Anand Kumar Kejariwal vs LIC of India

THIS revision petition has been filed by one Anand Kumar Kejariwal (hereinafter referred to as the ''Petitioner'') against the order of the State Consumer Disputes Redressal Commission, Uttar Pradesh (hereinafter referred to as the ''State Commission'') in favour of LIC of India and another (hereinafter referred to as the ''Respondents'').

THE facts of the case are that the Petitioner''s wife had taken two insurance policies on 28.3.1989 and 22.8.1990 respectively for Rs. 50,000 each in respect of her life from Respondent/Insurance Company. She paid insurance premium on the said policies which continued till she passed away on 12.10.1992. The petitioner being her nominee filed a claim which was repudiated by the Respondent/Insurance Company vide its letter dated 31.5.1995 on the following grounds: (i) that the life assured has given wrong age in both policies; and (ii) she had stated in both policies that her husband had taken two life insurance policies which were continuing whereas both policies had lapsed at the time of her filling up the proposal forms.

SINCE according to the Petitioner, the above did not amount to suppression of vital information, he filed a complaint with the District Forum on grounds of deficiency in service and requested that the Respondent/Insurance Company be directed to pay the Petitioner the sum assured on the two policies with interest @ 24% per annum from the date of death of his wife on 12.10.1992 till the date of actual payment, Rs. 25,000 on account of physical and mental agony, and Rs. 1000 as cost of litigation.

RESPONDENT/Insurance Company, on the other hand justified repudiation of the claim on the ground that since the insurance policy is a contract between the insuree and the Life Insurance Corporation, giving wrong information in respect of two important issues were adequate grounds for repudiation of the claims.

THE District Forum after hearing both parties accepted the complaint on the grounds that giving wrong information about the age does not amount to suppression of a material fact and further there is a provision in the policy certificate under the heading "Proof of Age" that in case wrong information is given about the age the insurer could charge extra premium by way of penalty from the insured and the policy itself would not become void and ineffective on this ground. Regarding the wrong information pertaining to the validity of her husband''s policies, the District Forum concluded that both the policies had become two years old at the time of death of the life assured and as per Section 45 of the Insurance Act, 1938, if a policy becomes two years old, the insurer cannot question the validity of the policy on the ground that a wrong statement was made in the proposal form and vital information was suppressed unless there is evidence to the effect that alleged wrong information/suppression was fraudulent. In the instant case, there is evidence that the proposal forms were filled up by the agent of the Respondent/Insurance Company and there is no evidence to show that when the insuree got her proposal form filled-up it was within her knowledge that the two policies of her husband had lapsed. Thus, the policy was wrongly repudiated and the District Forum, therefore, directed the Respondent/Insurance Company to pay full insurance money of the two policies to the Petitioner along with bonus if any within two months of the order failing which it would be required to pay interest on the entire amount @ 15% per annum.

AGGRIEVED by this order, Respondent/Insurance Company filed an appeal before the State Commission. The State Commission while accepting the appeal did so only in respect of the wrong statement made by the life assured regarding the two policies taken by her husband. However, one of the Members gave a dissenting opinion upholding the orders of the District Forum. The operative part of the order of the State Commission is as follows: "For the purpose of deciding this case the issue of wrong mentioning of age is being discarded because even if the stand of L.I.C. of wrong mentioning of age is accepted the difference will be 2/3 years which could have been taken care of in view of the provisions of Section 45 of the Insurance Act as interpreted by Hon''ble Supreme Court in the case of Mithu Lal. The only surviving point is the allegation of LIC that there was wrong answer given to the question mentioned in proposal form whether there was any policy on the life of husband, the answer given was that both policies of her husband were in force. On inquiry it was found that the answer was incorrect. Both the policies stood lapsed much before the policies were taken by Smt. Bina. It has to be noted here that the contract is between proposer and LIC on the basis of statement made in the answers to the questions mentioned in the proposal form. A contract can be obtained only by truthful declaration because at the end of the proposal form there is column that all the declarations made in proposal form are true to the knowledge of the proposer. Nothing has been brought to our notice on behalf of the complainant that the statement made in the proposal form was correct. LIC''s allegation is that the statement made regarding two policies of her husband was disclosed in the repudiation letter as also in the written statement filed by LIC in complaint proceedings. There was much stress on behalf of Sri M.H. Khan that dishonesty alone could have been the circumstance to denounce the allegations that wrong answers were given. A wrong answer if bona fide should be of no ill consequences and the contract should not be vitiated. He wanted to rely upon the decision of Hon''ble Apex Court in the case of Asha Devi. Suffice to say that the entire exercise of Sri M.H. Khan is futile for the reason that both the policies were actually lying lapsed and husband knew of the fact that his policies stood lapsed. Sri M.H. Khan has further argued that there is nothing to prove that the life policies of her husband were already lapsed. This contention of Sh. M.H. Khan has no legs to stand upon. The contract therefore, stood vitiated. The District Forum''s view on this point is erroneous and has to be set aside."

Hence, the present revision petition.

LEARNED Counsel for the parties presented their arguments in support of their respective cases. Learned Counsel for Petitioner stated that the State Commission had erred in accepting the appeal of the Respondent/Insurance Company on the grounds that material information was knowingly and wilfully suppressed by the insuree. In fact, so far as the issue of giving wrong information about the age is concerned, the State Commission in its order has itself observed that the issue of wrong mentioning of age is being discarded. Regarding incorrect information about the validity of her husband''s policies, the District Forum had clearly concluded that the blame for this should not rest with the insuree since the insurance form was filled up by the agent of the Respondent/Insurance Company. No evidence has been produced to conclude that the insuree was aware of the fact that the two policies taken by her husband had lapsed and that she had willingly suppressed this information. Further, since the policy was already two years old, Section 45 of the Insurance Act, 1938 would apply as also the judgment of Hon''ble Supreme Court in Mithoolal Nayak v. LIC of India, (1962) 2 SCR 571. Therefore, the present revision petition deserves to be accepted.

LEARNED Counsel for the Respondents on the other hand stated that the maxim of ubberimae fides was clearly violated by the insuree since she was aware of her correct age and also that her husband''s policies were lying in a lapsed condition, with the sole intent to deceive the Respondent/Insurance Company in order to induce it to grant her the insurance policies. These are material facts which could have influenced the judgment of a prudent insurer in fixing the premium or even granting the insurance policy. The revision petition is, therefore, devoid of merits and is liable to be dismissed.

WE have considered the averments made by the Counsel for both parties as well as the evidence on record. So far as suppression of age by the insuree is concerned, it is a fact that even the Respondent/Insurance Company does not consider it suppression of a "material fact" because there is a clear policy guideline that in such cases there is no need to cancel the policy and the matter can be resolved by taking a higher premium as penalty from the insuree. This fact has also been fairly conceded by the State Commission in its order. So far as suppression of information regarding the status of her husband''s policy is concerned, the District Forum which is a Court of fact finding has on the basis of credible evidence concluded that there was no wilful suppression of information by the insuree and the insurance form had in fact been filled up by the agent, one K.C. Singh, of the Respondent/Insurance Company. There is also no evidence that the insuree was aware that the two policies of her husband had lapsed. In view of this fact and because two years had expired from the date on which the policy was effected, as per provisions of Section 45 of the Insurance Act, 1938, the policy could not be questioned on grounds of mis-statement.

IN view these facts, we conclude that the Respondent/Insurance Company was not justified in repudiating the claim of the Petitioner. We, therefore, set aside the order of the State Commission and uphold the order of the District Forum. The revision petition is accepted with no order as to costs. Revision Petition allowed.