Prabhavati Gangadhar Shanbhag vs Life Insurance Corporation of India and another

G.P. Shivaprakash, J.—One Anil Gangadhar Shanbhag died on December 10, 1980, at the age of 27 years as evidenced by the death certificate produced under memo dated July 19, 1981.

It appears, during his lifetime, he had taken six life insurance policies, the particulars of which are as follows :

Policy No. Date of commencement Sum assured (Rs.) 1. 40196022 21-9-1972 15,000 2. 40380276 28-12-1975 10,000 3. 40380277 28-12-1975 10,000 4. 40384001 18-3-1976 10,000 5. 50384083 20-3-1976 10,000 6. 40469599 10-8-1978 25,000

After his death, the petitioner, who is the mother of the deceased, preferred claims in respect of the amounts due under the aforesaid six policies issued by the respondent, together with the incidental benefits accruing thereon. The said claims were made by the petitioner on January 19, 1981. The respondent-Corporation, in several letters which are marked as annexures B to F, repudiated the claims made by the petitioner on the ground that the insured had suppressed certain material facts regarding his state of health when he took the policies. While repudiating the claims, the respondent-Corporation has stated that the deceased-insured had suffered from "a trial septal defect" for which he had consulted medical men and had taken treatment in a hospital and the same was not disclosed at the relevant time in his proposals for the insurance policies.

Sri Mandgi, learned counsel appearing for the petitioner, relying on the provisions in section 45 of the Insurance Act, 1938, submitted that the repudiation by the respondent is legally untenable. Section 45 reads as hereunder :

"Policy not to be called in question on ground of misstatement after two years. - No policy of life insurance effected before the commencement of this Act shall, after the expiry of two years from the date of commencement of this Act and no policy of life insurance effected after the coming into force of this Act shall, after the expiry of two years from the date on which it was effected, be called in question by an insurer on the ground that a statement made in the proposal for insurance or in any report of a medical officer, or referee, or friend of the insured, or in any other document leading to the issue of the policy, was inaccurate or false, unless the insurer shows that such statement was on a material matter or suppressed facts which it was material to disclose and that it was fraudulently made by the policy holder and that the policy holder knew at the time of making it that the statement was false or that it suppressed facts which it was material to disclose.

Provided that nothing in this section shall prevent the insurer from calling for proof of age at any time if he is entitled to do so, and no policy shall be deemed to be called in question merely because the terms of the policy are adjusted on subsequent proof that the age of the life insured was incorrectly stated in the proposal."

Relying on the above provisions, learned counsel contended that in view of the fact that more than two years had elapsed from the effective date of each of the policies as on the date when the insured died and claims were lodged by the petitioner, it is not open for the respondent to call in question the said policies on the ground that any statement made in the proposals for insurance or in any report of a medical officer or referee, or friend of the insured, or in any other document leading to the issue of the policies, was inaccurate or false. He submitted that the respondent has not shown that such statement was on a material matter or suppressed facts which it was material to disclose and that it was fraudulently made by the deceased insured and that he knew at the time of making it that the statement was false or that it suppressed facts which it was material to disclose.

The statement of objections on behalf of the respondent was filed during the course of hearing. In fact, in the first instance, in the absence of a statement of objections the petition was allowed on July 3, 1991, but later in the day at the request of learned counsel, Sri V. C. Brahmarayappa, appearing for the respondent the order already pronounced by me was recalled and the statement of objections of the respondent was received and the matter was heard again.

In the statement of objections, at the outset it is stated that the petitioner cannot enforce contractual obligations arising out of the policies, under article 226 of the Constitution of India. Besides, it is also stated that questions of facts arise for determination and, therefore, the writ petition is not maintainable.

The fact that the life of the deceased, Anil Gangadhar, was covered by the aforesaid six policies is not disputed. It is stated in the objections that the claims were made by one G.D.S. Shanbhag and not by the petitioner. From the correspondence annexures B to F, it appears that the said G.D.S. Shanbhag was none other than the father of the insured who died after lodging the claims. The petitioner is the mother of the insured. The insured died unmarried.

Learned counsel appearing for the respondent-Corporation first contended that since the claims preferred by the petitioners arise under the policies which are purely contractual in nature, this court cannot issue any direction to the respondent in exercise of its power under article 226 of the Constitution of India. This submission, in my view, is anachronistic. It is now well-settled that writs could be issued to public bodies, that too a statutory body like the respondent, to perform its statutory obligation even though in certain circumstances it is contractual in nature. In Gujarat State Financial Corporation Vs. Lotus Hotels Pvt. Ltd., the Supreme Court has observed thus (at page 852) :

"Viewing the matter from a slightly different angle altogether, it would appear that the appellant is acting in a very unreasonable manner. It is not in dispute that the appellant is an instrumentality of the Government and would be ''other authority'' under article 12 of the Constitution. If it be so, as held by this court in Ramana Dayaram Shetty Vs. International Airport Authority of India and Others, the rule inhibiting arbitrary action by the Government would equally apply where such corporation dealing with the public whether by way of giving jobs or entering into contracts or otherwise and it cannot act arbitrarily and its action must be in conformity with some principle which meets the test of reason and relevance.

