Life Insurance Corporation of India vs MANIKLAL PATEL

LIFE Insurance Corporation of India (L.I.C.) has come up in appeal against the order dated 19.2.1995 passed in Case No. 25/95 by the District Consumer Disputes Redressal Forum, Sidhi (for short the ''District Forum'').

ONE Baijnath Patel the grand-father of the complainant got his life assured for the sum of Rs. 50,000/- dated 23.9.1993, table and term 14-10, half yearly premium Rs. 2,863/- vide Endowment Assurance Policy (With Accident Benefits), Policy No. 370361961. The assured died on 5.8.1994. The nominee the grand-son submitted the claim form. The claim was repudiated on the ground that the policy was fraudulently obtained by suppressing the correct age by the deceased at the time of taking of the policy. He had shown his age in the proposal form as 49 years, but, in fact he was above 70 years of age. The complainant filed a complaint. The complaint was resisted. The District Forum after appreciation of evidence held that at the time of taking of the policy the deceased was aged about 70 years, hence, was not entitled to obtain the policy. Therefore, the contract of insurance so entered into between the deceased and the L.I.C. was against the public policy, hence, the claim was rightly repudiated. However, the District Forum has ordered for refund of the amount of premium of Rs. 14,462/ - with interest thereon at the rate of 12% per annum from 30.3.1995. Learned Counsel for the appellant contended that the policy was fraudulently obtained inasmuch as the deceased submitted an affidavit about the age which was found to be incorrect. The gap of the age is not 4 or 5 years, but, is of more than 21 years, therefore, under condition No. 5 of the policy, the amount of premium was rightly forfeited. Counsel cited a decision of Supreme Court in Mithoolal Nayak v. Life Insurance Corporation of India, AIR 1962 SC 814, and a decision of the National Commission in Life Insurance Corporation of India Limited & Anr. v. Kantaben, I (1996) CPJ 115 (NC).

Mr. Mohan Chouksey, learned Counsel for the respondent supported the award.

AFTER hearing Counsel, we are of the opinion that the order of the District Forum cannot be sustained. It is a clear case of fraud and of obtaining the policy fraudulently, therefore, the policy was rightly called in question under Section 45 of the Insurance Act, 1938 and in view of condition No. 5 of the policy the amount of premium so deposited was rightly forfeited. The condition No. 5 reads thus : "5. Forfeiture in certain events-In case the premiums shall not be duly paid or in case any condition herein contained or endorsed hereon shall be contravened or in case it is found that any untrue or incorrect statement contained in the proposal, personal statement, declaration and connected documents or any material information is withheld, then and in every such case, but subject to the provisions of Section 45 of the Insurance Act, 1938, wherever applicable, this policy shall be void and all claims to any benefit in virtue hereof shall cease and determine and all money that have been paid in consequence hereof shall belong to the Corporation, excepting always in so far as relief is provided in terms of the privileges herein contained or may be lawfully granted by the Corporation."

The contracts of insurance are of utmost good faith. The proposer of life insurance is under an obligation to disclose all material facts within his knowledge relating to the state of his health and other material facts. In the present case, it cannot be doubted that the insured was a grand-father who by suppression of the fact of his correct age obtained the policy by playing fraud upon L.I.C. The Supreme Court in case of Mithoolal Nayak''s case (supra), has held that when the contract is bad on the ground of fraud the party who has been guilty of fraud cannot ask for the refund of the money paid under the contract. The policy taken by the deceased is vitiated by fraud committed by him upon L.I.C. The National Commission in LIC v. Kantaben (supra), following the decision of the Supreme Court in Mithoolal''s case has taken the same view.

IN the result, the appeal is allowed. The order of the District Forum is set aside. No costs. Appeal allowed.