The appellant–insurer issued a circular on 24th April 2006 and imposed a registration charge of Rs.250 per assignment. The first respondent–Dravya Finance Private Limited, which is a finance company, challenged the said circular before the Bombay High Court on the ground that firstly, it is contrary to Section 38 of the Insurance Act and secondly, it is in violation of Article 265 of the Constitution of India as a levy of a tax or fee was sought to be made without any authority of law. There were other challenges, such as violation of Articles 14, 19(1)(g) and 300A of the Constitution of India. (Para 2)
The question is whether the appellant–insurer is lawfully entitled to levy a service charge of Rs.250/- for a transaction of assignment of a life insurance policy. In the impugned order, the High Court, in detail, went into the question of whether the levy of Rs.250/- under the impugned circular was a tax or a fee. The High Court held that by the impugned circular, the appellant has provided for service charge or fee for the services to be rendered to the person requesting for registration of an assignment. This finding regarding the nature of the levy has not been assailed by the appellant–insurer. (Para 8)
Now, the only question is whether the appellant had a lawful authority to levy a service charge or fee for the transaction of assignment or transfer of policy. (Para 9)
At this stage, we may note that the Insurance Regulatory and Development Authority of India (Fee for granting written acknowledgement of the receipt of Notice of Assignment or Transfer) Regulations, 2015 have been made in accordance with the powers conferred by Section 114A of the Insurance Act. The Regulations were brought into force on 29th April 2015. Regulations 3 and 4 of the said Regulations read thus:
“Fee for granting acknowledgement of Notice of Assignment or Transfer: (3) An Insurer is permitted to collect the following fee for granting a written acknowledgement of the receipt of notice of assignment or transfer. (a) In respect of those policies that are issued in electronic form as specified by the regulations under the provisions of Section 14(2) of the Act the fee collected shall not exceed Rs.50 (Rupees fifty only) inclusive of applicable taxes; (b) In respect of policies issued other than those referred under Regulation (3)(a) above the fee collected shall not exceed Rs.100 (Rupees Hundred Only) inclusive of applicable taxes; (4) No other fee shall be collected for rendering any other services such as, recording the fact of the transfer or assignment or any other services connected to the assignment or transfer prescribed in Section 38 of the Act.” (emphasis added)
Hence, the said Regulations prohibit the levy of any fee for recording the assignment of policies. (Para 11)
We find no error in the view taken by the High Court that the appellant–insurer had no right to claim fees of Rs.250/- for recording the endorsement of assignment or transfer. (Para 12)
SUPREME COURT OF INDIA
2023 STPL(Web) 256 SC
[2023 INSC 815]
Life Insurance Corporation Of India Vs. Dravya Finance Pvt. Ltd. & Ors.
Civil Appeal No. 4095 of 2012-Decided on 6-9-2023
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