F.A.No.837 OF 2012 AGAINST C.C.NO.790 OF 2011 DISTRICT FORUM-II HYDERABAD

Between:

M/s LIC Housing Finance Limited

Rep. by its Branch Manager,

Maitrivanam, Huda Complex,

Ameerpet, Hyderabad

Rep. by its Manager (Defaults)

Ch.Srinivas

                                                                                                                Appellant/Opposite party

        A N D

Mr.Kagitha Srinivasa Rao S/o Kagitha Eswara Rao

H.No.5-4-107 & 108, Flat No.303,

Cyber View Apartments near B.J.P.office

Kukatpally.

                                                                                                                      Respondent/complainant

Counsel for the Appellants                     M/s S.Shiv Shanker

Counsel for the Respondents                 M/s K.Ramakoteswara Rao

QUORUM:   SRI R.LAKSHMINARASIMHA RAO, HON’BLE MEMBER

                                                AND

SRI THOTA ASHOK KUMAR, HON’BLE MEMBER

    MONDAY  THE FIRST DAY OF APRIL

                                TWO THOUSAND TWELVE

Oral Order (As per Sri R.Lakshminarasimha Rao, Hon’ble Member)

***

1.             M/s LIC Housing Finance Company Ltd is the appellant. The appeal is challenge to the order of the District Forum whereby the appellant was directed to waive the outstanding loan amount of `5,26,310/- pertaining to the loan accounts bearing number 64038900, 64040597 and 64049977 besides payment of `1,000/- towards compensation.

2.             The respondent’s father during his life time availed loan, `5,00,000/-, `1,00,000/- and `4,25,000/-  under the loan accounts bearing numbers 64038900, 64040597 and 64049977 respectively  from the appellant  by creating mortgage on deposit of title deeds  and the loan amounts were sanctioned on 20.09.2002, 4.09.2003 and 17.03.2009 respectively. The respondent intimated the appellant that his father died on 10.04.2011. The appellant issued notice demanding for an amount of `5,26,310/- till the month of May,2010.

3.             The respondent’s plea is that the appellant has not complied with the requirement of Clause 6(a) to (d) of the terms and conditions of the appellant either at the time of sanctioning the loan or at the time of disbursement of loan amount to the respondent’s father. It is stated that the appellant failed to obtain insurance policy for the respondent’s father and the respondent got issued notice through his advocate on 25.07.2011 demanding for waiver of the outstanding loan amount and the appellant issued notice dated 7.08.2011 to the respondent’s father with a demand to pay the amount pertaining to the loan accounts nos. 64038900 and 64040597.  It is stated that the respondent after the death of his father came to know about the terms and conditions of the loan agreement and that the appellant despite being informed in the month of May,2012 about the death of the borrower, issued notice to the respondent’s father that if the amount is not paid within one week, action would initiated under Securitization Act.

4.             The appellant resisted the claim on the premise that the appellant is different entity from the LIC of India and that the deceased shirked his responsibility to offer life insurance policy as collateral security and that the respondent is co-applicant who is alive and he cannot seek for waiver of the loan amount.

5.             The respondent, in support of his claim filed his affidavit and the documents, ExA1 to A14 and on behalf of the appellant, its Manager (Legal) filed his affidavit and no documents have been marked.

6.             The District Forum allowed the complaint on the premise that the appellant neglected to obtain insurance policy at the time of sanctioning the loan and for its  failure, the appellant is liable to waive the outstanding loan to the credit of three loan accounts.

7.             Feeling aggrieved by the order of the District Forum, the opposite party has filed appeal stating that the respondent had not paid any amount to the appellant or the LIC of India for taking insurance policy and that submission of life insurance policy for the purpose of obtaining loan from the appellant is not mandatory. It is contended that the District Forum had not considered the documentary evidence in correct perspective and misconstrued the terms and conditions of the appellant.

8.             The point for consideration is whether the respondent is entitled to waiver of outstanding loan amount?

9.             The facts not disputed are that the respondent’s father during his life time availed loan of `5,00,000/-, `1,00,000/- and `4,25,000/-  under the loan accounts bearing numbers 64038900, 64040597 and 64049977 respectively  from the appellant  by creating mortgage on deposit of title deeds.  The respondent claimed for waiver of loan amount on the premise that the appellant failed to take insurance policy covering the risk on the life of his father whereas the appellant refused to waive the loan amount on the ground  that the duty is cast on the borrower to mortgage life insurance policy and for failure of the borrower the relief of waiver of loan cannot be sought for and it is also contended by the appellant that the respondent being co-applicant cannot seek for waiver of the loan amount on the ground that the appellant failed to take life insurance policy for his father.

