State Consumer Disputes Redressal Commission
Br.Manager, Lic Of India & Ors. vs Om Prakash Kumawat & Ors. on 13 May, 2009
BEFORE THE CONSUMER DISPUTES REDRESSAL COMMISSION, RAJASTHAN, JAIPUR. APPEAL NO: 1463/2008 1. Br.Manager, Life Insurance Corporation of India, Sikar. 2. Divisional Manager, Jeevan Prakash, Bhawani Singh Road, Post Box no. 65, Jaipur through Manager (Legal) Opposite parties -appellants Vs. 1. Omprakash Kumawat r/o Nada ki dhani, Raghunathgarh, Distt. Sikar. Complainant- respondent 2. Subhash Dikshit, Agent LIC of India, Sikar. Opposite party- respondent Date of judgment 13.5.09 Before: Mr.Justice Sunil Kumar Garg- President Mr.G.S.Hora -Member Mr.Prashant Mantri counsel for the appellants Mr.Sanjay Verma counsel for the respondent no.1 2 JUDGMENT
BY THE STATE COMMISSION, ( PER HON. MR.JUSTICE SUNIL KUMAR GARG, PRESIDENT ) This appeal has been filed by the appellants which were opposite parties no. 1 & 2 before the District Forum against order dated 15.7.08 passed by the District Forum, Sikar in complaint no. 337/06 by which the complaint of the complainant was allowed in the manner that the appellants were directed to pay a sum of Rs. 1 lac the amount of the LIC policy alongwith interest @ 9% p.a. w.e.f. 31.3.06 within a period of two months and if the amount was not paid within two months the interest @ 12% p.a. would be charged and complaint against respondent no.2 who was opposite party no.3 before the District Forum was dismissed.
2. It arises in the following circumstances-
That the complainant respondent no.1 had filed a complaint against the appellants as well as respondent no.2 before the District Forum, Sikar on 7.12.06 inter alia stating that his wife Bimla Devi now deceased had taken a life insurance policy for a sum of Rs.1 lac through respondent no.2, the agent of the LIC bearing policy no. 195045107 on 4.5.05 and at the time of taking the policy, the fact of taking another two policies bearing no. 195033890 and 195026260 were mentioned to the agent of the LIC Sh. Subhash Dikshit, respondent no.2. It was further stated in the complaint that the deceased had died on 2.11.05 because of pain in stomach and after the death of the deceased claim was preferred by the complainant 3 respondent being the husband and nominee of the deceased before the office of the appellants but that claim was repudiated by the appellants through letter dated 31.3.06 on the ground that while taking the policy in question bearing no. 195045107 on 4.5.05, the fact of taking earlier two policies bearing no. 195033890 and 195026260 was not mentioned though it was necessary and since these facts were not disclosed by the deceased in her declaration form on 4.5.05 at the time of taking the policy, therefore, the deceased was guilty of suppression of material facts regarding taking of earlier policies prior to this policy. Thereafter the present complaint was filed.
A reply was filed by the appellants on 17.2.07 and they have taken the same pleas which were taken by them in the repudiation letter dated 31.3.06. It was further stated in the reply that in the colm. 9 of the proposal form, the fact of taking earlier policies should have been mentioned and since that was not mentioned in the proposal form, therefore, it was a case of suppression of material facts on the part of the deceased and had the deceased would have mentioned the fact of earlier policies, the policy in question has not been issued and it was prayed that claim was rightly repudiated by the appellants as and complaint be dismissed.
After hearing the parties the District Forum, Sikar through impugned order dated 15.7.08 had allowed the complaint inter alia holding that -
(i) That the present policy was taken by the deceased on 4.5.05 and prior to that a policy bearing no. 4 195026260 was taken by the deceased on 28.12.04 and another policy bearing no. 195033890 was taken on 28.4.05 and this fact was not mentioned while taking the present policy on 4.5.05 and further since the deceased had died, therefore she was the best person to have said that she had mentioned the fact of earlier policies to the agent and in her absence this fact could not be found established but the fact that her husband, the complainant respondent no.1 had told about the two earlier policies to the agent of the LIC, respondent no.2, that fact could not be found established and further if for the sake of argument, the fact of taking earlier policies were not mentioned by the deceased, even then the present case could not be treated as a a case of suppression of material facts on the part of the deceased.
