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P.C. Chacko and another Versus Chairman, Life Insurance Corporation of India and others

2007 (11) TMI 655 - SUPREME COURT

Civil Appeal No. 5322 of 2007 - Dated:- 20-11-2007 - S.B. SINHA AND HARJIT SINGH BEDI JJ. JUDGMENT: S.B SINHA, J. 1. Leave granted. 2. Application of Section 45 of the Insurance Act, 1938 is in question in this appeal which arises out of a judgment and order dated 17th December, 2004 passed by a Division Bench of the High Court of Kerala at Ernakulam in A.F.A. No. 18 of 2000 setting aside the judgment and order of a learned Single Judge dated 23rd September, 2000 passed in Appeal Suit No.633 of .....

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se that the insured suppressed material facts, the policy had been repudiated by the respondent on 10th February, 1989. Non-disclosure and mis-statement in the proposal form to the various questions to which answers were given by the insured is said to be the reason for the aforementioned repudiation of the contract of insurance. 4. It now stands admitted that the insured had undergone an operation for Adenoma Thyroid. The particulars furnished by him while filling up the application form for ob .....

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h wrong answers, as the injured died on account of polyneuritis, a learned Single Judge of the High Court opined that there was nothing to indicate that if the injured had disclosed the factum of previous operation, the appellant-Corporation might not have inclined to insure and insisted on a higher premium and thus there was no material to show that the non- disclosure was of a material fact justifying repudiation of the policy by the Corporation. 6. On an intra court appeal, the Division Bench .....

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undergoing Adenoma Thyroid operation four years prior to the date of proposal of policy, the cause of insureds death being polyneuritis which had no connection with the operation and the judgment of the trial court having been affirmed by the learned Single Judge, should not have been interfered with by the Division Bench. Our attention was further drawn to the fact that the medical officer had noted a black mole on lower aspect of left side of neck and from Ext. A1 wherefrom it appeared that th .....

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f. Our attention in this behalf has been drawn to the decision of the Madras High Court in All India General Insurance Co. Ltd. and another vs. S.P. Maheshwari : AIR 1960 Madras 484 for the proposition that there exists a distinction between a representation and a warranty. 9. Mr. Patwalia, learned Senior Counsel, appearing on behalf of the respondents, on the other hand, submitted that having regard to the provisions contained in Section 45 of the Insurance Act and the policy having been repudi .....

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a Life Insurance Corporations agent and furthermore in view of the fact that a declaration was given by the insured that no untrue averment was made therein, the contract of insurance was null and void and all monies which had been paid in respect thereof would stand forfeited to the Corporation. Learned counsel for the Corporation has placed strong reliance on Mithoolal Nayak vs. Life Insurance Corporation of India : 1962 Suppl (2) SCR 571. 10. The basic fact of the matter is not in dispute. Th .....

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question on ground of mis-statement after two years, - 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 offi .....

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l 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. 12. Section 45 postulates repudiation of such policy within a period of two years. By reason of the aforementioned provision, a period of limitation of two years had, thus, been specified and on the expiry th .....

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or application of second part of Section 45 of the Insurance Act which 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. [See Mithoolal Nayak (supra] 14. The insureds brother was an agent of the Life Corporation .....

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y be estopped from pleading that even if such a fact had been disclosed, it would not have made any material change. 16. The purpose for taking a policy of insurance is not, in our opinion, very material. It may serve the purpose of social security but then the same should not be obtained with a fraudulent act by the insured. Proposal can be repudiated if a fraudulent act is discovered. The proposer must show that his intention was bona fide. It must appear from the face of the record. In a case .....

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entation and a warranty. A Division Bench of the Madras High Court in S.P. Maheshwari (supra) upon taking into consideration the history of insurance laws in United States of America, in England and in India stated :- (10) One great principle of insurance law is that a contract of insurance is based upon utmost good faith Uberrima fides; in fact it is the fundamental basis upon which all contracts of insurance are made. In this respect there is no difference between one contract of insurance and .....

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r, each one is required to be absolutely innocent of every circumstance which goes to influence the judgment of the other while entering into the transaction. 18. While the parties entered into a contract of insurance the same shall, subject to statutory interdict, be governed by the ordinary law of contract. The insurer may not rely upon the disclosures made by the insured. It may gather information from other sources. The Madras High Court, although in our opinion, has rightly issued a note of .....

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e followed in such cases or not would depend upon the facts and circumstances of each case. If it is found that the agent himself was interested in getting the policy executed by the Life Insurance Corporation, such common knowledge takes a back seat. In S.P. Maheshwari (supra), it was stated : (27) This brings us on finally to the topics of nondisclosure or misrepresentation which are practically the positive and negative aspects of the same thing. The effect of misrepresentation on the contrac .....

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misrepresentations, both must relate only to material information. The said decision, therefore, is of no assistance to the appellants herein. 20. We are not unmindful of the fact that Life Insurance Corporation being a State within the meaning of Article 12 of the Constitution of India, its action must be fair, just and equitable but the same would not mean that it shall be asked to make a charity of public money, although the contract of insurance is found to be vitiated by reason of an act .....

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001) SCC 160], whereupon reliance has been placed by Mr. Sathish, it was held : The contracts of insurance including the contract of life assurance are contracts uberrima fides and every fact of material (sic material fact) must be disclosed, otherwise, there is good ground for rescission of the contract. The duty to disclose material facts continues right up to the conclusion of the contract and also implies any material alteration in the character of the risk which may take place between the p .....

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udiation of the contract of insurance was not done by the respondent with extreme care and caution or was otherwise invalid in law. The Division Bench of the High Court has taken all the aspects of the matter in consideration and, in our opinion arrived at a just decision. 22. Strong reliance has been placed by the learned counsel for the appellants on Allianz Und Stuttgarter Life Insurance Bank Ltd. v. Hemanta Kumar Das [AIR 1938 CAL 641] wherein in regard to some purported statements made by t .....

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a horoscope. The horoscope was accepted by the company as being sufficient. Therefore, we may take that the company issued the policy upon the footing that they were insuring the life of a man whose age was fifty four. This is not a case where the proposer says that his age was fifty four and the Company merely accepted that statement at its face value and proceeded to issue a policy on that footing and subsequently, either shortly afterwards or a long time afterwards, admitted the age as stated .....

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