Allahabad High Court
Life Insurance Corporation Of India ... vs Permanent Lok Adalat And Another on 16 May, 2018
Author: Sangeeta Chandra
Bench: Sangeeta Chandra
HIGH COURT OF JUDICATURE AT ALLAHABAD AFR Reserved on 23.11.2017 Delivered on 16.05.2018 Case :- WRIT - C No. - 32505 of 2012 Petitioner :- Life Insurance Corporation Of India (LIC) And Another Respondent :- Permanent Lok Adalat And Another Counsel for Petitioner :- Manish Goyal Counsel for Respondent :- Sanjay Kumar Srivastava,Anand Prakash Srivastava,Ashok Mehta,Ashok Mishra,S.C.,S.P. Lal,Santosh Kr.Srivastava Hon'ble Mrs. Sangeeta Chandra,J.
1. This writ petition challenges the order passed by Permanent Lok Adalat (Respondent No. 1) on 18.04.2012 in PLA Case No. 1 of 2011 by majority of the Members of Respondent No. 1. A dissenting opinion was delivered by the Chairman of Permanent Lok Adalat which has been filed as Annexure - 3 to the writ petition and reliance has been placed on the said dissenting opinion by the counsel for petitioner, Ms. Ankita Jain holding brief of Mr. Manish Goyal during the course of argument.
2. It has been submitted by Ms. Ankita Jain that the wife of respondent No. 2 (who is an advocate in Azamgarh), namely, Smt. Chandrakala Srivastava took a Life Insurance Policy of Rs.50,000/- bearing Policy No. 295338500 on 15.05.2009 (hereinafter to referred as first Policy) and another Life Insurance Policy for Rs. 1 Lakh bearing Policy Number 295339162 dated 25.05.2009 (hereinafterto referred as the second policy). Smt. Chandrakala Srivastava died after 15 days of taking the first policy and just after six days of taking the second policy.
3. The respondent No. 2 is the nominee. He submitted a claim under the two policies for Rs.1,50,000/- on 25.06.2009. Since the life assured i.e. Smt. Chandrakala Srivastava died within a short period of taking out these insurance policies, an inquiry was instituted by the petitioners in which it came out that Smt. Chandrakala Srivastava had cancer of the Gall Bladder and was admitted in Sir Sunder Lal Hospital, BHU, Varanasi on 01.09.2009 and was operated by Dr. Ajay Khanna on 06.04.2009 and was discharged on 19.04.2009. While the claim submitted by the respondent No. 2 was under investigation, the respondent No. 2 repeatedly filed applications for release of Rs.1,50,000/- under the two policies, which applications remained pending as final decision was to be taken by the Zonal Office. In the claim that was submitted by the Respondent No. 2, it was mentioned that Smt. Chandrakala Srivastava had no prior history of any ailment and she died all of a sudden after stomach ache.
4. When all facts were investigated and it came out that there was a deliberate misrepresentation by the wife of respondent No. 2 while making the proposal, the petitioners repudiated the claim on 19.09.2011. The order of repudiation of claim on 19.09.2011 has been filed as Annexure - 6 to the writ petition. A copy of the claim and inquiry report dated 30.10.2010 has been filed as Annexure - 7 to the writ petition.
5. Ms. Ankita Jain has further submitted that in the meantime the respondent No. 2 had already submitted a claim before the Permanent Lok Adalat, Azamgarh on 26.05.2011 registered as PLA Case No. 401 of 2011. The petitioners filed their objections/written statements on 18.07.2011 and also filed an affidavit of Dr. Jai Prakash Srivastava, the medical examiner who had examined Smt. Chandrakala Srivastava while submitting the proposal, and also filed an affidavit of Manager (Legal), Divisional Office, Gorakhpur. The Respondent No. 2 filed a rejoinder affidavit on 04.08.2011.
6. In the objections filed by the petitioner a specific objection was taken of non exhaustion of statutory remedy and lack of jurisdiction with the Permanent Lok Adalat in such matters. Additionally, an Application was moved before the Respondent No. 1 to summon records from the Chief Medical Superintendent, Sir Sunder Lal Hospital, BHU, Varanasi and to ensure attendance of the Chief Medical Superintendent for giving evidence. Personal service of summons on the doctor at BHU Hospital was also affected by the petitioners on 27.08.2011. But instead of appearing before the Respondent No. 1 the Medical Superintendent of the Hospital made all documentary evidence available i.e. Bed Head Ticket, Discharge Certificate, Details of Medical Treatment, Medical Prescriptions etc. duly certified by him, which were brought on record by the petitioner before the Respondent No. 1 by means of filing an affidavit on 30.08.2011.
7. Ms. Ankita Jain has argued that the majority of the Members constituting the Respondent No. 1 granted relief of payment of Rs. 2 Lakhs along with interest @ 10 per cent per annum in favour of respondent No. 2 while imposing a penalty of Rs.6,000/- to be paid equally by the Life Insurance Agent and the Medical Examiner.
