Bajaj Allianz Life sold ULIP to a consumer without obtaining his signature on the sales illustration, as mandated by IRDA. Moneylife intervention helped to solve a difficult case that even insurance ombudsman had refused to take up. Bajaj Allianz generously agreed to a settlement of Rs30,000
An agent of Bajaj Allianz Life had sold Capital Unit Gain ULIP to a consumer without obtaining his signature on the sales illustration, as is directed by Insurance Regulatory and Development Authority (IRDA). The policyholder paid three premiums and then surrendered the policy. After finding about the IRDA directive, he raised the issue on technical grounds. Even though the policyholder filed complaint at an advanced stage, Moneylife intervention helped to solve a difficult case with kind consideration of Bajaj Allianz Life who were generous to pay Rs30,000 to the policyholder. It was an intricate case that was refused to be taken up by the insurance ombudsman of Hyderabad.
Moneylife Foundation Insurance Helpline received following email from Chirag Rao (name changed).
I had bought Bajaj Allianz Capital Unit Gain ULIP on 14 Sep 2007. My annual premium was Rs75,000 and I paid it for three years and surrendered the policy on 13 Sep 2010. The amount I received after surrendering the policy was approximately Rs2.01 lakh. I later came to know that IRDA had directed Bajaj Allianz Life to withdraw the product within 15 days from the date the directive was issued i.e. 13 Aug 2007 as the product was not customer friendly. Bajaj Allianz sought an extension of period for selling the policy. IRDA gave them an extension till 15 Sep 2007 to sell the policy with the condition that the policy must be accompanied by sales illustration signed by the policy buyer.
Mr Sam Ghosh, then managing director of Bajaj Allianz in his interview to Economic Times in Sep 2007 said that further sale of Capital Unit Gain ULIP will be done only if the policy buyers signed the sales illustration. http://articles.economictimes.indiatimes.com/2007-09-03/news/28468876_1_mis-selling-ulips-actuarial-funded IRDA in its directive had also mentioned that it will conduct inspections in the future to verify if signatures have been obtained on sales illustration. In reply to my RTI application to IRDA asking them if any inspection had been done to verify the same, I received a reply that the information was not available.
I initially registered a complaint with IRDA IGMS (Integrated Grievance Management System) # 04-13-020634 and 05-13-011717. Bajaj Allianz have accepted in their reply to my complaint that there has been a procedural lapse on their part, but also contended that this would not amount to mis-selling. If the sales illustration had been shown to me I would have had second thoughts on buying the policy in question. I also complained to the office of the insurance ombudsman, Hyderabad. I received a reply that my complaint does not come under their purview and that I may contact IRDA, which had issued the directive.
Is Mr Rao case an aberration or many policyholders suffered due to Bajaj Allianz purported “procedural lapse”? Sep 2007 Economic Times interview has Mr Ghosh stating, “We will print lakhs of forms and distribute them to our agents. If an agent does not bring in a signed copy of the illustration along with the proposal, we will ask him to go back and get one.” Clearly, it was not done in the case of Mr Rao. It proves that Bajaj Allianz did not comply with what it’s then managing director told media.
Bajaj Allianz had not given any indication of accepting Mr Rao’s request. Moreover, why does IRDA’s reply to the RTI reveal that there is no information with IRDA itself on them conducting inspections? Moneylife took the issue with IRDA. Bajaj Allianz changed their stand with reply to Moneylife stating, “We are in talks with customer. As agreed by him and on his explicit consent, we have initiated the process of settlement.” Bajaj Allianz Life refunded Mr Rao an amount of Rs30000 within four days.
Before Moneylife intervention, Bajaj Allianz Life had refused to budge with policyholder request. It is evident from their email response to the policyholder grievance, which states, “Any grievance as regards mis-selling cannot be entertained by the company at this belated stage after you have already enjoyed insurance cover and surrendered the policy in accordance with the terms and conditions as contained in the contract of insurance. In fact payment of renewal premium without protest is sufficient to indicate your ratification of the terms and conditions of the insurance policy. You have not been able to indicate how you have been prejudiced on account of the procedural lapse in not obtaining your signatures on the sales illustration in the year 2007 and the reason for raising such grievance after the policy is already surrendered.”
Benefit illustrations of many old ULIPs were mis-leading. Thus, taking signature of customer on flawed benefit illustration may not mean much. Agents would present deceptive benefit illustration, sanctioned by the Regulator to seal the deal. Moneylife had written about how one customer relied on the misleading benefit illustration of HDFC Life Young Star product that conveniently ignored the steep mortality charges, which made up for 80% of the premium for one policy.
