Jharkhand High Court
Life Insurance Corporation Of India ... vs Harjeet Kaur on 30 April, 2014
Author: R.Banumathi
Bench: Chief Justice, Shree Chandrashekhar
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IN THE HIGH COURT OF JHARKHAND AT RANCHI
L.P. A No. 53 of 2013
With
L.P. A No. 52 of 2013
Life Insurance Corporation of India Appellant In both cases
Versus
Harjeet Kaur Respondent In both cases
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CORAM: HON'BLE THE CHIEF JUSTICE.
HON'BLE MR. JUSTICE SHREE CHANDRASHEKHAR
For the Appellant : Mr. Sachin Kumar
For the Respondent : Mr.Sameer Kumar Lall
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CAV on 25th April, 2014 Pronounced on 30th,April, 2014
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R.Banumathi,C.J. These Letters Patent Appeals are preferred
against the dismissal of the writ petitions, W.P(C)
No.2367/2009 and W.P(C) No.2588/2009, by which learned
Single Judge confirmed the award passed by the Permanent Lok
Adalat, Jamshedpur dated 12.1.2009 in P.L.A Case
Nos.295/2008 and dated 2.3.2009 in P.L.A Case
No.299/2008.
2. The respondent is the widow of late Nishan Singh,
who died on 4.5.2006, leaving the respondent with two minor
children. The husband of the respondent- Claimant had two life
insurance policies bearing Policy No.553725125 and Policy No.
551387031 as under:-
Policy No. Table No. & Deferment Insurance Claim
Period/Plan & Term
551387031 122-E-24-24 Rs.3,64,000/-
553725125 153-10 Rs.10,00,000/-
After death of her husband, the respondent being the nominee
in respect of the above policies made an application before the
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Branch Manager, Life Insurance Corporation, on 1.8.2006,
seeking for payment of the amount of Rs.10,00,000/- under
Policy No. 553725125 and Rs.3,64,000/- under Policy No.
551387031.
3. In pursuance of the application, the appellants are
said to have made an inquiry into the matter and the
Investigating Officer submitted the report on 2.7.2007. After
submitting the death claim, the respondent was regularly
visiting the office of the Appellant-Insurance Company.
According to the respondent-claimant, on 12.3.2008, the
appellants handed over a copy of the letter to the respondent,
by which the death claim was refused by the appellant. The
payment of the insurance amount has been denied to the
respondent on the ground that the policy holder/husband of the
respondent-claimant was in the habit of taking drugs and he
had taken treatment of anti-addiction medication and the Life
Assured did not disclose about the illness and treatment at the
time of taking/revival of the policy.
4. Being dissatisfied with the order passed by the
Senior Divisional Manager with regard to her claim, the
respondent sent registered notice to the appellants on 7.4.2008;
but she did not receive any reply. Then the respondent filed an
application before the Permanent Lok Adalat, Jamshedpur,
under Section 22-C of the Legal Services Authorities Act, 1987
in P.L.A Case No. 295/2008 and P.L.A Case No.299/2008
seeking payment for the amount insured for the policies in
question. Before the Permanent Lok Adalat, during conciliation
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the appellant denied to conciliate on the ground that the
deceased, late Nishan Singh, had suppressed the fact regarding
his illness and on that ground, the claim was repudiated. As
such, Permanent Lok Adalat had taken the matter for
determination under Section 22C(8) and 22D of the Legal
Services Authorities Act. Both the parties adduced oral and
documentary evidence. Considering the oral and documentary
evidence adduced by the parties, the Permanent Lok Adalat held
that repudiation of the claim by the Insurer-LIC does not seem
to be justifiable and also against the principles of natural justice
and passed the award for Rs.10,00,000/- towards the death
claim under the Policy No.553725125 and Rs.3,64,000/- under
Policy No. 551387031.
5. Being aggrieved by the award dated 12.1.2009 and
6.3.2009passed by the Permanent Lok Adalat, the appellants filed writ petitions in W.P(C) No. 2367/2009 and W.P(C) No.2588/2009 respectively. Referring to the decision rendered in the case of Interglobe Aviation Limited v. N.Satchidanand [(2011) 7 SCC 463], learned Single Judge held that the Permanent Lok Adalat has jurisdiction to decide any controversy between the parties under Section 22C of the Legal Services Authorities Act, 1987. Learned Single Judge further held that sub-section (4) of Section 22E of the Legal Services Authorities Act, 1987 specifically provides that every award made by the Permanent Lok Adalat under the Act shall be final and shall not be called in question in any original suit, application or execution proceeding. Learned Single Judge dismissed the writ 4 petitions. Being aggrieved by the dismissal of the writ petitions, LIC has preferred these appeals.
