A recent note discusses the decision of the Supreme Court in Kandimalla Raghavaiah v. National Insurance, concluding that it is being misinterpreted, and lays down dangerous precedent for insurance claims. While the concern highlighted by the abovementioned note, that “consumers will continue to find themselves at the receiving end with genuine complaints being thrown out for being time–barred” is completely valid, it appears that the decision has not been misinterpreted, and in fact espouses a view detrimental to valid insurance claims.
The source of the controversy lies in the relationship between the insurance claim and a complaint before the National Consumer Disputes Redressal Commission [“National Commission”], established under section 9(c) of the Consumer Protection Act, 1956 [“Act”]. On the facts of the case, a claim for insurance resulting out of a fire in a godown was not pursued for four years after the fire broke out. The insurance company refused to settle the claim, on the ground that the claim was time-barred (The decision is silent on the issue of which provision the insurance company relied on for the limitation period). Against this decision, the claimant approached the National Commission, which dismissed the petition as time-barred under section 24A of the Act. It was this decision which was appealed against to the Supreme Court.
Section 24A of the Act reads-
(1) The District Forum, the State Commission or the National Commission shall not admit a complaint unless it is filed within two years from the date on which the cause of action has arisen.
(2) Notwithstanding anything contained in sub-section (1), a complaint may be entertained after the period specified in sub-section (1), if the complainant satisfies the District Forum, the State Commission or the National Commission, as the case may be, that he had sufficient cause for not filing the complaint within such period :
Provided that no such complaint shall be entertained unless the National Commission, the State Commission or the District Forum, as the case may be, records its reasons for condoning such delay. [emphasis supplied]
The question to be decided by the Supreme Court was when the cause of action could be said to have arisen. The appellant contended that (for a variety of reasons not necessary to go into here), it could not have filed the complaint earlier. More importantly, it was contended that the refusal to settle the claim was the deficiency in service against which the complaint with the National Commission was filed. Since the cause of action, for the purposes of section 24A, was this deficiency of service, the limitation period would begin only after the refusal to settle and not at the time of the damage to the claimant. The insurance company, significantly, did not contend that the claim was barred by limitation under section 24A. In paragraph 8 of the decision, the respondent are reported as contending only that the requirements for filing a claim were not fulfilled by the claimant, and the claim was rightly rejected. Thus, the insurance company’s defence was there was no deficiency of service, and not that a complaint against a deficiency of service was barred by limitation.
Now, under the Consumer Protection Act, a complaint is filed for a defect in goods, or for deficiency in services. The cause of action for such a complaint is thus the defect or the deficiency, as the case may be. Admittedly, the fire in the godown would be the cause of action for the insurance claim. In determining the period of limitation for the insurance claim, the date of the fire in the godown would be relevant. However, the limitation period for filing an insurance claim would be governed by the terms of the insurance policy, which is not discussed by the Supreme Court. This issue was considered by an earlier decision of the Apex Court in Oriental Insurance v. Prem Printing Press (2009). Here, a specific clause in the policy provided that the claim shall be deemed to have been abandoned and not recoverable three months after its repudiation. This was interpreted by the Supreme Court as meaning that three months after the final and conclusive rejection of the claim by the insurance company. Now, the case note mentioned above, argues that the decision in Kandimalla Raghavaiah conflicts with the earlier decision in Prem Printing Press, since the latter held the limitation period to be commencing from the rejection of the claim. However, that view is erroneous, since the two cases dealt with two different limitation periods. In Kandimalla Raghavaiah, it was to commence with the cause of action, in Prem Printing Press, it was to begin with the repudiation of the claim.
However, this distinction does not mean that Kandimalla Raghavaiah was correctly decided. Although the limitation period in Kandimalla Raghavaiah was to begin with the cause of action (as provided by section 24A), the decision still proceeds on a dubious interpretation of the term ‘cause of action’. Cause of action in section 24A must refer to the cause of action of the consumer complaint, and not the cause of action of the insurance claim. In stressing on the significance of section 24A, the Supreme Court cites another prior decision in State Bank of India v. BS Agricultural Industries, where the Court had observed,
It would be seen from the aforesaid provision that it is peremptory in nature and requires consumer forum to see before it admits the complaint that it has been filed within two years from the date of accrual of cause of action. The consumer forum, however, for the reasons to be recorded in writing may condone the delay in filing the complaint if sufficient cause is shown. The expression, `shall not admit a complaint’ occurring in Section 24A is sort of a legislative command to the consumer forum to examine on its own whether the complaint has been filed within limitation period prescribed thereunder. As a matter of law, the consumer forum must deal with the complaint on merits only if the complaint has been filed within two years from the date of accrual of cause of action and if beyond the said period, the sufficient cause has been shown and delay condoned for the reasons recorded in writing. In other words, it is the duty of the consumer forum to take notice of Section 24A and give effect to it. If the complaint is barred by time and yet, the consumer forum decides the complaint on merits, the forum would be committing an illegality and, therefore, the aggrieved party would be entitled to have such order set aside.
However, all this paragraph shows is that section 24A cannot be circumvented, and does not suggest that ‘cause of action’ should be interpreted as being different from a deficiency in service or defect in goods, as the case may be. In fact, the facts in BS Agricultural Industries dealt with a deficiency of banking services, and the limitation period was held to have begun from the date when the deficiency occurred. Hence, if at all, the decision is authority for the proposition contrary to that proffered by the Court in Kandimalla Raghavaiah.
The result of this decision now is that in all other complaints, the limitation period under section 24A will commence from the date of the deficiency in service, while in insurance claims, it will commence from the date of the damage. Especially given the long delays that often accompany the settlement of insurance claims, this position defeats the purpose of allowing redress against insurance companies under the Consumer Protection Act. Thus, with due respect, it seems apparent that the decision in Kandimalla Raghavaiah merits urgent reconsideration.