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Smt. Veena Sharma Vs. Life Insurance Corporation of India Etc. - Court Judgment

LegalCrystal Citation
SubjectInsurance
CourtPunjab and Haryana High Court
Decided On
Case NumberCivil Writ Petition No. 2396 of 1989
Judge
Reported in1999ACJ685; (1999)121PLR202
ActsInsurance Act, 1938 - Sections 45
AppellantSmt. Veena Sharma
RespondentLife Insurance Corporation of India Etc.
Appellant Advocate Nimit Kumar, Adv.
Respondent Advocate B.R. Mahajan and; Sanjeev Dhiman, Advs.
DispositionPetition allowed
Cases ReferredLife Insurance Corporation of India v. Chander Kanta and Ors.
Excerpt:
- .....in brief, the facts are that the husband of the petitioner, shri s.p. sharma, had taken three life insurance policies from the respondents. the particulars of the policies are as under: -policy no. name of branch sum assured date ofcommencement23856809 solan rs. 20,000/- 1.7.197823857530 shimla rs. 10,000/- 15.12.197823173625 solan rs. 25,000/- 15.12.1979two of the afore-mentioned policies, i.e. one taken on 1.7.1978 and 15.12.1978 lapsed due to non-payment of premium, but the respondents on receipt of payment, revived the same on 16.3.1981 and 30.3.1981 respectively. shri s.p. sharma died on 27.3.1983 and the cause of death as stated in the last medical report was heart failure. petitioner being a nominee mentioned in the policies, applied to the respondents branch office at solan.....
Judgment:

V.K. Jhanji, J.

1. In this petition under Articles 226 and 227 of the Constitution of India, petitioner is seeking a writ in the nature of Mandamus directing the respondents to pay the amount of insurance as payable under the policies along with bonus accrued and interest at the rate of 12 per cent on the entire amount from the date of death till realisation.

2. In brief, the facts are that the husband of the petitioner, Shri S.P. Sharma, had taken three Life Insurance Policies from the respondents. The particulars of the policies are as under: -

Policy No. Name of Branch Sum assured Date ofcommencement23856809 Solan Rs. 20,000/- 1.7.197823857530 Shimla Rs. 10,000/- 15.12.197823173625 Solan Rs. 25,000/- 15.12.1979

Two of the afore-mentioned policies, i.e. one taken on 1.7.1978 and 15.12.1978 lapsed due to non-payment of premium, but the respondents on receipt of payment, revived the same on 16.3.1981 and 30.3.1981 respectively. Shri S.P. Sharma died on 27.3.1983 and the cause of death as stated in the last medical report was heart failure. Petitioner being a nominee mentioned in the policies, applied to the respondents Branch Office at Solan and Shimla for claiming the amount under the polices. The Branch Offices asked the petitioner to approach the Regional Office at Chandigarh as the cases had been sent to the Regional Office Unit-ll Branch, Chandigarh, for the settlement of death claims. It is the case of the petitioner that she continued to write letters to respondent No. 2 time and again, but the settlement was delayed for one reason or the other. She has contended that respondents have been calling upon her to produce one document or the other and on 19.3.1985, she was told that the matter is under consideration with the Branch Office, Chandigarh, and the decision shall be shortly conveyed to her. Petitioner has further contended that ultimately, she was informed that her claim cannot be accepted on the ground that the personal statements regarding health made by her husband at the time of taking out the policies as also at the time of their revival were wrong and material information was withheld. On rejection of her claim, petitioner approached respondent No. 1 for considering her claim, but respondent No. 1 declined to revise the decision of respondent No. 2. Petitioner has contended that she again approached respondent No. 1 through letter dated 29.5.1986 to reconsider her claim, by contending that the policies were revived after the medical check-up by the Medical Officer approved by the Life Insurance Corporation of India, who did not find any disease and the proposal was accepted by the Life Insurance Corporation. It is further the case of the petitioner that respondent No. 1 refused to consider her case. Petitioner has also averred that she approached the Hon'ble Finance Minister of India who referred the matter to Life Insurance Corporation, Northern Zonal Office, New Delhi, but the claim of the petitioner was not reconsidered. Petitioner then served a notice upon the respondents through her Advocate, but that too was not responded to. Hence, the present writ petition.