(ii) That the appellants were not justified in repudiating the claim of the complainant respondent and it had amounted to deficiency in service on the part of the appellants.
Aggrieved from that order dated 16.7.08 passed by the District Forum, Sikar , this appeal has been filed by the appellants.
3. In this appeal the main contention of the learned counsel for the appellants is that before taking policy in question, the deceased had taken two other policies and since these facts were not mentioned by the deceased deliberately in colm. 9 of the proposal form dated 4.5.05 , therefore, she was guilty of 5 suppression of material facts and thus on that ground the claim of the complainant respondent was rightly repudiated by the appellants through letter dated 31.3.06 and the District Forum had committed serious error and illegality in decreeing the claim of the complainant respondent. Hence the impugned order could not be sustained and liable to be quashed and set aside and this appeal deserves to be allowed.
4. On the other hand, the learned counsel appearing for the respondent no.1 has supported the impugned order of the District Forum .
5. We have heard the learned counsel for the appellants as well as for the respondent no.1 and gone through the entire materials available on record.
6. There is no dispute on the point that the deceased had taken a life insurance policy for a sum of Rs.1 lac through respondent no.2, the agent of the LIC bearing policy no. 195045107 on 4.5.05
7. There is also no dispute on the point that the deceased had taken two other policies bearing no. 195026260 on 28.12.04 and policy bearing no. 195033890 on 28.4.05 but at the time of taking the policy in question ,the fact of taking earlier two policies was not mentioned in column 9.
8. There is also no dispute on the point that deceased had died on 2.11.05.
9. There is no dispute on the point that the claim of the above 6 mentioned policy in question was repudiated by the appellants through letter dated 31.3.06 on the grounds mentioned therein.
10. A bare perusal of the proposal form clearly reveals that it was filled in up by the agent Subhash Dikshit, respondent no.2 and a bare perusal of the signatures of the deceased Bimla reveals that she could not be said to be an literate lady and it appears that she was only in a position to put her signatures.
11. Thus, in the facts and circumstances just narrated above, the question for consideration is whether repudiation of claim of the complainant by the appellants was justified or not or whether findings of the District Forum decreeing the claim could be sustained or not and further the question whether non-mentioning in col.9 of taking earlier policy could be treated in the present case as suppression of material facts on the part of the deceased or not.
On suppression of material facts
12. It may be stated here tht it is the fundamental principle of insurance law that utmost good faith must be observed by the contracting parties and good faith forbids either party from non-disclosure of the facts which the parties known. The insured has a duty to disclose and similarly it is the duty of the insurance company and its agents to disclose all material facts in their knowledge since obligation of good faith applies to both equally and in this respect, the decision of the Hon'ble Supreme Court in M/s.Modern Insulators Ltd. Vs. Oriental Insurance Co. (AIR 2000 SC 1014) may be referred to.
13. The onus probandi, in cases of fraudulent suppression of 7 material facts rests heavily on party alleging fraud namely the insurer. In this respect, the decision of the Hon'ble Supreme Court in LIC Vs. Smt. G.M.Channabasemma (1996 (III) CPJ 8 (SC) may be referred to where it was held that the burden of proving that the insured had made false representation and suppressed material facts is undoubtedly on the LIC of India. Furthermore, mere concealment of some facts will not amount to concealment of material facts and if there is fraudulent suppression of material facts in the proposal, the policy could be vitiated otherwise not.
14. Suppression of fact must be a conscious operation of the giver of the answer which he knowingly did not disclose.
15. The Hon'ble National Commission in National Insurance Co. Ltd. Vs. Bipul Kunda (2005 CTJ 377 (CP) (NCDRC) ) has held that for repudiating a claim of an insured, it is for the insurer to show that a sttement on a fact, which was material for the policy, had been suppressed by the insured and that statement was fraudulently made by him/her with the knowledge of the falsity of that statement.
