The petitioner herein seeks a writ of certiorarified mandamus to quash the order dated 27.8.2004 passed by the first respondent confirming the order passed by the second respondent dated 29.3.2004 and to pay the petitioner the benefits due under the policies bearing Nos. 321271739 and 321271724 within a time frame.
2. The petitioner herein is the father of one Sivakumar. The said Sivakumar had applied for insurance coverage for his life with the respondents herein. He made two proposals through his agent. The said proposals dated 25.11.2002 were submitted to the second respondent on 30.11.2002. The petitioner states that the formalities regarding the policies were completed by Sivakumar in the month of May, 2002 and necessary premiums were also paid to the authorised agent of the respondents along with the proposal forms, which were accepted by the agent. After covering himself with the policy, the petitioner's son got employment in Kuwait as an Elevator Technician. He left India and joined his employer on 28.7.2002. During the course of his employment, the said Sivakumar met with an accident on 20.9.2003 and died.
3. On coming to know about the policy taken by the deceased Sivakumar, the petitioner applied to the second respondent for the payment of the policy amounts. However, the second respondent forwarded the same to the first respondent and by proceedings dated 29.3.2004, the first respondent repudiated the claim under the policy on the ground that the policy taken by the deceased Sivakumar was void and the proposal was signed at Nagercoil on 25.11.2002, on which date, the deceased Sivakumar was not in India. The petitioner does not dispute the said fact. The petitioner, however, defends that there was no deliberate mistake as to the place of employment and to the nature of employment as on the date of the declaration viz., 25.11.2002 and hence, the policy cannot be repudiated treating it as void ab initio. By proceedings dated 29.3.2004, the petitioner was informed that if aggrieved of the same, the petitioner could make a representation to the first respondent. Consequently, the petitioner made a representation.
4. By letter dated 6.7.2004, the first respondent informed the petitioner that the matter would be placed before the Review Committee and the decision taken would be informed. The communication to the second respondent dated nil enclosing the receipt for the Ex-gratia amount of Rs.3,736/- and Rs.1,288/- was given to the petitioner towards the full discharge of his claim against the two policies. Aggrieved against the same, the petitioner has come before this Court. Subsequent to the filing of the writ petition, the first respondent passed the order dated 27.8.2004 informing the decision of the Review Committee, confirming the order passed by the second respondent. The petitioner had hence filed the petition in W.P.M.P.No. 867 of 2009 to amend the prayer to challenge the order dated 27.8.2004.
5. The petitioner contends that the acceptance of the policy in the month of May, 2002 by the agent tantamounted to acceptance by the Life Insurance Corporation of India in terms of Section 42 of the Insurance Act, 1938 (hereinafter referred to as 'the Act'). When the policy terms do not require the petitioner to present the proposal in person, the Life Insurance Corporation cannot wriggle out of its responsibility from honouring the policy. He pointed out that the agent had issued a receipt for the premium which amounts to acceptance of a receipt issued by the Life Insurance Corporation. The petitioner submits that the death of the deceased Sivakumar was on account of an accident and not on account of any ailment, which could be called a suppressed material fact. Accordingly, by order dated 23.11.2009, W.P.M.P.No.868 of 2009, the petition to amend the prayer to quash the order dated 23.11.2004, was granted. In the circumstances, the repudiation is totally against natural justice, equity and public policy. It is further pointed out that there was never a suppression of the material facts from the deceased insured. Quite apart from that, the respondents have not made any investigation as regards the mistake alleged. Hence, going by Section 42 of the Act, the respondents are bound to pay the petitioner as per the policy conditions.
6. Learned counsel appearing for the petitioner pointed out that considering the scope of Section 42 of the Act and the decision reported in AIR 2001 Supreme Court 549 (Life Insurance Corporation of India and others V. Smt. Asha Goel and another) that the receipt by the agent would be binding on the Life Insurance Corporation in terms of Section 42 of the Act, consequently the orders of the respondents, have to be quashed. He also placed reliance on the decision reported in 2003 (3) CTC 526 (Athayee (died) and another V. Life Insurance Corporation of India and another) that when there was no suppression of material facts on the date when the proposal was given to the agent; that the petitioner's son was in India and was self-employed, the question of subjecting the petitioner's son to any medical examination did not arise. Quite apart from that, he submitted that as on the date when the proposal was given to the agent, he was in India and there was no suppression of facts. Learned counsel also referred to decisions reported in (2004) 3 SCC 553 (ABL International Ltd. And another V. Export Credit Guarantee Corporation of India Ltd. and others) as well as (2009) 8 SCC 339 (National Thermal Power Corporation Limited V. Mahesh Dutta and others) as regards the maintainability of the Writ Petition.
