1.       The present First Appeal (FA) has been filed by the Appellants against Respondent as detailed above, under section 19 of Consumer Protection Act 1986, against the order dated 09.01.2017 of the State Consumer Disputes Redressal Commission, Rajasthan, (hereinafter referred to as the ‘State Commission’), in Consumer Complaint (CC) No. 50 of 2014 inter alia praying for setting aside the impugned order passed by the State Commission. 

2.       The Appellants were the Respondents and the Respondent was Complainant in the said CC/50/2014 before the State Commission. Notice was issued to the Respondent on 18.04.2017.  Parties filed their Written Arguments/Synopsis on 16.10.2023 (Appellants) and 18.12.2023 (Respondent) respectively.

3.       Brief facts of the case, as emerged from the FA, Order of the State Commission and other case records are that: -

Complainant’s father Mr. Sohan Lal (Deceased Life insured) obtained insurance policy and submitted the proposal form for a Reliance Endowment Plan dated 08.02.2013 giving all relevant details and information in the prescribed form, for a sum assured of Rs.23,99,700/-.Based on the information provided and declaration made in the Application Form and on receipt of premium, Policy was issued to the Deceased Life Insured with effective date of coverage as 08.03.2013.The insured expired on 27.03.2013.The Appellant received the death claim intimation from the Respondent/Complainant, S/o deceased, who is the nominee in the said Policy, wherein it was stated that the Deceased Life Insured had passed away on 27.03.2013 due to heart attack and claimed the sum assured. The claim of the insured was repudiated on 28.03.2014 on the ground of suppression of material facts by Deceased Life Insured. Hence, the complainant filed complaint before the State Commission. Vide Order dated 09.01.2017, the State Commission has allowed the complaint.

4.       The present Appeal has been filed with a delay of 17 days (16 days as per Registry).  IA/4210/2017 has been filed by the Appellant for condonation of delay. The delay in filing the First Appeal is condoned after considering the reasons stated in the condonation of delay application.

5.       Appellants have challenged the Order dated 09.01.2017 of the State Commission mainly on following grounds:

(i)      The impugned order is wrong, arbitrary and unreasonable and is passed without application of mind.  The impugned order is based on conjectures and surmises. The State Commission has wrongly observed that there was no suppression of material facts by the DLI.  The Appellant got an investigation through Sharp Eagle Investigation Agency and after perusal of investigation report and certificates issued by Dr. Manohar Lal and the Technician of Hindustan Pathology Lab procured during the investigation of the matter, Appellant came to know that the Diseased Life Assured was suffering from diabetes & paralysis since three years and he was under treatment of Dr. Manohar Lal Sharma and one of local vaid (for herbal medicines). Said documents submitted by the Appellant were never challenged or denied by the Respondent neither by filing a rejoinder nor in the evidence filed by him before the State Commission.  

(ii)     The State Commission by not considering the investigation report has acted in contravention to the Law and hence the impugned order is liable to be quashed only on this ground alone.  The investigation is a right conferred under clause 8(3) of IRDA 2002.

(iii)    By doing investigation and collecting documents appellant has discharged his onus and shifted it upon the Respondent/complainant to disprove the investigation and documents.  Merely making a statement in complaint is not sufficient to accept the case of Respondent. 

(iv)    As per section 45 of the Insurance Act, 1938, the policy can be called in question within two years from the date of issuance by insurer on the ground that statement made in the proposal 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.

(v)     Insurance is a contract based on utmost faith where insured has to furnish true and correct information to the Insured and by not doing so complainant is not entitled for sum assured.  The sum assured is not the right of nominee and or legal heirs of DLA.  The complainant has failed to discharge its burden and therefore the case of complainant is false.  By furnishing false information the contract becomes void ab initio and therefore complainant is not entitled for any benefit under the policy. 

(vi)    State Commission has decided the case without taking into account the law laid down by the Hon’ble Supreme Court and the National Commission with respect to suppression of material fact while applying for the life insurance policy.  The scope of proposal form has been properly described by the Hon’ble Supreme Court in Satwant Kaur Sandhu V. New India Assurance Company Ltd. IV (2009) CPJ 8 (SC).  In the case of Life Insurance Corporation of India and Ors. Vs. Maya Devi, Revision Petition No. 1327 of 2008 decided on 20.08.2015, the National Commission held that while the DLA was suffering from Acute and Transient Psychotic Disorders and had taken treatment in the hospital for the same and was also on medical leave for 15 days, he suppressed the above fact at the time of taking the policy and it tantamount to suppression of material fact even if the disease had no nexus to the cause of death i.e. accident. In the case of Life Insurance Corporation of India v. Smt. Shahida Khatoon and Km. Fatima Shamim, Revision Petition No. 2406 of 2012, decided on 10.09.2013, the National Commission held, overruling the judgment of both the fora below that suppression of the fact that the DLA was suffering from Diabetes Mellitus for the past 10 years tantamount to suppression of material fact which goes to the root of the contract of insurance and has a bearing on the risk involved would be material. In the case of Life Insurance Corpn. Of India Divisional Manager V. Smt. Kempamma W/o Late Hemagirigowda and Hemagirigowda @ Thammaiah, Revision Petition No. 3848 of 2007, decided on 24.01.2013, the National Commission overruled the decision of the State Commission holding that it committed error in allowing the complaint and dismissed the complaint wherein the DLA suppressed the fact that he was suffering from tuberculosis and had undergone X-Ray at the time of renewing the policy.

