Life Insurance Corporation of India vs Shashi Sharma

THIS is an appeal under Section 15 of the Consumer Protection Act (hereinafter called the ''Act''), 1986 against the judgment and order dated 16.8.2001 passed by District Consumer Forum. I, Agra in Complaint Case No. 495 of 1999, Smt. Shashi Sharma v. Life Insurance Corporation of India whereby District Consumer Forum directed the appellant LIC to pay Rs. 1,00,000/- of both the policies along with 12% per annum interest to the complainant and Rs. 1,000/- as compensation towards mental agony and harassment.

A complaint under Section 12 of the Act was preferred by the complainant with the averments that her husband Arun Kumar Sharma assured his life vide two Policy Nos. 261047690 and 261047993 on 5.1.1995 and 24.8.1995 each amounting to Rs. 50,000/-. He was not suffering from any disease at the time of taking the policies nor he cancealed anything from LIC. It was further stated in the complaint that the assured died on 29.6.1997 due to heart attack and the information about the death was given to the L.I.C. on 17.7.1997 and in response to that LIC sent papers for making formalities on 30.7.1997 which were complied with. However, vide letter dated 23.12.1997 it was informed to the complainant that as life assured had concealed the facts about the illness at the time of taking of policies, as such claim was repudiated. Hence the complaint was filed.

The appellant/opposite party filed an objection and admitted the policies but specific plea taken was that the assured was suffering from diabetes and hypertension even prior to the date of proposal but the insured had concealed the said ailments while offering the policies and as such the claim was repudiated. It was further pleaded that other policies of the assured were already disposed of and the amount under the said policies had been paid to the nominee but the amount of the present policies has not been paid as the life assured had died after obtaining the policies and as such investigations were conducted and it was revealed that the life assured was suffering from diabetes and hypertension. Yet the insured offered the policies by playing fraud and concealing the material facts of illness.

IN support of his contention the complainant filed affidavit along with copies of payment of premium, copies of the letters and the correspondence between the parties, copy of the repudiation letter etc. which have been marked as Annexures 5/1 to 5/13. With the additional counter affidavit the appellant filed copy of repudiation letter, copy of the certificate of treatment of one Arun Kumar Sharma, r/o Ram Nagar Colony, Agra, copy of E.C.G. report, copy of the prescription issued by one Dr. C.R. Rawat, Director of Agra Heart Centre, Agra.

AGAINST these documents, the complainant also filed rejoinder affidavit denying the treatment by Dr. C.R. Rawat. The learned District Forum after perusing the record available passed the aforesaid order. Aggrieved against the same, present appeal has been filed. We have heard learned Counsel for the appellant Mr. B.L. Jaiswal and learned Counsel for the respondent/complainant Mr. A.K. Pandey and have perused the memo of appeal, other material along with annexures and written arguments in brief.

THE impugned judgment and order was criticised by Mr. Jaiswal mainly on the ground that deceased insured Arun Kumar Sharma inspite of the fact that he was suffering from ailments of diabetes and hypertension concealed this material fact while taking the aforesaid policies and as such the appellant was very well justified in repudiating the claim under Section 45 of the Indian Insurance Act. It was also argued that on the strength of the affidavit, annexures, certificate of Dr. Rawat, it was amply clear that Arun Kumar Sharma was under regular treatment of Dr. R.C. Rawat for getting him cured from the diseases of diabetes and hypertension. Yet the District Forum for no rhyme and reason rejected the objection of the appellant and sustained the claim.

MR. Pandey on the other hand submitted that the deceased was not suffering from the ailments of diabetes and hypertension before taking of the aforesaid two policies nor he was medically treated by Dr. C.R. Rawat and it was a clear case of a heart failure all of a sudden due to which Sri Arun Kumar Sharma died on 29.6.1997. Further it was submitted that in all there were six policies out of which claim with regard to four policies bearing Nos. 26800138, 26800662, 26800666 and 58903956 have been settled and that is why it was argued that rejecting the claim of the complainant with regard to two policies and allowing the claim of four other policies, a double standard was employed and arbitrary approach which is not sustainable in the eyes of law. Further more, the report of Dr. Rawat was criticised by MR. Pandey on the ground that it was based on no material and it was very vague and it was not possible for anyone to opine for want of any material after such a long time. In our considered opinion prior to coming to a conclusion and with a view to better appreciate the facts of the case it will be just proper to make a reference of the ratios which may be helpful in determination of the case.

Section 45 of the Indian Insurance Act gives the right of repudiation. The scope of Section 45 has been well explained by the Hon''ble Supreme Court of India in Mithoo Lal Nayak v. L.I.C. of India, AIR 1962 SC. p 814. The conditions of the applicability are as follows: (i) the statement must be on material matter or must as press facts which it was material to disclose; (ii) the suppression must be fraudulently made by the policy holder; (iii) the policy holder must have known at the time of making statement that it was false or that it suppressed fact which fact was material to disclose.

