AIR Vice Marshal Jonnalagadda Rajendra AVSM VSM (Retd)

1. This First Appeal has been filed under Section 51 of the Consumer Protection Act, 2019 ("the Act") against the order of the Uttar Pradesh State Consumer Disputes Redressal Commission, Lucknow ("the State Commission") dated 09.02.2021 in Consumer Complaint No. 22/2018, wherein the complaint filed by the Respondent herein was partly allowed.

2. For convenience, the parties in the case are referred to as they were arrayed before the State Commission. "Neha Jain," the wife and nominee of the Deceased Life Assured (DLA) Mr. Sourabh Jain, is the Complainant/ Respondent. The "HDFC Standard Life Insurance Co. Ltd." is Appellant/ Opposite Party (OP)/Insurer.

3. Briefly stated, the case of the Complainant is that the DLA, Late Mr. Sourabh Jain, obtained Life Insurance Policy No.16414002 from the Opposite Party (OP) for a sum assured of ₹75,00,000. The proposal form was submitted on 17.10.2013, and an initial premium of ₹15,612 was paid. The Complainant, being the wife of the DLA, was nominated as the beneficiary under the policy. Pursuant to the proposal, the OP subjected the DLA to a medical examination at its authorised diagnostic centre. Being satisfied with the medical reports and other requisite particulars, the OP accepted the proposal and issued the policy on 18.11.2013. During the currency of the policy, the DLA expired on 22.11.2016 at the Institute of Liver & Biliary Sciences, Delhi, due to cardiac arrest. This fact is recorded in the Death summary issued. Death Certificate was also issued by the South Delhi Municipal Corporation. Thereafter, she lodged a death claim with the OP on 24.02.2017. However, vide letter dated 28.07.2017, the OP rejected the claim on the grounds that the DLA had allegedly made material misrepresentations wherein he suppressed relevant facts by failing to disclose the rejection of an earlier insurance proposal by another insurer and his alleged history of chronic alcoholism prior to the issuance of the policy. Aggrieved by the claim repudiation, the Complainant approached the State Commission alleging deficiency in service and adoption of unfair trade practices on the part of the OP and sought payment of the insured sum along with interest, compensation for mental agony, and litigation costs.

4. Upon issuance of notice, the OP entered appearance and filed its written version contesting the complaint. It was contended that an investigation conducted after the claim revealed that the DLA was a chronic alcoholic and had been admitted to the Institute of Liver & Biliary Sciences on 17.10.2016, where, upon clinical examination, he was diagnosed with progressive liver failure and subsequently expired on 22.11.2016. The OP further asserted that the DLA was aware of his medical condition prior to obtaining the policy but had deliberately suppressed these material facts while submitting the proposal form. It was specifically alleged that the DLA had answered "No" to questions relating to any serious illness, hospitalization, or medical investigations, despite his existing health condition. According to OP, such suppression of material information constituted a breach of the duty of utmost good faith and rendered the policy voidable, thereby fully justifying the repudiation of the insurance claim.

5. The learned State Commission vide Order dated 09.02.2021 partly allowed the complaint with the following directions: -

                          "ORDER The complainant is allowed with cost partially. The opposite parties are directed to pay Rs. 75 lakh to the complainant at a rate of 10% simple interest per annum from the date of filing of this complaint within 30 days and if they fail to do so a higher rate of interest at the rate of 15% will be charged after 30 days till the date of payment. The opposite parties are also directed to pay 1 lakh compensation for physical and mental harassment and, Rs.20,000 cost of the suit. If it is not paid within 30 days the complainant will be free to recover it through the court on the cost of the opposite parties."

6. Being aggrieved by the said order, the OP (Appellant herein) filed the present Appeal No.242 of 2021 with the following prayer:

It is therefore humbly prayed that the present appeal may please be allowed and the impugned order dated 09.02.2021 passed in CC No 22/2018 by Ld. State Commission, Uttar Pradesh at Lucknow may please be set aside and the complaint of the respondent may be dismissed. Any other order, which is just and proper in the facts and circumstances of the case, may please be passed in the favor of the Appellant.

