Shri Bansidhar Sharma

S/o Late Kanayalal Sharma

C/o Rani Hotel, Mawlong Hat,

Shillong-793002 ….. Appellant / Complainant

-Vs-

1. The Branch Manager

LIC of India, Jeevan Jyoti

JM Nichols Roy Road, Dhankheti,

Shillong-793003

2. The Divisional Manager

LIC of India, Jeevan Prakash

SS Road, Guwahati-781001

3. The Chairman

LIC of India,

Mumbai-400021

…….Respondents / Opposite Parties

Date of hearing: 09.11.2013

Date of judgment: 30.11.2013

Whether to be reported: Yes

JUDGMENT & ORDER (CAV)

Per Mr. Justice P. K. Musahary (Retd), President :

1.      This is claimant’s appeal against an order dated 15.12.2006 passed by the

learned District Consumer Redressal Forum, East Khasi Hills District, Shillong

(District Forum in short) dismissing his complaint being Consumer Case No. 28 of

2004.

2.       We have heard Mr. S P Sharma, learned counsel for the appellant and Mr.

S. Jindal, learned counsel for the respondents. We have also perused the

pleadings along with the documents and written arguments filed by the parties.

3.      The appellant’s case is that his father Late Kanayalal Sharma, while

residing at Shillong, purchased two insurance policies on his life being Policy No.

482585127 dated 16.10.2001 and Policy No. 483023940 dated 14.01.2003

assuring sum of Rs. 2 lakhs and Rs. 3 lakhs respectively and appointing him as

the nominee. Appellant’s father (insured) expired on 16.05.2003 during his visit to

his native village Kyamsar in Nagaur district, Rajasthan. He obtained a death

certificate on 05.06.2003 from the local village panchayat secretary and lodged

claim on both the policies on 13.02.2004. His claims were repudiated by the

opposite parties on 27.09.2004.

4.       With regard to Policy No. 482585127, the learned District Forum on the

basis of showcause reply and other relevant documents came to findings that the

premium was to be paid in March and September every year with one month

grace period. The last premium was paid on 23.10.2002 and the next premium

was due on 28.03.2003 but it was not paid even within the one month grace

period. Since the insured died on 16.05.2003, no claim was admissible against the

said Policy which got admittedly lapsed due to non-payment of due premium. We

cannot change or interfere with the findings arrived at by the learned District

Forum unless the appellant can show non-consideration of any valid documents

on record which led to the said findings.

5.       As regards the Policy No. 483023940, there is no dispute over its

subsistence or validity but the claim has been repudiated on account of alleged

fraud perpetuated by the complainant and suppression of true age of the insured.

Since the insured died within three years of the commencement of the Policy, the

opposite parties got the matter inquired through its officer and in such inquiry it

was found that the insured died much before 16.05.2003. According to opposite

parties, as many as six death certificates from different persons have been

annexed to the claim petition but none of the signatories of the certificates stated

that they have seen the dead body of the insured. The opposite parties also

asserted that from the inquiry it was found that the insured, at the time of the

proposal, stated his age as 60 years in 2002 calculated from his date of birth on

20.04.1942, whereas his daughter Smt. Pushpa, while taking a Policy in 1991,

recorded her father’s age as 67 years in 1991. It is, therefore, argued that the age

of the insured should have been 78 years in 2002. Further, in the Voters List

published in January 1998, the insured’s age was shown as 78 years.

Furthermore, in the Voters List published in January 2003, the insured Kanayalal’s

name has been shown in the list of deleted voters, from which it could be

presumed that he expired between January 1998 and January 2003 and not in

May 2003 and for the same reason it stood proved that the insured Kanayalal

Sharma was not 60 years old when he bought the Policy.

6.       The opposite parties’ case is that-

(1) Insured Kanayalal Sharma was not even alive when the proposal for life

insurance was made; (2) insured Kanayalal Sharma expired much earlier than

16.05.2003 and (3) the insured and the deceased were two different persons and

even the person presented before the doctor and insurance representative was

somebody else.

7.       A life insurance Policy, as we know, is opened through an agent who

meets, interacts, pursues and then convinces the customer to buy the Policy.

