Mithoolal Nayak Vs. Life Insurance
Corporation of India [1962] INSC 4 (15 January 1962)
15/01/1962 DAS, S.K.
DAS, S.K.
SUBBARAO, K.
DAYAL, RAGHUBAR
CITATION: 1962 AIR 814 1962 SCR Supl. (2) 571
CITATOR INFO:
RF 1991 SC 392 (7)
ACT:
Insurance-Life Policy-Obtained, by deliberate
misstatement and fraudulent suppression Repudiation, by Company after two
years-Whether proper-Refund of money paid as premium-Insurance Act, 1938 (4 of
1938) s. 45-Indian Contract Act, 1872 (9 of 1872) ss. 64 and 65.
HEADNOTE:
In 1942, one M sent a proposal for the
insurance of his life. He was examined by Dr. D who submitted two reports, one
with the proposal form and one confidential. The confidential report showed
that M was anaemic, had a dilated heart and his right lung showed indications
of an old attack of pneumonia or pleurisy and that he was a total physical
wreck. Nothing came out of this proposal and it lapsed. In 1943, M consulted
and was treated by one Dr. L for anaemia oedema of the feet, diarrhoea and panting
on exertion. In 1944, M made a second proposal for insurance of his life.
Against the question in the proposal form whether he had consulted any medical
man for any ailment within the last five years, he gave the answer, "Nor'.
He also did not disclose any of his ailments. After medical examination by one
Dr. K the proposal was accepted and a policy for Rs. 25,000/was issued on March
13, 1945. The policy lapsed for non-payment of premium but was revived in July,
1946. In November, 1946, M died. His assignee, the appellant, made a demand for
Rs. 26,000/-but the Company on October 10, 1947, repudiated it on the ground
that the policy had been obtained by deliberate mis-statement and fraudulent
suppression of material facts.
Thereupon, the appellant filed a suit to
recover the amount of the policy contending that s. 45 Insurance Act, barred
the company from calling in question the policy after two years on the ground
that any statement made in the proposal was inaccurate or false.
Held, that the policy-holder was guilty of
fraudulent suppression of material facts relating to his health and the Company
was entitled to avoid the contract.
Section 45 Insurance Act applied to the case
as two years had lapsed since the policy was effected; in view of the language
of s.45 the two years could not be counted from the date of the revival of the
policy. The second part of s. 45 entitled the company to repudiate the contract
even after the expiry 572 of two years if three conditions were fulfilled viz.
(a) the statement was on a material matter or there was suppression of facts
which it was material to disclose; (b) the suppression was fraudulently made by
the policy-holder, and (c) the policy-holder must have known at the time of the
making of the statement that it was false or that it suppressed facts which it
was material to disclose. When M was treated in 1943 by Dr. L he was suffering
from serious ailments. He must have known that it was material to disclose this
but made a false statement that he had not been treated by any doctor for any
serious ailment.
There was deliberate suppression fraudulently
made by M. Even though the Company had got M examined by four doctors before
issuing the policy, it was not estopped from questioning the policy. It had no
means of knowing that M had been treated by Dr. L for serious ailments.
Held, further, that the appellant was not
entitled even to a refund of the money paid as premium as one of the terms of
the policy was that all monies paid belonged to the company if the policy was
vitiated by fraudulent suppression of material facts. To such a contract
neither s. 65 nor s. 64 of the Indian Contract had any application.
CIVIL APPELLATE JURISDICTION: C.A. No. 224 of 1959.
Appeal from the judgment and decree dated August 28, 1956, of the Madhya Pradesh High Court in F.A. No. 90 of 1949.
A. V. Viswanatha Sastri, S. N. Andley,
Rameshwar Nath and P.L. Vohra, for the appellant.
S. T. Desai, R. Ganapathy Iyer and K. L. Hathi,
for the respondent.
1962. January 15-The Judgment of the Court
was delivered by S. K. DAS, J.-This is an appeal on a certificate granted by
the High Court of Madhya Pradesh under Art. 133 (1) (a) of the Constitution,
The appellant is Mithoolal Nayak, who took an assignment on october 18, 1945 of
a life insurance policy on the life of one Mahajan Deolal for a sum of Rs.
