Patna High Court
Life Insurance Corporation Of India vs Baidyanath Singh And Ors. on 24 April, 1978
Equivalent citations: AIR1978PAT334, 1978(26)BLJR687, [1979]49COMPCAS653(PATNA), AIR 1978 PATNA 334
Author: Nagendra Prasad Singh
Bench: Nagendra Prasad Singh
JUDGMENT Nagendra Prasad Singh, J.
1. The Life Insurance Corporation of India (hereinafter to be referred to as the Corporation), the defendant in the suit, is the appellant in this appeal. The plaintiff filed the suit in question claiming to be the widow of one Shri Deoghar Singh for a decree of Rs. 25,000 with interest thereon, being the amount payable to her after the death of her aforesaid husband, who had been insured under a policy for the said amount.
2. According to the case of the plaintiff, aforesaid Deoghar Singh had made a proposal for being insured for a sum of Rs. 25,000 to the United India Life Insurance Company (defendant No. 2) in the year 1954. In the proposal form, dated 12-11-1954 (Ext. 7) Deoghar Singh mentioned his age as 48 years. Thereafter, he was examined by two doctors namely, the then Civil Assistant Surgeon, Begusarai as well as the doctor of the Corporation, and they reported that he was fit for being insured (reports are Exts. 7/a and 7/b). The age was also admitted by the Corporation. This fact is mentioned in the letter dated 24-12-1954 (Ext. 3/e) addressed by the Company to Deoghar Singh as well as in the policy which is dated 20-1-1955 (Ext 12). Deoghar Singh, however, died suddenly on 26-5-1960. It may be mentioned that after coming into force of the Life Insurance Company Act, 1956 all the assets and liabilities of different Life Insurance Companies vested in the Corporation, and, as such, after the death of Deoghar Singh; a claim was made by the plaintiff, as the nominee mentioned in the insurance policy. Ultimately, the suit in question was filed when the Corporation did not make the payment.
3. At the trial, the defence of the Corporation was that the plaintiff was not entitled for the amount assured because Deoghar Singh while submitting the proposal form had made a fraudulent misrepresentation about his age and, as such, the whole contract had been vitiated. According to the Corporation, the age of Deoghar Singh in the year 1954, when he was insured, was 68 years instead of 48 years, as mentioned by him in the proposal form, which waa discovered after his death. Evidence was adduced on behalf of the plaintiff as well as on behalf of the defendant-Corporation on this question. Learned Additional Subordinate Judge, however, on a consideration of the materials on record, came to the conclusion that the age of the insured having been admitted by the Corporation, could not be reopened. He also held that there was no fraudulent misrepresentation on the part of the insured and the assertion of the Corporation that on the relevant date he was aged about 68 years has not been substantiated, Both the findings aforesaid are being questioned before this Court.
4. Learned counsel appearing on behalf of the Corporation submitted that it cannot be held that once the age of the insured is admitted by the Corporation, it is final and irrevocable even if it is later discovered that fraud had been practised on the Corporation by the insured, and in this connection, learned counsel drew our attention to the provisions of the Insurance Act, 1938 (hereinafter to be referred to as the Insurance Act). Section 45 of the said Insurance Act, which is relevant for the question involved, is as follows:--
"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."
In view of this section, after expiry of two years from the date on which the policy is effected, it cannot be called in question by an insurer that a statement in the proposal for insurance or in any report of a medical officer was inaccurate or false unless the insurer shows that such a statement was on a material matter or suppressed facts which was material to disclose and that it was fraudulently made. On a proper reading of this section it is clear that whenever the Corporation wants to question the correctness of any statement made in the proposal form, it has to prove three things, (i) that the statement in question was in respect of material matter, or which was suppressed was material to disclose, (ii) it was fraudulently made and (iii) the policy-holder knew at the time of making it that such a statement was false or suppressed facts were material to be disclosed. If the three conditions are fulfilled, in view of Section 45 of the Insurance Act it is open to the Corporation to challenge the correctness of any such statement made in the proposal form, and Section 45 of the Insurance Act is not a bar. The Supreme Court had also examined the scope of that section in the case of Mithoolal Nayak v. Life Insurance Corporation of India (AIR 1962 SC 814) and pointed out that any fraudulent act on the part of the policy-holder is to be judged in the light of the provisions of Section 17 of the Indian Contract Act, (hereinafter to be referred to as the Contract Act) and once it is found that a fraud was practised, the policy is vitiated and no claim can be based thereon. The same view was expressed by a Bench of the Madras High Court in the case of All India General Insurance Co. Ltd. v. S. P. Maheshwari (AIR 1960 Mad 484). This is based on the principle that a contract of life insurance is uberrima fides and it is vitiated due to the nondisclosure and misrepresentation which are fraudulent in nature.
