# MITHOOLAL NAYAK v. LIFE INSURANCE CORPORATION OF INDIA

- **Citation:** [1962] Supp. 2 S.C.R. 571
- **Court:** Supreme Court of India
- **Decided:** 1960-02-16
- **Case number:** C.A. No. 224 of 1959
- **Bench:** S.K. DAs, K. SunnA RAO, Raghubar Dayal
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/mithoolal-nayak-v-life-insurance-corporation-of-india-2324
- **Pages:** 19

## Headnote

ln•urance-Life Policy-Obtained by deliberate mis-statement and fraudulent suppiusion-Re'JlUdiatio1t by Company
<rfter
l'JJO yean-Whether proper-Rtfund of money paid. as
premium-Insurance Act, 1938 ( 4 of 1938) s. 45-lndian
Contract Act, 1/172 (9 of 1872) ss. 64 and 65.
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 carr.e out of this proposal and it lapsed. In
1943, M consulted and was treated by one Dr. L
for
anatrnia orderna of the feet, diarrhoea and panting on
exertion.
In 1944, M made a second proposal fur 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 tl:e answer, "'No'.
He also did not
disclose any of his ailments. Aft'f 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 delibernte mis-statem<nt and fraudulent suppression of material facts.
Thereupon, the appellant filed
a suit
to reco\·er the amount of the policy contending that s. 45
Insurance Act, barred the Company from calling in question
the policy after two ye'!rs on the ground that any statement made in the proposal was inaccurate or false.
Held, that the policy-holder was guilty of fr~udulent
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 Ian·
guage of s.45 the two years could not be count<d 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
Jf16S
Jat1110ry JS.
l96Z
MilAH/"1 Jicyal;
•.
Li/t 1Mt1'anct
Corpor.tion of lnclia
572 SUPREME:;COURT REPORTS [1962] BUPP.
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 WIU material to disclose; (b) the supprcuion
was fraudulently made by the policy-holder, and (c} the
policy-holdor m,ust 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 wa• sull'ering from serious ailments.
He
must have known that it was material to disclose this but
made a false statement that he had not been tr~ated by any
doctor for any serious ailment. There was deliberate supprc8'ion fraudulmtly made. by M.
Even though the Company
had got M examinG!I by four doctors before issuing the policy,
it was nlM estoppedirom questioning the policy.
It had no
means oflmowing that M had been treated by Dr. L for
srrious ailments.
H•ltl, further, that the appellant was not entitled even
to a refund of the money paid as premium as one of the term•
of the policy was that all monies paid belonged to the
Company if the policy was vitiated by fraudulent suppresalon
of mat~rial facb. To such a contract neither s. 65 nor s. 6-l
of the"Indlan Contract had any application.

## Text

2 8.C.R.
SUPREME COURT REPORTS
571
MITHOOLAL NAYAK
v.
LIFE INSURANCE CORPORATION OF INDIA
(S.K. DAs, K. SunnA RAO and RAGHUBAR DAYAL JJ.)
ln•urance-Life Policy-Obtained by deliberate mis-statement and fraudulent suppiusion-Re'JlUdiatio1t by Company
<rfter
l'JJO yean-Whether proper-Rtfund of money paid. as
premium-Insurance Act, 1938 ( 4 of 1938) s. 45-lndian
Contract Act, 1/172 (9 of 1872) ss. 64 and 65.
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 carr.e out of this proposal and it lapsed. In
1943, M consulted and was treated by one Dr. L
for
anatrnia orderna of the feet, diarrhoea and panting on
exertion.
In 1944, M made a second proposal fur 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 tl:e answer, "'No'.
He also did not
disclose any of his ailments. Aft'f 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 delibernte mis-statem<nt and fraudulent suppression of material facts.
Thereupon, the appellant filed
a suit
to reco\·er the amount of the policy contending that s. 45
Insurance Act, barred the Company from calling in question
the policy after two ye'!rs on the ground that any statement made in the proposal was inaccurate or false.
Held, that the policy-holder was guilty of fr~udulent
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 Ian·
guage of s.45 the two years could not be count<d 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
Jf16S
Jat1110ry JS.
l96Z
MilAH/"1 Jicyal;
•.
Li/t 1Mt1'anct
Corpor.tion of lnclia
572 SUPREME:;COURT REPORTS [1962] BUPP.
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 WIU material to disclose; (b) the supprcuion
was fraudulently made by the policy-holder, and (c} the
policy-holdor m,ust 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 wa• sull'ering from serious ailments.