6. Learned counsel for the appellant submitted that the Life Assured at the time of taking/revival of the policy made a false statement and suppressed material facts relating to his health with dishonest intention. According to the appellant, had this fact been declared in the proposal form, the Life Insurance Corporation could not have accepted the proposal and in the aforesaid background the appellant decided to declare the revival of the policy as null and void and the decision of the Corporation was communicated to the claimant vide a letter dated 24.9.2007. It was further submitted that Section 45 of the Insurance Act empowers the Corporation to repudiate any claim arising out of any policy if the policy was obtained by suppressing materials fact. Learned counsel further submitted that the learned Single Judge erred in saying that the award made by the Permanent Lok Adalat cannot be challenged and the learned Single Judge failed to appreciate that the provisions of Section 22E of the Legal Services Authorities Act cannot take away the powers of the High Court under Article 226 of the Constitution of India, which is the basic structure of our Constitution. In support of his contention, learned counsel relied upon the decision of Bar Council Of India v. Union of India [(2012) 8 SCC 243].
7. Refuting the contentions, learned counsel appearing for the respondent contended that where conciliation fails and settlement/agreement could not be reached, in the light of the 5 power conferred under Section 22C(8) of the Legal Services Authorities Act, 1987, the Permanent Lok Adalat can decide the dispute on merit and such jurisdiction is vested with the Permanent Lok Adalat. It was further submitted that the appellant filed the petition dated 14.11.2008 giving consent to contest the case and while so, the appellant cannot challenge the jurisdiction of the Permanent Lok Adalat to decide the dispute on merit. Learned counsel submitted that after proper appreciation of the law and fact in right perspective, the Permanent Lok Adalat has rightly passed the award and in view of Section 22E(4), such award passed by the Permanent Lok Adalat cannot be challenged and the learned Single Judge rightly dismissed the writ petition.
8. Upon consideration of all the rival contentions, order of the learned Single Judge and the award passed by the Permanent Lok Adalat and other materials on record, the following points arise for determination:-
(i) Whether the Permanent Lok Adalat had the jurisdiction to decide the matter on merit by going into the disputed question of fact;
(ii) Whether the writ petition is maintainable as against the award passed by the Permanent Lok Adalat;
and
(iii) Whether there was suppression of material facts by the Life Assured relating to his health as alleged by the appellant.
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9. Whether the Permanent Lok Adalat has the jurisdiction to adjudicate the dispute between the parties:-
The Legal Services Authorities Act, 1987, refers to two types of Lok Adalats. The first is a Lok Adalat under Section 19 of the Act which has no adjudicatory function or power and it discharges purely conciliatory function. Chapter VIA - PRE-
LITIGATION CONCILIATION AND SETTLEMENT and Section 22A, 22E along with few other consequent amendments were inserted in the Legal Services Authorities Act, 1987, by 2002 Amendment Act. Section 22A(a) defines Permanent Lok Adalat to mean a Permanent Lok Adalat established under sub-section (1) of section 22B. The Permanent Lok Adalat established under Section 22B(1) of the Legal Services Authorities Act, 1987, has been constituted to exercise jurisdiction in respect of Public Utility Services having both conciliatory and adjudicatory functions. The expression, "Permanent Lok Adalat" should refer only to "Permanent Lok Adalats" established under Section 22B(1) of the Legal Services Authorities Act, 1987, and not the Lok Adalats constituted under Section 19 of the Act. Section 22A(b) defines "Public Utility Service" as under:-
―22A. Definitions. .........
(a) .......
