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Life Insurance Corporation of India Vs. Canara Bank Ltd. and ors. - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtKarnataka High Court
Decided On
Case NumberRegular First Appeal No. 28 of 1970
Judge
Reported in[1973]43CompCas534(Kar); ILR1973KAR1292; (1973)2MysLJ117
ActsIndian Contract Act - Sections 64 and 65; Insurance Act, 1938 - Sections 45
AppellantLife Insurance Corporation of India
RespondentCanara Bank Ltd. and ors.
Appellant AdvocateM. Chinnaswami and ;C. Srinivasa Iyengar, Advs.
Respondent AdvocateS.G. Sundaraswamy and ;M.R. Kamath, Advs.
Excerpt:
- section 29: [s.r. bannurmath & a.n. venugopala gowda,jj] concluded contract sale of seized assets of borrower by financial corporation - offer of appellant accepted and acted upon by corporation, by receiving money and adjusting to loan account - letter of confirmation of sale issued by corporation held, offer made to appellant by corporation, that too, with consent of borrower, has resulted into a concluded contract. corporation is obliged to hand over possession and transfer assets to appellant. inaction on part f corporation, being a state authority and unilateral cancellation of contract by it is arbitrary and is violative of article 14 of constitution. writ court can grant relief. that apart, borrower also cannot contend that offer to appellant is not fair. law does not permit a.....venkataswami, j. 1. this appeal against the decree in o.s. no. 33 of 1967 on the file of the civil judge, udipi, is by the defendant, life insurance corporation of india (hereinafter referred to as 'l.i.c.'). the suit which had been filed by the canara bank ltd. (hereinafter referred to as 'trustee') as a trustee under five insurance policies, the assured sums thereunder aggregating to rs. 1,30,000, and the heirs of the deceased-assured, was decreed for a sum of rupees 1,65,546, with current and future interest thereon at the rate of 7 1/2% per annum. 2. the relevant facts leading up to the appeal, briefly, are as follows : one v. s. r. sriranga shetty, a merchant of mercara, took out five insurance policies with the appellant. the first four policies were for a sum of rs. 25,000 each and.....
Judgment:

Venkataswami, J.

1. This appeal against the decree in O.S. No. 33 of 1967 on the file of the Civil Judge, Udipi, is by the defendant, Life Insurance Corporation of India (hereinafter referred to as 'L.I.C.'). The suit which had been filed by the Canara Bank Ltd. (hereinafter referred to as 'trustee') as a trustee under five insurance policies, the assured sums thereunder aggregating to Rs. 1,30,000, and the heirs of the deceased-assured, was decreed for a sum of rupees 1,65,546, with current and future interest thereon at the rate of 7 1/2% per annum.

2. The relevant facts leading up to the appeal, briefly, are as follows : One V. S. R. Sriranga Shetty, a merchant of Mercara, took out five insurance policies with the appellant. The first four policies were for a sum of Rs. 25,000 each and the last one for Rs. 30,000. On the date of submission of his proposals in regard to the first two policies, the assured was 48 years old. All these policies were taken out and issued between the dates December 21, 1960, and March 13, 1964. These policies had all been issued under the Married Women's Property Act, 1874, and the first plaintiff-bank had been constituted a trustee. The assured, Sriranga Shetty, died on September 12, 1964, on account of 'enteric', as per his death certificate, that is within 3 years 9 months and 6 months from the dates of issue of the first and the last of the above policies, respectively. For convenience, the details have been furnished in the form of a tabular statement below :

Sum assure : 25,000 25,000 25,000 25,000 30,000Date ofProposal : 13-11-60 13-11-60 28-12-61 28-12-61 26-12-63Date ofCommencementof policy : 21-12-60 21-12-60 28-12-61 28-12-61 13-3-64Duration at 3 yrs. 3 yrs. 2 yrs. 2 yrs. 0 yr.death : 8 months 8 months 8 months 8 months 5 months21 days. 21 days. 14 days. 14 days. 29 days.

