# Mahakali Sujatha v. The Branch Manager, Future Generali India Life Insurance Company Limited & Another

- **Citation:** 2024 INSC 296
- **Court:** Supreme Court of India
- **Decided:** 2024-04-10
- **Case number:** Civil Appeal No. 3821 of 2024
- **Bench:** B.V. Nagarathna, Augustine George Masih
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/mahakali-sujatha-v-the-branch-manager-future-generali-india-life-insurance-37774
- **Pages:** 33

## Headnote

The present civil appeal has been filed by the complainant, who
is the daughter of the insured-deceased, who is also the nominee
under the subject life insurance policies of her late father. The
controversy in the present case pertains to the factum of repudiation
of the insurance claim of the complainant on the ground of the
material suppression of information regarding the previous policies
allegedly held by the insured-deceased, while taking the life
insurance policy from the respondent insurance company. Whether,
the respondent insurance company herein was correct in repudiating
the claim of the appellant on the ground of suppression of material
information pertaining to the existing policies with other insurers.
Headnotes
Insurance Act, 1938 - s.45, before the 2014 amendment
- Evidence Act, 1872 - Burden of proof - Onus of proof -
Repudiation of insurance claim of the complainant on the
ground of the material suppression of information regarding
the previous policies - Consumer complaint filed - The
District Commission allowed the complaint on the ground
that no documentary evidence was available to show that
deceased-insured had taken various insurance policies from
other companies - The State Commission upheld the order of
the District Commission - However, the NCDRC observed that
the respondent insurance company had given details of the
aforesaid policies by way of affidavit and the same was not
denied by the complainant in her affidavit - Therefore, NCDRC
concluded that deceased insured had withheld information
in respect of several insurance policies which he had taken
from other insurers - Correctness:
[2024] 4 S.C.R.
725
Mahakali Sujatha v. The Branch Manager, Future Generali
India Life Insurance Company Limited & another
Held: As per the language and interpretation of Section 45, the
insurer cannot question the policy after the expiry of the time
period and if it does, then the burden rests on the insurer to
establish materiality of the fact suppressed and the knowledge
of the insured about such suppression, so that the repudiation
of the claim could be justified by the insurer - In the present
case, the onus was on the insurer to show that the insured had
fraudulently given false information and the said information was
related to a material fact - The respondent insurance company
has produced no documentary evidence whatsoever before
the District Forum to prove its allegation that the insured had
taken multiple insurance policies from different companies and
had suppressed the same - Before the State Commission, the
respondent had provided a tabulation of the 15 different policies
taken by the insured-deceased - However, the said tabulation
was not supported by any other documentary evidence, like
the policy documents of these other policies, or pleadings in
courts, or such other corroborative evidence - The NCDRC had
accepted the averment of the respondents, without demanding
corroborative documentary evidence in support of the said fact
- The approach adopted by the NCDRC was not correct - The
cardinal principle of burden of proof in the law of evidence
is that "he who asserts must prove", which means that if the
respondents herein had asserted that the insured had already
taken fifteen more policies, then it was incumbent on them
to prove this fact by leading necessary evidence - The onus
cannot be shifted on the appellant to deal with issues that have
merely been alleged by the respondents, without producing any
evidence to support that allegation - The respondents have
merely provided a tabulation of information about the other
policies held by the insured-deceased - The table produced is
incomplete and contradictory as far as the date of birth of the
insured is concerned - Therefore, the NCDRC could not have
relied upon the said tabulation and put the onus on the appellant
to deal with that issue in her complaint and thereby considered
the said averment as proved or proceeded to prove the stance
of the op

## Text

_Characters 0–39,600 of 74,884. This is a partial read: ask again with offset=39600 for what follows._

* Author
[2024] 4 S.C.R. 724 : 2024 INSC 296
Mahakali Sujatha
v.
The Branch Manager, Future Generali India Life Insurance
Company Limited & Another
(Civil Appeal No. 3821 of 2024)
10 April 2024
[B.V. Nagarathna* and Augustine George Masih, JJ.]
Issue for Consideration
The present civil appeal has been filed by the complainant, who
is the daughter of the insured-deceased, who is also the nominee
under the subject life insurance policies of her late father. The
controversy in the present case pertains to the factum of repudiation
of the insurance claim of the complainant on the ground of the
material suppression of information regarding the previous policies
allegedly held by the insured-deceased, while taking the life
insurance policy from the respondent insurance company. Whether,
the respondent insurance company herein was correct in repudiating
the claim of the appellant on the ground of suppression of material
information pertaining to the existing policies with other insurers.