8. It has been argued by the learned counsel for the petitioner that when the order of repudiation of claim on 19.09.2011 was brought on record, the Permanent Lok Adalat ceased to have any jurisdiction in the matter and the respondent No. 2 should have been relegated to the statutory remedy as per Life Insurance Circular dated 30th of May, 2011, which required the filing of an Appeal against the order of Divisional Office or the Circle Office, as the case may be, within a period of three months (instead of earlier one month). A copy of the Circular dated 30th of May, 2011 has been produced in Court which is kept on record.
9. Ms. Ankita Jain while fleshing out the argument relating to statutory remedy argued that the respondent No. 2 should have approached the Zonal Office in this case as the claim was of less than Rs. 2 Lakhs and the Permanent Lok Adalat overstepped its jurisdiction. Without setting aside the order of repudiation dated 19.09.2011 which was brought on record but was not subject to challenge before the PLA, it directed the payment of Rs.1,50,000/- on the two policies and Rs.50,000/- as compensation for harassment and Rs.6,000/- as penalty. According to her, the matter before the PLA had become infructuous since the repudiation order dated 19.09.2011 had been passed during the pendency of the claim and the repudiation order had not been challenged. In fact, this objection made by the counsel for petitioners at the time of argument before the Respondent No. 1 was not even dealt with in the impugned Award. Since there was a complete absence of jurisdiction available with the Respondent No. 1 after repudiation of claim, the Award made was a nullity and is liable to be set aside on this ground alone.
10. On merits of the case, the learned counsel for petitioner has submitted that a contract of Insurance is a contract of utmost good faith and violation of this itself dis-entitles the proposer from taking the benefit of policy. She has referred to several judgments of the Supreme Court and of various High Courts to say that a contract of insurance is entered into in an utmost good faith (UBERRIMA FIDES) and it was the duty of the insured to bring to the notice of the Insurer that she had undergone an operation for cancer of Gall Bladder one month before making of the proposal.
11. Moreover, according to the petitioner it shall be presumed that since the insured had undergone an operation and was hospitalized just one month before taking of the two policies, she could not have forgotten such a serious illness altogether while filling up the form/proposal. The effect of non-disclosure and misrepresentation would entitle the Insurance Company in repudiating its liability.
12. The learned counsel for the petitioners has placed before this Court relevant paragraphs of judgment rendered in the following:-
All India General Insurance Co. Limited and another Vs. S.P. Maheshwari: AIR 1960 Madras 484.
Life Insurance Corporation of India Vs. SOSAMMA PUNNAN: 1992 (74) Company Cases 218 (Kerala).
13. In All India General Insurance Company (supra) the Madras High Court has referred to English Judgments and English Commentaries and traced out the history of the Insurance since the same was initially introduced in Europe in the fifteen hundreds. The aim of insurance is in the nature of a provision against loss or damage. Its aim is to provide against dangers which beset human life and dealings. Those who seek it endeavour to avert disaster for themselves by shifting possible losses on to the shoulders of others, who may be willing for a pecuniary consideration, to take the risk thereof. Those who grant insurance undertake the risk with a view to obtain a fair amount of profit upon their investments. It is therefore a business proposition. Both the insurers and the insured, enter upon a common understanding in a business-like way.
14. The precise definition of a contract of insurance has nowhere been stated, but, generally, it may be defined as a contract whereby, for a stipulated sum called premium, one party undertakes to indemnify another against loss from certain specified risks.
15. One great principle of insurance law is that a contract of insurance is based upon utmost good faith (UBERRIMA FIDES). 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.
16. The principle underlying utmost good faith (UBERRIMA FIDES) is that the insurer trusts 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 which would increase the risk does not exist, or induce him to wrongly estimate the risk. It is upon the honesty of the insured for the communication of every fact which the insurer ought to know before he invests his money and the non-disclosure of which will affect his judgment.
17. In practice, modern insurers obtain their information through a number of carefully drawn questionnaires. They are commonly referred to as "forms", one of which is intended to be completed by the proposer who is seeking to insure the life of another or of himself, which he must answer completely in his own handwriting, and which should be signed by the life insured. There are other forms also for completion of which the medical examiner is appointed by the insurer who is a duly qualified medical professional.
18. The Madras High Court while dealing with the history of insurance and life insurance particularly and the forms/proposals made by the life insured and the insurer, has observed that in all such matters it is usually the agent who is personally interested in putting through a particular transaction and he assists the proposer or life insured to answer correctly the printed questions. The medical examiner, on the other hand, is supposed to know the form he is filling up and also instructed to explain the questions which are largely of technical medical significance, to the life insured, so that he may fully comprehend the nature of information being provided by him to the medical examiner. This form is usually concluded with a declaration that the life insured has hidden nothing within his knowledge, and has not made any incorrect statement, and the life insured is required to sign it along with the medical examiner. The Madras High Court in paragraph - 24 has observed thus:-
"(24) To sum up, in policies of life insurance there is an understanding that the contract is Uberrima fides and no party is allowed to play hide and seek but each will have to place his cards on the table; and even mental reservations of any kind are not allowed. This Uberrima Fides is a two-way traffic. Contracts of insurance, being contracts of faith, misrepresentation by either party will constitute good ground for avoidance."
