Unjustified Imposition Of 10% Interest For Deficiency In Service Is Unreasonably High, Must Range Between 6-10%: NCDRC

Brief Facts:

The Complainant availed a theft insurance policy for his vehicle from ICICI Lombard General Insurance Co. (“Insurance Company”). During the subsistence of the policy, his vehicle was stolen. Thereafter, the Complainant submitted a claim before the Insurance Company. However, the Insurance Company repudiated it. Feeling aggrieved, the Complainant filed a consumer complaint before the District Consumer Disputes Redressal Commission, Northwest Delhi (“District Commission”). The District Commission allowed the complaint and directed the Insurance Company to pay an amount of Rs. 9,19,604/- within 30 days, failing which interest at 10% would be levied. Aggrieved by the order of the State Commission, the Insurance Company filed an appeal before the State Consumer Disputes Redressal Commission, Delhi (State Commission). The State Commission dismissed the appeal and upheld the order of the District Commission. Dissastified, the Insurance Company filed a revision petition before the National Consumer Disputes Redressal Commission (“NCDRC”).

The NCDRC partially modified the orders of the State Commission and District Commission by reducing the interest rate to 9% (from the date of the order) from 10% per annum, as imposed by the District Commission and the State Commission. It also allowed the Insurance Company to take 8 weeks for making the payment and imposed the reduced interest rate only in case of non-payment. Dissatisfied by the order of the NCDRC, the Complainant filed a review petition and contended that no reasons were provided for reducing the interest rate from 10% to 9% and for specifying the payment period. The NCDRC dismissed the Complainant's review petition.

Thereafter, the Complainant challenged the NCDRC's decision regarding reduction in the interest rate and the payment period before the Delhi High Court (“High Court”). The High Court noted that the NCDRC didn't provide any justification for the reduction in interest and remanded the matter back to the NCDRC for reconsideration.

Observations by the NCDRC:

The NCDRC noted in most of its orders concerning insurance cases, the interest awarded for deficiency in service typically ranges between 6% to 9%. It held that the District Commission and State Commission imposed an interest rate of 10% without providing any justification for such a high rate. Therefore, the NCDRC held that an interest rate of 9% is reasonable and sufficient compensation for the delay, if any, in payment.

The NCDRC held that:

“Insofar as the question of interest to be paid, it is noted that in most of the Orders of this Commission compensation to be paid for a deficiency of service ranges from 6% to 9%. In most of the Orders of this Commission relating to insurance cases, the rate of interest hovers around 6% per annum. In this case, 9% rate of interest has been directed to be paid, which in our considered opinion is more than enough as compensation. 10% rate of interest is definitely on the higher side as no reason has been given by either District Forum or State Commission to give such high interest rate.”

The NCDRC also noted that it granted the Insurance Company eight weeks to make the payment, with interest at 9% per annum applicable only if the payment was delayed beyond this period. It held that this was a modification from the District Commission's Order, which allowed only 30 days for compliance. Therefore, it held that allowing eight weeks for payment and imposing interest only in case of default was fair and justified. Consequently, the NCDRC disposed of the review petition accordingly.

Case Title: ICICI Lombard General Insurance Company Ltd vs Khushboo

Case Number: NC/RA/64/2024

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