(b)―public utility service‖ means any -
(i) transport service for the carriage of passengers or goods by air, road or water; or
(ii) postal, telegraph or telephone service; or
(iii) supply of power, light or water to the public by any establishment; or
(iv) system of public conservancy or sanitation; or
(v) service in hospital or dispensary; or 7
(vi) insurance service,‖
10. The establishment of Permanent Lok Adalat is done under Section 22-B. The Central authority and every State authority, as the case may be, have been mandated to establish Permanent Lok Adalats at such places and for exercising such jurisdiction in respect of one or more public utility services and for such areas as may be notified. The composition of Permanent Lok Adalat is provided in Section 22-B(2). Accordingly, every Permanent Lok Adalat shall consist of: (a) a person who is or has been a District Judge or Additional District Judge or has held judicial office higher in rank than that of a District Judge; and (b) two other persons having adequate experience in public utility service to be nominated by the Central Government or by the State Government, as the case may be on the recommendation of the Central authority or by the State authority (as the case may be). The judicial officer, namely, the District Judge or the Additional District Judge or the Judicial Officer higher in rank than that of a District Judge shall be the Chairman of the Permanent Lok Adalat. [See Bar Council Of India v. Union of India [(2012) 8 SCC 243, p.253]. Section 22C of the Act provides for the procedure for raising the dispute before the Permanent Lok Adalat. Sub-section (1) of Section 22C provides that any party to a dispute can make an application to the Permanent Lok Adalat for settlement of the dispute. Section 22C reads as under:-
―22C. Cognisance of cases by Permanent Lok Adalat - (1) Any party to a dispute may, before the dispute is brought before any court, make an application to the Permanent Lok Adalat for the settlement of dispute:8
Provided that the Permanent Lok Adalat shall not have jurisdiction in respect of any matter relating to an offence not compoundable under any law:
Provided further that the Permanent Lok Adalat shall also not have jurisdiction in the matter where the value of the property in dispute exceeds ten lakh rupees:
Provided also that the Central Government, may, by notification, increase the limit of ten lakh rupees specified in the second proviso in consultation with the Central Authority.
(2) After an application in made under sub-section (1) to the Permanent Lok Adalat, no party to that application shall invoke jurisdiction of any court in the same dispute.
(3) Where an application is made to a Permanent Lok Adalat under sub-section (1), it -
(a) shall direct each party to the application to file before it a written statement, stating therein the facts and nature of dispute under the application, points or issues in such dispute and grounds relied in support of, or in opposition to, such points or issues, as the case may be, and such party may supplement such statement with any document and other evidence which such party deems appropriate in proof of such facts and grounds and shall send a copy of such statement together with a copy of such document and other evidence, if any, to each of the parties to the application;
(b) may require any party to the application to file additional statement before it at any stage of the conciliation proceedings;
(c) shall communicate any document or statement received by it from any party to the application to the other party, to enable such other party to present reply thereto.
(4) When statement, additional statement and reply, if any, have been filed under sub-section(3), to the satisfaction of the Permanent Lok Adalat, it shall conduct conciliation proceedings between the parties to the application in such manner as it thinks appropriate taking into account the circumstances of the dispute.
(5) The Permanent Lok Adalat shall, during conduct of conciliation proceedings under sub-section (4), assist the parties in their attempt to reach an amicable settlement of the dispute in an independent and impartial manner.
(6) It shall be the duty of every party to the application to cooperate in good faith with the Permanent Lok Adalat in conciliation of the dispute relating to the application and to comply with the direction of the Permanent Lok Adalat to produce evidence and other related documents before it.
(7) When a Permanent Lok Adalat, in the aforesaid conciliation proceedings, is of opinion that there exists elements of settlement in such proceedings which may be acceptable to the parties, it may formulate the terms of a possible settlement of the dispute and give to the parties concerned for their observations and in case the parties reach at an agreement on the settlement of the dispute, they shall sign the settlement agreement and the Permanent Lok Adalat shall pass an award in terms thereof and furnish a copy of the same to each of the parties concerned.
(8) Where the parties fail to reach at an agreement under sub-section (7), the Permanent Lok Adalat shall, if the dispute does not relate to any offence, decide the dispute.‖ 9
11. Section 22D, interalia, provides for the procedure of Permanent Lok Adalat. Section 22E accords finality to the award of the Permanent Lok Adalat. Section 22D and 22E read as under:-
―22D Procedure of Permanent Lok Adalat - The Permanent Lok Adalat shall, while conducting conciliation proceedings or deciding a dispute on merit under this Act, be guided by the principles of natural justice, objectivity, fair play, equity and other principles of justice, and shall not be bound by the Code of Civil Procedure, 1908 (5 of 1908) and the Indian Evidence Act, 1872 (1 of 1872).
22E Award of Permanent Lok Adalat to be final - (1) Every award of the Permanent Lok Adalat under this Act made either on merit or in terms of a settlement agreement shall be final and binding on all the parties thereto and on persons claiming under them.
(2) Every award of the Permanent Lok Adalat under this Act shall be deemed to be a decree of a civil court.
(3) The award made by the Permanent Lok Adalat under this Act shall be by a majority of the persons constituting the Permanent Lok Adalat.
(4) Every award made by the Permanent Lok Adalat under this Act shall be final and shall not be called in question in any original suit, application or execution proceeding.
