BEFORE THE A.P. STATE CONSUMER DISPUTES REDRESSAL COMMISSION

AT HYDERABAD.

F.A. 445/2008 against C.C.  56/2007,   Dist. Forum, Adilabad

Between:

1. Smt. K. Shailajakshi

W/o. Prakash, Age: 35 years,

Employee in Canada

R/o. H.No. 1-3-457, Indra Nagar

Nirmal, Adilabad

2.  Ch. Prakash @ Chityala Prakash

S/o. Deva  Reddy, Age: 37 years, 

Employee in Canada

R/o. H.No. 1-3-457, Indra Nagar

Nirmal, Adilabad

3.  CH. Sarayu

D/o. Prakash

Rep. by her father & natural guardian

Ch. Prakash @ Chityala Prakash

S/o. Deva Reddy, Age: 37 years, 

Employee in Canada

R/o. H.No. 1-3-457, Indra Nagar

Nirmal, Adilabad                                         ***                         Appellants/

                                                                                                Complainants.                                                                         And

L.I.C. of India

Rep. by its Branch Manager

Prodduturi Complex

Nirmal, Adilabad Dist.                                ***                         Respondent/       

                                                                                                Opposite Party  

Counsel for the Appellant:                          M/s. Gopi Rajesh Associates

Counsel for the Resp:                                  M/s. K. Venkatesh Gupta

CORAM:

                         HON’BLE SRI JUSTICE D. APPA RAO, PRESIDENT     

                                                             &

  SMT. M. SHREESHA, MEMBER

MONDAY, THIS THE TWENTIETH DAY OF SEPTEMBER TWO THOUSAND TEN

Oral Order: (Per Hon’ble Justice D. Appa Rao, President)

                                                          *****

1)                This is an appeal preferred by the complainants  who were partly unsuccessful against the order of the Dist. Forum in not directing the  refund of  the entire premium amount paid by them with interest @ 18% p.a. together with compensation  and costs.

2)                The case of the complainants in brief is that they are man and wife residing at   Canada.    The agent of the insurance company by name Mr. Praveen Kumar approached the father of the complainant No. 1 to take policies in their names by giving proposal forms to him.   Accordingly the proposal forms were forwarded to them with a request to submit to the insurance company.    On receiving the proposal forms with premium amount the insurance company issued bonds in their names and in the name of their daughter CH. Sarayu.  Complainant Nos. 1 & 2  had paid Rs. 71,685/- each  on 28.3.2006 and 28.4.2007 for the policies covering for an amount of Rs. 10 lakhs each  and complainant  No. 3 had paid Rs. 11,123/- on 28.12.2005 and 10.3.2007 for the policy covering for an amount of  Rs. 1 lakh.    When they had returned from Canada approached the insurance company to enquire with regard to their policies  they learnt that NRIs  were ineligible,  in view of the regulations.    Immediately they made an application for supply of copies of proposal forms and on receiving photostat copies they found that the agent of the insurance company forged their signatures and mentioned that they were working at Pune instead of Canada.   It is obvious that  the insurance company without verifying the facts  issued the policy bonds.   On that they sought for cancellation of policies and sought refund of the amount.  However the insurance company addressed a letter stating that they would regularize the policies subject to medical examination and other special report  as to  availability of the complainants in India,  and till then the amounts would be kept in suspense account till fresh proposals are received.    However they did not agree for such a course.  They addressed a letter on 4.7.2007 for refund of the amount mentioning that they had no faith.    On that they were informed that the matter has been forwarded to higher officials and they were awaiting orders.    Since they did not receive any communication they sought for cancellation of policies and sought refund of the entire premium amount paid by them together with compensation of Rs. 1 lakhs towards mental agony and costs. 

3)                The insurance company resisted the case.  While admitting payment of premium and issuance of policies as alleged in the complaint it denied that they have informed that they were residing in Canada.   On receipt of proposals they scrutinized the applications and found  them to be bonafide and issued policies.    They were not aware of the forgery indulged by the agent in respect of the policies.    It had no mechanism to verify the details of their employment and signatures.       It had processed the proposals in good faith.    In June, 2007 they came to know that the  assured  were working at Canada through their letter dt. 12.6.2007.    It could never assume that the agent would cheat and indulge in forgery.    They received confidential reports from the agent to know  first hand information.    The agent has submitted ACRs in respect of three proposals against column as to the occupation, financial or social position of the complainant by mentioning ‘No’.    In fact the agent should have stated that they are NRIs.   When there was no mention,  proposals were accepted and policies were issued.    In fact even they extended the facility to regularize the policies provided the complainants submit separate forms.  As per section 20 of the Indian Contract Act when both parties to the agreement are under a mistake of fact entered into the agreement, the agreement is void.    Only basing on the proposal forms submitted they were under the impression that they were residents of Pune and therefore policies were issued.    The remedy lies against the agent and not against them.    Even u/s 188 of the Indian Contract Act the agent has to do every lawful thing in the conduct of insurance business.    There was no deficiency in service on their part and therefore prayed for dismissal of the complaint with costs. 

4)                The complainants in proof of their case filed affidavit evidence and got Exs. A1 to A4 marked while the insurance company filed the affidavit evidence of its Manager and got Exs. B1 to B10 marked. 

5)                The Dist. Forum after considering the evidence placed on record opined that in view of the submission of insurance company that they would undertake to continue the policies and in view of the reluctance of the complainants to continue and  that when both of them were at fault invoking the principles of natural justice directed the insurance company to refund Rs.  1,90,000/- with a liberty to renew the policies if they desire  to do so. 

