This appeal coming before us for hearing finally on 15.06.2011, upon hearing the arguments of the either counsels and perused the documents, Written Submission of 3rd respondent as well as the order of the District Forum, this Commission made the following order:
M. THANIKACHALAMÂ J. PRESIDENT
1. The first and second opposite parties in C.C.221/2008, on the file of District Consumer Disputes Redressal Forum, Coimbatore, are the appellants in F.A.466/2009 and F.A.824/2010 respectively.2. The parties are referred in this order as arrayed in C.C.221/2008.3. Thiru.Sampathkumar, husband of the first complainant and father of the second complainant, had borrowed/availed housing loan of Rs.5.06 lakhs on 5.4.2003 from the second opposite party, for the purpose of construction of a residential house, in Plot No.43 in S.F. No.85/3A, Pallapalayam Village at Udumalpet. While availing the said loan, at the instance of the second opposite party, Sampathkumar had taken insurance policy with the first opposite party on payment of one time premium of Rs.31928/- under which, entire house loan was covered, as per the outstanding in the loan account in the event of death of the borrower.4. Mr.Sampathkumar/borrower was paying the loan outstanding to the second opposite party and he was covered under the group life insurance scheme. Though he was hale and healthy, in the month of April 2003, he developed uneasiness and admitted in Sri Ramakrishna Hospital, Coimbatore, where he was diagnosed, for the first time that his kidneys were not functioning properly. Subsequently, he was shifted to Airforce Hospital, Bangalore and despite intensive treatment given, he collapsed on 29.5.2004. The complainants were not in a position to pay the house loan, because of the illness of the borrower. Based upon the insurance cover, the complainants made a claim, which was repudiated, as if, at the time of the insurance, he had ailment, whereas he suppressed the material facts and therefore, because of the pre-existing disease, the insured is not entitled to claim the assured amount. Questioning the repudiation, the complainants preferred an appeal to the Ombudsman, who allowed an ex-gratia payment of Rs.30,000/-, concluding that the insurer have failed to prove the pre-existing disease. Even thereafter, the opposite parties have not paid the amount or discharge the debt and when the amount of Rs.30,000/- was offered, the complainants have rightly rejected.
5. The second opposite party had initiated proceedings under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, for non-payment of the loan amount against the property and under the compulsion, the complainants have paid a sum of Rs.2 lakhs, which is also liable to refunded. The act and conduct of both the opposite parties, amount to gross deficiency in service and unfair trade practice, by which, they have caused mental agony and hardship, for which, the complainants are entitled to a compensation of Rs.2 lakhs, in addition to, discharge of the outstanding in the loan account. Hence, the claim.6. The first opposite party admitting the master policy issued by the insurer to the Group Policyholder, including the borrower in this case, resisted the claim inter alia contending that because of the decision rendered by Ombudsman, the claim is barred by Res Judicata, that the insured had suppressed the material facts, offending âUtmost Good Faithâ and therefore, his LRs cannot be the consumers, that on the date of death of Sampathkumar, the outstanding loan amount was Rs.4,43,650/-, that as per the medical records, penal of doctors opined, the disease which caused to the death of Sampathkumar must be a long duration, resulting renal disease, which should be construed as pre-existing illness, suppressed by the insured and based upon sound principles, the claim was repudiated justifiably, cannot be labeled as deficiency in service, that as per the decision of the Ombudsman, when the amount was offered, the complainants refused and therefore, they are not entitled to any relief against them, thereby praying for the dismissal of the case, denying other averments also.