3. On the death of the assured, on September 12, 1964, the trustee preferred claims on all the above policies, on January 15, 1965. After some correspondence, the details of which it is unnecessary to set out, on August 9, 1965, the L.I.C. sent a cheque for rupees 1,35,140 drawn on the Canara Bank Ltd., Udipi, to the trustee, apparently in full settlement of the claims. According to the trustee, this act constituted a full and final settlement of all the claims. But, the L.I.C. has disputed that it constituted any such concluded settlement or that they had at any time given up their right to repudiate their liability under the policies for good and sufficient reasons. But before the said cheque was encashed by the trustee, the L.I.C. stopped payment thereon and sent intimation to that effect to the trustee, by telegram and letter, on August 14, 1965. Ultimately, on the basis of the information received by the L.I.C., by means of a pseudonymous letter, and the result of their own subsequent enquiry and investigation, the claims based on all the policies were repudiated by the L.I.C. by a letter dated June 24, 1966. After exchange of notices, the present suit came to be filed for reliefs outlined earlier. The repudiation, by the L.I.C. of its liability under the policies in question, was based principally on the ground that the assured had made false statement in the proposal forms and personal statements, in answer to the questions posed by the insurer, and which had a bearing on his previous state of health, and that such statements related to material facts and the same were deliberately and fraudulently suppressed by the assured, although they were well within his knowledge.

4. The case of the trustee, in substance, was that the statements did not relate to material facts and the assured has had no knowledge of such facts and that they were not material enough to warrant disclosure by him, in answer to the questions contained in the proposal form and personal statements. On behalf of the L.I.C. the suit was resisted principally on the ground that the assured had made several false statements which it was material to disclose and that if answers to some of them had been truthfully given, there was every chance of the proposals for insurance being found unacceptable. In its written statement the L.I.C. has set out the circumstances which led to the repudiation of the claim, particularly the facts relative to the hospitalisation of the assured from August 4, 1959, to September 5, 1959, hardly 14 months prior to the first of the above proposals, during which 'biopsy' was done twice and deep X-ray treatment given for a week in regard to a suspected 'chronic inflammatory adenitis' on the neck. It is contended that the policies had become void on account of such false and fraudulent statements in regard to matters material for an insurer to determine the insurability of the assured, as a result of which the claims in respect of all the policies deserved to be rejected.

5. It is also averred on behalf of the L.I.C. that, in regard to more than one question, the answers contained in the proposal forms and personal statements were untrue to the knowledge of the assured. Attention particularly has been invited in the written statement to the following :

'(c) Question No. 4(a). - What has been your usual state of health

Answer : good.

Question No. 4(d). - Have you consulted a medical practitioner within the last five year If so, give details.

Answer : no.

(d) Question No. 7. - In the case of all the 5 policies and No. 6 in another form in the case of the last policy, have you even suffered from any of the following ailments

(a) giddiness, fits, neurasthenia, neuralgia, paralysis, insanity, nervous breakdown or any other disease of the brain or the nervous system

Answer : no.

(i) Any disease of ear, nose, throat, or eyes, including defective sight or hearing In case of discharge from the ear, state when it was last noticed.

Answer : no.

(j) Malaria, typhoid, influenza, Kala-azar, filariasis or any other fever lasting for a week.

Answer : no.

(k) Any other illness within the last five years requiring treatment for more than week.

Answer : no.

(c) Question No. 9 in all these policies and question No. 8 in one of the forms in the last policy.

(a) Did you ever have any operation, accident or injury If so, give detail

Answer : no.

(b) Have you remained absent from you work on grounds of health during the last 2 year If so, state when, how long and for what ailment

Answer : no.

(f) Question No. 10. - In all the policies and question No. 9 in one of the forms in the last policy :

(a) Have you ever had an electro-cardiogram, X-ray or fluoroscopic examination made or your blood examine If so, give detail

Answer : no.

