No Principal-Agent Relationship: Delhi State Commission Says No Deficiency By Canara Bank

Brief Facts of the Case:

The complainant filed a complaint before the District Commission, alleging that Canara Bank, acting as a corporate agent for Bajaj Allianz Life Insurance, misrepresented and sold insurance policies that resulted in financial losses.

The complainant bought 4 Bajaj Alliance Unit Gain Plus Gold policies. She paid a total premium of Rs.1,20,000/- and later the complainant wanted to surrender the policies. The insurance company (O.p.No.1) informed the complainant that she has to wait for one more year to surrender the policies as she can do the same only after completion of 36 months from the date of issuance of the policy. She again approached the insurance company with the same request. Insurance company disbursed the amount after surrendering the policy . The complainant was shocked to see that out of total amount of Rs. 1,80,000/- paid by her, her account was credited with only Rs. 1,23,750/-and there is a loss of Rs.56,250/-in 36 months.

She filed a complaint before the District Commission alleging fraud and misrepresentation, claiming compensation of Rs.30,000 and Rs.11,000 as litigation cost .

Insurance Company argued that the complainant already surrendered the policies and amount was paid to her as per the contract terms. Bank argued that there is no principal agent relationship. All the policies are issued subject to terms and conditions and hence the complaint is not maintainable.

The District Commission ruled in favour of the complainant, directing the insurance company to refund rs. 56,250 /-with 9% interest and further directed canara bank and insurance company to pay Rs.50,000 as compensation and also awarded a cost of rs.5,000/-

Canara Bank, aggrieved by this decision, filed an appeal before the State Commission. The bank contended that it was duly authorized by the Reserve Bank of India (RBI) and the Insurance Regulatory and Development Authority (IRDA) to act as a corporate agent for procuring and soliciting insurance business, without assuming any risk or direct involvement in underwriting or settling claims.

Canara Bank argued that it could not be held liable for the actions of the insurance company, as it was merely facilitating the sale of insurance products.

Observation:

The State Commission noted that there was no principal-agent relationship between the corporate agent and the complainant. As per the agreement, Canara Bank was only involved in the solicitation of insurance products and did not assume responsibility for the performance or services provided by the insurers, Bajaj Allianz Life Insurance. . The commission observed that the appellant was duly authorized by the RBI and IRDA to act solely as a corporate agent in soliciting and procuring insurance business.

The Commission further observed that Canara Bank was merely facilitating the sale of insurance policies and had no direct involvement in the underwriting or claims settlement processes

Given these observations, the Commission concluded that Canara Bank could not be held liable for any alleged deficiency in service by the insurance company. The Commission modified the order of the District Commission to this extent and absolved Canara Bank from all liabilities in the matter.

The state commission in a separate judgment dismissed the appeal filed by insurance company and upheld the order of District Commission against insurance company.

Case Title: Canara Bank ( e-Syndicate Bank) Vs MS. Sulakshna Bhattacharya & Ors

Case No. FIRST APPEAL NO.-737/2014

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LiveLaw is a responsible media, and we have no hesitation to correct ourselves if any mistake has happened on the part of our reporters/editors. We had reported the judgement of the Delhi State Commission passed on 29.11.2024 with the title “ Unjustified Deductions: Delhi State Commission Holds Canara Bank And Bajaj Insurance Liable For Deficiency Of Service”. It was published on 31.12.2024 and realising that the State Commission has allowed the appeal filed by Canara Bank holding that there was no deficiency on part of Canara Bank, we immediately had taken down the news item on 02.01.2024. We apologise for the error which was not at all intentional. We also have taken internal measures to not repeat such errors in reporting. ]