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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
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
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
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
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
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
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
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
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.
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
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
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
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.
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.
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