19. The Madras High Court in its judgment has referred to two English Commentaries and also some case laws to further hold that it does not matter whether the omission to communicate a material fact arises from intention, or indifference, or mistake, provided the insured knew of the fact in question. The insurer can and may obtain a policy where the insured knowingly misrepresents his state of health, but it does not require the insured to disclose more than he actually knows. The insured is not bound to disclose facts which he does not know, or facts which are commonly in the knowledge of insurer himself.
20. Looking into the facts of the case Madras High Court had found the husband of the insured was a heavy drinker and suffered from cirrohosis of liver and was hospitalized on several occasions earlier and therefore, the All India General Insurance Company was justified in repudiating the contract.
21. Similarly, in Life Insurance Corporation of India Versus Sosamma Punnan (supra) the Kerala High Court has observed that under Section 45 of the Insurance Act the period of two years starts from the date when the policy was originally effected and if the life insured dies after the said period, the Life Insurance Corporation of India can repudiate the policy only if it is shown that all three conditions enumerated in second part of Section 45 are satisfied, namely, (a) the statement 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 that it was false, or that he suppressed facts which it was material to disclose. Where the death of life assured occurs before the expiry of two years from the date of issuance of the policy, it would be open to the Life Insurance Corporation to avoid its liability by showing that the statement in the proposal form was inaccurate as to material facts, thereby vitiating the contract. Any fact which would influence the judgment of a prudent insurer in fixing the premium or determining whether he will take the risk, is a material fact. It is not necessary for the insurer in such a case to establish that suppression was fraudulently made by the policy-holder or that the policy- holder must have known at the time of making the statement that the statement was false or that it suppressed facts which it was material to disclose.
22. In the aforesaid case of Sosamma Punnan (supra) the life insured was suffering from diabetes and this fact was known to him even prior to the proposal and he used to consume alcohol also. The plaintiff was the widow of one Punnan Kuruvilla and after his death on 6th of August, 1981 she made a claim which was repudiated and the repudiation was upheld by Kerala High Court placing reliance upon a judgment rendered by the Supreme Court in Mithoolal Nayak Vs. Life Insurance Corporation of India: AIR 1962 SC 814. In the decision of Mithoolal Nayak the Supreme Court held that it is clear from the words of Section 45 that the period of two years had to be calculated from the date on which the policy was originally effected, and since the insured had taken out two policies and had died within two years of the second policy, but the second policy related back to the initial one, the LIC could succeed only if it could show that all three conditions mentioned in the second part of the Section 45 are satisfied.
23. The Kerala High Court relied upon English Case Law in Scaton v. Heath, (1899) I.Q.B. 782, 792 and observed "......In such contracts, as one party is in a very strong position to know the material facts and the other party is in a very weak position to discover them, the former is under a duty not only to abstain from making false representations of material facts, but also to disclose, in the utmost good faith (UBERRIMA FIDES), such material facts as are within his knowledge to the other party."
24. Moreover, the Kerala High Court has also referred to independent commentaries like Pollock & Mulla's Indian Contract Act and Specific Relief Act, 10th Edition wherein at Page 98, 'Material fact' has been defined as "Any fact the knowledge or ignorance of which would materially influence an insurer in making the contract or in estimating the degree and character of risks in fixing the rate of premium is a material fact." If the insured has knowledge of a fact which others cannot ordinarily have, then he should not indulge in making a suggestion which is false.
25. Referring to English Commentaries and Case Law it has also been observed that the insured is bound not only to give a true answer to the question but also spontaneously to disclose any fact exclusively within his knowledge which it is material for the insurer to know. The terms of the policy would clearly show that the statements made as to the state of health of an insured in the proposal form and the personal statement of policy holder were the basis of the contract between the parties and if there was suppression or misrepresentation in regard to the health of the insured, that would vitiate the contract of insurance and would enable the insurer to repudiate the contract.
26. It has also been argued by Ms. Ankita Jain that the Permanent Lok Adalat did not make any effort for conciliation and therefore, it could not adjudicate the matter on merits. It is settled law that only when conciliation between the parties fails, that matter can be adjudicated on merits. No such effort was made.
27. Mr. Anand Prakash Srivastava, representing the respondent No. 2 has read out several passages of the majority opinion to repudiate the arguments made regarding the maintainability of the claim before the PLA. He has pointed out from the impugned Award that the claim was made by the respondent No. 2 after the death of his wife on 25.06.2009 and he continued making applications thereafter on various dates reiterating such claim. It was only when he did not hear anything from the petitioners that the claim was filed by the respondent No. 2 on 26.05.2011. After notices were issued objections were filed on 18.07.2011 and pleadings were completed and even orders passed on applications moved by the petitioners for summoning the medical records from Chief Medical Superintendent of Sir Sunderlal Hospital, BHU, Varanasi that the repudiation of claim on 19.09.2011 was resorted to by the LIC.
