This Appeal under Section 19 of the Consumer Protection Act, 1986 (for short “the Act”) assails the order of State Commission dated 19.09.2018 allowing the Complaint No.153 of 2017 filed by the Respondent.

2.     In brief, the facts of the case are that the deceased life assured (DLA) late Mrs. Sahana Bibi had availed two life insurance policies from the Appellant in the year 2013 viz., (i) Policy No.35037653103 under SBI Life Shubh Nivesh Endowment Plan was issued on 30.05.2013 for a term of 11 years for the sum assured of ₹4,50,000/- based on proposal dated 06.05.2013 and (ii) Policy under SBI Life Smart Income Protect Plan No.I-B004862910 issued on 11.07.2013 for a term of 15 years for a sum of ₹24,50,000/- based upon proposal dated 24.06.2013.  The DLA expired on 20.09.2013.  Claims were submitted under both the policies which were repudiated by the Appellant on the grounds that the policies had been obtained through suppression of material information and on the basis of fabricated documents.  A Complaint was filed before the State Commission by the Respondent herein praying for allowing the claim which came to be allowed with the following directions:

“The case stands allowed on contest against the OPs with a cost of ₹25,000/- being payable by the OPs to the Complainant.  The OPs are directed to settle the instant claim by paying ₹24,50,000/- to the Complainant within 40 days from today together along with simple interest @ 9% over the aforesaid sum of ₹24,50,000/- w.e.f. 10.07.2017 till full and final payment is made.”

3.     The Appellant is before this Commission with the prayer to:

“In view of what is stated above it is humbly prayed that the present appeal may be admitted and after hearing the parties, the Hon’ble Commission may be pleased to quash and set aside the order dated 19.09.2018 passed by the Hon’ble Bengal State Consumer Dispute Redressal Commission, Kolkatta in the Complaint No.513/2017

Or

Pass any other appropriate order(s)/direction(s) as deemed fit and proper.”

4.     Parties led their evidence and filed written synopsis of arguments.  We have heard learned Counsel for the parties and perused the record including the written synopsis.

5.     Learned Counsel for the Appellant states that the impugned order was erroneous since it had failed to appreciate that the Respondent had not disclosed the correct information at the time of submitting the proposal for the policy.  It was stated that the DLA had mentioned her occupation as the owner of Sahana Human Hair Process, Dhusia and submitted a joint bank account statement of Saving Account No.30724360774 as proof of income.  However, the said bank account was found to be jointly held by Sk. Saber Ahammad and Sahana Bibi jointly.  The bank statement was relied upon by the Appellant for granting the insurance policy cover.  However, as the DLA expired within 2 years of the policies, the Appellant undertook an investigation which revealed that the bank account for the period 01.04.2011 to 30.01.2013 was in the name of Sk. Saber Ahammad as an individual account.  Thus, it was concluded that there was suppression of material fact regarding income of the DLA and accordingly, the contract was found to be based on fraudulent information and therefore, void ab initio.  As a contract of insurance is one based on uberrima fides or utmost good faith, the claim of the DLA was repudiated.

6.     It was also argued by the Appellant that the DLA’s husband had moved the Insurance Ombudsman, Kolkata in the matter who in their award dated 18.01.2016 dismissed the Complaint since the husband of the DLA accepted vide letter dated 03.04.2014 that they belonged to BPL family and his wife was a house wife only which contradicted the statement already given in the proposal form.   It was contended that in view of this order, the principle of res judicata applied and therefore, the complaint before the State Commission did not lie.  It was also submitted that the DLA had applied for the Permanent Account Number (PAN Card) after issuance of the first policy (No.35037653103) and prior to applying for the second policy.  Income Tax Returns for the period 2012-2013 and 2013-2014 submitted as proof of income by the DLA revealed that the Trading, Profit & Loss Account of Sahana Human Hair Process for the year 2011-2012 and 2012-2013 were created documents.  As per Appellant’s enquiries, a partnership deed was entered into by the DLA with Saber Ahammad only on 20.06.2013. Hence, the Trading, Profit & Loss Account for the year 2011-2012 and 2012-2013 were fraudulent documents.  The Appellant contends that the suppression of material information is contrary to the principle of utmost good faith on which a contract of document is based and therefore, the insurance policies in question were a nullity, ab initio.  The claim was accordingly repudiated vide letters dated 10.07.2014.  The declaration in the policy proposal at serial no.9.6 and 7 is attracted in view of the false information provided and hence, the representation of the Complainant which was referred to the Claims Review Committee of the Appellant had been turned down.  The Insurance Ombudsman, Kolkata dated 18.01.2016 had held that Sk. Jahangir Alam vide his letter dated 03.04.2014 admitted that they belonged to BPL family and his wife was a housewife which contradicted the statement in the proposal form.

7.     The Appellant also submitted that the complaint before the State Commission was barred by limitation since it was filed on 10.07.2017 whereas the repudiation of the claim was dated 10.07.2014 which is beyond the period of 2 years prescribed.  The order dated 18.01.2016 of the Insurance Ombudsman could not extend the time period for filing of the Complaint and the delay had not been explained as held in various orders of the Hon’ble Supreme Court and this Commission.  Reliance was placed on the judgments of the Apex Court in Kandimalla Raghavaiah vs. National Insurance Co. Ltd., Civil Appeal No.4962 of 2022, SBI vs. M/s Agricultural Industries, Civil Appeal No.2067 of 2002 and Anshul Aggarwal vs. New Okhla Industrial Development Authority, IV (2011) CPJ 63 (SC) and of this Commission in UP Awas Evam Vikas Parishad vs. Brij Kishore Pandey & Another,  Revision Petition No.3186 of 2009, Rajinder Singh vs. State of Haryana,  Revision Petition No.2945 of 2010 and Oriental Insurance Company Ltd. Vs. Sri M. J. Khanna, First Appeal No.279 of 2010.