(5) The Permanent Lok Adalat may transmit any award made by it to a civil court having local jurisdiction and such civil court shall execute the order as if it were a decree made by that court.‖
12. The constitutional validity of Section 22A, 22B and 22C was challenged before the Hon'ble Supreme Court in the case of Bar Council Of India v. Union of India [(2012) 8 SCC 243]. Holding that the provisions of Chapter - VIA are constitutionally valid and they do not violate Article 14 of the Constitution of India and referring to case of S.N.Pandey v. Union of India & Ano. [(2012)8 SCC 261], in paragraph 22 to 24 and 34 of the aforesaid case, Hon'ble Supreme Court held as under:-
"22. Chapter VI-A inserted by the 2002 Amendment Act in the 1987 Act, as its title suggests, provides for pre-litigation conciliation and settlement procedure. The disputes relating to public utility service like transport service for carriage of passengers or goods by air, road or water or postal, telegraph or telephone service or supply of power, light or water or public conservancy system or sanitation or service in 10 hospital or dispensary or insurance service, etc., in the very scheme of things deserve to be settled expeditiously. Prolonged dispute in respect of the above matters between the service provider and an aggrieved party may result in irretrievable damage to either party to the dispute. Today, with increasing number of cases, the judicial courts are not able to cope with the heavy burden of inflow of cases and the matters coming before them. The disputes in relation to public utility service need urgent attention with focus on their resolution at the threshold by conciliation and settlement and if for any reason such effort fails, then to have such disputes adjudicated through an appropriate mechanism as early as may be possible. With large population in the country and many public utility services being provided by various service providers, the disputes in relation to these services are not infrequent between the service providers and common man. Slow motion procedures in the judicial courts are not conducive for adjudication of disputes relating to public utility service.
23. The Statement of Objects and Reasons itself spells out the salient features of Chapter VI-A. By bringing in this law, the litigation concerning public utility service is sought to be nipped in the bud by first affording the parties to such dispute an opportunity to settle their dispute through the endeavours of the Permanent Lok Adalat and if such effort fails then to have the dispute between the parties adjudicated through the decision of the Permanent Lok Adalat. The mechanism provided in Chapter VI-A enables a party to a dispute relating to public utility service to approach the Permanent Lok Adalat for the settlement of dispute before the dispute is brought before any court.
24. Parliament can definitely set up effective alternative institutional mechanisms or make arrangements which may be more efficacious than the ordinary mechanism of adjudication of disputes through the judicial courts. Such institutional mechanisms or arrangements by no stretch of imagination can be said to be contrary to constitutional scheme or against the rule of law. The establishment of Permanent Lok Adalats and conferring them jurisdiction up to a specific pecuniary limit in respect of one or more public utility services as defined in Section 22-A(b) before the dispute is brought before any court by any party to the dispute is not anathema to the rule of law. Instead of ordinary civil courts, if other institutional mechanisms are set up or arrangements are made by Parliament with an adjudicatory power, in our view, such institutional mechanisms or arrangements cannot be faulted on the ground of arbitrariness or irrationality.
....... ...... ....... ......... ........ ..........
34. The alternative institutional mechanism in Chapter VI-A with regard to the disputes concerning public utility service is intended to provide an affordable, speedy and efficient mechanism to secure justice. By not making applicable the Code of Civil Procedure and the statutory provisions of the Evidence Act, there is no compromise on the quality of determination of dispute since the Permanent Lok Adalat has to be objective, decide the dispute with fairness and follow the principles of natural justice. Sense of justice and equity continue to guide the Permanent Lok Adalat while conducting conciliation proceedings or when the conciliation proceedings fail, in deciding a dispute on merit.‖
13. In the case of S.N.Pandey v. Union of India & Ano.
[(2012) 8 SCC 261], (judgment dated 28.10.2002), upholding 11 the constitutional validity of Chapter - VIA - Pre-Litigation Conciliation and Settlement - Hon'ble Supreme Court held as under:-
―2. We have gone through the provisions of the said Chapter which contemplate the setting up of Permanent Lok Adalats for deciding disputes in which public utility services is one of the matters involved. It is quite obvious that the effort of the legislature is to decrease the workload in the courts by resorting to alternative dispute resolution. Lok Adalat is a mode of dispute resolution which has been in vogue since over two decades. Hundreds of thousands of cases have been settled through this mechanism and is undisputedly a fast means of dispensation of justice. The litigation is brought to a quick end with no further appeals or anguish to the litigants. The constitution of the Permanent Lok Adalat mechanism contemplates the judicial officer or a retired judicial officer being there along with other persons having adequate experience in the public utility services.