28. The counsel for respondent No. 2 has also pointed out from the impugned Award the various dates on which efforts were made for conciliation. He has also referred to the minority opinion of the Chairman of PLA where he has enumerated dates on which efforts were made for conciliation.
29. It has been argued that the last such effort made for conciliation was made on 30.08.2011. It was thereafter the repudiation of claim was made by the LIC on 19.09.2011. By 19.09.2011, all pleadings had been exchanged and evidence also summoned and the matter was ripe up for hearing. The arguments had been heard on 06.09.2011 also. The learned counsel for the respondent No. 2 has pointed out that from perusal of the impugned Award itself it is evident that after the efforts for conciliation had failed, the matter was heard on merits and evidence recorded of the officers appearing on behalf of the LIC and oral statement taken and cross examination of respondent No. 2 was also done.
30. It has been settled by the Hon'ble Supreme Court that when efforts at conciliation failed, then, the matter could be adjudicated on merits by the Permanent Lok Adalat. Thus, the contention of petitioners that the Permanent Lok Adalat was not competent to decide the dispute on merits on failure of settlement between the parties cannot be accepted. From the judgment relied upon by the learned counsel for the petitioners also viz. United India Insurance Company Limited Versus Ajai SinhA and another: 2008 (7) SCC 454 and Interglobe Aviation Ltd. Versus Satchidanand : (2011) 7 SCC 463 it is evident that the Supreme Court has observed that the observations made in LIC Versus Suresh Kumar, 2011 (7) SCC 491 to the effect that the Permanent Lok Adalat has no jurisdiction or authority vested in it to decide any lis as such between the parties even where the attempt to arrive at an agreed settlement between the parties has failed, refers only to Permanent Lok Adalat organized under Section 19 of the Act and should not be confused with Permanent Lok Adalats constituted under Section 22B (1) of the Act.
31. The Supreme Court in paragraphs 32 and 37 of the said judgement as in Interglobe Aviation Ltd. (supra) referred to two types of Lok Adalats. The first Lok Adalat is constituted under Section 19 of the Act which has no adjudicatory functions or powers and which discharges purely conciliatory functions. The second is a Permanent Lok Adalat established under section 22B(1) of Legal Services Authority Act to exercise jurisdiction in respect of public utility services, having both conciliatory and adjudicatory functions. A direction was issued to State Legal Services Authorities and High Courts to ensure that the nomenclature of Lok Adalats established under Section 19 and Section 22B (1) is changed. Section 19 Lok Adalats may be referred as "Continuous Lok Adalats" and the Lok Adalats constituted under Section 22-B(1) should be referred to as "Permanent Lok Adalat."
32. The arguments of the learned counsel for the petitioners, therefore, with regard to the respondent No. 1 exceeding its jurisdiction and of not acting in accordance with the procedure prescribed in attempting the conciliation first, or that the matter before the PLA being not open to be considered on merits as repudiation of claim has come on 19.09.2011 are rejected.
33. With regard to the merits of the controversy, the counsel for the respondent No. 2 has argued that in the impugned Award it has been observed that Dr. J.P. Srivastava, the Medical Officer, had signed on the proposal. The formalities were completed by the Agent selling the policy including those columns that were to be filled by the Medical Examiner or the life insured, in his own handwriting. In the first inquiry that was held after the death of wife of the resondent No. 2, the Assistant Branch Manager, Azamgarh, Shri Chandra Shekhar Prasad had himself gone to the village from where the respondent No. 2 hailed. He had inquired from at least five persons and thereafter submitted a report that on the basis of evidence that the claim seems to be correct and the matter was forwarded for appropriate orders to be passed by the Competent Authority.
34. It was also submitted that there was a contradiction in the dates mentioned in the Bed Head Ticket regarding the date of admission in Sir Sunder Lal Hospital, BHU, Varanasi and the Discharge Certificate issued therefrom. All the medical prescriptions/certificates including the Bed Head Ticket and Discharge Certificate were not signed by the Doctor who treated Smt. Chandrakala Srivastava. The photostat copies of medical papers were verified only by the Chief Medical Superintendent. Therefore, such papers could not have been relied upon and were rightly rejected by the Respondent No. 1. The Medical Examiner, Dr. J.P. Srivastava, had filed an affidavit saying that although he had examined Smt. Chandrakala Srivastava, she was a lady and her whole body was covered from her neck downwards and therefore, he could not say whether she had been operated upon, unless this fact was mentioned by Smt. Srivasatava herself. Smt. Chandrakala Srivastava herself did not disclose that she was undergoing treatment for cancer and had also been hospitalized and operated upon. Therefore, the Medical Examiner had no opportunity or means to know the correct state of health of the deceased.
35. The counsel for respondent No. 2 has argued that the Medical Examiner admitted in his affidavit that he did not examine the deceased carefully before signing the medical report and therefore, in the impugned Award Rs.3,000/- as penalty has also been imposed by the respondent No. 1 on the doctor. In fact, in the impugned Award there is a mention that any medical professional who has some experience much less, even an ordinary person, can make out from the mere looking at the face of a patient of cancer who is about to die that such a person is critically ill and would die soon. It has therefore been presumed by the Respondent No. 1 that the doctor did not physically examine Smt. Chandrakala Srivastava at all. The deceased was never presented for physical/medicalexamination but the medical report was signed on the insistence of the Agent just to meet the target of selling life insurance policies by the Branch Office of the LIC.