Headnotes
Insurance Act, 1938 - s.45, before the 2014 amendment
- Evidence Act, 1872 - Burden of proof - Onus of proof -
Repudiation of insurance claim of the complainant on the
ground of the material suppression of information regarding
the previous policies - Consumer complaint filed - The
District Commission allowed the complaint on the ground
that no documentary evidence was available to show that
deceased-insured had taken various insurance policies from
other companies - The State Commission upheld the order of
the District Commission - However, the NCDRC observed that
the respondent insurance company had given details of the
aforesaid policies by way of affidavit and the same was not
denied by the complainant in her affidavit - Therefore, NCDRC
concluded that deceased insured had withheld information
in respect of several insurance policies which he had taken
from other insurers - Correctness:
[2024] 4 S.C.R.
725
Mahakali Sujatha v. The Branch Manager, Future Generali
India Life Insurance Company Limited & another
Held: As per the language and interpretation of Section 45, the
insurer cannot question the policy after the expiry of the time
period and if it does, then the burden rests on the insurer to
establish materiality of the fact suppressed and the knowledge
of the insured about such suppression, so that the repudiation
of the claim could be justified by the insurer - In the present
case, the onus was on the insurer to show that the insured had
fraudulently given false information and the said information was
related to a material fact - The respondent insurance company
has produced no documentary evidence whatsoever before
the District Forum to prove its allegation that the insured had
taken multiple insurance policies from different companies and
had suppressed the same - Before the State Commission, the
respondent had provided a tabulation of the 15 different policies
taken by the insured-deceased - However, the said tabulation
was not supported by any other documentary evidence, like
the policy documents of these other policies, or pleadings in
courts, or such other corroborative evidence - The NCDRC had
accepted the averment of the respondents, without demanding
corroborative documentary evidence in support of the said fact
- The approach adopted by the NCDRC was not correct - The
cardinal principle of burden of proof in the law of evidence
is that "he who asserts must prove", which means that if the
respondents herein had asserted that the insured had already
taken fifteen more policies, then it was incumbent on them
to prove this fact by leading necessary evidence - The onus
cannot be shifted on the appellant to deal with issues that have
merely been alleged by the respondents, without producing any
evidence to support that allegation - The respondents have
merely provided a tabulation of information about the other
policies held by the insured-deceased - The table produced is
incomplete and contradictory as far as the date of birth of the
insured is concerned - Therefore, the NCDRC could not have
relied upon the said tabulation and put the onus on the appellant
to deal with that issue in her complaint and thereby considered
the said averment as proved or proceeded to prove the stance
of the opposite party - The repudiation of the policy was without
any basis or justification - Thus, the impugned order passed by
the NCDRC set aside. [Paras 16,17, 48, 49, 50]
Principle/Doctrine - uberrimae fidei - Insurance - Reciprocal
duties:
726
[2024] 4 S.C.R.
Digital Supreme Court Reports
Held: Just as the insured has a duty to disclose all material
facts, the insurer must also inform the insured about the terms
and conditions of the policy that is going to be issued to him and
must strictly conform to the statements in the proposal form or
prospectus, or those made through his agents - Thus, the principle
of utmost good faith imposes meaningful reciprocal duties owed
by the insured to the insurer and vice versa. [Para 22]
Insurance Regulatory and Development Authority (Protection
of Policyholders' Interests) Regulations, 2002 - A fact, whether
material or not - Propositions:
Held: Whether a fact is material will depend on the circumstances,
as proved by evidence, of the particular case - It is for the court
to rule as a matter of law, whether, a particular fact is capable of
being material and to give directions as to the test to be applied
- Rules of universal application are not therefore to be expected,
but the propositions as set out are well established: (a) Any fact
is material which leads to the inference, in the circumstances
of the particular case, that the subject matter of insurance is
not an ordinary risk, but is exceptionally liable to be affected by
the peril insured against - This is referred to as the "physical
hazard"; (b) Any fact is material which leads to the inference
that the particular proposer is a person, or one of a class of
persons, whose proposal for insurance ought to be subjected
at all or accepted at a normal rate - This is usually referred to
as the "moral hazard"; (c) The materiality of a particular fact is
determined by the circumstances of each case and is a question
of fact. [Para 26]
Evidence Act, 1872 - Burden of proof and onus of proof -
Consumer Fora:
Held: Though the proceedings before the Consumer Fora are
in the nature of a summary proceeding - Yet the elementary
principles of burden of proof and onus of proof would apply -
Section 101 of the Evidence Act states that whoever desires any
Court to give judgment as to any legal right or liability dependent
on the existence of facts which he asserts, must prove that those
facts exist - When a person is bound to prove the existence of
any fact, it is said that the burden of proof lies on that person
- Section 102 of the Evidence Act provides a test regarding on
whom the burden of proof would lie, namely, that the burden lies
[2024] 4 S.C.R.
