Ratan Chakraborty vs Life Insurance Corporation Of India & Ors

Ravi Krishan Kapur, J

This petition is filed challenging an order dated 9 March, 2016 passed by the Senior Divisional Manager of the Life Insurance Corporation. The short point involved in this petition is whether the respondent authorities were justified in suspending the second insurance policy of the petitioner being a Jeevan Saral Policy bearing No.429209715 dated 28 December, 2011 on the ground of material suppression and non-disclosure of material facts.

The brief facts of the case are that the petitioner purchased a policy being policy No.426922836 on 12 August, 2008 for an assured sum of Rs.50 lakhs. The petitioner continued with the said policy and was regularly making payment of the premium for approximately 5 years. Ultimately, the petitioner surrendered this policy on 25 February, 2013. Before surrendering the first policy the petitioner purchased another policy for an assured sum of Rs.2 crores on 20 December, 2011. This policy was to mature in December 2027. On 4 August, 2014 the respondent authorities issued a letter to the petitioner, inter alia, informing the petitioner that the second policy being policy No.429209715 was temporarily suspended on the grounds that (i) a clarification was sought for not disclosing the extra premium which the petitioner had been directed to pay in respect of the first policy being policy No.426922836; and (ii) a request was made by the respondent authorities for the petitioner to carry out a liver profile test at a particular medical centre and that was not complied with (iii) a request made by the respondent authorities to provide details of the elevated liver profile of the petitioner which was also not complied with by the petitioner. The= petitioner  replied  to  the  said  letter  on  17  November,  2014  requesting  the respondent authorities to recall and withdraw the letter dated 4 August, 2014. On 24 November, 2014 the respondent authorities further taking notice of the petitioner's letter reminded the petitioner that he had failed to comply with the requirements contained in the earlier letter dated 4 August, 2014. The petitioner replied to the letter dated 24 November, 2014 but failed to carry out the medical test as requested by the respondent authorities. Moreover, the petitioner alleged that he was not responsible for what had been filed in the form and blamed the agent for filling up the wrong details. Further correspondence ensued between the parties and ultimately the petitioner filed a writ petition being WP 1252 (W) of 2016, inter alia, complaining of non-consideration of his representations dated 17 November, 2014 and 25 August, 2014 respectively made to the respondent authorities. By an order dated 8 February, 2016 a Learned Single Judge of this Hon'ble  Court  directed  that  the  representations  filed  by  the  petitioner  be considered and the same be disposed of in accordance with law. Pursuant to the order dated 8 December, 2016, the Senior Divisional Manager of the respondent authorities considered the same of the petitioner and rejected the representation of the petitioner primarily on the grounds that the petitioner had failed to (a) undergo a liver function test as directed and; (b) that there was non-disclosure of material facts by the petitioner in obtaining the second policy and (c) further that the petitioner had not complied with the conditions contained in the letter of the respondent authorities dated 4 August, 2014 within the specified time period or at all. By the impugned order, it was further held that, the petitioner had concealed material facts before the respondent authorities and the policy of the petitioner had been justifiably suspended.

Counsel appearing on behalf of the petitioner strenuously contended that there was no suppression of any kind whatsoever by the petitioner. He submitted that the respondent authorities in suspending the second policy had acted perversely and without application of mind. He further submitted that from the affidavit-in-opposition filed on behalf of the respondent authorities it would be evident that the petitioner in his application form pertaining to the second policy had  categorically  stated  that  he  had  obtained  the  previous  policy  bearing No.426922836 and accordingly there was no question of any kind of suppression.

Counsel appearing on behalf of the respondent authorities submitted that the impugned order passed by the respondent authorities was passed in accordance with law and after appreciation of all the facts and circumstances of the case. He submitted that the respondent authorities were entitled under Section 45 of the Insurance Act, 1938 to repudiate the second insurance policy on the ground of suppression of material facts and non-disclosure of relevant materials. He relied on the decision reported in (2008)1 SCC 321 (PC Chako and Another vs. Chairman of Life Insurance Corporation of India) to support the proposition that the respondent authorities were justified in revoking or suspending the insurance policy within the stipulated period on the ground of fraudulent disclosure on the part of the policy holder.

Now with regard to the challenge by the petitioner to the impugned order dated 9 March, 2016 passed by the respondent authorities rejecting the representations of the petitioner and justifying the suspension of the second policy. It is an indisputable position that in the particulars furnished by the petitioner  whilst  obtaining  the  second  policy  the  petitioner  had  at  serial No.12A(b) answered the question "accepted with extra premium or lien - No".

