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NON-REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.2216 OF 2018 [Arising out of SLP (C) No. 14021 of 2017]

D. SRINIVAS   … APPELLANT

VERSUS

SBI LIFE INSURANCE CO. LTD.AND ORS.   … RESPONDENTS

J U D G M E N T

S. ABDUL NAZEER, J.

1. Leave granted.

2. In this appeal, the appellant has questioned the legality and correctness of the

order dated 03.02.2017 in First Appeal No.560/2012, passed by the National

Consumer  Disputes  Redressal  Commission,  New  Delhi  (for  short  ‘the

National  Commission’) whereby the National  Commission has allowed the

appeal filed by the first respondent herein and rejected the complaint of the

appellant.

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3. Brief facts necessary for disposal of this appeal are that the appellant along

with his wife, Smt. D. Suguna and son Mr. D. Venugopal obtained  housing

loan of Rs.30,00,000/- (Rupees thirty lacs) in the month of September, 2008

from the respondent Nos. 2 and 3 for construction of a house in Hyderabad.

On 29.09.2008,  a  sum of  Rs.78,150/-  (Rupees  seventy  eight  thousand one

hundred fifty) was debited from their loan account towards SBI Life Insurance

Cover  under  Group  Insurance  Scheme  for  home  loan  borrowers,  through

master policy holder i.e. State Bank of Hyderabad, covering the Life of Mr. D.

Venugopal,  who  was  one  of  the  joint  loanees.  The  proposal  form  dated

29.09.2008 was accompanied by good health declaration by the insured. D.

Venugopal expired on 17.12.2009 due to a massive heart attack. Consequently,

the said life insurance obtained in his name came into force, obligating the

insurer, the first respondent herein, to pay the outstanding amount in their loan

account. The appellant approached the insurer and the bank informing them

about the demise of D. Venugopal and requested them to settle the insurance

claim  and  to  discharge  the  outstanding  loan  amount  in  their  house  loan

account. Since the insurer did not accede to his request, he filed a consumer

complaint before the State Commission.  

4. The insurer contested the complaint mainly on the ground that the proposal for

the policy was not accepted as the insured did not present himself for medical

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examination in spite of repeated requests made by the insurer. It was asserted

that  the amount of premium of Rs.78,150/- was refunded by cheque dated

10.12.2008 to the  State  Bank of  Hyderabad.  Thus,  the  insurer  pleaded no

deficiency in service and denied its liability in connection with the payment to

the insured.  

5. The State Commission allowed the complaint by its order dated 16.07.2012.

However,  the  National  Commission,  by  majority,  allowed  the  appeal  and

dismissed the complaint filed by the appellant.

6. Learned counsel for the appellant submits that the insurance policy was taken

in the name of D. Venugopal in terms of the Insurance Scheme. The proposal

was sent along with the premium of Rs.78,150/- on 29.9.2008.  Admittedly,

the  insurance  company  has  received  the  premium  on  13.10.2008.   D.

Venugopal  died  on  17.12.2009.  This  was  intimated  to  the  State  Bank  of

Hyderabad on 3.4.2010.  Thereafter, several letters were sent to the bank for

discharge of the loan amount in terms of the insurance policy.  The deceased -

D.  Venugopal  was  never  called  for  medical  examination.   It  was  only  on

18.1.2011 the  insurance  company  had  called  for  medical  examination  for

coverage of life insurance of the deceased and, therefore, the policy could not

be completed pending examination and that the proposal was returned. It is

clear that there was presumption of acceptance of the proposal in favour of the

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deceased as the proposal form along with good health declaration form was

accepted by the bank and sent to the insurance company and the premium was

debited by the bank from his  loan account.   Neither  the appellant  nor the

deceased  were  intimated  by  the  respondents  to  appear  for  medical

examination. They did not receive any intimation from the respondents that

the policy has not been issued even though he continued to remain alive for

more  than  1  year  3  months.  The  premium  was  refunded  only  after  the

appellant insisted for clearance of dues vide cheque dated 23.2.2011, nearly

2½ years after the death of the insured.  In this view of the matter, the majority

view of the National Commission is clearly unsustainable.

7. Learned counsel for the respondents, on the other hand, submits that there is

no concluded contract between the parties. Therefore, the insurer is not bound

to discharge loan merely on the ground of receipt  of  premium for  issuing

policy. The deceased did not appear for medical examination. Therefore, the

policy  could  not  be  completed  on  receipt  of  the  death  intimation.  The

premium amount has been refunded. He prays for dismissal of the appeal.

8.We have carefully considered the submissions of the learned counsel for the

parties.   It  is  not  in  dispute  that  the  appellant,  his  wife  and  his  son  D.

Venugopal had obtained a housing loan of Rs. 30 lacs from the bank in the

month of September, 2008 for the construction of the house.  A sum of Rs.

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78,150/- was debited from their loan account towards life insurance cover,

covering the life of D. Venugopal, who was one of the joint loanees.  The

proposal  form  dated  29.09.2008  was  also  accompanied  by  good  health

declaration by the insured.  The insurance company received the premium on

13.10.2008.  D. Venugopal died on 17.12.2008. This was intimated to the bank

on 13.4.2010.  A notice dated 14.5.2010 was issued to the bank to settle the

loan account.  However, the bank did not send any reply to this notice.  For

the first  time on 18.1.2011 the bank sent a reply stating that the insurance

company vide reference No.15365 dated 17.10.2008 had called for medical

examination for coverage of life insurance of D. Venugopal in respect of the

housing loan in question.  It was also informed that a communication was sent

on  16.12.2008  regarding  refund  of  the  proposal  amount  as  the  insurance

policy could not be completed pending medical examination and the proposal

was rejected. The appellant submitted a reply dated 25.2.2011 stating that at

no point of time any letter from the insurance company was received calling

for medical examination nor did they receive any amount under cheque dated

10.2.2008  said  to  have  been  issued.  Neither  the  bank  nor  the  insurance

company had ever informed the proposer or the appellant herein about the

non-issuance  of  policy  for  want  of  medical  certificate  though  they  have

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alleged that they have intimated the said fact.  The letter dated 17.10.2008 was

not sent to the appellant herein.  

