Telangana High Court
Mrs.B.Madhavi vs S.B.I.Life Insurance Company Limited on 1 April, 2026
HIGH COURT FOR THE STATE OF TELANGANAAT HYDERABAD
****
THE HON'BLE JUSTICE MOUSHUMI BHATTACHARYA
AND
THE HON'BLE JUSTICE GADI PRAVEEN KUMAR
W.P.Nos.8760 of 2019 and 13176 of 2020
DATE :01-04-2026
W.P.No.8760 of 2019
Between :
Mrs.B.Madhavi
... Petitioner
And
SBI Life Insurance Company Limited, represented by its Manager,
Hyderabad and Two Others.
... Respondents.
COMMON ORDER:(per Hon'ble Justice Gadi Praveen Kumar) Since these Writ Petitions arise out of common set of facts and the parties are also common, they are being disposed of by this common order.
2. Heard Sri E.Phani Kumar, learned counsel for the petitioner, Sri Srinivas Karra, learned counsel representing Sri K.Jaya Raj, learned counsel for the respondent No.2-Insurance Ombudsman in 2 W.P.No.8760 of 2019 and Sri Mettu Srinivas Reddy, learned Standing Counsel appearing for the State Bank of India (SBI).
3. W.P.No.8760 of 2019 is filed assailing the award dated 17.12.2018 passed by the learned Insurance Ombudsman, for the States of Andhra Pradesh, Telangana and Yanam City, the 2ndrespondent herein, whereby the complaint of the petitioner seeking waiver of the loan liability on account of the death of her husband was dismissed, while directing refund of the premium amount of Rs,87,802/- along with interest at 8% per annum, as illegal and arbitrary and consequently, sought a direction against the 1st respondent to give effect to the waiver of the loan instalments payable by the petitioner in respect of the loan Account No.62055694550 with SBI RACPC, Abids, from the date of death of the petitioner's husband on 04.08.2017.
4. W.P.No.13176 of 2020 is filed to declare the action of the respondents in classifying the loan account No.62055694550 of the petitioner as Non-Performing Asset (NPA), as illegal and arbitrary.
5. The facts leading to file the present Writ Petitions are that the petitioner and her husband availed a housing loan from the respondent-SBI on 15.03.2008 for a sum of Rs.23.00 lakhs for the 3 purpose of construction of a residential house repayable in equated monthly instalments at the rate of Rs.24,976/-. It is further stated that on the insistence of the Bank, an insurance coverage was obtained by paying an amount of Rs.87,802/- on 10.05.2008 with a bona fide belief that the policy would cover the loan liability in the event of death of either borrower. It is admitted that subsequently, the petitioner's husband availed a top up loan of Rs.10.00 lakhs on 01.03.2017 payable in 119 equated monthly installments at Rs.12,800/- commencing one month after disbursement. It is further averred that they were regular in remitting the installments, but unfortunately, the petitioner's husband was diagnosed with cancer and after series of hospitalizations, passed away on 04.08.2017.
6. It is stated that pursuant to the demise of the petitioner's husband, she approached the Bank for waiver of balance EMIs considering the insurance coverage, but when the installments were getting debited from her account, she addressed a letter dated 06.10.2017 and reminders on 26.02.2018 and 02.07.2018 to the SBI enclosing the death certificate of her husband and requested for closure of the loan account duly discharging the same. However, the Bank failed to respond to the representations submitted by the petitioner. Therefore, the petitioner knocked the doors of the 2nd 4 respondent, who by award dated 17.12.2018 dismissed the complaint of the petitioner. Aggrieved by the said award, the petitioner filed W.P.No.8760 of 2019.
7. While issuing notice before admission on 20.08.2020, this Court granted interim stay of recovery of the instalments and despite the said interim order, the 2nd respondent transferred the petitioner's home loan account to the 1st respondent on 31.10.2019 by classifying it as NPA. Aggrieved thereby, she filed W.P.No.13176 of 2020.