3. We do not find any constitutional infirmity in the said legislation.
The Act ensures that justice will be available to the litigant speedily and impartially. We do emphasise that the persons who are appointed on the Permanent Lok Adalats should be persons of integrity and adequate experience. Appropriate rules, inter alia in this regard, no doubt will have to be framed, if not already in place.
4. We uphold the validity of the said Act and hope that the Permanent Lok Adalats will be set up at an early date. The Lok Adalats are enacted to primarily bring about settlement amongst the parties. The parties are normally required to be present in person and since the impugned provisions are in the interest of the litigating public, the Lok Adalats shall perform their duties and will function, even if members of the Bar choose not to appear.‖
14. The disputes relating to Public Utility Service have been entrusted with the Permanent Lok Adalats only if the process of conciliation and settlement fails. By a reading of Section 22C, it is clear that the emphasis is on settlement in respect of the disputes concerning Public Utility Services by means of Permanent Lok Adalat. As held by the Hon'ble Supreme Court, in order to avoid delay in adjudication of disputes relating of Public Utility Services on merits, the Parliament has conferred power of adjudication upon the Permanent Lok Adalats. In the case of Bar Council Of India [(2012) 8 SCC 243], observing that the Permanent Lok Adalat has jurisdiction for settlement of disputes concerning Public 12 Utility Services, before the matter is brought to the Court under Section 27C, Hon'ble Supreme Court held as under:-
―27. Can the power conferred on Permanent Lok Adalats to adjudicate the disputes between the parties concerning public utility service up to a specific pecuniary limit, if they do not relate to any offence, as provided under Section 22-C(8), be said to be unconstitutional and irrational? We think not. It is settled law that an authority empowered to adjudicate the disputes between the parties and act as a tribunal may not necessarily have all the trappings of the court. What is essential is that it must be a creature of statute and should adjudicate the dispute between the parties before it after giving reasonable opportunity to them consistent with the principles of fair play and natural justice. It is not a constitutional right of any person to have the dispute adjudicated by means of a court only. Chapter VI-A has been enacted to provide for an institutional mechanism, through the establishment of Permanent Lok Adalats for settlement of disputes concerning public utility service before the matter is brought to the court and in the event of failure to reach any settlement, empowering the Permanent Lok Adalat to adjudicate such dispute if it does not relate to any offence.‖
15. Section 22D, interalia, provides that while deciding a dispute on merit, the Permanent Lok Adalat shall be guided by the principles of natural justice, objectivity of fair play, equity and other principles of justice and shall not be bound by the Code of Civil Procedure, 1908 and Evidence Act, 1872. In view of the provisions of Section 22D and the judgment of the Hon'ble Supreme Court in the case of Bar Council Of India [(2012) 8 SCC 243] and S.N.Pandey [(2012)8 SCC 261], upholding the constitutional validity of Chapter - VIA and Section 22A to 22E of the Legal Services Authorities Act, 1987, the appellant cannot challenge the process of Permanent Lok Adalat to adjudicate the dispute between the parties on merits.
16. In the present case, after the respondent filed the application under Section 22C for passing an award, there was a conciliation and when the conciliation failed and settlement could not be reached, the appellant is said to have filed a petition dated 14.11.2008 giving consent to contest the matter 13 on merits. Counter affidavit filed by the respondent/claimant refers to the said petition dated 14.11.2008 filed by the appellant giving consent to contest the case on merits and it is further averred that the Permanent Lok Adalat passed the order dated 14.11.2008 proceeding to decide the matter on merits. Having filed the petition dated 14.11.2008 giving consent to contest the case on merit, the appellant is also estopped from challenging the jurisdiction of Permanent Lok Adalat in deciding a dispute on merits. We find no merit in the contention of the appellant questioning the jurisdiction of Permanent Lok Adalat in adjudicating a dispute between the parties on merits under the Legal Services Authorities Act, 1987.
17. As per Second Proviso to Section 22C, the Permanent Lok Adalat shall not have jurisdiction in the matter where the value in dispute exceeds Rupees Ten lakhs. In PLA Case No.295/2008 (Policy No.553725125), sum assured was Rs.10,00,000/-. In PLA Case No.299/2008 (Policy No.551387031), sum assured was Rs.3,64,000/-. On behalf of the appellant, it was contended that even though both the policies of Life Assured was of late Nishan Singh and the respondent-claimant was the nominee, knowingly two separate claims were filed for two policies in order to avoid the question of pecuniary jurisdiction and the learned Forum, Permanent Lok Adalat failed to appreciate this aspect of the matter. Learned counsel further submitted that had a single case been filed for both the claims, the Permanent Lok Adalat would not have had the jurisdiction to decide the matter. On behalf of the respondent, it was submitted that both the proposals were 14 separate and under different Tables and both the policies were repudiated by the appellant-LIC by two separate orders and therefore, two separate cases were filed by the respondent. Since the appellant-LIC subjected itself to the jurisdiction of Permanent Lok Adalat in both the cases filed separately, the objection regarding pecuniary jurisdiction of Permanent Lok Adalat does not merit acceptance.