"The crux of the dispute between the parties rests on the answer given by the petitioner to this question. It is an admitted position that the earlier policy being No.426922836 which the petitioner was enjoying had been obtained after paying extra premium. This fact was undeniably suppressed by the petitioner when he furnished the information for obtaining the second policy. It is well settled that life insurance has a requirement of social security and is a contract uberrima fides and every material fact must be disclosed otherwise there may be good grounds for cancellation of the policy.

As has been held in All India General Insurance Co. Ltd. and Ors. vs. S.P. Maheswari reported in AIR 1960 Mad 484:

"One great principle of insurance law is that a contract of insurance is based upon utmost good faith uberrima fides; in fact it is the fundamental basis upon which all contracts of insurance are made. In this respect there is no difference between one contract of insurance and another. Whether it be life or fire or marine the understanding is that the contract is uberrima fides and though there may be certain circumstances from the peculiar nature of marine insurance which require to be disclosed, and which do not apply to other contracts of insurance, that is rather an illustration of the application of the principle, than a distinction in principle. From, the very fact that the contract involves a risk and that it purports to shift the risk from one party to the other, each one is required to be absolutely innocent of every circumstance which goes to influence the judgment of the other while entering into the transaction.

Mutual trust and confidence is the basis upon which the parties proceed. The insurer trusts to the representations of the assured, and proceeds upon the confidence that he does not keep back any circumstance in his knowledge, so as to mislead the insurer into a belief that the circumstance does not exist, or to induce him to estimate the risk as if it did not. On the other hand, the assured relies upon the honesty of the insurer for the communication of every fact which he ought to know before he invests his money and the non-disclosure of which will affect his judgment, as for instance, where the insurer grants a policy where he will never, run any risk thereunder.

This duty to disclose not only exists at the time of entering into the contract but continues during its subsistence and after the risk has happened. Brownlie v. Campbell, (1880) 5 AC 925 HL, per Jessel M.R. London Assurance v. Mansel, (1879) 11 Ch D 363 at p. 367; Per Lord Mansfield, Carter v. Boehm, (1766) 97 ER 1162; Susiladevi v. Oriental Govt. Security Life Assurance Co., Ltd., AIR 1948 Mad 182."

This principle of law has been repeatedly reiterated by all Courts in India including the Hon'ble Supreme Court in Life Insurance Corporation of India & Ors. vs. Asha Goel and Ors. reported in AIR 2001 SC 549 at paras 12, 13 & 14 and Oriental Insurance Company Limited vs. Mahendra Construction reported in AIR 2019 SC 2182 at paras 11 to 17.

In the instant case on a perusal of the impugned order, I find that the respondent authorities had repeatedly asked the petitioner to carry out a liver function test as far back as on 4 August, 2014. This request was further reiterated in the letter dated 24 November, 2014 and subsequently in further correspondence. The petitioner chose not to opt for a liver function test. It is the contention of the petitioner that the liver function test in 2014 would not have given the same result at the time of entering into the policy i.e. 3 years ago. I am of the view that this was not a justifiable reason in not complying with the request of respondent authorities for the petitioner undergoing a medical test at the cost of the respondent authorities. I also find that it has been categorically and justifiably held in the impugned order that in answering question No.12A(b) the petitioner had deliberately and intentionally suppressed the true and correct facts and deliberately provided misleading information as to whether the previous policy had been accepted with extra premium or not. Information regarding whether the petitioner had to pay extra premium in respect of the first policy was a material fact. The mere disclosure of a previous insurance policy did not discharge the obligation which was cast on the petitioner. To a very specific query the petitioner was undeniably under a bounden duty to disclose that he had to pay extra premium in respect of the previous policy. Both these facts appear to have  weighed  heavily  with  the  Senior  Divisional  Manager  in  passing  the impugned order. It has been specifically held in the impugned order that it was with the sinister purpose of avoiding extra premium which the petitioner would have had to pay that the petitioner chose not to furnish the correct information.

Thus, there was concealment of material facts and mis-statement on the part of the petitioner in filing his proposal form pertaining to the second policy.

I am of the view that all the relevant facts were well-considered and there were adequate and justifiable reasons resulting in the impugned order dated 9 March, 2016. I, therefore, find no reason to interfere with the impugned order. In view of the aforesaid, I find no merit in the instant writ petition and dismiss the same. However, there will be no order as to costs.

WP 8080(W) of 2016 stands disposed off accordingly.