7. The second opposite party admitting the loan availed by Sampathkumar as well as he was covered under the insurance, opposed the claim, contending that because of the non-payment of the installments, as available under the provisions of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, they have initiated the proceedings for the recovery of the amount, and at that time, a sum of Rs.2 lakhs was paid towards debt, which cannot be ordered to be refunded and that since they have not committed any deficiency of service or caused mental agony to the complainants, they should be relieved from the clutches of the prayer.8. The District Forum by its order dated 27.10.2009, recorded a finding based upon affidavits and documents relied upon by the opposite parties, that the repudiation of the claim by the opposite parties should be construed as deficiency in service. On that basis, a further conclusion was reached that as per the insurance coverage, the first opposite party is liable to pay the outstanding loan, to the second opposite party. Thus, giving a direction to the first opposite party to discharge the loan, to the second opposite party, it has further directed the second opposite party, to return the sum of Rs.2 lakhs paid on 21.08.2008 to the complainant, further directing the first opposite party alone to pay a compensation of Rs.20,000/-, for mental agony along with costs, further, directing to release the documents from the security and issue âNo Due Certificateâ, which caused grievance to both the opposite parties, resulting two appeals as said above.9. The husband of the first complainant and the father of the second complainant, availed housing loan from the second opposite party in loan account No.MTL9/014 to the extent of Rs.5.06 lakhs, not in dispute. It is also not in dispute that the borrower was covered under the group insurance policy holder scheme, covered by the Master Policy, issued by the insurer namely the first opposite party. As per the terms and conditions of the policy, the insurer is liable to discharge the outstanding, as on the date of the death of the borrower if the insured has not violated the terms and conditions of the policy. In this case, the policy was issued on 5.4.2003 and the insured had paid the one time payment of premium of Rs.31,928/-. Unfortunately, he died on 29.5.2004 that is roughly after a year. Because of the illness, neither the borrower, after his death nor his LRs have paid the installments, payable to the second opposite party, who had advanced the loan. After the death, when the LRs have claimed the benefits under the policy, it was repudiated, as if, the insured was suffering from pre-existing disease, which alone had caused his death, thereby he should come within the meaning of a person, who had suppressed the material facts.10. Aggrieved by the said repudiation admittedly the complainants approached the Ombudsman, seeking an award based upon the policy, where the same defence was taken by the first opposite party. The Insurance Ombudsman, Chennai repelling the contention of the insurer, concluding that the assured had not suppressed any material facts, for the reasons known to him, failed to order the payment, whereas, he has ordered, under the principle of equity and natural justice, ex-gratia payment of Rs.30,000/-, as per the order dated 11.10.2007. The relevant order of the Insurance Ombudsman reads âThis Forum, after a careful consideration of all the facts of the case and after taking into account all the points as enumerated above comes to the conclusion that total denial of claim under the policy on the ground that the assured had suppressed his diabetes could not be justified. There is also merit in the contention of the insurer that they were put to a disadvantage due to suppression of his real health condition. In the circumstances, to ensure that the golden principles of âequity and natural justice are made applicable to both the contending parties in a fair measure, this Forum decides to allow the claim on an ex-gratia basis. The Insurer is, therefore, directed to pay the complainant an amount of Rs.30,000/- under the policy in full and final settlement of the claimâ.Â
11. After the disposal of the case by the Insurance Ombudsman, the first opposite party offered to pay the ex-gratia payment of Rs.30,000/- which was declined by the complainants, resulting this consumer complaint.12. One of the defence taken by the first opposite party appears to be âRes Judicata as available under Section 11 of CPC. Neither this proceedings nor the proceedings before the Insurance Ombudsman, would come within the meaning of âSuitâ as defined under CPC, where the principles of Res Judicata could be extended. Therefore, we find no substance in this defence and that is why this defence was also not urged before us, effectively.13. Ex.A2 is the Certificate of insurance.  In the reverse side of this Certificate, we find summary of terms and conditions of the claim and the original terms and conditions of the scheme not produced before us. Under the summary of terms and conditions of the scheme, as per the Clause 3, the borrower joining in the scheme, should declare his good heath and the declaration should be made in a truthful manner, where we find some kind of definition for âcritical illness also, which says the borrower should not have suffered or suffering from certain kind of critical illness, in which, kidney failure also comes, thereby indirectly indicating, that at the time of taking the policy, the borrower should have been suffering from renal failure that is pre-existing disease. In this view, when the policy was taken in the year 2003, if the assured had the kidney problem and that was the cause for the death subsequently, then certainly we can say that the assured had suppressed the material facts and therefore on the basis of the pre-existing disease, the LRs of the assured are also not entitled to the benefits available under the policy.