727
Mahakali Sujatha v. The Branch Manager, Future Generali
India Life Insurance Company Limited & another
on the person who would fail if no evidence were given on either
side - There are however exceptions to the general rule as to
the burden of proof as enunciated in Sections 101 and 102 of the
Evidence Act, 1872, i.e., in the context of the burden of adducing
evidence: (i) when a rebuttable presumption of law exists in favour
of a party, the onus is on the other side to rebut it; (ii) when any
fact is especially within the knowledge of any person, the burden
of proving it is on him (Section 106) - In some cases, the burden
of proof is cast by statute on particular parties (Sections 103 and
105). [Paras 41, 42]
Evidence Act, 1872 - Burden of proof and onus of proof -
Distinction between:
Held: There is an essential distinction between burden of proof
and onus of proof; burden of proof lies upon a person who
has to prove the fact and which never shifts but onus of proof
shifts - Such a shifting of onus is a continuous process in the
evaluation of evidence - For instance, in a suit for possession
based on the title, once the plaintiff has been able to create a high
degree of probability so as to shift the onus on the defendant,
it is for the defendant to discharge his onus and in the absence
thereof, the burden of proof lying on the plaintiff shall be held to
have been discharged so as to amount to proof of the plaintiff's
title. [Para 43]
Evidence - Burden of proof - Insurance contracts - Nondisclosure of a material fact:
Held: In the context of insurance contracts, the burden is on the
insurer to prove the allegation of non-disclosure of a material fact
and that the non-disclosure was fraudulent - Thus, the burden of
proving the fact, which excludes the liability of the insurer to pay
compensation, lies on the insurer alone and no one else. [Para 45]
Word and Phrases - Contra proferentem rule:
Held: In United India Insurance Co. Ltd. v. Orient Treasures (P)
Ltd., (2016) 3 SCC 49, the Supreme Court quoted Halsbury's
Laws of England (5th Edn. Vol. 60, Para 105) on the contra
proferentem rule - Where there is ambiguity in the policy the
court will apply the contra proferentem rule - Where a policy is
produced by the insurers, it is their business to see that precision
and clarity are attained and, if they fail to do so, the ambiguity
728
[2024] 4 S.C.R.
Digital Supreme Court Reports
will be resolved by adopting the construction favourable to the
insured. [Para 40]
Case Law Cited
Manmohan Nanda v. United India Insurance Co. Ltd.
[2021] 11 SCR 1138 : (2022) 4 SCC 582 - relied on.
Reliance Life Insurance Co Ltd v. Rekhaben Nareshbhai
Rathod [2019] 6 SCR 733 : (2019) 6 SCC 175; Mithoolal
Nayak v. Life Insurance Corporation of India [1962]
Supp. 2 SCR 571 : AIR 1962 SC 814;Venkatachala
Gounder v. Arulmigu Viswesaraswami and VP Temple
[2003] Supp. 4 SCR 450 : (2003) 8 SCC 752; Shobika
Attire v. New India Assurance Co. Ltd. [2006] Supp. 6
SCR 266 : (2006) 8 SCC 35 - referred to.
Sahara India Life Insurance Co. Ltd. v. Rayani
Ramanjaneyulu 2014 SCC OnLine NCDRC 525 :
(2014) 3 CPJ 582 - referred to.
Carter v. Boehm (1766) 3 Burr 1905; Reynolds v.
Phoenix Assurance Co. Ltd. (1978) 2 Lloyd's Rep.
440 - referred to.
Books and Periodicals cited
MacGillivray on Insurance Law, (12th Edn., Sweet &
Maxwell, London, 2012 at p. 477); Halsbury's Laws of
England, Fourth Edition, Para 375, Vol. 25 : Insurance;
Sarkar, Law of Evidence, 20th Edition, Volume-2,
LexisNexis - referred to.
List of Acts
Insurance Act, 1938; Evidence Act, 1872; Insurance Regulatory
and Development Authority (Protection of Policyholders' Interests)
Regulations, 2002.
