Life Insurance Corporation Of ... vs Unknown
2023 Latest Caselaw 2321 j&K

        HIGH COURT OF JAMMU & KASHMIR AND LADAKH
                        AT JAMMU

                                                   OWP No.401/2010

                                               Reserved on 10.10.2023

                                               Pronounced on 17 .10.2023


Life Insurance Corporation of India th. Shri                    ..... petitioners (s)
Rangil Singh son of Sh. Bharat Singh age 52
years, R/O House No. 196 Lane No. 6, Great
Kailash, Jammu posted as Manager
(Legal)/IT) Life Insurance Corporation of
India, Railhead Complex, Jammu

                                Through :- Mr.C.S.Gupta Advocate

                          V/s

                                                                .....Respondent(s)

1 J&K State Consumer Disputes Redressal Commission constituted under
Consumer Protection Act, Manda House, Palace Road, Jammu
2. State of Jammu and Kashmir through Commissioner/Secretary Consumer
Affairs and Public Distribution Department, New Secretariat Jammu
3.Smt. Padma Sharma wd of Sh. Joginder Lal Sharma resident of Village
Bhalwal Brahamana Tehsil Akhnoor and District Jammu
                            Through :- None

Coram: HON'BLE MR. JUSTICE SANJEEV KUMAR, JUDGE
         HON'BLE MR. JUSTICE MOHAN LAL, JUDGE

                                  JUDGMENT

Sanjeev Kumar J.

1. Life Insurance Corporation of India, the petitioner herein, invokes

the writ jurisdiction of this Court vested in it by Article 226 of the Constitution

of India to assail an order and judgment dated 11.11.2009 passed by the Jammu

and Kashmir State Consumer Disputes Redressal Commission ["the

Commission"] in appeal No.2600 titled „Life Insurance Corporation of India

vs Smt. Padma Sharma whereby the Commission has dismissed the appeal of

the petitioner and upheld an order dated 12.12.2003 passed by the Divisional

Forum, Jammu ["the Divisional Forum"].

Factual Matrix:

2. A complaint under Section 10 of the Jammu and Kashmir

Consumer Protection Act, 1987 ["the Act of 1987"] was filed by respondent

No.3 before the Divisional Forum alleging therein that her husband late

Sh. Joginder Lal Sharma had obtained an LIC policy bearing No. 140754977

covering the risk w.e.f 28.08.1997 to 28.08.2017. It was alleged that the

husband of respondent No.3 died on 19.09.1999 and despite intimation of death

of the insured, the petitioner-insurer repudiated the claim on the ground that the

deceased husband of respondent No.3 had suppressed material information

with respect to ailments he was suffering from at the time of entering into

contract of insurance with the petitioner-insurer. It was submitted that the

repudiation of claim of respondent No.3 by the petitioner-insurer amounted to

denial of service, as such, respondent No.3 was entitled to the assured amount

together with compensation.

3 The aforesaid complaint was, of course, contested by the

petitioner. In the objections filed by the petitioner-insurer, it was claimed that

late Sh. Joginder Lal Sharma was suffering from Adult Polycystic disease and

cancer at the time of entering into the contract of insurance, but the deceased

did not disclose this fact against the column raising a specific query as to

whether he was suffering from cancer. It was contended that the suppression of

the fact by the deceased husband of respondent No.3 was tantamount to

violation of trust between the parties, as such, the petitioner was well within its

right to repudiate the claim. It was also brought to the notice of the Divisional

Forum that the fact that the deceased husband of respondent No.3 was

suffering from various ailments including Cancer was substantiated by the

leave account of the deceased, a perusal whereof would indicate that the

deceased had been taking several spells of sick leave from his employer prior

to obtaining the insurance cover.

4 The Divisional Forum did not accept the stand of the petitioner-

insurer and vide its order dated 12.12.2003 allowed the complaint. Feeling

aggrieved, the petitioner approached the Commission by way of an appeal. The

appeal was heard in ex parte by the Commission and decided in terms of

judgment impugned in this writ petition.