3. On notice of the writ petition, respondents filed written statement and took various preliminary objections therein, like that the writ petition involves disputed questions of fact and the subject matter of the writ petition is purely contractual in nature and therefore, writ petition under Article 226 of the Constitution is not maintainable. On merits, respondents stated that it came to the notice of respondents that Shri S.P. Sharma, husband of the petitioner, died in P.G.I, on 27.3.1983 and according to History given in the PGI by the Insured and his wife (petitioner), the insured had been suffering from hyper-tension since 1979, but this fact was not disclosed when the policies were taken or when the two policies were got revived. Respondents have further stated that the record of the medical reimbursement also proves that the deceased had not disclosed the material facts correctly in his declaration of good health submitted for revival of two policies and for proposal for taking of third policy, and further withheld the material information from the Corporation. Respondents thus, have stated that petitioner is not entitled to the relief sought for in this petition.

4. Learned counsel for the petitioner has contended that respondents were not justified in calling in question the policies on the ground of mis-statement after two years. Reference in this regard has been made to Section 45 of the Insurance Act 1938. Against this, Mr. B.R. Mahajan, Advocate, appearing on behalf of respondents has contended that the form filled in by the insured in regard to personal statement regarding health contained a declaration that if any statement made is found to be incorrect, then contract shall be deemed to be null and void and all monies paid towards revival of the policies and subsequent thereto, shall stand forfeited to the Corporation. Mr. Mahajan jeontended that it is on the basis of afore-said declaration that the policies were issued. It is contended that the Insured did not disclose the material particulars regarding the disease he was suffering from and therefore, Corporation has rightly declined to entertain the claim made by the petitioner.

5. Section 45 of the Act referred to by learned counsel for the petitioner, reads as under:-

'45. Policy not to be called in question on ground of mis-statement after two years- No policy of life Insurance effected before the commencement of the Act shall after the expiry of two years from the date of commencement of this Act and no policy of life insurance effected after the coming into force of this Act shall, after the expiry of two years from the date on which it was effected, be called in question by an insurer on the ground that statement made in the proposal for insurance or in any report of a medical officer, or referee, or friend of the insured, or in any other document leading to the issue of the policy, was inaccurate or false, unless 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 the statement was false or that it suppressed facts which it was material to disclose; Provided that nothing in this section shall prevent the insurer from calling for proof of age at any time if he is entitled to do so, and no policy shall be deemed to be called in question merely because the terms of the policy are adjusted on subsequent proof that the age of the life insured was incorrectly stated in the proposal.'

6. A reading of aforesaid section shows that it is in two parts. The first part provides that a policy can be called in question within two years from the date it was effected on the ground that some statements leading to the issue of policy were inaccurate or false, and the second provides that when the insurer challenges the contract of insurance after the expiry of 2 years of its being effected, he cannot seek to avoid the policy except when there is any false statement or suppression concerning a material matter.

7. Section 45 of the Act came up for consideration before a Division Bench of Assam High Court in New India Assurance Co. Ltd. v. Sulochana Chowdhurani, A.I.R. 1962 Assam 65. Therein, it was held that contract of insurance including contracts of life insurance are contracts uberrima fides and every fact of materiality must be disclosed, otherwise there is good ground for rescission of the contract. The duty to disclose material facts continues right upto the conclusion of the contract and, also implies any material alteration in the character of the risk which may take place between proposal and acceptance. If there are any misstatements or suppression of material facts, the policy can be called in question. It was also held that 'Section 45 modifies the common law in so far as the policy is sought to be challenged on account of misstatement of suppression of facts in any document after the expiry of two years from the date of the commencement of the Act in cases where the policy was effected prior to the Act and if the policy has been called in question after two years of its being effected in cases where the policy has been effected subsequent to the coming in force of the Act. In either of these two cases the insurer has to prove that - (1) misstatement was on a material matter or that the suppression was of material facts, (2) it was fraudulently made by the policy holder and (3) the policy-holder knew at the time of making it that the statement was false or the facts which were suppressed were material to disclose. The burden is much heavier on the insurer after two years than in a case where the insurer calls into question the policy before two years from the date when it was effected. Section 45 will be attracted even if the insured dies within two years of the date when the policy was effected if the policy was called in question by the insurer after the expiry of two years from such date. Section 45 to a great extent mitigates the rigours of the rule that the most trivial misrepresentation within the ambit of the warranty might still be good defence for the insurer to refuse payment on the policy.'