Before giving effect to the insurance Policy signatures are obtained on a duly filled

in prescribed form. The Policy is issued by the insurance company only when the

proposer can meet the queries and completes the formalities. Going by the

formalities observed before issuing the Policy, there is no scope for opening life

insurance Policy of a dead person. If such a Policy is opened in the name of a

dead person, the concerned agent of an insurance company would also be equally

liable for the fraud committed in the matter. In such a case, the insured alone

cannot be held liable for the fraud. The insurance company must disclose the

action taken by it against the agent concerned for the fraud committed by him. The

opposite parties have indicated nothing about the action taken against the agent.

The Commission is not to believe the allegation of the opposite parties that the

insurance Policy in question was opened even when the insured was not alive.

The accepted position of law is that when insurance claim has been repudiated

after proper investigation and application of mind, the allegation of deficiency of

service becomes unacceptable. In the present case the opposite parties have

claimed to have conducted proper investigation through a senior branch manager.

This fact is available from the written statement filed by the opposite parties. The

said senior branch manager submitted his investigation report on 29.01.2004.

Copy of the said report is not laid or furnished along with the written statement for

perusal of the Commission. However, the opposite parties in Para 8 (v) of the

showcause have stated as under-

(v) “That the investigation report dated 28.06.2004 of Shri B. S. Pareek, branch

manager Deedwana revealed that the deceased/assured was 85 years old or

above at the time of submission of proposal form on 13.12.2002 and was possibly

not alive. He was residing at Village Kyamsar for many years and had not even

visited Shillong in the last 5-10 years. On an inquiry made by him from the staff of

Tehsil who were engaged in preparation of Voters List, the job of review of Voters

List starts in November every year and after addition and deletion the Voters Lists

are published in January of following years. It implies that the deceased/assured

died before November 2002 and subsequently his name was deleted in the Voters

List dated 01.01.2003 published in 20.01.2003. Further the said Investigating

Officer also came to know from one of the relatives of the deceased that he died

before Deepawali (04.11.2002) i.e. before completion of the proposal on

13.12.2002.”

8.       From the above it appears that the senior branch manager collected some

documents pertaining to proposal form of the insured and his daughter and also

collected some Voters Lists of the locality in Rajasthan published on 05.01.98 and

01.01.2003 to show that the age shown in the insurance proposal does not tally

with the age shown in the Voters List. The Voters List of deleted voters as

published on 20.01.2003 was also brought on record to show that the insured died

before 04.11.2002 i.e. before completion of the proposal on 13.12.2002. There is

no disclosure in the written statement that the said Branch Manager, while

conducting investigation met any persons/witnesses to verify the antecedents of

the insured and to ascertain as to whether the insured died at his native place on

16.05.2003. There are, on record, as many as six death certificates issued by six

different authorities including the one issued by local Sarpanch and the medical

officer, but none of them was contacted by the investigating Branch Manager. In

all the said death certificates, it is mentioned that the insured died on 16.05.2003.

Apparently the said investigating Branch Manager did not record the statements of

any witnesses. There being no meeting with the concerned persons/witnesses and

recording of their statements, the inquiry/investigation as conducted by the

investigating branch manager cannot be said to be proper and in accordance with

existing accepted procedure. There is no denial of the fact that the entire

investigation was done behind the back of the complainant and the copy of the

investigation report, purportedly made and submitted by the said officer, was

never furnished to the complainant. The same has not been laid or filed before the

learned District Forum for perusal and consideration.

9.       That apart, the opposite parties have filed no evidence on affidavit of the

senior branch manager concerned nor have they examined him as a witness to

prove the fact that he conducted the investigation and submitted a report. In

absence of such affidavit and evidence of the officer concerned, we find the stand

of the opposite parties unacceptable and unbelievable. In this regard the learned

counsel for the appellant relied on National Insurance Company Ltd Vs Munir

Shah, reported in 2003 (1) CPR 122 (NC) wherein the Hon’ble National

Commission held that the investigating officer’s report, if not proved by an affidavit,

cannot be a basis for repudiation of insurance claim. The said decision is

applicable to the present case and it has to be followed by this Commission.

