Om Prakash Moda Vs. Life Insurance Corporation of India and anr. - Court Judgment

P.K. Mohanty, J.

1. The petitioner assails the communication made by the Life Insurance Corporation dated 26-3-1998 (Annexure-4) repudiating the claim under the Insurance Policy in the name of his son Late Mohesh Moda.

2. The brief fact of the petitioner's case is that his son Late Mohesh Moda had made a proposal for Life Insurance on 7-2-1995 for a death benefit of Rs. 3,00,000/-. The second premium was paid on 15-8-1995 within the permissible grace period of one month. However, the third premium was paid on 3-4-1996, i.e. 17 days after the grace period was over and since the policy lapsed, an application for revival was made and the policy was revived. The petitioner's son died on 12-4-1996. After the death of his son, the petitioner filed a claim for the benefit under the policy, but the same has been illegally repudiated on the ground that the policy holder made deliberate misstatement and withheld material information from the LIC regarding health at the time of getting the policy revived.

3. Opposite parties 1 and 2 have filed a counter-affidavit refuting the claim made by the petitioner, inter alia, on the ground that the petitioner ought not to have invoked the extraordinary jurisdiction under Article 226 of the Constitution of India for enforcing the contractual obligation, arising out of a policy contract, since disputed question of fact are involved and the matter can be decided by a competent civil Court and that the petitioner has not approached this Court in clean hands, inasmuch as, there has been suppression of material and relevant facts. According to these opposite parties, the deceased-life assured was suffering from Miliary Tuberculosis (T.B. Meningitis) with Tuberculoma of brain from 5-11-1995 as per the statement of the consulting doctor Dr. M.A. Rahim. But at the time of revival of the policy, the life assured deliberately suppressed this fact while giving declaration of good health and the same fact was revealed at the time of scrutiny of the claim form. It is stated that Late Mohesh Moda, son of the present petitioner, submitted a proposal dated 7-2-1995 on 11-2-1995 at the office of the opposite party No. 2 and the said proposal having been accepted, a policy was issued on 15-2-1995 for assured sum of Rs. 3,00,000/-. The policy bond issued has been annexed as Annexure-A/1. The life assured had paid only three premium instalments, first being on 7-2-1995 i.e. at the time of issuance of the policy, the second premium which was due on 15-9-1995 was paid on 5-9-1995 but that was within the date of the grace period, but the third premium which was due on 15-2-1996 was paid on 3-4-1996 beyond the grace period. In terms of the conditions of the policy, the premium having not been paid within the days of grace, the policy automatically lapsed. However, on submission of fresh declaration of good health and payment of premium by the policy holder, the policy was revived by the Corporation. It is pleaded that on the basis of the declaration made by the petitioner's son, the LIC acted in good faith and revived the lapsed policy, but subsequently after expiry of nine days of the revival of the policy, the policy holder died on 12-4-1996. On receipt of the death intimation, the opposite party No. 2 issued the claim form and the duly filled in claim form was submitted on 20-6-1996 by the petitioner. After receipt of the claim form, the opposite parties made due enquiry but on careful consideration of the facts stated in the claim form B as well as Medical Attendance Certificate, the Life Insurance Corporation found that the life assured was suffering from Miliary Tuberculosis (T.B. Meningitis) with Tuberculoma of brain from 5-11-1995 after commencement of the policy and before revival of the policy. But the said fact had not been disclosed by the life assured at the time of revival of policy while giving declaration regarding health on 3-4-1996. The suppression regarding health on the part of the life assured is material suppression and violation of the contract of Life Insurance and, as such, the Life Insurance Corporation has rightly repudiated the claim under the policy. The opposite parties have filed the claim application form 'A' and the claim Form 'B' i.e. Medical Attendance Certificate as Annexures A/3 and A/4 respectively.

4. In view of the pleadings of the parties, the questions that call for determination are (a) whether the liability of the Corporation under a police of the Life Insurance can be determined and the writ petition will be maintainable under Article 226 of the Constitution of India, and (b) whether, the petitioner's claim can be repudiated by the LIC on the ground that the revival of the policy was void because of material suppression of facts and furnishing false declaration of health.