7. Learned Counsel appearing for the Appellant/OP reiterated the contentions advanced in the Written Version and the Memorandum of Appeal and argued that the DLA, Shri Sourabh Jain, had applied for an HDFC Term Assurance Policy for a sum assured of ₹75,00,000 by submitting a proposal form dated 17.10.2013, pursuant to which the policy in question was issued with effect from 18.11.2013. It is the specific contention of the learned counsel for the OP that, in the proposal form, the DLA had answered "No" to the specific questions relating to his medical history, including any history of chronic alcoholism, liver disease, prior hospitalization, or medical investigations. The DLA expired on 22.11.2016. Learned Counsel further submitted that upon receipt of the death claim from the Complainant, who is the nominee under the policy, the Appellant conducted an investigation, which revealed that the DLA had been suffering from Progressive Liver Failure prior to submitting the proposal form and had ultimately expired at the Institute of Liver & Biliary Sciences, Delhi. As per the Appellant, these facts stood adequately corroborated by the hospital records as well as the certificate issued by the treating physician and clearly established that the DLA had deliberately concealed material information relating to his health while seeking the insurance policy. He asserted that such suppression of material facts amounted to a breach of the principle of utmost good faith governing contracts of insurance, thereby entitling the insurer to repudiate the claim, which was done vide letter dated 28.07.2017. It was further contended that the State Commission committed a manifest error in allowing the complaint and directing payment of the sum assured solely on the basis that the death summary recorded the immediate cause of death as cardiac arrest, without duly appreciating the material evidence on record demonstrating the existence and concealment of a pre-existing liver ailment. He sought the Appeal to be allowed and the impugned order dated 09.02.2021 be set aside. He relied on Mithoolal Nayak vs. Life Insurance Corporation of India, MANU/SC/0255/1962; Sunita Goyal vs. Bajaj Allianz Life Ins. Co. Ltd. & Ors., F.A. No.545 of 2015 decided on 07.09.2017 by NCDRC; HDFC Standard Life Ins. Co. Ltd. vs. Jayalaxmi, MANU/CF/0064/2011; P.C. Chacko and Anr. Vs. Chairman, LIC and Ors., MANU/SC/8115/2007; Satwant Kaur Sandhu vs. New India Ass. Co. Ltd., MANU/SC/1164/2009; Reliance Life Ins. Co. Ltd. and Ors. vs. Rekhaben Nareshbhai Rathod, MANU/SC/0593/2019; Suraj Mal Ram Niwas Oil Mills (P.) Ltd. vs. United India Ins. Co. Ltd. and Ors., MANU/SC/0814/2010; Reliance Life Ins. Co. Ltd. & Anr. Vs. Madhavacharya, R.P. No. 211 of 2019, decided on 02.02.2010 by NCDRC; LIC of India vs. Smt. Kusum Patro, R.P. No.1585 of 2011, decided on 19.03.2012 by NCDRC; ICICI Prudential Life Ins. Co. Ltd. & Anr. Vs. Sulabai Chandrakant Shinde, R.P. No.2155 of 2011 decided on 03.08.2015 by NCDRC; LIC of India vs. Krishan Chander Sharma, MANU/CF/0460/2006; and Ravneet Singh Bagga vs. KLM Royal Dutch Airlines, (2000) 1 SCC 66 in support of his arguments.

8. On the other hand, vide order dated 09.06.2026, the Respondent/ Complainant was proceeded ex parte in view of repeated non- appearance on 25.07.2024, 01.07.2025, 16.01.2026, and 09.06.2026.

9. We have examined the pleadings and the associated documents placed on record, and rendered thoughtful consideration to the arguments advanced by the learned counsel for the Appellant/OP.

10. The core issue revolves around whether the policyholder was liable to disclose his history of alcohol consumption and liver disease? Did he fail to so disclose? And if so, whether the same entitles the insurer to reject the claim?

