Karnataka High Court
Life Insurance Corporation Of India And ... vs U.K. Vasappa on 19 November, 1986
Equivalent citations: [1989]66COMPCAS375(KAR), AIR 1987 KARNATAKA 216, ILR 1987 KANT 1
JUDGMENT Chandrakantharaj Urs, J.
1. This appeal is by the Life Insurance Corporation of India, by its zonal manager at Madras and also the divisional manager of the Life Insurance Corporation of India at Udipi. The appeal is directed against the judgment and decree of the Additional Civil Judge at Shimoga in O. S. No. 17 of 1972. The judgment is dated January 20, 1976.
2. The facts leading to the suit and consequently this appeal may be stated as follows:
Respondent-Vasappa, who was the plaintiff in the trial court prayed for a decree against the respondents (the present appellants before us) in the sum of Rs.1,05,030.30 together with costs and current interest. The said sum was claimed under two insurance policies taken out by his father, bearing Nos. 39595964 for Rs.5,000 and 39681872 for Rs.1,00,000. Notice charges of Rs.30 was included in the claim. The suit became necessary because the Life Insurance Corporation of India refused to pay the claim made by the plaintiff. Their repudiation of their obligation was based on the provisions contained in section 45 of the Insurance Act, 1938 (hereinafter referred to as "the Act").
3. The plaint averments were as follows:
The plaintiff's father (the assured) died on June 30, 1970. On September 10, 12, 1970, a reply was issued by the divisional manager at Udipi that on policy No. 39595964, only a sum of Rs.1,167, and in respect of the other policy, that being premature, the matter regarding the net amount payable, would be decided only on admitting the liability. On January 19, 1971, the zonal manager addressed a letter to the plaintiff that the claim under policy No. 39681872 was repudiated and intimated that all monies payable under the said policy stood forfeited, the reason being that the deceased father of the plaintiff had given his age as 49 years and the horscope sent in support thereof together with the earlier policy showed that the date of birth was different and he did not disclose his correct age in his proposals. He further made it clear in the said letter that the deceased was not less than 50 years of age at the time of insurance. The plaintiff did not accept the repudiation. He got a notice issued through his counsel from Udipi. The notice was also replied to by the appellants, representing the Life Insurance Corporation of India. Plaintiff had done no more than reiterating his claim of insurance in the lawyer's notice.
4. In the written statement, the fact of taking out the first policy on November 24, 1965, and the second policy on January 24, 1969, was admitted. The first policy was for Rs.5,000 and the second policy was for Rs.1,00,000. That the plaintiff was the nominee under both the policies was admitted by the defendants. The date of death of the plaintiff was also admitted. In the written statement the defendants reiterated what had been stated by the divisions manager in his earlier letter. They contended that the age given by the assured was incorrect and that amounted to fraud as he was more than 50 years of age and, therefore, there was no liability on the part of the Life Insurance Corporation of India to pay on the policy. They also said that they had information that the plaintiff's father had suppressed information on obtaining the policies and on enquiry, the Life Insurance Corporation had found that he had grossly under stated the age and, therefore, the policy had been obtained with fraudulent intention. In those circumstances, they repudiated their liability to pay on the two polices.
5. On such pleadings, the court below framed as many as eight issues, which are as follows:
"(1) What was the age of the deceased Kadappa Gowda on the date of the proposals relating to the two policies?
(2) Whether the defendants are estopped from questioning the correctness of any information after the age was admitted by the defendants?
(3) Whether, on the death of the insured, the defendants are entitled to read just the premia and reduce the claim under policy No.39595964, on the ground that the information of age given by the deceased was incorrect?
(4) Whether the defendants show that the information regarding the age was inaccurate or false and the statement regarding age was a material matter which the deceased was found to disclose?
(5) Whether the defendants show that the deceased suppressed the correct age which it was material to disclose and that he knew at the time of making it that the statement was false or that he suppressed the facts which, it was material to disclose?
(6) Whether the defendants further show that the deceased fraudulently gave inaccurate age or suppressed the correct age at the time of making the proposal?
(7) Whether the defendants are entitled to repudiate the policy No.396818172 on the ground that the correct age was suppressed by the deceased?
(8) Whether the defendants are liable to pay the plaintiff under the two policies as claimed in the suit?
(9) What decree or order?"
6. On such issues, evidence was lead by the parties. The plaintiff examined in all four witnesses and the defendants examined in all ten witnesses. The documents marked by the plaintiffs are to be found at exhibits P-1 to P-13 and for the defendants at exhibits D-1 to D-15. After hearing the arguments of the counsel for the parties, the trial court found on all issues in favour of the plaintiff and decreed that the defendant Life Insurance Corporation is liable to pay Rs.1,167 under the first policy, and Rs.1,00,000 under policy No. 2.