(b) Have you ever been in any hospital, asylum or sanatorium for check-up, observation, treatment or an operation If so, give detail

Answer : no.

6. The trial court came to the conclusion that the L.I.C. had failed to establish that the assured had undergone treatment for cancer and, therefore, it must be held that the L.I.C. had failed to prove the Sriranga Shetty, the assured, had deliberately and fraudulently suppressed material facts in his personal statement made in connection with the issue of the policies in question. It was also held that what had been proved by way of facts, regarding hospitalisation, did not amount to material facts and disclosure of which was necessary for an insurer. It was, therefore, concluded that the policies were valid and enforceable, and the provisions of section 45 of the Insurance Act, 1938, on which alone the insurer could rely to avoid the policies, would be unavailable to the defendant, L.I.C. On the question relating to estoppel arising out of a settled account, as pleaded, there has been no discussion whatever.

7. On behalf of the appellant, Sri M. Chinnaswamy, the learned counsel, submitted that several of the answers given, particularly those relating to questions 4(d), 7(i), (k) and 10(a) and (b), have been shown to be untrue and false to the knowledge of the assured by adducing reliable oral and documentary evidence. He especially relied on the answer furnished to question 10(b) and submitted that in view of the unimpeachable evidence provided by the doctors and the hospital records, the fact that the assured stayed in an hospital for over 30 days and underwent 'biopsy' twice and X-ray treatment extending over a week should be held to have been established. He further contended on the basis of this that it can by no stretch of imagination be said that the assured might have forgotten all about it in a space of fourteen months, prior to the date of the first of his proposals for insurance. In regard to the argument that the said treatment, even if it could be called as one such, was not of any materiality and the assured, therefore, could not be attributed with any fraudulent intent, he invited attention to the evidence and opinion of several doctors and witnesses examined on behalf of the L.I.C., who had unequivocally stated that if the records relating to hospitalisation had been made available at the time of the acceptance of the proposal, they would not have recommended the case for insurance. It is further submitted that on the question of materiality of fact to be disclosed, the proper test to be applied is whether or not the information is material from the point of view of the insurer, and not the insurer, to enable such insurer to make up its mind as to the insurability or otherwise of the assured and, if found insurable, as to the terms of the policy to be issued.

8. On behalf of the respondent-trustee, Sri. S. G. Sundaraswamy, the learned counsel, contended that the hospital records would not conclusively establish that the assured underwent deep X-ray treatment. He further contended that the fact that he was hospitalised and underwent some 'biopsy' and treatment as aforesaid would not necessarily mean that the assured was suffering from any serious disease so that it was incumbent upon him to have considered the whole thing serious enough to warrant mention in the personal statement and, therefore, there was no question of the entertaining of any fraudulent intention on the part of the assured in the context of the answer to questions Nos. 10(b) and 7(i). Once this conclusion is accepted, then the provisions of section 45 of the Insurance Act would be of no avail to the defendant, L.I.C. At one stage, it was faintly contended that Sriranga Shetty, mentioned in the hospital records, was not the assured at all. But, in view of the evidence of some of the doctors and a relative of the assured, the argument in this behalf was not pressed with any show of seriousness. We do not, therefore, propose to examine it any further. Lastly, it was contended that in view of the contents of the correspondence that ensued between the bank and the L.I.C., between the dates of preferment of the claim and the issue of the cheque by the L.I.C., a case of 'settled account' would arise thus giving rise to a fresh contract between the parties and, therefore, fraud, it any, anterior to it, would not affect the legality or effectiveness of it. We may at this stage itself briefly dispose of this contention. In reply to this argument, it was contended by Sri Chinnaswamy that subsequent to the stoppage of payment of the cheque, the trustee had itself written that the L.I.C. was well advised to examine the matter thoroughly and satisfy itself as to the validity of the claim arising from the policies, and this circumstance should, therefore, be sufficient to hold that there was no concluded agreement in regard to any such settlement. We do not consider it necessary to examine this contention in any detail as no authority bearing on this question was cited in support of it. But, in the view we propose to take of this case, namely, that the assured had fraudulently suppressed material facts which were within his knowledge while furnishing the answers to the questions contained in the personal statements, this contention has to be rejected, as such a contract, if any, would be clearly vitiated on account of the fraud practiced by the assured in connection with the issue of the policies in question. The contention, therefore, has to fail.