(vii) The State Commission has failed to appreciate that basic principal of insurance contract is "uberrima fides" which restricts the insured from non-disclosure of material fact relevant for assessment risk by the insurer. The life insurance contracts are contracts 'uberrimae fides' where observance of utmost good faith is enjoined on the parties to the contract, i.e. they must disclose all material facts in respect of the risk to be covered by the insurance. The insured is obliged to give full and correct information on all matters which would influence the judgment of a prudent insurer in determining whether he will accept the risk, and if he would, at what rate of premium and subject to what conditions. The material facts having a bearing on the risk in life insurance contracts viz., the state of health or illness (present & past), occupation and habits, particulars of previous insurance etc. are only within the knowledge of the proposer. The insurer, therefore, has to rely entirely on the information, which the proposer gives at the time of proposal. If a material fact is suppressed, the insurer will be misled about the risk covered and hence the same will vitiate the contract. The insurer will then be well within its right to treat the insurance contract as void as per the terms and conditions of the Policy Document.

(viii) The State Commission failed to appreciate that in case of misrepresentation by the insured with respect to any information contained in the Proposal From, the insurer can avoid the insurance contract as per Section 45 of the Insurance Act. Further it has been held in a catena judgments and more specifically held in judgment of the Division Bench of Andhra Pradesh High Court in LIC of India v. B. Chandravathamma, AIR 1971 AP 41.

(ix)    The State Commission has failed to appreciate that there has been no negligence or deficiency of services on the part of the Appellant in dealing with the claim of the Respondent. The State Commission has  failed to ascertain and appreciate the fact that the Appellant acted with extreme care and caution before repudiating the claim. The State Commission has wrongly allowed the complaint by directing the Appellant to pay the sum assured under the policy to the Respondent along with costs. The State Commission has acted illegally and with material irregularity while exercising its jurisdiction U/s 17 of Consumer Protection Act, 1986.

6.       Heard counsels of both sides.  Contentions/pleas of the parties, on various issues raised in the FA, based on their FA/Reply, Written Arguments, and Oral Arguments advanced during the hearing, are summed up below.

1. 1  In addition to the averments made under grounds (para 7), it is contended by the Appellant that the DLI submitted the duly signed Proposal Forum for a Reliance Endowment Plan dated 08.02.2013 giving all relevant details and information in the prescribed form, for a sum assured of Rs.23,99,700/-.  The DLI had given declaration that he had made complete, true and accurate disclosure of all the facts and circumstances as may be relevant for the acceptability of the risk and had not withheld any information as may be relevant for the acceptability of Proposal.  Further, he had also agreed under the agreement that if any untrue statement be contained in the proposal form, the Policy Contract shall be null and void and the moneys which have been paid in respect thereof shall stand forfeited to the Appellants.  The Applicant received a death claim intimation from the Respondent, After perusal of the documents submitted by the Respondent, the Son of DLI who is the nominee in said Policy wherein it was stated that the DLI had passed away on 27.03.2013 due to heart attack and further claimed the sum assured. The claim being an early claim and also after perusal of the documents submitted by the Respondent, the Appellant got an investigation through Sharp Eagle investigation agency and after perusal of investigation report and certificates issued by Dr. Manohar Lal and the Technician of Hindustan Pathology Lab procured during the investigation of the matter, Appellant came to know that DLA was suffering from diabetes & paralysis since 3 years and he was under treatment of Dr. Manohar Lal Sharma, one of local vaid (for herbal medicines). The Appellant on the basis of documents collected during the investigation of the matter was convinced that there was non-disclosure of earlier disease by DLI and DLI was suffering from diabetes & paralysis since 3 years and he was under treatment. Appellant repudiated the claim on 28.03.2014 on grounds of suppression of material facts by DLI. Aggrieved by the said Repudiation, the Respondent filed a complaint bearing Consumer Complaint before the State Commission. The State Commission has allowed the complaint without application of mind.  In support of his contentions, the Appellants have relied upon  following judgments:

(i) Satwant Kaur Sandhu (supra)

(ii) Life Insurance Corpn. Of India and Ors. Vs. Maya Devi (supra)

(iii) LIC of India Vs. Smt. Shahida Khatoon and Km. Fatima Shamim, RP No. 2406 of 2012.

(iv) LIC of India, Divisional Manager v. Smt. Kempamma W/o Late Hemagirigowda and Hemagirigowda @ Thammaiah, RP No. 3848 of 2007.