7. It is against that decree, that the present appeal is filed.
8. Before us, the only point urged by Sri. S. V. Ramanna, learned counsel for the appellants-zonal and divisional managers of Life Insurance Corporation of India-is that the assured having died with in two years after the issue of the second policy, under section 45 of the Act, the Life Insurance Corporation was entitled to repudiate its liability. He also urged that such repudiation was based on the fact of the non-disclosure of correct age of the assured with fraudulent intention which could be inferred on the facts and circumstances of the case; such as, his taking out the first insurance in 1965 at Shimoga and thereafter the second policy in 1968 at Chickmagalur. The further fact was that the first policy was for a small amount of Rs.5,000 while the second was for a large amount of Rs.1,00,000. He drew the attention of the court specially to the evidence of D.W. 10, the scribe of a document to which the deceased father of the plaintiff was a party. The said document was marked as exhibit D-49.
9. Before analysing section 45 of the Act, and the right conferred on the insurer under the said section, it would be useful to refer to the evidence on which the court below has relied to come to the conclusion that the discrepancy of the age given was not so material to the issuance of the policy which would enable the insurer to repudiate its obligations. We see at exhibit D-20 the first policy issued for Rs.5,000. The proposal did not give any specific date indicating the date of birth, but merely stated that the date of birth would follow. However, the age was disclosed by the assured as 47 years. That was in 1965. In respect of the second policy, date of birth of the assured is shown in the proposal as August 18, 1919, and the age as 49 years, in support whereof a horoscope was produced. D.W. 3, the agent of the Life Insurance Corporation, who insured the proposal, in his oral evidence stated that he filed the proposal form and entered the date of birth having calculated the same on the basis of the horoscope furnished. This fact possibly cannot be disputed by the Life Insurance Corporation as the same is borne out by records.
10. We have, in addition to the policy and the proposal at exhibits D-20 and D- 29, medical reports which are to be found at exhibits D-23, D-43 and D-44. These are reports of one panel of doctors of the Life Insurance Corporation obtained at the time of preparing the proposals for the first and second policies. After physical examination, routine or otherwise in 1965, the report indicated that the assured would be aged about 48 years. Similarly, in exhibit D-43, one doctor appointed that the assured would be aged about 49 years. The other doctor opined at D-44 that the estimated age is about 49 years. In all the reports of the doctors, the doctors have opined that the life of the assured was considered to be good in column 12(c) of the prescribed proposal form.
11. As against this, in exhibit D-49, the sale deed executed by the assured, Kadappagowda, the estimated age of the vendor is shown to be about 40 years on May 4, 1953, the date of the document. The scribe of the document has given evidence as D.W. 10. On that date (of giving evidence), he was aged about 93 years. In examination-in-chief, he has admitted that he knew Kadappagowda for about 22 years earlier, the witness was about 71 years old. He had scribed the document in connection with the sale effected by the said Kadappagowda. He said Kadappagowda was running a hotel in a thatched hut at that time. The witness asserted that Kadappagowda, the assured, was about 54 years old and he was about 65 or 68 years old. In cross-examination, he admitted that he had written thousands of documents. He admitted, however, that the age of Kadappagowds was shown in the documents as 40 on an estimate made by him. In response to the specific question as to what "Summaru" in Kannada means, the witness said, it may vary from two to seven or eight years of the actual age. Beyond that, there is no evidence produced by the defendants to determine the correct age of the assured on the relevant dates.
12. In these days, life insurance and various other forms insurances have become quite common in this country. At the relevant time the Life Insurance Corporation had been nationalised. It operates throughout the length and breadth of the country assisted by several Zonal Branches and Divisional Offices, employing lakhs of agents canvassing people to take out policies on their life or in any other form, Such as annuities, educational policies in favour of children, etc. It is very rare indeed that a person voluntarily goes and seeks to take out a policy on his life, more so, in areas, which are not fully urban like metropolitan areas. Policies are taken out on the canvassing of the agents of the Life Insurance Corporation who are trained to impart to the assured the benefits of insurance. Sometimes, it is possible that, on the advice of the tax advisers, people with taxable income take out insurance policies of various types for purposes of tax avoidance which will result in lesser burden of tax. The court should not lose sight of this reality.