9. We now turn to the main contention based on the provisions of section 45 and section 17 of the Insurance Act and the Contract Act respectively. But it is to be remarked that the case on behalf of the trustee, in the context of the answer to question No. 10(b), is, as already indicated, put substantially on the basis of non-compliance with the requirements relating to fraudulent intention specified in section 45 of the Insurance Act. The basis for such a contention has been that knowledge on the part of the assured that he had been suffering from any ailments serious enough, in his opinion, to treat the fact of his hospitalisation in question as a material circumstance warranting disclosure, had not been proved.

10. Before proceeding with the discussion bearing on the contentions, we propose to prefer, rather briefly, to a few of the decided cases cited on both sides which have a bearing on some of the principle governing the matter on hand.

11. In Joel v. Law Union & Crown Insurance Company, the Court of Appeal in England while dealing with a contract of insurance which was sought to be avoided by the insurer on the ground of non-disclosure of a material fact, to wit that the assured had consulted a doctor for nervous depression, held that the answers to that question and others had not, on a true construction of the documents, formed the basis of the contract, and, therefore granted a new trial. But the passage in the judgment of Fletcher Moulton L.J. needs to be noticed, with respect, in order to show, at least, that the knowledge by the assured, that a fact is material or not, would not be of much moment and that the proper test to apply was whether a reasonable man would have recognised that it was material to disclose the knowledge in question in order that the insurer be able to make up his mind whether the proposal ought to be accepted or not. The passage is :

'The contract of life insurance is one uberrimae fidei. The insurer is entitled to be put in possession of all material information possessed by the insured. This is authoritatively laid down in the clearest language by Lord Blackburn in Brownlie v. Campbell : 'In policies of insurance, whether marine insurance or life insurance, there is an understanding that the contract is uberrimae fides (Sic in the report) that, if you know any circumstance at all that may influence the underwriter's opinion as to the risk he is incurring, and consequently as to whether he will take it, or what premium he will charge, if he does take it, you will state what you know. There is an obligation there do disclose what you know, and the concealment of a material circumstance known to you, whether you thought it material or not, avoids the policy.' There is, therefore, something more than an obligation to treat the insurer honestly and frankly, and freely to tell him what the applicant thinks it is material he should know. That duty, no doubt, must be performed, but it does not suffice that the applicant should bona fide have performed it to the best of his understanding. There is the further duty that he should do it to the extent that a reasonable man would have done it; and, if he has fallen short of that by reason of his bona fide considering the matter not material, whereas the jury, as representing what a reasonable man would think, hold that it was material, he has failed in his duty, and the policy is avoided. This further duty is analogous to a duty to do an act which you undertake with reasonable care and skill, a failure to do which amounts to negligence, which is not atoned for by any amount of honesty or good intention. The disclosure must be of all you realised to be material, not of that only which you did in fact realise to be so.'

12. The next case is of the Privy Council in Mutual Life Insurance Company of New York v. Ontario Metal Products Company Ltd. Here also, liability under an insurance policy was sought to be avoided by the insure on the ground that the assured has deliberately suppressed the fact of her having been treated by a medical practitioner in answering a question in a proposal of insurance. In answering a question : 'What is the test of materiality ?', the position has been stated thus :

'....... It is the insures who propound the questions stated in the application form, and the materiality or otherwise of a misrepresentation or concealment must be considered in relation to their acceptance of the risk.'

again,

'In their view, it is a question of fact in each case whether, if the matters concealed or misrepresented had been truly disclosed, they would, on a fair consideration of the evidence, have influenced a reasonable insurer to decline the risk or to have stipulated for a higher premium.'

