PRABHAVATIBEN BACHUBHAI MEGHJI vs Life Insurance Corporation of India

THE appellant is the original complainant who had taken insurance for Rs. 50,000/- from the respondent Insurance Company. THE proposal was made and signed on 28.3.88, which was accepted by the Insurance Company. THE insured expired on or about 28.12.88 and, therefore, the present appellant wife of the insured made a claim before the Insurance Company. THE claim has been repudiated by the Insurance Company on the ground that there was suppression of material facts. THE learned District Forum raised the preliminary issue as to whether the District Forum had jurisdiction to hear this dispute. According to the District Forum the services rendered by the opposite party Insurance Company was not delayed or there was any deficiency. According to the District Forum the issue before it was whether the insured was suffering from disease at the time when the insurance was taken. THEre is a dispute between the insured and the Insurance Company regarding this aspect Relying upon the decision reported in I (1991) CPJ 3 (NC). in the case of Shri Umedilal Aggarwal v. United India Insurance Company Ltd., the District Forum came to the conclusion that for such a dispute a Civil Suit should be filed where the parties can produce evidence and examine the wit ness. In the aforesaid view of the matter the District Forum rejected the complaint on the ground that the complainant should file a Civil Suit for such type of dispute.

IF we look to the definition of service in Section 2(1)(o), service means service of any description which is made available to potential users. This definition is very wide to include service of any description. Even though the definition was wide enough to include service of every description the Legislature thought that certain facilities which a consumer is enjoying may fall short of the definition of service. With a view to include these facilities in connection with banking, financing, insurance, transport, processing, supply of electrical or other energy, board or lodging or both, entertainment, amusement or the purveying, a news or other information were specifically included in the definition of service. IF we look to these facilities included in the definition it is possible that some of them might not fall strictly within the definition of service because some of them might be lacking the service element. This definition of service in which the insurance is also included which is a social legislature wherein a person pays premium to cover the risk of his death has also been included in the definition. The legislature has, therefore, created a legal fiction and according to the known principles interpretation the fiction should be carried out to its logical end. In other words, if the insured of nominee is a consumer and if the Insurance Company is the provided of fictional service, then nonpayment of insurance amount would amount to deficiency in service.

It has now been settled by the Supreme Court in the case of Life Insurance Corporation of India v. G.M. Channabasemma, reported in AIR 1991 SC 392 that the burden to prove that the insured had knowledge that he was suffering from disease and that the same was not disclosed in the proposal form is upon the Insurance Company. We may also add that when insurance is taken the insured, in many cases, is examined by the medical practitioner of the choice of the Insurance Company and unless he certifies that the insured is fit to take the insurance the proposal is not accepted. Merely because the Insurance Company applied the mind and had bona fidely taken a decision will not absolve the Insurance Company from the liability to make payment of insurance amount. The Insurance Company must also produce evidence before the Forum to prove that the insured had disease prior to the proposal. In the instant case no evidence has been laid and the complaint has been dismissed on a preliminary ground of jurisdiction relying upon the aforesaid decision.

MR. B.Y. Mankad, the learned Advocate appearing on behalf of the appellant cites the latest decision of the Hon''ble National Commission in the case of Divisional Manager, L.I.C. v. Uma Devi reported in II (1991) CPJ 516 (NC). where similar question regarding jurisdiction was raised where one Chartered Accountant filed a proposal for insurance of his life with the Insurance Company on 27.2.88 for Rs. 1 lakh with double accident benefit. The proposal was accepted on 28.3.88 and the policy was issued. The insured had chest pain on 29.4.88 and was admitted in the hospital and on the next day i.e., on 30.4.88 he died of cardiac arrest due to myocardial infarction. His nominee Smt. Umadevi filed the claim for Rs. 2 lakhs which was repudiated by the Insurance Company and, therefore, she filed a complaint before the State Commission. The Insurance Company raised preliminary objection regarding jurisdiction and maintainability of the complaint The Hon''ble National Commission observed that "the definition specifically includes the provision of facilities in connection with insurance and no activity relating to provision of such facilities in connection with insurance has been made an exception. A consumer who suffers loss on account of deficiency in rendering service may approach Redressal Forum constituted under the Act for compensation. It is, therefore, well within the jurisdiction of a Redressal Forum to entertain such complaint and to adjudicate upon a dispute arising out of deficiency in service relating to provisions of facilities in connection with insurance and to grant appropriate relief if such deficiency is proved. We do not find any merit in this contention as the point is concluded against the appellant by the decision of this Commission dated the 28th July, 1989 in F.A. Nos. 3 & 4 of 1989 (Umedilal Agarwal v. United India Insurance Co. Ltd., II (1992) CPJ 451 (NC).)". It was then contended by the appellant Insurance Company that if any material fact of information is suppressed the contract is vitiated. Thus the Corporation has a right to avoid the liability arising out of a contract of Insurance according to the provisions contained in the policy of insurance. It was further contended that since the policy holder suppressed certain material facts, the claim was repudiated, the State Commission had no jurisdiction to entertain the complaint and adjudicate upon the dispute. The Hon''ble National Commission, therefore, observed that "Repudiation of a claim on mere allegation that there was suppression of facts by the insured at the time of filing the proposal cannot debar a forum constituted under the Act from adjudicating upon a dispute arising out of such a repudiation and to investigate whether such a repudiation was justified or not and to grant relief, if any, if such a repudiationtant amounts to a deficiency in service. This contention cannot be sustained in view of the decision of this Commission dated the 5th June, 1991 in the case of the Divisional Manager, Life Insurance Corporation of India, Andhra Pradesh v. Shri Bhavanam Srinivasa Reddy, II (1991) CPJ 189 (NC) wherein on a similar plea we have held that" .Any unilateral repudiation of the contract by the Insurance Company on the allegation that there had been a suppression of relevant material by the insurer at the time of taking the policy of insurance will not disentitle the policy holder from approaching the Redressal Forums constituted under the Act seeking an adjudication of the question whether the said repudiation was justified in law. In such a case the Consumer Dispute Redressal Forum has not Only the jurisdiction but also a duty to investigate into the question whether the charge made by the Insurance Company on the basis of which the alleged repudiation was made is well founded in fact, (emphasis supplied).