In the last eight months, there have been over 150 incursions by the Chinese side and that Indian troops also enter areas claimed by them during patrolling
In yet another face-off with Indian soldiers, Chinese troops stayed 20 kilometres inside Indian territory in Chaglagam area of Arunachal Pradesh on 13th August.
However, the Army Headquarters sought to play down the incursion, saying the Chinese troops have gone back to their areas and such incidents keep taking place as both sides enter areas claimed by the other side while patrolling the disputed Line of Actual Control (LAC).
People’s Liberation Army (PLA) troops had come over 20kms inside Indian-claimed territory in Chaglagam area of Arunachal Pradesh and after they were stopped by the Indian troops, the two sides showed banners to each other to leave the area, sources said here.
However, the two sides held to their positions and the Chinese soldiers left after staying put for two-three days, they said.
In April, Chinese troops had entered 19kms deep inside the Indian Territory and pitched their tents in Depsang plains in Ladakh. They returned after a three-week stand-off and several rounds of hectic parleys between the top officials of the two countries.
In the last eight months,there have been over 150 incursions by the Chinese side and that Indian troops also enter areas claimed by them during patrolling.
The CIC said information on defaulters shared by RBI with CIBIL cannot be denied to an RTI applicant and the central bank should display this info on its website. This is 159th in a series of important judgements given by former Central Information Commissioner Shailesh Gandhi that can be used or quoted in an RTI application
The Central Information Commission (CIC), while allowing an appeal, directed the Central Public Information Officer (CPIO) and chief general manager of Reserve Bank of India (RBI) to provide complete information about defaulters of nationalised bank. The CIC also directed the RBI governor to display this information on its website, in fulfilment of its obligations under Section 4 (1)(b)(xvii) of the Right to Information (RTI) Act.
While giving this judgement on 15 November 2011, Shailesh Gandhi, the then Central Information Commissioner said, “The CIC is aware that information on defaulters is being shared by Reserve Bank with an organisation called CIBIL. In such a situation, it is difficult to understand the reluctance to share this information with citizens using RTI. The RBI's circular of 1994- mentioned above- in fact appears to promise to share this information suo moto with the public.”
Samalkha (District Panipat, Haryana) resident PP Kapoor, on 16 August 2010, sought from the PIO information about money deposited by citizens in nationalised banks and defaulters of loan. Here is the information he sought under the RTI Act...
1. Total amount of money deposited by Indian citizens in nationalized Indian banks during the periods 2006, 2007, 2008, 2009 and 2010. Provide information for each year separately;
(a) Information till date regarding total amount of loan taken but not repaid by industrialists from Indian nationalized banks and the total amount of interest accumulating on such unpaid loans; and
(b) Details of default in loans taken from public sector banks by industrialists. Out of above list of defaulters, top 100 defaulters, name of the businessman, address, firm name, principal amount, interest amount, date of default and date of availing loan.
(c) Steps being taken for putting information sought in query 2(a) and list of defaulters on the website of the Respondent - public authority.
The CPIO in a letter dated 14 October 2010 informed Kapoor, the applicant, that query no1 was transferred to Department of Economic Analysis and Policy (DEAP), queries 2(b) and (c) were transferred to Department of Banking Supervision (DBS) and query 2(a) was transferred to Department of Banking Operations and Development/DBS.
Again on 22 October 2010, the CPIO denied information on query 2(b) stating that the information was held in fiduciary capacity and was exempt from disclosure under Sections 8(1)(a) and (e) of the RTI Act.
Citing information provided by the CPIO as incomplete, Kapoor filed his first appeal. The First Appellate Authority (FAA) stated inter alia that the CPIO of DEAP had provided certain information vide letter dated 12 October 2010.
The FAA further said, "As regards the contention of the appellant with respect to his query at Point 2(b), which relate to the default in loans taken by industrialists from public sector banks and matters associated with them), I find that the CPIO, DBS has specified that the information received from banks in this regard is held by the Reserve Bank in a fiduciary capacity and as such it cannot be disclosed in terms of clauses (a) and (e) of Section 8(1) of the Act. There can be no doubt that the information on defaulters received from banks are held by the Reserve Bank in a fiduciary capacity and are confidential in nature. Therefore, the exemption claimed under Section 8(1)(e) is, without doubt, proper in the eyes of law. Whether the exemption provided by clause (a) of Section 8(1) would be attracted in a given case would depend upon the factual position. In this matter, since Section 8(1)(e) is clearly attracted, I do not propose to consider the other exemption which the CPIO, DBS has made use of for withholding the information.'