25,000/-in circumstances which we shall presently state. Mahajan Deolal died on
November 12, 1946 573 Thereafter, the appellant made a demand against the
respondent company for a sum of Rs. 26,000/and odd on the basis of the life
insurance policy which had been assigned to him. This claim or demand of the
appellant was repudiated by the respondent company by a letter dated October
10, 1947, which in substance stated that the insured Mahajan Deolal had been
guilty of deliberate misstatements and fraudulent suppression of material
information in answers to questions in the proposal form and the personal
statement, which formed the basis of the contract between the insurer and the
insured. On the repudiation of his claim the appellant brought the suit out of
which this appeal has arisen. The suit was originally instituted against the
oriental Government Security Life Assurance co. Ltd., Bombay, which issued the
policy in favour of Mahajan Deolal on March 13, 1945. Latter, on the passing of the life Insurance corporation Act, 1956, there was a statutory transfer of the
assets and liabilities of the controlled (life) business of all insurance
companies and insurers operating in India to a Corporation known as the Life
Insurance Corporation of India. By an order of this Court made on February 16, 1960, the said Corporation was substituted in place of the original
respondent. For brevity as convenience we shall ignore the distinction between
the original respondent and the said Corporation and refer to the respondent in
this judgment as the respondent company. The Suit was decreed by the learned
Additional District Judgment of Jabalpur by his judgment dated May 7, 1949. The respondent company then preferred an appeal to the High Court of Madhya
Pradesh. This appeal was heard by a Division Bench of the said High Court and
by a judgment dated August 28, 1956, the appeal was allowed and the suit was
dismissed with costs. It is from 574 that appellate judgment and decree that
the present appeal has been brought to this Court.
We now proceed to state some of the relevant
facts relating to the appeal and the contentions urged on behalf of the
appellant. Mahajan Deolal was a resident of. village Singhpur, Tehsil
Narsinghpur. It appears that he was a small landholder and possessed several
acres of land.
Sometime in December, 1942, Mahajan Deolal
submitted a proposal through one Rahatullah Khan, an agent of the respondent
company at Narsingpur, for the insurance of his life with the respondent
company for a sum of Rs. 10,000/only. Mahajan Deolal's age at that time was
about 45 as stated by him. In the proposal form which was submitted to the
respondent company, Mahajan Deolal mentioned the name of one Motilal Nayak, by
profession a doctor, as a personal friend who best knew the state of the health
and habits etc. of the insured. This Motilal Nayak, be it noted, is a brother
of the appellant, the evidence in the record showing that the two brothers
lived together in the same house. When the proposal for insurance of his life
was made by Mahajan Deolal in December 1942, he was examined by a doctor named
Dr. D. D. Desai. This doctor submitted two reports about Mahajan Deolal; one
report, it appears, was admitted with the proposal form through the agent of
the respondent company;
another report was sent in a confidential
cover along with a letter from the doctor. In this letter (Ex. D-22) the doctor
explained why he was submitting two medical reports. In substance he said that
the report submitted with the proposal form at the instance of the agent,
Rahatullah Khan, was not a correct report and the correct report was the one
which he enclosed in the confidential cover. In that report Dr. Desai said that
Mahajan Deolal 575 was anaemic, looked about 55 years old, had a dilated heart
and his right lung showed indications of an old attack of pneumonia or
pleurisy. The doctor further said that the general health of Mahajan Deolal was
very much run down and he was a total physical wreck. The doctor opined that
Mahajan Deolal' life was an uninsurable life. It appears that nothing came out
of the proposal made by Mahajan Deolal for the insurance of his life in
December, 1942. The evidence of the Inspector of the respondent company shows
that on receipt of Dr. Desai's reports, the respondent company directed that
Mahajan Deolal should be further examined by the Civil Surgeon, Hoshangabad and
District Medical officer, Railways at Jabalpur. Mahajan Deolal could not,
however, be examined by the two doctors aforesaid and according to the rules of
the respondent company the proposal lapsed on the expiry of six months for want
of completion of the medical examination as required by the respondent company.
