BEFORE THE CONSUMER DISPUTES REDRESSAL COMMISSION, RAJASTHAN, JAIPUR


APPEAL NO: 1937/2006


Life Insurance Corporation of India,

through Br.Manager, Hindon city,

Distt. Karauli.

Opposite party-appellant


Vs.


Megh Ram Meena,

r/o Ganwadi Meena, Post Danalpur

Via Shri Mahaveerji,Teh. Hindon city,

Distt. Karauli.

Complainant-respondent


Date of judgment 18.5.09


Before:


Mr.Justice Sunil Kumar Garg- President

Mr.G.S.Hora -Member


Mr.J.P.Sharma counsel for the appellants

Mr. Himmat Singh counsel for the respondent


JUDGMENT


BY THE STATE COMMISSION, ( PER HON. MR.JUSTICE SUNIL KUMAR GARG, PRESIDENT )


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This appeal has been filed by the appellants LIC against order dated 15.9.06 passed by the District Forum, Karauli in complaint no. 45/2006 by which the complaint of the complainant was allowed in the manner that the appellants were directed to pay a sum of Rs. 1 lac, the amount of the LIC policy alongwith interest @ 10% p.a. w.e.f. 23.12.03 the date on which the claim was repudiated and further to pay a sum of Rs.1000/- as costs and Rs. 10,000/- as amount of compensation for mental agony .


2. It arises in the following circumstances-

That the complainant respondent had filed a complaint before the District Forum, Karauli on 10.4.06 inter alia stating that his wife Janta Devi Meena, now deceased had taken a life insurance policy for a sum of Rs. 1 lac from the appellants bearing policy no. 194093587 on 20.12.02 for twenty years and at the time of taking the policy the deceased was of the age of 31 years and the payment of premium was to be paid for 15 years and thereafter for five years the premium was to be deducted from the bonus. It was further stated in the complaint that suddenly on 21.3.03 the deceased felt some pain in her chest and she was taken to Majaveerji where she had died and after the death of the deceased claim was preferred by the complainant respondent being the husband and nominee of the deceased before the office of the appellants but that claim was repudiated by the appellants through letter dated 23.12.03 on the ground that before taking the policy in question the deceased had filled in up a declartion form regarding her health on 8.12.02 in which in column 4.A she had mentioned that she was a labourer and that

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question was answered in that column known as present occupation but this answer was not correct as she was not doing any job and thus on that ground case of suppression of material facts was found. Thereafter the present complaint was filed.


A reply was filed by the appellants on 26.5.06 and they have taken the same pleas which were taken by them in the repudiation letter dated 23.12.03. It was further stated in the reply that since in column 4. A the deceased had mentioned that she was a labourer and in the affidavit pertaining to declaration of age, she had shown herself to be a homely lady, therefore, both stands were contradictory with eath other and from that point of view answer given by the deceased in column 4.A should be treated as wrong one and it was prayed that claim was rightly repudiated by the appellants and complaint be dismissed.


After hearing the parties the District Forum, Karauli

through impugned order dated 15.9.06 had allowed the complaint inter alia holding that -


(i) That since at the time of accepting the policy, when in column 4.A the fact of labourer was mentioned, therefore, after death of the deceased the LIC could not differ from that stand and further the present case could not be said to be case of suppression of material facts regarding declaration about profession on the part of the deceased and further in the villages the lady also works as labourer and also does the work at home, therefore, it could not be said that she

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was intentionally given wrong answer.


(ii) That the appellants were not justified in repudiating the claim of the complainant respondent and it had amounted to deficiency in service on the part of the appellants.


Aggrieved from that order dated 15.9.06 passed by the District Forum, Karauli , this appeal has been filed by the appellants.