8. The 1strespondent filed a counter-affidavit contending that the crux of the compliant filed by the petitioner before the 2nd respondent - Ombudsman is regarding non-settlement of death claim of the husband of the petitioner under SBI Life-Super Suraksha Master Policy. It is submitted that the SBI Life Insurance Company (for short, 'the Company') has not received any membership form in the name of the deceased for grant of insurance coverage under the Loan Account No.62055694550 and the deceased was not insured with the Company and hence, it is not liable to pay any death benefits.
9. It is narrated in the counter that under Home Loan Insurance, the borrower member is offered insurance subject to the terms and conditions incorporated under the Company and the proposal form is 5 the basis for assessment of risk and the borrower has to submit a membership form along with requisite premium and supporting documents. It is stated that in the present case, the petitioner while obtaining housing loan of Rs.22.00 lakhs had applied for insurance coverage from the Company and submitted proposal with initial premium of Rs.87,802/-. It is also contended that after receipt of the membership form, the Company raised requirement of income proof and credit appraisal note from the proposer and however, since the said requirement was not complied with, the proposal was cancelled and premium amount was refunded to the complainant videcheque dated 01.08.2008 and the same was intimated to the SBI vide letter dated 05.08.2008. Insofar as the husband of the petitioner is concerned, the Company did not receive any membership form for grant of insurance coverage on his life with regard to loan account No.62055694550 and hence, the Company has no contractual obligation to pay the death claim benefits of the petitioner's husband.
10. It is contended that the petitioner filed a complaint before the 2nd respondent - Ombudsman claiming death benefits of her husband and the learned Ombudsman on consideration of the documentary evidence dismissed her claim for death benefits and directed to refund the premium with interest 8% per annum. It is further stated that in 6 compliance with the order of the 2nd respondent, the Company refunded an amount of Rs.1,03,239.87 on 12.11.2018 and Rs.52,458.25 on 08.01.2019.
11. It is stated in the counter that since the petitioner defaulted in payment of EMIs, her loan account was classified as NPA in terms of RBI norms. In support of their contentions, the respondents relied upon the judgment of the Hon'ble Supreme Court in LI C v/ s. Vasireddy K om alavalli K am ba 1 to contend that mere receipt of premium does not conclude a contract of insurance and accordingly, prays for dismissal of the Writ Petitions.
12. Learned counsel for the petitioner contended that the 2nd respondent having accepted the contention of the petitioner as regards negligence of the insurer, who behaved in a very careless manner without trying to find out why such huge amount was lying in the unencashed account, dismissed the complaint of the petitioner directing refund of the premium of Rs.87,802/-along with at 8% per annum. Though the 1st respondent returned an amount of Rs.1,03,239.87 on 09.11.2019 and Rs.52,458.25 on 08.01.2019, the petitioner protested the same by sending a legal notice on 24.09.2019, 1(1984)2 SCC719 7 for which the insurer replied on 03.04.2019 confirming that the amount of premium was returned pursuant to the directions of the award.
13. Learned counsel further contended that though the Ombudsman while observing that the insurer was unable to show any evidence to prove that the letter sent to the petitioner to submit income proof was received by the petitioner, declined the relief. It is further contended that the learned Ombudsman failed to appreciate that the petitioner has paid instalments 187 out of 233 and the Bank issued demand letter on 16.04.2020 referring to outstanding an amount of Rs.25,63,300/- while the balance EMIs payable would be Rs.11,48,896/-.
14. Learned counsel for the petitioner places reliance upon the judgments passed by the Hon'ble Supreme Court in D.Srinivas v/ s. SBI Life I nsurance Com pany Lim ited 2 , wherein it was held receipt of the premium amount by the Insurance Company amounts to presumption of acceptance besides that good faith obligation was also considered to be one of the factors and on receipt of the premium amount by the Company for issuance of the policy is a complete contract and cannot be withdrawn later. It is further held that if the policy is signed in the name of one loanee, the same covers the joint 2 2018 (3) SCC 653 8 loan and Insurance Company cannot attempt to wriggle out of its liability. The said principle was followed by two more Co-ordinate Benches of the Hon'ble Supreme Court in Gokul Chand (d) Through LR s v/ s. Axis Bank Lim ited 3 and Bhum ik aben N. M odi v/ s. Life I nsurance Corporation of I ndia 4 .
