One of my clients recently had a case which I am explaining below and if you are stuck in such similar situation, here is what to do.
Note: Due to attorney-client privilege, I cannot disclose complete case details or identify the actual parties involved. However, I am sharing the essential facts and legal approach so that if you find yourself in a similar situation, you can understand the available solutions and legal remedies.
TL;DR: An insurance company cannot recover an alleged excess payment from you solely due to its own calculation mistake. You are entitled to the amount confirmed in writing at maturity. Threats of imprisonment under Sections 318 and 319 BNS are civil recovery attempts misusing criminal law. Approach the Insurance Ombudsman or file a consumer complaint to settle the matter.
Key Facts of the Case
- A life insurance policy in the name of the client's father, held with a major Indian insurer, matured on 15 March 2025.
- The insurer's representatives verbally promised a maturity amount of ₹12,50,000, but only ₹10,80,000 was credited.
- After credit, the insurer sent a notice claiming it had overpaid by ₹75,000 and demanded repayment, citing a calculation error.
- The insurer sent collection agents to the client's family home, who demanded photographs and acknowledgment of the notice.
- Following a year of silence, the insurer sent a fresh legal notice on 10 April 2025, quoting Sections 318 and 319 BNS, along with threats to report to IRDAI.
- The written confirmation letter from the insurer at maturity stated a higher amount than actually paid, contradicting the subsequent correction letter.
- The client's family refused to pay, and the matter was taken to the Chamber of Advocate Sudhir Rao for a legal strategy.
The Direct Legal Answer
Here's the thing — the insurer's demand is on shaky ground. Let's break down the specific questions raised.
Can the insurer demand repayment of the alleged excess?
Not when the mistake is entirely its own. If the insurer's letter at maturity confirmed a specific sum and paid less, the burden of proof for any alleged overpayment lies squarely on the insurer. Your parents never asked for more; the insurer's promise was never honoured. A unilateral error in calculation cannot shift financial liability to you. The principle of estoppel under the Indian Contract Act prevents the insurer from denying its own written confirmation.
Are the threats of imprisonment under Sections 318 and 319 BNS valid?
No. Make no mistake — these sections deal with criminal breach of trust and dishonest misappropriation. They apply only if there is fraudulent intent to retain property belonging to another. Here, your parents received exactly what the policy terms entitled them to. There's no dishonest intention. Using criminal law to recover a civil debt is an abuse of process. Courts routinely quash such FIRs or complaints under Section 528 BNSS.
Should we respond to the legal notice?
Absolutely. Do not ignore it. A well-crafted reply, drafted by an advocate experienced in insurance disputes, can shut down the insurer's claims early. The reply should highlight the insurer's own contradictory letters, the lack of any finding of fraud, and the threat of a consumer complaint.
Advice in Such Cases
Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation to come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think.
First, preserve all correspondence — every letter, email, text message, and notice from the insurer. Second, do not engage with collection agents directly. Refer them to your advocate. Third, file a complaint with the Insurance Ombudsman or approach the District Consumer Disputes Redressal Forum. Insurers often back down when faced with a formal consumer complaint, as they risk heavy penalties and adverse orders. Insurance-specific litigation requires an advocate who understands the regulatory framework, IRDAI guidelines, and the nuanced interplay between contract law and consumer protection statutes.
Applicable Sections of Law
This is a civil dispute with criminal overtones. The key provisions are:
- Section 318 BNS (Criminal Breach of Trust by a Public Servant) and Section 319 BNS (Criminal Breach of Trust): While cited by the insurer, these sections require intentional misappropriation of property entrusted to you. They do not apply to a genuine dispute over a policy calculation.
- Section 528 BNSS: The High Court's inherent power to quash criminal proceedings where the allegations are civil in nature and no offence is made out.
- Indian Contract Act, 1872 — Sections 72 and 77: Deal with restitution where payment was made under mistake. But here, no excess was paid — the insurer is simply trying to reclaim funds it never disbursed.
- Consumer Protection Act, 2019 — Sections 2(7) (definition of unfair trade practice) and 13 (complaint procedure): You can file a consumer complaint for deficiency in service and unfair trade practice.
Jurisdiction — Where to File the Case
You have multiple options. For a consumer complaint, file before the District Consumer Disputes Redressal Forum where your parents reside (territorial jurisdiction) for claims up to ₹1 crore. The Insurance Ombudsman (set up under the IRDAI Guidelines) can handle complaints up to ₹30 lakh, with a faster, less formal procedure. For quashing any criminal case filed by the insurer, approach the High Court under its writ or inherent jurisdiction. Pecuniary and territorial jurisdiction ensures you file in the correct forum — a specialist advocate can advise on this.
Limitation Period
The limitation for filing a consumer complaint is two years from the date of the cause of action (when the insurer first demanded payment). For quashing criminal proceedings, there is no fixed limitation, but you must act promptly — ideally within weeks of receiving the legal notice. Missing the two-year window can be fatal, though courts may condone delay in exceptional circumstances under Section 5 of the Limitation Act.
Interim Reliefs Available
Early in the matter, you can seek an injunction under Order 39 Rule 1 and 2 of the CPC to restrain the insurer from taking coercive action (like sending collection agents or filing a criminal complaint). The court may also issue a status quo order, preserving the current position pending final adjudication. These interim orders are critical — they stop the insurer in its tracks while the main dispute is heard.
If You Are the Victim
- Collect and secure all original policy documents, maturity letters, and notices from the insurer.