1. 2  On the other hand, Respondent has contended that father of the complainant had taken a life insurance policy from the Appellant Insurance Company for a sum assured Rs.23,90,700/-. The Life assured had paid premium amount of Rs.70,830/- for the said policy.  Father of the complainant died on 27.03.2013.  Death claim was lodged under the subject policy before the Appellant Insurance Company by the Respondent.  It is contended that the respondent submitted the duly filled up claim form in the office of the insurance company.  The insurance company repudiated the claim on 28.03.2014 on the ground that at the time of taking insurance the complainant’s father allegedly concealed the material facts about his health.  Left with no other remedy against the Appellant  Insurance  Company, the complainant filed the  complaint before the State Commission.  The OP/Insurance company filed written reply stating that complainant’s father was suffering from diabetes and paralysis for the last three years and was under the treatment of Dr. Manoharlal Sharma and a local Vaidya  (for herbal Medicines).  The State Commission properly perused the proposal form which was verified by the official of the Insurance Company.  The State Commission also perused  and appreciated the moral hazard report of the Sales Manager of the Company in which he has certified that complainant’s father appeared healthy and he had personally met the assured and found no health risk.  The attention of the State Commission was also drawn to the report  of the Investigator, in which investigator was not able to find any medical treatment taken by the life assured i.e. the complainant's father. The State  Commission after perusing the entire case and evidence led by the parties, held that there is no evidence that complainant's father was suffering from diabetes and paralysis. The statement of neighbour that complainant's father probably was suffering from diabetes cannot be relied upon. Similarly, the statement of technician that deceased visited him for diabetes check up, cannot be relied upon. This does not prove that patient was diagnosed with diabetes. It is further contended that the technician does not state what was his diabetes reports. Most importantly, at the same time Dr. Amar Sethia who was Insurance Company's Medical Examiner had personally examined the deceased life assured. If the deceased was suffering from paralysis how could the medical examiner had escaped to notice this fact. The paralytic person has deficiency in walking, talking, grasping and is faced with other problems which can be easily observed but medical examiner certifying his health condition could not observe that patient was suffering from paralysis for the last three years. The State Commission allowed the complaint. 

7.       In this case the claim has been repudiated by the Petitioner Insurance Company vide letter dated 28.03.2014 on the grounds of suppression of material facts in the proposal form.  The repudiation letter states that non-disclosure of diabetes and paralysis was material to the issuance of the policy, these ought to have been disclosed in the proposal form and by not doing so deceased life insured (DLI) has mis-led the insurance company to grant insurance cover.  As has been held by Hon’ble Supreme Court in catena of judgments, no doubt, Insurance Company is entitled to repudiate the claim on the grounds of non-disclosure/suppression of material facts, but as was laid down by the Hon’ble Supreme Court in Life Insurance Corporation of India Vs. G.M. Channabasamma (1991) 1 SCC 357, the burden of proving that the insured had made false representations and/or suppressed material facts is undoubtedly on the Insurance Company.  

8.       We have carefully gone through the orders of the State Commission, other relevant records and rival contentions of the parties.  The State Commission after due consideration of the facts of the case and appreciation of evidence before it, has concluded that there is no evidence that complainant’s father was suffering from diabetes and paralysis.  The statement of the neighbor  that complainant’s father probably was suffering from diabetes cannot be relied upon.  Similarly, the statement of technician that deceased visited him for diabetes check cannot be relied upon.  In this regard, extract of relevant para of the State Commission’s order is reproduced below:-

“3.  We have considered the contentions of the Ld. counsel for the complainant and have perused the evidence collected by the Insurance Company. We find that there is no evidence that complainant's father was suffering from diabetes and paralysis. The statement of neighbour that complainant's father probably was suffering from diabetes cannot be relied upon. Similarly the statement of technician that deceased visited him for diabetes check cannot be relied upon. This does not prove that patient was diagnosed diabetes. Technician does not state what was his diabetes reports. At the same time Dr. Amar Sethia who was Insurance Company's Medical Examiner had personally examined the deceased. If the deceased was suffering from paralysis how could the medical examiner had escaped to notice this fact which even a layman might observe. The paralytic person has deficiency in walking, talking, grasping and is faced with other problems which can be easily  observed but medical examiner certifying his health conditions could not observe that patient was suffering from paralysis for the last three years is inconceivable.”

9.       We are in agreement with the observations and findings of the State Commission and find no reason to interfere with its findings.  The certificate of Manohar Lal Sharma, who is local Vaid for herbal medicines cannot be relied upon in the absence of treatment records of diabetes and paralysis for concluding that the DLI was suffering from these diseases and that he suppressed the information relating to this in the proposal form.  It is important to note that the State Commission has specifically observed that the deceased was examined by the Insurance Company’s doctor, if the deceased was suffering from paralysis, how could the doctor escaped to notice this fact.  After considering the entirety of the facts and circumstances of the case and available evidence,  we find no illegality or material irregularity in the order of the State Commission, hence, the same is upheld.  Accordingly, the First Appeal 581 of 2017 is dismissed.

10.     The pending IAs in the case, if any, also stand disposed off.