Failure To Pay Maturity Amount And Periodic Benefits, Cuttack District Commission Directs LIC To Disburse Amount, Pay Compensation

The District Consumer Disputes Redressal Commission, Cuttack (Odisha) bench comprising Debasish Nayak (President) and Sibananda Mohanty (Member) held LIC, India liable for deficiency in services for failure to pay maturity amount and periodic payments of the insurance policies to the Complainant. Along with the timely disbursal of the insurance amount, the bench directed it to pay Rs. 50,000, as compensation, to the Complainant. 

Brief Facts:

Mr. Sundar Prakas Das (“Complainant”) availed two insurance policies, an Endowment Assurance Policy and a Money Back Policy, under the Salary Savings Scheme from the Life Insurance Corporation (“LIC”) while he was employed in the Irrigation Department of Odisha. Premiums for these policies were regularly deducted from the Complainant's salary by his employer and deposited with the LIC. The Endowment Assurance Policy matured in 2007, and the money-back policy matured in 2014. Despite the premiums being deducted and forwarded to LIC, upon maturity, the LIC did not disburse the maturity amount for the first policy and did not provide the periodic benefits for the second policy to the Complainant. After numerous inquiries and correspondences, LIC's Keonjhar Branch informed him to contact the Cuttack Division office for the maturity amount of the policy. The letter also indicated that the Money Back Policy was under scrutiny, with inquiries made about premium payment status during the Complainant's service period. Upon contacting the Assistant Manager of LIC, he was assured that the maturity amount would be paid after clearance of premium amounts from different branches. Despite this assurance, LIC did not take any action for the payment of the maturity amounts. Feeling aggrieved, the Complainant approached the District Consumer Disputes Redressal Commission and filed a consumer complaint against LIC.

In response, LIC asserted that it did not possess the policy records of the Complainant and did not receive any premium amounts from the employer or the Complainant. It argued that it was unable to settle the claim without the necessary documentation and premium receipts. LIC stated that the records for Endowment Assurance Policy were available at the Keonjhar Branch, and the maturity amount would be released upon production of all necessary documents and receipt of premiums by that branch. Similarly, it claimed that the Money Back Policy was attached to their Nabarangpur branch, and any periodical payment due would be released from that branch. It denied responsibility for the delay in payment, asserting that the release of maturity amounts was contingent on compliance with documentation and premium payment procedures.

Observations by the Commission:

The District Commission noted that LIC, as the issuer of the policies, had the responsibility to disburse the maturity amounts within the stipulated time. LIC's attempt to shift the burden onto their branch offices was held unacceptable. The District Commission highlighted that the Complainant should not be held responsible for non-payment of premiums due to the employer's lapses.

Referring to the Supreme Court decisions in Delhi Electric Supply Undertaking v. Basanti Devi & Anr. [Civil Appeal No.6113/1995], and Life Insurance Corporation & Ors. v. Rajiv Kumar Bhaskar [Civil Appeal No.6028/2002], the District Commission emphasized that LIC cannot deny assured amounts to the nominee or policyholder based on non-receipt of premiums from the employer. The District Commission held that LIC, by not disbursing the legitimate dues after the maturity period, committed a deficiency in service and engaged in unfair trade practices.

Consequently, LIC was directed to pay the Complainant the maturity amounts of both policies along with other benefits, with interest at 15% per annum from their respective dates of maturity until quantified. Additionally, it was directed to pay Rs. 50,000 to the Complainant as litigation costs, with a mandate to fulfil the order within 30 days from the receipt of the copy of the order.  

Case Title: Sundar Prakas Das vs Div. Manager, LIC of India and Others

Case No.: CC/158/2017

Advocate for the Complainant: S Mohapatra and Associates

Advocate for the Respondent: CR Pattanaik and Associates

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