He
must have known that it was material to disclose this but
made a false statement that he had not been tr~ated by any
doctor for any serious ailment. There was deliberate supprc8'ion fraudulmtly made. by M.
Even though the Company
had got M examinG!I by four doctors before issuing the policy,
it was nlM estoppedirom questioning the policy.
It had no
means oflmowing that M had been treated by Dr. L for
srrious ailments.
H•ltl, further, that the appellant was not entitled even
to a refund of the money paid as premium as one of the term•
of the policy was that all monies paid belonged to the
Company if the policy was vitiated by fraudulent suppresalon
of mat~rial facb. To such a contract neither s. 65 nor s. 6-l
of the"Indlan 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. V~natha Saatri-, l!J. N. Andley, Ramuhwar
Nath and P.L. Vohra, for the appellant.
S. T. Desai, R. GanapatAy Iyer and K. L. Hathi,
for the respondent.
1962. January 15-The Judgment of the
Olurt was deli v.ered by
o., 1,
S. K. DAS, J.-This is an appeal on a oertifioate granted by the High Court of Madhya Pradesh
under Art. 133 (I) (a) of the Constitution, The appellant ill Mithoolal Nayak, who took an &88ignment on
Ootober 18, HM5 of a life imuranoe policy on the
life of one Mahajan Deolal for a sum of Re. 25,000/-
in
ciroumstanooe
which we
shall
presently
state. Mahajan Deolal died on November 12, 1940
2S.C.R.
SUPREME COURT REPORTS
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. companv by a letter dated
October 10, 1947, which in substance stated that
the insured Mahajan Deolal had been guilty of
deliberate mis-statements 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 sitid
Uorporation was substituted in plaP,e of the original
respondent. For brevity and convenience we shall
ignore the distinction between the ori~inal 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 Judge of Jabalpur by his judgment
dated May 7, 1919. The respondent company then
preferred an appeal to the Hi!!h 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 dismis8ed with costs. It is from
1962
Jlithoolat NaJalc
"
Lif~ l11surance
CorporaJion of l 11dic
Das J
1961
JlitA .. W N9•
y,
Lif1 1""""""
eo.,.ro1w. •11 "'"1
DasJ.
574 SUPREME OOURT REPORTS [1962] SUPP.
that appellate judgment and decree that the prosent
appeal has been brought to this Court.
We now proOP.ed to state some of the relPvant
facts relating to tho appeal and the contentions
urged on behalf of the appellant. Mahajan Deolal
was a
reBident of village
Singhpur,
Tehsil
Narsinghpur. It appears 'hat he was a small land·
holder and poBBessed several acres of land. Sometime in December, 1942, Mahajan Deolal submitted
a propoeal through one Rahatullah Khan, an agent
of the respondent company at Narsin!!'.hpur, for the
insurance of his life with tho respondent company
for a sum of Hs. 10,000f ·only. Mahajan Deolal's
age at that time was about 45 as stated by him. In
the
propo~al form which was submitted to the
respondent company, Mahajan Deolal mentioned the
name of one Motilal ~ayak, by profc88ion 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 th<• appellant,
the evidenee in the reC'ord showing that the two
brothers lived together in the same house. Wht-n
the proposal for msurance of his life Wiil! made by
Mal1ajan Deolal in December 1!142, he was examined
hy a doctor named Dr. n. D. Desai.
This doctor
submitted two reports about Mahajan Deolal; one
report, it apy.ears, was submitted with the proposal
form through the agent of the reapondent company;
anuther report was sent in a confidential cover
along with a letter from tho doctor.
Jn 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 instan<"e 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 rE'port Dr. Desai said that Mahajan Deolal
2 S.C.R.
SUPREME COURT REPORTS
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's iife was an uninsurable life. It
appears that nothing came out of the proposal made
by Mahajan Dcolal for the insurance of his life in
December, Hl42.
The evidence of the Inspector of
the respondent company shows that on receipt of
Dr. Desai's repcn'ts,
the respondent company
directed that Mahajan Deolal shou Id bP further
examined by the Civil Surgeon, Hoshangabad and
District l\Iedical 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
re:,pu11dcnt company. Then, on July !ti, HJ44, a
second proposal was made through the same agent
of the respondent company for the. insurance of the
lifo of ilfahajan 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 a.gent, Raha.tullah
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
Dcolal 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 tht> life of
Mahajan Deolal was pending with the re11pondent
company. Now, in the proposal form (Ex. D-ll)
there was a question (question no. 13) to the following effect :
19112
Mithoolal Nayak
v,
Life lnsuranc1
Corporation of India
Das J.