9. From the scheme it is clear that in the case of joint housing loan the full loan

amount will be insured even if the policy is issued in the name of only one

loanee.   In  this  case,  the  insured was  D.  Venugopal  son  of  the  appellant,

whereas the loan is the joint loan in the name of the appellant, his son - the

insured and wife of the appellant.  The insured had signed a declaration which

is as under:

Good Health Declaration:

“I declare that I am in sound health, do not have any physical defect/deformity, perform my routine activities  independently  and,  that  I  have  never suffered  or  have  been  suffering,  or  have  been hospitalized  for  any  critical  illness  @  or  a condition requiring medical treatment for a critical illness as on date.”

10. In cases of loan amount exceeding Rs.7.5 lacs, the provision in the policy

is as under:

Where the loan Amount Exceeds Rs.7.5 Lacs

“As I am willing to join for life insurance cover from SBI Life  Insurance Co.  Ltd.  subject  to my under-going  the  medical  examination  and satisfying  the  health  underwriting  criteria  of  the Company,  I  authorise  the  Bank  to  debit  my

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account for the standard gross premium plus any additional premium that may be required by SBI Life based on medical underwriting.

I also note that in the event of SBI Life Insurance Co. Ltd. not being in a position to accept my life insurance  for  any  reason  whatsoever,  the  initial premium amount remitted by the Bank would be refunded and credited back to my account.”

11. It  is clear from the above that the proposer was willing to join the life

insurance  coverage  from the  respondent  insurance  company  subject  to  his

undertaking medical  examination and for his willingness he authorized the

bank to debit his account for payment of the premium. This clearly implies

that medical examination was to take place prior to the premium being debited

from the bank account of the proposer. The specific condition in the policy is

that in case the loan amount exceeds Rs.7.5 lacs the medical examination was

compulsory.   If the medical examination was compulsory for such cases it

should  have  been  done  along with  filing  of  the  proposal  form before  the

payment of the premium. If the proposal was not accepted for any reason the

premium would  have  been  credited  to  the  account  of  the  proposer.   The

premium has been refunded after 23.2.2011.  From this, it is clear that the

insurance company had not rejected the proposal before 23.2.2011.

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12. Our  attention  has  been  drawn  to  the  case  of  LIC  v. Raja  Vasireddy

Komalavalli Kamba and Ors., (1984) 2 SCC 719, wherein this Court has clearly

stated that the acceptance of an insurance contract may not be completed by mere

retention  of  the  premium  or  preparation  of  the  policy  document  rather  the

acceptance must be signified by some act or acts agreed on by the parties or from

which the law raises a presumption of acceptance.

13. Although we do not have any quarrel with the proposition laid therein, it

should be noted that aforesaid judgments only laid down a flexible formula for

the court to see as to whether there was clear indication of acceptance of the

insurance.  It is to be noted that the impugned majority order merely cites the

aforesaid judgment, without appreciating the circumstances which give rise to a

very clear presumption of acceptance of the policy by the insurer in this case at

hand.  The insurance contract being a contract of utmost good faith, is a two-way

door.   The  standards  of  conduct  as  expected  under  the  utmost  good  faith

obligation should be met by either party to such contract.

14. From the aforesaid clause it may be seen that the condition precedent for

acceptance of the premium was the medical examination.  It would be logical for

an underwriter to accept the premium based on the medical examination and not

otherwise.  Therefore, by the very fact that they accepted the premium waived

the condition precedent of medical examination.

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15. It is an admitted fact that the premium was paid on 29.09.2008.  That it

was only in 18.01.2011 that the respondent insurance company informed the

appellant that the policy was not accepted by them.  We are unable to fathom

the reason for such excessive delay in informing the appellant, which cannot be

excused.  We are of the opinion that the rejection of the policy must be made in

a  reasonable  time  so  as  to  be  fair  and  in  consonance  with  the  good  faith

standards.   In  this  case,  we  cannot  hold  that  such  enormous  delay  was

reasonable.  Moreover, it is borne from the records that the premium was only

re-paid on 24.02.2011, after a delay of more than one year five months.  If we

consider above aspects, it can be reasonably concluded that the insurer is only

trying to get out of the bargain, which they had willfully accepted.  From the

aforesaid circumstances we can easily conclude that the policy was accepted by

the insurer.

16. In  the  circumstances,  there  is  no  reason  to  believe  that  there  was  no

complete contract. There is clear presumption of the acceptance of the proposal

in  favour  of  the proposer. Therefore,  the majority  view of  the Commission

would not sustain.

17. In the result, the appeal succeeds and is accordingly allowed.  The order of

the National Commission dated 22.11.2016 is hereby set aside and the order of

the State Commission dated 16.7.2012 is restored.

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   18. There shall be no orders as to costs.

      ……………………..…J.        (N.V. RAMANA)

      …………………..……J.        (S. ABDUL NAZEER)

New Delhi; February 16, 2018.