10.   From record we find that the opposite parties filed photocopies of the

Voters List without filing the originals as published in the official gazette. No officer

from the election department was examined to prove that the photocopies as filed

by the opposite parties were made from the original Voters List published by the

government. Such photocopies of Voters List cannot be accepted in evidence

unless it is duly compared with and authenticated by a competent officer of the

concerned department. As against the above weak piece of documentary

evidence, we may turn to oral evidence of CW2, Shri Hari Prasad Sharma,

younger son of the insured, who categorically stated that his father was born on

20.04.1942. He denied the suggestion put during cross-examination that his father

died prior to making the proposal for life insurance. That apart, in his evidence on

affidavit, he stated that his father (insured) passed away on 16.05.2003 at their

native village Kyamsar under Nagaur district in Rajasthan and the funeral and last

rites took place at the said native village in presence of more than 100 villagers

including the Village Sarpanch. The Sarpanch issued a death cum funeral

certificate stating therein that his father (insured) died on 16.05.2003. The said

certificate in original was filed, proved and marked as Ext 1. One independent

witness, Shri Kamal Sharma was examined as CW3. He stated that he was born

and brought up in Shillong. His father stayed at the native place in Rajasthan and

they were neighbours of the insured. He saw the insured alive 3 or 4 days before

his death. He went to Rajasthan in the month of April, 2003. He denied the

suggestion put during cross-examination that the insured did not die on

16.05.2003. The evidence of CW3 lends support to the claimant’s case.

11.   What is found established in this case is that the insured, in both the

insurance proposals, recorded his date of birth as 20.04.1942. After his death,

when the claim was filed, the opposite parties questioned the correctness of the

same and repudiated the claim alleging mis-statement and suppression of material

information mainly because the insured’s age as shown in the proposal does not

tally with the age recorded in the Voters List. The opposite parties have

overweighed and gave undue importance to the entry made in the Voters List to

disbelieve the age recorded in the proposal. If such procedure or practice is

allowed it would encourage the insurance companies to repudiate the claims

easily at their whims on ground of alleged suppression of material information by

collecting such documents on age. The Commission cannot allow such dangerous

trend to grow. Besides, in our considered view all suppression of material

information cannot result into repudiation of insurance claim unless the

suppression is proved to be willful with ill intention. Nobody knows exactly when

the end of life comes. In fact nobody desires to die early. An insured, by dying

early does not personally derive any benefit. By his premature death, it rather

benefits the nominee only. So, where is the question of willful suppression or

misinformation about the date of birth or age of the insured in this case?

12.   The opposite parties examined only one witness, namely Shri S. S. Thakur.

His evidence is that he was the Branch Manager of LIC Shillong on 8th

He certified that LIC Shillong office issued two insurance policies in the name of

Shri Kanayalal Sharma by Policy No. 482585127 and 483023940. There is no

significance in this oral evidence. The opposite parties examined no other witness

to establish their case or to demolish the evidence of the complainant. Except the

presumption and surmises, based on some Voters List (not duly proved in

accordance with law), there is no solid/cogent evidence on record proving the

charge of committing fraud or suppressing material information that the insured

died before the insurance Policy was opened or the insured was no longer alive at

the time when the proposal was made. The opposite parties made no attempt to

examine any witness from the native village of the insured, not to speak of

examining the village Sarpanch.

June, 2006.

13.   We are satisfied that the complainant has been able to prove the fact that

the insured died in his native place on 16.05.2003 and his funeral and other rites

were performed in presence of Sarpanch and co-villagers. We are, therefore, of

the view that the learned District Forum failed to appreciate the evidence and

materials on record and came to erroneous findings/conclusion resulting into

dismissal of the complaint. We are not persuaded to agree with the findings of the

learned District Forum. We are, rather, persuaded to disagree and set aside the

impugned order dated 15.12.2006 as far as it relates to Policy No. 483023940 as

unsustainable under the law. Consequently we hold and order as follows: -

(1) Repudiation of claim under LIC Policy No. 482585127 is valid and

sustainable under law.

(2) Repudiation of claim under LIC Policy No. 483023940 is invalid and

unsustainable under the law.

(3) The opposite parties shall pay to the Appellant the following:

(a) The assured sum of Rs. 3.00 (Three) lakhs with accrued bonus as

applicable under the Policy No.483023940 along with interest on the total

sum @ 12% p.a. from 16.11.2003 (i.e. 6 months from the death of the

Insured) till the date of payment.