Kapoor, dissatisfied with order of FAA as information was not provided on Query 2 (b) and (c) approached the CIC with his second appeal.
During the hearing before the Bench of Mr Gandhi, the then CIC, the CPIO stated that that the information sought by the appellant in query 2 (b) was held by RBI in fiduciary capacity on behalf of the banks.
Mr Gandhi enquired whether the information is provided by banks to RBI in fulfilment of statutory requirements. The PIO admitted that banks were providing the information in fulfilment of statutory requirements.
The Bench pointed out that information provided in fulfilment of statutory requirements, cannot be considered to be information held in a fiduciary capacity. The PIO then submitted that information about customers is held by banks in a fiduciary capacity and hence disclosure of the same would violate the fiduciary - trust placed by borrowers of the banks."
The Bench then reserved its verdict.
During the hearing on 15 November 2011, Mr Gandhi said based on perusal of papers and submission of parties, it appeared that no information had been provided in relation to query 2(c), despite the order of the FAA. Regarding query 2(b), the CPIO contended that the information sought was exempt under Section 8(1)(a) and (e) of the RTI Act.
The Bench said, the CPIO claimed exemption under Section 8 (1)(a) but not explained how this would apply. The FAA also had not given any comment on this. No justification was offered at the time of hearing as well.
Section 8 (1)(a) exempts, 'information, disclosure of which would prejudicially affect the sovereignty and integrity of India, the security, strategic, scientific or economic interests of the State, relation with foreign State or lead to incitement of an offence;'.
"It appears that the PIO is claiming that the economic interests of the State would be prejudicially affected. It is impossible to imagine that any of the other interests mentioned in the provision could be affected. This Bench rejects the contention of the PIO that the economic interests of India would be affected by disclosing the names and details of defaulters from public sector banks. If it means that such borrowers would not bank with public sector banks for fear of exposure, it would in fact be in the economic interest of the Nation. This Bench does not accept the claim of exemption under Section 8 (1) (a) by the PIO," Mr Gandhi said.
The PIO also claimed exemption under Section 8(1)(e) of the RTI Act.
Section 8(1)(e) of the RTI Act exempts from disclosure "information available to a person in his fiduciary relationship, unless the competent authority is satisfied that the larger public interest warrants the disclosure of such information".
Mr Gandhi reiterated the definition of a fiduciary relationship. "An equally important characteristic for the relationship to qualify as a fiduciary relationship is that the provider of information gives the information for using it for the benefit of the one who is providing the information. All relationships usually have an element of trust, but all of them cannot be classified as fiduciary. Information provided in discharge of a statutory requirement, or to obtain a job, or to get a license, cannot be considered to have been given in a fiduciary relationship," he said.
Information provided by banks to RBI is done in furtherance of statutory compliances. In fact, where RBI requires certain information to be furnished to it by banks and such banks have no choice but to furnish this information, it would appear that such requirement of RBI is directory in nature. Moreover, no specific benefit appears to be flowing to the banks from RBI on disclosure of the information sought by the Appellant. Consequently, no fiduciary relationship is created between RBI and the banks, the Bench noted.
The CPIO also argued that information about customers is held by banks in a fiduciary capacity and hence disclosure of the same would violate the fiduciary - trust placed by borrowers of the banks. The CIC said it found some merit in this argument.
Mr Gandhi said, "Information of customers is held by banks in a fiduciary capacity. If this information is disclosed to the RBI and subsequently furnished to the citizens under the RTI Act- it may violate the fiduciary relationship existing between the customers and the banks. Therefore, the information sought in query 2(b) is exempt from disclosure under Section 8(1)(e) of the RTI Act."
"However," the Bench said, "if a customer defaults in repayment, should the information about the default also be considered as information held in a fiduciary capacity, is a moot question. The lender is likely to take all measures including filing suits to recover the money due, and these actions would mean publicly disclosing the default amounts. In such circumstances the Bank would make these details public, and not feel fettered by the fiduciary nature of the relations."
Mr Gandhi said, when the Bench comes to the conclusion that the exemptions of Section 8 (1) of the RTI Act apply, it needs to consider the provision of Section 8(2) of the RTI Act which stipulates as follows:
"Notwithstanding anything in the Official Secrets Act, 1923 (19 of 1923) nor any of the exemptions permissible in accordance with sub- section (1), a public authority may allow access to information, if public interest in disclosure outweighs the harm to the protected interests."
