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Friday, October 28, 2016

“It is further clarified that in view of the disposal of this Appeal, in the circumstances mentioned above, the Appellant will be liable to pay interest at the prevailing Bank rate (without penal interest) as per Section 8 sub-section (5) of the Insurance Regulatory and Development Authority (Protection of Policy Holder Interest) Regulations, 2002. The disposal of this Appeal is without prejudice to other Appeals in which arguments have been closed.”= adjustment of equities between the parties on account of earlier interim order as well as the language used in the order dated 10th December, 2015. The exercise that needs to be undertaken is really one of modification of the order dated 10th December, 2015, necessitated because of obvious omission in supplying the date from which the interest should be calculated. Since the High Court did not grant any relief by way of interest and the petitioners did not challenge the said judgment and order, we find merit in the submission of learned Attorney General that interest will be payable only on or after 4th April, 2008 when this Court imposed certain restrictions on the petitioners’ right to lodge death claims or maturity claims for appropriate amounts. However, since the interim order of this Court has stood in the way of the petitioners from getting its money claims against LIC within due time and the money has remained with the LIC because of interim arrangement enforced by this Court, it will not be proper to reduce the bank rate as ordered already. Accordingly, we modify the last but one paragraph of final order dated 10th December, 2015 passed in Civil Appeal No.8543 of 2009. It shall be so read as to include a clause that the LIC will be liable to pay interest at the prevailing bank rate (without penal interest) from 30 days after the date of death or date of maturity relating to the life insurance policy concerned or from 4th April, 2008, whichever is later. This matter is disposed of accordingly. We hope and trust that the LIC will discharge its liabilities as per this order with promptitude and without any unnecessary delay.

                                                   REPORTABLE
                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION
                     REVIEW PETITION(C) No.3538 of 2016
                                     IN
                        CIVIL APPEAL NO.8543 OF 2009
Dravya Finance Pvt. Ltd. & Anr.                    …..Petitioners
      Versus
S.K. Roy & Ors.                                    …..Respondents

                               J U D G M E N T

Shiva Kirti Singh, J.
Heard learned counsel for the parties.

Although this petition is labelled as a contempt  petition  arising  out  of
Civil Appeal No.8543 of 2009, by  order  dated  26th  September,  2016,  the
contempt proceedings were closed and the petition is now being treated  only
as a limited review petition for answering a short but significant  question
as to from what date, the interest needs to be calculated and  paid  by  the
LIC to the petitioners in terms of final order dated 10th December, 2015  in
Civil Appeal No.8543 of 2009.  The last  but  one  paragraph  of  the  Order
dated 10th December, 2015 is relevant for appreciating  the  issue  relating
to interest indicated above.  That paragraph runs as follows :-

“It is further clarified that in view of the disposal  of  this  Appeal,  in
the circumstances mentioned above, the  Appellant  will  be  liable  to  pay
interest at the  prevailing  Bank  rate  (without  penal  interest)  as  per
Section 8 sub-section  (5)  of  the  Insurance  Regulatory  and  Development
Authority (Protection of Policy Holder  Interest)  Regulations,  2002.   The
disposal of this Appeal is without  prejudice  to  other  Appeals  in  which
arguments have been closed.”



It will also be apposite to extract the Order passed in this  case  on  26th
September, 2016 which is as follows :-

      “On hearing the parties, we find that the order passed by  this  Court
on 10th December, 2015 in C.A.No.8543 of 2009 has been substantially or  may
be fully complied with except that a  dispute  has  arisen  with  regard  to
interpretation of observations made at the end of  that  Order  relating  to
payment of interest at the prevailing bank rate.  The  dispute  requires  an
answer as to the ‘the date’ from which the interest should be calculated.

      In our considered opinion, this dispute  raises  questions  of  equity
between the parties to be adjusted on account of earlier  orders  passed  in
C.A.No.8543 of 2009 and the language used in the Order dated 10th  December,
2015.  It will be appropriate to  consider  the  issue  not  under  Contempt
Jurisdiction  but  in  Review   Jurisdiction.    Therefore,   the   contempt
proceedings are closed.

      For that purpose, we direct that this Contempt Petition shall  now  be
treated as limited Review Petition and  may  be  listed  in  Court  on  18th
October, 2016 i.e. on a non-misc. day.

      It is further  recorded  that  the  petitioners  may  accept  whatever
amount Life Insurance Corporation (LIC) is ready to pay as interest  without
prejudice to their claims which may be determined by way of Review.

      It goes without saying  that  the  petitioners  will  be  entitled  to
pursue their remedy by approaching LIC  with  further  particulars/materials
in respect of the cases which are still pending for settlement.”