5 The impugned judgment is assailed by the petitioner, inter alia, on

the following grounds:

(i) That both the Forum as well as the Commission erred in law in not appreciating the fact that the contract between an insured and the insurer is of utmost good faith and the insured is required to give true and fhull information as is requisitioned by the insurer at the time of obtaining insurance policy. Both the Forum and the Commission below did not appreciate that the deceased, by suppression material information about his health condition at the time of entering into contract of insurance, breached this faith and, thus, disentitled his nominee to claim the assured amount;

(ii) That the Commission could not have disposed of the appeal on merits when, for some reasons, the counsel appearing for the petitioner-insurer before it could not show up in time. It is contended that the Commission, despite having been requested for adjournment, proceeded to decide the appeal filed by the petitioner on merits without affording an opportunity of being heard to it; and,

(iii) That there is no application of mind by the Commission which has, in a mechanical manner, put a seal of approval on the order passed by the Divisional Forum.

Arguments and discussion:

5 Heard learned counsel for the parties and perused the entire

material on record.

6 From a reading of order dated 12.12.2003 passed by the

Divisional Forum, it clearly transpires that the petitioner-insurer has, by way of

evidence, amply brought on record that the deceased, a Government employee

had availed leave for different spells between 1995 to 1997. The petitioner has

also brought on record a certificate issued by Superintendent of S.M.G.S

Hospital, Jammu vide No. MRD/600 dated 29.09.2001 which shows that the

deceased had remained hospitalized as a case of „second Aries neck‟ (ulcerated

and bleeding) which was recovered after receiving radiotherapy and

Chemotherapy for CA Tonsil. As per the certificate of the Doctor, the

deceased developed this disease about one year back and was discharged on

request from the hospital on 11.10.1999. There is another certificate issued by

the Medical Officer, SDH Akhnoor on record which shows that the deceased

was suffering from different diseases w.e.f October 1995 onwards.

7 From the evidence on record led by the petitioner, the following

admitted position emerges:

(i) That the deceased was suffering from different ailments and was under treatment in SDH Akhnoor from October 1995 onwards;

(ii) That the deceased had obtained medical leave from his employer for different spells w.e.f 20.10.1995 till 13.10.1997;

(iii) That the deceased developed the disease „second Aries neck‟ (ulcerated and bleeding) in the year 1998 and remained hospitalized for the said disease in the year 1999 and received radiotherapy and chemotherapy;

(iv) That the death of the deceased was caused due to cancer; and,

(v) That admittedly the deceased did not share any information about his health condition at the time of entering into contract of insurance with the petitioner.

8 On the basis of the aforesaid admitted facts, both the Forum and

the Commission below have concurrently held that the disease „cancer‟ which

ultimately consumed the life of the deceased was developed in the year 1998

i.e after taking the insurance cover in the year 1997 and, therefore, saying „no‟

in the column raising a query as to whether he was suffering from cancer,

cannot be said to be suppression of any material information with respect to

pre-existing disease which later on became the cause of death of the deceased.

It is in the background of this admitted position obtaining in the case, we have

to look for an answer to the question, whether the insured suppressed the

material information from the petitioner-insurer at the time of entering into

contract of insurance and thereby breached the trust on which a contract of

insurance is predicated.

9 At this stage, we deem it appropriate to make a little survey of the

legal position enunciated by the Hon‟ble Supreme Court of India which may

guide our judgment in the matter. A notable judgment in the case of Branch

Manager, Bajaj Allianz Life Insurance Company vs Dalbir Kaur, AIR

2020 SC 5210 handed down by a three Judge Bench of the Hon‟ble Supreme

Court throws out substantial light on the issue raised for determination in this

case.

10 In Dalbir Kour's case (supra), the respondent Dalbir Kour

instituted a consumer complaint before the District Consumer Disputes

Redressal Forum which was allowed and the insurer was directed to pay the

full death claim together with interest. An appeal preferred before the State

Consumer Disputes Redressal Commission ["SCDRC"] by the insurer was

rejected and even the revision petition filed before the National Consumer

Disputes Redressal Commission ["NCDRC"] met the same fate. It was held by

the NCDRC that the death had occurred due to natural causes and there was no

reasonable nexus between the cause of death and non-disclosure of the disease.