1162
.v;11Nolal Nay"
Y.
LiJ• 1 ruiua11ee
c .. ,,,.,;.,. of llllii•
Das J,
576 St"PREME·COURT REPORTS [1962) SUPP.
"Have you within the past five yeal'll
consulted an:v medical man for any ailment,
not neC<'ssarily confining you to your house7
If so, givn details and state names and
dddre.eeea of medical man consulted."
The &nswor given to the question was-"No".
This answer, 'MJCording to the case of the resp on·
dent, w:i.e false and deliberately false, because,
according to the evidence of one Dr. P.N Lakshma·
nan, 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. Wo shall advert
in greater det,ail to the evidence of Dr. Laksbmanan
at a later stage. In his personal statement acoompanying the second prop088.I
Mahajan
Deolal
answered in the negative question l 2(b), the queation
boing as to when he was last under medical treat.
ment and for what ailment and how long.
In the
samo personal st11.tement with regard to questions,
for example, question nos.
5(a); 5(b) eto., as to
whei.ber he snffored from shortness of breath,
anaemia, asthma eto., Mahajan Deolal gave negative
answel'll. The contention on behalf of the respon·
dent oompany was that these answers in the
personal statement were alao deliberately false and
constituted a fraudulent supprei;eiort of material
particulars relating to the health of the insured.
With regard to' the second proposal and the pel'llonal
statem~nt accompanying it, Dr. Motilal Nayak,
brother of the appellant, gave a friend's report, in
which he ~aid that Mahajan Deolal's health lvas
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 trf'atmcnt at
Jabalpur in September.October,· 1943. On reocipt
•
2. S.C.R. SUPREME COURT REPORTS
5'77
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. Ka,Padia reported that Mahajan Deolal was a
he~lthy man and looked about 52 to 54 years old.
He recommended that Mahajan Di;olal might be
given a policy of fourteen years. In his report Dr.
Kapadia noted that Mahajan Deolal had stated that
he had suffered from pneumonia 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 wors9 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 l 945 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 cm
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
IHI
M ith,./al N 9alo
••
Life I nSVfdfUI
CorJ>ottJliota of IUi11
Da1J.
•
lHI
llu"-"'N•Jd
••
Lift lruw-•
c .. ;.rolilA o/ IMW.
o.,J.
578 SUPREME COURT REPORTS [1962) SUPP.
eff6Ct.
The respondent company also made an
enquiry from the appeflant 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 waa a. friend and he (the
appellant) had purchased the policy for a sum of
Re. 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 Deola.l
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
some time in July, 1946. We have already stated
that Mahajan Deola.I died in November, 1946. The
certificate of Dr. Cla.rke, who was the medical
attendant at the time when Mahajan Deolal died,
showed that the primacy cause of death of Mahajan
Deolal . was malaria. followed by Bt>vere 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 t.lle tiine of his <lea.th.
One of such medical practitioners mentioned in the
certificate was Dr. Lakshmanan. On r6Ceipt of this
certificate the respondent company got into touch
with Dr. Lakshmana.n and discovered from him that
Mahajan Deolal had been treated in September·
October, 1943, by Dr. Lakahmana.n for ailments
which, according to the doctor, were of a 1erioua
nature.
Several iuul!ll were tried between the partiea
in the trial court. But the four questions which
•
2 S.C.R.
SUPREME COURT REPORTS
579
were argued iu the High Court and on which the
fate of the appeal depends were these :-
( l) Whether the policy was vitiated
by fraudulent suppression of material
facts by Mahajan Deolal ?
(2) Whether the preeent appellant
had no insurable interest in the life of the
insured, and if so, can he sue on the
policy ?
(3) Whether the Fespondent 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
cont.eating 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 l2(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 fonnd that the ailments for
which Dr. Lakshmanan treated Mahajan Deolal in
September-October, 19.43, were of a casual or trivial
nature and the failure of the policy-hG!der to disclose
those ailments did not attract the second part of
11111
Mil/too/al Nlf)d
v.
Life 1 nJ:uranu
Cor~tia 4f India
DasJ,
,,,,
M~N~
••
LVw , __
c.,_,i. •Ir..-
D .. 1.
580 SUPREME OOURT REPORTS (1962] SUPP.
s. 45 of the Insnr&nce 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 oomp'lny 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
thiA 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( l )(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 t.han Ra. 20,000f-.
