BANGALORE: The Karnataka High Court has said that insurance companies cannot invoke the forfeiture clause and hold back the amount due to a policyholder in case he or she decided not to continue with the policy.

The court said, "In the event of the policyholder being unable to continue with the policy by paying the premium, the amount paid to the insurance company by the policyholder shall be refunded without invoking the forfeiture clause and without waiting for the expiry of the maturity period."

Condition void

Dictating the judgment, Justice Huluvadi G. Ramesh said that the condition of the forfeiture clause was void and without any basis.

The court was responding to a petition by two residents of Hubli, Huchappa and Irappa, who had challenged the decision of the Hubli branch of LIC to cancel their policy, as they were unable to pay the premium.

The petitioners said that the LIC branch had asked them to undergo a medical test if they wished to renew their insurance policy.

It had also told them that the amount due to them would be forfeited.

Allowing their petition, Justice Huluvadi Ramesh said that Article 21 of the Constitution, as well as Articles 38 and 39 under the Directive Principles, made it clear that the condition imposed by insurance companies that policy-holders would have to forfeit the amount due to them if they did not pay the premium for three years was detrimental to the interests of the common man.

It also violated the spirit of the Constitution, he said.

He said such a practice amounted to amassing of public wealth.

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