Then, on July 16, 1944, a second proposal was made through the same agent of
the respondent company for the insurance of the life of Mahajan Deolal, this
time for a sum of Rs. 25,000/-. The Inspector of the respondent company said in
his evidence that this second proposal was made at the instance of the same
agent, Rahatullah Khan inasmuch as the proposal of 1942 had not been rejected
but had only lapsed. It appears that at the time of the first proposal in 1942
Mahajan Deolal had paid a sum of Rs. 571/and odd towards the first premium due
in case the proposal was accepted. In the personal statement, accompanying the
second proposal of July 16, 1944, it was stated that an earlier proposal for
insuring the life of Mahajan Deolal was pending with the respondent company.
Now, in the proposal form (Ex. D-11) there was a question (question no. 13) to
the following effect:
576 "Have you within the past five years
consulted any medical man for any ailment, not necessarily confining you to
your house? If so, give details and state names and addresses of medical man
consulted." The answer given to the question was-"No". This
answer, according to the case of the respondent, was false and deliberately
false. because, according to the evidence of one Dr. P.N Lakshmanan, Consulting
Physician at Jabalpur, Mahajan Deolal was examined and treated by the said
doctor between the dates September 7, 1943, and October 6, 1943, when the
doctor found that Mahajan Deolal was suffering from anaemia, oedema of the
feet, diarrhoea and panting on exertion. We shall advert in greater detail to
the evidence of Dr. Lakshmanan at a later stage. In his personal statement
accompanying the second proposal Mahajan Deolal answered in the negative
question 12(b), the question being as to when he was last under medical treatment
and for what ailment and how long. In the same personal statement with regard
to questions, for example, question nos. 5(a);
5(b) etc., as to whether he suffered from
shortness of breath, anaemia, asthma etc, Mahajan Deolal gave negative answers.
The contention on behalf of the respondent company was that these answers in
the personal statement were also deliberately false and constituted a
fraudulent suppression of material particulars relating to the health of the
insured. With regard to the second proposal and the personal statement
accompanying it, Dr. Motilal Nayak, brother of the appellant, gave a friend's
report, in which he said that Mahajan Deolal health was good and that he had
never heard that Mohajan Deolal suffered from any illness. It is worthy of note
here that Dr. Motilal Nayak himself took Mahajan Deolal to Dr. Lakshmanan for
treatment at Jabalpur in September-October., 1943. On receipt 577 of the second
proposal in July, 1944, Mahajan Deolal was examined by Dr. Kapadia, who was the
District Medical officer of the Railways at Jabalpur. Dr. Kapadia reported that
Mahajan Deolal was a healthy man and looked about 52 to 54 years old. He
recommended that Mahajan Deolal might be given a policy of fourteen years. In
his report Dr. Kapadia noted that Mahajan Deolal had stated that he had
suffered from pneurnonia four or five years ago, and that he had also cholera
some years ago. No mention, however, was made of anaemia, asthma, shortness of
breath etc. On December 29, 1944, Mahajan Deolal made a further declaration of
his good health and so also on February 12, 1945.
On March 13, 1945, the policy was issued by the respondent company. It contained the usual terms of such life insurance
policies, one of which was that in case it would appear that any untrue or
incorrect averment had been made in the proposal form or personal statement,
the policy would be void. The first premium due on the policy was taken from
the amount which was already in deposit with the respondent company in
connection with the proposal made in 1942. Then, on May 22, 1945, Mahajan Deolal wrote a letter to the respondent company in which he said that his financial
condition had become suddenly worse and that he would not be able to pay the
premium for the policy. He requested that the policy be cancelled.
In the meantime the premium for 1945 not
having been paid, the policy lapsed. Then, on October 28, 1945, Mahajan Deolal made a request for revival of the policy, but a few days before that, namely
on October 18, 1945, the policy was assigned in favour of the appellant, by an
endorsement made on the policy itself. This assignment was duly registered by
the respondent company by means of its letter dated November 1, 1945 in which
the respondent company said that it accepted the assignment without expressing
any opinion as to its validity or 578 effect. The respondent company also made
an enquiry from the appellant as to whether the latter had any insurable
interest in the life of the insured and what consideration had passed from him
to the insured. To this the appellant replied that he had no insurable interest
in the life of Mahajan Deolal except that the latter was a friend and he (the
appellant) had purchased the policy for a sum of Rs. 427.12 nP. being the
premium paid by him so far, because Mahajan Deolal did not wish to continue the
policy. On his request for a revival of the policy Mahajan Deolal was again
medically examined, this time by one Dr.