18. Maintainability of writ application as against the award passed by the Permanent Lok Adalat.
As per sub-section (4) of Section 22E, every award made by Permanent Lok Adalat under the Legal Services Authorities Act, 1987 shall be final and shall not be called in question in any original suit, application or execution proceeding. On behalf of the appellant, it was contended that Section 22E(4) of the Legal Services Authorities Act, 1987 cannot take away the power of the High Court under Article 226 of the Constitution of India and the appellant cannot be left remediless where there are sufficient grounds to set aside the award.
19. In Bar Council Of India [(2012) 8 SCC 243], observing that the award passed by Permanent Lok Adalat is binding on all parties concerned and if any party having grievance against the award of Permanent Lok Adalat can always approach the High Court under its supervisory and extraordinary jurisdiction under Articles 226 and 227 of the Constitution of India, in para 38, the Hon'ble Supreme Court held as under:-
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―38. There is no inherent right of appeal. Appeal is always a creature of statute and if no appeal is provided to an aggrieved party in a particular statute, that by itself may not render that statute unconstitutional. Section 22-E(1) makes every award of the Permanent Lok Adalat under the 1987 Act either on merit or in terms of a settlement final and binding on all the parties thereto and on persons claiming under them. No appeal is provided from the award passed by the Permanent Lok Adalat but that in our opinion does not render the impugned provisions unconstitutional. In the first place, having regard to the nature of dispute up to a specific pecuniary limit relating to public utility service and resolution of such dispute by the procedure provided in Sections 22-C(1) to 22-C(8), it is important that such dispute is brought to an end at the earliest and is not prolonged unnecessarily. Secondly, and more importantly, if at all a party to the dispute has a grievance against the award of Permanent Lok Adalat it can always approach the High Court under its supervisory and extraordinary jurisdiction under Articles 226 and 227 of the Constitution of India. There is no merit in the submission of the learned counsel for the petitioner that in that situation the burden of litigation would be brought back on the High Courts after the award is passed by the Permanent Lok Adalat on merits.
[Underlining Added]
20. Learned Single Judge dismissed the writ petition in limine holding that the award of Permanent Lok Adalat shall not be called in question in any original suit, application or execution proceeding. As held by the Hon'ble Supreme Court in the case of Bar Council Of India [(2012) 8 SCC 243], if substantial grounds are made out for assailing the award passed by the Permanent Lok Adalat, writ petition is certainly maintainable before the High Court under its supervisory and extraordinary jurisdiction under Articles 226 and 227 of the Constitution of India. To this limited extent, we modify the finding/reasoning of the learned Single Judge.
21. Whether there was suppression of material fact by the Life Assured and whether appellant has made out sufficient ground to set aside the award The Life Assured, Late Nishan Singh, submitted proposal Form on 28.9.2001 for issuance of policy (551387031) for a sum assured Rs.1,30,000/- under the Plan and Term 122- 24-24 and another proposal Form on 27.8.2002 for issuance of 16 Policy (553725125) for a sum assured Rs.10,00,000/- under the Plan and Term 153-10. In Clause 11 of the Proposal Form, the Life Assured was required to answer certain questions relating to his health and habit. In various columns in Clause 11, the Life Assured had stated that he is not suffering from any illness and not addicted to (i) Alcoholic Drinks (ii) Narcotic or any other drugs and he is in good state of health. At the end of the Proposal Form, the Life Assured had also signed the declaration declaring that the statements and answers given by him in various columns are true and correct in every particulars and that he has not withheld any information.