13. It is in evidence that Kadappagouda, the deceased father of the plaintiff- respondent, was not a highly educated person. One may even describe him as an illiterate. He only knew how to read and write. His initial occupation in 1965 was the running of a non-vegetarian hotel from 1953. His hotel was in a hut, according to the scribe, in the village. Between 1953 and 1965 he had made much progress. But his progress between 1965 and 1968 was much more in that he had become an excise contract for Thirthalli Taluk, one of the prosperous agricultural areas of Shimoga District. It is in that background, that we have to look at the evidence on record both in regard to the age as well as the conduct of the parties. That the agent who secured the proposal in 1965 for the first policy was an agent stationed at Shimoga town in not in dispute. That the sum assured in that policy was only Rs.5,000. That after a few initial payments amounting to a little over Rs.1,000, the premiums were not paid and the policy was allowed to lapse. No specific reason has been furnished as to why the policy was allowed to lapse. A fresh policy was indeed applied for in the year 1969 and that was for a large sum, the assured amount being Rs.1,00,000 on the life of the assured as we have seen. But, by that time, he had become a wealthy man, being an excise contractor. Mr. S.V. Ramanna, learned counsel for the appellants drew our attention to the fact that the policy was issued from the Chickmagalur Branch Office and not from Shimoga Branch Office as was the case in the first policy issued. He, therefore, wants this court to draw an inference that the assured was having ulterior motives in doing so. He has not drawn attention to any specific motives in doing so. He has not drawn attention to any specific provision of law or contract which forbids anyone in the country taking policies from any particular office or its Branch. On a close scrutiny, we found that the agent who canvassed for the second policy was the Development Officer in the Life Insurance Corporation and he was stationed at Koppa, very close to the place of normal residence of the assured, Kadappagowda. The geographical situation of the place of residence is closer to Chickmagalur than to Shimoga having equally good accessibility by road. Therefore, the place of issuance of policy has nothing to do with the ulterior motives suggested by learned counsel. But it is clearly traceable to the residence of the agent who canvassed the business for the Life Insurance Corporation and no more.
14. Therefore, these circumstances cannot be taken into account or taken notice of much less relied upon to draw the inference that the second policy was taken out with the intention of committing fraud on the insurance company. Even otherwise, the acceptance of the proposal in both the cases was by the appellants. They had the means and wherewithal to make all cross reference to ascertain whether the age given was proper as the assured in the second policy had disclosed the fact of having taken the earlier policy. The age furnished on both occasions is very close to the year 1919 in which he claimed to have been born according to the horoscope. It is asserted that the horoscope had been perused by one of the agents of the Life Insurance Corporation. Therefore, no criminal intention to commit fraud may be inferred because in the first policy he had not furnished any date of birth. It is possible that at the time of issuance of the first proposal, the agent did not insist upon the date of birth and therefore left the column blank to be furnished later as is evidenced by the proposal itself. Therefore, with regard to the discrepancy now sought to be read into the age furnished besides the age spoken to by the witness D.W. 10, we do not have any material to come to the conclusion that the age was "material" for the issuance of the policy. The discrepancy may have been due to ignorance and partly due to the indifference of the canvassing agents of the appellants.
15. We will shortly hereinafter advert to the argument whether such discrepancy in age is material to the insurance of the policy or not. But the preponderance of evidence is that the age furnished in the proposals would be closer to the age estimated by the doctors who physically examined the assured. Therefore, we have no hesitation to sustain the conclusions reached by the trial court in that behalf.
16. Now, the main argument of Sri S. V. Ramanna, learned counsel for the appellants, is that for the issuances of a life insurance policy, the age is material and therefore the petitioner having suppressed his real age which ought to have been far in excess of 50 according to the evidence of D.W. 10 seen in the light of exhibit D-49, the policy was obtained fraudulently and as such in terms of section 45, the appellants were justified in repudiating their obligation under the policies in question. He has drawn our attention to the principle laid down by the English Courts in Dawsons Ltd. v. Bonnin [1922] All ER 88. At page 93, Viscount Haldane has stated as follows, quoting from an earlier decision:
"Without going so far as to hold that this rule is also applicable to the construction of life policies generally, he though that it applied to the life policy before him, and said ..........When we loom at the terms of this contract, and see that it is expressly said in the policy, as well as in the declaration itself, that the declaration shall be the basis of the policy, it is hardly possible to avoid the conclusion that the truth of the particulars (which, I think, include the statement that he was of temperate habits) is warranted."
17. We certainly cannot disagree with that proposition attributed to Lord Blockburn as is evident from the facts that could be gathered from the extract. The declaration made by the insured in that case was in respect of the suppression of the fact that the insured was a heavy drinker and that he was of moderate habits as declared. On the facts it was found to be incorrect and therefore such declaration was held to be the basis of acceptance of the proposal to issue the policy. Viscount Haldane however relied upon the ruling and applied the principles to the facts of the case of Dawsons Ltd. [1922] All ER 88 which was in respect of the insurance taken to protect a motor vehicle against fire accident. In this declaration, it had been stated that the vehicle was garaged normally at a particular place; but actually it was burnt at another place where it had been garaged. It was proved that it was the normal place of garage where it had met with a fire accident. Therefore, in that case, they had no hesitation in coming to the conclusion that declaration as to the place of garaging was material to the issuance of the policy covering that vehicle against fire accidents.