Belapurkar. Later on February 25, 1946, he
was examined by Dr. Clarke. The policy was then revived on payment of all
arrears of premium, these arrears having been paid by the present appellant. On
receipt of the revival fee, the policy appears to have been revived sometime in
July, 1946. We have already stated that Mahajan Deolal died in November, 1946.
The certificate of Dr. Clarke, who was the medical attendant at the time when
Mahajan Deolal died, showed that the primary, cause of death of Mahajan Deolal
was malaria followed by severe type of diarrhoea; the secondary cause was anaemia,
chronic bronchitis and enlargement of liver. In the certificate which Dr.
Clarke gave there was mention of certain other medical practitioners who had
attended Mahajan Deolal at the time of his death. One of such medical
practitioners mentioned in the certificate was Dr. Lakshmanan. On receipt of
this certificate the respondent company got into touch with Dr. Lakshmanan and
discovered from him that Mahajan Deolal had been treated in September October,
1943, by Dr. Lakshmanan for ailments which, according to the doctor, were of a
serious nature.
Several issues were tried between the parties
in the trial court. But the four questions which 579 were argued in the High
Court and on which the fate of the appeal depends were these:(1) Whether the
policy was vitiated by fraudulent suppression of material facts by Mahajan
Deolal ? (2) Whether the present appellant had no insurable interest in the
life of the insured, and if so, can he sue on the policy ? (3) Whether the
respondent company had issued the policy with full knowledge of the facts
relating to the health of the insured and if so, is it estopped from contesting
the validity of the policy ? and (4) Whether in any event the appellant is
entitled to refund of the money he had paid to the respondent company ? These
are the four questions which have been agitated before us and we shall deal
with such of them as are necessary for deciding this appeal.
So far as the first question is concerned,
the learned trial Judge found that though Mahajan. Deolal had given a negative
answer to question no, 13 in the proposal form and to questions nos. 5(a),
5(b), 5 (f) and 12(b) in the personal statement, these answers though not
strictly accurate, furnished no grounds for repudiating the claim of the
appellant by the respondent company, in as much as s.45 of the Insurance Act,
1938 (4 of 1938) applied and the answers did not amount to a fraudulent
suppression of material facts by the policy-holder within the meaning of that
section. The learned trial Judge found that the ailments for which Dr.
Lakshmanan treated Mahajan Deolal in September-October, 1943, were of a causal
or trivial nature and the failure of the policy-holder to disclose those
ailments did not attract the second part of 580 s. 45 of the Insurance Act. The
High Court came to a contrary conclusion and held that even applying s. 45 of
the Insurance Act, the policy-holder was guilty of a fraudulent suppression of
material facts relating to his health within the meaning of that section and
the respondent company was entitled to avoid the contract on that ground.
On behalf of the appellant it has been argued
before us that the finding of the learned trial Judge on this question was the
correct finding and that the High Court was wrong in arriving at a contrary
finding on this question in view of the evidence given in the case. The
judgment of the High Court is a judgment in reversal and the appellant has a
right of appeal under Art.
133(1)(a) of the Constitution in as much as
the value of the subject matter of the dispute in the court of first instance
and still in dispute is more than Rs. 20,000/-. We have, therefore, allowed
learned counsel for the parties to take us through the evidence in the case. On
a consideration of that evidence we have come to the conclusion that the
finding of the High Court is the correct finding.
We shall presently consider the evidence, but
it may be advantageous to read first s. 45 of the Insurance Act, 1938, as it
stood at the relevant time. The section, so far as it is relevant for our
purpose, is in these terms:
"No policy of life insurance effected
before the commencement of this Act shall after the expiry of two years from
the date of commencement of this Act and no policy of life insurance effected
after the coming into force of this Act shall, after the expiry of two years
from the date on which it was effected, be called in question by an insurer on
the ground that a statement made in the proposal for insurance or in any report
of a medical officer, or referee, or friend of the insured, or in any other
document leading to 581 the issue of the policy, was inaccurate or false,
unless the insurer shows that such statement was on a material matter or
suppressed facts which it was material to disclose and that it was fraudulently
made by the policy-holder and that the policy-holder knew at the time of making
it that the statement was false or that it suppressed facts which it was
material to disclose.