22. The Life Assured died on 4.5.2006 and at the time of death, he was aged about 35 years. In the Claim Form B claiming the assured amount, Dr.Satish K. Kundan/last Medical Attendant has stated that the cause of death cannot be ascertained clinically after the death of a patient. According to the appellant, since the Life Assured was only aged about 35 years and cause of death was not a natural death, the cause of the death was required to be ascertained by conducting post- mortem. The contention of the appellant is that contract of insurance is based on the Principles of Uberimafide i.e. Utmost Good Faith and the Life Assured is required to disclose true and correct facts in the Proposal Form, which is the sole basis of the contract of insurance. According to the appellant, from the certificate of Pasricha Hospital & Maternity Home, Jalandhar City, it came to the notice of the Corporation that the Life Assured, late Nishan Singh son of late Labh Singh, was admitted in the said hospital under the supervision of 17 Dr.Pankaj Punj for treatment of addiction to injection on 7.2.2003 and discharged on 13.3.2003 and from the same certificate, it also appears that the Life Assured, late Nishan Singh, was advised to come for follow-up, for which he visited the said hospital on 18.2.2003 and 25.2.2003. According to the appellant, the said certificate was issued by Dr.Pankaj Punj on the request of the claimant/respondent made through a Fax application dated 26.3.2007 and Permanent Lok Adalat has failed to appreciate that the said certificate of Pasricha Hospital & Maternity Home, Jalandhar City, was submitted by the respondent-claimant herself and the respondent-claimant never denied the said document.
23. Learned counsel for the appellant submitted that Section 45 of the Insurance Act, 1925 empowers the Corporation to repudiate any claim arising out of any policy if the said policy was obtained by suppression of material fact. It was submitted that the Life Assured, late Nishan Singh, was in habit of taking drugs and was under treatment for anti- addiction medication. It was also submitted that with regard to the specific question relating to health condition in Clause 11, the Life Assured answered in negative and the appellant- Corporation accepted the policy believing the statement of late Nishan Singh and the declaration signed by him, which was later on found to be untrue/false and therefore, the appellant- Insurance Corporation rightly repudiated the contract and this aspect was not properly consider by the Permanent Lok Adalat. 18
24. Elaborating the contract of insurance falling under the category of contract of Principles of Uberimafide i.e. Utmost Good Faith, in the case of Satwant Kaur Sandhu v. New India Assurance Company Limited [(2009) 8 SCC 316], Hon'ble Supreme Court held as under:-
"18. A mediclaim policy is a non-life insurance policy meant to assure the policy-holder in respect of certain expenses pertaining to injury, accidents or hospitalisations. Nonetheless, it is a contract of insurance falling in the category of contract uberrimae fidei, meaning a contract of utmost good faith on the part of the assured. Thus, it needs little emphasis that when an information on a specific aspect is asked for in the proposal form, an assured is under a solemn obligation to make a true and full disclosure of the information on the subject which is within his knowledge. It is not for the proposer to determine whether the information sought for is material for the purpose of the policy or not. Of course, the obligation to disclose extends only to facts which are known to the applicant and not to what he ought to have known. The obligation to disclose necessarily depends upon the knowledge one possesses. His opinion of the materiality of that knowledge is of no moment. (See Joel v. Law Union & Crown Insurance Co. (1908) 2 KB 863 (CA))
19. In United India Insurance Co. Ltd. v. M.K.J. Corpn. (1996) 6 SCC
428) this Court has observed that it is a fundamental principle of insurance law that utmost faith must be observed by the contracting parties. Good faith forbids either party from non-disclosure of the facts which the party privately knows, to draw the other into a bargain, from his ignorance of that fact and his believing the contrary.
(Also see Modern Insulators Ltd. v. Oriental Insurance Co. Ltd. (2000) 2 SCC 734).
20. MacGillivray on Insurance Law (10th Edn.) has summarised the assured's duty to disclose as under:
―... the assured must disclose to the insurer all facts material to an insurer's appraisal of the risk which are known or deemed to be known by the assured but neither known nor deemed to be known by the insurer. Breach of this duty by the assured entitles the insurer to avoid the contract of insurance so long as he can show that the non-disclosure induced the making of the contract on the relevant terms.‖
25. Considering the term, ―material fact‖, the Hon'ble Supreme Court in the case of Satwant Kaur Sandhu [(2009) 8 SCC 316], held as under:-
―22. The term ―material fact‖ is not defined in the Act and, therefore, it has been understood and explained by the courts in general terms to mean as any fact which would influence the judgment of a prudent insurer in fixing the premium or determining whether he would like to accept the risk. Any fact which goes to the root of the contract of insurance and has a bearing on the risk involved would be ―material‖.19
23. As stated in Pollock and Mulla's Indian Contract and Specific Relief Acts:
―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.‖
24. In this regard, it would be apposite to make a reference to Regulation 2(1)(d) of the Insurance Regulatory and Development Authority (Protection of Policy-holders' Interests) Regulations, 2002, which explains the meaning of term ―material‖. The Regulation reads thus:
―2. Definitions.--In these Regulations, unless the context otherwise requires,--
(a)-(c) * * *
(d) ‗proposal form' means a form to be filled in by the proposer for insurance, for furnishing all material information required by the insurer in respect of a risk, in order to enable the insurer to decide whether to accept or decline, to undertake the risk, and in the event of acceptance of the risk, to determine the rates, terms and conditions of a cover to be granted;
Explanation.-- ‗Material' for the purpose of these Regulations shall mean and include all important, essential and relevant information in the context of underwriting the risk to be covered by the insurer.‖ Thus, the Regulation also defines the word ―material‖ to mean and include all ―important‖, ―essential‖ and ―relevant‖ information in the context of guiding the insurer to decide whether to undertake the risk or not.
