LIC OF INDIA & ORS.
Represented by The Divisional Manager,
Jeevan Prakash, Naupatna
Cuttack
Orissa                                                                   ...........Petitioner(s)
                                                      Versus    
RAMAMANI PATRA & ANR.
Talasahi, P.O. Banpur
Khurda, Cuttack
Orissa                                                                 ...........Respondent(s)

BEFORE:    
     HON'BLE MR. JUSTICE J.M. MALIK, PRESIDING MEMBER
     HON'BLE DR. S.M. KANTIKAR, MEMBER

Dated : 03 Aug 2015


JUSTICE J. M. MALIK, PRESIDING MEMBER

1.      This is a case of pre-existing disease before the proposal form was filled in.  Both the Fora have  come to the conclusion that the OPs have failed to prove their case and allowed the complaint.

2.      Sh. Umakant Patra obtained L.I.C. policy in the sum of Rs.1,00,000/- which commenced from 9th July 1994.  Unfortunately, Sh. Umakant Patra passed away due to cerebro-vascular accident in the hospital on 14.11.1994.  The parents of the diseased –Smt. Ramamoni Patra and her husband Sri  Madhusudan Patra filed the claim before the OPs.  The OPs repudiated the claim vide their letter dated 31.03.1998 stating that the Life Assured was suffering from infective hepatitis and was hospitalized for treatment prior to his taking the policy.

3.      The District Forum directed the complainant to pay Rs.1,00,000/- alongwith interest @ 12% per annum  w.e.f. 11.11.1994 till the date of payment.  Cost of Rs.500/- was also awarded.  The State Commission confirmed the order of the District Forum.  This is an admitted fact that the proposal form was signed on 01.08.1994.  The District Forum made the following observation:-

“So far as the question of deficiency of service by the O.Ps is concerned, on a perusal of the copy of the policy the deceased Umakanta Patar, it appears that the policy was dated 1.8.94, but the risk was covered with effect from 9.7.94,  the copy of the – slip of Municipal hospital, Bhubaneswar goes to show that the deceased was admitted and treated for Infective Hepatitis from 12.7.94 to 18.7.94, which is within the period insured and not prior to it.  Further the death of the insured was not due to infective hepatitis.  But due to Cerariaro Varcular Accident as per the death certificate Annexure-2.  So it cannot be said that the deceased suppressed his illness prior to taking of the policy.  So we are inclined to hold that the complainants claim has been illegally repudiated and they are entitled to get the sum assured of Rs. One lakh from the O.Ps with 12% interest per annum with effect from 14.11.96 till the date of payment.  Hence there is deficiency of service by the O.P.s and there is cause of claim for the same”.

4.      The State Commission observed:-

“The document relating to the treatment of the life assured being of the month of July is certainly prior to the proposal and there is suppression of material fact by the life assured and he did the same knowingly with a view to defraud the Corporation.  Peculiarly, what we find from the proposal form is that it is dated 01.08.1994 though the policy commenced from 09.07.1994.  We cannot lose sight of the fact acceptance of the proposal is a must before acceptance of the contract between the Corporation and the life assured”.  

5.      The main question is whether these observations are tenable in Law.  The counsel for the complainants vehemently argued that the findings given by both the fora are valid, reasonable and just.  She reiterated the findings given by them.

6.      We are of the considered view that the Fora have erred in giving compensation to the complainant.  The OPs themselves admitted that date of commencement of policy from 09.07.1994, being his birthday, which is permissible and in consonance with prevailing L.I.C. regulations, i.e. manual and the same reads as under:-

“I.      Commencement of Risk and Dating Back of Policies:

          The risk under the Corporation’s Policies commences on the date of receipt of the first premium in full or the date of Acceptance whichever is the later, but if the acceptance of a Proposal is conditional upon the proposer’s compliance with any requirements, then the risk under the Policy will commence on the date on which all the requirements are satisfactorily complied with or on the date of receipt of the first Premium in full, whichever is the later.
 
          Normally policies (except those effected under Tables 44, 97 and 115) can be dated back, if desired, within the financial year for a period not exceeding one month without any extra charge”.

7.      Secondly, it must be borne in mind that the contract between the parties falls in the category of contract uberrimae fidei, meaning a contract of utmost good faith on the part of the assured.  When an information on a specific aspect is asked for in the proposal form, an assured is under a solemn obligation to make a true and full disclosure of the information on the subject which is within his knowledge.  It is not for the proposer to determine whether the information sought for, is material for the purpose of the policy or not.  This view fully dovetails with “Joel V. Law Union & Crown Insurance Company, (1908) 2 KB 863 (CA)” , “MacGilliwray on Insurance Law (10th Edn.)” ,  “In Carter V. Boehm, (1558-1774) All ER Rep 183: (1766)3 Burr 1905” and “Satwant Kaur Sandhu Vs. New India Assurance Co. Ltd.”, reported in IV (2009) 8 SCC 316  and “P.C. Chacko and anr. Vs. Chairman, LIC of India (2008) 1 SCC 321”.

8.      The time when the proposal form is filled in, irrespective of the fact whether the risk started earlier or not, is the crucial, main pillar and the foundation upon which the whole case rests.  This fact is most important, single determinant of this knotty problem.  In 01.08.1994, it was in the knowledge of the assured that he was suffering from above said diseases.  It was the bounden duty of the assured to disclose the facts at that time.  He had no qualms about lying. Consequently, his nominee or LRs are not entitled to any compensation.

9.      The third important question is that the duty of the Consumer Fora is not to find out whether there is a nexus between the accidental death and disease suppressed by the insured.  That has nothing to do with the grant of compensation.  The nexus point has to be eschewed out of consideration otherwise the uberrimae fidei shall stand violated.  In light of the above discussion, we accept the Revision Petition, set aside the orders passed by the Fora below and dismiss the complaint moved by the complainant.  No order as to costs.