(b) A sum of Rs. 35,000/- as compensation and damages on account of

mental agony and harassment.

(c) A sum of Rs. 10,000/- as litigation costs.

(d) The aforementioned amounts shall be paid within a period of 30

days from this date, failing which the entire sum shall carry further interest

@ 12% p.a. till realization.

14.   The appeal is thus allowed in part and disposed of with modification of the

impugned order as indicated above. Return the records below immediately along

with a copy of this judgment and order.

Per: Mr. Ramesh Bawri, Senior Member :

1. While I am respectfully and completely in agreement with the

aforementioned findings, observations and directions issued by the Hon’ble

President, with regard to Policy No. 483023940 I would like to add the following

additional reasons for upholding the Appellant’s claim:

(a) LIC has claimed that the Insured died between 5.1.1998 and 1.1.2003 and

was perhaps not even alive on 13.12.02 when he made the proposal for his life

insurance. This, in our view, is a preposterous proposition inasmuch as the

proposal form filed before us by LIC itself shows that it was treated as a medical

case and the Doctor who examined the Insured has himself clearly certified that -

“I certify that the Proposer has signed in my presence after admitting that all the

answers to question No. 10 and onwards of the form have been correctly

recorded.”

(b) As the deceased insured was examined by the doctor of the insurance

company and from his physical outlook the doctor must have assessed his

approximate age. Had he been looking 82 years old, as claimed by LIC, instead of

60 the doctor would surely have noticed and opined that the insured was looking

overaged as compared with the age mentioned in the proposal form. No doubt

certain diseases cannot be ascertained even despite examinations and tests

conducted by medical experts, but there are certain issues such as approximate

age, physical appearance etc., which can clearly be observed by a medical expert

on physical examination of the insured. A difference of 22 years could even be

made out by a common man. For this reason too, LIC’s contentions regarding the

Insured’s age cannot be accepted.

(c) The Policy document which shows the Insured’s date of Birth as 20.4.1942

also reveals that his age has been admitted by LIC. It may be mentioned that in

Policy No. 482585127 too the Insured’s age has been admitted by LIC.

(d) LIC’s case is mainly founded upon copies of some Voters Lists, both in

respect of the Insured and of his purported relatives, as proof of the correct age of

the Insured which, according to them, was around 82 and not 60 when he made

the proposal. Now, age proof is accepted by LIC is the following manner only:

(A) Proofs of age, which are generally acceptable to the Corporation:

(1) Certified extract from Municipal or other records made at the time of birth.

(2) Certificate of Baptism or certified extract from family Bible if it contains age

or date of birth.

(3) Certified extract from School or College if age or date of birth is stated

therein.

(4) Certified extract from Service Register in case of Govt. employees and

employees of Quasi-Govt. institutions including Public Limited Companies and

Pass port issued by the Pass port Authorities in India.

(B) Alternative Age Proofs which are accepted:

(1) Marriage certificate in the case of Roman Catholics issued by Roman

Catholic Church.

(2) Certified extracts from the Service Registers of Commercial Institutions or

Industrial Undertakings provided it is specifically mentioned in such extracts that

conclusive evidence of age was produced at the time of recruitment of the

employee.

(3) Identity Cards issued by Defence Department.

(4) A true copy of the University Certificate or of Matriculation/Higher

Secondary Education, S.S.L. Certificate issued by a Board set up by a State/

Central Government.

(5) Non- standard age proof like Horoscope, Service Record where age is not

verified at the time of entry, E.S.I.S. Card, Marriage Certificate in case of Muslim

Proposer, Elder’s Declaration, Self-declaration and Certificate by Village

Panchayats are accepted subject to certain rules.

It can thus be seen that LIC does not accept Voters Lists as Proof of age by the

Insured. Hence, by the same yardstick, LIC too cannot use / rely upon a Voters

List as Proof of Age to repudiate an Insured’s claim, that too without proving it in

accordance with law.