5. Learned counsel appearing for the respondent, however, submitted that whatever may be the right of the Corporation in view of Section 45 of the Insurance Act to question the correctness of statement made in the proposal, it cannot be allowed to say that the insurer had made a wrong statement about his age in the proposal form after that age had been admitted by the Corporation. In the instant case, as I have already pointed out, in the policy itself it has been mentioned that the age of the insured has been admitted. According to the learned counsel, the Corporation should not be allowed to reopen the said question. In support of his contention, learned counsel referred to two cases, (i) a Bench' decision of the Calcutta High Court in Alliance Und Stuttgarter Life Insurance Bank Ltd. v. Hemanta Kumar Das (AIR 1938 Cal 641), and (ii) Maneklal Kalidas Shah v. Yorkshire Insurance Co. Ltd. (AIR 1939 Bom 161). In the former case (AIR 1958 Cal 641) a dispute had arisen about the age given by the insured. Later, the Insurance Company was trying to show that his age was much more than what he had mentioned in the proposal form. In that connection it was observed as follows:--
"This is not a case where the proposer says that his age was fifty-four and the Company merely accepted that statement at its face value and proceeded to issue a policy on that footing and subsequently, either shortly afterwards or a long time afterwards, admitted the age as stated in the policy in accordance with the provisions of Clause 9 (2) thereof, This was a case where the whole transaction from the very beginning proceeded upon the basis that the company had satisfied themselves that the proposer was of the age of fifty-four and then issued the policy accordingly. In my view therefore the admission contained in the endorsement at page 3 of the policy is of such a character that the defendants when the policy matured could not be heard to say that the age of the insured was anything different from what he himself had stated it to be in Feb. 1934. It is not necessary that one should apply in terms the principle of estoppel, because that is merely a rule of evidence. In my view, this matter goes far deeper than that,"
But, in this case also it was pointed out by Panckridge J. in his judgment that it was permissible, if it could be shown that the admission has been obtained by fraud, and in that connection it was observed as follows:--
"I imagine such a course to be permissible if it could be shown that the admission has been obtained by fraud, as for example by the production of 4 forged horoscope,"
In the latter case (AIR 1939 Bom 161) it was pointed out that once the age is admitted by the Insurance Company, there is no reason why they should not be held to be precluded from disputing the correctness of it unless the admission was procured by fraud. A distinction was drawn between cases where the age was not admitted and the cases where the age was admitted by the Company, because in the former case the burden of proving the age initially would be on the person claiming under the assurance, but in the latter case the age having been admitted need not be proved, it is for the Company to prove that the admission of age was procured by fraud. In my view, it is difficult to accept the contention of the learned counsel appearing for the respondents that once the age is admitted by the Corporation, it cannot be disputed. But, I hasten to add that usually the Corporation should not be allowed to dispute the same unless it is established on behalf of the Corporation that a fraud has been practised in getting the age admitted. It is well known that fraud vitiates even most solemn transaction, but in proving this aspect of the matter, the onus will be on the Corporation.
6. Learned counsel appearing for the respondents then submitted that even if it is assumed that the insured had given a wrong age in the policy, still in the facts and circumstances of the present case the exception to Section 19 of the Contract Act will be applicable and the Corporation cannot take the plea that the admission of age was made because of misrepresentation made by the insured. Section 19 of the Contract Act along with the exception is as follows:--
"When consent to an agreement is caused by coercion, fraud or misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so caused. A party to a contract, whose consent was caused by fraud or misrepresentation may, if he thinks fit, insist that the contract shall be performed, and that he shall be put in the position in which he would have been if the representations made had been true.