The Hon‟ble Supreme Court reversed the judgment of NCDRC and dismissed

the complaint. It was held by the Hon‟ble Supreme Court that a contract of

insurance is one of utmost good faith and a proposer who seeks to obtain a

policy of insurance is duty bound to disclose all material facts bearing upon the

issue as to whether the insured would consider it appropriate to assume the risk

which is proposed. Placing strong reliance on the judgment in Reliance Life

Insurance Co. Ltd. vs Rekhaben Nareshbhai Rathod, (2019) 6 SCC 175,

the Hon‟ble Supreme Court concluded that non-disclosure by the deceased

insured that he was suffering from serious medical condition at the time of

entering into a contract of insurance and that he was hospitalized to undergo

treatment for such condition in spite of specific queries relating to ailment,

hospitalization or treatment undergone by the insured, was a breach of trust on

which a contract of insurance is formed. Paras 30 & 31 of the judgment

rendered in Rekhaben Nareshbhai Rathod's case which is quoted in para 11

of the judgment rendered in Dalbir Kour's case (supra) is noteworthy and is

set out below:

"30. It is standard practice for the insurer to set out in the application a series of specific questions regarding the applicant's health history and other matters relevant to insurability. The object of the proposal form is to gather information about a potential client, allowing the insurer to get all information which is material to the insurer to know in order to assess the risk and fix the premium for each potential client. Proposal forms are a significant part of the disclosure procedure and warrant accuracy of statements. Utmost care must be exercised in filling the proposal form. In a proposal form the applicant declares that she/he warrants truth. The contractual duty so imposed is such that any suppression, untruth or inaccuracy in the statement in the proposal form will be considered as a breach of the duty of good faith and will render the policy voidable by the insurer. The system of adequate disclosure helps buyers and sellers of insurance policies to meet at a common point and narrow down the gap of information asymmetries. This allows the parties to serve their interests better and understand the true extent of the contractual agreement.

31. The finding of a material misrepresentation or concealment in insurance has a significant effect upon both the insured and the insurer in the event of a dispute. The fact it would influence the decision of a prudent insurer in deciding as to whether or not to accept a risk is a material fact. As this Court held in Satwant Kaur (supra) "there is a clear presumption that any information sought for in the proposal form is material for the purpose of entering into a contract of insurance". Each representation or statement may be material to the risk. The insurance company may still offer insurance protection on altered terms."

11 The observations of the Supreme Court made in paragraphs 9 and

10 in Dalbir Kour's case (supra) are also relevant and are, therefore, set out

below:

"9 A contract of insurance is one of utmost good faith. A proposer who seeks to obtain a policy of life insurance is duty bound to disclose all material facts bearing upon the issue as to whether the insurer would consider it appropriate to assume the risk which is proposed. It is with this principle in view that the proposal form requires a specific disclosure of pre-existing ailments, so as to enable the insurer to arrive at a considered decision based on the actuarial risk. In the present case, as we have indicated, the proposer failed to disclose the vomiting of

blood which had taken place barely a month prior to the issuance of the policy of insurance and of the hospitalization which had been occasioned as a consequence. The investigation by the insurer indicated that the assured was suffering from a pre-

existing ailment, consequent upon alcohol abuse and that the facts which were in the knowledge of the proposer had not been disclosed. This brings the ground for repudiation squarely within the principles which have been formulated by this Court in the decisions to which a reference has been made earlier. In Life Insurance Corporation of India vs Asha Goel, this Court held:

"12...The contracts of insurance including the contract of life assurance are contracts uberrima fides and every fact of material (sic material fact) must be disclosed, otherwise, there is good ground for rescission of the contract. The duty to disclose material facts continues right up to the conclusion of the contract and also implies any material alteration in the character of risk which may take place between the proposal and its acceptance. If there is any misstatements or suppression of material facts, the policy can be called into question. For determination of the question whether there has been suppression of any material facts it may be necessary to also examine whether the suppression relates to a fact which is in the exclusive knowledge of the person intending to take the policy and it could not be ascertained by reasonable enquiry by a prudent person."

