Pranav B Prem

In a recent order, the National Consumer Disputes Redressal Commission (NCDRC), New Delhi, comprising Presiding Member Binoy Kumar and Member Justice Saroj Yadav, reiterated that interest rates imposed in insurance-related consumer disputes for deficiency in service typically range from 6% to 9% per annum. The Commission held that imposing an interest rate of 10% without any reasoning is unjustified and on the higher side.

The dispute originated when Khushboo, the complainant and daughter of the insured Late Sunita Rani, availed a theft insurance policy for a vehicle from ICICI Lombard General Insurance Company. During the validity of the policy, the insured vehicle was stolen. The complainant filed a claim, which was repudiated by the insurance company on the ground of non-transfer of the policy after the death of the original policyholder. Aggrieved by the denial, the complainant approached the District Consumer Disputes Redressal Forum, North West, Delhi.

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The District Forum, by its order dated 18.06.2019, allowed the complaint and directed the insurance company to pay Rs. 9,19,604/- (the Insured Declared Value of the vehicle), along with compensation of Rs. 70,000/- for mental agony and Rs. 10,000/- towards litigation costs, to be paid within 30 days. The forum also ordered that failure to comply would attract an interest of 10% per annum from the date of receipt of the order.

The insurance company challenged the order before the State Consumer Disputes Redressal Commission, Delhi, which partly modified the District Forum’s order, reducing compensation for mental agony to Rs. 20,000/- while retaining the 10% interest. Dissatisfied, the insurance company filed a revision petition before the NCDRC.

By order dated 26.10.2023, the NCDRC upheld the direction to pay the insured amount but modified the interest component. It reduced the interest rate to 9% per annum and granted the insurance company a period of eight weeks to comply, with the interest applicable only in case of non-payment within this extended period. It also set aside the compensation and litigation cost awarded by the lower fora.

The complainant then filed a review petition, arguing that the NCDRC's order did not provide any justification for reducing the interest rate from 10% to 9% and for granting an extended payment period. This review petition was dismissed by the Commission on 26.03.2024, holding that the grounds raised had already been addressed in the earlier order.

The matter was subsequently taken before the Delhi High Court, which noted that the NCDRC had not provided specific reasons for the reduction in the interest rate and the payment period. The High Court remanded the matter back to the NCDRC for reconsideration.

Upon reconsideration, the NCDRC observed that the range of interest rates in its previous decisions concerning insurance-related consumer disputes generally falls between 6% and 9%. The Commission noted that neither the District Forum nor the State Commission had offered any justification for imposing a 10% interest rate. It emphasized: "In most of the Orders of this Commission relating to insurance cases, the rate of interest hovers around 6% per annum. In this case, 9% rate of interest has been directed to be paid, which in our considered opinion is more than enough as compensation. 10% rate of interest is definitely on the higher side as no reason has been given by either District Forum or State Commission to give such high interest rate."

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Further, the NCDRC found it reasonable to grant the insurance company eight weeks to comply with the payment obligation and held that the 9% interest would apply only in case of delay beyond that period. It clarified that this modification from the 30-day period initially imposed by the District Forum was justified under the circumstances.

Ultimately, the NCDRC affirmed its previous order dated 26.10.2023 and dismissed the review petition. The Commission found no error apparent on the record that would warrant interference, thereby concluding the matter in favour of the modified relief granted to the insurance company.

Appearance

For the Appellant: Nemo

For the Respondent: Nemo

Cause Title: ICICI Lombard General Insurance Company Ltd V. Khushboo

Case No: NC/RA/64/2024

Coram: Hon'ble Mr. Binoy Kumar [Presiding Member], Hon'ble Mrs. Justice Saroj Yadav [Member]

[Read/Download order]