Holding

The appeal is allowed and the matter is remitted to the District Forum to consider the effect of clause 5.9 and the concealment of the pre‑existing disease.

Summary

The insured, Satpal Singh Muchal, had taken a Medi‑claim policy from New India Assurance and disclosed a pre‑existing kidney ailment. The insurer invoked clause 5.9 of the policy to cancel it, refunding a pro‑rata premium, and later refused renewal citing the pre‑existing condition and adverse claim experience. The District Consumer Forum ordered the policy to be revalidated and the claim considered, but the State and National Consumer Commissions upheld the insurer’s position. On appeal, the Supreme Court held that the lower forums had failed to consider the effect of clause 5.9 and the concealment of the pre‑existing disease, and therefore remitted the case to the District Forum for fresh consideration. No costs were awarded.

Issues considered

Whether the insurer could validly cancel the Medi‑claim policy under clause 5.9 despite the insured's concealment of a pre‑existing disease.
Whether the District Forum erred in directing revalidation of the policy and consideration of the claim.
Whether the refund of pro‑rata premium was appropriate under the policy terms.

Legislation cited

Consumer Protection Act, 1986

Subjects

insurancemediclaimpre‑existing diseaseconcealmentpolicy cancellationconsumer protectionpro‑rata premiumclause 5.9renewal

Judgment

[2009] 4 S.C.R. 415
_.. ~

t-
~

NEW INDIA ASSURANCE CO. LTD. A
V.
SATPAL SINGH MUCHAL
Civil Appeal No. 1616 of 2009

MARCH 16, 2009
B
[DR. ARIJIT PASAYAT AND ASOK KUMAR GANGULY,
1 JJ.]

Consumer Protection Act, 1986 - Medic/aim policy -
Concealment of fact of pre-existing disease at the time of taking
insurance policy - Termination of policy - Refund of pro rata c
premium - Insured seeking renewal of policy and payment of
medic/aim amount - Forums below directing revalidation of
policy and to consider claim of insured - On appeal, held:
.,. Forums below did not consider effect of the clause in policy
that company could cancel policy any time by notice and in D
that case would refund pro rata premium for unexpired period
of insurance as also admission by insured as regard suffering
of ailment during pendency of policy - Hence, matter remitted
to District Forum to consider the matter afresh.
E
CIVILAPPELLATE JURISDICTION: Civil Appeal No. 1616
of 2009
f
From the Judgement and Order dated 11.05.2006 of the
National Consumer Disputes Redressal Commission, New
Delhi. F
A.K. Raina, Anil Kumar Jha, for the Appellant.
Satish Kumar, Ashwani Bhardwaj, for the Respondent.
The Judgement of the Court was delivered by
~- • +' G
DR. ARIJIT PASAYAT, J.
1. Leave granted.
2. Challenge in this appeal is to the order passed by the
415 H
416 SUPREME COURT REPORTS [2009] 4 S.C.R.

·-.
,
_.
A National Consumer Disputes Redressal Commission
(hereinafter referred to as the 'National Commission')
dismissing the revision petition filed by the appellant. Order
passed by the State Commission, Madhya Pradesh was under
challenge before the National Commission. The State Consumer
B Disputes Redressal Commission (hereinafter referred to as the
'State Commission') had dismissed the appeal filed by the
insurer against the order passed by the District Consumer
Redressal Forum, Indore (in short the 'District Forum').

3. Background facts as projected by the appellant are as
c follows:
Respondent took a Medi-claim policy in the month of
January, 1999. The policy was renewed lastly on 22.1.2002 for
a period of one year i.e. till 21.1.2003. Respondent was suffering
from kidney trouble and intimated the same to the Divisional
D
office of the appellant No.1-company. On receiving the intimation
that the respondent was suffering from kidney trouble, insurer
terminated the policy by letter dated 18.6.2003 with effect from
17.2.2002 by placing reliance on clause 5.9. of the policy.
Respondent issued notice to the appellant calling upon them to
E treat the policy of insurance as subsisting and to bear the
expenses of the treatment of the respondent. Another notice
was issued on 2.7.2002 calling upon the appellant to pay the
claim of the respondent. Appellant replied to the notice. Again "
respondent issued notice to the appellant stating that he was
F suffering from kidney trouble for about last two years. The
appellant was of the view that there was concealment of the fact
of the pre existing disease at the time of taking the policy of the
insurance. It was clear that the insurance cover was taken by
concealment of material facts and, therefore, the insurance policy
G was terminated and the respondent was intimated. The • 'f .--

