Life Insurance Corporation of India vs Vegesina Bharathi

Kodandaramayya, J.—These two appeals arise out of two suits O.S. Nos. 106 of 1977 and 48 of 1978 on the file of the Subordinate Judge''s Court, Narsapur. O.S. No. 106 of 1977 is filed for the recovery of Rs. 22,880.62 being the balance of amount due on the life insurance policies, Exhs. B-2 and B-4, obtained by one Dr. Vegesina Viswanatharaju on his own life and the Plaintiff being the widow of the said policy holder. The suit having been decreed, the Defendant-Life Insurance Corporation (hereinafter referred to as ''the Corporation'') filed the appeal AS. No. 1006 of 1979. The other suit is filed by the Corporation for recovery of Rs. 46,867.01 being the principal and interest due on a registered mortgage deed dated 30.5.1974 executed by late Dr. Vegesina Viswanatharaju, (Dr. Raju for brevity), the husband of the Plaintiff in O.S. No. 106 of 1977 who is the first Defendant in O.S. No. 48 of 1978. The other Defendants in O.S. No. 48 of 1978 are children of Dr. Raju. The suit was dismissed. The suit having been dismissed, against that the Corporation filed AS. No. 1007 of 1979.

The Plaintiff in O.S. No. 106 of 1977 having given credit to the mortgage amount filed the suit for the balance of the amount under the two policies; in view of the contention of the Corporation that the claim is repudiated, the Corporation sued for the entire outstanding amount due under mortgage without giving any credit to the amounts payable under these two policies.

The sole question for determination in these two appeals is whether repudiation of the claim made by the Corporation is valid and hence the issues made in O.S. No. 106 of 1977 are relevant for the purpose of both the appeals. The issues are framed in paragraph 6 of the judgment of the trial court which held that there is no evidence to show that Dr. Raju was bedridden prior to 3.11.1975 or subsequent to 3.11.1975 and there is no evidence of his suppression of his ailment in his personal health statement issued on 7.9.1976 and 9.9.1976 and the repudiation of the claim made by the Corporation is not justified and consequently the Plaintiff is entitled to the outstanding amounts due after the mortgage amount is deducted.

In these appeals by the Corporation, Learned Counsel, Mr. J.V. Suryanarayana Rao, argued that these two policies having lapsed for non-payment of premium were revived on 7.9.1976 and 9.9.1976 as per the personal statement of the policy holder Dr. Raju and revival of the policy constitutes a fresh agreement and the contract of insurance is a contract of uberrima fides and admittedly Dr. Raju underwent treatment for heart attack which occurred on 3.11.1975 which is suppressed by him while securing the revival of the policy is void and the court below misdirected itself in thinking that there is no suppression of material facts by the policy holder for the revival and hence the claim by the legal representative of the policy holder is properly repudiated. He further submitted that proper legal approach is whether the contract is void because of suppression of material facts by the policy holder and not whether the repudiation is justified or not.

This is refuted by the Learned Counsel for the Plaintiff stating that the policies are taken by Dr. Raju on 14.9.1973 and 26.9.1973 and any repudiation beyond two years is governed strictly by Section 45 of the Insurance Act, 1938 (hereinafter called ''the Act'') and the burden is on the Corporation to show that the repudiation is justified on the grounds as envisaged under the said section and further the revival is strictly governed by the terms of the policy and production of health certificate is sufficient compliance and the doctor of the Corporation certified that Dr. Raju was keeping good health on the date of the revival and there is no evidence to show that Dr. Raju underwent any treatment for heart attack, and consequently the repudiation is wholly unjustified and the judgment of the court below is clearly sustainable.

In view of the above controversy the following questions arise:

(1) Whether two years'' period must be counted from the date of revival treating the revival as a fresh contract for the purpose of Section 45 of the Act?

(2) What are the conditions for revival of the policy and an: they complied with, for a valid revival?

(3) Whether revival of the policies is vitiated on any of the grounds envisaged by Section 45 of the Act?