15. Per contra, learned counsel for the respondents reiterating the contents of the counter-affidavit submits that the award passed by the learned Ombudsman is legal and valid and the petitioner's claim of banks insistence and assurance of waiver pursuant to the death of the borrower is fabricated and the learned Ombudsman conforms no coverage in its award. Since the petitioner defaulted in payment of the EMIs, her loan account led to NPA as on 31.10.2019.
16. In the judgment relied upon by the respondents in the case of Vasireddy K om alavalli K am ba (1 supra), the Hon'ble Supreme Court held that though in certain human relationships silence to a proposal might convey acceptance but in the case of insurance proposal, silence does not denote consent and no binding contract arises until the person to whom an offer is made says or does 3(2024) 6 SCC 154 4(2024) 6 SCC 385 9 something to signify his acceptance. Therefore, there are no merits in the Writ Petitions and pray for dismissal of the same.
17. Basing on the above pleadings, the learned Ombudsman observed that during the course of hearing the representative of the insurer had stated that they have admittedly received a proposal for insurance from the petitioner along with deposit of Rs.87,802/- on 10.05.2008 and after receiving the same, they had written a letter to her to give income proof. Subsequently, as they did not receive any income proof, they had refunded the premium received from her informing her that insurance cover could not be provided as income proof was not furnished.
18. However, the complainant stated before the learned Ombudsman that she did not receive any such letter or her amount from the insurer. On the said submission, the learned Ombudsman directed the representative of the insurer to verify as to what happened to the amount refunded. Pursuant thereto, the insurer stated that the amount was lying in their 'unencashed' account and by oversight it went unnoticed and they have now decided to refund the amount to the petitioner with interest after obtaining her bank details. 10
19. The learned Ombudsman observed that the insurer failed to adduce any cogent evidence to establish that the communication addressed to the petitioner calling upon her to submit proof of income was duly served upon her. It was also noted that the refund cheque towards the premium allegedly issued in her favour was never delivered to her. The insurer despite being aware of such non-delivery did not undertake any follow up measures to ensure that the cheque was duly handed over to the petitioner. It was further observed that when the amount is refunded to a customer, it is incumbent upon the insurer to pursue the matter to its logical conclusion and ensure that the refunded amount actually reaches the customer. However, in the present case, the insurer failed to discharge this obligation and allowed the amount to remain in its unencashed account for an inordinate period of ten years.
20. The learned Ombudsman also observed that despite having sympathy for the complainant, no sufficient or cogent grounds exist to warrant interference with the decision of the insurer, who opined that the question of settlement of the death claim does not arise. It was further held that the learned Ombudsman lacks the authority to direct issuance of a policy in the name of a deceased person. Accordingly, notwithstanding the contention that the deceased life assured was 11 deprived of insurance coverage due to the alleged callous and negligent conduct of the insurer, the complaint preferred by the petitioner was dismissed.
21. We have given our earnest consideration to the contentions urged and perused the records.
22. On a thorough examination of the entire material placed on record, the rival submissions made by the learned counsel on either side and the reasoning assigned by the learned Insurance Ombudsman, this Court, prima facie, is of opinion that the impugned award dated 17.12.2018 cannot be sustained either on facts or in law.