11. It is not in dispute that the DLA, Late Mr. Sourabh Jain, obtained Life Insurance Policy No. 16414002 from the OP for a sum assured of ₹75,00,000. The proposal form was submitted on 17.10.2013, and ₹15,612 premium was paid. The Complainant, being the wife of the DLA, was the nominee under the policy. Pursuant to the proposal, the OP subjected the DLA to medical examination at its authorised diagnostic centre. Upon being satisfied with the medical reports, the OP accepted and issued the policy on 18.11.2013. During the subsistence of the policy, the DLA expired on 22.11.2016 at Institute of Liver & Biliary Sciences at Delhi due to cardiac arrest. The Death Certificate issued by South Delhi Municipal Corporation. Thereafter, she submitted a death claim on 24.02.2017 with OP. However, vide letter dated 28.07.2017, the OP repudiated the death claim filed by her alleging misrepresentation and non-disclosure of one rejection of previous insurance policy by another insurance company and that the DLA was Chronic alcoholic prior to issuance of the policy and, therefore, the repudiation was sought to be justified by the insurer under Section 45 of the Insurance Act, 1938 on the ground of alleged suppression of material facts.

12. Section 45 of the Insurance Act, 1938, as amended, governs the circumstances under which a life insurance policy may be questioned. The provision is reproduced hereinabove for ready reference as under:

                          45. Policy not be called in question on ground of misstatement after three years. - (1) No policy of life insurance shall be called in question on any ground whatsoever after the expiry of three years from the date of the policy, i.e., from the date of issuance of the policy or the date of commencement of risk or the date of revival of the policy or the date of the rider to the policy, whichever is later.

                          (2) A policy of life insurance may be called in question at any time within three years from the date of issuance of the policy or the date of commencement of risk or the date of revival of the policy or the date of the rider to the policy, whichever is later, on the ground of fraud:

                          Provided that the insurer shall have to communicate in writing to the insured or the legal representatives or nominees or assignees of the insured the grounds and materials on which such decision is based.

                          Explanation I. --For the purposes of this sub-section, the expression "fraud" means any of the following acts committed by the insured or by his agent, with intent to deceive the insurer or to induce the insurer to issue a life insurance policy:

                          (a) the suggestion, as a fact of that which is not true and which the insured does not believe to be true;

                          (b) the active concealment of a fact by the insured having knowledge or belief of the fact;

                          (c) any other act fitted to deceive; and

                          (d) any such act or omission as the law specially declares to be fraudulent.

                          Explanation II. --Mere silence as to facts likely to affect the assessment of the risk by the insurer is not fraud, unless the circumstances of the case are such that regard being had to them, it is the duty of the insured or his agent keeping silence, to speak, or unless his silence is, in itself, equivalent to speak.

                          (3) Notwithstanding anything contained in sub-section (2), no insurer shall repudiate a life insurance policy on the ground of fraud if the insured can prove that the misstatement of or suppression of a material fact was true to the best of his knowledge and belief or that there was no deliberate intention to suppress the fact or that such misstatement of or suppression of a material fact are within the knowledge of the insurer:

                          Provided that in case of fraud, the onus of disproving lies upon the beneficiaries, in case the policyholder is not alive. Explanation. - A person who solicits and negotiates a contract of insurance shall be deemed for the purpose of the formation of the contract, to be the agent of the insurer. (4) A policy of life insurance may be called in question at any time within three years from the date of issuance of the policy or the date of commencement of risk or the date of revival of the policy or the date of the rider to the policy, whichever is later, on the ground that any statement of or suppression of a fact material to the expectancy of the life of the insured was incorrectly made in the proposal or other document on the basis of which the policy was issued or revived or rider issued:

                          Provided that the insurer shall have to communicate in writing to the insured or the legal representatives or nominees or assignees of the insured the grounds and materials on which such decision to repudiate the policy of life insurance is based:

                          Provided further that in case of repudiation of the policy on the ground of misstatement or suppression of a material fact, and not on the ground of fraud, the premiums collected on the policy till the date of repudiation shall be paid to the insured or the legal representatives or nominees or assignees of the insured within a period of ninety days from the date of such repudiation.