According to P Ramanatha Aiyar's, The Law Lexicon (2nd edition; Reprint 2007) at page 1557, "public interest" 'mean those interests which concern the public at large'.
Mr Gandhi noted, banks and financial institutions in India heavily finance various industries on a routinely basis. "However, it is a fact that large sums of such amounts are sometimes not recovered. In some cases, loans availed of are not repaid despite the fact that the industrialist(s) may actually be in a financial position to pay. Where financial assistance is given to industries by banks, in the absence of financial liquidity, it would result in a blockade of large funds creating circumstances that would retard socio-economic growth of the nation," he said.
He said, "I wish government and its instrumentalities would remember that all information held by them is owned by Citizens, who are sovereign. Further, it is often seen that banks and financial institutions continue to provide loans to industrialists despite their default in repayment of an earlier loan."
The Supreme Court of India in UP Financial Corporation vs Gem Cap India Pvt Ltd (AIR 1993 SC 1435) has noted that "Promoting industrialisation at the cost of public funds does not serve the public interest; it merely amounts to transferring public money to private account".
"Such practices have led citizens to believe that defaulters can get away and play fraud on public funds. There is no doubt that information regarding top industrialists who have defaulted in repayment of loans must be brought to the citizens' knowledge; there is certainly a larger public interest that would be served on disclosure of the same. In fact, information about industrialists who are loan defaulters of the country may put pressure on such persons to pay their dues. This would have the impact of alerting Citizens about those who are defaulting in payments and could also have some impact in shaming them," the Bench observed.
RBI had by its circular DBOD No. BC/CIS/47/20.16.002/94 dated 23 April 1994 directed all banks to send a report on their defaulters, which it would share with all banks and financial institutions, with the following objectives:
1. To alert banks and financial institutions (FIs) and to put them on guard against borrowers who have defaulted in their dues to lending institutions.
2. To make public the names of the borrowers who have defaulted and against whom suits have been filed by banks/FIs.
Many Revenue departments publish lists of defaulters and All India Bank Employees Association (AIBEA) has also published list of bank defaulters.
While discussing whether a private contract between the borrower and the financing institution or bank can be interfered with the Supreme Court in Mardia Chemicals Ltd vs Union of India (decided on 8 April 2004) observed:
"…it may be observed that though the transaction may have a character of a private contract yet the question of great importance behind such transactions as a whole having far reaching effect on the economy of the country cannot be ignored, purely restricting it to individual transactions more particularly when financing is through banks and financial institutions utilizing the money of the people in general namely, the depositors in the banks and public money at the disposal of the financial institutions. Therefore, wherever public interest to such a large extent is involved and it may become necessary to achieve an object which serves the public purposes, individual rights may have to give way. Public interest has always been considered to be above the private interest. Interest of an individual may, to some extent, be affected but it cannot have the potential of taking over the public interest having an impact in the socio-economic drive of the country." (Emphasis added)
"There are times when experts make mistakes, other times when corruption influences decisions," Mr Gandhi said, adding, "Asymmetry of information deprives the citizens of an opportunity to take proper decisions. The Commission is aware that the RBI is sharing information on defaulters with an organisation called CIBIL. In such a situation, it is difficult to understand the reluctance to share this information with citizens using RTI."
The CIC said, it is of the considered view that the details of defaulters of public sector banks should be revealed since it would be in larger public interest. The Bench is convinced that the benefits accruing to the economic and moral fibre of the country far outweigh any damage to the fiduciary relationship of bankers and their customers if the details of the top defaulters are disclosed, it added.
While allowing the appeal, the CIC directed the CPIO to provide complete information as per records on queries 2(b) and 2(c) to Kapoor before 10 December 2011.
The Bench, using its powers Section 19 (8)(a)(iii) also directed the governor of RBI to display this information on its website, in fulfilment of its obligations under Section 4 (1) (b) (xvii) of the RTI Act before 31 December 2011 and update it each year.
CENTRAL INFORMATION COMMISSION
Decision No. CIC/SM/A/2011/001376/SG/15684
Appeal No. CIC/SM/A/2011/001376/SG
Appellant : PP Kapoor,
Samalkha - 132101 - 03,
District Panipat, Haryana
Respondent : Dr N Krishna Mohan,
PIO & Chief General Manager,
Reserve Bank of India,
Dept. of Banking Supervision,
Central Office, Centre - I,
Cuffe Parade, Colaba, Mumbai - 400005