List of Keywords
Insurance; Evidence; Burden of proof; Onus of proof; Material
suppression of information; Previous insurance policies; Repudiation
of insurance claim; Corroborative evidence; Insurance policies;
Insurance contracts; Uberrimae fidei; Reciprocal duties; Material
fact; Consumer Fora; Contra proferentem rule; Proposal form.
[2024] 4 S.C.R.
729
Mahakali Sujatha v. The Branch Manager, Future Generali
India Life Insurance Company Limited & another
Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3821 of 2024
From the Judgment and Order dated 22.07.2019 of the National
Consumers Disputes Redressal Commission, New Delhi in RP No.
1268 of 2019
Appearances for Parties
Venkateswara Rao Anumolu, Sunny Kumar, Advs. for the Appellant.
Praveen Mahajan, Ms. Adviteeya, Nishant Sharma, Rakesh K.
Sharma, Advs. for the Respondents.
Judgment / Order of the Supreme Court
Judgment
B.V. Nagarathna, J.
1.
The present civil appeal has been filed by the complainant, who is
the daughter of the insured-deceased Sri Siriveri Venkateswarlu,
who is also the nominee under the subject life insurance policies of
her late father. The appellant is assailing the order dated 22.07.2019
passed by the National Consumer Disputes Redressal Commission,
New Delhi (hereinafter referred to as "NCDRC") in Revision Petition
No.1268 of 2019.
2.
By the impugned order, the NCDRC has allowed the revision petition
filed by the respondent-opposite party, thereby setting aside the orders
passed by the District Consumer Forum and the State Consumer
Forum and sustaining the repudiation of the complainant's claim by
the opposite party insurer-company.
3.
The brief facts giving rise to the present appeal are as follows:
3.1. For the sake of convenience, the parties shall be referred to
as complainant and opposite party.
3.2. Late Sri Siriveri Venkateswarlu, father of the complainant,
obtained two insurance policies from the opposite party - one
on 05.05.2009, for a sum of Rs. 4,50,000/-, and the other on
22.03.2010, for a sum of Rs. 4,80,000/-. Under the said two
policies, in the event of death by accident, twice the sum assured
was payable by the insurer. In the application form of the policy,
730
[2024] 4 S.C.R.
Digital Supreme Court Reports
the insured had been asked about the details of his existing life
insurance policies with any other insurer, and the insured had
answered the same in the negative. The complainant, being the
daughter of the policy holder Late Sri Siriveri Venkateswarlu,
was nominated to receive the proceeds under both the policies.
3.3. On 28.02.2011, the policy holder unfortunately lost his life in
a train accident, leaving behind the complainant alone as his
legal heir as well as nominee for death benefits. Immediately
thereafter, the complainant approached the opposite party
and informed about the death of her father and they advised
the complainant to submit a claim form along with necessary
documents which she did. However, by letter dated 31.12.2011,
the complainant's claims were repudiated by the opposite party.
3.4. The claim of the complainant was repudiated on the ground that
the policy holder had suppressed material facts in his application
form with respect to existing life insurance policies from other
insurers. Upon investigation by the opposite party, it was found
that the insured had substantial life insurance cover with other
insurance companies, even prior to the date of his application.
After an evaluation of all facts and documents submitted and
circumstances of the case, the opposite party came to the
conclusion that the replies to the questions in the application
form were incorrect, in as much as the opposite party held
documentary proof in support of the same. They observed that
had such information been disclosed, their underwriting decision
would have materially changed. It was further remarked that
the contract of insurance is based on the principle of utmost
good faith and the company relies on the information provided
by the life insured in the application for insurance. Thus, the
claim was held to be not valid and the liability to pay under the
policy was repudiated by the insurer.
3.5. Being aggrieved by the repudiation of the claim, the complainant
approached the concerned District Forum by way of a consumer
complaint, bearing CC No.8 of 2014. The District Commission at
Vijaywada, Krishna District, by order dated 27.08.2014, allowed
the consumer complaint, on the ground that no documentary
evidence was available to show that the deceased-insured had
taken various insurance policies from various other companies.
[2024] 4 S.C.R.
731
Mahakali Sujatha v. The Branch Manager, Future Generali
India Life Insurance Company Limited & another
The Commission found deficiency of services on the part of the
opposite party in repudiating the claim filed by the complainant
and therefore directed the opposite parties to pay the insurance
amount of Rs.7,50,000/- + Rs.9,60,000/- under two policies
jointly and severally with interest at the rate of 6% per annum
from 31.12.2011, i.e., the date of repudiation of the claim of the
complainant, till realisation, along with costs of Rs. 2000/- to
the complainant.