Before examining these questions, let us see the factual background. We have notified as per Exhs. B-2 and B-4, the two policies commenced on 14.9.1973 and 28.9.1973. The evidence discloses that the said policy holder Dr. Raju fell suddenly sick on 3.11.1975. He was examined by DW 2, the Principal of Rangaraya Medical College, Kakinada and Physician of General Hospital at Kakinada. His evidence discloses that he examined on 3.11.1975 having gone to Bhimavaram where Dr. Raju was practicing and the subject had the complaint of heart attack and advised him to take treatment. He stated, "When I examined V. Viswanatharaju I suspected it may be heart attack. To err on the wrong side, we diagnose as heart attack and start treatment and only on observation we will rule out it is not heart attack". He admitted that he did not treat him. The fact that he examined him on being summoned is indisputable in view of the evidence given by him. The two letters a addressed to the Corporation, Exhs. B-13 and B-14, affirm that he went to Bhimavaram and examined Dr. Raju. The same facts were also disclosed by Exh. B-15, a report said to have been submitted by him in the prescribed form. In that, column 2 is pertinent. It states, "What was the nature and the duration of the disease as reported by the patient at the time of consultation." The answer is, "One day''s duration, pain chest." Column 5 speaks, "What was the history reported to you on the date of first consultation." The answer is, "Painchest of sudden onset." Column 6 speaks: "What was the diagnosis arrived at by you"? The answer is, "Acute myocardial Infarction." Column 10 is also pertinent. It states: "Did you treat the deceased for any ailment during the period from 9.9.1973 to 9.6.1976." The answer is negative. In the second letter he corrected the date.

DW 1 is the Higher Grade Assistant in Divisional Office, at Machilipatnam, who filed Exhs. B-5 and B-6, the personal statements regarding health said to have been signed by Dr. Raju. Exh. B-5 is in English and Exh. B-6 is in Telugu. Exh. B-5 bears the signature and is dated 7,9.1976. Exh. B-6 is dated 9.9.1976. But DW 1 could not say who handed over these statements and how the office received them. He also admitted that there is no separate application for reviving the two lapsed policies. He further submitted that a medical certificate was submitted by the insured along with false personal statements. But he could not say whether Exhs. B-5 and B-6 were received in the office personally or sent through post to the office by the insured. Now the other evidence in the case is that of DW 3. He is one of the approved doctors of the Corporation. As admitted by DW 1 he too did not state that the Exhs. B-5 and B-6 were taken by him. He stated that Dr. Raju was examined by him and he issued Exh. B-16, the medical report. He admitted in the cross-examination:

...I examined the heart and found everything very normal. All the data noted by me in sub-columns (a) to (d) in column No. 6 of Exh. B-16 are normal. Since I found the heart of Dr. V. Viswanatharaju was absolutely normal, I never felt any need to take ECG.

On this material, what was emphasised by the Learned Counsel for the Corporation is that in Exh. B-5, the health statement, column 3 (b) required him to state the answer under the following question. The question reads as follows:

Have you been required to take medical treatment? If so, give details (such as date and duration of illness, effect of treatment, etc. as also name and address of the doctor who treated you).

Against that the answer is given as ''no''. So the emphasis is that Dr. Raju is guilty of suppression of material fact and thus misled the Corporation in accepting the revival of the policy. It is a fresh contract and is void because of this misrepresentation. This is the factual background. Let me consider the questions now raised before me.

An insurance policy may lapse for a number of reasons, but the failure to pay the consideration due in the form of premium is one of the well-known grounds. Undoubtedly revival constitutes a new contract, but the policy may itself provide how the revival should take place. A passage in this connection from Halsbury''s Laws of England, Vol. 35,4th Edition, para 498 may be pertinent:

Revival as new contract: A revival of insurance policy operates as a new contract and the parties'' rights and liabilities, according to ordinary principles, do not begin until the new contract has started to run.

X X X X

It is not unusual to find that the terms and conditions are laid down for the revival and there is then no effective revival until the new terms and conditions are accepted and complied with. However, if the original contract laid down the basis on which, in the event of revival being desired, the insurers would grant this, it is doubtful whether the insurers can add further terms and conditions if and when reveal is desired.

Now the conditions of revival in this case are made as a part of the terms of the contract granting the policy. They are printed on the reverse of the policy which are in the following terms:

Revival of Discontinued or Lapsed Policies:

When the premium is not paid within the days of grace, the policy lapses, but may be revived during the lifetime of the life assured, but within a period of five years from the due date of the first unpaid premium and before the date of maturity, on the following terms:

(a) Within six months from the due date of the first unpaid premium without evidence of health on payment of the premium in arrears with interest rate of 0.63 per cent for each month or portion of a month reckoning from the due date of each premium paid late, subject to a minimum payment on this account of rupee one.