x x x x x x" It would be noticed that
the operating part of s. 45 states in effect (so far as is relevant for our
purpose) that no policy of life insurance effected after the coming into force
of the Act shall, after the expiry of two years from the date on which it was
effected, be called in question by an insurer on the ground that a statement
made in the proposal for insurance or in any report of a medical officer, or
referee, or friend of the insured, or in any other document leading to the
issue of the policy, was inaccurate or false; the second part of the section is
in the nature of a proviso which creates an exception. It says in effect that
if the insurer shows that such statement was on a material matter or suppressed
facts which it was material to disclose and that it was fraudulently made by
the policyholder and that the policy-holder knew at the time of making it that
the statement was false or that it suppressed facts which it was material to
disclose, then the insurer can call in question the policy effected as a result
of such inaccurate or false statement. In the case before us the policy was
issued on March 13, 1945, and it was to come into effect from January 15, 1945.
The amount insured was payable after January 15, 1968, or at the death of the
insured, if earlier. The respondent company repudiated the claim by its letter
dated October 10, 1947. Obviously, therefore, two years had expired from the
date on which the policy was effected. We are clearly of the opinion that s. 45
of the Insurance Act applies in the present case in 582 view of the clear terms
in which the section is worded, though learned counsel for the respondent
company sought, at one stage, to argue that the revival of the policy sometime
in July, 1946, constituted in law a new contract between the parties and if two
years were to be counted from July, 1946, then the period of two years had not
expired from the date of the revival. Whether the revival of a lapsed policy
constitutes a new contract or not for other purposes, it is clear from the
wording of the operative part of s. 45 that the period of two years for the
purpose of the section has to be calculated from the date on which the policy
was originally effected; in the present case this can only mean the date on
which the policy (Ex. P-2) was effected. From that date a period of two years
had clearly expired when the respondent company repudiated the claim. As we
think that s. 45 of the Insurance Act applies in the present case, we are
relieved of the task of examining the legal position that would follow as a
result of inaccurate statements made by the insured in the proposal form or the
personal statement etc. in a case where s. 45 does not apply and where the
averments made in the proposal form and in the personal statement are made the
basis of the contract.
The three conditions for the application of
the second part of s. 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.
The crucial question before us is whether
these three conditions were fulfilled in the present 583 case. We think that
they were. We are unable to agree with the learned trial Judge that the
ailments for which Mahajan Deohal was treated by Dr. Lakshmanan in
September-October, 1943, were trivial or casual ailments. Nor do we think that
Mahajan Deolal was likely to forget in July, 1944, that he had been treated by
Dr. Lakshmanan for certain serious ailments only a few months before that date.
This brings us to a consideration of the evidence of Dr. Lakshmanan. That
evidence is clear and unequivocal. Dr. Lakshmanan says that Dr. Motilal Nayak
brought the patient to him at Jabalpur. We have already referred to the fact
that Dr. Motilal Nayak had himself made a false statement in his friend's
report dated July 17, 1944, when he said that he had never heard that the
insured had suffered from any illness. It is impossible to believe that Dr.
Motilal Nayak would not remember that he had himself taken the insured to
Jabalpur for treatment by Dr. Lakshmanan who was an experienced consulting
physician. Dr.
Lakshmanan said that when he first examined
Mahajan Deolal on September 7, 1943, he found that his condition was serious as
a result of the impoverished condition of his blood, and that Mahajan Deolal
was suffering from anaemia, oedema of the feet, diarrhoea and panting on
exertion.
The doctor asked for an examination of the
blood.
The pathological report supported the
diagnosis that Mahajan Deolal was suffering from secondary anaemia meaning
thereby that anaemia was due to lack of iron and malnutrition. Dr. Lakshmanan
further found that from the symptoms disclosed the disease was a major one.
Mahajan Deolal had also cardiac asthma which was a symptom of anaemia and due
to dilatation of heart. Dr. Lakshmanan saw the patient again on September 9,
1943, and then again on September 16, 1943. On October 6, 1943 Mahajan Deolal
himself went to Dr. Lakshmana. On that date Dr. Lakshmanan found that 584
anaemia had very greatly disappeared. In crossexamination Dr. Lakshmanan
admitted that the anaemia, dilatation of heart and cardiac asthma from which
Mahajan Deolal was suffering continued a passing phase which might disappear by
treatment. He further admitted that he did not mention cardiac asthma in his
letter addressed to the respondent company. We have given our very earnest
consideration to the evidence of Dr. Lakshmanan and we are unable to hold that
the ailments from which Mahajan Deolal was then suffering were either trivial
or casual in nature.
