State Consumer Disputes Redressal Commission
Sbi Life Ins Co Ltd vs Jayaben K Suwa on 31 July, 2023
DETAILS DD MM YYYY
Date of judgment 31 07 2023
Date of filing 20 11 2017
Duration 11 08 5
IN THE STATE CONSUMER DISPUTES REDRESSAL COMMISSION
STATE OF GUJARAT
COURT NO. 4
APPEAL NO. 740 OF 2017
SBI LIFE INSURANCE COMPANY LIMITED
1st floor, Akshar Arcade,
Opp. Memnagar Fire Station, Darpan Circle,
Memnagar, Ahmedabad.
...APPELLANT
VERSUS
Smt. JAYABEN KARABHAI SUWA
R/o. Khakhijalia,
Ta: Upleta,
Dist: Rajkot.
CORAM: Hon'ble Mr. R N Mehta Presiding Member
Hon'ble Ms. P R Shah Member
Appearance: Mr. S G Shah Adv. for Appellant.
Mr. B S Malkan Adv. for Respondent.
(Order by Mr. R N Mehta, Presiding Member)
[1]. Being aggrieved and dissatisfied with the order and judgment dated 8th November 2017 of District Commission, Rajkot(Additional) in consumer complaint no. 323 of 2016, the original opponent prefers this appeal under Section 15 of The Consumer Protection Act, 1986 (herein after referred as "The Act" or "Act") and submits that the impugned order is unjust, arbitrary in nature, contrary to evidence on record and therefore not sustainable in the eyes of law and it deserves to be quashed and set aside and the original complaint be dismissed with cost to the present appellant.
Rnm a7402017 Page 1 of 7[2]. For the convenience parties, they are addressed to its original nomenclature before the District Commission.
[3]. It was case of the complainant before the District Commission that her husband had proposed on 19/12/2013 for "SBI Life- Saral Swadhan" policy from the opponent and paid Rs.5000/- towards premium. She further stated that according to agreed terms, life assured has to pay yearly premium of Rs. 5000/- and sum insured would be Rs.1,75,000/- and if death of life assured occurred during policy period, the opponent insurance company will pay sum assured to legal heirs of deceased life assured. She also stated that her husband had studied up to 2 nd standard and could write his name only. She further stated that her husband had paid two annual premium. She also stated that on 25/7/2015 her husband expired which was intimated to opponent insurer and claim was lodged but the opponent insurer sent letter of requirement dated 10/9/2015 and thereafter informed vide letter 9/10/2015 for cancellation of proposal and returned premium paid till that date. She submitted that her husband died of heart attack whereas the insurer had disowned liability on the ground of non-disclosure of facts at the time of proposal. She alleged that her husband was not much educated and therefore the manager and agent of the opponent insurer filled up proposal form and did not disclose correct facts. She alleged that all past treatment details were explained to agent and branch manager and even then, they did not disclose in the form and deprived her from benefits of life insurance. Being aggrieved she had filed complaint alleging therein deficiency in service and prayed for the sum insured together with interest and compensation and cost of complaint.
[4]. On service of notice from the District Commission, the opponent appeared through advocate and filed detail reply contending therein that District Commission has no competent territorial jurisdiction especially because office of the insurer is situated at Ahmedabad and no office at Rajkot. It is also further contended that the complainant had earlier approached insurance ombudsman where decision of insurance company was upheld and therefore complaint is hit by res judicata. It is also contended that life insurance is a contract of "UTMOST GOOD FAITH" and therefore proponent is duty bound to disclose correct facts as to his health, habit, and other related matters in true spirit. It is submitted that in the instant case, deceased life assured committed a breach of this principle and suppressed material information that he had undergone surgery and was suffering from dry gangrene with gouty arthritis prior to the date of proposal. It is submitted that when questions were put to him in proposal, he denied to have any ailment and obtained policy fraudulently. It is submitted that in life insurance contracts, there is a positive duty on the proposer to disclose all facts material to the risk being proposed, accurately and fully. Every fact is material fact which would influence the judgment/assessment of risk by an insurer in fixing the premium or determining whether he / she will undertake the risk or not. It is submitted further that suppression of material Rnm a7402017 Page 2 of 7 information is fatal to the contract of insurance, which is based on the principles of "Utmost Good faith." Thus, any contract of insurance procured by breach of the principle of "Utmost Good Faith" is nullity and void ab-initio. Therefore, premium was returned and cancelled contract of insurance and in such a case there is no case of deficiency in service and complaint is not maintainable and deserves to be dismissed. The opponent has placed on record, all documents pertaining to contract including proposal, policy, and premium receipts. The insurer has also placed on record correspondence exchanged between parties.