If revival is completed within fourteen days from the expiry of the days of grace a simple revival charge of rupee one only will be required, no matter what the amount of the premium may be.

(b) At any time after the first six months from the date of the first unpaid premium but not later than the expiry of a period of five years from the due date of the first unpaid premium on production of evidence of health and habits of the life assured (including a Medical Report on his life from the Corporation''s appointed Medical Examiner, whenever required by the Corporation, the fee for which must be paid in advance) to the satisfaction of the Corporation, and of evidence to show that there has been no adverse change in personal or family history or occupation and on payment of the premiums in arrears with interest thereon at the rate of I Vi per cent per annum compounding half-yearly reckoning from the due date of each premium paid late.

It is also necessary to look to Section 50 of the Insurance Act which reads as follows:

Notice of options available to the assured on the lapsing of a policy: An insurer shall, before the expiry of three months from the date on which the premiums in respect of a policy of life insurance were payable but not paid, give notice to the policy holder informing him of the options available to him unless these are set forth in the policy.

It is seen from this provision that there is an obligation on the part of the insurer to issue notice to the policy holder before expiry of the three months from the date for which the premium under the policy was payable but not paid unless they are set forth in the policy. In view of this, the conditions set forth above contemplate the mode of the revival of the lapsed policies. It is seen that this revival can be divided in two parts: (a) revival within six months from the date of the first unpaid premium, and (b) revival after six months, but not later than five years from the date of the first unpaid premium. We are now concerned with Clause (b) of the above conditions which envisages three things for the revival of the policy after the expiry of six months from the date of the first unpaid premium. Firstly, production of the evidence of health and habits of the life insured, secondly, evidence that there has been no adverse change in personal or family history or occupation, and thirdly, payment of arrears along with interest at the stipulated rate. It is admitted that these conditions alone should govern the revival of the policy once the policy is revived irrespective of the validity it relates back and the original policy comes into play. Once the revived policy comes into play, Section 45 of the Act is attracted and any repudiation is governed by Section 45 of the Insurance Act. Hence the first question to be considered is that the two years'' period must be computed from the date of the original policy or from the date of the revival. This question is no longer res Integra in view of the pronouncement of the Supreme Court in Mithoolal Nayak Vs. Life Insurance Corporation of India, . A similar contention was raised before the learned Judges stating that once the policy is revived the two years'' period contemplated u/s 45 must be computed from the date of the revival. Negative this contention, their Lordships observed thus:

Whether the revival of a lapsed policy constitutes a new contract or not for the other purposes, it is clear from the wording of the operative part of Section 45 that the period of two years for the purpose of the section has to be calculated from the date on which the policy was originally effected.

Thus I hold once the revival takes place the original policy comes into operation and Section 45 of the Act is clearly attracted in which event the burden is on the Corporation to show that the requirements of Section 45 are satisfied before successfully repudiating the contract. Hence the finding on point No. 1 is that two years'' period must be computed from the date of the original policy and not from the date of the revival of the policy.

When we came to the second question, we have already noticed the conditions for revival. It is not disputed that those conditions are not complied with, such as production of a certificate relating to health and the evidence of any change in family history and occupation and actual payment of arrears. Hence the conditions of revival are complied with and the revival has actually taken place and there is no non-compliance of the conditions of the revival. I find accordingly the second question.

The last and important question is whether such revival is vitiated, even though Section 45 applies to the facts of the case.

