Aggrieved by the order dated 14.8.2009 passed by the Meghalaya State Consumer Disputes Redressal Commission, Shillong (in short, ‘the State Commission’) in complaint case no. 4 of 2005, the Life Insurance Corporation of India (in short, ‘the LIC’) has filed the present appeal. By the impugned order, the State Commission has partly allowed the complaint by observing as under:-

       “In the result we are satisfied that there has been deficiency in service… able to make out a case for being granted relief by this Commission.  We hold that LIC was not justified in repudiating the claims of the complainant and that the complainant is entitled to be paid the sum assured along with all bonus and benefits as payable under the terms of the following policies –

We therefore direct the opposite parties LIC to pay to the complainant the sum assured totaling Rs.12,50,000/- in respect of policy nos.482586105 d 20.12.2001, No. 483023461 dated 15.5.2002 and no. 483024512 dt. 13.2.2003 together will all bonus and benefits as payable under the terms of the respective policies, after deducting therefrom Simple Extra Premium at Rs.3/- per thousand alongwith interest thereon from the respective dates of commencement of the policies.  The opposite parties are further directed to pay to the complainant compensatory interest @ 9% p.a. from 1.4.2005 till the date of payment on the total amount payable by LIC in terms of this order within 30 days of receipt of a copy of this order from this Commission to be served by the Registry.  The  complaint petition is disposed of with the above directions.”

2.      The facts and circumstances leading to the complaint have been amply noted by the State Commission in the impugned order and need no repetition at our end. However, for the purpose of disposal of the present appeal, we simply observe that the consumer dispute raised in the complaint before the State Commission related to non-settlement of three insurance policies  (supra) out of the  seven insurance policies taken by the deceased Mrs. Sangeeta Chaudhury, wife of the complainant-Mr. Murari Lal Chaudhury during the period between 1994 to 2003, the LIC having already settled and paid the insurance claims payable under the preceding four policies, which the deceased had taken in the years 1994, 1996, 1997 and 1999. The insured, Smt. Sangeeta Chaudhury died on 13.9.2004 after giving birth to her third child at Nazareth Hospital, Shillong. The claim in respect of the above referred three policies was repudiated by the LIC vide letter dated 30.3.2005 primarily on the ground that in the proposal forms submitted by the insured for taking the above-referred three policies, she had withheld correct information regarding her health status at the time of effecting the policy and rather gave false information in that behalf concealing the factum of her pregnancy at the time of taking of the policy, as also in regard to she having had operation or miscarriage or caesarean operation earlier. The claim filed by the husband and nominee of the insured was also repudiated on the very same ground.

3.           Though the State Commission, going by the facts and circumstances of the case and the material produced by the parties, reached the finding that the insured had withheld information on the above aspect at the time of taking the policy, it took the view (based on certain decisions of different High Courts) that the said suppression was not of material fact by observing as under:-

“In our considered view, the alleged mis-statements were not on any material manner.  Pregnancies and caesarian operations are not procedures unknown in common life.  The cause of death, as per the Death Report before us, was haemonhagic Shock Placenta Accreta.  The Medical Report also reveals that no other disease or illness preceded the disease or illness which caused the death of the insured.  This, to our mind, alone settles the issue that the alleged mis-statement was not any material matter as the disease / illness in respect of which the alleged mis-statements were made did not constitute the cause of death.  At best, these could be said to be inaccurate or false statements but not on a material matter.

Having examined the documents and heard the Ld. Counsels and in view of the above discussion, we are firmly of the view that LIC was not justified in adopting double standards by accepting the claim of the complainant in respect of 4 policies and in the same breath repudiating the remaining 3 policies inasmuch as whatever grounds LIC had for the repudiation were common to all the policies.  Once LIC found the claims to be payable in respect of 4 policies, by charging additional premium, it is obvious that the ground of repudiation, even assuming that it was valid, was easily waivable and not so fatal as to result in complete repudiation of the claim.  LIC cannot be allowed to blow hot and cold in respect of different policies by the same person, especially as the alleged suppression / misstatement was contained in all the 7 policies and not the 3 rejected ones alone.  We also find that bar contained inSec45 of the insurance Act, precluding the Insurance Co. from raising any questions tow years after the date of the policy, clearly operates against LIC and they cannot call into question the proposals submitted by the insured as, in our view, the particulars contained in the proposal forms do not satisfy the necessary ingredients of being material, being fraudulent and being false to the knowledge of the insured.”