3.6. Being aggrieved, the insured/opposite party filed an appeal
bearing FA No.94 of 2015 before the concerned State Consumer
Forum at Vijaywada. The State Commission observed that there
was absolutely no material produced by the opposite party
before the Forum to prove the allegation of suppression. The
documents attempted to be produced were neither original nor
certified nor authenticated. However, even assuming that there
were existing policies, still the non-disclosure of pre-existing
policies does not amount to suppression of material facts.
Reliance for the same was placed on some previous judgments
of the NCDRC. Hence, the claim could not have been said
to be vitiated by fraud. The opposite parties were not right in
repudiating the claim. The State Commission therefore, by its
order dated 11.12.2018, dismissed the appeal of the opposite
party and upheld the order of the District Commission.
3.7. The opposite party thereafter approached the NCDRC through
Revision Petition No.1268 of 2019, challenging the order passed
by the State Commission in FA No.94 of 2015. The NCDRC,
vide impugned judgment, agreed with the opposite party that
the deceased-insured had withheld the information in respect
of several insurance policies which he had taken from other
insurers. The NCDRC observed that on the one hand, the
opposite party had duly stated the details of the other policies
in their affidavit, but on the other, the complainant, even in her
affidavit filed by way of evidence, did not claim that the policies
mentioned in the written version of the opposite party had not
been taken by the deceased. Reliance was further placed by
the NCDRC on the judgment of this Court in Reliance Life
Insurance Co Ltd vs. Rekhaben Nareshbhai Rathod, (2019)
6 SCC 175, ("Rekhaben") wherein the repudiation of the claim
732
[2024] 4 S.C.R.
Digital Supreme Court Reports
due to suppression of the fact of other existing insurance policies
was upheld by the Supreme Court. The NCDRC held that the
Supreme Court's judgment would prevail over the judgments of
the NCDRC relied upon by the State Consumer forum and thus,
the revision petition was allowed and the consumer complaint
was dismissed.
4.
Hence, the complainant has preferred the present Special Leave
Petition against the impugned judgment of the NCDRC.
5.
We have heard learned counsel for the Appellant, Sri Venkateswara
Rao Anumolu and learned counsel for the Respondent, Sri Praveen
Mahajan for the insurer. The controversy in the present case pertains
to the factum of repudiation of the insurance claim of the Complainant
on the ground of the material suppression of information regarding
the previous policies allegedly held by the insured-deceased, while
taking the life insurance policy from the Opposite Party.
6.
Learned counsel for the appellant submitted that the insurance
company has not proved that appellant's father had any other
insurance policy while taking the insurance policy from the opposite
party. Thus, there has been no material suppression of fact in the
application form with respect to holding any previous policy by the
insured-deceased or his family members.
7.
It was further submitted by the appellant that the NCDRC was
incorrect in upholding the repudiation of claim in the absence of an
iota of documentary evidence on record to support the contention
that the insured-deceased had suppressed any fact under Clause
6 of the Proposal Form about the previous policies issued by other
insurers. The respondent has merely alleged the fact of multiple
insurance policies of the insured-deceased through their affidavit of
evidence but had not discharged their burden of proof by leading
any documentary evidence to support their allegation.
8.
Per Contra, learned counsel for the respondent has supported
the judgment of the NCDRC and has further contended that the
insured-deceased had taken fifteen other insurance policies worth
Rs.71,27,702/- prior to the issuance of the subject policies by them.
These policies were not disclosed in the proposal forms and had the
respondent been aware about these other insurance policies with
other insurance companies and the existing risk cover at the time
[2024] 4 S.C.R.
733
Mahakali Sujatha v. The Branch Manager, Future Generali
India Life Insurance Company Limited & another
of assessment of risk under the subject policies, they would have
certainly not issued the subject policies to the insured-deceased.
Thus, the insured-deceased has suppressed the material fact and
the claim has been rightly repudiated on this ground alone.
9.
Learned counsel for the respondent further submitted that the policy
of life insurance is based upon the principle of "uberrimae fidei", i.e.,
utmost good faith. When a specific fact 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 the
best of his knowledge. In the present case as well, the insureddeceased was under the obligation to make complete and honest
disclosure of all the facts and materials at the time of filling of the
proposal form. The failure to do so shows the mala fide intention
on the part of the insured-deceased and renders the policy invalid,
void ab-initio, inoperative and unenforceable.