8. In Mithoolal Nayak v. Life Insurance Corporation of India, A.I.R. 1962 S.C. 814, their Lordships of the Supreme Court laid down three conditions for the application of second part of Section 45. They are:

(i) the statement must be on a material matter or must suppress facts which it was material to disclose,

(ii) the suppression must be fraudulently made by the policy holder, and

(iii) the policy-holder must have known at the time of making the statement

that it was false or that it suppressed facts which it was material to disclose.

9. The period of two years for the purpose of Section 45 is to be calculated from the date the policy was originally effected. In this case, policies were made effective w.e.f. 1.7.1978, 15.12.1978 and 15.12.1979 respectively. The insurer did not raise an objection in regard to any statement made by the insured in the proposal for insurance or in the personal statement regarding health till his death. Respondents have repudiated the policies in question only after the death of deceased, i.e. much after the period of two years from the date on which policies were effected. For repudiating the policies and to deny the claim of petitioner after the expiry of two years from the date the policies were effected, it was for the respondents to bring their case within four-corners of three conditions laid down by their Lordships of the Supreme Court in Mithoolal Nayak's case (supra). Burden of proving all the three conditions was on the respondents.

10. In Lakshmi Instance Co. Ltd. v. Bibi Padma Wati, A.I.R. 1961 Pb. 253, a Division Bench of this Court in the context of onus of proof held:

'The insurance company has also to discharge the onus, that the representations alleged to be fraudulent were material and made with the insured's knowledge and wrongful intent regarding the condition of his health, family history, age, habits, occupation etc. The insurer must show that the statement made by the insured were such which he know or should have known that they were untrue and were made wilfully in bad faith and with intent to conceal or deceive. Such defences, in so far as they result in forfeitures, have to be proved affirmatively by a preponderance of the evidence. Tek Chand, J, (as His Lordship then was) speaking for the Bench opined that 'By S.45 the nice distinction created by the doctrine of warranty under the English Common Law has been eliminated. The insurer cannot avoid the consequences of the insurance contract by simply showing inaccuracy or, falsity of the statement made in the proposal for insurance, or in any report of the medical officer, or in any other document leading to the issue of the policy. Burden is cast on the insurer to show that statement on the basis of which the policy is sought to be avoided by him was on a material matter, or, facts have been suppressed which it was material for the policy holder to disclose. It has further to be proved that the statement was fraudulently made by the policy-holder with the knowledge of the falsity of the statement at the time when it was made, or that the suppression was of material facts which had not been disclosed. Therefore, in the case of policies of life insurance which are not excepted by the two years rule, proof of deliberate fraud and not merely of constructive fraud or of misstatements has to be shown in order to avoid the policy.'

11. In this case, respondents are repudiating their liability under the policies on the ground that the deceased had deliberately made misstatements and with held material information regarding his health at the time of taking out the in- surance policies or at the time of getting the same revived. Reliance in this regard is being placed on his personal statement regarding health. In this personal statement, deceased gave the following answers to the questions posed:

'2 Since the date of your proposal Answer If 'Yes',for the above-mentioned policy, 'Yes' or give details of'No'. ailment, date &(a) Have you ever suffered from duration, doctorsor are you suffering from:- consulted,(i) Asthma, tuberculosis (a)or any other disease of lungs (i) No.(ii) High blood pressure (ii) No.or any disease of the heart ?(iii) Peptic ulcer or any disease (iii) No.of the stomach, liver or spleen ?(iv) Any disease of kidney, prostate (iv) No.or urinary system ?(v) Diabetes, hernia, hydrocele, (v) No.cancer or leprosy?(vi) Paralysis, epilepsy or any disease (vi) No.of the nervous system?(vii) Any other illness requiring (vii) No.treatment for more than a week?(b) Did you ever have any (b) No.operation, accident or injury?(c) Have you had an electrocardio- (c) No.gram, X-ray or screening, blood,urine or stool examination?(d) What deaths or illness have (d) No.there been in your family (parents,husband, wife, brothers, sisters orchildren). Give age at death, dateand cause of death.