We have, therefore,
allowed learned counsel for the parties to take us
through the evidence in the case.
On a consideration of that evidcnoe we have come to the conclusion that the finding of the .High Court is the
oorreot finding.
We shall presently consider the evidlliloe, but
it may be advantageous to read first s. 45 of the
Insnranoe Act, 1938, as it stood at the relevant
time. The eeution, so far as it is relevant for our
purpoee, is in these terms :
"No policy of life insurance effected
before the commencement of this Act shall
after the expiry of two yea.rs from the date of
commencement of this Act and no policy of
life insuranoe effected after the coming iu to
force of this Act shall, after the expiry of
two years from the date on which it was
effected, be oalled in question by an insurer
on the ground that a statement m9.de in the
proposal for insurance or in any report of a
medical officer, or referee, or friend of the
inlllred, or in any other dooument le&dilli to
•
2 S.C.R.
SUPREME COURT REPORTS
581
the issue of the policy, was inaccurate or
false, unless the insurer shows that such state·
ment was on a material matter or suppressed
facts which it was material to disclose and
th11t 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 wu
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 excep·
tion. 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 dicclose
and t.hat 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 tci 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 thats. 45
of the Insurance Act applies in the present caae in
IHB
M itA.olal N .,.,,
••
Lifel.,.,...,
Corp.ratioo of 1.-.
Das J,
MW1Do/ol }.'nyak
...
M lttJttronc.
l:MJHwalion "' 1"4 ;,/
DaaJ.
582 SUPREME COURT REPORTS [1962) SUPP.
view of the clear terms in whkh the s11ction is
worded, though learned counsrl for the resporident
company S'•ught, at one stage>, to arf!ue that the
revi\'al of the poli0y somP time in July, 1946,
constituted in law a new contract between the
parties and if two yrars were to be counted from
July, 1916, then the period of two years had not
expired from the date of tl1c revival. 'Whether the
revival of a lapsed policy constitutes a new contract
or not for other purposeB, it is clear from the wording of the operative part of s. 45 thnt the period of
two years for the purpooe of the sfction has to be
calculated from the date on ~vhirh the policy was
origirndl.v cffec~ed ; in the present case this can
only mean the date on whieh the policy (Ex. P-2)
was effected.
From that date a period of two
years had clearly expired when the respondent
company rtpudiated the claim. As we think that
s. -t.'i of the Insurance Act. applies in the present
case, we aro relieved <;f the tl\8k of examining the
lagal position thll.t
W<l\llcl follow as a. result of
ina.ccnrn te
c~atl'mt'nts mu<lt' by the insured in the
proposal form or the !)(•rsonal statement etc. in a
case where b. 4ii docs not apply and where the
aver111e11ts made in the proposal form and in the
personal statement art' made the basis of the
contrnct.
The three conditions for the application of
the second pa.rt of s. 45 arf'-
(a) the statemPnt must he on a.
material
matter or must supprcBB facts which it was material
to disclose ;
(b) the suppreBBion
must be frau<iulently
made by the poliry-holder ; and
(c} the policy-holder must have known at the
time of 111aking the stakment that it waa false or
that it suppreBSed facts which it was material to
disclose.
The crucial question before us is whether
these three conditione were fulfilled in the present
2 S.C.R.
SUPREME COURT REPORTS
583
case. We think that they were. We are llnable to
agree with the learned trial Judge that the ailments
for which Mahajan Deolal was trnaterl by Dr.
Lakshmanan in September-October, 1943, were
trivia I 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 seriouR ailments only a few months before
that rlate. This brings us to a consideration of the
evidenee of Dr. Lakshmanan. That evidence is clear
and unequivocal. Dr. Lakshmanan says that Dr.
Motilal Nayak brought the patient to him atJabalpur.
We have already referred to the fact that Dr.
Motilal Na.yak 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. Moti!al 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, anrl that Mahajan Deolal was
suffering from anaemia, oedema of the feet,
diarrhoea and panting on exertion. The doctor
ask<'d for an examination of the blood. The
pathological report supported the diagnoeis that
Mahajan Deolal was suffering from secondary
anaemia meaning thereby that anaemia was due
to lack of iron and malnutrition. Dr. Laksbmanan
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 Septomb<'r 9, 1!14:~, and
then a«ain on September J6, W-t::.
On October 6,
1943 :M:,.hajan Deolul Lilll3ei f :.Vent to Dr. Laksh·
manan. On that date Dr. Lakshmanan found that
IUU
Millu>olal N~
v.