25. The upshot of the entire discussion is that in a contract of insurance, any fact which would influence the mind of a prudent insurer in deciding whether to accept or not to accept the risk is a ―material fact‖. If the proposer has knowledge of such fact, he is obliged to disclose it particularly while answering questions in the proposal form. Needless to emphasise that any inaccurate answer will entitle the insurer to repudiate his liability because there is clear presumption that any information sought for in the proposal form is material for the purpose of entering into a contract of insurance.‖
26. In the aforesaid legal position, let us consider the facts in hand. As pointed out by the Permanent Lok Adalat, at the time when the Life Assured, late Nishan Singh, submitted the proposal, the Doctor of LIC, after thorough check and careful examination of the Life Proposed, submitted a confidential report. It was only thereafter the proposal form was 20 accepted. As pointed out by the Permanent Lok Adalat, there is nothing on record to indicate that the medical examination report of the Doctor of LIC was an adverse one and the Doctor, who examined the deceased policy-holder, at the time of proposal form, had made a false report based on thorough check up of the Life Assured. The Permanent Lok Adalat raised a presumption that the deceased was hale and healthy at the time of examination of the proposal form. As pointed out by the Permanent Lok Adalat, the respondent filed Medical Attendant Certificate certified by Dr.Satish Kundan, in which the treating Doctor has not ascertained the cause of the death of Late Nishan Singh but gathered from the family and neighbouring people that late Nishan Singh was suffering from Gastroenteritis problems which resulted in vomiting and diarrhoea which caused the death. The Permanent Lok Adalat has also referred to the opinion of Dr.M.S.Ahmad, who is one of the Members of the Permanent Lok Adalat and who has also said that the death might have caused due to Gastroenteritis. The conclusion of the Permanent Lok Adalat is based on evidence and materials available on record and does not suffer from any substantial error.
27. The appellant-LIC relies upon the certificate issued by the Pasricha Hospital & Maternity Home, Jalandhar City, to contend that the deceased husband of the respondent was addicted and he was visiting the hospital. The appellant-LIC relies upon the certificate issued by the Pasricha Hospital & Maternity Home, Jalandhar City, but it is not known as to how the appellant-LIC could lay hand on the said certificate. The 21 contention of the appellant-LIC is that the claimant herself secured and submitted the said certificate of Pasricha Hospital & Maternity Home, Jalandhar City. It is quite unbelievable that the respondent-claimant herself secured and submitted the certificate of Pasricha Hospital & Maternity Home, Jalandhar City. We find it difficult to accept the contention of the appellant that the respondent-claimant herself secured the said certificate and submitted along with the claim form. In this context, the Permanent Lok Adalat rightly held that the said certificate has been obtained by the appellant-LIC itself, in order to avoid the claim of the respondent.
28. So far as the alleged suppression of material facts is concerned, by referring to the medical examination at the time of the proposal form, the Permanent Lok Adalat rightly held that the Life Assured, late Nishan Singh, was hale and healthy and that there was no suppression of material fact. There is nothing on record that the statement made by the insured was untrue to his knowledge. There is absolutely no material to show that there was suppression of material fact. In these facts and circumstances of the case, the Permanent Lok Adalat rightly held that the appellant was not justified in repudiation of the contract of insurance claim. We do not find any substance in the contention that the Permanent Lok Adalat committed serious and substantial error of law and on fact warranting interference exercising the jurisdiction under Articles 226 and 227 of the Constitution of India. Even though the learned Single Judge did not go into the merits of the matter, we do not find 22 any reason warranting interference with the award of the Permanent Lok Adalat and the LPAs are liable to be dismissed.
29. In the result, both the Letters Patent Appeals are dismissed.
(R.Banumathi, CJ) (Shree Chandrashekhar,J) Jharkhand High Court, Ranchi Date, 30th,April, 2014 AFR Dey