36. The counsel for the respondent No. 2 has placed reliance upon the following judgments :-
(1). LICI Vs. Ambika Prasad Pandey: AIR 1999 Madhya Pradesh, 13;
(2). LICI Vs. Vankadaru Koteswaramma: 2003 ACJ 234;
(3). LICI Vs. District Permanent Lok Adalat and another : 2006 ACJ 100;
(4). Dr. Ambika Kumary and others Vs. State of Kerala and others: AIR 2012 Kerala 16;
(5). Smt. Meena Sahu Vs. Life Insurance Corporation of India and another: 2006 (2) ADJ 568 (All) DB; and (6). Executive Engineer, Electricity Distribution Division - II, Gorakhpur Vs. Chairman, Lok Adalat, Gorakhpur: 2015(3) JCLR 862 (All).
37. In LICI Vs. Ambika Prasad Pandey (supra) the Madhya Pradesh High Court has observed that the allegation of suppression of material facts by the insured has to be proved by the Insurance Company. The Insurance Company having failed to prove that the insured was suffering from serious ailment before the date of taking the policy and he had knowledge of such serious ailment while filling up the questionnaire, the claim of the applicant for recovery of policy amount from the Insurance Company was rightly decreed.
38. In LICI Vs. Vankadaru Koteswaramma (supra) the Andhra Pradesh High Court has observed that under Section 45 repudiation of claim by the LIC on the ground that the insured did not disclose that he was suffering from diabetes at the time of making the proposal could not be accepted as the insured was examined by a panel doctor and he did not find any traits of diabetes that the LIC had failed to produce the panel doctor who examined the insured at the time of acceptance of the proposal was held to be conclusive of the fact that the panel doctor had only submitted the medical report to oblige the insurance agent. The finding of the Trial Court was therefore confirmed by the High Court.
39. In LICI Vs. District Permanent Lok Adalat and another (supra) the Rajasthan High Court again emphasized the duty of the LIC to cross-check the information furnished by the person intending to take the policy. The failure to detect correct information was a lapse on the part of the LIC and the LIC could not wriggle out of its obligation to pay of the claim on the ground that the insured did not disclose the material information regarding his health at the time of taking of the policy. It was observed that the policy-holder was no doubt legally bound to disclose about his illness or ailment but the Corporation was also equally and legally bound to cross-check the information furnished by the person intending to take a policy through the doctor authorized by the Corporation. If they failed to do so, it is a lapse on their part while granting the policy, and after the death of policy-holder such plea raised by the Corporation deserves to be rejected as unjustified. The Corporation has itself to blame and not the assured.
40. In Dr. Ambika Kumary (supra) the Kerala High Court has dealt with the provisions of Legal Services Authorities Act, 1987 and Section 22 in particular. Section 22-C (8) confers power on the Permanent Lok Adalat to decide a dispute on merits if the parties fail to reach an agreement under Sub Section (7), and if the dispute does not relate to an offence. A similar observation has been made by a Coordinate Bench of this Court in Executive Engineer, Electricity Distribution Divisioin - II (supra).
41. In Smt. Meena Sahu Versus Life Insurance Corporation of India and another (supra) a Division Bench of this Court has observed in more or less similar case where the proposal form was not filled by the deceased in his own handwriting and the Medical Examiner in his confidential report enclosed with the policy in question had stated that the insured revealed no signs or symptoms of suffering from any physical disorder, more particularly of jaundice, that the LIC could not wriggle out of the contract by saying that it was void or voidable at its option. This Court observed that the husband of the petitioner no doubt had died within two years of the taking of policy and on an inquiry it was found that he was suffering from various liver disorders such as cirrhosis, recurrent jaundice episodes and hepatic encephalopathy (liver enlargement). In such cases Section 45 of the Insurance Act was not applicable. The matter was governed by Section 19 of the Indian Contract Act. The Hon'ble Division Bench in paragraphs - 8, 9, 10 and 11 has observed thus:-
"8. The deceased having died within two years of taking Life Insurance Policy the provisions of Section 45 of the Insurance Act are not applicable to the present case. The matter is governed by Section 19 of the Indian Contract Act, which runs as under:
"19. When consent to an agreement is caused by coercion, fraud or misrepresentation, the agreement is a contract viodable at the option of the party whose consent was so caused.
A party to a contract, whose consent was caused by fraud or misrepresentation, may, if he thinks fit, insist that the contract shall be performed, and that he shall be put in the position in which he would have been if the representations made had been true.
Exception.-If such consent was caused by misrepresentation or by silence, fraudulent within the meaning of section 17, the contract, nevertheless, is not voidable, if the party whose consent was so caused had the means of discovering the truth with ordinary diligence.
Explanation - A fraud or misrepresentation which did not cause the consent to a contract of the party on whom such fraud was practised, or to whom such misrepresentation was made, does not render a contract voidable."