[5]. The District Commission heard both parties and concluded that complainant's husband had died of heart attack and it has no nexus with dry gangrene and therefore complainant is entitle to sum insured. It was held that since treatment of complainant's husband had been taken at Upleta which falls within the territorial jurisdiction of Rajkot District, it has competent jurisdiction to adjudicate this complaint. It has been further held that The Consumer Protection Act is a special act and therefore provisions of Civil Procedure Code are not strictly applicable and therefore question of res judicata do not applies. It is observed in judgment that deceased life assured died of Heart attack and non-disclosure of dry gangrene had no effect and therefore services of the insurer is held deficient and passed impugned order.
[6]. Mr. S G Shah submitted that the investigations carried out by the appellant revealed that deceased life assured had dry gangrene and he had taken treatment from various hospitals. However, this fact was never disclosed in proposal form though specific questions were put to him. Mr. Shah further submitted that complainant has averred in complaint that life assured had disclosed these facts to agent and Manager but they did not mention it in the proposal form and therefore it is not suppression on his part. This makes it clear that it was within their knowledge that life assured had dry gangrene and though it was not answered correctly. It is submitted that deceased was asked whether he was under medical treatment during last 5 years or undergone surgery or under monitoring for more than 14 days he answered negative. The record of his past treatment from different hospital supports that he had undergone surgery. Mr. Shah submits that merely because agent has not disclosed facts correctly is an excuse not permissible in the eyes of law especially when statement made in proposal form is signed by deceased life assured and therefore, he cannot disown the same. It has been held Hon'ble Supreme Court that while filling up proposal form, agent is acting for and on behalf of proponent and therefore he is agent of insured and anything mentioned wrongly in the proposal form, it is binding to insured proponent. Mr. Shah submits that it is not necessary that cause of death must have nexus with materials suppressed but necessary is it must have affected decision of insurer whether to accept proposal or not. In the instant case, had it been disclosed that deceased is suffering from dry gangrene, insurance company would not have Rnm a7402017 Page 3 of 7 accepted proposal at all. Thus, it is clear breach of UTMOST GOOD FAITH and therefore complainant is not entitled to claim any amount under the policy. He also further submits that insurance company has cancelled policy and returned premium shows that it has acted bonafidely and not taken any disadvantage otherwise insurance company has right to retain premium received as his risk was assured for two years. Mr. Shah therefore submitted that District Commission has ignored well established principles of UTMOST GOOD FAITH and wrongly allowed the complaint.