- Do not pay a single rupee under duress. Document every instance of harassment by collection agents.
- File a written complaint with the Insurance Ombudsman in your region — the process is free and often resolves disputes within 3-6 months.
- Approach the District Consumer Forum for compensation, damages for mental harassment, and litigation costs.
- If the insurer files a criminal case, engage an advocate immediately to file a quashing petition under Section 528 BNSS before the High Court.
Documents You Must Keep Ready
- Policy document and all premium payment receipts.
- Maturity letter from the insurer showing the confirmed amount.
- Subsequent correction letters or notices from the insurer.
- Legal notice received (photocopy and original).
- Any photographs or recordings of collection agents at your home.
- Identification proofs (Aadhaar, PAN, Voter ID) of all family members named in the policy.
- Bank statements showing the credited amount.
- Correspondence (emails, messages) with the insurer's representatives.
What Evidence Is Required?
- Primary evidence: The insurance policy contract, the maturity letter, and the bank statement showing the credited sum.
- Secondary evidence: Photographs of agents at your home, audio/video recordings (if lawfully made), and witness statements from family members.
- Documentary evidence: All notices, correction letters, and IRDAI correspondence.
- Any written assurance from the insurer's advisor concerning the promised payout.
- Proof that you pointed out the discrepancy at the first instance (e.g., your earlier letter or email).
- Affidavits from neighbours or family members who witnessed the collection agents' conduct.
How Courts Typically Approach Such Cases
Civil courts and consumer forums are protective of policyholders. They view insurance companies' demand for repayment of alleged excess with suspicion. Courts examine whether the insurer's own agent induced the policyholder, whether the written confirmation at maturity was clear, and whether any fraud existed on the policyholder's side. They typically rule that the insurer bears the risk of its own calculation errors. A criminal complaint initiated solely to recover a civil sum is almost always quashed as an abuse of process.
Timeline of Legal Process
- Notice Reply: 1-2 weeks (drafted by advocate and sent via registered post).
- Consumer Complaint Filing: 2-4 weeks (drafting, verification, filing).
- Summons to Insurer: 4-8 weeks after filing.
- Written Statement by Insurer: 2-3 months from summons.
- Evidence and Arguments: 6-12 months in consumer forum; 12-18 months in civil court.
- Final Order: 12-24 months from filing.
- Appeal (if any): 6-12 months additional.
- Quashing Petition in High Court (if criminal case filed): 4-8 months from filing.
Understanding the Costs
The total cost of a matter like this varies significantly from one case to the next — it depends on the complexity of the dispute, the forum involved, the number of hearings, and the specific facts of your situation. There is no single fixed figure that applies to everyone.
A professional advocate can give you an accurate estimate only after reviewing all your facts and documents in a consultation.
Can the Matter Be Settled Out of Court?
Yes. Most insurance disputes can be settled through mediation before the Insurance Ombudsman or through Lok Adalat (for pending court matters). If the insurer realises its demand is unsustainable — for instance, if you demonstrate the written confirmation at maturity — it may agree to withdraw the notice without any payment from you. A compromise deed can be executed, recording the settlement. Settlement is advisable when it saves both parties time and litigation costs, but you should never agree to pay a single rupee to settle a demand that has no legal or contractual basis.
Common Mistakes People Make
- Paying under pressure: Making even a partial payment to "stop harassment" can be construed as admission of liability.
- Ignoring legal notices: This invites the insurer to file a case, often leading to a default order against you.
- Engaging a lawyer without insurance law experience: This type of matter — involving complex policy wordings, IRDAI regulations, and potential misuse of criminal law — requires an advocate who regularly handles insurance disputes. General practitioners often miss procedural nuances like the correct forum, limitation periods, or effective quashing arguments.
- Destroying evidence: Throwing away letters, envelopes, or bank statements can be fatal to your case.
- Speaking to collection agents without a witness: Always have a family member or neighbour present and record the interaction if lawful.
- Posting on social media: Insurers can use public posts to allege defamation or undermine your credibility in court.
FAQs People Normally Have
Can the insurer actually send me to jail for not paying the alleged excess amount?
No. Criminal breach of trust requires proof of dishonest intention to misappropriate property. Here, there's no evidence of fraud — it's a genuine dispute over a calculation error. The police will typically treat such complaints as civil matters and refuse to file an FIR. If an FIR is filed, the High Court will likely quash it under Section 528 BNSS.
What if I already paid the alleged excess under pressure?
You can still recover that money. File a consumer complaint or a civil suit for restitution of money paid under mistaken belief or coercion. The court may order the insurer to refund the amount along with interest and compensation for harassment.
Should I approach IRDAI?
Yes. IRDAI does not adjudicate individual disputes, but a complaint to IRDAI puts regulatory pressure on the insurer. It often prompts the insurer to resolve the matter internally to avoid regulatory action.
How long will the whole process take?
A consumer complaint can be resolved in 12-18 months at the district level. If it goes to appeal, add 6-12 months. A quashing petition in the High Court may take 4-8 months. Early legal intervention often shortens the timeline significantly.
Can we represent ourselves in the consumer forum?
Technically yes, but it's not advisable. Insurance contracts are dense, and the procedural rules are strict. A single missed deadline or procedural error can derail your case. An experienced advocate can anticipate the insurer's defences and present your case effectively.
This article is general legal information, not legal advice. Consult a qualified advocate about your specific situation.
Advocate Sudhir Rao, Supreme Court of India