Since the issue under dispute is very narrow one, it  is  not  necessary  to
refer to facts in detail.   It  is  sufficient  to  notice  that  the  first
petitioner is a non-banking finance  company  engaged  in  the  business  of
lending money  against  collateral  security.   It  accepts  life  insurance
policies as collateral security through assignment of insurance policies  by
borrower in favour of the  petitioners.   On  22nd  October,  2003  and  2nd
March,  2005,  LIC  issued  two  circulars  for  putting   restrictions   on
assignment of insurance  policies  with  a  view  to  prevent  “trading”  in
policies.  The circulars  were  challenged  before  the  Bombay  High  Court
through two writ petitions filed in the year 2004.   They  were  allowed  by
quashing the two circulars vide judgments and orders dated 22nd March,  2007
and 23rd April, 2007 respectively.  No order for grant of any  interest  was
passed by the High Court nor the petitioners appealed against such orders.

LIC challenged the judgments of  Bombay  High  Court  by  way  of  S.L.P.(C)
Nos.8918 and 10783, both of  2007.   This  Court  passed  interim  order  in
favour of LIC and, as a result, the petitioners  could  get  only  temporary
registration of assignment in its favour but could not file any death  claim
or maturity claim during the pendency of the Civil Appeal  No.8543  of  2009
arising out of SLP against the petitioners.  Ultimately, by the final  order
dated  10th  December,  2015,  Civil  Appeal  against  the  petitioners  was
disposed of on the basis of undertakings furnished on affidavit  which  were
accepted by the Court on account of agreement accorded to the terms  of  the
undertaking by the learned senior counsel  for  the  LIC.   The  provisional
registrations were made permanent and  the  interim  orders  passed  on  4th
April, 2008 were recalled.  The LIC was thus required to process  the  claim
applications or maturity applications as  well  as  fresh  applications  for
registration in accordance with the order dated 10th December, 2015  and  in
that context, this Court observed that LIC will be liable  to  pay  interest
at the prevailing  bank  rate  (without  penal  interest)  as  per  relevant
provisions in the regulations of 2002.

It may be indicated, at this stage only, that the  other  appeals  in  which
arguments had been concluded also came to be finally dismissed  against  the
LIC on 29th December 2015.  As a result, the judgment of the High  Court  of
Bombay declaring the circulars ultra vires stood confirmed.

The present contempt petition came to be filed against the LIC.  As  noticed
above, the same was closed on 26th September, 2016 but this  Court  directed
it to be treated as  a  limited  review  petition  because  of  an  apparent
omission in the final order dated 10th December, 2015 in not  mentioning  as
to from what date, the LIC will be liable to pay interest at the  prevailing
bank rate (without penal interest).

On behalf of the petitioners,  Mr.  Shyam  Divan,  learned  Senior  Advocate
placed reliance upon various sub-regulations  of  Regulation  8  to  suggest
that as per statutory regulations, the interest should be payable  after  30
days from the date of maturity of the policy or date of death in case  where
the insured died during the pendency of the policy.

On the other hand, learned Attorney  General  appearing  on  behalf  of  LIC
pointed out that the High Court did not grant any relief by way of  interest
and, therefore, equity can be taken care of by ordering payment of  interest
only at a reasonable rate from 4th April, 2008 when  this  Court  passed  an
interim order but without prejudice to the ultimate rights  of  the  parties
and, as a result, temporary registration of assignment became possible.

He strongly advocated for reducing the rate of interest from  bank  rate  to
that of savings bank rate on the plea that there was  no  intentional  delay
caused by the LIC and, therefore, its  interest  should  also  be  protected
while adjusting the equities through grant of interest.

As is evident from order passed in this case on 26th  September,  2016,  the
present dispute relates  only  to  a  question  of  adjustment  of  equities
between the parties on account of earlier  interim  order  as  well  as  the
language used in the order dated 10th December,  2015.   The  exercise  that
needs to be undertaken is really one of  modification  of  the  order  dated
10th December, 2015, necessitated because of obvious omission  in  supplying
the date from which the interest  should  be  calculated.   Since  the  High
Court did not grant any relief by way of interest and  the  petitioners  did
not challenge the said judgment and order, we find merit in  the  submission
of learned Attorney General that interest will be payable only on  or  after
4th April,  2008  when  this  Court  imposed  certain  restrictions  on  the
petitioners’ right to lodge death claims or maturity claims for  appropriate
amounts.

However, since the interim order of this Court has stood in the way  of  the
petitioners from getting its money claims against LIC within  due  time  and
the money has remained with the LIC because of interim arrangement  enforced
by this Court, it will not be proper to reduce  the  bank  rate  as  ordered
already.  Accordingly, we modify the last but one paragraph of  final  order
dated 10th December, 2015 passed in Civil Appeal No.8543 of 2009.  It  shall
be so read as to include a clause  that  the  LIC  will  be  liable  to  pay
interest at the prevailing bank rate (without penal interest) from  30  days
after the date of death or date of maturity relating to the  life  insurance
policy concerned or from 4th April, 2008, whichever is later.

This matter is disposed of accordingly.  We hope  and  trust  that  the  LIC
will discharge its liabilities  as  per  this  order  with  promptitude  and
without any unnecessary delay.


                                        ……………………………….J.

                                        [ANIL R. DAVE]





                                        ……………………………….J.

                                        [SHIVA KIRTI SINGH]



                                        ……………………………….J.

                                        [R. BANUMATHI]



New Delhi.

October 26, 2016.