Disposed

M/S the Legal v. Life Insurance Corporation of India

Karnataka HC8 Sept 2021WP/35552/2018

Case brief

AI extract

What is this about?

In a PIL regarding unclaimed insurance amounts, the Court noted the existence of the Senior Citizens Welfare Fund Act, 2015 and IRDAI master circulars mandating transfer of such funds. The petition was disposed of with a direction for the regulatory authority to monitor compliance.

What did the court decide?

Petition disposed of; IRDA directed to ensure future compliance with the master circular and to call for periodical reports on compliance by insurers.

M/S the Legal Vs Life Insurance Corporation of India — Consumer Protection | Karnataka HC (2021)

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 8^TH DAY OF SEPTEMBER, 2021

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PRESENT

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THE HON'BLE MR.SATISH CHANDRA SHARMA, ACTING CHIEF JUSTICE

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AND

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THE HON'BLE MR. JUSTICE SACHIN SHANKAR MAGADUM

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WRIT PETITION NO.35552/2018 (GM-RES-PIL)

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BETWEEN

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M/S THE LEGAL ATTORNEYS AND BARRISTERS, NO.7, 2^ND FLOOR, THALANKI VILLA, WALTON ROAD, BENGALURU-01 REP BY SRI.R.V.SREE RAMA REDDY, ADVOCATE AND ASSOCIATES ... PETITIONER (BY SMT.B.SUDHA, ADV.)

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AND:

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1 . LIFE INSURANCE CORPORATION OF INDIA CENTRAL OFFICE, 5^TH FLOOR, WEST WING, YOGAKSHEMA, PO BOX 19953 G1, BHIMA MARG, NARIMAN POINT, MUMBAI-400 021

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2 . LIFE INSURANCE CORPORATION OF INDIA 1^ST FLOOR, JEEVAN PRAKASH BUILDING, OPP TO TOWN HALL, J.C.ROAD, HALSURUPETE, NAGARATHPETE, BANGALORE-02 KARNATAKA

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3 . THE INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY (IRDA) 3^RD FLOOR, PARISHRAMA BHAVAN,

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BASHEER BAGH, HYDERABAD, TELANGANA-500 004

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... RESPONDENTS

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(BY SRI SHIVAYOGI B.HALLUR, ADV. FOR R1 & R2 SRI. S.SRIRANGA, ADV. FOR R3)

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THIS WRIT PETITION IS FILED UNDER ARTICLES 226 & 227 OF THE CONSTITUTION OF INDIA PRAYING TO DIRECT THE RESPONDENTS TO TAKE SUITABLE ACTION TO FORMULATE A POLICY FOR DISBURSEMENT OF THE UNCLAIMED AMOUNTS TO THE SUCCESSORS OR LEGAL HEIRS OR NOMINEES OR THE CLASS I HEIR OF THE POLICE HOLDER THEREAFTER THE CLASS II HEIR SHALL HAE THE CLAIM ON THE POLICY OF THE POLICY HOLDER AND ETC.

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THIS WRIT PETITION COMING ON FOR ORDERS THIS DAY, ACTING CHIEF JUSTICE, MADE THE FOLLOWING:

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ORDER

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The petitioner before this Court, a law firm established in the name and style as M/s. The Legal, Attorneys and Barristers, Bangalore, has filed the present public interest litigation stating that the insurance companies in the country have collected premium amounts from large number of Indian citizens and after maturity period, the policy holders or the legal heirs in the event of the death of the person insured, have to undergo many formalities to receive the amounts released by the insurance companies. The petitioner's contention is that the unclaimed policies are amounting to the tune of Rs.15,167/- crores and therefore,

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as the amount is lying with various insurance companies including Life Insurance Corporation (for short 'LIC'), the same should be used for social welfare of the country and the policy holder or the legal representatives of the policy holder should be traced. The petitioner has prayed for the following reliefs:

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(i) Issue a writ of mandamus or any other appropriate writ or order directing the Respondents to take suitable action to formulate a policy for disbursement of the unclaimed amounts to the successors or Legal Heirs or nominees or the Class I heir of the Policy Holder thereafter the Class II heir shall have the claim on the policy of the policy holder;

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(ii) Direct the Respondents to ensure that all the accumulated unclaimed policy amounts shall be disbursed in the manner appointing an investigating body and take the stock of the unclaimability and report to the standing committee. Further, after receipt of the report, the Standing Committee shall take necessary action within 2 years from the date of the death of the policy holder, thereafter the entire policy amount shall be deposited in a Nationalized Bank for about 5 years in the name of the Policy Holder and Insurance Company so as to enable the

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claimant to take the benefit in due course of time of 5 years.

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(iii) Thereafter, if the amount is unclaimed for 5 years from the date of deposit order by the Standing Committee, again 5 year time may be extended for further 5 years and the same principle shall be adopted for every 5 year term upto 25 years. After 25 years, the said amount of matured Policy plus deposit benefits shall be transferred to the Government Relief Funds (i.e. drought relief fund, flood relief fund, medical relief fund, etc. under the control of Prime minister's Relief Fund).

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(iv) Pass an order or orders to formulate necessary policy and changes in the IRDA to meet the ends of justice.

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(v) Pass any such direction or writ or an appropriate order in the circumstances deem fit to meet the ends of justice.