Now if the appellant entered into a solemn contract in discharge and performance of its statutory duty and the respondent acted upon it, the statutory corporation cannot be allowed to act arbitrarily so as to cause harm and injury, flowing from its unreasonable conduct to the respondent. In such a situation, the court is not powerless from holding the appellant to its promise and it can be enforced by a writ of mandamus directing it to perform its statutory duty. A petition under article 226 of the Constitution would certainly lie to direct performance of a statutory duty by ''other authority'' as envisaged by article 12."

In the instant case, the respondent-Corporation, having accepted the proposals and issued the policies on the life of the deceased insured, cannot wriggle out of its commitments arising under the policies without valid reasons. I, therefore, reject the first contention of learned counsel that a writ petition is not maintainable to enforce the terms of the policies.

In the statement of objections, the respondent-Corporation while giving particulars of the policies issued to the deceased insured has stated, that an investigation conducted revealed that the deceased, Anil Gangadhar Shanbhag, even prior to submitting his proposals to the insurance company dated August 28, 1972, December 26, 1975, December 26, 1975, February 28, 1976, March 8, 1976 and August 3, 1978, was suffering from "a trial septal defect" for which he had taken treatment from a reputed hospital. According to the respondent, this fact was not disclosed by him in his proposals. It is asserted in the statement of objections that the insured gave "untrue answers to the relevant questions in the said proposals regarding his health". In the statement of objections, the respondent-Corporation has extracted the questions and the answers given by the insured contained in each of the proposals in respect of the policies and also the declaration made by the insured. It is also stated that the insured had not disclosed and had not answered the relevant questions regarding the declinature of his proposal for life insurance in the year 1971. The respondent-Corporation has further stated that the assured had made incorrect statements and withheld vital information from the respondent regarding his health at the time of submitting the proposals for the life insurance policies. At paragraph 10 of the statement of objections, the respondent-Corporation has stated thus :

"This respondent has indisputable proof to establish that the deceased was not keeping good health and took treatment from a reputed hospital before submitting his proposals for insurance. This respondent has also proof to show that the deceased life assured had withheld information regarding declinature of his proposal submitted to the Bangalore Divisional Office in the year 1971, when he submitted his proposal dated August 23, 1972, which resulted in policy No. 40196022."

In Mithoolal Nayak Vs. Life Insurance Corporation of India, the Supreme Court while considering the provisions of section 45 of the Insurance Act has laid down the law that for the application of the provisions of the second part of section 45, the following three conditions are to be fulfilled : (a) the statement must be on 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.

In the instant case, it is not pleaded in the statement of objections that the deceased insured had suppressed any material fact fraudulently and that the insured had known at the time of making the statement that it was false or that it suppressed facts which it was material to disclose. From the answers given by the insured in his personal statement it cannot be inferred that the deceased had knowledge of his ailment and that he deliberately suppressed the facts of his health and thus committed fraud on the respondent as sought to be made out by the respondent in its statement of objections. Besides, the respondent-Corporation has also not produced any reliable material to show that the deceased was as a matter of fact suffering from "a trial septal defect" for which he had taken treatment in a hospital.

In view of the fact that in cases of fraudulent suppression of material facts, the burden of proof rests heavily on the party alleging fraud, the respondent-Corporation cannot escape its obligations under the policies by merely stating that the deceased insured at the time of making proposals had suppressed material facts. I am, therefore, of the view that this petition has to succeed.

Accordingly, I allow this petition and direct the respondent-Corporation to honour its obligations in terms of the policies issued and settle the claims of all petitioner and make payment of all the amounts due under the respective policies after satisfying itself that the petitioner is the sole legal heir of the insured.

Learned counsel for the petitioner further submitted that the petitioner is entitled to interest in respect of the amounts due under the policies which has been wrongfully withheld by the respondent-Corporation. In this context, he relied on a decision in Dipashri Vs. Life Insurance Corporation of India and Others, The claim for the amounts due under the policies was made on January 19, 1981, as could be seen from annexure-A. In view of the wrongful retention of the amounts due under the policies, the respondent-Corporation will be liable to pay 15 per cent. interest on the amounts due in terms of the policies from January 19, 1981, till the date of payment.

Rule made absolute. The writ petition allowed with costs, Advocates'' fee Rs. 1,000.