Be aware of the time limit clause

THE Union Ministry of Consumer Affairs spends huge amounts on advertisements aimed at educating people about their rights. It seems that the campaigns either do not send out the right messages, or they do not reach those who need them the most. I refer here particularly to the time limit of two years provided under the Consumer Protection Act for consumers to file complaints. Lack of awareness about this limitation period has resulted in many a person being denied the right to redress under the Act.

There is another important aspect as far as the law of limitation is concerned, and it pertains to what is known as the cause of action, that gives rise to the complaint. Since the limitation period of two years is to be calculated from the date on which the cause of action arises, there is a lot of debate over what constitutes the cause of action.

In the case of Manipal Soubhagaya Nidhi Ltd vs Prabhu ( RP No 3425 of 2006), pertaining to non-refund of maturity amounts deposited with a non-banking financial company, the apex court dismissed 51 complaints on the ground that they were time-barred. To arrive at this conclusion, it took the date of maturity of the deposits as the cause of action, and calculated two years from then on.

The lower courts’ interpretation of the cause of action was, however, far more favourable. They had opined that so long as the person who receives the deposit has not denied his liability to pay it back, it is a recurring cause of action for the depositor. The apex court, unfortunately, disagreed and said since the deposits had matured in 2002 and the complaints were filed in 2006, they were time-barred.

Now, in another case pertaining to rejection of insurance claims by the insurer, the lower courts dismissed the complaints of 140 claimants  — mostly widows — on the ground that they were time-barred. To arrive at that conclusion, the courts had taken the date of death as the date from which the cause of action had arisen. The national commission, fortunately, disagreed.

The complaints here pertained to insurance claims in respect of a scheme for BPL (below poverty line) families launched by the Madhya Pradesh Government. Called Vivekananda Group Insurance, the scheme was introduced in January 2006 for a period of five years and was meant to provide financial assistance to dependents of insured members in case of natural disaster, accidental death, permanent or partial disability. In all such eventualities, the insurance company designated for the district was required to pay Rs.50,000. The claims were to be considered in consultation with the nodal officer of the district.

On the ground that their claims were unjustly repudiated by the insurance companies despite the nodal officer forwarding them, three class action petitions pertaining to a total of 140 complainants were filed before the courts.

When the district forum dismissed them, all of them filed appeals before the state consumer disputes redressal commission. Some of the appellants even sought condonation of delay on grounds of poverty and ignorance. They said they were unaware of their rights under the CP Act and also about the limitation provision under the Act. The state commission, however, dismissed them, forcing them to file revision petitions before the national commission.

After considering the scheme in detail and two orders of the Supreme Court on the subject, the national commission held:  (a) Where the claim was lodged either with the nodal officer or the insurance company after two years of death, such cases would be barred by limitation; (b) but where the claim had been made to the nodal officer, or the nodal officer had forwarded the claim to the insurance company, or had been directly filed with the insurance company within two years of death, and the case had remained undecided, the cause of action in such cases would continue till the claim was paid or rejected; (c) where the claim had been rejected, the  cause of action should be calculated from the date of such rejection. In short, the calculation of limitation starts from the time the claim is rejected by the insurance company, the commission held (Laxmi Bai and Others vs ICICI Lombard General Insurance Company and Others, RP NO 3118 of 2010).

If only consumers were aware of the limitation clause, they would not have ended up wasting so much time and money in long legal battles on the limitation period. They would have filed the cases much earlier. Now their complaints will have to be heard by the district forum on merit.

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