5. Learned Counsel for the petitioner referring to the decision in Life Insurance Corporation of India and Ors. v. Smt. Asha Goel and Anr. AIR 2001 SC 549 has submitted that a writ petition is maintainable in the facts and circumstances of the present case. In the case referred to supra, the apex Court has observed that ordinarily the High Court should not entertain a writ petition filed under Article 226 of the Constitution for mere enforcement of a claim under a contract of insurance. However where an insurer has repudiated the claim, in case such a writ petition is filed the High Court has to consider the facts and circumstances of the case, the nature of the dispute raised and the nature of the inquiry necessary to be made for determination of the questions raised and other relevant factors before taking a decision whether it should entertain the writ petition or reject it as not maintainable. The Apex Court has further observed that it has also to be kept in mind that in case an insured or nominee of the deceased insured is refused relief merely on the ground that the claim relates to contractual rights and obligations and he/ she is driven to a long drawn litigation in the civil Court, it will cause serious prejudice to the claimant/other beneficiaries of the policy. The pros and cons of the matter in the context of the fact-situation of the case should be carefully weighed and appropriate decision should be taken. In a case where claim by an insured or a nominee is repudiated raising a serious dispute and the Court finds the dispute to be a bona fide one which requires oral and documentary evidence for its determination then the appropriate remedy is a civil suit and not a writ petition under Article 226 of the Constitution.

6. In the case at hand, the policy has been repudiated by the Life Insurance Corporation in its letter dated 26-3-1998 (Annexure A/5) on the ground that the insured had made deliberate mis-statements and withheld the material information from the L.I.C. regarding his health at the time of getting the policy revived. It is the case of the L.I.C. that the deceased-life assured was suffering from Miliary Tuberculosis (T.B. Meningitis) with Tuberculoma of brain from 5-11-1995 as per the statement of the consulting Doctor Dr. MA. Rahim, but at the time of revival of the policy, the life assured had deliberately suppressed this fact while giving declaration of good health and the said fact could be revealed at the time of scrutiny of the claim form. In this writ petition, notice was issued by order dated 8-12-1999 and the counter was filed and the matter is at the hearing stage and, therefore, at this stage, we feel that in the facts and circumstances of the case, keeping in view the dictum of the Apex Court in the aforesaid case, the present writ petition has to be held as maintainable.

7. Now coming to the question whether the petitioner's claim has rightly been repudiated by the L.I.C. on the ground that the revival of the policy was void because of material suppression of fact and furnishing of false declaration of health, the pleadings of the parties and the documents produced are to be considered. The opposite party L.I.C.'s specific case is that the deceased-life assured was suffering from Miliary Tuberculosis (T.B. Meningites) with Tuberculoma of brain from 5-11-1995 as per the statement of the consulting Doctor Dr. M.A. Rahim, but at the time of revival of the policy, the life assured has deliberately suppressed the fact in his declaration of good health which came to light at the time of scrutiny of the claim. It is, therefore, claimed that the deceased-life assured, having suppressed material facts regarding his health condition in the declaration form, the insurance contract is void and thus the petitioner is not entitled to the claim.

8. Factually, it is not in dispute that the petitioner's son, whose life was assured, had paid only three premium instalments, the first on 7-2-1995 along with the proposal for the insurance policy, the second instalment was paid on 5-9-1995 within the grace period and the third premium instalment which was due on 15-2-1996 was paid on 3-4-1996 beyond the grace period and thus in terms of the conditions of the policy, the premium, if not paid within the grace period, the policy automatically lapses due to non-payment of premium. In case revival of the policy is sought, one can do so by paying the interest on the amount and submitting a fresh declaration of good health to the satisfaction of the Corporation. The third condition in the policy stipulates as under:

3. Revival of Discontinued or Lapsed Policy: When the premium is not paid within the days of grace the Policy lapses without acquiring any paid-up value, but it may be revived during the lifetime of the Life Assured, but within a period of five years from the due date of the first unpaid premium and before the Date of Maturity on production of evidence of the health and habits of the Life Assured (including a Medical Report on his life at his own expense) to the satisfaction of the Corporation and of evidence to show that there has been no adverse change in the personal or the family history or occupation and on payment of the premiums in arrears with interest thereon at such rate as may be fixed by the Corporation from time to time compounding half yearly reckoning from the due date of such premium paid late. The corporation reserves the right to accept or decline the revival of discontinued policy. The revival of the discontinued Policy shall take effect only after the same is approved by the Corporation and is specifically communicated to the Life Assured.

(Emphasis supplied)

In the case at hand, admittedly the policy had lapsed because of non-payment of the third premium within the grace period and for which an application was made for revival of the policy along with the required particulars on 3-4-1996. Copy of the personal statement submitted by the deceased insured Mahesh Moda has been annexed as Annexure A/2, the Claim Statements as Annexure A/3 and Medical Attendance Certificate as Annexure A/4 to the counter-affidavit. The policy holder Mohesh Moda expired on 12-4-1996 after a period of nine days from the date of revival of the policy. A perusal of Annexure A/2, the personal statement regarding health of Late Mohesh Moda indicates at Column 2 as under:

2. Since the date of your proposal for the above Answer If yes, give details of

mentioned policy Yes or No ailment, date, duration,

doctors consulted

(a) Have you ever suffered from any illness/ (a) No

disease requiring treatment for a week

or more?

