NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION-It is admitted that late Vinod Kumar Jain had availed a housing loan of Rs.10 lakhs. It is admitted that an amount of Rs.27,660/- was deducted from the account of the borrower towards the single premium amount payable towards insurance. It is admitted that at the time of sanction of the housing loan to the Complainant’s husband, OP-1 had an insurance master policy from OP-2 to cover such loans. It is admitted that a borrower could seek coverage under this group insurance scheme by paying the premium amount in advance. It is also admitted that for this purpose OP-1 acts as corporate agent of OP-2, in collecting the applications and forwarding the same to OP-2/SBI Life Insurance Company Ltd. = It is also argued that if the insurance company is not held liable to pay the sum assured for which the proposal was made, the bank also could not be asked to pay the amount to the Complainant. This argument also fails in the light of the finding of the State Commission that OP-2/SBI Life Insurance Company cannot be made liable to pay for the lapses on the part of the employees of the petitioner bank. We find ourselves in full agreement with the State Commission on this point, as everything that was required of the borrower, be it the proposal for insurance or authorization to debit the amount of one time premium to his account, was done at the time of sanction of the loan itself. By no stretch of imagination, the borrower can be held responsible for the lapses, which later resulted in the contract of insurance remaining incomplete till his death.

NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI REVISION PETITION NO. 2315 OF 2011 (Against the order dated 22.03.2011 in Appeal No. 1540/2010 of the State Commission, Karnataka) State Bank of Hyderabad Koppal Branch, Koppal 583 231 Karnataka ……….Petitioner Versus 1. Nirmala W/o late Vinod Kumar Shri Balaji Granites Jawahar Road Koppal 583 231 Karnataka 2. SBI Life Insurance Co. Ltd, Central Processing Centre Kapas Bhawan, Plot No.3A, Sector 10A, Belapur Navi Mumbai 400 614 Represented by its Manager .........Respondents BEFORE HON’BLE MR. JUSTICE V.B. GUPTA, PRESIDING MEMBER HON’BLE MR. VINAY KUMAR, MEMBER For the Petitioner : Mr. Buddy A. Ranganadhan, Advocate & Mr. A.V. Rangam, Adovcate PRONOUNCED ON: 29-02-2012 ORDER PER MR.VINAY KUMAR, MEMBER State Bank of Hyderabad Koppal Branch, Karnataka has filed this revision petition challenging the order of Karnataka State Consumer Disputes Redressal Commission in FA No.1540/2010. The revision petitioner/OP-1 has filed this petition against the original complainant as the first respondent and SBI Life Insurance Company Ltd., the original OP-2 as the second respondent. 2. As seen from the record, Mr. Vinod Kumar Jain, the husband of the Complainant Mrs. Nirmala had sought a housing loan of Rs.10 lakh from the revision petitioner/OP-1 to construct a house on his plot in Koppal town. The case of the complainant is that the loan was agreed but simultaneously Mr. Jain was made to apply for insurance from OP-2/SBI Life Insurance Company to provide insurance cover to the housing loan. An amount of Rs.27,660/- was debited to the borrower’s account towards premium. All this happened on 9.3.2007. 3. Three months later, the borrower died on 19.6.2007. His widow/the complainant asked the OP-1 to have the insurance claim settled and apply the proceeds towards clearance of the outstanding housing loan. OP-2 rejected the insurance claim on the ground that the insured had died before the acceptance of the proposal and therefore, there was no privity of contract between the Complainant and the Insurance Company/OP-2. Soon thereafter, a notice was issued by OP-1 asking the Complainant to pay back the entire loan. Subsequently, a notice was also published in local newspapers to the effect that OP-1/State Bank of Hyderabad was going to take possession of the concerned property. 4. The District Forum took note of the fact that late Vinod Kumar Jain while availing the housing loan had agreed to become member of Super Surakasha Samooha Insurance Scheme and had agreed to deduction of Rs.27,660/- towards premium for the same. He had also given the required declaration stating that he was in sound health and authorized the revision petitioner/OP-1 to debit his account and send the premium amount to OP-2 through demand draft. The same was sent by OP-1 to OP-2. The receipt of the demand draft of the same date was not denied by OP-2. The District Forum also noted that three months later OP-2/SBI Life Insurance Company informed OP-1 that an additional amount of Rs.3,386/- was required towards premium, which was sent on 21.6.2007 by debiting the amount to the account of the borrower. District Forum, therefore held that there was a presumption of acceptance of the proposal for insurance with the receipt of premium of Rs.27660/- on 9.3.2007. Therefore, it directed OP-2/SBI Life Insurance Company to pay the insurance amount proportionate to premium of Rs.27,660/-. 5. The State Commission has taken a view that OP-1 had insisted upon the borrower accepting the insurance cover under SBI Life group insurance scheme for protection of the housing loan of Rs.10 lakhs. Towards this, it obtained authorization of the borrower to deduct and pay the premium amount of Rs.27660/-. The Commission has observed that insurance proposal and the demand draft for premium amount were sent to OP-2, without ascertaining the exact amount of premium payable for insurance coverage of Rs.10 lakhs, considering the age of the insured. The State Commission has also noted that the same was returned by OP-2 to OP-1 seeking not only additional premium of Rs.3,386/- but also particulars of the loan, date of the final EMI and statues of health of the borrower. The revision petitioner/OP-1 resubmitted the details together with the requisite insurance premium on 25.6.2007, which was subsequent to the death of the borrower. 