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A detailed and exhaustive reply has been filed by the respondent No.3-Insurance Regulatory and Development Authority of India (hereinafter referred to as 'IRDAI' for short) and the stand of the IRDAI is that it is regulated under Insurance Regulatory and Development Authority (IRDA) Act,

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1999 (for short 'Act of 1999'). It has been further stated that the Government of India has enacted Senior Citizens Welfare Fund Act, 2015 as a part of the Finance Act, 2015, which mandates the transfer of unclaimed amounts to the Senior Citizen Welfare Fund after a period of ten years and the same is being done by the insurance companies for promoting the welfare of the senior citizens. It has also been stated that the IRDAI is monitoring transfer of funds in terms of Senior Citizen Welfare Fund Rules, 2016. Up to 2020, the insurance companies have transferred Rs.81.65 crores in March 2018 and Rs.398.66 crores in March 2019 and it is a continuing process. It has also been stated that as per Master Circular dated 25.07.2017, the unclaimed amount is being transferred to the Senior Citizens Welfare Fund and there is a complete mechanism under the aforesaid master circular in respect of unclaimed policies/unclaimed amounts.

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Learned Counsel for respondent Nos.1 and 2 have categorically stated before this Court that as per the direction issued by the IRDAI, the unclaimed amount is being transferred from time to time to the Senior Citizens Welfare Fund and information in respect of the unclaimed policies are

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available on the website i.e. www.licindia.in. It has been stated that the action completed mechanism for settling the unclaimed policy is provided under the LIC Act of 1956 read with the rules and regulations formulated by IRDAI and also the master circular issued by the IRDAI dated 25.07.2017.

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Heard the learned counsel for the parties and perused the records. The matter is being disposed of at the motion hearing stage itself with the consent of the parties.

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The undisputed facts reveal that the petitioner-firm has filed the present public interest litigation showing serious concern about the unclaimed amounts/unclaimed policies stating that the unclaimed amounts are lying with various insurance companies. As per the contention of the petitioner, Rs.15,167/- crores is lying idle with life insurance companies. The aforesaid amount has been seriously disputed by respondent Nos.1 to 3. The fact remains that the present petition has been filed with a noble cause to ensure that the unclaimed amount is transferred to the Senior Citizens Welfare Fund. The Government of India was aware of the huge amounts available with the insurance companies and

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enactment of the Senior Citizens Welfare Fund Act, 2015 as a part of the Finance Act, 2015, which mandates the transfer of unclaimed fund to the Senior Citizens Welfare Fund after a period of ten years and the same has been carried out for promoting the welfare of the senior citizens and for such other purposes as specified under Chapter 7 of the Act. The Government of India in exercise of powers conferred under Section 128 of the Finance Act, 2015 has formulated Senior Citizens Welfare Fund Rules, 2016 which specifies the entities which are required to transfer the unclaimed amounts to the Senior Citizens Welfare Fund and the same is being done by the insurance companies. As per the report of respondent No.3, the unclaimed amount totalling to Rs.81.65 crores was transferred in March 2018 and Rs.398.66 croes was transferred in March 2019 and it is an ongoing process for which the IRDAI is having a strict watch over the various insurance companies. Respondent No.3 has also issued Master Circular dated 25.07.2017, the relevant extracts of which are reproduced as under:

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"Bangalore Date: 09-08-2018

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From: Reshma Khanum B.A.LL.B Advocate

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No.7, 2^nd Floor, Walton Road Off Vittal Malya Road Bangalore-560 001

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To Life Insurance Corporation of India Central Office, 5^th Floor, West Wing Yogakshema, PO Box 19953 G1 Bhima Marg, Nariman Point Mumbai-400 021

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Dear Sir/Madam

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Sub: Information sought regarding the steps the IRDA is taking against regarding the steps the IRDA is taking against the LIC and others Public Insurance Companies of India for disposal of the unclaimed insurance policy holders money of Rs.15,167/- crores lying idle with the LIC and other Insurance Companies.

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With reference to the above subject, on 29-072018 in the Times of India and other newspapers the IRDA has given news information regarding the unclaimed insurance policy holders money of Rs.15,167/- crores and the money which is lying idle in the insurance companies is to be disburse/settle to the policy holder's Legal Representative or to the policy holder's relatives, if it is not possible to disburse the said money to the nearest relatives of policy holders at least the IRDA has to take certain steps to transfer this money to the Government Exchequer or the Central Government or State Government have to confiscate to the Government.

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I request you to give what guidelines or the rules that the IRDA has framed for proper disposal or disbursement of the unclaimed policy holder's money lying with LIC and other Public Insurance Company and also provide us steps taken by the Central Government or Statement Government to guide or direct the IRDA and other Insurance Companies for disposal or disbursement of the unclaimed policy holder's money and also to

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provide all the details and other information in this regard as I have to file a Public Interest Litigation in this regard against the Public Insurance Companies, LIC and IRDA in this respect. I request you to send a reply within a week of receipt of this letter.

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Thanking you.

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Sincerely

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(Reshma Khanum) Advocate"

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Sri Sriranga, learned Counsel appearing for respondent No.3-IRDAI, has categorically stated before this Court that the IRDAI is keeping a strict watch over various insurance companies and the aforesaid master circular is being strictly enforced by the insurance companies. It has been stated that any breach or violation of the master circular attracts penal provision including Section 102 of the Insurance Act, 1938. In the light of the aforesaid, as there is already a mechanism for transferring the unclaimed amounts to the Senior Citizens Welfare Fund and the unclaimed amount is being transferred from time to time, this Court is of the opinion that the petition deserves to be disposed and it is disposed of accordingly.

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However, respondent No.3-IRDAI shall ensure that in future also, the master circular is being complied with by the insurance companies and periodical report shall also be called for from the insurance companies regarding compliance of the master circular by respondent No.2 only to ensure as to whether the unclaimed amount is being transferred to the Senior Citizens Welfare Fund as provided under the aforesaid circular or not.

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SD/ACTING CHIEF JUSTICE

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SD/-

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JUDGE

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M/S the Legal v. Life Insurance Corporation of India

Case brief

What is this about?

What did the court decide?

M/S the Legal v. Life Insurance Corporation of India

Case brief

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