4.      We have heard Mr. Kamal Mehta, learned counsel representing the appellant-LIC and Mr. Kartike Anand, learned counsel representing the respondent and have given our thoughtful consideration to their submissions.

5.      Mr. Mehta would assail the impugned order of the State Commission as erroneous and legally untenable on the ground that the LIC was fully justified in repudiating the claim lodged by the complainant because the insured, at the time of taking the policy, had suppressed material facts about her state of health so much so that in the proposal forms submitted by her for obtaining the three policies No.482586105 dated 20.12.2001 in the sum of Rs.1,00,000/-, No.483023461 dated 15.5.2002 in the sum of Rs.9,00,000/- & No.483024512 dated 13.2.2003 in the sum of Rs.2,50,000/- the Insured had given factually incorrect answers to the questions put in paragraph 18 of the proposal forms as under:

             Question                                                                         Answer

18(a)            Are you pregnant now                                                     No

18(b)            Date of last delivery                                                          One year ago

18(c )            Have you had any abortion or miscarriage or                     No

caesarian operation, if so give details.

6.      In order to show that the deceased insured had suppressed the material fact, learned counsel has heavily relied upon a certificate issued by the Medical Officer, Nazareth Hospital, Shillong, which certified that the insured Smt. Sangeeta Chaudhury underwent three caesarean sections, out of which the last two were on 14.1.2002 and 13.9.2004 (the date on which she died) after delivery of her third baby. This would clearly show that the answers given by the insured were palpably incorrect and it is no wonder that it was done with some ulterior motive.  We say so because the insured had taken these high-value policies after the second caesarean delivery and perhaps after being made aware of the risk to her life in the third caesarean delivery. Not only that she had concealed the factum of her having undergone two earlier caesarean sections delivery at the time of taking the third policy, she had also concealed even the factum of her pregnancy. In our opinion, State Commission has lightly brushed aside this aspect of the matter on certain wholly untenable line of reasoning.

7.           Whether the non-disclosure/incorrect disclosure on the above aspects relating to her pregnancy and caesarean section deliveries was on material point is the question which remains to be considered. Mr. Mehta, learned counsel for the appellant has relied upon the two decisions of the Hon’ble Supreme Court, first being in the case of P.C. Chacko and another vs. Chairman, Life Insurance Corporation of India & others [(2008) 1 Supreme Court Cases 321] and the second, in the case of Satwant Kaur Sandhu vs. New India Assurance Company Limited [(2009) 8 Supreme Court Cases 316], and strongly contended that the insured had suppressed/concealed material facts. In the former case, the Supreme Court has categorically held that a deliberate wrong answer, which has a bearing on the contract of insurance, if discovered, may lead to the policy being vitiated in law. Further, that the purpose of taking the policy of insurance is not very material; it may serve the purpose of social security but then the same should not be obtained with fraudulent act by the insured. Further, that the proposal can be repudiated if a fraudulent act is discovered. The latter decision has reinforced the above legal position by observing as under:-

“The term “material fact” is not defined in the Insurance Act, 1938 and, therefore, it has been understood and explained by the courts in general terms to mean as any fact which would influence the judgment of a prudent insurer in fixing the premium or determining whether he would like to accept the risk. Any fact which goes to the root of the contract of insurance and has a bearing on the risk involved would be “material”. The Insurance Regulatory and Development Authority ( Protection of Policyholders’ interests) Regulations, 2002 defines the word “material” to mean and include all “important”, “essential” and “relevant” information in the context of guiding the insurer to decide whether to undertake the risk or not.

Thus, 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 t he proposal form. 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.”

8.      The above legal position would squarely apply to the facts and circumstances of the present case inasmuch as here too, the insured did not disclose the factum regarding her pregnancy and about her having undergone caesarean section deliveries. These were indeed material facts. Concealment of such facts would amount to concealment of material facts. In our opinion, having regard to the totality of the facts and circumstances of the case and the material obtaining on record, the finding by the State Commission holding the LIC guilty of negligence is legally unsustainable and should be set aside.

9.      In the result, the appeal is partly allowed and the impugned order, so far it has allowed the complaint and has directed the LIC to pay the insurance claim and other benefits under the above referred policies, is hereby set aside. The complaint will be deemed to have been dismissed. However, in the peculiar facts and circumstances of the case and as a special case, we direct the LIC to refund the premium amounts received by it in respect of three policies (supra) with interest @ 9% per annum till the date of payment. The appeal stands disposed of accordingly.