10. Learned counsel for the respondent also relied upon the judgment
of this court in the case of Rekhaben, which is contended to be
similar in facts to the present case and where this Court allowed
the repudiation of the insurance claim on the ground of material
suppression of information about the previously taken insurance
policies.
11. Having heard the learned counsel for the respective parties, the point
that arises for consideration before this Court in the present Civil
Appeal, is, whether, the respondent herein was correct in repudiating
the claim of the appellant on the ground of suppression of material
information pertaining to the existing policies with other insurers.
12. In order to answer the aforesaid question, it would be useful to
recapitulate the relevant provisions of the law of insurance and
evidence, vis-à-vis burden of proof and the method of discharging
that burden of proof to prove an alleged fact, which is suppression
of a material fact while seeking an insurance policy from an insurer.
13. The repudiation of an insurance claim is largely governed by Section
45 of the Insurance Act, 1938. Section 45 is a special provision of
law, which bars the calling in question of an insurance policy beyond
expiry of the stipulated period, except in a few circumstances that
have to be proved by the insurer. The relevant part of the said
provision, as it stood at the material time, is reproduced as under:
734
[2024] 4 S.C.R.
Digital Supreme Court Reports
"45. Policy not be called in question on ground of misstatement 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 officer, or referee, or friend of the
insured, or in any other document leading to 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:
Provided that 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."
14. A three-judge bench of this court in Mithoolal Nayak vs. Life
Insurance Corporation of India, AIR 1962 SC 814, explained the
scope of the operating part of Section 45 as under:
"7....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
[2024] 4 S.C.R.
735
Mahakali Sujatha v. The Branch Manager, Future Generali
India Life Insurance Company Limited & another
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."
15. The scope of Section 45 was dealt with by this Court in the case of
Rekhaben as follows:
"14. Section 45 stipulates restrictions upon the insurer
calling into question a policy of life insurance after the
expiry of two years from the date on which it was effected.
After two years have elapsed the insurer cannot call it into
question on the ground that: (i) a statement made in the
proposal; or (ii) a statement made in any report of a medical
officer, referee or friend of the insured; or (iii) a statement
made in any other document leading to the issuance of the
policy was inaccurate or false, unless certain conditions are
fulfilled. Those conditions are that: (a) such a statement
was on a material matter; or (b) the statement suppressed
facts which were material to disclose and that (i) they were
fraudulently made by the policy holder; and (ii) the policyholder knew at the time of making it that the statements
were false or suppressed facts which were material to
disclose. The cumulative effect of Section 45 is to restrict
the right of the insurer to repudiate a policy of life insurance
after a period of two years of the date on which the policy
was effected. Beyond two years, the burden lies on the
insurer to establish the inaccuracy or falsity of a statement
on a material matter or the suppression of material facts.
Moreover, in addition to this requirement, the insurer has
to establish that this non-disclosure or, as the case may
be, the submission of inaccurate or false information was
fraudulently made and that the policy-holder while making
it knew of the falsity of the statement or of the suppression
of facts which were material to disclose."
(emphasis by us)
736
[2024] 4 S.C.R.
Digital Supreme Court Reports
16. Since the present case deals with a policy and its repudiation before
the 2014 amendment to Section 45 of the Insurance Act, the preamendment time period of two years would be applicable to the
case. As per the aforesaid language and interpretation of Section
45, the insurer cannot question the policy after the expiry of the
time period and if it does, then the burden rests on the insurer to
establish materiality of the fact suppressed and the knowledge of
the insured about such suppression, so that the repudiation of the
claim could be justified by the insurer.
17. In the present case, the onus was on the insurer to show that
the insured had fraudulently given false information and the said
information was related to a material fact. The second aspect of the
controversy would be dealt with first.
18. For a better appreciation of the controversy, it would be important
to analyse the maxim of uberrimae fidei that governs the insurance
contracts. It may also be observed that insurance contracts are
special contracts based on the general principles of full disclosure
inasmuch as a person seeking insurance is bound to disclose all
material facts relating to the risk involved. Law demands a higher
standard of good faith in matters of insurance contracts which is
expressed in the legal maxim uberrimae fidei. The plea of utmost good
faith has also been taken by the respondent, for contending that the
insured-deceased had a duty to disclose the details of the previous
policies, as the same was sought in the application form. However,
the insured failed in his duty to correctly answer the question about
his previous policies. The law relating to the maxim uberrimae fidei
was dealt with by this Court in the case of Manmohan Nanda vs.