3. In this appeal the main contention of the learned counsel for the appellants is that since the answer given by the deceased in column 4.A was wrong one as in the affidavit pertaining to declaration of age, she had shown herself to be a homely lady, therefore, it was a case of suppression of material facts regarding profession and further in cases when the women are allowed to take LIC policy of Category II, they have to fullfil the following conditions:


i. Other members of the family are adequately insured.

ii. The female life to be assured has good educational and social background.

iii. MHR by the competent authority should clearly indicate the source of income and social status of the life proposed.


and further if correct position would have been disclosed by the deceased, the policy in question would have not been issued in her favour and thus the claim of the complainant respondent was rightly repudiated by the appellants through letter dated 23.12.03

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and the District Forum had committed serious error and illegality in decreeing the claim of the complainant respondent. Hence the impugned order could not be sustained and liable to be quashed and set aside and this appeal deserves to be allowed.


4. On the other hand, the learned counsel appearing for the respondent has supported the impugned order of the District Forum and has further stated that apart from the grounds on which claim was allowed there are other grounds for dismissing the appeal as in this case the deceased was an illiterate lady as she had put thumb impression on her proposal form and the proposal form was filled in up by the agent Ramniwas Gupta and therefore , if anything was found wrong one on the part of the deceased, for that the deceased could not be held responsible as the terms and conditions of the policy were not disclosed to the deceased and from that point of view also the present case is not a case of suppression of material facts regarding profession and thus appeal be dismissed.


5. We have heard the learned counsel for the appellants as well as for the respondent and had gone through the entire materials available on record.


6. There is no dispute on the point that the deceased had taken a life insurance policy for a sum of Rs. 1 lac from the appellants bearing policy no. 194093587 on 20.12.02 for twenty years


7. There is also no dispute on the point that deceased had died on 21.3.03 meaning thereby within two years of issuance of the policy.


8. There is no dispute on the point that the claim of the above mentioned policy was repudiated by the appellants through letter dated 23.12.03 on the grounds mentioned therein.


9. There is no dispute on the point that in column 4.A of the proposal form the word "Majdoori" was mentioned and there is also no dispute on the point that the deceased was an illiterate lady as she had put her thumb impressions on the proposal form and affidavit regarding declaration of age is printed in English and on that also she had put her thumb impressions.


10. There is no dispute on the point that at the time of taking the policy in question the deceased was a young lady of 30 years.


11. Thus, in the facts and circumstances just narrated above, the question for consideration is whether repudiation of claim of the complainant by the appellants was justified or not or whether findings of the District Forum decreeing the claim could be sustained or not .


On suppression of material facts


12. It may be stated here tht it is the fundamental principle of insurance law that utmost good faith must be observed by the contracting parties and good faith forbids either party from non-disclosure of the facts which the parties known. The insured has a duty to disclose and similarly it is the duty of the insurance company and its agents to disclose all material facts in their knowledge since obligation of good faith applies to both equally and in this respect, the decision of the Hon'ble Supreme Court in M/s.Modern Insulators Ltd. Vs. Oriental Insurance Co. (AIR 2000 SC 1014) may be referred to.


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13. The onus probandi, in cases of fraudulent suppression of material facts rests heavily on party alleging fraud namely the insurer. In this respect, the decision of the Hon'ble Supreme Court in LIC Vs. Smt. G.M.Channabasemma (1996 (III) CPJ 8 (SC) may

be referred to where it was held that the burden of proving that the insured had made false representation and suppressed material facts is undoubtedly on the LIC of India. Furthermore, mere concealment of some facts will not amount to concealment of material facts and if there is fraudulent suppression of material facts in the proposal, the policy could be vitiated otherwise not.


14. Suppression of fact must be a conscious operation of the giver of the answer which he knowingly did not disclose.


15. The Hon'ble National Commission in National Insurance Co. Ltd. Vs. Bipul Kunda (2005 CTJ 377 (CP) (NCDRC) ) has held that for repudiating a claim of an insured, it is for the insurer to show that a sttement on a fact, which was material for the policy, had been suppressed by the insured and that statement was fraudulently made by him/her with the knowledge of the falsity of that statement.


16. It may further be stated here that even if the death takes place within two years, mis-representation, if any, that should be material in the sense of having some effect upon life expectation whether direct or indirect and if it is found material, that defence could be taken by the Insurance Company, not otherwise.