9. "Misrepresentation" as defined under Section 18 of the Contract Act means and includes-
(1) the positive assertion, in a manner not warranted by the information of the person making it, of that which is not true, though he believes it to be true;
(2) any breach of duty which, without an intent to deceive, gains an advantage of the person committing it, or any one claiming under him, by misleading another to his prejudice, or to the prejudice of any one claiming under him;
(3) causing, however innocently, a party to an agreement, to make a mistake as to the substance of the thing which is the subject of the agreement.
10. The Corporation has repudiated the claim on the ground of suppression of material facts. There is no allegation of playing fraud. The pleas taken by the respondent Corporation for avoiding its liability under the policy in question are that the deceased made a declaration in the proposal form that the statements and answers contained therein were true in every particular and that the assured suppressed the material facts about his health. The learned counsel for the respondents submitted that the assured having suppressed material facts about his health, the policy is void. It was argued that acceptance of the proposal was recommended by the doctor and agent because of misstatements and suppression made by the assured. The learned counsel for the respondent in support of his contentions relied on the decision in Mithoolal Nayak v. L.I.C. Of India, AIR 1962 SC 814.
11. In the instant case, the proposal form was not filled in by the deceased in his own handwriting. The deceased had no educational qualification. The deceased being a man of 36 years was supposed to be a healthy person. The medical examiner's confidential report enclosed with the policy in question reveals that no sign or symptoms of suffering from any physical disorder more particularly of jaundice were found in the medical examination of life assured by the doctor of the Corporation nor the Life Insurance Corporation has produced any evidence to show that there was misrepresentation of facts which if known earlier would have stopped the Corporation from issuing the policy. The medical examiner of the Corporation having examined the assured and submitted a favourable report regarding his health, the Life Insurance Corporation cannot wriggle out of the contract by saying that it was void or voidable at its option. It is not a case where the L.I.C. of India would not have consented to the contract of the insurance but for misrepresentation or suppression of material facts. The facts of the present case are distinguishable from Mithoolal Nayak's case (supra). In the said case the policy holder had taken policy a few months before his death. In the present case there is no evidence that the policy holder was treated for any serious ailment short time before the taking of the policy. The L.I.C. of India, its development officer and other staff including the medical practitioner who has examined the person insured owe a responsibility to the person to whom they sell insurance and they are presumed to be acting in the interest of the Corporation. The L.I.C. of India cannot disclaim the liability to make payment of assured amount under the policy No. 310786680 for the acts and omissions of its development officer or medical practitioner appointed by it to examine the deceased before accepting the proposal." (emphasis supplied)
42. Having heard learned counsel for petitioner and respondent respondent No. 2, I have also perused the impugned Award and minority opinion rendered by Chairman of Permanent Lok Adalat.
43. Certain facts are undisputed between the parties with regard to taking out of two policies by the deceased Smt. Chandra Kala Srivastava on 15.05.2009 and 25.05.2009 for Rs. 50,000/- and Rs. 1 lac respectively and the insured having died on 01.06.2009. It has also come on the record in the affidavits filed before the Lok Adalat that Smt. Chandra Kala Srivastava was a house wife with no independent income of her own. The first policy was taken through a different agent namely Smt. Archana Yadav, Insurance Agent and the second policy was taken through a different agent namely Shri Rajendra Prasad, Insurance Agent. There was no mention in the proposal form of the second policy about the first policy being taken just ten days ago. Immediately before her death, the respondent No. 2 had shifted his wife to his village and it has come on record that the first inquiry was held by the Assistant Branch Manager after visiting the village of the respondent No. 2 and not the locality/mohalla in the city of Azamgarh where the respondent No. 2 and his family usually resided. The first report that was submitted was on the basis of the oral evidence of the villagers and the Gram Pradhan that they did not have any knowledge of any illness of Smt. Chandra Kala Srivastava and she was not taken to any doctor but was informed by the respondent No. 2 that he had no time to take his wife to a doctor as she had suffered from a stomach ache on 01.06.2009 and died the same day. The death certificate was issued by one Dr. S.N. Singh (BMS) with his Clinic at Ghaghariya Bazar, Azamgarh on 29.08.2009 which states that Smt. Chandra Kala Srivastava, the deceased, had died before the said doctor had reached the house of the deceased and had been informed by her husband that she died at around 5:30 hours.
44. It has also come on record in oral statement of respondent No. 2, paper No. 38Ga-1, that the deceased was sick for two days and complained of stomach age before her death. There was certainly opportunity available with the respondent No. 2 to consult a doctor before the deceased died. It has also come on record that when the medical report was made by Dr. J.P. Srivastava on 22.05.2009 he had stated that he had examined Smt. Chandra Kala Srivastava who was a lady, without the help of female nurse or midwife and on consent being given by her that she could be examined by a male doctor in absence of a female attendant. It has also come on record that the doctor in his affidavit before the respondent No. 1 had stated that the deceased was covered from neck to toe and he could not have, therefore, derived any knowledge of the operation for repromed on her stomach, which was covered with the clothes at the time of examination.