Exception-- If such consent was caused by misrepresentation or by silence, fraudulent within the meaning of Section 17, the contract, nevertheless, is not voidable, if the party whose consent was so caused had the means of discovering the truth with ordinary diligence."
According to the learned counsel appearing for the respondents, the Insurant Company had agreed to insure after proper verification and examination and if Deoghar Singh had made any misrepresentation, the Company concerned could have discovered the truth by ordinary diligence and having not done so, now they cannot set up it as a plea of defence. On the face of it, the argument of the learned counsel appearing for the respondents is attractive. But, it is difficult to accept in the way it has been put. According to the learned counsel whatever be the nature of misrepresentation, whether fraudulent or otherwise, the Corporation should be called upon to satisfy the court that it could not have discovered the truth with ordinary diligence, In this connection it may be pointed out that the word 'fraudulent' mentioned in the Exception to Section 19 only qualifies 'silence' and not misrepresentation. In other words, if the consent has been obtained by misrepresentation or by silence, which is fraudulent within the meaning of Section 17, then only exception comes into play. It shall not apply to misrepresentations which are fraudulent within the meaning of Section 17. 'Fraud' has been denned in Section 17 of the Contract Act. 'Misrepresentation' has been defined in Section 18. All misrepresentations are not necessarily fraudulent. Therefore, the Exception applies only to misrepresentations which are not fraudulent or to cases where consent has been obtained by silence which was fraudulent within the meaning of Section 17. Sulaiman J. while construing the scope of this section in the case of Niaz Ahmad Khan v. Parsottam Chandra (AIR 1931 All 154) observed as follows:--
"But on the face of it the exception is ambiguously worded. The difficulty is caused mainly by the punctuation, viz. a comma after the word 'silence' which seems to indicate that the words 'fraudulent within the meaning of Section IV apply both to 'misrepresentation1 and to 'silence'. But, as observed by their Lordships of the Privy Council in the case of Maharani of Burdwan v. Krishnakamini Dasi, (1897) ILR 14 Cal 365 and Lewis Pugh v. Ashutosh Sen, AIR 1929 PC 69 at p. 71, punctuation is no part of the statute, and a Court of Law is bound to interpret the section without the commas inserted in the print. If the comma after the word 'silence' is to be ignored the expression 'fraudulent' within the meaning of Section 17 might well apply to 'silence' exclusively and not to 'misrepresentation'. This interpretation is strengthened by the circumstance that the legislature has used the preposition 'by' twice, i.e., both before 'misrepresentation' and also before 'silence'. If the expression 'fraudulent within the mean-Ing of Section 17' qualifies 'misrepresentation' the result would be that due diligence would be required in the case where misrepresentation became fraudulent, but would not be required when the misrepresentation fell within Section 18 and was just short of fraud, for the exception would be confined to the former kind only. This would be a startling result. ''...... We are therefore inclined to hold that in the case of an active misrepresentation knowing the fact to be false, as distinct from mere silence or concealment, it is not incumbent upon the party defrauded to establish that he had no means of discovering the truth with ordinary diligence."
In the case of Kapparthi Venkataratnam v. Palleti Sivaramudu (AIR 1940 Mad ,560) the same view was expressed saying that the exception is not applicable to fraudulent misrepresentations. As such once it is held that the misrepresentation about the age of the person was fraudulent within the meaning of Section 17 of the Contract Act, the exception of Section 19 is of no avail. On the other hand, if it is just misrepresentation within the meaning of Section 18, then in view of excep-jtion to Section 19, the Corporation has to satisfy that it had no means of discovering the truth with ordinary diligence. It will always depend on facts and circumstances of each case as to whether a particular misrepresentation was fraudulent or not. In some case an inaccurate age given in the proposal may amount only to a misrepresentation, in other, because of the special circumstances, it may amount to fraudulent misrepresentation to which the exception of Section 19 shall not be applicable.