THUS it has been held that the test to determine the materiality is whether the fact has any bearing on the risk undertaken by the insurer. If the fact has any bearing on the risk, it is a material fact. This would be a fact, the knowledge or ignorance of which would materially influence an insurer in making the contract or estimating the degree and character of the risk or in fixing the rate of premium or to decline the risk. Any fact which tends to suggest that the life assured is likely to fall short of the average duration would be a material fact. Further the Hon''ble High Court in Civil Writ Misc. Petition No. 26862 of 2003 reported in III (2004) CPJ 627 (DB), Shanta Bai @ Basanta Devi v. LIC of India and Others, has held that "since the petitioner''s husband played fraud on the LIC by concealing material facts we are not inclined to exercise our discretion under Act 226 of the Constitution of India in this case".

FURTHER in another case-Senior Divisional Manager v. Smt. Raksha Goel, reported in II (2002) CPJ 92 (NC), the Hon''ble NCDRC has held that "Compassion that is a concern for the sufferings or misfortune of the complainant is one thing but that cannot overturn the law". The Hon''ble NCDRC in the case of L.I.C. of India and Others v. Smt. Shashi Bala, reported in IV (2003) CPJ 91 (NC), has held that "No one should forget that policy is issued on trust and in good faith. It is for both the parties to maintain this well laid principle". It further held that "deceased suffering from diabetes, not disclosed-Nexus between diabetes mellitus and heart attack well established. Repudiation "justified". For sustaining the repudiation the burden is on the appellant Insurance Company to prove conclusively that at the time of insurance, the insured was suffering from illness and further obligation is of the Insurance Company to prove conclusively that the factum of illness was suppressed by the insured and the policy was obtained by playing fraud. Further the obligation of the Insurance Company is to prove that the illness was the cause of the death. The case is to be seen in this perspective. In the instant case by way of affidavits dated 5.5.2000 and 25.4.2001 the complainant has specifically deposed that her husband was not suffering either from diabetes or hypertension whereas through counter affidavit and the additional counter affidavit filed by Sri N.D. Bagri, the Administrative Officer (Law) of the LIC has stated that on enquiry it was revealed that the insured was suffering from diabetes and hypertension prior to the submitting that proposal form and he concealed all the material facts regarding his ailment and obtained policies by playing fraud and by concealing material facts. It was also averred that the life assured was under treatment of Dr. C.R. Rawat who by a certificate has certified that "late Arun Kumar Sharma aged 49 years, r/o 2/42, Ram Nagar Colony, Agra was under my treatment for one/two years, about three years back. He was being treated for hypertension and diabetes until his death".

ON the face of it the two affidavits filed by Sri N.D. Bagri carries no credence, neither it cannot be a case of personal knowledge with Sri N.D. Bagri, Administrative Officer (Law) to know that the insured was suffering from diabetes and high blood pressure prior to submitting of the proposal form nor it can be accepted otherwise. Even the certificate of Dr. Rawat which has been mentioned above suffers from vagueness. He has not been certain as to since when Arun Kumar Sharma was suffering from diabetes and illness of hypertension. He has himself written that "he was under my treatment for one/two years about three years back".

THE case of the complainant on the other hand is based on personal knowledge. She being the nominee and the wife, in all fairness, is supposed to know about the illness of her husband. She has been very frank enough to accept in para 1 of her affidavit that her husband was under treatment for some time. She has specifically stated that there was no medical treatment prior to the taking of the policy regarding the ailment of diabetes and/or hypertension. Obviously the exercise of discretion of repudiation of the appellant under Section 45 of the Insurance Act is arbitrary based on no evidence and is the outcome of non-exercise of proper discretion. In the instant case besides the above two policies, the insured also took policy Nos. 26800138, 26800662, 26800666 and 58903956 and after the death of the insured, when the claim was made by the complainant, the same was accepted by the LIC and the claims were satisfied. If it was a case that the insured was suffering, prior to the proposals, from illnesses of diabetes and hypertension, then in all fairness the claim with regard to these proposals should also have been rejected, but that has not been done. That shows that the repudiation of these two claims is no substance. Thus in view of the above discussion we are of the opinion that the findings recorded by the learned District Forum are well reasoned and needs no interference.

The appeal is liable to be dismissed. However, the rate of interest awarded by the learned District Forum @ 12% is excessive. Hence it is reduced to 6% per annum. To this extent the appeal is liable to be allowed. ORDER Appeal is allowed to the extent that the rate of interest is reduced from 12% to 6% per annum. With this modification the rest portion of the judgment and order are confirmed. There will be no order as to costs. Let copy as per rules be made available to the parties. Appeal allowed.