16. It may further be stated here that even if the death takes place within two years, mis-representation, if any, that should be material in the sense of having some effect upon life expectation whether direct or indirect and if it is found material, that defence could be taken by the Insurance Company, not otherwise.
17. The word "misrepresentation" means suggestio falsi, in matter of substance essentially material to the subject, whether by acts or by words, by manoeuvres, or by positive assertions or 8 material concealment (suppressio veri) whereby a person is misled and damnified.
18. The word "fraud" means a conduct either by letter or words, which induces the other person, or authority to take a definite determinative stand as a response to the conduct of former either by word or letter. In this respect, the decision of the Hon'ble Supreme Court in Ram Preeti Yadav Vs. UP Board of High School & Intermediate Education and ors. (JT 2003 (Supp.I) SC 25 ) may be referred to.
19.. It is well settled that misrepresentation itself amounts to fraud in some cases.
20. The word "misconduct" means an act or conduct in the nature of a breach of trust or an act resulting in loss to other party.
21. The word "suppression of fact" envisages a deliberate or conscious omission to state of fact with the intention of deriving wrongful gain. In this respect, the decision of the Hon'ble Supreme Court in Collector of Customs Calcutta Vs. Tin Plate Co. of India Ltd. ( (1997) 10 SCC 538 ) may be referred to.
Insurance Company is State with in article 12 of Constitution of India
22. The Hon'ble Supreme Court in Biman Krishna Bose Vs. United India Insurance Co. Ltd. & ors. reported in III (2001) CPJ 10 (SC) had observed in the following manner-
(i) That the Insurance Companies are "State"
within the 9 meaning of Article 12 of the Constitution of India and they are expected to act fairly and reasonably.
(ii) That the Insurance Companies are required to satisfy the requirement of reasonableness and fairness while dealing with the customers. They must not take any irrelevant and extrneous considertion while arriving to a decision. Arbitratiness should not appear in their actions or decisions.
23. In this respect we may further add that agents of LIC are bound to disclose full information relevant and advantageous to the insured. The purpose of creating the Corporation is to serve the interest of consumers.
24. Further in insurance practice generally insurer's agent approaches proposers for insurance and gets the proposal form filled up and signed by them with a declaration that the answers are true and shall be the basis of the contract.
25. Apart from that generally the declaration form is filled in up by the agent of the LIC in presence of the insured and if some untrue answers are made in the proposal and insured signs it without the knowledge of the implications, in such a case insured could not be put at fault and the policy would be enforceable against the insurer.
Misrepresentation or fraud by agent
26. Section 238 of the Contract Act provides that misrepresentation made or frauds committed by agents acting in 10 the course of their business for their principals, have the same effect on agreements made by such agents as if such misrepresentations or frauds had been made or committed by the principals.
27. The application of Section 238 of the Contract Act requires that to make the principal liable, the misrepresentation or fraud must be committed by the agent in the course of business or employment i.e. falling within the scope of authority of the agent.
28. A principal is liable for the agent's fraud acting within the scope of his authority, whether the fraud is committed for the benefit of the principal or for the benefit of the agent.
29. Keeping in mind the above legal position, if the facts of the present case are examined in broad prospectived it clearly appears that Mr.Subhash Dikshit , respondent no.2 was the agent of the appellants LIC at the time when the declaration form Ex. D-1 was got filled in up and a bare perusal of the declaration form it clearly appears that the same was got filled in up by the agent himself and the deceased Bimla had put her signatures at three places and if the signatures of the deceased are examined, it appears that she was not literate lady at all but she was illiterate and the manner in which she had put her signatures further reveals that she could only put her signatures and when this being the position to know from such a lady what was written in the proposal form could not be expected and if in the above circumstances in colm. 9 of the proposal form in which the fact of earlier policies should have been mentioned was found blank, for that it could not be said that she had fraudulently not mentioned the fact of taking earlier two policies.
1130. Not only this, a bare perusal of colm.9 of the proposal form reveals that it was crossed and thereafter it was written ' not applicable' and it was filled in up by the agent and from that point of view also the deceased could not be held responsible for non-mentioning the fact of earlier policies in column 9 of the proposal form.