13. The next case is of Ratan Lal v. Metropolitan Insurance Co. Ltd. At page 416 of the report, on the question of the nature of a material fact, referring to English cases, it is observed by Ahmad J. as follows :

'Therefore, in this case non-disclosure of material facts even in the absence of misrepresentation or fraud may make the contract voidable at the instance of the parties to whom 'uberrima fides' is due. But then in such cases sometimes a ticklish question arises as to what is a material fact. Authorities say that any fact which tends to suggest that the life insured is likely to fall short of the average duration is material fact (Thomson v. Weems); and rightly so, for, after all, life assurance is nothing but a scientific assessment of an average duration of a life, and that is not possible unless all correct data about that life are diligently and faithfully made available to the company.

But then the borderline between what is material and what is not material is more often than not so faint and dim that there is always a danger of one being taken for the other. Therefore, in order to avoid this danger one has to be careful in drawing a distinction between what is illness or material change in health and what is ordinary simple disorder. A disorder is not one 'tending to shorten life' simply from the circumstance that the assured dies from it (Watson v. Mainwaring).'

14. On behalf of the respondent, considerable reliance was placed on certain decisions in Lakshmi Insurance Co. Ltd. v. Bibi Padmawati, which was affirmed by thee Supreme Court in [1967] 37 Comp. Cas. 667 and Life Insurance Corporation of India v. Janaki Ammal. We shall examine them, with reference to the points raised inn regard to them, before concluding the discussions on this aspect with a reference to the decision of the Supreme Court in Mithoolal Nayak v. Life Insurance Corporation of India.

15. In Lakshmi Insurance Co. Ltd. v. Bibi Padmawati the court was concerned with an assured who had been treated for tuberculosis, but did not know that he was suffering from such disease as his doctor had not told him about it. In regard to a question in the personal statement, bearing on this aspect, while taking out the policy of insurance, he had answered in the negative. But on behalf of the respondent therein reliance was placed on an observation that the clauses in a contract of insurance must be construed in favour of the assured whenever there is an ambiguity or two equally reasonable inferences are possible on proved facts. It seems to us unnecessary to reproduce the relevant enunciation, as no such situation is present in the case on hand. For the same reason it is not also necessary to refer to the decision of the Supreme Court in appeal against the judgment of the High Court of Punjab. But it was argued that the facts in that case were quite close to those in the present case. We think that the decisions in question turn on the facts of that case and the facts of the case on hand are clearly distinguishable. The question posed therein, the answer to which has been made the basis for the repudiation of liability by the insurer, is not on all fours with question No. 10(b) concerned herein. The latter clearly refers to hospitalisation even as regards a check-up apart from treatment any other ailment. The trial court in the instant case has clearly misdirected itself in thinking that the insurer had set out to prove that the disease the assured was suffering from was concern and had failed to prove the same. As the question was argued before us, on behalf of the insurer, the case was out not so high. It was merely contended that the assured had made untrue statements with regard to hospitalisation and X-ray treatment given there for the 'adenitis' of his throat. Hence, these cases are not of much assistance to the respondent-trustee.

16. The next case is of the High Court of Madras in Life Insurance Corporation of India v. Janaki Ammal. This case also is distinguishable. That was a case where an assured treated for 'hypochondria' omitted to mention that fact while taking out a policy of insurance. The court held that the fact concerned was not material, even from the point of view of the insurer, as 'hypochondria' of the nature found in that case was no ailment to all.