Li/elnsurCorpo<alion of In4i.
Da.r J.
J~Z
.11.ilWWN~
v.
Lift '"""•11t1
c..p...,;,. of /Nlia
/las 1.
584
SUPREME COURT REPORTS [1962) SUPP.
anaemia bad very greatly diea ppeared. In croesexamina.tion Dr.
Lak~hm1man admitted that the
anaemia, dilatation of heart and cardiac asthma
from which Mahajan D~ola.l was suffering constitued a pa.ssing phase which might disa.ppcar by treatment. He furthllr 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. Lakshma.nan and we arc 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 Daolal's son gave ovidence in the case
and he sa.id in
hiR ovidence that though Dr.
Laksb.manan prescribed some medicine, his father
did not tuko it. He further said that his father
was a. strict vegetarian. Tl.is evidence was given
by thll son with regard to what the doctor had 11&id
that he prescribed fresh liver juice made a.t home
according to his directions three times a day.
He
also prescribed iroa sulphate in tnblet from with
plenty of water. Tho son furth1>r said that during his stay at Jabalpur his fathn frlt · weakneBB,
though he used to move about freely and was
never confined to bt>d.
The son tried to make it
appear in his evidence that his father was suffering
from nothing eerious. Dr. Lakshma.nan said in
his evidence that his fees for visiting a. patient a.t
Jaba.lpur 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 ta.ken by his physican, Dr. Motile.I Na.yak
from his village to Jabalpur nor would he have
consulted Dr. Lakshmanan, a consulting physioian
of repute, for so many days
on payment of
Rs.16/- per visit. No doubt·, Mahajan Deola.l's son
now tries to make light of the
illness of his father
but Dr. Lakshmana.n's ovidcnco shows olearly
enough that in September-October, 1943. Mahajan
2 S.C.R.
SUPREME COURT REPORTS
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 respondAnt company. In his answers 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 ast·
hma. In other words, there
was a deliberate
suppression fraudnlently made by Mahajan Deolal.
Fraud, according to s. l 7 of the Indian Contract
Act, 1872 (IX of 1872), means and includes Inter
ttUa any of the following acts committed by a
party to a contract. wit.h intent to
de~eive another
party or to induce him to enter into a contract-
(!) 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 concealqient 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 delibarately 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 qu\)stion.
Learned counsel for the appellant has argued before
us that Mahajan Deolal was ex? mined 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
J&62
Milhoolal Na;ak
v.
Life IRJUrante
Co·po1«1ion o/'f•li•
Dad.
1118!
Jlillll>OW N9"
v.
Lif1·.i-_,
c.p.,.,;. •f 11"U.
D.s }.
586 SUPREME OOURT REPORTS [1962] SUPP.
disclosed that he had suffered previously from
malaria, pneumonia. and cholera.
Dr. Kapadia,
it is pointod out, was specifica.Jly asked t.o oxamine
Mahajan Deolal in viow of the conflictiniz reports
which Dr. Desai had earlier submitted. On theee
facts, the a.rgumE'nt has been that the re~pondent
company had full knowledge of a.II facts relevant
to the state of health of llfahajan Deola.I and having
knowledge of the full facts, it was not open to the
respondent company to call the policy in question
on tho 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 th<' a.ppell1mt has
referred us to th~ Explanation to s. 19 of the Indian
Contract Act in support of his argument. We are
unable to accept this argument ns correct.. It is
indeed trne that llfahajan Deolal was examinPd
by as many as four doctors. It is also tnri> that the
respondent company had before it the eo·nflfoting reports of Dr. Desai and it specially asked Dr. Kapadia
to examine Mahajan Deolal in view of the rl'ports
submitted by Dr. Desai.
Yet, it muRt be pointed
out that the respondent comprmy had no means of
knowing that Mahajan Deolal had been treated
for the serious ailment of secondarv anaemia
followed by dilatation of heart etc. in"SeptcmberOctober, 1943 by Dr. Lakshmane.n. Xor e:in it be
11aid that if the respondent company had know·
ledge of those facts, they would not have made
any difference. The principle underlying tho Ex·
planation to s. 19 of the Contract Act ie that a false
representation. whether fraudulent or innocent is irre·
levant if it has not induced the party to whom it is
made to act upon it by enteriniz into a contract.