6)                Aggrieved by the said decision, the complainants preferred the appeal contending that the Dist. Forum did not appreciate either facts or law in correct perspective.  The policies were processed by the agent of the insurance company by name Mr. Praveen Kumar.   They were in Canda.  They  had no occasion to know the proposals submitted by them were in fact submitted to the insurance company.    A perusal of which would show that their signatures were forged.   Without verifying whether they were residents of Pune or not policies were issued and later when they came to learn that NRIs could  take the policies they sought for cancellation, more so, when they came to know that the agent of the insurance company had forged their signatures.  Therefore they were entitled to the entire premium amount paid by them besides compensation of Rs. 1 lakh. 

7)                The point that arises for consideration is whether the order of the Dist. Forum is vitiated by mis-appreciation of fact or law?

8)                It is an undisputed fact complainant No. 1 is the wife of complainant No. 2.    Complainant No. 3 CH. Sarayu is their daughter.  When they were in Canada  at the instance of father of complainant No. 1, complainant No. 1 & 2 had taken  a policy for Rs. 10 lakhs each by paying Rs. 71,685/- each  on 28.3.2006 and 28.4.2007 and complainant No. 3 had taken a policy for Rs. 1 lakh  by paying  Rs. 11,123/- on 28.12.2005 and 10.3.2007 vide policies Exs. B1 to B3.   Their father sent the proposals forms issued by the agent of the insurance company and after filling they sent them to their father who in turn forwarded to the agent of the insurance company.    Instead of showing that they were  residents of Canada he showed as residents of Pune by forging their signatures.    The insurance company without verifying whether in fact they were residing at the place mentioned issued policies.   Since their signatures were forged and when they sought for cancellation of policies, the insurance company by its letter Ex. B8 dt.  27.6.2007 informed that:

“We are in receipt of copy of your letter dt. 12.6.2007 addressed to the Branch Manager of our Nirmal branch.

We are very sorry to note that the first two policies mentioned above have been booked by our agent while you were at Canada.  We have also noted your request  for the refund of premiums with interest.   However, we wish to inform you that  the policies can be  regularized by having medical  reports and  other special reports now as you are available in India at present.   Similarly, the medical report and special reports  on the life of your husband, Sri Prakash  can be taken when he visited India in the month of July, 2007.    You will have to give a fresh proposal  along with the above special reports.    If everything  is found in order we can regularize  the policies with  the dates of commencement mentioned in the policy bonds issued at your local address.  In case it is not possible  to continue  the risk we will refund the premiums as requested by you. 

It may kindly be noted that the risk under these policies  stands suspended till fresh proposals  along with special reports are submitted and accepted by us. 

We appeal to you to extend your co-operation in regularizing  the above policies.  Our Branch Manager  of Nirmal branch will contact you and arrange for  the medical reports and other special reports. 

Ours is a public sector undertaking and time tested procedures  for dealing with  frauds of this nature are in place.   We have already initiated disciplinary action against the agent as per our procedures.”

Importantly  when the complainants dispute  their signatures on the proposal forms Ex. B4 to B6 and positively alleged that  the proposal forms were fabricated  by forging their signatures giving incorrect particulars  and when they were residing  at Canada  it was shown that   they were  residents of Pune  and obtained policies, and  sought for cancellation of the policies and refund of the entire premium paid by them,  instead of making  any enquiry, the insurance company  obviously to hush up  the matter, agreed to regularize  the policies after taking  fresh proposals and medical report etc. for which the complainants  did not agree on the ground that they had no faith.   No proceedings whatsoever were filed in order to show that the insurance company had taken any action against their agent.  When serious allegations were made against him that he had fabricated proposals and forged their  signatures the  insurance company dare not enquire into it  nor cancel the policies.  On the other hand as we have earlier  stated intends to regularize these policies.    They did not report the matter to the police.  When the allegations were far reaching, we believe that the agent who had processed the applications was appointed by them.    They do not intend to take any action, however wanted  to make business by utilizing the services of such persons.  It is really a pathetic story where the insurance company by abdicating its duty by not reporting to the police against their agent when he had committed wholesale fraud an un-specious   contention  was taken that there was mistake of fact on both sides and therefore the agreement was  void and as such there was no need for them to refund the amount.  It  is ridiculous.   Absolutely there was no mistake of fact.  They did not verify  to say so.   When the complainants assert that their signatures were forged and when this matter was brought to its notice they could have enquired into and found  out the truth.   Blindly they had accepted the report of the insurance agent.  In a way they admitted that their own agent had issued the ACRs with false answers and misled the insurance company.   By no stretch of imagination it could be said that their actions are bonafide.  At least they could have rectified the mistake when it was brought to their notice.  By no stretch of imagination they can find fault with the complainants when their own agent had forged their signatures and obtained policies with false information.    

9)                The insurance company obviously intends to make business and do not want to report to the police when such cases were brought to their notice.   Since these offences are being suppressed by getting them regularized such instances are recurring.    The conduct of the insurance company in this regard is wholly deficient.  They are not entitled to keep the amount any longer with them.   They are bound to pay back the said amount with interest as they had ploughed  into their own business.    In the circumstances they are bound to refund the entire premium amount which they had received under the policies with interest @ 9% from the date of Ex. B8 viz., from 27.6.2007 together with compensation.   Undoubtedly this act of the insurance company had caused mental agony to the complainants  for which we quantify compensation at Rs. 20,000/-

9)                 In the result the appeal is allowed and the order of the Dist. Forum is modified directing the insurance company to pay Rs. 3,12,186/- with interest @ 9% p.a., from 27.6.2007 till the date of payment together with compensation of Rs. 20,000/- and costs of Rs. 5,000/-.  Time for compliance four weeks.

1)      _______________________________

PRESIDENT                 

2)      ________________________________

 MEMBER

                                                                                      Dt. 20. 09. 2010.

*pnr

“UP LOAD – O.K.”