[7]. Mr. B S Malkan had submitted written synopsis and submitted that the order passed by the District Commission is just and fair considering facts of the present case and therefore no interference is required. It is submitted that nothing new has been argued by the opponent and therefore findings of District Commission is based on sound principles of law and therefore appeal is to be dismissed with cost to present appellant. He submitted that when it came to the knowledge of the opponent that proponent is illiterate, agent was provided by the opponent insurance company ought not to have replied in English. It is not in dispute that life assured had relied upon the agent provided by insurer and he committed mistake and therefore complainant cannot be deprived of her legitimate right. He also further submitted that the complainant has joined Manager (in whose presence form was filled up) however he deliberately avoided to appear and to file reply. The District Commission has rightly addressed it and proceeded ex-parte against it. It is surprising that opponent had submitted in its written statement for deletion of party. He submits that deceased life assured never suppressed any material information and filed appropriate answer in reply to interrogatories too. That has been considered by the District Commission and therefore defence of the opponent was not believed and passed order direction insurer to remove deficiency in service and to pay claim amount. Mr. Malkan has referred following judgments (a). 2018-CPJ-95-NC SBI Life Insurance vs Baijnath Tanti (b). 2018-1-CPJ-208 (NC) Bajaj Allianze Life Insurance Co vs D Ayyapu Reddy (c). 2018-2-CPJ-374 (NC) Vipin Grover vs New India Assurance Co. Ltd (d). 2018-2-CPJ-510 (NC) Royal Sundaram Allianze Insurance Co. vs Melanie Das and
(e). 2018-1-CPJ-21(SC) D Srinivas vs SBI Life Insurance Co Ltd. And submitted that impugned order is just and appeal is to be dismissed.
[8]. We have gone through the impugned order, pleadings of parties, documentary evidence placed on record and considered rival submissions of parties. It is not in dispute that opponent insurer had issued policy and second annual premium was also paid by the life assured. It is not in dispute that proposal was signed by the deceased life assured wherein he was asked questions related to his health and it was specifically asked whether he had undergone any surgery and it was replied in negative. The pleadings in the complaint petition makes it further clear that deceased life assured was under treatment for dry gangrene and he had been treated Rnm a7402017 Page 4 of 7 at various hospitals. However, it is case of complainant that this fact was disclosed before agent but he did not mention it in the proposal. Thus, facts remain admitted that life assured was suffering from ailment and it was not mentioned in the proposal. Merely because agent has not filled up details of life assured in proposal form will not give any benefit to insured as while filling proposal form agent is acting on behalf of the proponent. Whatever filled up in proposal form and that is signed by the life assured therefore he owns the responsibility for the same. Page 54 of the record is copy of the proposal form and writings above life assured's signature reads as under:
"15. Declaration by the proposer/ HUF Karta/ Life to be assured:
I hereby declare that the forgoing information and answers have been given by me after fully understanding the questions and the same are true, accurate, and complete in every manner and that I have not withhold or omitted to give any information. Further I have not provided any false information in reply to any question. I understand and agree that the statements in this proposal constitute warranties. I do hereby agree and declare that these statements and this declaration shall be the basis of the contract of assurance between me and SBI life insurance co. ltd and that if there is any mis-statement or suppression of material information or if any untrue statement be contained therein the said contract shall be absolutely null and void and all moneys which shall have been paid in respect thereof shall stand forfeited subject to Sec.45 of the Insurance Act, 1938.
The above declaration is clear and proponent is accepting liability of the statements made in the proposal form. Therefore, now it cannot be permitted that the agent had not answered questions correctly though he was given all material information.
[9]. It is also important to note that the opponent insurer in its version at paragraph 8 replied as under:
"8. That the Life Insurance Contract is a Contract of "utmost good faith" wherein the proponent is duty bound to disclose everything concerning his/her health, habits and other related matters which are within his / her knowledge at the time of making the proposal for insurance cover and even before the date of commencement of the policy, failing which the insurer has every right to repudiate the claim. In the instant case, the Deceased life Assured (Hereinafter referred as DLA), shri Karabhai Nathabhai Suva committed a breach of the principles of utmost good faith by suppressing the material fact that the DLA had undergone surgery and he was suffering and under treatment for Dry Gangrene and Gouty Arthritis disease prior to the date of submission of the proposal for issuance of the policy.