23. It is an admitted fact that the petitioner and her husband obtained housing loan to a tune of Rs.23,00,000/- repayable in 233 EMIs at Rs.24,976/- commencing from October, 2008. It is also not in dispute that the insurer had received the premium amount of Rs.87,802/- from the petitioner on 10.05.2008 towards insurance coverage of the housing loan. After the death of the petitioner's husband, she had approached the Bank seeking discharge of loan liability. Since the respondents did not act on the representations, she approached the learned Ombudsman. It is evident from the record that 12 she had remitted EMIs at Rs.24,976/- from 10.10.2008 till 10.04.2019 i.e. 187 instalments out of 233 instalments.
24. It is to be noted that the insurer having received premium amount of Rs.87,802/-, towards insurance coverage, failed to place any convincing material to establish that the alleged requirement of submission of income proof was ever duly communicated to the petitioner or that the cancellation of the proposal was effectively intimated to her. On the contrary, the record reveals that the premium amount remained with the insurer for an inordinately long period of nearly ten years in an 'unencashed' account without any meaningful attempt to either conclude the contract of insurance or ensure refund of the amount to the petitioner. Such conduct, as rightly observed by the learned Ombudsman, clearly reflects gross negligence and deficiency in service particularly in the context of insurance contracts, which are governed by the principle of utmost good faith.
25. Having recorded categorical findings regarding the failure of the insurer to establish communication of rejection and its lack of diligence in refunding the premium, the learned Ombudsman committed a manifest error in declining the substantive relief sought by the petitioner. In the considered view of this Court, once the premium was 13 admittedly received and retained by the insurer without proper communication of rejection, a presumption arises in favour of the petitioner regarding the existence of a concluded contract of insurance, particularly in the context of housing loan insurance schemes, which are intended to secure the loan liability in the event of death of the borrower.
26. In this backdrop, the reliance placed by the respondents in the case of Vasireddy K om alavalli K am ba 's (1 supra) on the principle that silence does not amount to acceptance in insurance contracts is of no avail, inasmuch as the present case is not one of mere silence, but one of prolonged and unexplained retention of premium coupled with failure to communicate rejection. The facts of the case, therefore, clearly attract the principles laid down by the Hon'ble Supreme Court in D.Srinivas 's case (2supra) relied upon by the learned counsel for the petitioner, wherein it was held that the retention of premium without communication of rejection leads to a presumption of acceptance and the insurer cannot subsequently disclaim liability. Further, in cases of housing loans secured with insurance cover, the policy is intended to secure the loan liability and technical pleas cannot be permitted to defeat the legitimate expectation of the borrower. 14
27. Furthermore, the petitioner, after the demise of her husband on 04.08.2017, has been diligently pursuing the matter and had even continued payment of instalments for a considerable period. The denial of insurance benefit in such circumstances on technical and procedural grounds attributable solely to the insurer, would result in grave injustice and defeat the very purpose of obtaining insurance coverage in connection with a housing loan.
28. As far as the issue of classification of the loan account as a Non- Performing Asset (NPA) is concerned, this Court is of the considered view that once the petitioner is found entitled to the benefit of the insurance coverage, the outstanding loan liability itself stands liable to be discharged from the date of death of her husband. In such circumstances, the very foundation for treating the account as defaulted ceases to exist. Therefore, the action of the Bank in classifying the account as NPA, which is based on alleged default in repayment, becomes legally untenable and cannot be sustained in the eye of law.
29. In view of the aforesaid discussion, we hold that the impugned award passed by the learned Ombudsman is arbitrary and unsustainable and the insurer cannot be permitted to evade its liability. 15 Consequently, the petitioner is entitled to the benefit of insurance coverage and the outstanding loan liability from the date of death of her husband is liable to be discharged. Consequently, the classification of the petitioner's loan account as NPA also cannot be sustained.
30. Accordingly, the Writ Petitions are allowed and the order dated 07.12.2018 passed by the learned Ombudsman is set aside. No order as to costs.
Pending miscellaneous petitions, if any, shall stand closed.
_________________________ MOUSHUMI BHATTACHARYA, J _____________________ GADI PRAVEEN KUMAR, J Date:01.04.2026 GJ