The ailments were serious though amenable to
treatment. Mahajan Deolal's son gave evidence in the case and he said in his
evidence that though Dr. Lakshmanan prescribed some medicine, his father did
not take it. He further said that his father was a strict vegetarian. This evidence
was given by the son with regard to what the doctor had said that he prescribed
fresh liver juice made at home according to his directions three times a day.
He also prescribed iron sulphate in tablet form with plenty of water. The son
further said that during his stay at Jabalpur his father felt weakness, though
he used to move about freely and was never confined to bed. The son tried to
make it appear in his evidence that his father was suffering from nothing
serious. Dr. Lakshmanan said in his evidence that his fees for visiting a
patient at Jabalpur were Rs. 16/per visit. We agree with the High Court that if
Mahajan Deolal was not suffering from any serious ailment, he would not have
been taken by his physician, Dr. Motilal Nayak from his village to Jabalpur nor
would he have consulted Dr. Lakshmanan, a consulting physician of repute, for
so many days on payment of Rs. 16/per visit. No doubt, Mahajan Deolal's son now
tries to make light of the illness of his father but Dr. Lakshmanan's evidence
shows elearly enough that in SeptemberOctober, 1943. Mahajan 585 Deolal was
suffering from a serious type of anaemia for which he was treated by Dr.
Lakshmanan. Mahajan Deolal could not have
forgotten in July, 1944, that he was so treated only a few months earlier and
furthermore, Mahajan Deolal must have known that it was material to disclose
this fact to the respondent company. In his answer to the questions put to him
he not only failed to disclose what it was material for him to disclose, but he
made a false statement to the effect that he had not been treated by any doctor
for any such serious ailment as anaemia or shortness of breath or asthma. In
other words, there was a deliberate suppression fraudulently made by Mahajan
Deolal. Fraud, according to s. 17 of the Indian Contract Act, 1872 (IX of
1872), means and includes Inter alia any of the following acts committed by a
party to a contract with intent to deceive another party or to induce him to
enter into a contract(1) the suggestion, as to a fact, of that which is not
true by one who does not believe it to be true; and (2) the active concealment
of a fact by one having knowledge or belief of the fact.
Judged by the standard laid down in s. 17,
Mahajan Deolal was clearly guilty of a fraudulent suppression of material facts
when he made his statements on July 16, 1944, statements which he must have
known were deliberately false.
Therefore, we are in agreement with the High
Court in answering the first question against the appellant.
We may here dispose of the third question.
Learned counsel for the appellant has argued
before us that Mahajan Deolal was examined under the direction of the
respondent company by as many as four doctors, namely, Dr. Desai, Dr. Kapadia,
Dr. Belapurkar and Dr. Clarke. It is further pointed out that Mahajan Deolal
had correctly 586 disclosed that he had suffered previously from malaria,
pneumonia and cholera. Dr. Kapadia, it is pointed out, was specifically asked
to examine Mahajan Deolal in view of the conflicting reports which Dr. Desai
had earlier submitted. On these facts, the argument has been that the
respondent company had full knowledge of all facts relevant to the state of
health of Mahajan Deolal and having knowledge of the full facts, it was not
open to the respondent company to call the policy in question on the basis of
the answers given by Mahajan Deolal in the proposal form and the personal
statement, even though those answers were inaccurate. Learned counsel for the
appellant has referred us to the Explanation to s. 19 of the Indian Contract
Act in support of his argument. We are unable to accept this argument as
correct. It is indeed true that Mahajan Deolal was examined by as many as four
doctors. It is also true that the respondent company had before it the
conflicting reports of Dr. Desai and it specially asked Dr. Kapadia to examine
Mahajan Deolal in view of the reports submitted by Dr. Desai. Yet, it must be
pointed out that the respondent company had no means of knowing that Mahajan
Deolal had been treated for the serious ailment of secondary anaemia followed
by dilatation of heart etc. in September-October, 1943 by Dr. Lakshmanan. Nor
can it be said that if the respondent company had knowledge of those facts,
they would not have made any difference. The principle underlying the
Explanation to s. 19 of the Contract Act is that a false representation,
whether fraudulent or innocent is irrelevant if it has not induced the party to
whom it is made to act upon it by entering into a contract. We do not think
that principle applies in the present case. The terms of the policy make it
clear that the averments made as to the state of health of the insured in the
proposal form and the personal statement were the basis of the contract between
the 587 parties, and the circumstance that Mahajan Deolal had taken paint to
falsify or conceal that he had been treated for a serious ailment by Dr. Lakshmanan
only a few months before the policy was taken shows that the falsification or
concealment had an important bearing in obtaining the other party's consent. A
man who has so acted cannot after wards turn round and say; "It could have
made no difference if you had known the truth." In our opinion, no question
of waiver arises in the circumstances of this case, nor can the appellant take
advantage of the Explanation to s. 19 of the Indian Contract Act.