10.            The loan agreement contains the terms and conditions which are binding on both the parties. The respondent laid stress on Clause 6 (a) to (d) of the loan agreement to contend that the appellant has to take insurance policy covering the risk of his father’s life. The Agreement and the clause runs contra to the contention of the respondent and it lays burden on the respondent and his father to submit life insurance policy as collateral security for payment of the loan amount. Clause 6(a) to (d) reads as follows:

“6.(a)    You will have to assign Life Insurance Policy/ies issued under the accept able plan to the Company having insurance cover equal to the amount of loan sanctioned as collateral security for the loan before the loan or the first installment thereof is disbursed as mentioned in Clause NBo.9 of the Schedule of Loan Offer Letter.

6(b)      Premiums due under the policy/ies assigned to the Company must be paid in the manner prescribed in the said policy/ies direct to the concerned office of Life Insurance Corporation of India issuing the policy and proof of payment submitted to the Company from time to time.  The said Policy/ies assigned to the Company must be kept in force to the extent of full sum assured failing which, without prejudice to the Company’s right to be kept in force to the extent of full sum assured failing which, without prejudice to the company’s right to recall the entire loan or the outstanding balance thereof along with the interest, additional interest and other dues if any, ou will be liable to pay interest at a higher rate form the month of discontinuance of Life Insurance Policy as is applicable to Company’/s Housing Loan Scheme without Life Insurance Policy i.e., griha Lakshmi Scheme.

6(c)      The sum payable under any of the policies offered as collateral security for the loan shall be appropriated towards repayment of the principal and interest due under the loan.

6(d)      In the event of the entire loan becoming immediately payable under the provisions contained herein (whether or not the due date has elapsed) or in the event of your failure to pay any interest/EMI/premia form the due date or in the event of your failure to maintain the said policy/ies in full force and effect or int eh even tof any breach of any of the conditions contained herein, then the Company, without prejudice to its rights to immediate payment of the principal money or part thereof shall be entitled to surrender such policy/ies without giving any notice to you of its intention to do so and to receive the amount of such surrender value and apply the same in such manner as the Company thinks fit either towards the principal amount or the interest or any other amount due or payable hereunder, before filing of Suit for recovery of dues. 

11.            The respondent had not denied that he is the co-applicant along with his father. Clause 6 does cast obligation on the respondent and his father to furnish life insurance policy as collateral security which the respondent and his father had not performed. It is contended by the learned counsel for the  appellant that the District Forum had applied the decision of the National Commission in “SBI Life Insurance Company Ltd vs Asha Dixit” I (2011) CPJ 81 without considering the applicability of the decision to the facts of the present case.

12.            In SBI Life Insurance Company’s decision (supra), the Hon’ble National Commission held that the lapse on the part of the Bank in remitting the premium would render the insurance company liable to pay the sum assured under the insurance policy. The State Bank of India collected Rs.25,000/- from the borrower which however failed to pay the amount to the SBI Life Insurance Company for renewal of the insurance policy and unfortunately the borrower died whereon the borrower’s legal heirs proceeded against the Insurance Company to pay the sum assured equal to the outstanding loan amount.  

13.            In the present case, the respondent’s father had not paid any amount to the appellant to take insurance policy or the respondent had not mortgaged any life insurance policy as security for repayment of the loan amount. The respondent had not stated in his affidavit or in the complaint as to his being co-applicant of the loan agreement. The appellant cannot be fastened with liability to waive the loan for the lapse on the part of the respondent and his father. The District Forum failed to consider non-applicability of the aforementioned decision and proceeded to allow the complaint by misconstruing Clause 6 of the terms and conditions of the appellant. As such the appeal deserves to be allowed.

14.            In the result, the appeal is allowed setting aside the order of the District Forum. Consequently, the complaint is dismissed. The parties shall bear their own costs.

                                                                        MEMBER

                                                                        MEMBER

                                                                     Dt.01.04.2013

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