45. The medical papers that were submitted by the petitioner before the Permanent Lok Adalat were duly certified to be true copies by the Chief Medical Superintendent, though the doctor who had operated upon the deceased, one Dr. Ajay Khanna, was not examined by the Permanent Lok Adalat. The Bed Head Ticket, the Discharge Ticket, the Medical Prescription etc. were produced before the Lok Adalat which were disbelieved only on the ground that they had not been signed by the doctor who had conducted the operation and under whose treatment the deceased had been admitted in Sir Sunder Lal Hospital, BHU.
46. In the impugned award the majority of Members have also observed that there was a confusion in the dates of admission and discharge from the Hospital. However, in the minority opinion of the Chairman, the dates mentioned in the medical papers had been property considered and it has been found that from the date when the operation was done on 06.04.2009 up to her discharge on 13.04.2009 the days calculated would be different from the period when the deceased was admitted in the women's ward showing total admission for 13 days. Only because in one of the medical papers issued from BHU the number of days of admission and treatment were found different, such papers could not be disbelieved when they were duly certified by the Chief Medical Superintendent and submitted through application before the respondent No. 1 by the petitioners.
47. The question to be considered by this Court on the facts which have come out from the pleadings on record and the Award impugned is whether the conclusion arrived at by the majority of the Members of Permanent Lok Adalat, that the doctor and the agents employed by the petitioners were chiefly responsible for misrepresentation and concealment and no such concealment or misrepresentation was done by the deceased or the claimant, can be said to be a reasonable conclusion.
48. The reason for disbelieving the medical papers submitted by the petitioner before the respondent No. 1 has also to be looked into and whether such a reason could be said to be a plausible reason. The BHU Medical Superintendent had admitted that he had countersigned/attested the medical papers issued from the hospital. There was no good reason to disbelieve them.
49. The Hon'ble Supreme Court in Mithoolal Nayak (supra) was considering a case where the appellant Mithoolal Nayak took out a Life Insurance Policy on 18th of October, 1945 on the life of one Mahajan Deolal for a sum of Rs.25,000/-. Mahajan Deolal died on 12th of November, 1946. Thereafter the appellant made a demand against the Insurance Company but such claim was repudiated by the Insurance Company by its letter dated 19th of October, 1947 stating that Mahajan Deolal had been guilty of deliberate mis- statements and fraudulent suppression of material information in answers to questions in the proposal form and the personal statement, which formed the basis of the contract between the insurer and the insured. The Supreme Court considered in detail the questions in the proposal form and the answers made thereto by Mahajan Deolal. The question was to the effect "Have you within the past five years consulted any medical man for any ailment, not necessarily confining you to your house? If so, give details and state names and addresses of medical man consulted." The answer to the question was - "No". This answer according to the respondent was false and made deliberately by Mahajan Deolal. According to the evidence collected in inquiry it was found that the a well known physician of Jabalpur had been consulted by Mahajan Deolal and he was treated by the said doctor between 7th September, 1943 and 6th October, 1943. The doctor had found Mahajan Deolal suffering from anaemia, oedema of the feet, diarrhoea and panting on exertion. At the time of his death Mahajan Deolal was 55 years old and the cause of death was shown as being a dilated heart and his right lung showed indications of an old attack of pneumonia or pleurisy and the doctor had found him a physical wreck at the time of the first examination and had refused to recommend grant of policy to him.
50. From the facts as were evident from the judgments of the learned Court below the Supreme Court had found that since sum of the insurance policy was large at the time when it was taken out i.e. Rs. 25,000/- in 1945 therefore, when the proposal was made, Mahajan Deolal was examined a doctor named D.D. Desai. This doctor submitted two reports about Mahajan Deolal. One report, it appears, was submitted with the proposal form through the agent of the respondent company. Another report was sent in a confidential cover along with a letter from the doctor. In the confidential report the doctor had opined that Mahajan Deolal's life was an uninsurable life. On receipt of Dr. Desai's report respondent company directed that Mahajan Deolal should be further examined by the Civil Surgeon, Hoshangabad and District Medical officer, Railways at Jabalpur. Mahajan Deolal, however, could not be examined by two doctors aforesaid and according to the rules of the respondent company the proposal lapsed on the expiry of six months for want of completion of the medical examination as required by the respondent company. Then, on July 16, 1944, a second proposal was made through the same agent of the respondent company for the insurance of the life of Mahajan Deolal, this time for a sum of Rs. 25,000/-. This time he was examined by another doctor who reported that Mahajan Deolal was a healthy man and he recommending giving of a policy for 14 years. It appears that policy was given and initially the premium was paid but later on due to failure of payment of premium in 1945 the policy lapsed. In October, 1945 Mahajan Deolal made a request for revival of the policy. Mahajan Deolal was again medically examined this time by another Dr. Belapurkar. Later on February 25, 1946, he was examined by Dr. Clarke. The policy was then revived on payment of all arrears of premium some time in July, 1946. On the evidence of several medical practitioners who had attended Mahajan Deolal at the time of his death, the respondent company came to a conclusion that Mahajan Deolal was suffering from several illnesses of a serious nature. Yet in the declaration form he had not mentioned any.