9. In the proposal form, the DLA replied in negative to the specific questions no. 14 (ii) and 14(iii). But from the documents produced on record, it is evident that the DLA had undergone surgery and he was suffering and under treatment for Dry Gangrene and Gouty Arthritis disease prior to the date of submission of the proposal form which deceased had not informed to SBI Life and fraudulently procured the Policy"
While passing impugned order, the District Commission not appreciated defence and misdirected itself and wrongly held that deceased life had expired due to heart attack and not due to dry gangrene and therefore it had no nexus with the cause of death. The District Commission ought to have considered that a person making a contract of insurance must tell the truth and above referred declaration gives authority to insurer to cancel the policy subject to provision of Sec. 45 of The Insurance Act. According to said provision, insurer company Rnm a7402017 Page 5 of 7 can call upon the policy in question within three years, if it is proved on record that statement made in the proposal form were incorrect. In the instant case, the complainant herself has stated that it is true that DLA was suffering from Dry gangrene and had taken treatment but those facts were disclosed before agent but he did not mention it. Thus, suffering from dry gangrene is not in dispute. The District Commission miserably failed to appreciate this aspect and therefore hold that there was no nexus with the cause of death. It is to be remembered that the facts which were within the knowledge of proponent, he should declare it irrespective of any other thing. When the validity of contract has been challenged because of misrepresentation even entry into contract was illegal and therefore enforcement of contract can not be done on other excuses. It has been rightly canvassed by the opponent insurer that Hon'ble Supreme Court in the case of Mithoolal Nayak vs LIC of India (1962-AIR-SC-
814)has held that second part of Sec. 45 says in effect that if the insurer shows that such statement was on a material matter or suppressed facts which it was material to disclose and that it was fraudulently made by the policy holder and that the policy holder knew at the time of making it that the statement was false or that it suppressed facts which it was material to disclose, then the insurer can call in question the policy effected as a result of such inaccurate or false statement. It was further held that by reason of a breach of warranty by one of the parties to the contract, the other party shall be discharged from the performance of the contract.Therefore, insurer was right in cancelling the policy that was taken by the complainant's husband and complainant is not entitle to any amount under the contract of Insurance.
[10]. Hon'ble Supreme Court in case of LIC of India vs Manish Gupta (2019-3-CPJ-31(SC)) also reiterated that any incorrect statement in the proposal of insurance contract gives power to insurer to disown the liability for breach of utmost good faith. In Reliance Life Insurance Company ltd vs Rekhaben Rathod (2019-2-CPJ-53(SC)) it was held that while filling proposal form for insured, agent of insurer acting as agent of insured and therefore any misstatement or incorrect statement in proposal form proponent would be responsible. Although Mr. Malkan had submitted authorities, facts of all these cases are different and therefore ratio laid down in all these judgments cannot be applied to facts of the present case. In D Srinivas case proposal was not finalised for long time whereas in the case on hand, not only policy was issued but even second annual premium was also paid. Therefore, in D Srinivas case there was no applicability of Sec.45 as contract was not concluded but here contract was concluded and then cancelled for suppression of facts.
Considering all these aspects we are of the opinion that complainant was not entitle to claim policy amount for suppression of material information and especially period prescribed in Sec.45 has not been over, insurer has legitimate right to cancel policy and if it is done, it Rnm a7402017 Page 6 of 7 cannot be termed as deficiency in service. The order and judgment passed by District Commission is therefore requires to be quashed and set aside. We therefore, pass following final order:
Order The appeal no. 740 of 2017 is hereby allowed.
The order and judgment dated 8th November 2017 of District Commission, Rajkot (Additional) in complaint no. 323 of 2016 is hereby quashed and set aside and original complaint stands dismissed.
There shall be no order as to cost. The copy of this order be supplied to parties free of cost at the earliest and also supply a copy in pdf format to concerned District Commission for their record purpose and to do needful. The office is hereby directed to initiate process of refund to appellant for the deposits together with interest accrued thereon at the earliest and advocate for the appellant is directed to furnish bank details of appellant to enable office of this Commission to refund through RTGS / NEFT.
Pronounced on this 31st day of July 2023.
Ms. P R Shah Mr. R N Mehta
Member Presiding Member
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