                          Explanation. --For the purposes of this sub-section, the misstatement of or suppression of fact shall not be considered material unless it has a direct bearing on the risk undertaken by the insurer, the onus is on the insurer to show that had the insurer been aware of the said fact no life insurance policy would have been issued to the insured. (5) Nothing in this section shall prevent the insurer from calling for proof of age at any time if he is entitled to do so, and no policy shall be deemed to be called in question merely because the terms of the policy are adjusted on subsequent proof that the age of the life insured was incorrectly stated in the proposal.]

13. Petitioners/OPs relied on Hon’ble Supreme Court in Reliance Life Insurance Co. Ltd. v. Rekhaben Nareshbhai Rathod, (2019) 6 SCC 175 decided on 24.11.2019 that suppression of the facts in proposal form will render Policy voidable by the Insurer.

14. It is undisputed that the DLA had submitted a proposal form on 17.10.2013 wherein as reply to Section 10: MEDICAL INFORMATION Question 1 to 7 he replied „No‟. As per proposal form, the DLA submitted that he did not suffer from any disease at the time of taking the policy.

15. In catena of judgements, the nature of insurance contracts, scope and restraint to be exercised in interpreting the terms of contract are well discussed and crystallized by this Commission and Hon’ble Supreme Court. The Hon’ble Supreme Court in the case of United India Insurance Co. Ltd. Vs M/s Hyundai Engineering & Construction Co. Ltd. & Ors., 2024 LiveLaw 409 has held that :

                          "16. Insurance is a contract of indemnification, being a contract for a specific purpose, Oriental Insurance Co. Ltd. v. Sony Cheriyan, (1999) 6 SCC 451, which is to cover defined losses, United India Insurance Co. Ltd. v. Levis Strauss (India) (P) Ltd., (2022) 6 SCC 1. The courts have to read the insurance contract strictly. Essentially, the insurer cannot be asked to cover a loss that is not mentioned. Exclusion clauses in insurance contracts are interpreted strictly and against the insurer as they have the effect of completely exempting the insurer of its liabilities, New India Assurance Co. Ltd. v. Rajeshwar Sharma, (2019) 2 SCC 671; Canara Bank v. United India Insurance Co. Ltd., (2020) 3 SCC 455; Oriental Insurance Co. Ltd. v. Samayanallur Primary Agricultural Coop. Bank, (1999) 8 SCC 543.

                          17. In Texco Marketing P. Ltd. v. TATA AIG General Insurance Company Ltd., Oriental Insurance Co. Ltd. v. Samayanallur Primary Agricultural Coop. Bank, (2023) 1 SCC 428, while dealing with an exclusion clause, this Court has held that the burden of proving the applicability of an exclusionary clause lies on the insurer. At the same time, it was stated that such a clause cannot be interpreted so that it conflicts with the main intention of the insurance. It is, therefore, the duty of the insurer to plead and lead cogent evidence to establish the application of such a clause, National Insurance Company Ltd. v. Vedic Resorts and Hotels Pvt. Ltd., 2023 SCC OnLine SC 648. The evidence must unequivocally establish that the event sought to be excluded is specifically covered by the exclusionary clause, National Insurance Co. Ltd. v. Ishar Das Madan Lal, 2007 (4) SCC 105. The judicial positions on the nature of an insurance contract, and how an exclusion clause is to be proved, shall anchor our reasoning in the following paragraphs."

16. In CA No.10671 of 2016 in Narsingh Ispat Ltd Vs Oriental Insurance Company Ltd. & Anr 2022 LiveLaw (SC) 443, the Hon’ble Supreme Court while reiterating National Insurance Co Ltd vs Ishar Das Madan Lal (2007) 4 SCC 105 (Para 12) held that the burden is on the insurer to show that the case falls within the purview of exclusion clause. In case of ambiguity, benefit goes to the insured.