7. On notice, the respondents have filed a counter, wherein, narrating the facts, the respondents placed reliance on the Regulations pertaining to the Life Insurance Corporation only to impress on the fact that the submission of the proposal to the agent would not amount to submission of the proposal to the respondents. In the circumstances, placing reliance on Section 42 of the Act is totally misplaced. The respondents further state that on the date when the proposal was submitted, i.e., proposal dated 25.11.2002 submitted on 30.11.2002, the proposer was not in this country. Hence, this raises a serious doubt as to the genuineness of the execution itself in a uberrima fides contract. As regards the occupation and income apart from residence, going by the terms of the policy that can be granted in such case, when the proposer is not in India and not self-employed, the proposer has to undergo medical examination. With the fact that the petitioner's son was not in India at the time of submitting his proposal, the issuance of policy itself is ab initio void. As such, the repudiation was proper and justified. As regards no investigation done, the respondents submit that considering the admitted fact as regards the residence of the petitioner's son, the facts do not call for any investigation; as such,
Section 45 of the Act would not have any relevancy at all. In the background of the admitted facts, rightly, the Review Committee rejected the plea of the petitioner. Consequently, the Writ Petition has to be dismissed.
8. Learned counsel appearing for the respondents while making a serious dispute as to the maintainability of the Writ Petition, however, placed reliance on the decision reported in AIR 1997 Supreme Court 2459 (Harshad J. Shah and another V. L.I.C. of India and others) as to the relevancy of the Regulations as to the agents employed under the Life Insurance Corporation of India, particularly with reference to
Section 45 of the Act as well as to the decisions reported in AIR 1962 SC 814 (Mithoolal Nayak V. Life Insurance Corporation of India), AIR 2001 Supreme Court 549 (Life Insurance Corporation of India and others V. Smt. Asha Goel and another) and (2004) 3 SCC 553 (ABL International Ltd., and another V. Export Credit Guarantee Corporation of India Ltd. and others), only to impress on the fact that the material facts which have to be given before the respondents by the proposer are so vital for the purpose of determining the policy conditions and the policy amount payable. In the light of the admitted facts of this case that the petitioner's son was not in India at the time the proposal was submitted and was not self-employed, the material facts thus suppressed, the question of placing reliance on Section 42 of the Act, hence, does not arise.
9. Learned counsel further pointed out the policy conditions which clearly state that if after the date of submission of the proposal, but before the issue of first premium, there is any change in the particulars given, declaration has to be made by the proposer and the changes have to be declared to the Corporation. Having regard to the above fact that the petitioner's son failed to inform the Corporation as regards the changes in the circumstances of the petitioner's son both as regards his employment as well as his residence, the policy, hence, has to be declared as ab initio void. He pointed out that the principle of uberrima fides, demands that the proposer discloses full and true facts, so that the contractual terms are really effective. In the light of the above circumstances, he prays for dismissal of the Writ Petition.
10. Heard the learned counsel appearing for the petitioner and the learned counsel appearing for the respondents and perused the relevant materials placed before this Court.
11. Since the question as regards the maintainability of the Writ Petition is not a serious dispute, as submitted by the learned counsel for the respondents, it is not necessary to go into the decisions relied on by the learned counsel for the petitioner reported in (2004) 3 SCC 553 (ABL International Ltd. And another V. Export Credit Guarantee Corporation of India Ltd. and others) and (2009) 8 SCC 339 (National Thermal Power Corporation Limited V. Mahesh Dutta and others).
12. As to the facts pleaded in the Writ Petition as well as in the counter, certain facts are not in dispute that the petitioner's son had his proposals placed before the Life Insurance Corporation on 30.11.2002 and had taken two policies. At the time when the proposals were placed before the Insurance Corporation, the petitioner was away from the country and was in Kuwait from 28.7.2002 to 31.12.2002. The petitioner's son died in an accident on 20.09.2003. It is also an admitted fact that the proposal given in the month of May 2002 was only to the agent and not to the Corporation. It is also a matter of record that the Corporation did not insist that the proposal has to be made only in person and by a person residing in India alone. However, if any policy has to be entered into between the Corporation and the proposer, the terms have to be such that they are disclosed fully and truly. Hence, should there be any mis-declaration or a false declaration by the proposer as to the material facts, necessarily the declaration has its own effect as to the binding character of the terms of the policy.