In the case referred above the insured died within three months from the date of the proposal. The nominee was awarded Rs. 2 lakhs and that finding has also been confirmed by the Hon''ble National Commission. We are of the opinion that the facts of this case are similar to the facts before the Hon''ble National Commission. On principle the National Commission observed that "when a consumer was seeking adjudication and challenging the repudiation being not justified in law the Commission observed that in such a case the Redressal Forum has not only jurisdiction but also a duty to investigate into the question whether the charge made by the Insurance Company to repudiate the claim was well founded". We are of the opinion that this decision applies to the present case.

HOWEVER, Mr. Dave, the learned Advocate appearing on behalf of me Insurance Company has cited a recent decision of the Hon''ble National Commission in First Appeal No. 153 of 1991 filed by Jagdish Prasad Dagar Bangalore v. Sr. Divisional Manager, LIC, decided on February 26, 1992 wherein considering the special facts of that case the Hon''ble National Commission has not reversed the judgment of the State Commission since they were convinced that the repudiation of the claim was not only bona fide but stated coherent reasons which have convinced the National Commission. To our opinion that case, though favours to some extent the Insurance Company cannot be said to be an authority on all points and in view of the decision which we have quoted, we are inclined to follow the decision of the National Commission stated above which has specifically stated that not only the Redressal Forum has jurisdiction but it is the duty of the Redressal Forum to decide the dispute. It may also be remembered that the Insurance has been specifically included in the definition of service and, therefore, the dispute which may arise between the consumer and the Insurance Company would be the dispute when the claim is rejected. If the claim is paid there is no question of raising any dispute. If the claim is wrongly rejected it certainly amounts to deficiency in service. If we accept the allegations which are not tested on the judicial anvil then according to our opinion we will be failing in our duty of adjudication of grievances of the consumer. It will be out of place to mention the provisions of Section 21(1)(b) of the Consumer Protection Act which reads as under: "to call for the records and pass appropriate orders in any consumer dispute which is pending before or has been decided by any State Commission where it appears to the National Commission that such State Commission has exercised a jurisdiction not vested in it by law, or has failed to exercise a jurisdiction so vested, or has acted in the exercise of its jurisdiction illegally or with material irregularity''".

Now, if the State Commission has a jurisdiction to hear the dispute and if it fails to decide the same telling the party to approach the Civil Court, to our opinion it might attract the provisions of the above Section. It means that it is the statutory duty of a Redressal Forum to decide all matters over which it has jurisdiction when a consumer prefers the Redressal Forums instead of the Civil Court. To our opinion, therefore, the provisions of Section 2(1)(o) are wide enough to include every type of dispute and merely because the claim has been bona fidely rejected will not take away the jurisdiction of the Redressal Forum. A bona fide decision can be erroneous also. We are, therefore, of the opinion that the District Forum has committed an error, in rejecting the complaint on a preliminary ground without entering into the merits. The only course open is to remand the matter to the District Forum. ORDER The appeal is allowed. The case is remanded to the District Forum holding that the District Forum has jurisdiction to hear the said dispute. The District Forum will decide the case on merits after giving full opportunity to both the parties to adduce evidence. Since the appellant has succeeded, the respondent will bear its own cost and cost of the appellant, which we quantify @ Rs. 300/-. Appeal allowed with costs.