10. This has been reiterated in the judgments in P C Chacko vs Chairman, Life Insurance Corporation of India and Satwant Kaur Sandhu vs New India Assurance Company Limited. In Satwant Kaur Sandhu vs New India Assurance Company Ltd., at the time of obtaining the Mediclaim policy, the insured suffered from chronic diabetes and renal failure, but failed to disclose the details of these illnesses in the policy proposal form. Upholding the repudiation of liability by the insurance company, this Court held:

"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."

12 From a reading of judgment rendered in Dalbir Kour's case

(supra), it becomes abundantly clear that the Hon‟ble Supreme Court, in no

uncertain terms, has held that the insurer is entitled to repudiate his liability if

there is non-disclosure of the material fact by the insured at the time of entering

into a contract of insurance 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. To put it in other words, 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‟. This exactly was explained by the

Supreme Court in Dalbir Kour's case (supra).

13 As is very aptly said in para 31 of the judgment in Rekhaben

Nareshbhai Rathod's case (supra), that the finding of a material

misrepresentation or concealment in insurance has a significant effect upon

both the insured and the insurer in the event of a dispute. The fact which would

influence the decision of a prudent insurer in deciding as to whether or not to

accept a risk is a material fact. Each representation and statement, required to

be made by the insured in the proposal form, may be material to the risk. The

insurance company may still offer insurance protection, but on altered terms.

14 Next in the line is another judgment of the Supreme Court

rendered by two Judge Bench in the case of Manmohan Nanda vs United

India Assurance Co. Ltd and another, (2022) 4 SCC 582. The two Judge

Bench once again surveyed the entire law in respect of a contract of life

insurance and culled out some principles which are enumerated in para 52 of

the judgment. Para 52 reads thus:

"(i) There is a duty or obligation of disclosure by the insured regarding any material fact at the time of making the proposal. What constitutes a material fact would depend upon the nature of the insurance policy to be taken, the risk to be covered, as well as the queries that are raised in the proposal form.

(ii) What may be a material fact in a case would also depend upon the health and medical condition of the proposer.

(iii) If specific queries are made in a proposal form then it is expected that specific answers are given by the insured who is bound by the duty to disclose all material facts.

(iv) If any query or column in a proposal form is left blank then the insurance company must ask the insured to fill it up. If in spite of any column being left blank, the insurance company accepts the premium and issues a policy, it cannot at a later stage, when a claim is made under the policy, say that there was a suppression or nondisclosure of a material fact, and seek to repudiate the claim.

(v) The insurance company has the right to seek details regarding medical condition, if any, of the proposer by getting the proposer examined by one of its empanelled doctors. If, on the consideration of the medical report, the insurance company is satisfied about the medical condition of the proposer and that there is no risk of preexisting illness, and on such satisfaction it has issued the policy, it cannot thereafter, contend that there was a possible preexisting illness or sickness which has led to the claim being made by the insured and for that reason repudiate the claim.

(vi) The insurer must be able to assess the likely risks that may arise from the status of health and existing disease, if any, disclosed by the insured in the proposal form before issuing the insurance policy. Once the policy has been issued after assessing the medical condition of the insured, the insurer cannot repudiate the claim by citing an existing medical condition which was disclosed by the insured in the proposal form, which condition has led to a particular risk in respect of which the claim has been made by the insured.

(vii) In other words, a prudent insurer has to gauge the possible risk that the policy would have to cover and accordingly decide to either accept the proposal form and issue a policy or decline to do so. Such an exercise is dependant on the queries made in

the proposal form and the answer to the said queries given by the proposer".