respondent was refunded pro rata premium of Rs.2782/- by
cheque dated 6.8.2002. Respondent submitted an application
for renewal of the policy. The respondent was intimated by letter
dated 11.3.2003 that because of pre-existing disease and
H adverse claim ratio, the policy of insurance has been cancelled
NEW INDIA ASSURANCE CO. LTD. V 417
SATPAL SINGH MUCHAL [DR. ARIJIT PASAYAT, J.]
~- and therefore the request of renewal cannot be considered. A
Respondent filed a complaint before the District Forum. Stand
of the appellant before the District Forum. was that every policy
whether it is a renewal or a fresh one is purely based on a
contract. Since the respondent was suffering from kidney trouble
even prior to the taking of the first policy, there was concealment· B
of material particulars. In four years the respondent had been
paid as claimed amount of Rs.95,925/- as against the premium
~
of Rs.17, 182/- and even in the year 2003-04 a sum of Rs.49,894/
> - was paid which indicated adverse claim experience and as
such in terms of clause 5.9 of the policy, the same had been c
rightly cancelled. The District Forum directed revalidation of the
policy and also directed consideration of the claim of the
respondent.
4. Against the said order an appeal was preferred before
the State Commission which as noted above, dismissed the D
same. Revision was carried before the National Commission
which dismissed the same.
5. In support of the appeal learned counsel for the appellant
submitted that the National Commission did not consider the
relevant aspects. The fact of concealment had not been E
considered as also the scope and the relevance of clause 5.9
,.. has been totally overlooked.
6. Learned counsel for the respondent on the other hand
supported the judgment. F
7. Clause 5.9 reads as follows:
"The policy may be renewed by mutual consent. The
company shall not however be bound to give notice that it
... -;..
is due for renewal and the company may at any time cancel G
this policy by sending the insured 30 days notice by
registered letter at the insured's last address and in such
event the company shall refund to the insured a pro rate
premium for un expired period of insurance."
8. The basic stand of the appellant was that there was H
418 SUPREME COURT REPORTS [2009] 4 S.C.R.

A concealment of the factum of ailment to the kidney when the I -
first application for insurance cover was made. Additionally the
effect of clause 5.9 has not been considered.
9. Reference was made by learned counsel for the
appellant to the letter of the respondent dated 24.62009 which
B inter alia contains the following paragraphs:

"My client has been suffering from kidney trouble since
last 2 years i.e. during the pendency of the Medi claim
policy and claim was already submitted. Now in order to
c thwart Mediclaim, the insurance Co. cannot cancel the
policy and the Insurance Co. is bound to pay the mediclaim
of my client.
My client has been suffering vehemently and is undergoing
vehemental trouble and agony. Your said notice has told
D on the nerves of my client and he has become despondent
from his life.
The main intention of the said Ruces is not to defeat at the
Medi claim of the insured. Since my client has been
suffering from kidney trouble during the recurrence of the
E Insurance policy, in Insurance Company is bound to make
payment, of the Medi claim submitted by my client."
10. It appears that the District Forum, the State '
Commission and the National Commission have not considered
F the effect of clause 5.9 and the admissions made by the
respondent in his letter as quoted above.
11. That being so, we remit the matter to District Forum to
consider the matter afresh, taking into account the
consequences flowing from the factum of concealment and the
G applicability of clause 5.9 to the facts of the case. The appeal is
allowed, but there shall be no order as to costs.
~ . ~

N.J. Appeal allowed.