Our finding on the first question makes it
unnecessary for us to decide the second question, namely, whether the present
appellant merely gambled on the life of Mahajan Deolal when he took the
assignment on October 18, 1945. The contention of the respondent company was
that appellant had no insurable interest in the life of Mahajan Deolal and when
he took the assignment of the policy on October 18, 1945 he was merely
indulging in a gamble on Mahajan Deolal's life; the contract was therefore,
void by reason of s. 30 of the Indian Contract Act. On behalf of the appellant,
however, the contention was that s. 38 of the insurance Act provided a complete
code for assignment and transfer of insurance policies and the assignment made
in favour of the appellant by Mahajan Deolal was a valid assignment in
accordance with the provisions of s. 38 aforesaid.
The High Court, it appears, proceeded on the
footing that from the very inception the policy was taken for the benefit of
the appellant on the basis of a gamble on the life of Mahajan Deolal;
it said that the appellant and his brother,
Dr. Motilal Nayak, knew very well that Mahajan Deolal was not likely to live
very long and when the policy was taken out in 1944, it was really for the
benefit of the present appellant, who soon after took an assignment 588 on
payment of the premium already paid by Mahajan Deolal and such arrears of
premium as were then outstanding. It is unnecessary for us to give our decision
on these contentions; because if Mahajan Deolal was himself guilty of a
fraudulent suppression of material facts on which the respondent company was
discharged from performing its part of the contract, the appellant who holds an
assignment of the policy cannot stand on a better footing than Mahajan Deolal
himself. It was argued before us that is the policy was valid in its inception,
that is to say, if it was in fact effected for the use and benefit of Mahajan
Deolal, who undoubtedly had an insurable interest in his own life, it could not
afterwards be invalidated by assignment to a person who had no interest but who
merely took it as a speculation.
Our attention was drawn to several decisions
on this question, American and English, noticed in para 502 of MacGillivray on
Insurance law (fourth Edition). We consider it unnecessary to examine those
decisions or to go into the question posed therein. That question must be left
to be determined in a case where it properly arises. As we have stated earlier,
on our conclusion on the first question, the appellant is clearly out of Court
and cannot claim the benefit of a contract which had been entered into as a
result of a fraudulent suppression of material facts by Mahajan Deolal.
This brings us to the last question, namely,
whether the appellant is entitled to a refund of the money he had paid to the
respondent company.
Here again one of the terms of the policy was
that all moneys that had been paid in consequence of the policy would belong to
the company if the policy was vitiated by reason of a fraudulent suppression of
material facts by the insured. We agree with the High Court that where the
contract is bad on the ground of fraud, the party who has been guilty of fraud
or a person who claims under him can not 589 ask for a refund of the money
paid. It is a well established principal that courts will not entertain an
action for money had and received, where, in order to succeed, the plaintiff
has to prove his own fraud. We are further in agreement with the High Court
that in cases in which there is stipulation that by reason of a breach of
warranty by one of the parties to the contract, the other party shall be
discharged from the performance of his part of the contract, neither s. 65 nor
s. 64 of the Indian Contract Act has any application.
For the reasons given above we have come to
the conclusion that there in no merit in the appeal. The appeal is accordingly
dismissed with costs.
Appeal dismissed.
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