18. One may not dispute the accuracy of that statement. The question is now well settled that what is material and what is not material will vary from case to case and it has to be ascertained judicially on the basis of the facts of each case. No hard and fast rule can be laid, by which, it can be categorically stated that a particular thing is material in every contract. We may even go to the extent of stating that in the case of life insurance, age is a material fact, and if, as a matter of fact, it is proved that the suppression of age is so much, the fraud may straightway be implied; say for instance, if a 70 year old person taking out a policy declaring himself to be 40 years, such declaration cannot but be with fraudulent intention. That is not the case here. Even if this court was to lean in favour of evidence adduced by the appellants, at best, the would be 52 or 53 and that as admitted by the learned counsel for the appellants, is well below the insurable age, which we are told is 60 years. Undoubtedly, if a person is more than 50 years old, the rules of contracts of the Life Insurance Corporation provide for his examination by more than one doctor and nothing more.
19. It is correctly observed by the author, the duty, in such a case, is to disclose every material fact, namely, every circumstance which would influence the judgment of a prudent insurer in fixing the premium or his determining whether he will take the risk. (See Chitty on Contracts, 25th edition at page-822 Note No. 3686 in Chapter relating to insurance and on the topic "utmost good faith"). However, the author has further observed that, generally speaking, facts may be material because their existence renders the subject-matter of the insurance peculiarly susceptible to a peril to be insured against or because they indicate that the assured is a person whose proposal needs special consideration. From that, it is clear that age, in every case, need not be material in regard to the acceptance of the risk, though it will be material to the fixing of quantum of premium in relation to the sum assured. What further emerges from the above principles is that contracts in regard to life insurance fall into that clause of contracts which are described as `Uberrima Fides' i.e., contracts of contracts good faith.
20. This court had occasion to consider in the case of Life Insurance Corporation of India v. Canara Bank Ltd., [1973] 43 Comp Cas 534 (Mys), the scope of section 45 of the Act. A Division Bench of this court, on the facts of that case, held that there was suppression of material facts and that the assured had deliberately withheld the fact of his hospitalisation with the fraudulent intention of inducing the insurer to accept the risk. That fact was a material one from the point of view of the insurer and the acceptance of the risk by it. There was evidence that the assured was fully aware of the hospitalisation and the treatment at the time the sent up his proposals for insurance. Therefore, they held section 45 of the Act was applicable to the facts of the case and the claim in respect of the policies could not succeed. Thus, that section 45 of the Act provides a safeguard to the insurer is put beyond the pale of doubt. The argument of Sri S.V. Ramanna that this case, with which we are now concerned, comes within the ambit of section 45 is difficult to accept. Section 45 reads as follows:
"45. 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 hat 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." (Underlining* is ours.)
21. From the language of the section, it is clear that it is only the second part of the section which confers on the insurer an opportunity to repudiate its obligation only on proof that in the proposal, the assured had declared or failed to declare the correct position with the fraudulent intention of inducing the insured to accept the proposal. If that is not established, the burden of establishing age is on the insured, if the insured does not establish it by independent evidence the fraudulent intention and the deliberate suppression or misstatement of material to the acceptance of the proposal, then the insurer cannot succeed on the basis of section 45 of the Act.
22. This is the view taken by a learned single judge of the High Court of Bombay in the case of Asha Goel v. Life Insurance Corporation of India . The learned Judge dealing with the scope and analysis of section 45 has held as follows:
"...An analysis of this provision of law shows that the insurer (Life Insurance Corporation in our case) under the first part of section 45, cannot repudiate any policy life insurance two years after it was affected merely on the ground that at the time of taking the policy, inaccurate or false statement was made by the policy holder. But under the second part if the insurer can show that such statement was on a material matter or the statement suppressed facts which it was material to disclose and that the suppression was fraudulently made by the policy-holder and further 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 repudiate the policy. In other words, under the first part of this section, the policy cannot be avoided by the insurer on the ground of inaccurate or false statement after the expiry of two years of effecting the policy but the insurer can do so if it can be established that the statement made by the policy holder was not only inaccurate or false but it was also on a material matter or that it suppressed facts which it was material to disclose and that it was fraudulently made and the policy-holder knew at the time of making the statement that it was false to his knowledge or that the facts which it was material to disclose were suppressed by him......"
23. The view expressed is not different from what we have said. In the absence of any evidence other than that of D.W. 10 and exhibit D-49, there is nothing done by the appellants to place before the court independent evidence to prove that the deceased-assured had deliberately made a non- disclosure in his proposal and that the non-disclosure was with the fraudulent intention of defrauding the insurer.
24. We, therefore, do not see any reason to disagree with the findings of the trial court. The appeal is misconceived and is therefore dismissed with costs.