6. The State Commission has made the following observation on the manner in which the entire matter was handled by the present revision petitioner/OP-1:- “Of course respondent No.2/Bank had taken a Group Insurance Suraksha Policy as a security of the loan advance to its customers but before submitting the proposal form the respondent No.2/Bank ought to have been collected the requisite premium to cover the risk to who the loan was sanctioned. But simply by collecting some amount has forwarded the proposal form, without obtaining any information through phone or communication by furnishing age of the loanee/borrower and his health condition. Therefore, the appellant has rightly returned the proposal form including the DD submitted by respondent No.2/Bank. On 24.07.2007 after a lapse of 4 months the same was resubmitted by respondent No.2 Bank vide Ex. R.3 that too after the death of the insured Vinod Kumar Jain. Considering the fact that respondent No.2 is of Koppal and respondent No.1 /complainant being the resident of Koppal before forwarding the said proposal afresh ought to have been made an attempt to ascertain whether the loanee/insured is alive by deputing any of its official/field officer of the Bank. But unfortunately no such attempt has been made by respondent No.2/Bank for which the appellant should not be made liable to pay the amount awarded by the DF.” Therefore, the State Commission has held that the State Bank of Hyderabad alone (and not SBI Life Insurance Corporation) is responsible to comply with the direction of the District Forum. 7. We have perused the records and heard the counsel for the revision petitioner/State Bank of Hyderabad (OP-1 before the District Forum). The main ground urged by the revision petitioner is that the impugned order amounts to “granting the Borrower’s wife a right of indemnification for the payment of the loan which was advanced by the very same Bank to the Borrower.” 8. We need to examine this plea in the backdrop of the admissions in the written response of OP-1 before the District Forum. It is admitted that late Vinod Kumar Jain had availed a housing loan of Rs.10 lakhs. It is admitted that an amount of Rs.27,660/- was deducted from the account of the borrower towards the single premium amount payable towards insurance. It is admitted that at the time of sanction of the housing loan to the Complainant’s husband, OP-1 had an insurance master policy from OP-2 to cover such loans. It is admitted that a borrower could seek coverage under this group insurance scheme by paying the premium amount in advance. It is also admitted that for this purpose OP-1 acts as corporate agent of OP-2, in collecting the applications and forwarding the same to OP-2/SBI Life Insurance Company Ltd. 9. On the other hand, no evidence was produced before the fora below to show that the insurance cover for the loan was a requirement of the borrower. The fact is that the proposal form for insurance and deduction of premium were made on the same day on which the application for the housing loan was accepted. Therefore, despite the façade of voluntary acceptance of insurance, the facts of this case reveal that the insurance coverage under the existing master policy of 2003 was a requirement of the revision petitioner/State Bank of Hyderabad, as an additional security for the housing loan. We are therefore, in full agreement with the view of the State Commission that it was thrust upon the borrower as a mandatory security for recovery of the loan. 10. In our considered opinion, in this case insurance was only an additional protection in the hands of the lender i.e. the bank, against default in repayment. Had it been for the indemnification of the borrower, there would be no need to either push it simultaneously with the sanction of the loan or to cover it under the existing master policy taken by the bank. 11. It is also argued that if the insurance company is not held liable to pay the sum assured for which the proposal was made, the bank also could not be asked to pay the amount to the Complainant. This argument also fails in the light of the finding of the State Commission that OP-2/SBI Life Insurance Company cannot be made liable to pay for the lapses on the part of the employees of the petitioner bank. We find ourselves in full agreement with the State Commission on this point, as everything that was required of the borrower, be it the proposal for insurance or authorization to debit the amount of one time premium to his account, was done at the time of sanction of the loan itself. By no stretch of imagination, the borrower can be held responsible for the lapses, which later resulted in the contract of insurance remaining incomplete till his death. 12. In view of the detailed examination above, the revision petition is held to be devoid of any merit and is dismissed as such. The impugned order of the Karnataka State Commission in Appeal No. 1540/2010 is confirmed. In addition, considering the conduct of the revision petitioner/bank and the resultant suffering undergone by the complainant, it is considered just and proper to award an amount of Rs 50,000 as compensation. The same shall be paid by the revision petitioner to the complainant within three months from the date of this order. Delay in payment, if any, shall carry interest at the rate of 9%. .………………………… (V.B.GUPTA,J.) PRESIDING MEMBER …………………………. (VINAY KUMAR) MEMBER s./-