17. We now turn to the last relevant case of Mithoolal Nayak v. Life Insurance Corporation of India. That was a case where the assured had omitted to refer to the fact of his having undergone treatment for 'diarrhea' and 'anemia' by a doctor. The Supreme Court, after analysing section 45 of the Insurance Act, has set out the ingredients necessary to be established by an insurer in order to avoid a liability under a policy of insurance, in accordance with the terms of that section. It is, however, worthy of note that the suppression of the fact of the aforesaid treatment was held to be fraudulent by the court within the meaning of section 17 of the Contract Act. The passage is at page 819 of the above report and runs thus :

'..... No doubt, Mahajan Deolal's son now tries to make light of the illness of his father, but Dr. Lakshmanan's evidence shows clearly enough that in September-October, 1943, Mahajan Deolal was suffering from a serious type of anemia 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 respondent-company. It 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 anemia or shortness of breath or asthma. In other words, there was a deliberate suppression fraudulently made by Mahajan Deolal. Fraud, according to section 17 of the Indian Contract Act, 1872 (IX of 1872), means and includes, inter alia, any of the following acts committed by a party to a contract with intent to deceive another party or to induce him to enter into a contract.'

18. One other principle laid down there in is that the Explanation to section 19 of the Contract Act, to the effect that a false representation whether fraudulent or innocent, is irrelevant if the party who is to act on it has not been misled in making the contract, would not be of any assistance to the assured in contracts of insurance of the present nature. The argument in substance before the Supreme Court on behalf of the assured, similar to the one urged also in this case, was that the insurance company having got the assured examined by several of its own doctors had acted on its own on the basis of the reports of such doctors, and was not at all induced to act on the misrepresentations, if any, of the assured. This argument was rejected and the court held that the Explanation to section 19 of the Contract Act could not be invoked in contracts of this nature and in the facts and circumstances of that case.

19. Referring to section 45 of the Insurance Act, this is what the Supreme Court has said :

'The three conditions for the application of the second part of section 45 are -

a. the statement must be on a material matter or must suppress facts which it was material to disclose;

b. the suppression must be fraudulently made by the policy-holder; and

c. the policy-holder must have known at the time of making the statement that it p1 was false or that it suppressed facts which it was material to disclose.

The crucial question before us is whether these three conditions were fulfilled in the present case. We think they were .....'

20. Keeping in view the aforesaid principles, we shall now proceed to examine the relevant evidence bearing on such a question. It is pertinent to note that in all these cases of proposals and personal statements, preceding the issue of policies, there is a statement by the assured making the statements in proposals and personal statements the basis of the contracts of insurance evidence by the five policies in question. That such statement were actually explained to the assured in a language known to him, viz., Kannada, is also acknowledged by the assured in his own hard-writing and in that language. We have referred to these circumstances, because an argument was urged that the assured did not know English although the knew how to sign in English. In these circumstances, we do not feel impelled to consider this argument with any seriousness, and reject it.

21. One other argument is that the assured may not have had the where-withal to pay the prima due on the policies. Some evidence is on record that he was a businessman and a tax assessee. We do not wish to say anything more on this aspect, beyond observing that in the proposals the sources of income of the assured have not been disclosed, although specifically invited to do so.

22. We shall refer briefly to the evidence adduced in regard to the hospitalisation and treatment of the assured during the period August 4, 1959, to September 5, 1959, just 14 months prior to the sending up of the proposal in regard to the first of the above policies. In this context it is also worthy of note that in a space of about 3 years and a few months, the time that had elapsed between the first and the last of the policies, the assured had insured for heavy sums aggregating to 1,30,000 in all, on five policies. The only time he had insured earlier was in 1947 for Rs. 10,000 and Rs. 20,000 on two policies. These policies were no longer in force and had been paid up. No clear or reasonable explanation is forthcoming as to this sudden apart on his part. It seems in some degree reasonable to infer that it has had something to do with the treatment he received and knowledge he derived as to his state of health during his hospitalisation in 1959. Indeed, this was suggested on behalf of the L.I.C. in the course of the arguments.