United India Insurance Co. Ltd., (2022) 4 SCC 582, ("Manmohan
Nanda"). The same could be discussed at this stage with reference
to legal authorities as well as relevant provisions of law.
19. MacGillivray on Insurance Law, (12th Edn., Sweet & Maxwell,
London, 2012 at p. 477) has summarised the duty of an insured to
disclose as under:
"... the assured must disclose to the insurer all facts material
to an insurer's appraisal of the risk which are known or
deemed to be known by the assured but neither known nor
deemed to be known by the insurer. Breach of this duty
[2024] 4 S.C.R.
737
Mahakali Sujatha v. The Branch Manager, Future Generali
India Life Insurance Company Limited & another
by the assured entitles the insurer to avoid the contract of
insurance so long as he can show that the non-disclosure
induced the making of the contract on the relevant terms."
20. Lord Mansfield in Carter vs. Boehm, (1766) 3 Burr 1905 has
summarised the principles necessitating disclosure by the assured
in the following words:
"Insurance is a contract of speculation.
The special facts upon which the contingent chance is to
be computed, lie most commonly in the knowledge of the
assured only; the under-writer trusts to his representation,
and proceeds upon confidence that he does not keep back
any circumstance in his knowledge, to mislead the underwriter into a belief that the circumstance does not exist ...
The keeping back such circumstance is a fraud, and
therefore the policy is void. Although the suppression
should happen through mistake, without any fraudulent
intention; yet still the under-writer is deceived and the
policy is void; because the risk run is really different from
the risk understood and intended to be run, at the time
of the agreement.
The policy would be equally void against the under-writer
if he concealed; ...
Good faith forbids either party, by concealing what he
privately knows, to draw the other into a bargain from
his ignorance of the fact, and his believing the contrary."
The aforesaid principles would apply having regard to the nature of
policy under consideration, as what is necessary to be disclosed are
"material facts" which phrase is not definable as such, as the same
would depend upon the nature and extent of coverage of risk under a
particular type of policy. In simple terms, it could be understood that
any fact which has a bearing on the very foundation of the contract
of insurance and the risk to be covered under the policy would be
a "material fact".
21. Under the provisions of Insurance Regulatory and Development
Authority (Protection of Policyholders' Interests) Regulations, 2002
the explanation to Section 2 (d) defining "proposal form" throws
738
[2024] 4 S.C.R.
Digital Supreme Court Reports
light on what is the meaning and content of "material." For an easy
reference the definition of "proposal form" along with the explanation
under the aforesaid Regulations has been extracted as under:
"2. Definitions. In these regulations, unless the context
otherwise requiresx x x
(d) "Proposal Form" means a form to be filled in by
the proposer for insurance, for furnishing all material
information required by the insurer in respect of a risk, in
order to enable the insurer to decide whether to accept
or decline, to undertake the risk, and in the event of
acceptance of the risk, to determine the rates, terms and
conditions of a cover to be granted.
Explanation: "Material" for the purpose of these regulations
shall mean and include all important, essential and relevant
information in the context of underwriting the risk to be
covered by the insurer."
Thus, the Regulation also defines the word "material" to
mean and include all "important", "essential" and "relevant"
information in the context of guiding the insurer in deciding
whether to undertake the risk or not."
22. Just as the insured has a duty to disclose all material facts, the
insurer must also inform the insured about the terms and conditions
of the policy that is going to be issued to him and must strictly
conform to the statements in the proposal form or prospectus, or
those made through his agents. Thus, the principle of utmost good
faith imposes meaningful reciprocal duties owed by the insured to
the insurer and vice versa. This inherent duty of disclosure was a
common law duty of good faith originally founded in equity but has
later been statutorily recognised as noted above. It is also open to
the parties entering into a contract to extend the duty or restrict it
by the terms of the contract.
23. The duty of the insured to observe utmost good faith is enforced by
requiring him to respond to a proposal form which is so framed to seek
all relevant information to be incorporated in the policy and to make it
the basis of a contract. The contractual duty so imposed is that any
[2024] 4 S.C.R.
739
Mahakali Sujatha v. The Branch Manager, Future Generali
India Life Insurance Company Limited & another
suppression or falsity in the statements in the proposal form would
result in a breach of duty of good faith and would render the policy
voidable and consequently repudiate it at the instance of the insurer.