51. The Supreme Court considering the facts of the case first referred to Section 45 of the Insurance Act as it stood at the relevant time, and three conditions mention in the second part of the said Section and also considered whether the revival of a lapsed policy constitutes a new contract as under Section 45 the period of two years for the purpose of Section had to be calculated from the date on which the policy was originally affected and in the case of Mahajan Deolal two years had really expired from the date of first issuance of of the policy on March 13, 1945, and the date on which the respondent company repudiated the claim. The Supreme Court held that where a policy holder, who had been treated a few months before, he submitted proposal for insurance of his life with the insurance company by physician of certain repute for certain illness, not only failed to disclose in his answer to a question put to him by the insurance company that he suffered from any ailment but he made a false statement to the effect that he had not been treated by any doctor for any such ailment, there was a deliberate suppression, fraudulently made by Mahajan Deolal.
52. The Supreme Court further discussed the definition of 'fraud' given under Section 17 of the Indian Contract Act, 1872 in paragraph - 8 of the judgment thus:-
"Fraud, according to Section 17 of the Indian Contract Act, 1872 (IX of 1872), means and includes Inter alia any of the following acts committed by a party to a contract with intent to deceive another party or to induce him to enter into a contract-
(1) the suggestion, as to a fact, of that which is not true by one who does not believe it to be true; and (2) the active concealment of a fact by one having knowledge or belief of the fact.
Judged by the standard laid down in Section 17, Mahajan Deolal was clearly guilty of a fraudulent suppression of material facts when he made his statements on July 16, 1944, statements which he must have known were deliberately false. Therefore, we are in agreement with the High Court in answering the first question against the appellant."
53. The Supreme Court thereafter considered the argument made by the counsel for appellant that Mahajan Deolal was examined under the direction of the Respondent-Company by as many as four doctors and he had correctly disclosed that he had suffered previously from malaria, pneumonia and cholera. On these facts the argument was raised that the Respondent - Company had full knowledge of all relevant facts to the state of health of Mahajan Deolal and having knowledge of full facts it was not open to the Respondent-Company to call the policy in question on the basis of answers given by Mahajan Deolal in the proposal form and the personal statement, even though those answers were inaccurate.
54. The Supreme Court observed in paragraph - 9 of the judgment thus:-
"..........We are unable to accept this argument as correct. It is indeed true that Mahajan Deolal was examined by as many as four doctors. It is also true that the respondent company had before it the conflicting reports of Dr. Desai and it specially asked Dr. Kapadia to examine Mahajan Deolal in view of the reports submitted by Dr. Desai. Yet, it must be pointed out that the respondent company had no means of knowing that Mahajan Deolal had been treated for the serious ailment of secondary anaemia followed by dilatation of heart etc. in September-October, 1943 by Dr. Lakshmanan. Nor can it be said that if the respondent company had knowledge of those facts, they would not have made any difference. The principle underlying the Explanation to Section 19 of the Contract Act is that a false representation, whether fraudulent or innocent is irrelevant if it has not induced the party to whom it is made to act upon it by entering into a contract. We do not think that principle applies in the present case. The terms of the policy make it clear that the averments made as to the state of health of the insured in the proposal form and the personal statement were the basis of the contract between the parties, and the circumstance that Mahajan Deolal had taken pains to falsify or conceal that he had been treated for a serious ailment by Dr. Lakshmanan only a few months before the policy was taken shows that the falsification or concealment had an important bearing in obtaining the other party's consent. A man who has so acted cannot after wards turn round and say; "It could have made no difference if you had known the truth." In our opinion, no question of waiver arises in the circumstances of this case, nor can the appellant take advantage of the Explanation to Section 19 of the Indian Contract Act."
55. The judgment in Mithoolal Nayak (supra) has been relied upon by the Hon'ble Supreme Court in LIC Vs. Smt. G.M. Channabasemma, (1991) 1 SCC 357 where the Supreme Court has observed in paragraph - 7 thus:-
".........It is well settled that a contract of insurance is contract uberrim fides and there must be complete good faith on the part of the assured. The assured is thus under a solemn obligation to make full disclosure of material facts which may be relevant for the insurer to take into account while deciding whether the proposal should be accepted or not. While making a disclosure of the relevant facts, the duty of the insured state them correctly cannot be diluted. Section 45 of the Act has made special provisions for a life insurance policy if it is called in question by the insurer after the expiry of two years from the date on which it was effected."
56. On a consideration of the facts of the present case, I am of the opinion that the insured and the claimant both resorted to deliberate concealment of true state of health of the insured and also to misrepresentation which amounted to fraud. The instant case is squarely covered by the above cited two decisions of the Supreme Court in Mthoolal Nayak and Channabasemma. Hence, the order passed by the majority of the members of the Lok Adalat is liable to be set aside and is set aside.
57. The writ petition is allowed.
Order Date :- 16.05.2018 LBY