17. It is a settled principle that a contract of insurance is one founded on the doctrine of uberrima fides (utmost good faith), requiring the proposer to disclose all material facts having a bearing on the assessment of risk. At the same time, where the insurer seeks to avoid liability on the ground of suppression or misrepresentation, the burden squarely lies upon the insurer to establish that the alleged non-disclosure was material, deliberate, and had a direct bearing on the risk undertaken. In Reliance Life Insurance Co. Ltd. v. Rekhaben Nareshbhai Rathod, (2019) 6 SCC 175, the Hon'ble Supreme Court held that suppression of a material fact may render the policy voidable; however, the insurer must prove that the fact suppressed was material to the contract of insurance. Likewise, in Bajaj Allianz Life Insurance Co. Ltd. v. Dalbir Kaur, 2020 SCC OnLine SC 848, it was reiterated that the proposer is under an obligation to disclose all material facts which would influence the insurer's decision to accept the risk.

18. In the present case, the Appellant/OP has failed to discharge the statutory burden cast upon it under Section 45 of the Insurance Act, 1938. Apart from relying upon the medical records generated during the hospitalization of the DLA in October-November, 2016, no cogent evidence has been produced to establish that, on the date of submission of the proposal form on 17.10.2013, the DLA was suffering from any liver disease or chronic alcoholism, was aware of such condition, or had deliberately suppressed the same. Significantly, before issuing the policy, the Appellant itself subjected the DLA to a medical examination through its authorised diagnostic centre and, being satisfied with the medical reports, accepted the proposal and issued the policy. The insurer has also failed to establish, as required by the Explanation to Section 45(4) of the Insurance Act, 1938, that had the alleged facts been disclosed, no life insurance policy would have been issued.

19. The Hon'ble Supreme Court in Texco Marketing Pvt. Ltd. v. Tata AIG General Insurance Co. Ltd., (2023) 1 SCC 428, United India Insurance Co. Ltd. v. Hyundai Engineering & Construction Co. Ltd., 2024 LiveLaw (SC) 409, and National Insurance Co. Ltd. v. Ishar Das Madan Lal, (2007) 4 SCC 105, has consistently held that the burden of proving the applicability of an exclusion clause rests upon the insurer and that any ambiguity must operate in favour of the insured. Similarly, in Narsingh Ispat Ltd. v. Oriental Insurance Co. Ltd., 2022 LiveLaw (SC) 443, the Hon'ble Supreme Court reiterated that unless the insurer satisfactorily proves that the claim falls squarely within the exclusionary clause, repudiation cannot be sustained.

20. Applying the aforesaid principles to the facts and circumstances of the present case, we are of the considered opinion that the Appellant has failed to establish that the Deceased Life Assured (DLA) had fraudulently suppressed or deliberately concealed any material fact so as to attract the provisions of Section 45 of the Insurance Act, 1938, and thereby justify repudiation of the insurance policy. In any case, it is an admitted and undisputed fact that the policy commenced on 18.11.2013 and the DLA expired on 22.11.2016. Consequently, as three years elapsed from the date of issue of the policy to the date of death, the embargo contained in Section 45 of the Insurance Act, 1938 squarely applies. Once the statutory period of three years expired, the insurer is precluded from calling the policy into question. Even for the sake of argument if the contentions of the OP are to be considered, it was incumbent upon the OP to establish that the statement made by the DLI was on a material matter, was fraudulently made, and that he knew it to be false or suppressed facts which it was material to disclose. The Appellant failed to discharge this statutory burden. In the absence of any cogent, reliable, or convincing evidence demonstrating fraudulent misrepresentation or intentional suppression of a material fact by the DLA, the repudiation of the insurance claim is legally unsustainable and constitutes a clear deficiency in service as well as an unfair denial of the contractual benefit due under the policy. The learned State Commission appropriately appreciated the pleadings, documentary evidence, and the applicable legal principles governing repudiation of life insurance policies under Section 45 of the Insurance Act, 1938. We find that the impugned order is based on a proper appreciation of the evidence and settled law and suffers from no illegality, perversity, or any material irregularity warranting interference in the exercise of appellate jurisdiction.

21. Consequently, the present First Appeal No. 242 of 2021 is dismissed, and the State commission order dated 09.02.2021 in CC No. 22 of 2018 is affirmed.

22. There shall be no order as to costs. All pending applications, if any, stand disposed of.