8.     The Appellant argued that the State Commission erred in holding that non-disclosure of income was not a material suppression since income is a vital factor for applying for insurance cover and the option for very high insurance cover not in conformity with current earnings and standard of living alters the nature of contract of insurance to one of wagers which are void ab initio.  Reliance was also placed by the Appellant on Chackochan vs. LIC of India, Civil Appeal No.5322 of 2007 in which it is held that the insurer was justified in repudiating a claim wherever there is suppression of facts.  It was also argued that the DLA was a beneficiary under the Mahatma Gandhi Rural Employment Programme (MGNREGA) since there was a MGNREGA Identity Card issued by the relevant Authority which had come to light during the investigations conducted by the Appellant as required in case of demise of the insured within two years of taking of the life insurance policy.

9.     Per contra, learned Counsel for the Respondent submitted that the impugned order of the State Commission was a reasoned order and that it had been rightly upheld that the policy having been approved and insurance premium accepted, the repudiation of the claim was a denial of service under the Act.  It was also argued that the decision of the Insurance Ombudsman was based on a letter which was obtained through misrepresentation and therefore, the order of the Ombudsman could not be relied upon.  It was submitted that it had been stated before the State Commission by the Respondent that the letter dated 03.04.2014 although signed by him was not written by him or read over and explained and that the information submitted with the proposal form was correct and not fraudulent.

10.   It is seen that the impugned order had addressed the following three issues in its order:

1. Whether the complaint case is maintainable in its present form and prayer?
2. Whether there is any deficiency in service on the part of the OPs?
3. Whether the Complainant is entitled to any relief?

11.   The State Commission had held that the Complaint lodged before the Banking Ombudsman could not be treated as a suit and therefore, the principle of res judicata was not applicable in this case.

12.   As regards the issues no.2 and 3, it was held that:

“Issuance of a policy signifies the fact that the issuer of the policy has done so after satisfying himself about the veracity of the information furnished along with the proposal form.  After merrily accepting insurance premium from the proposer without asking any question, the Insurance Company cannot renege on its commitment.  That apart, belying about one’s income cannot be considered as material suppression.  Since no one can foresee the timing of one’s death, it is hardly believable that for the sake of making a life insurance policy, one would resort to falsehood. 

Accordingly, the State Commission allowed the Complaint.

13.   From the forgoing, it is evident that in this case, two policies of life insurance were taken and that the DLA expired within four months of the insurance policies having been availed.  While the cause of death has been recorded as enteric fever with pneumonia leading to cardio respiratory arrest, the Appellant/Insurance Company has investigated the matter as mandated under the IRDA Guidelines with regard to claim of life insurance in case of demise of the life assured within two years of taking of the policy.  It is a well-established proposition of law that a contract of insurance is based on the principle of Uberimma Fides or utmost good faith.  Disclosure of full and correct information in the proposal form is a responsibility cast upon the individual seeking to avail the insurance.  In the instant case, the policy proposal has disclosed the details of the business of the insured and filed Trading, Profit & Loss Statement for the years which have been argued by the Appellant to relate to a period after the policy was issued.  It is also stated that the bank account stated to have been held in the joint name of Sk. Saber Ahammad was found to be incorrect.  The Appellant has also relied upon the MGNREGA Identity Card issued to the DLA to argue that the policy was obtained by misrepresentation and suppression of facts.  The letter of repudiation dated 10.07.2014 reads as under:

“This policy was issued on the basis of the above facts disclosed in the proposal form.  However, as per the documents available with us, late Sahana Bibi had grossly overstated her income in the proposal form.

Also, the financial proof submitted to support income and occupation of the proposed life assured were found to be not genuine.”

14. The repudiation of the policy is clearly done on the grounds of the policy applicant having overstated her income at the time of the policy proposal and the financial proof having been found to be not genuine. The State Commission’s finding that the issuance of the policy signifies that the insurer had satisfied itself about the veracity of information provided at the time of the proposal and cannot now at this stage renege from it. It has also come to the finding that the information provided by the policy holder regarding the income cannot be considered as material suppression.

15.    The basis of the order of the State Commission is the policy proposal which has been established during investigation by the appellant to be false as it is based on fictitious documents. IRDA Guidelines prescribe an investigation in situations of premature death of policy holders, within 2 years of the policy being taken. In the instant case the DLA expired within 4 months of the issue of the policies in question. The appellant cannot be faulted for undertaking the investigation mandated in such cases. The repudiation of the claim is based on the unearthing of facts that establish the fact that the policy was based on false representations and submissions in the policy regarding her income from ‘Sahana Human Hair Process, Dhusia’, the holding of a joint account with Sk. Saber Ahammad and providing details of the said bank account. Once these details are established as being false and the husband of the DLA has accepted the same before the Insurance Ombudsman the State Commission ought to have considered that the policy was based on a violation of the principle of uberrima fides and therefore the policy was void as per General Condition No.9.6 of the policies relating to ‘Non-Disclosure’. As the policy was void, ab initio, the finding that the appellant was liable for deficiency in service cannot be justified. The finding of the State Commission that having issued the policy, the appellant was bound to honour it, cannot be sustained on this ground. The impugned order is liable to be set aside on this ground.

16.    In view of the discussion above, the appeal is found to have merit and is accordingly allowed. The impugned order is set aside and the Complaint No.513 of 2017 is dismissed. There shall be no order as to costs.

17.    Pending IAs, if any, stand disposed of with this order.