24. In relation to the duty of disclosure on the insured, any fact which
would influence the judgment of a prudent insurer and not a particular
insurer is a material fact. The test is, whether, the circumstances
in question would influence the prudent insurer and not whether it
might influence him vide Reynolds vs. Phoenix Assurance Co. Ltd.,
(1978) 2 Lloyd's Rep. 440. Hence, the test is to be of a prudent
insurer while issuing a policy of insurance.
25. The basic test hinges on whether the mind of a prudent insurer
would be affected, either in deciding whether to take the risk at all
or in fixing the premium, by knowledge of a particular fact if it had
been disclosed. Therefore, the fact must be one affecting the risk. If
it has no bearing on the risk it need not be disclosed and if it would
do no more than cause insurers to make inquiries delaying issue
of the insurance, it is not material if the result of the inquiries would
have no effect on a prudent insurer.
26. Whether a fact is material will depend on the circumstances, as
proved by evidence, of the particular case. It is for the court to rule
as a matter of law, whether, a particular fact is capable of being
material and to give directions as to the test to be applied. Rules
of universal application are not therefore to be expected, but the
propositions set out in the following paragraphs are well established:
(a) Any fact is material which leads to the inference, in
the circumstances of the particular case, that the
subject matter of insurance is not an ordinary risk,
but is exceptionally liable to be affected by the peril
insured against. This is referred to as the "physical
hazard".
(b) Any fact is material which leads to the inference that
the particular proposer is a person, or one of a class
of persons, whose proposal for insurance ought to be
subjected at all or accepted at a normal rate. This is
usually referred to as the "moral hazard".
(c)
The materiality of a particular fact is determined by the
circumstances of each case and is a question of fact.
740
[2024] 4 S.C.R.
Digital Supreme Court Reports
27. If a fact, although material, is one which the proposer did not and
could not in the particular circumstances have been expected to know,
or if its materiality would not have been apparent to a reasonable
man, his failure to disclose it is not a breach of his duty.
28. Full disclosure must be made of all relevant facts and matters that
have occurred up to the time at which there is a concluded contract.
It follows from this principle that the materiality of a particular fact
is determined by the circumstances existing at the time when it
ought to have been disclosed, and not by the events which may
subsequently transpire. The duty to make full disclosure continues to
apply throughout negotiations for the contract but it comes to an end
when the contract is concluded; therefore, material facts which come
to the proposer's knowledge subsequently need not be disclosed.
29. Thus, a proposer is under a duty to disclose to the insurer all material
facts as are within his knowledge. The proposer is presumed to know
all the facts and circumstances concerning the proposed insurance.
Whilst the proposer can only disclose what is known to him, the
proposer's duty of disclosure is not confined to his actual knowledge,
it also extends to those material facts which, in the ordinary course
of business, he ought to know. However, the assured is not under a
duty to disclose facts which he did not know and which he could not
reasonably be expected to know at the material time. The second
aspect of the duty of good faith arises in relation to representations
made during the course of negotiations, and for this purpose all
statements in relation to material facts made by the proposer during
the course of negotiations for the contract constitute representations
and must be made in good faith.
30. The basic rules to be observed in making a proposal for insurance
may be summarized as follows:
(a) A fair and reasonable construction must be put upon
the language of the question which is asked, and the
answer given will be similarly construed. This involves
close attention to the language used in either case,
as the question may be so framed that an unqualified
answer amounts to an assertion by the proposer that
he has knowledge of the facts and that the knowledge
is being imparted. However, provided these canons
are observed, accuracy in all matters of substance
[2024] 4 S.C.R.
741
Mahakali Sujatha v. The Branch Manager, Future Generali
India Life Insurance Company Limited & another
will suffice and misstatements or omissions in trifling
and insubstantial respects will be ignored.
(b) Carelessness is no excuse, unless the error is so
obvious that no one could be regarded as misled. If
the proposer puts 'no' when he means 'yes' it will not
avail him to say it was a slip of the pen; the answer
is plainly the reverse of the truth.
(c)
An answer which is literally accurate, so far as it
extends, will not suffice if it is misleading by reason
of what is not stated. It may be quite accurate for the
proposer to state that he has made a claim previously
on an insurance company, but the answer is untrue
if in fact he has made more than one.
(d) Where the space for an answer is left blank, leaving
the question un-answered, the reasonable inference
may be that there is nothing to enter as an answer. If
in fact there is something to enter as an answer, the
insurers are misled in that their reasonable inference
is belied.