17. The word "misrepresentation" means suggestio falsi, in matter of substance essentially material to the subject, whether by acts or by words, by manoeuvres, or by positive assertions or

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material concealment (suppressio veri) whereby a person is misled and damnified.


18. The word "fraud" means a conduct either by letter or words, which induces the other person, or authority to take a definite determinative stand as a response to the conduct of former either by word or letter. In this respect, the decision of the Hon'ble Supreme Court in Ram Preeti Yadav Vs. UP Board of High School & Intermediate Education and ors. (JT 2003 (Supp.I) SC 25 ) may be referred to.


19.. It is well settled that misrepresentation itself amounts to fraud in some cases.


20. The word "misconduct" means an act or conduct in the nature of a breach of trust or an act resulting in loss to other party.


21. The word "suppression of fact" envisages a deliberate or conscious omission to state of fact with the intention of deriving wrongful gain. In this respect, the decision of the Hon'ble Supreme Court in Collector of Customs Calcutta Vs. Tin Plate Co. of India Ltd. ( (1997) 10 SCC 538 ) may be referred to.


Insurance Company is State with in article 12 of Constitution of India


22. The Hon'ble Supreme Court in Biman Krishna Bose Vs. United India Insurance Co. Ltd. & ors. reported in III (2001) CPJ 10 (SC) had observed in the following manner-


(i) That the Insurance Companies are "State" within the

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meaning of Article 12 of the Constitution of India and they are expected to act fairly and reasonably.


(ii) That the Insurance Companies are required to satisfy the requirement of reasonableness and fairness while dealing with the customers. They must not take any irrelevant and extrneous considertion while arriving to a decision. Arbitratiness should not appear in their actions or decisions.


23. In this respect we may further add that agents of LIC are bound to disclose full information relevant and advantageous to the insured. The purpose of creating the Corporation is to serve the interest of consumers.


24. Further in insurance practice generally insurer's agent approaches proposers for insurance and gets the proposal form filled up and signed by them with a declaration that the answers are true and shall be the basis of the contract.


25. Apart from that generally the declaration form is filled in up by the agent of the LIC in presence of the insured and if some untrue answers are made in the proposal and insured signs it without the knowledge of the implications, in such a case insured could not be put at fault and the policy would be enforceable against the insurer.


Misrepresentation or fraud by agent


26. Section 238 of the Contract Act provides that misrepresentation made or frauds committed by agents acting in

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the course of their business for their principals, have the same effect on agreements made by such agents as if such misrepresentations or frauds had been made or committed by the principals.


27. The application of Section 238 of the Contract Act requires that to make the principal liable, the misrepresentation or fraud must be committed by the agent in the course of business or employment i.e. falling within the scope of authority of the agent.


28. A principal is liable for the agent's fraud acting within the scope of his authority, whether the fraud is committed for the benefit of the principal or for the benefit of the agent.


29. Keeping in mind the above legal position, if the facts of the present case are examined in broad prospective it clearly appears that the proposal form dated 8.12.02 was got filled in up by the agent himself and the deceased had only put her thumb impressions on it which clearly reveals that she was not literate lady at all and if in the above circumstances in colm.4.A of the proposal form in which the word "Majdoori" was written, it could not be said that she had fraudulently mentioned that fact or she was aware of that fact.


30. It may further be stated here that from the record it is very much clear that after taking the policy and before her death the deceased had never been admitted in any hospital, meaning thereby the death of the deceased was a sudden death and when the death of the deceased was a sudden death, in such a case it could not be said that the deceased was aware that she would die in near future and from that point of view also it could not be said

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that the deceased had knowingly and fraudulently mentioned in colm. 4.A the word " Majdoori" while in the affidavit pertaining to declaration of age, in which she had mentioned that she is " homely lady" but for the above difference, it could not be said that in the proposal form the word " Majdoori" or in the affidavit regarding age the word " homely lady" had been mentioned by the deceased with any fraudulent intention as she was an illiterate lady, especially when the declaration form regarding age as well as the proposal form were filled in up by some other persons, therefore, for that difference, there would be no case of suppression of material facts on the part of the deceased and the LIC could not escape from its liability on the ground of suppression of material facts.


