid after deduction of the premium falling due during the then current policy year.

(ii) Premiums are payable on the due dates mentioned in the Policy Certificate or within the grace period allowed without any obligation on the company to notify the Life Assured/policy holder of the due dates.If the premiums are not paid on the due dates or even during the grace period, the policy lapses and no benefits shall be payable thereunder except to the extent indicated in condition (3) below."

The condition 3 referred in the above Clause is as follows: "3. Paid up Value :

If premiums have been paid for atleast three consecutive years and any subsequent premium has not been paid within the grace period, the Sum Assured under this Policy shall stand reduced to a paid-up sum which shall be an amount bearing to the Sum Assured the same proportion as the number of premiums which have been paid bears to the total number of premiums which are payable under the Policy, to which will be added the guaranteed additions and vested bonuses if any, provided that such paid-up sum together with the guaranteed additions and vested bonuses is not less than Five Hundred Rupees."

In our view when the policy was not reinstated by the petitioner, the payment should have been made as per Clause 3 above. It is not clear why did respondent surrender the policy and why did the petitioner accept the surrender of the policy. In our opinion, live policy can only be surrendered, if the insured wants to surrender the same. There is a separate provision for the lapsed policies and perhaps its surrender may not be in order. The fact that the insured paid Rs.1,59,506/- to the petitioner for reinstatement of the policy, goes on to show that the insured did not want to surrender the policy. The effect of not accepting the reinstatement of the policy by the petitioner would only be that the policy would remain lapsed. The respondent had paid 62 premiums out of total 180 premiums required to be paid. As the sum assured is Rs.20,00,000/-, as per Clause 3, the paid up value should be about Rs.6.88 lakh plus guaranteed additions and vested bonuses if any. This amount is definitely greater than the surrender value already paid by the petitioner plus the awarded amount by the District Forum. Hence, in fact the petitioner is liable to pay more to the respondent/complainant. As the respondent/complainant has not filed any revision petition, the order dated 17.08.2012 of the State Commission and thereby the order dated 05.07.2012 of the District Forum have attained finality qua the complainant.

Based on the above discussion, we find no merit in the revision petition filed by the petitioner and the same is dismissed herewith.

No order as to costs.