13. It is a settled principle of law that the contract of insurance is a contract of uberrima fide and the assured is under an obligation to make full and true disclosure of the material facts necessary and material for taking the policy of insurance. Insurance Act, 1938, provides for regulating the business of insurance in the country.
Sections 40 to
44-A of the said Act deal with registration of agents, regulation of the employment of agents and licensing of the insurance agents.
14. Dealing with the need for true disclosure of material facts, in the decision reported in (2008) 1 SCC 321 (P.C.Chacko and another Vs. Life Insurance Corporation of India and others), the Apex Court, referred to the distinction between material facts and what is not material as expounded in the decision reported in AIR 1959 Patna 413 (Ratan Lal and another Vs. Metropolitan Insurance Co. Ltd.). The extract in the said decision quoted by the Apex Court may, for ready reference, be extracted, which reads as follows:
" The well-settled law in the field of insurance is that contracts of insurance including the contracts of life assurance are contracts uberrima fides and every fact of materiality must be disclosed otherwise there is good ground for rescission. And this duty to disclose continues up to the conclusion of the contract and covers any material alteration in the character of the risk which may take place between proposal and acceptance. "
15. As already pointed out, as far as the present case is concerned, when the petitioner's son stated that he was self-employed and was in India, certainly, the question as to the requirement as to the medical examination had no application for the Insurance Corporation to insist upon. That would be so, provided, at the time when the proposal was given to the Corporation, the proposer was in India, i.e., in the month of May. It is not denied by the petitioner that the proposal was given to the Corporation only in the month of November and not in May, 2002. The defence taken by the petitioner that the proposal has to be taken as one done in the month of May rests on Section 42 of the Act. As far as the said reliance placed by the petitioner is concerned, as rightly pointed out by the respondents, the Regulations which decide on the relationship between the Agent and the Life Insurance Corporation has a bearing in this case.
16. Learned counsel for the petitioner pointed out that however, Section 42 of the Act had come subsequent to the decision; hence, has to be taken as a guiding factor for deciding on the respective relationship of the parties herein.
17. I do not agree with the said submission. The provisions contained in Section 42 of the Insurance Act is generic in nature and that does not stand in the way of the insurance company formulating any Regulations which guide the relationship between the respondents and its agents. Given the fact that the agent is governed by the Regulations of the Insurance Corporation, unless and until the petitioner is in a position to show that the Regulations cannot have a guiding factor for determining the relationship as a Master and Agent relationship, it is difficult to accept the submission made by the learned counsel for the petitioner placing reliance on Section 42 of the Insurance Act that the proposal given to the agent would be binding on the Insurance Company.
18. In the decision reported in AIR 1997 Supreme Court 2459 (Harshad J. Shah and another V. L.I.C. of India and others), the Apex Court had an occasion to consider a similar plea wherein, it pointed out to the Rules framed by the Life Insurance Corporation prohibiting the agents from collecting money on behalf of the Life Insurance Corporation. Making particular reference to the Life Insurance Corporation of India Agent Regulations, 1972, framed by the Life Insurance Corporation of India in exercise of its powers vested in the Life Insurance Corporation Amendment Act (Act 1 of 1981) under
Section 48(2), the Apex Court pointed out that considering the express provisions in the Regulation which are statutory in nature that the agents are not authorised to collect any money or to accept any risk on behalf of the Life Insurance Corporation of India and that they can collect so only if they are expressly authorised to do so. It held that the question of implied authority has no application to bind the Insurance Company. The Apex Court pointed out that in view of the express prohibition where agents obtain bearer cheques from the insured of the premium amount and the agent deposits the same with the Life Insurance Corporation of India, it could not be said that the agent was authorised to receive the premium on behalf of the Life Insurance Corporation of India. The Apex Court pointed out that in disclaiming its liability, Life Insurance Corporation of India was acting in accordance with the provisions of the Regulations framed by it whereby the agents have been prohibited from collecting money on behalf of the Life Insurance Corporation of India. Consequently, the Apex Court held that the agent was not acting on behalf of the Life Insurance Corporation of India; hence, directed the Life Insurance Corporation of India to refund the entire amount of the premium paid with interest.