23. For determining the question of fact whether or not the answer to question No. 10(b) related to a material fact or not, it is unnecessary to consider all the oral and documentary evidence adduced as, in our opinion, much of it relates to the good health enjoyed by the assured subsequent to such hospitalisation and the fact that he did not die of any disease relating to cancer of any ailment affecting the throat. We have seen from the earlier discussion that it is immaterial for the question on hand that the assured did not die of any disease which had been suppressed by him. We have also seen that the materiality or otherwise of the fact suppressed does not depend exclusively on the understanding of the assured, but on the fact whether a reasonable man would or would not think it proper to disclose the same, in a contract based on mutual good faith, as the present one, in order to enable an insurer to make up his mind to accept the proposal or not. In this view, we proceed to examine only the evidence relevant in the context of question No. 10, and the answer thereto, which has been reproduced earlier.

24. On behalf of the plaintiff, only one witness, P.W. 1, son of the assured, has been examined. He has been examined on October 16, 1969. His age therein has been shown as 26 years. It is, therefore, clear that the he must have been about 16 to 17 years of age when his father, the assured, had been hospitalised in the year 1959. He flatly denies that his father was ever in the hospital as suggested. His evidence is totally unworthy of acceptance when one has regard for the oral and documentary evidence adduced on behalf of the L.I.C. We shall leave our comment on this evidence at that. Moreover, the burden of proving this fact is entirely on the L.I.C. having regard to the provisions of section 45 of the Insurance Act, on the basis of which alone the appellant (L.I.C.) could succeed or fail.

25. Among other evidence, only the evidence of D. Ws. Nos. 1, 2, 3, 4, 6 and 7 is, in our opinion, relevant as bearing on the question on hand. D.W. 1, Dr. H. V. Suryanarayan Rao, is a pathologist, who at the relevant point of time was on the staff of the K. R. Hospital, the one in question. He was also a professor in the medical college, in the E.N.T. Branch, for over 13 years. He has put in 26 years of service. He speaks to admission of one Sriranga Shetty into the hospital as per Exhibit D-2. But the actual register of admission is exhibit D-11 and the relevant entry is exhibit D-11-a, the relevant number being 147/8. Exhibit D-2 shows that he was admitted on August 4, 1959. Exhibit D-2 also refers to the result of the 'biopsy' and lymphoid tissue showing chronic inflammatory changes; ulceration of the surface in some area; detachment of crypts with inflammatory exudate; no evidence of malignancy. He also speaks to exhibit D-1, which is a treatment records. This treatment record is, in our opinion, rather revealing. It shows that the assured was given X-ray for a week from August 31, 1959, and that he had an income of Rs. 100 per mensem. Some argument was addressed as to the total period of actual treatment. On behalf of the L.I.C. it is stated that such period was of 25 hours duration and on behalf of the trustee it is contended that such treatment was only of 25 minutes duration. The matter has not been clarified in the course of the examination of D.W. -1, who was quite qualified to speak on the point. Be that as it may, the fact remains that Sriranga Shetty had undergone treatment by X-ray for a week. Any such situation in a man's lifetime is not likely to be forgotten. He also refers to exhibit D-3 which sets down the nature of the complaint and some other documents relative to the assured. He has also stated that cancer is a 'terminal disease'. He is emphatic that the tumor that he had noticed 'looked malignant'. He speaks to the 'biopsy' done twice, both in the tonsils and lymphatic gland. He also avers that he 'suspected cancer because it had, in the particular case, all the characteristics of cancer.'