15 From the case law referred to hereinabove, it is evident that, for

the insurer to repudiate the life insurance policy, it is obligatory to plead and

demonstrate that there has been suppression of material fact at the time of

making the proposal. What constitute a material fact would depend upon the

nature of insurance policy taken, the risk to be covered as well as the queries

that are raised in the proposal form. It is now settled that the insurance

contracts are special contracts based on the principles of „Uberrimae Fidei‟

and, therefore, a person seeking insurance is bound to disclose all material facts

relating to the risk involved. In the life Insurance policy, the risk involved is

death and, therefore, a proposer seeking insurance has to disclose all material

information which may influence or effect the decision of the insurer as to

whether or not to accept the proposal.

16 As is authoritatively held in Rekhaben Nareshbhai Rathod's

case (supra), any fact which may influence the decision of a prudent insurer in

deciding whether or not to accept the risk, is a material fact. It is reiterated in

Satwant Kour Sandhu vs. New India Assurance Company Ltd. (2009) 8

SCC 316 that 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.

17 The observations of Hon‟ble Supreme Court in para 25 of

Satwant Kaur Sandhu to the effect that "the upshot of the entire discussion

is that in a contact 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", are apt to be noticed. If the proposer has knowledge

of such fact, he is obliged to disclose it particularly while answering questions

in the proposal form. Needless to emphasize 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.

18 Bearing in mind the legal position as adumbrated hereinabove,

when we delve into the facts of this case, we clearly find that the deceased

husband of the respondent No.3 had committed a breach of trust by not

disclosing the nature of ailments he was suffering during the year from 1995 to

97 in respect of which a certificate issued by the Medical Officer SDH

Akhnoor and referred in the letter of Sh. Chatter Singh A.G.M (supra) placed

on record has clearly brought out that the deceased insured was suffering from

different ailments right from October 1995 onwards.

19 The medical leave sanctioned in favour of the deceased insured

indicates that he was on leave for a period ranging from one month to two

months. Between 1995 to 1997, the insured had remained on medical leave for

almost six months. Had the insured disclosed about all the ailments he was

suffering from, perhaps the insurer would have been in a better position to take

a decision as to whether or not to accept the risk involved in the insurance

policy. As is clearly held in Rekhaben Nareshbhai Rathod's and Satwant

Kaur Sandhu's cases (supra) and reiterated by three Judge Bench in the case

of Dalbir Kour's case (supra), the suppression of different ailments which the

deceased was suffering from and was treated for prior to entering into a

contract of insurance, was the suppression of material fact, for, the disclosure

whereof had the effect of influencing the decision of a prudent insurer in

deciding as to whether or not to accept the risk and, therefore, a „material fact‟.

20 When we examine the instant case in its true perspective, we find

that the deceased husband of respondent No.3 was guilty of a breach of utmost

trust by suppression of material fact while entering into contract of insurance

with the petitioner-insurer. The Insurance Company was, thus, correct in

repudiating the claim lodged by respondent No.3. We are, therefore, inclined to

allow this writ petition and set aside the orders passed by the Divisional Forum

and the Commission.

21. We are, however, told by the learned counsel for the petitioner

that the entire assured sum in terms of the judgment passed by Divisional

Forum as well as the Commission has already been paid to respondent No.3.

We deem it appropriate to provide that, notwithstanding the fact that we have

allowed this petition and set aside the orders of the Divisional Forum and the

Commission, we restrain the petitioner-insurer to recover the said amount from

the wife of deceased i.e respondent No.3 herein. Similar course of action was

adopted by the Hon‟ble Supreme Court in the case of Dalbir Kour (supra) by

invoking Article 142 of the Constitution of India. We are aware that power

akin to Article 142 is not specifically conferred upon the High Court. However,

the jurisdiction conferred upon the High Court under Article 226 of the

Constitution of India is wide and extensive and can be exercised

ex debito justiciae to render justice in a particular case and to sub-serve the

interest of justice. It is in exercise of this jurisdiction, we have provided that the

amount of assured sum paid to respondent No.3 in terms of impugned orders

shall not be recoverable.

                                (MOHAN LAL)                        (SANJEEV KUMAR)
                                     JUDGE                                   JUDGE
Jammu
17.10.2023 Sanjeev              Whether order is reportable: Yes