12. It is only on the basis of answer in respect of question regarding high blood pressure or any disease of the heart, it is being contended that the deceased fraudulently suppressed material information. During the course of arguments, learned counsel appearing for the respondents contended that from the history-sheet of the Insured and as contained in the P.G.I, record, it is clear that the Insured was a known case of hyper-tension since 1979. It is contended that at the time of filling the proposal form as also the personal statement, he was duty bound to disclose that the was a patient of hyper-tension. It is thus, contended that the insured deliberately made misstatement and withheld material information regarding his health and therefore, petitioner is not entitled to the relief sought for in the writ petition. I do not find any merit in this contention of counsel for respondents. In my view, mere non-mentioning of Insured being a patient of hyper-tension did not amount to suppression of material facts so as to entitle the respondents to repudiate the policies. In fact, personal statements regarding health filled by the Insured at the time of taking out of the policies or at the time of their revival, nowhere indicate that the insured was specifically asked as to whether he was a patient of hyper-tension. It was for the respondents to bring on record material to show that answers to the questions posed were intended to be comprehensive and that the Insured was told that the hypertension is caused because of blood pressure. In absence of any material in this regard, respondents are not entitled to deny their liability under the policies. This Court in Satya Rani v. Life Insurance Corporation of India, 1987(62) Company Cases, 64, had an occasion to deal with the non-mentioning of insured's suffering from hyper-tension. It was observed that hyper-tension is such a disease which may be continuous or intermittent and that by itself may not be considered material for disclosing in the proposal form or in the personal statement. Insured in this case had taken out the policies in the year 1978 and there is no material on record that at the time when the policies were taken out he was a patient of hyper-tension. It is only when two policies which had lapsed and were got revived in 1980, it is said that the insured failed to disclose that he was a patient to hyper-tension. A reading of letter, Annexure R-3, addressed to the petitioner by the Divisional Manager, Life Insurance Corporation of India, Northern Zone, Divisional Officer, Chandigarh, shows that at the time of revival of the two policies, the Insured was medically examined. In case, deceased was not in good health or a patient of hyper-tension, the same could have been easily detected in the medical examination. Respondents instead of placing on' record the medical examination have denied that Insured was medically examined. The very fact that the respondents revived the policies, proves that they were satisfied with the answers to the questions posed in the personal statement regarding health. In fact, there is hardly any convincing material brought on record by the respondents that Insured made any misrepresentation of material facts, muchless fraudulent. In my view, the action of the respondents in declining the claim of the petitioner is arbitrary and cannot be sustained. Petitioner being the nominee is entitled to the insurance amounts under the life policies.

13. Faced with this situation, learned counsel appearing on behalf of respondents contended that writ petition under Article 226 is not maintainable because liability under the insurance policy is contractual and moreover, the writ petition involves disputed questions of fact. I do not find any merit in this contention of the counsel.

14. In Smt. Asha Goel v. Lite Insurance Corporation of India and Ors., A.I.R. 1986 Bombay 412, it was held that:

'L.I.C. which is a statutory Corporation, and which carries on business of insurance in the public interest, is an 'authority' or an 'instrumentality' of the State within the meaning of Art, 12 of the Constitution. The business activities of L.I.C. are not of a commercial nature but are for the welfare and benefit of the society as it is a primary goal of L.I.C. to promote the welfare of the people. Hence, assuming that the liability of L.I.C. under a policy of life insurance is not a statutory liability and is a contractual liability even then, a writ under Art. 226 of the Constitution can lie against L.I.C. for enforcement of such a liability.'

As regards the objection that the writ petition involves disputed questions of fact, it is only to be stated that the writ petition was filed way back in 1989 and has come up for hearing only now and if at this stage the petitioner is asked to seek her remedy in Civil Court, it would cause great hardship to her. More so, it is not the case of the respondents that they have in their possession any other material, apart from the one placed on record, which may affect the decision of the case. As already dealt with, the material placed on record in no way makes out a case for the respondents to deny the claim of the petitioner.

15. In regard to the prayer of the petitioner for grant of interest, learned counsel for the respondents has contended that petitioner is not entitled to any interest because it was specifically provided in the policies that the Life Insurance Corporation would pay the sum assured together with further sum or sums as may be allocated by way of bonus, but without interest to the person or persons to whom the sum is expressly payable. This contention too deserves to be rejected. This Court in Life Insurance Corporation of India v. Chander Kanta and Ors., (1998-2)119 P.L.R. 354, in this very context held that money payable under the insurance policy is a debt on the death of the insured and the Court , can order payment of interest on the sum insured under the Interest Act from the date of death of the insured. In the circumstances of the case, petitioner is entitled to interest. Accordingly, respondents are directed to pay to the petitioner within three months the insurance amounts together with bonus, payable under the three policies with interest at the rate of 12 per cent with effect from the date of death till filing of the writ petition and for the period the writ petition remained pending, at the rate of 6 per cent till the date of payment.

16. The writ petition stands allowed in the terms indicated above. No costs.


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