(b) Did you ever have any operation, accident (b) No

or journey

(c) Have you had an electrocardiogram,

X-ray or Screening of blood, urine (c) No

or stool stool examination?

The Medical Attendance Certificate submitted along with the claim form and annexed as Annexure-A/4 to the writ petition, which has been signed by Dr. M.A. Rahim, discloses at column-4 as under:

4. (a) What was the exact cause of death: (a) Primary cause CARDIAC ARREST MIL

Besides defining the disease or other IARY TUBERCULOSIS

cause of death in such terms as you

consider appropriate, kindly add the Secondary cause TB Miningites.

distinctive technical name, Tuberculoma of Brain

(b) Was it ascertained by examination (b) Symptoms and investigation

after death or inferred from symptoms

and appearance during life

(c) How long had he been suffered from (c) 5 months

this disease led to his death

(d) What were the symptoms of the illness (d) HEADACHE, VOMITTING, FEVER AND

COUGH.

(e) When were they first observed by the (e) 5 months back

deceased.

(f) What was the date on which you were (f) 5-11-95

FIRST consulted during the illness

(g) Did you attend him during the whole (g) Yes.

of its course. If not, state during

what period.

Thus, from the claim form B as well as the Medical Attendance Certificate it is clear that the life assured was suffering from Miliary Tuberculosis (T.B. Meningites) with Tuberculoma of brain from 5-11-1995, whereas these facts were not disclosed in the declaration regarding health on 3-4-1996 by the life assured at the time of revival of the policy. Thus, according to the L.I.C., a suppression regarding health on the part of the life assured amounts to a material suppression and violation of the terms and conditions of the policy and, as such, the L.I.C. has rightly repudiated the claim under the Policy.

9. The learned Counsel for the petitioner, referring to Section 45 of the Insurance Act submits that repudiation of a claim by insurer merely on the ground that the deceased has withheld correct information regarding his health at the time of effecting insurance with the Corporation is not proper and the matter of repudiation of policy should not be dealt with in a mechanical and routine manner but it should be done with extreme care and caution. In Life Insurance Corporation of India and others referred to supra, the Apex Court extensively considered the scope of Section 45 of the Insurance Act in the light of decision in : AIR1962SC814 Mithoolal Nayak v. Life Insurance Corporation of India. It has been held that three conditions for application of the second part of Section 45 are : (a) the statement must be on a material matter or must suppress facts which it was material to disclose; (b) the suppression must be fraudulently made by the policy holder; and (c) the policy holder must have known at the time of making the statement that it was false or that it suppressed facts which it was material to disclose.

10. In terms of condition No. 3 of the policy, when the premium is not paid within the days of grace, the policy lapses without acquiring any paid-up value, but it may be revived during the lifetime of the life assured on production of evidence of health and habits of the life assured (including a medical report of his life at his own expense) to the satisfaction of the Corporation and on complying with other formalities as laid down in the said clause. On the basis of the declaration made by the policy holder, the Life Insurance Corporation of India acted in good faith and revived the lapsed policy. But subsequently, after expiry of nine days from the date of revival, the policy holder died on 12-4-1996. The petitioner, as nominee, laid his claim and on receipt of claim form and on consideration of the statements made in claim Form-B as well as medical attendance certificate, the Life Insurance Corporation of India found that the life assured was suffering from Miliary Tuberculosis (T.B. Meningites) with Tuberculoma of brain from 5-11-1995 after commencement of the policy and before revival of the same. These facts were not disclosed by the life assured at the time of the revival of the policy in the form of declaration regarding health on 3-4-1996. The life assured was thus guilty of fraudulent suppression of material fact when he made his statement, which he must have known were deliberately false and hence the policy issued to him relying on those statements was vitiated in law.

11. In view of the factual position, there cannot be any manner of doubt that the revival of the policy was made on the basis of the statements made in the original form as well as the declaration form which did not disclose the ailment of the deceased. The medical attendance report filed by the petitioner himself and signed by Dr. M.A. Rahim, who had treated the deceased clearly discloses that the life assured was suffering from such ailment. Thus non-disclosure of said material fact regarding the ailment of life assured, in our considered opinion, amounts to a material suppression of facts and on the basis of such statement, the policy having been revived by the Life Insurance Corporation of India, the claim made by the petitioner has rightly been repudiated.

12. In such view of the matter, we find no merit in the writ petition and as such, the same is dismissed.

J.P. Mishra, J.

13. 1 agree.