Aggrieved by the order dated 22.9.04 passed by the Karnataka

State Consumer Disputes Redressal Commission, Bangalore (in short, ‘the State Commission’) in Complaint Case no.072/99, 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 filed by Smt. V. Radhamma, respondent and has directed the appellant-LIC to settle her claim payable under Policy no.620890467 dated 28.9.94 and Policy No.611420913 dated 19.1.95 with interest @ 9% per annum from the date of complaint till realization. The State Commission has also directed the LIC to refund the premium amount received by it in respect of Policy No. 611426269 dated 28.10.94 obtained from Peenya Branch to the complainant with interest @ 9% per annum till realization, leaving the parties to bear their own costs.

2.      The facts and circumstances which gave rise to the complaint and then the present appeal are that late M. Veeerappa, the husband of the complainant, Smt. V. Radhamma had taken the following five policies on his life.

3.      Out of the above policies, Policy no.620890624 lapsed due to non-payment of the premium due on 28.1.95. The insured, M. Veerappa died on 8.2.97 and the claim of the nominee/complainant in respect of Policy No.611426027 was settled in the sum of Rs. 1 lakh by its Peenya Branch Office. The claim of remaining three policies was not settled/repudiated by the LIC on the ground of non disclosure of the particulars about the earlier policies obtained by the  insured. The complaint filed by the complainant was also resisted on the same ground. The State Commission on consideration of the respective pleas has negatived the stand of the LIC and has made the above order by observing as under:-

“3. We perused the records in order to ascertain; whether in fact, the insured has disclosed the particulars regarding earlier policies? From the proposal form submitted on 13.8.94, we find the insured has disclosed the Policy Dated:28.8.1994, which he had. If that is so, the Insurance Company is not right in repudiating the Claim in so far as the Policy No.620890467 Dated 28.9.1994 is concerned. The next Policy is Dated 19.1.1995, in this case, the proposal form has been submitted on 09.1.1995. In this proposal form also, the Complainant has disclosed the earlier policy Dated 28.8.1994. If that is so, repudiating the Claim on the ground of suppression of fact regarding disclosure of earlier Policies is also not correct. In so far as the Policy Dated 28.10.94, which was obtained from the Peenya Branchy is concerned, the insured had not disclosed the proposal or the Policies, which were obtained earlier in his proposal form. If that is so, in so far as the Policy No.61142626 Dated 28.10.94 is concerned, the Insurance Company is justified in repudiating the Claim. But however, whatever the premium received towards this Policy from the insured is to be paid to the Nominee. Hence, the Order is passed disposing of the Complaint of the Complainant with the following terms:”

4.      We have heard Mr. Amit Bansal, learned counsel representing the appellant-LIC and Ms. Nazneen Ahmed, learned counsel representing the respondent and have given our thoughtful consideration to their submissions.

5.      Mr. Bansal would assail the finding and order of the State Commission as erroneous on the ground that it is not based on correct appreciation of the facts and circumstances and the material obtaining on record. He submitted that the State Commission has wrongly held that in the proposal form dated 3.8.94, the insured had made a disclosure about the policy dated 28.8.94 which is incongruous on the face of it.  It so appears to us also because in the proposal form submitted on 13.8.94, the insured could not have possibly disclosed the particulars of the policy of the later date, i.e., 28.8.94. The State Commission further observed that in the proposal form submitted on 09.1.95, the insured had disclosed earlier policy dated 28.8.94 and if that is so, the LIC could not have repudiated the claim on the ground of non-disclosure of the earlier policies. In this regard, Mr. Bansal submits that before making proposal for the fifth consecutive policy on 09.1.95, the complainant was holding four policies and, therefore, the disclosure in regard to one policy only would amount to non-disclosure of particulars of the policies already held by the insured. This submission also appears to have merit because the question 9 of the format of the Insurance proposal requires the proposer to give details of his previous insurance (including details of policies surrendered/lapsed during the last three years) in the columns contained in the table under question 9. The question no.9 and the table under it reads as under:-

9. Please give details of your previous Insurance (including Policies Surrendered/Lapsed during the last 3 years)

6.      A perusal of the above question and table should not leave any doubt in anybody’s mind that a proposer of Insurance is obligated to furnish the details not only of the existing policies but also many other details. From the proposal forms brought on record, it would appear that the insured had made disclosure of only one pre existing Policy dated 28.8.94 in the last policy, which he had taken on 09.1.95. Even in this proposal form, he had not disclosed about the other three policies already obtained by him. Such partial disclosure was no disclosure in the eyes of law. It would clearly amount to non-disclosure/concealment of the material facts. More particularly so because it is admitted that the insured had taken the five policies in quick succession between 3.8.94 to 9.1.95 in the sum varying between 1 lakh to 2 lakh while his yearly income was not even sufficient to pay the premium of these policies. The insured had clearly concealed the factum of earlier policy while making proposal for Policy No(s).620890624, 620890467 & 611426269.

7.      On the strength of two decisions of 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 another, in the case of Satwant Kaur Sandhu vs. New India Assurance Company Limited, (2009) 8 Supreme Court Cases 316, Mr. Bansal has strongly urged that LIC was fully justified in repudiating the claim lodged by the complainant because the insured at the time of taking the policy had suppressed the material facts about the previous policies, which he had obtained. In the former case, Supreme Court has categorically held that a deliberate wrong answer, which has a great 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 the 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 proposition would squarely apply to the facts and circumstances of the present case inasmuch as here also the insured had not disclosed the factum regarding the existence of previous policies while making the proposal for obtaining subsequent policies. Such concealment must be with certain ulterior motive. Mr. Bansal submitted that there exists circumstances on record which would show that the insured had acted fraudulently in withholding this vital information because he had disclosed his annual income of Rs.27600/-, which was hardly sufficient to cover even the insurance premiums payable in respect of the five policies held by him and that it must be for this reason that the insured chose to take the policies from different branch offices of the LIC namely Peenya, Honnali and Jayanagar so that the factual position about the pre existing policies taken by the insured may not be verified by the concerned branch office(s). These circumstances make us to believe that the insured had deliberately suppressed this material fact from the Insurance Company with ulterior motive and by doing so, he has played fraud on the LIC in obtaining at least three subsequent policies. In the circumstances, LIC was fully justified in repudiating the claim payable in respect of said policies. In our view, the State Commission has grossly erred in recording the factually incorrect finding that the insured had disclosed the particulars of the previous policies while taking the Policy no.620890467 dated 28.9.94 and Policy no.611420913 dated 19.1.95 and directing the LIC to pay the claim under the said policies to the complainant. The finding of the State Commission is legally unsustainable.

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 under Policy no.620890467 dated 28.9.94 and Policy no.611420913 dated 19.1.95 with interest @ 9% per annum from the date of complaint is hereby set aside. However, in the peculiar facts and circumstances of the case and as a special case, we direct the LIC to refund the premium amount received by it in respect of these two policies (also the amount of premium having in respect of Policy no.611426269 dated 28.10.94 having already ordered to be refunded by the State Commission) to the respondent/complainant with interest @ 9% per annum. The appeal stands disposed of accordingly.