7. Learned counsel appearing for the respondents then submitted that in the facts and circumstances of the present case the age having been admitted by the Corporation, the onus was on them to prove two facts, firstly that the actual age of Deoghar Singh was 68 years instead of 48 years on the day when he was insured, and, secondly, that the admission was made by the Company concerned about the age given by him in the proposal form due to a fraud practised on the Company. According to the learned counsel the Corporation has failed to prove either. In my opinion, there is substance in this contention. On behalf of the Corporation, on the question that the insured was aged about 68 years in the year 1954 reliance has been placed on one affidavit alleged to have been sworn by Deoghar Singh on 7-3-1952, (Ext. A) and on the deposition of Deoghar Singh dated 9-7-1952 in Title Suit No. 52 of 1950 (Ext. D). In both these documents, he has stated his age to be about 70 years. If the statements made in these two documents are accepted to be correct, then his age in Nov. 1954, when the proposal was made, would have been about 73 years. Admittedly, before the proposal was accepted and policy was issued, he was examined by two competent doctors, one, as already stated above, the Civil Assistant Surgeon then posted at Begusarai and the other a doctor of the Corporation. Their reports have been produced and marked as Exts. 7/a and 7/b. These are supposed to be the confidential reports of the medical examiners. In this it has been reported that Deoghar Singh was aged about 48 years. Col. 1 (b) thereof is as follows:--
"Does the proposer look elder or younger than the avowed age? If so, by how many years?
Both the doctors have made a note against this query saying 'No'. It is difficult to believe that if the insured was aged about 73 years in Nov. 1954 then these two doctors would have certified that he looked like of 48 years was fit to be assured. Learned counsel appearing for the respondents has also drawn our attention to the report made by the Agent of the Company over the proposal form. The report shows that on enquiry it was found that the informations contained in the proposal were correct, (the relevant portion is not printed in the paper book). On behalf of the plaintiff several witnesses were examined on that question and they are P.W.'s 4, 5, .6, 8 and 9 apart from the plaintiff (P.W. 15). P.W. 6 is the Mukhiya of the Gram Pan-chayat. He has given his age as 62 years and has stated that Deoghar Singh died when he was a few years above 50. No witness has been examined on behalf of the defendant to say that at the time of death Deoghar Singh was aged 79 years, because if his statements in the aforesaid affidavit and deposition (Exts. A and D) are held to be correct, then at the time of death he must be 79 years old. This is not the case even of the Corporation. According to the Corporation, he got himself insured at the age of 68 years and died after six years later, i.e. at the age of 74 years only. Learned counsel for the Corporation could not explain as to how the two qualified doctors could have certified a person aged about 73 years as a person of 48 years only. It has come in evidence that one of the Corporation's doctors who had examined him was still the doctor of the Corporation, .but for the reasons best known to the Corporation, he has not been examined to say that he had been misled or to explain the circumstances under which he had made the aforesaid report after examining Deoghar Singh that he was aged about 48 years. No doubt, it is surprising as to how and why Deoghar Singh had given his age as about 70 years in the year 1952 in the aforesaid affidavit and deposition, but taking all the circumstances into consideration, I am inclined to hold that he had not given the correct age in the aforesaid affidavit and deposition. There is no allegation on behalf of the Corporation that the agent or the aforesaid two doctors were in collusion with the insured. The insured lived for six years after the policy was issued and he died of heart-failure. There is no suggestion that he was suffering from incurable or serious disease and suppressing that fact he got himself insured. He had paid the premiums for all these years which amount to about Rs. 10,000. All these circumstances indicate that apparently there was no reason on his part to give an age which was factually 26 years lower than his actual age. As such, I am of the view that the Corporation has failed to discharge the onus which the law has placed on it in view of the admission of age having been made by it during the lifetime of the insured. In such a situation, I am left with no option but to hold that it has not been proved that Deoghar Singh had made any misrepresentation at the time when he was insured, much less a fraudulent misrepresentation, and his age having been admitted by the Corporation on proper verification, the plaintiff or the heirs of the insured are entitled for the decree claimed on their behalf on the basis of the policy in question.
8. In the result, the appeal is dismissed and the decree passed by the learned Additional Subordinate Judge is hereby affirmed. In the circumstances of the case there will be no order as to costs.
B.P. Jha, J.
9. I agree.