(e) The learned District Forum dismissed the Appellant’s claim on the basis

that he has failed to ‘dispel the doubt raised (by LIC) in the matter through

adducing relevant evidence’. We believe this was not the right approach as it was

on LIC that the burden lay to prove material mis-statement, suppression or fraud

on the part of the Insured, in order to repudiate the claim. The deceased life

assured was the best person to explain / produce evidence as to his age, but he is

no more in the world. Under such circumstances, a strict burden lay on the

insurance company to prove that the deceased life assured had concealed or mis-

stated the material fact as regards his age. The complainant / legal heir of the

deceased could at most help the insurance company in arriving at a correct

conclusion, but in the absence of strict proof, the deceased life assured cannot be

condemned on mere allegation that he had played a fraud with the insurance

company.

2. With regard to the other Policy No. 482585127 which lapsed, we must

remember that Section 50 of the Insurance Act reads as under:

"50. Notice of options available to the assured on the lapsing of a policy:-

An insurer shall, before the expiry of three months from the date on which the

premiums in respect of a policy of life insurance were payable but not paid, give

notice to the policy-holder informing him of the options available to him unless

these are set forth in the policy."

In L.I.C. Of India vs Smt. Amarjit Kaur decided on 18.2.2003, the Hon'ble

National Commission observed that "Even though the relevant clause is printed in

the policy it is desirable that a notice as contemplated under Section 50 be given".

Further, only to demonstrate how lapsation of policies ought to be treated by an

Insurer, we refer to Regulations 4 & 5 of The Insurance Regulatory & Development

Authority (Standardization of terms & conditions of ULIP Products and treatment of

lapsed policies) Regulations, 2010 which mandate as follows:

"4. Where policies lapse, the policy holder is entitled to one of the following

options:-

a. to revive the policy;

b. to continue with the policy only to the extent of risk cover and

c. to continue with the policy with risk cover and as part of the Fund;

d. to withdraw completely from the Fund without any risk cover.

5. In order to exercise the options available by a policy holder as mentioned in

regulation 4 above, the insurance company shall take the following steps in all

cases where a policy has lapsed:

a. A notice shall be issued to such a policy holder asking him/her to exercise the

said options within a period of 30 days of receipt of such notice.

b. In case no option is exercised within 30 days, the option at regulation 4 (c)

above, i.e, to continue in the Fund with risk cover will be deemed to have been

exercised and the risk charges and fund management charge will be recovered."

We also deem it necessary to note here that the terms of a LIC Pension Plus

Policy (not the type of policy with which we are concerned here) contains the

following clause:

"If you fail to pay premiums under the Policy within the days of grace, a notice

shall be sent to you within a period of fifteen days from the date of expiry of grace

period to exercise one of the following options within a period of thirty days of

receipt of such notice. (1) Revival of the Policy, or (2) Complete withdrawal from

the Policy.

During the notice period of 30 days, the Policy shall be treated as in force till the

date of discontinuance of the Policy (i.e. till the date on which the intimation is

received from the Policyholder for complete withdrawal of the Policy or till the

expiry of the notice period) and the charges shall be taken, as usual. If you do not

exercise any option within the stipulated period of 30 days, you shall be deemed to

have exercised the option of complete withdrawal from the Policy."

Although in the instant case, the options available to the assured on the lapsing of

a policy have been set forth in the Policy and a notice was not mandatory nor are

the Regulations cited above applicable, we are of the view that, in the interests of

justice, LIC ought to follow the same salutary principles as aforementioned (and

we see no reason why they should not ) in respect of all types of policies and send

notices to a policy holder within a period of fifteen days from the date of expiry

of grace period to exercise his option, either to revive the Policy or to completely

withdraw from it, within a period of thirty days of receipt of such notice. Similarly,

again in the interests of justice and fair play, LIC ought to have a mechanism of

sending premium-due notices to all policy holders as a reminder, at least 15 days

before the premium is due, in tune with the procedure followed by several other

private Insurance companies. It cannot be forgotten that in the matter of lapsation

of policies, a major reason for lapsed policies is the lack of communication

between the insured and insurer after the sale of a policy. It is quite likely that

an Insured may forget to pay his premium on time, leading his Policy to lapse for

this simple reason and, eventually, in case of death, depriving his heirs / nominees

from receiving the insured amount, much to their shock and dismay, thereby

undermining the very purpose for which a Life Insurance Policy is taken, besides

enriching the Insurance Co. by the amount of premiums collected.

SENIOR                                         MEMBER PRESIDENT