31. It may further be stated here that from the record it is very much clear that after taking the policy and before her death the deceased had never been admitted in any hospital, meaning thereby the death of the deceased was a sudden death and when the death of the deceased was a sudden death, in such a case it could not be said that the deceased was aware that she would die in near future and from that point of view also it could not be said that the deceased had knowingly and fraudulently not mentioned in colm. 9 the fact of taking earlier two policies. Therefore, if the fact of earlier policies was not mentioned by the deceased in subsequent policy, it would not amount to suppression of material facts on the part of the deceased and the LIC could not escape from its liability on the ground of suppression of material facts.
32. When onus in cases of fraudulent suppression of material facts rests heavily on the party alleging fraud,viz the insurer,therefore,that burden has to be discharged by the LIC and in the present case the appellants LIC had failed to discharge that burden and,therefore,the stand taken by the appellants LIC in repudiating the claim of the complainant respondent no.1 under the policy could not be accepted.
33. It may further be stated here that since respondent no.2 was the agent of the LIC and if any mistake was committed by him 12 during his course of employment, for that LIC could be responsible for the act of its agent and from that point of view also, since the deceased was an illiterate lady and if something was found missing in the proposal form, for that it could not be said that it was due to any misrepresentation or fraud by the deceased on the LIC.
34. Thus,non-mentioning of the fact of taking earlier policy in the declaration form by the deceased would not amount to suppression or concealment of material fact or misstatement in real sense and,therefore,the appellants LIC were not justified in repudiating the claim of the complainant respondent no.1 on the ground of suppression of material facts and thus the District Forum was right in decreeing the claim of the complainant respondent no.1.
Life Insurance Corporation is a social welfare institution
35. The Hon'ble Supreme Court in the case of Life Insurance Corportion of India Vs. Anuradha (II (2004) SLT 1065= III (2004) CLT 5 (SC)= (2004) 10 SCC 131, has observed that the Life Insurance Corporation is a social welfare institution, more so when life insurance has been nationalised and the service is not available in the private sector. Thus it could be said that the institution of LIC has been established as a welfare measure and similarly the C.P.Act,1986 is also a benevolent welfare statute for the protection of consumers. Taking into that consideration also the repudiation of the claim of the complinant respondent no.1 by the appellants could not be justified.
1336. Thus it is held that the present case was not a case of suppression of material facts on the part of the deceased or complainant respondent no.1 and,therefore, the appellants were not justified in repuditing the claim of the complainant respondent no.1 on ground of suppression of material facts regarding taking earlier policy and the District Forum was right in decreeing the claim of the complainant respondent no.1.
37. For the reasons stated above, it is held that the present case was not a case of deliberate suppression of material facts on the part of the deceased and appellants were not justified in repudiating the claim of the complainant respondent no.1 on the ground of suppression of material facts and the appellants have repudiated the claim of the complainant-respondent no.1 without any basis and on wrong assumption and in an arbitrary manner and in view of this, the findings of the District Forum decreeing the claim of the complainant respondent no.1 are liable to be confirmed as they are based on correct appreciation of entire materials and evidence available on record and they do not suffer from any basic infirmity, illegality or perversity and this appeal deserves to be dismissed so far as merit of the case is concerned.
On point of rate of interest
38. In this case the District Forum has awarded interest @ 12% p.a and in our considered opinion, the rate of interest awarded by the District Forum appears to be on higher side and looking to the entire facts and circumstances of the case, we deem it proper to award interest at the rate of 9% p.a. instead of 12% p.a. from the date of filing of the complaint and to that extent, the impugned order of the District Forum is liable to be modified.
14Accordingly, this appeal filed by the appellants on merits is dismissed. However, the appellants LIC would pay interest on the decreetal amount at the rate of 9% p.a. instead of 12% p.a. from the date of filing of the complaint and to the above extent on point of interest the impugned order of the District Forum,Sikar dated 15.7.08 stands modified accordingly.
(G.S.Hora) (Justice Sunil Kumar Garg) Member President