14. The declaration so made by the complainants, was not produced, as seen from the list of documents, exhibited on the opposite parties side. Therefore, we do not have the materials, to know what kind of declaration was given, whether it was certified by any doctor or something like that. The first opposite party having given the insurance coverage, accepting the offer made by the assured, then it is for them to prove that the assured is not entitled to the claim or his LRs are not entitled to the claim, since assured had suppressed the illness, for which, even as recorded by the insurance Ombudsman, practically we have no material. Therefore, there is nothing wrong in concluding that the assured has not suppressed the material facts or he was not suffering from any pre-existing disease, and in this view, as of right, as per the summary of terms and conditions available in Ex.A1, LRs are entitled to the benefits, that the sum assured will be equivalent to the outstanding amount, including the interest as per the original EMI schedule. Admittedly, the first opposite party repudiate the claim, which should be construed, as deficiency in service as rightly held by the District Forum.15. The learned counsel for the first opposite party argued that the Discharge Summary itself will prove that the assured was suffering from pre-existing disease and therefore, no separate proof is required, which submission, we are unable to concur, since by going through Ex.B3 and Ex.B4, we are unable to say emphatically, that the assured should have been suffering from renal failure on the date of taking the policy, though he was a diabetic patient to some extent. In the Death Summary dated 29.05.2004 [Ex.B3] we find no indication, that in the month of March 2003, the assured had renal failure though there is some indication regarding the renal disease since March 2003. The death was caused, not due to renal failure and it appears, he died due to cardiac arrest. Ex.B4 probably issued by Consultant Cardiologist at the request of the first opposite party and he has not filed proof affidavit and this is also not definite, that the death had caused to the renal failure. Thus, we feel, as rightly held by the Insurance Ombudsman, which finding is not challenged by the Insurance Company, the insurer has failed to prove that the assured had suppressed the material facts, viz., he had pre-existing disease. In this view, as per the condition available in the policy, there was no kidney failure, to bring the disease as if he had critical illness, thereby excluding the assured from the policy.  The District Forum correctly assessing the condition of the policy, taking into account, the first opposite party has failed to pay the assured under Ex.A2, has rightly issued the direction against the first opposite party, which direction, we should affirm.16. The Insurance Ombudsman having come to the conclusion that the first opposite party has not proved that the assured had suppressed the material facts, it is not known, under what circumstances, they have failed to issue the direction, which we are inclined to issue as said above.17. The learned counsel appearing for the second opposite party argued that the direction issued against them, is not sustainable since they have not committed any deficiency, which is opposed. Admittedly, the second opposite party, for the non-payment of EMI, preceded against the secured property, under SARFAESI Act and at that time, admittedly by the complainants, not disputed, they have paid a sum of Rs.2 lakhs, that is, ordered to be returned by the second opposite party, in which also, we find no illegality, though it requires some slight modification, that we will be doing at the end of the orders. For the non-payment of the amount, taking action by the second opposite party, that too, when the LRs of the borrower or borrower have failed to pay the amount, cannot be faulted, as deficiency in service, that too, when the Insurance Company also failed to pay the amount, as per the terms and conditions available in Ex.A2.  Therefore, the compulsion to pay the amount by the complainant to the second opposite party or the action taken by the second opposite party will not certainly come within the meaning of deficiency in service or negligent act, as the case may be and for doing the legal act, by the second opposite party, we cannot order them to pay any compensation, and that is why the District Forum has correctly directed, the first opposite party alone to pay compensation of Rs.20,000/-, relieving the second opposite party, in which also, we are unable to find any error, warranting our interference.  Hence, the appeal preferred by the first opposite party, is not meritorious and liable to be dismissed, whereas, the appeal preferred by the second opposite party is to be allowed in part, modifying the order of the District Forum to some extent.
F.A.466/2009
18. The appeal preferred by the first opposite party in F.A.466/2009 is dismissed, confirming the order of the District Forum as such, directing the parties to bear their respective costs in this appeal.Â
F.A.824/2010
19. The appeal preferred by the second opposite party namely in F.A.824/2010 is allowed in part and the order of the District Forum is modified, directing the second opposite party to return the sum of Rs.2 lakhs paid on 21.08.2008, to the complainants after collecting the amount from the first opposite party as per the first direction in the operative portion of the judgement, otherwise confirming the order even against the second opposite party, regarding the release of the document, directing them to bear their respective costs in this appeal.