Case Note & Summary
The dispute arose between the Life Insurance Corporation of India (LIC) and Dravya Finance Pvt. Ltd. regarding a circular issued by LIC imposing a registration charge of Rs.250 for the assignment of life insurance policies. Dravya Finance challenged this circular in the Bombay High Court, arguing that it was contrary to Section 38 of the Insurance Act, 1938, and violated Article 265 of the Constitution of India. The High Court ruled that the charge constituted an unconstitutional service fee without legal authority, leading to the circular's annulment. The appellant-insurer contended that the fee was part of a business transaction and necessary to cover administrative costs associated with processing assignments. However, the Supreme Court upheld the High Court's decision, emphasizing that Section 38 did not authorize such a fee and that no regulations or rules permitted the insurer to levy charges for recording assignments. The court noted that the Insurance Regulatory and Development Authority of India had established regulations prohibiting any fees for recording assignments. Consequently, the Supreme Court dismissed the appeal, affirming the High Court's ruling that the insurer could not impose the Rs.250 fee for recording assignments.
Headnote
A) Constitutional Law - Levy of Fees - Unconstitutionality of Circular - Insurance Act, 1938, Section 38 - The High Court held that the levy of Rs.250 for registration of assignment was unconstitutional as there was no authority to impose such a fee, violating Article 265. The circular was struck down for lacking legal backing and being contrary to statutory provisions (Paras 3, 12).
Issue of Consideration
Whether the appellant-insurer had the lawful authority to levy a service charge of Rs.250 for the transaction of assignment of a life insurance policy.
Final Decision
The Supreme Court dismissed the appeal, affirming the High Court's ruling that the insurer had no right to impose the Rs.250 fee for recording assignments.
Law Points
- Insurance Act
- 1938
- Section 38
- Life Insurance Corporation Act
- 1956
- Section 6
- Article 265
- Article 14
- Article 19(1)(g)
- Article 300A