If Section 45 applies, the burden is on the Corporation to show that the conditions of Section 45 are attracted and the repudiation of the contract is valid. It is necessary to see the conditions on the repudiation of the contract as envisaged by Section 45. Three conditions for the application of second part of Section 45 are necessary, (a) the statement must be a material matter or must suppress facts which it was material to disclose; (b) the suppression must be fraudulently made by the policy holder; and (c) the policy holder must have known at the time of making the statement that it was false or that it suppressed facts which it was material to disclose. The crucial question is whether these conditions are fulfilled in the present case. The Learned Counsel for the Corporation states that Dr. Raju was himself a doctor and the contract of revival is a fresh contract and he deliberately suppressed the fact that he underwent treatment with DW 2 and his positive statement in Exh. B-5 in negative constitutes a suppression fraudulently made on a material matter. We have already noticed that what was required for a contract for revival is only the production of evidence of health or habits and there is no obligation on the part of the policy holder to make any statement or produce any other evidence for securing the revival of the policy. The conditions extracted above further envisage of his producing the evidence of health by himself whether required by the Corporation or not. So the crucial thing is the existing state of health on the date of the revival. It is indisputable that if the policy holder continues to pay premium even if he fell sick, the operation of the policy cannot be curtailed by any known principle of law or on the terms of the contract. If he commits default in payment of the premium and when the policy lapses, it is revived on complying with the conditions prescribed on the policy. The three conditions already envisaged are, the state of health on the date of revival, any change in his occupation and his factual payment of the arrears. The previous health prior to the date on which the revival actually takes place is not relevant. If the Corporation satisfies that on the date of revival his health is normal, he is entitled to revival irrespective of the fact whether he fell sick or not prior to the date of the revival.

If this is the requirement of law, DW 3 who has examined him and who gave the certificate Exh. B-16 categorically stated that he examined Dr. Raju and found everything is normal and he felt no necessity even to take ECG and hence I hold that the requirement of producing a certificate of a medical practitioner approved by the Corporation is satisfied and no further requirement of making any further statement is envisaged as per the conditions relating to revival of discontinued or lapsed policies. It is necessary to bear in mind that the evidence is not clear. Now Exhs. B-5 and B-6 have emanated. The Corporation could not say who filled up those statements, though the signature is that of Dr. Raju. Thus I hold that statements Exhs. B-5 and B-6 appear to be superfluous. It is the certificate given by the medical practitioner approved by the Corporation which is crucial. DW 3''s evidence is positive and he did not say that he was misled in giving the certificate because of any suppression of facts made by Dr. Raju. Under these circumstances, the negative answer given in the statement Exh. B-5 is not fatal to the claim and it cannot be described as a fraudulent suppression on the material question. Hence I hold that the production of certificate of health Exh. B-16 is not shown to be vitiated by any suppression of material facts by Dr. Raju and the Corporation failed to discharge the burden cast on it to show that the elements required u/s 45 are complied before it repudiated the contract.

Further, I may also add that a strict reading of column 3(b) in Exh. B-5 would only require the policy holder to state whether he underwent any treatment. The evidence of PW 2 is positive in stating that he did not treat Dr. Raju for the complaint of heart attack and the evidence of P Ws 1 and 2 disclose that Dr. Raju was carrying on his normal duties and he undertook a journey to a foreign country, though unfortunately met a sudden demise at Iran on 15.6.1977. So assuming that the statement in Exh. B-5 has any bearing on the effect of obtaining the certificate under Exh. B-16, I am of the opinion that it is not a material fact on which the policy holder can be said to be guilty of suppressing the same as the question required him to answer whether he underwent any treatment. It is not as if he was asked to state any disease that occurred to him between the period of lapsed policy and its revival. No doubt, column 3(a) states, "Have you suffered from any physical or mental illness, injury or-disability." The question is too vague to answer relating to a complaint like the present one which was not taken seriously. Even DW 2 says that to be on the right side, he advised him to take treatment for heart attack. Once we hold that the statement in Exh. B-5 is superfluous not warranted on the terms of revival and the certificate produced by Dr. Raju Exh. B-16 and the evidence of DW 3 do not warrant any conclusion that Dr. Raju was guilty of any suppression of fact in obtaining the report, it must be held that the revival of the policy is not vitiated on any grounds envisaged u/s 45 of the Act and the Corporation, has failed to establish any such suppression in securing the report from DW 3 under Exh. B-16. The medical report alone is the crucial thing for the purpose of revival of the policy and it envisages the solitary requirement of good health on the date of revival. Assuming that some health hazard is there prior to the revival, it is quite irrelevant and the Corporation is bound to accept the revival if a good condition of health is shown on the date when the revival is proposed. Hence I hold against the Corporation the point No. 3 also.

In the result, the appeals fail, and AS. No. 1006 of 1979 is dismissed with costs and AS. No. 1007 of 1979 is dismissed without costs.