We do not think that that principle applies in the
present ca11C. The terms of the policy make it-clear
thai the avermunts ma<le as to the state of health
of the insured in the proposal form and the personal
statement were the basis of tho contract l>etween the
2 $.C.R.
SUPREME OOURT REPORTS
f187
parties, and the circumstance that Mahajan Deolal
had taken pains 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 afterwards 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 circu·
mstanoes 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 makee it un·
necessary 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 be took the assignment
of the policy on October. 18, 1945 he was merely
indulging in a gamble on Mahajan Deolal's life; the
contract waq 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 Deolli.l was a valid assignment in accord.
ance 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 aud when the policy was taken
out in 1944, it was really for the benefit of the
persent appellant, who soon after took an assignment
1961
M it/JNlal ll8'11k
••
Ufa'"'"'~
OorfJ"alW.. of .tndil
Dos J,
1962
.llilMolol Jf9olf
v.
Lif• 1.,.,,_,
~ll'f81io1 •/ l1 1lio
Doll.
588 SUPREME OOURT REPORTS [1962] SUPP.
on payment of the premium already pa.id by
Ma.ha.ja.n Deolal a.nd s11ch arrears of premium aa
were then outstanding. It iB unneoesea.ry for us to
give our decision on these contentions; bec~use if
Ma.ha.ja.n Deolal wa.s him~elf guilty of a fraudulent
supprossion of m~terial facts on which the respon·
dent company w~ <lisch<1.rged from pJrforming its
pa.rt of the contract, th~ appellant who holds an
assignment of the policy cannot stand on a. better
footing than Mahajan
D~o!R.I himself. It wa.s
argued before us tha.t if the policy was valid in its
inception, that ii to say, if it was in fa.ct effecte<l
for the use nn<l bandit of Mahajan Ddolal, who
undoubtedly had an insurable interest in his own
lifo, it could not afr.erwards be invalidated by R.Bsign.
ment to a person who had no interest but who
merely took it IH a speculation. Ollr attention was
drawn to
SE>v<ral
decisions on t.his quest.ion,
American e.nd English, noticed in para
502 of
Ma.cGillivray on Insurance law (fourth Edition).
We consider it mmecessary to examine those
decisions or to go into tho question posed therein.
That question must be left to be determined in a.
ca.so where it properly a.rises.
As we have stated
earlier, on our conclusion on the first question,
the appellant is clearly out of Court and can not
claim the bendit of a contra.ct which had been
entered into R.B a result of 1~ 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 tbu respondent company.
Here again one of the tcr:n~ of the policy was that
all moneyR that had bren pa.id in consequence of the
policy would belong to the company if the policy
was vitiated by reason of a fra.11d11lent suppression
of material fact8
h~· t lH' iusur1·1l.
We agree with
the High Court that where t be contract is had on
the groun<i of fran<i, the party who hn.s been guilty
of fraud or a. person whc, cln.ims under him ca.n not
2 S.C.R. SUPREME OOURT REPORTS
589
ask for a refund of the money pa.id. It is a wellestablished 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 oases 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 giv.en above we have come to
the conclusion that there in no merit in the appeal.
The appeal is accordingly dismissed with costs.
Appeal dismissed.
M/s. STEELWORTH LTD.
'!)8.
STATE OF ASSAM
lB. P. SINHA, c. J., J. L. KAPUR, M. 1IIDAYATULLAH'
J.C. SHAH and J. R.MuDHOLKAR, JJ.)
Saki Tax-Provincial legialation imposing Un; in certain
circu111.!lancea-Oonstitutional
validity-Amendment-Effect--
Assam Sales T1J11: Act, 1947 (Act, XVII of 1947), as amended by
Assam Sale8 T1J11: (Amendment Act, 1960) (Act, XIII of 1960)
s. 15 (1) (b) (i) (b) and (c)-Oonstitution of India, Arts. 14, 19
(l)(f).
The petitioner carried on business of manufacturing,
selling and supplying iron and steel materials in the State of
Assam. Before the Assam Sales Tax Amendment Act of 1960,
it held a registration certificate under which all its purchases for
use in manufacture or production of goods taxable under the
Act were exempted from Sales Tax, but after the amendment
it became liable to pay tax on those goods. It was contended
that by omission of sub-cl. (b), discrimination was introduced
by differentiating between materials bought for articles to be
supplied against a contract and articles produced and sold by
the petitioner and that this was not a reasonable classification
1912
Mithoolol Na]Oi
v.
Li/• Inm011U
Corporation of lnii<
Dos 1.
....
1962
1....,.,,. 16.