31. When onus in cases of fraudulent suppression of material facts rests heavily on the party alleging fraud,viz the insurer,therefore,that burden has to be discharged by the LIC and in the present case the appellants LIC had failed to discharge that burden and,therefore,the stand taken by the appellants LIC in repudiating the claim of the complainant respondent no.1 under the policy could not be accepted.


32. It may further be stated here that since the proposal form was filled in up by the agent of the LIC and if any mistake was committed by him during his course of employment, for that LIC could be responsible for the act of its agent and from that point of view also, since the deceased was an illiterate lady and if something was found missing in the proposal form, for that it could not be said that it was due to any misrepresentation or fraud played by the deceased on the LIC.


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33. Thus,mentioning the word " Majdoori" in column 4.A of the proposal form by the deceased would not amount to suppression or concealment of material fact or misstatement in real sense and,therefore,the appellants LIC were not justified in repudiating the claim of the complainant respondent on the ground of suppression of material facts regarding profession and thus the District Forum was right in decreeing the claim of the complainant respondent.

Life Insurance Corporation is a social welfare institution


34. The Hon'ble Supreme Court in the case of Life Insurance Corportion of India Vs. Anuradha (II (2004) SLT 1065= III (2004) CLT 5 (SC)= (2004) 10 SCC 131, has observed that the Life Insurance Corporation is a social welfare institution, more so when life insurance has been nationalised and the service is not available in the private sector. Thus it could be said that the institution of LIC has been established as a welfare measure and similarly the C.P.Act,1986 is also a benevolent welfare statute for the protection of consumers. Taking into that consideration also the repudiation of the claim of the complinant respondent by the appellants could not be justified.


35. Thus it is held that the present case was not a case of suppression of material facts on the part of the deceased and,therefore, the appellants were not justified in repuditing the claim of the complainant respondent on ground of suppression of material facts regarding profession and the District Forum was right in decreeing the claim of the complainant respondent.


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36. So far as the argument of the learned counsel for the appellant that before issuing the policies to the women some conditions have to be filled in up by them and since in the present case had the fact that she was a homely lady be mentioned, the policy in question would have not been issued in favour of the deceased is concerned, in our considered opinion; whatever has been stated above, from that; it clearly appears that she could not be found guilty of suppression of material facts in filling the column 4.A of the proposal form as she was a totally illiterate lady and if anything is found wrong, she could not be held responsible

in any way. Therefore, this argument of the learned counsel for the appellant stands rejected.


37. For the reasons stated above, it is held that the present case was not a case of deliberate suppression of material facts on the part of the deceased and appellants were not justified in repudiating the claim of the complainant respondent on the ground of suppression of material facts and the appellants have repudiated the claim of the complainant-respondent without any basis and on wrong assumption and in an arbitrary manner and in view of this, the findings of the District Forum decreeing the claim of the complainant respondent no are liable to be confirmed as they are based on correct appreciation of entire materials and evidence available on record and they do not suffer from any basic infirmity, illegality or perversity and this appeal deserves to be dismissed so far as merit of the case is concerned.


On point of rate of interest


38. In this case the District Forum has awarded interest @ 10% p.a w.e.f. 23.12.03, the date on which the claim was repudiated by

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the appellant and in our considered opinion, the rate of interest awarded by the District Forum appears to be on higher side and looking to the entire facts and circumstances of the case, we deem it proper to award interest at the rate of 9% p.a. instead of 10% p.a. from the date of filing of the complaint and to that extent, the impugned order of the District Forum is liable to be modified.


Accordingly, this appeal filed by the appellants on merits is dismissed. However, the appellants LIC would pay interest on the decreetal amount at the rate of 9% p.a. instead of 10% p.a. from the date of filing of the complaint and to the above extent on point of interest the impugned order of the District Forum,Karauli dated 15.9.06 stands modified accordingly.



(G.S.Hora) (Justice Sunil Kumar Garg)

Member President