Penalty on LIC for negligence

LIC has been found guilty of deficiency in service by keeping the money of a consumer for five years without issuing a policy. In this case, Madhav Hari vs LIC, a person submitted a proposal to LIC under the Jeevan Aastha plan and paid Rs. 1.75 lakh. But he did not get either the policy or refund for five years. He moved the district consumer forum. It ordered LIC to refund the full amount along with a compensation of Rs. 4.25 lakh.

The Maharashtra State Consumer Commission upheld the order. On appeal, the National Consumer Commission deleted the order on compensation. The consumer appealed to the Supreme Court, arguing that the plan was equity-linked and not mere insurance. So he lost the benefit of escalation of investment value.

LIC submitted that the plan which the consumer opted had closed and he was given a choice to join another plan, which he did not. So he did not deserve compensation. The court agreed with the consumer and added Rs. 2 lakh more to the previous compensation, observing that “mere interest will not provide sufficient redress”. Retaining the money with no effort to refund it for five years clearly established a deficiency in service, the judgment said.