Current Trends In Law “Retaining money wrongfully”

The Supreme Court division bench consisting of Dr. Justice D.Y. Chandrachud and Justice Hemant Gupta have, in the judgment of the case- Madhav Hari Joshi v. Divisional Manager, Life Insurance Corporation of India and Another, delivered on January 4, 2019, directed the  L.I.C. to pay to the appellant an amount of Rs two lakhs towards all the claims, demands and outstandings, including litigation expenses, by way of penalty for holding on to his money wrongfully for five years, in addition to the payment of the amount ordered by the National Consumer Disputes Redressal Commission.

The Apex-Court has stated further, that omission on the part of the LIC to refund the appellant’s amount deprived the appellant of the use of his money. Hence, a mere direction for the payment of interest on the principal sum will not provide sufficient redress.

The two appeals in this case arose from the decisions of the National Consumer Disputes Redressal Commission – NCDRC, on February 26, 2015 and April 29, 2015. The appellant submitted a proposal to the LIC under its Jeevan Aastha Plan on January 31, 2009.

It is not in dispute that together with the proposal, the appellant had paid an amount of Rs 1,75,000/- inclusive of an amount of Rs ten thousand  towards additional risk premium. This Plan was open for subscription for 45 days between December 8, 2008 and January 22, 2009.

In response to the LIC’s offer of another plan through the communication of its Branch Officer on April 15, 2009,the appellant wrote to the Chairman of the LIC recording his grievance that he had complied with all formalities, including the payment of additional premium and had undergone a medical test.

Eventually, as it transpired, neither was apolicy issued to the appellant nor were his moneys refunded. That led him to file a complaint before the District Consumer Disputes Redressal Forum, Thane in 2012. Through his amended complaint, he sought a refund of his investment of Rs.1,75,000/- together with interest and compensation in the amount of Rs 5 lakhs.

The District Forum allowed the complaint with direction to the LIC to refund the amount of Rs 1,75,000/-. In addition, compensation in the amount of Rs 4,25,000 was granted on the ground that the appellant  had been deprived of his moneys for a period of five years.

The State Consumer Disputes Redressal Commission , Mumbai, confirmed the order of  District Forum.

The LIC instituted the revisional proceedings before the National Commission. The National Commission maintained the direction for the payment of Rs 1,75,000/-.The appellant  was also granted interest at the rate of 12 pc per annum from the date on which the principal amount was paid to the LIC till the date on which it was deposited with the District Forum .However, the direction for the  compensation was deleted. A review petition instituted against the order in revision was dismissed.

It was submitted by the appellant’s counsel that as the appellant completed all the necessary formalities and as once the proposal was accepted, there was no justification to deny the issuance of a policy. Moreover, the policy was an equity-based plan. As a result of the retention of moneys by the LIC for nearly five years , the appellant  lost the benefit of an enhancement in the value of his investment in the booming equity market and he should be suitably compensated. Hence, it was urged that the refund ordered with12 pc interest would not be a sufficient recompense.

From a reading of the impugned judgment of the National Commission, it emerges that all findings of fact have, in fact, been recorded in favour of the appellant.

It appears from his letter of April 15, 2009 that the Branch Manager of  the LIC had been already conveyed a decision to complete the proposal with extra premium .Admittedly, even the extra premium of Rs 10,000/-  was paid by the appellant as part of his payment of Rs 1,75,000/-. The remaining formalities that were required to be observed were to be fulfilled by the Development Officer and not by the appellant.LIC retained the money of the appellant for nearly five years. No effort was made to refund the money.

In this view of the matter, a deficiency of service has been clearly established on the part of the LIC. The National Commission has awarded interest at 12 pc per annum on the principal sum of Rs 1,75,000/-. The District Forum had quantified the compensation payable to the appellant at Rs 4,25,000/-. The District Forum did not indicate the basis on which this computation was made.

It has been the submission by the appellant’s counsel that the plan for which he had applied was an equity based market plan and, hence he has lost the benefit of an escalation in his investment value. According to the Court, there is merit in this submission. The plan in question was not exclusively an insurance based product. By being linked to the equity market, it had an investment element.

LIC held on to the money of the appellant wrongfully for five years. Its omission to refund has deprived the appellant of the use of his money. Hence, a mere direction for the payment of interest on the principal sum will not provide sufficient redress.

In the Apex-Court’s view, the ends of justice would be met, if the direction, which has been issued by the National Commission, is modified and an additional amount  of Rs two lakh is directed to be paid towards all the claims, demands and outstandings, including litigation expenses.

The addition, what has been directed to be paid by this Court shall be paid to the appellant within one month from the date of this judgment.

The counsel for the LIC informed the Court that the amount which was ordered to be paid by the National Commission has already been deposited in the District Forum. The additional amount, which has been directed by this Court shall also be deposited before the District Forum within the stipulated period. The amount shall be released to the appellant by the District Forum on proper identification.

The Court has made it amply clear that the amount of Rs two lakhs shall be in addition to what has been ordered by the National Commission and disposed of these appeals.

Adv. R.S. Agrawal

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