Holding State Bank of India (SBI) responsible for not personally informing the borrower about withdrawing free personal accident insurance cover, the national consumer disputes redressal commission (NCDRC) directed SBI to waive the home loan outstanding of Rs14.30 lakh and pay Rs75,000 as compensation and litigation cost to the wife of the deceased borrower.
In an
order earlier this month, the NCDRC bench of air vice-marshal (AVM) J Rajendra (retd) (presiding member) says, "It is undisputed that the insurance policy was issued as part of grant of loan in the year 2007. The policy was discontinued in the year 2013, and the husband of the complainant died in an accident in the year 2015. It is also admitted position that, other than posting on SBI websites and notice boards of the bank branches, no notice was given to the insured about the discontinuation of the policy. Evidently, SBI failed in its duties to inform the husband of the complainant that the insurance cover was withdrawn. Hence, SBI is liable for deficiency in service."
"As regards the insurance policy, clearly, its issue is inherent to the loan agreement. Notwithstanding the fact that no premium was charged, SBI had obtained the insurance from New India Assurance Company (till 2012) and SBI General Insurance Company Ltd (till 2013) on behalf of the insured towards securing the loan amount. Therefore, the interest paid by the insured to the Bank on the loan amount itself constitutes consideration to the insurance policy as well," the bench says.
The case is related to SBI MaxGain Home Loan obtained by Pune-based Navnath Vaidya in December 2007. The loan facility was provided with certain complimentary facilities, including free personal accident insurance coverage. After availing loan facility and complimentary facilities, Mr Vaidya regularly paid all instalments until October 2015. But, on 15 November 2015, he met with an accident and succumbed to the injuries.
After his death, his wife Sheetal Navnath Vaidya wrote letters to SBI and SBI General Insurance requesting them to take necessary action regarding the accident policy which was given as a complimentary along with the home loan. But, instead of taking any action, SBI demanded dues from her, though she requested to settle the remaining instalments with the accident cover policy. However, SBI and SBI General Insurance did not respond to the letters issued by Ms Vaidya. SBI initiated an inquiry into the policy and deducted three instalments from Mr Vaidya's savings account. Due to this, Ms Vaidya withdrew the entire amount from her late husband's bank account.
Although the policy was initially issued by New India Assurance Company, it was discontinued in 2012 and after that, it was issued by SBI General Insurance Company. The policy was discontinued by SBI General Insurance on 1 July 2013.
Ms Vaidya said she and her husband were never informed about this discontinuation and argued that it was SBI's duty to notify borrowers of such changes, especially considering the policy was a selling point of the loan at the time of issuance. She then filed a complaint before the Pune district consumer disputes redressal forum seeking a waiver of the outstanding loan balance of Rs14,30,756.74.
In its reply before the district forum, SBI contended that there was no deficiency in service, as discontinuation of the insurance policy was notified through notice boards and websites. The loan repayments were still due, as the insurance policy was valid only for a year and not extended beyond 2013. New India Assurance, in its reply, also contended that its involvement ended when the policy was discontinued in 2012, before the accident. SBI General Insurance, in its written version before the district forum, maintained that, since the policy was not renewed by SBI after 2013, there was no active insurance coverage at the time of the accident of Mr Vaidya in 2015.
The district forum dismissed the complaint filed by Ms Vaidya, saying she is not the consumer and cannot claim the benefits of any free service as a matter of right. "When any person borrows the loan, it is his duty to repay it and in his absence the liability shifts upon his legal representatives. Ms Vaidya, being the legal representative of deceased Navnath Vaidya, has the liability to repay the loan amount. For waiving of the loan amount, she has taken shelter of emotional reasons. However, in the eyes of law, emotions cannot supersede the legal procedure...the policy was provided as a complimentary token to the loan borrowers without charging anything, i.e. free of cost. Availing such free-of-cost facilities does not fall under the provisions of the Consumer Protection Act."
Ms Vaidya then approached the Maharashtra state consumer disputes redressal commission. While setting aside the district forum's order, the state commission ruled in favour of Ms Vaidya. It says, "The district consumer commission has held that free personal accident benefit cover was granted to the husband of Ms Vaidya and therefore the complainant cannot be called as a consumer under the Act. But, in fact, SBI did not inform the discontinuation of insurance cover to the husband of Ms Vaidya immediately after the discontinuation of policy."
"The insurance cover was discontinued in the year 2013 and the husband of Ms Vaidya met with an accident in 2015. In view of the said facts it can be said that SBI failed in its duties to inform the husband of Ms Vaidya that the insurance cover was withdrawn. Hence, SBI is liable for deficiency in service. Hence, the findings of the district consumer commission are not legal and correct, hence, liable to be set aside," the state commission says.
Aggrieved by the order, SBI filed a revision petition before NCDRC. The counsel for SBI contended that the personal accident cover was offered free of charge. "As per Section 2(42) of the Act, it does not qualify as a 'service'. Therefore, Ms Vaidya is not a 'consumer' and the complaint is non-maintainable. Additionally, aspects such as the free nature of the service, non-production of an insurance certificate and due publicity of discontinuation were not addressed."
He also argued that the state commission required SBI to waive the outstanding home loan and refund three instalments with 9% interest, along with compensation and litigation costs, while there was no deficiency of service or unfair trade practice on the lender's part.
The counsel for Ms Vaidya argued that the home loan, sanctioned on 20 December 2007, included a free personal accident insurance policy as part of the loan agreement, covering the loan's outstanding balance or market value in the event of the borrower's accidental death. "Clearly, Clauses 7 & 8 collectively show that they are inherent to the loan agreement and not merely a complimentary service. Given the inclusion of accident insurance cover as part of the loan itself, as a borrower, Mr Vaidya qualified as a 'consumer' of the Bank's services under the Act. Consequently, Ms Vaidya also qualifies and has a right to file a complaint regarding deficiencies in service."
He also disputed SBI's assertion that the loan account was declared a non-performing asset (NPA) due to lack of payment and asserted that Ms Vaidya never received any demand notice. "This misrepresentation was intended to mislead the court and secure favourable orders," he added.
After hearing all parties and perusing documents available on record, AVM Rajendra from NCDRC observed that Ms Vaidya claimed that SBI failed to inform of policy discontinuation and it constituted gross negligence. "As a consequence, her husband remained under the bona-fide impression that it remained valid. Otherwise, he would have taken other (another) policy. She thus sought a waiver of the loan balance. SBI asserted the absence of any deficiency and argued that there is no liability due to timely notification. The policy was free-of-cost and limited-term, and the bank exercised discretion to discontinue it without needing his consent."
While dismissing the revision petition, the bench directed SBI to waive the home loan amount of Rs14,30,756.74, which was outstanding after the death of Mr Vaidya, who met with an accident in the year 2015. It also asked SBI to pay Ms Vaidya the three instalments deducted from Mr Vaidya's account after his death, along with an interest of 9% per annum from the date of deduction till its realisation. SBI is also directed to pay a compensation of Rs50.000 towards mental agony and also Rs25,000 towards costs of litigation.
(Revision Petition No1222 of 2023 Date: 7 November 2024)
Justice well served...and SBI deserves this..
Further, it is high time that the Ministry of Consumer Affairs , must issue a directive under the Consumer Protection Act 2019 that all the important decisions like discontinuing any benefit of the Consumers, a written personal notice must be given. Mere incorporation of such discontinuance on the Bank website or even a publication in a news paper will not suffice to protect the Consumer interest.
I also compliment the bench of NCDRC for siosing the Revision application just within a year of filing. Wish such prompt efficiency percolates down ato all Consumer Commissions.