26. In this context, it is relevant to refer to an argument urged on behalf of the trustee-bank. In effect it is this : Merely because a patient had been treated by X-ray therapy on the basis of suspected cancer, when in fact it was not, it would not follow that the patient was bound to take such a treatment seriously and refer to it as a material fact in any personal statement such as the one concerned in this case. This argument assumes that the patient was bound to state only if it was cancer and not otherwise. The materiality of a fact depends on the surrounding circumstances and also the nature of the information sought by an insurer. It is not open to an assured to decide for himself as to which fact is material and which not. In the instant case, circumstances are : (1) he was hospitalised for over a month; (2) two 'biopsy' examinations were done and these would involve removal of tissues by a minor operation; (3) X-ray therapy for a week. In the fact of all these circumstances, any reasonable man would think that there might be something seriously wrong with him although he may not have had a clear idea of the disease he might be suffering from. Moreover, question No. 10(b) is clear and unambiguous, and clearly refers to hospitalisation. Hospitalisation for about 31 days cannot be classed as a passing phase, and a mere simple check-up as inferred by the trial court. In the context of supervening events present in this case, it would be clear that such a question, framed by the insurer, could not be said to be not of any importance to the insurer. In certain given situations, as illustrated by the present case, the question assumes considerable importance. It is, therefore, expected of an assured to answer it trustfully and in good faith. The importance of the question has also been shown by the evidence of several witnesses that if they had known all about it, they would not have recommended the assured as a good risk. We are clearly, therefore, of the view that the assured had deliberately withheld this fact and with the fraudulent intention of inducing the insurer to accept the risk. We further hold the this fact was a material one from the point of view of the insurer and the acceptance of the risk by it. We are also satisfied that the assured was fully aware of the fact of hospitalisation and the treatment, at the time he sent up his proposals for insurance. We, therefore, disagree with the view of the trial court on this question.

27. The other three witnesses, D.Ws. Nos. 2 to 4, are also doctors. D.W. 2 speaks to the admission of the patient into the hospital. D.W. 3 is the doctor who first examined the assured and recommended his admission for further examination in the K.R. Hospital. D.W. 4 is the pathologist who examined the tissues during 'biopsy' and opined that the 'adenitis' was not malignant and, therefore, not cancer. D.W. 6 is almost a neighbour of the assured. He speaks to his having seen a swelling on the neck of the assured prior to his death. D.W. 7 is a doctor who was a house-surgeon at K.R. Hospital from July 1, 1959, to September 15, 1959. He speaks to his having talked with Sriranga Shetty then. What is significant is that he has taken up practice at Mercara and his clinic is hardly 150 yards from the house of Sriranga Shetty. This is what he says :

'He (Sriranga Shetty) had come to my clinic at Mercara. I enquired him of his ailment in Mysore. He said he was alright and nothing to worry. He had not forgotten his treatment in the hospital at Mysore.'

28. This would clearly show that the assured was conscious of his treatment and had not forgotten all about it.

29. Before concluding, one other question that arises in this case requires to be briefly considered. It is in evidence that the premia on the policies were being regularly paid up. Such payments, it is stated, amount to a fairly large sum of over Rs. 12,000. There is no relief sought as regard this amount, either alternatively or otherwise. Assuming that such a relief falls to be considered, either in equity or at law, it is apparent that in view of the law as laid down by the Supreme Court in the case of Mithoolal Nayak, that neither section 64 nor section 65 of the Contract Act would apply to claim relief on the basis of money had and received, as the same was based on a contract founded on fraud, and the respondent-plaintiff would not be entitled to any such relief. But, in the course of the debate, it was stated on behalf of the L.I.C. by its learned counsel that refund of such amounts lies within the discretion of the insurer as per the very provisions of the Insurance Act. Since it is clearly a matter left to the discretion of the insurer, we wish to say no more about it.

30. For the above reasons, this appeal has to succeed and is allowed. The judgment and decree in appeal are, therefore, set aside and the suit will stand dismissed.

31. As regards costs, it is seen that the L.I.C. is already in possession of all the moneys paid as premia. This apart, judging from the events subsequent to the death of the assured, i.e., on September 12, 1964, up to the date of repudiation, i.e., June 24, 1966, the plaintiff were more or less left to believe by the conduct of the L.I.C. that there was a reasonable basis for their claim. We, therefore, think that this is a fit case where parties should be directed to bear their own costs both here and in the court below. It is ordered accordingly.

32. Appeal allowed.


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