19. In the background of the said decision of the Apex Court reported in AIR 1997 Supreme Court 2459 (Harshad J. Shah and another V. L.I.C. of India and others) I reject the plea of the petitioner placing reliance on Section 42 of the Act that the receipt of the application and the money by the agent in the month of May, 2002 would amount to receipt of the form with true particulars. In this background, the reliance placed by the learned counsel for the petitioner on the decision reported in AIR 2001 Supreme Court 549 (Life Insurance Corporation of India and others V. Smt. Asha Goel and another) has to be rejected. The said decision, hence, has to be seen in the background of the provisions of the Act. In any event, a perusal of the said decision shows that the insured therein died due to Myocardial Infarction and Cardiac arrest. The Apex Court pointed out that repudiation of claim by Corporation merely on grounds that insured who died of acute Myocardial infarction and cardiac arrest had not disclosed correct information regarding his health at the time of effecting insurance with Corporation is not proper.
20. A reference to the said decision necessarily takes us to the admitted facts herein particularly with reference to the declaration that the petitioner has to make as per Clause 3 in the declaration to be signed by the proposer. For easy reference, the clause pertaining to the declaration by the proposer is extracted herein.
"And I further agree that if after the date of submission of the proposal but before the issue of the First Premium Receipt (i) any change in my occupation or any adverse circumstances connected with my financial position or the general health of myself or that of any members of my family occurs or (ii) if a proposal for assurance or an application for revival of a policy on my life made to any office of the Corporation has been withdrawn or dropped, deferred or accepted at an increased premium or subject to a lien or on terms other than as proposed I shall forthwith intimate the same to the Corporation in writing to reconsider the terms of acceptance of assurance. Any ommission on my part to do so shall render this Assurance invalid and all monies which shall have been paid in respect thereof forfeited to the Corporation."
21. In the background of the above said decision, the admitted facts are that, on the date of presentation of proposal on 30.11.2002 to the Life Insurance Corporation, the petitioner's son was not in India and that he was not self employed. In terms of the contract clause, given the fact that the residence and the occupation have a necessary bearing on the insured amount payable under the policy conditions. The responsibility of the proposer to inform the changes in the material particulars cannot be undermined.
22. Learned counsel for the respondents further referred to a decision reported in AIR 1962 Supreme Court 814 (Mithoolal Nayak v. Life Insurance Corporation of India) only to impress on the fact as to what could be the material particulars as regards the declaration. He also referred to the decision of the Supreme Court reported in (2008) 1 SCC 321 (P.C.Chacko and another Vs. Life Insurance Corporation of India and others) that the proposer has the duty to inform the material particulars and wherever there is a suppression or a deliberate wrong answer, it has a significant bearing on the contract of insurance and later if the material facts are discovered as are different from what has been stated, the policy itself gets vitiated in law. In the matter of disclosure, the Court has to consider the deliberateness or otherwise only to see that when the proposer had knowledge about the terms of the proposal and that with the said knowledge, had not disclosed the true facts, certainly the policy executed by the Insurance Corporation has to be declared as void ab initio.
23. Going by the law declared by the Apex Court in the said decision as well as in the decision reported in AIR 1962 Supreme Court 814 (Mithoolal Nayak v. Life Insurance Corporation of India), I have no hesitation in accepting the plea of the Corporation that when the facts given in the form are different from the facts that existed as on the presentation of the policy and there existed a material difference to make the declaration untrue, the question of the Corporation being bound by the policy terms does not arise. Hence, the Corporation rightly repudiated the policy claim.
24. This leaves us with only one further question for consideration, viz., the death had not occurred due to any illness or disease, but due to the accident. In the background of the fact that there is a suppression of material fact, the question as to whether the insured died of an accident or by any disease does not assume any significance. In the background of the fact as stated above, the material facts not declared, the question as to the nature or cause of death does not assume any significance for consideration by the authority concerned. As already pointed out, the proposal was submitted only on 30.11.2002 and the petitioner's son was not in India at that time, I have no hesitation in confirming the order of the authorities.
25. Learned counsel for the respondents submitted that the Life Insurance Corporation is ready to return back the amount paid as premium amount and this Court may direct any interest, may be at 12% per annum.
26. Recording the submission made by the learned counsel for the respondents, this Court feels that the amount paid as premium, hence, has to be refunded to the petitioner with interest at 12% per annum from 30.11.2002 till the date of refund within a period of two weeks from the date of receipt of a copy of this order. The Writ Petition is disposed of accordingly. No costs.
sl To
1. The Zonal Manager, L.I.C. of India, Anna Salai, Chennai 600 002.
2. The Branch Manager, L.I.C. Of India, Tirunelveli Division, Jeevan Prakash, P.B.No.183, Tirunelveli 627 002