1. Respondent's father, Venkatappa Setty, had insured his life with the Mysore Government Insurance Department for Rs. 5,750/- under a policy which was issued to him on 25th May, 1955. He dies on 27th day of July,1955, whereafter, his son, the respondent, made a claim for payment of the money. The insurance department of the Government repudiated the liability on the ground that the policy had become void by reason of certain wilfully false statements made by his father in the course of the papers leading up to the issue of the insurance policy. Thereafter, after issuing necessary notice under Section 80 of the Code of Civil Procedure the respondent filed the suit, out of which this second appeal arises, to enforce payment of the money due under the policy. The suit was defended by the Life Insurance Corporation of India who by then had taken over the life insurance business till then being carried on by the department of the State Government.
2. The principal or the only matter in respect of which the respondent's father, Venkatappa Setty, is stated to have made a false statement was in regard to a certain policy of insurance said to have been taken out by him from another company called ' The Oriental Life Insurance Company. A proposal for that policy was made by venkatappa Setty in April,1954, which proposal, it is said, was accepted by the insurance company with a load of Rs. 2 per thousand in the rate of premium. This fact , it was contended, had been deliberately withheld by Venkatappa Setty while making his proposal for the insurance policy concerned in this suit. The proposal in that regard was made by him on 4th April, 1955, under exhibit D-17. Exhibit D-15 is a personal statement made by him in the course of medical examination on the same day and annexed to the proposal,exhibit D-17. The case for the plaintiff-respondent was that his father was not aware of this alleged loading of the premium by the Oriental Life Insurance Company and that, therefore, he cannot be said to have been guilty of making any false statement or deliberately withholding any information any information in the course of either exhibit D-17 or exhibit D-15.
3. That the respondent's father, Venkatappa Setty, had made a proposal to the Oriental Insurance Company in April 1954, and that proposal was accepted by that company with a loading of Rs. 2 per thousand in the premium was proved by documents not questioned in evidence and also by the oral evidence of one L.F.C. Vaz examined as D.W. I. That fact is no longer is dispute. But , on the question whether Venkatappa Setty, at the time be signed exhibits D-15 and D-17, knew or did not know the Oriental Insurance Company having loaded his premium, the courts have differed. The trial court held that the evidence established that Venkatappa Setty knew that fact. The lower appellate court, however, has taken a different view and held that evidence had not been let in by the appellant to prove the knowledge of Venkatappa Setty. Hence, the suit that was decreed by the trial court has been dismissed by the lower appellate court.
4. The point of law argued on behalf of the appellant before me is that the burden of proving Venkatappa Setty's knowledge of the aforesaid fact was not on the appellant at all, but that the burden was on the respondent to prove the negative fact that his father was unaware of the loading.
5. There is in the judgment of the lower appellate court some discussion on cases dealing with Section 45 of the Insurance Act of 1938. But, that section is demonstrably not applicable to the facts of this case. That imposes a certain restriction on the right of an insurer to avoid an insurance policy on the ground of false statement said to have been made by the assured at the time of taking out the policy after a period of two years had elapsed since the date of the proposal. The position of law in cases to which the said section does not apply is not the same, nor is it possible to derive any assistance in ascertaining that position from cases dealing with section 45. In Mithoolal Nayak v. Life Insurance Corporation of India  32 Comp. Cas. 177 (S.C.). their Lordships were dealing with a case to which section 45 would undoubtedly apply and expressly stated that they were not going to deal with the position of law relating to cases to which section 45 does not apply.
6. The only use which the learned counsel for the appellant wanted to make of these cases is that because section 45 of the Insurance Act places on the insurer the burden of proving certain facts, it must be read as impliedly laying down or indicating that the position in regard to the burden of proof was the reverse in cases not governed by the said section. I do not think that such a large inference can be drawn. The obvious object of that section is to place certain restrictions on the common law right of the insurer to repudiate his liability under an insurance policy in certain circumstances, a right which arose or arises out of the circumstance that a contract of insurance is contract uberrimae fidei. It may not be wrong to say that the amendment of the law sought to be effected by section 45 was not intended to make any difference to the ordinary application of principles arising from the contract uberrimae fidei but to make it clear that the standard of good faith imposed by that principle which applies to both the parties equally require to be further emphasised from the point of view of the insured after the expiry of certain minimum period.
7. The entire legal argument proceeded as it must proceed on the basis of the declaration made by the proponent in the form of proposal. It appears at the end of it (vide exhibit D-15) and read as follows:
'I do hereby declare that the proposal statements and those made by me to the medical officer are true to the best of my knowledge and belief,and that I have not withheld or concealed any circumstance with regard to which information has been required from me. I agree that the statements made by me shall be the basis of the proposed contract for any insurance of my life and that if it shall hereafter appear that I have wilfully made any untrue statement or have fraudulently concealed any circumstance which I ought to have made known then all the premiums which shall have been paid under the said contract shall be forfeited, and the contract rendered absolutely null and void.'
8. Now , this is made up of two parts. The first part is the affirmation of the truth of the statements made in the proposal to the best of the proposer's knowledge and belief. The second part constitutes the warranty attached to the contract of insurance entered into on the basis of the proposal, a warranty which may be regarded as a condition precedent to the enforcement of the liability of the insurer under the contract. The content of the warranty itself makes it perfectly clear that the invalidating circumstance would be either an untrue statement wilfully made or an important circumstance fraudulently concealed. Hence both in its positive and negative aspects the warranty is directly related to some type of dishonest mental attitude. According to the plain meaning of the language employed, the proposer can be said to have made a willfully untrue statement only if he knew that what he was stating was untrue; likewise, he can be said to have fraudulently concealed any circumstance or fact only if he knew the existence of the same.
9. That being the clear effect of the language and the nature of warranty, there can be little doubt, in my opinion, that the burden of proving the necessary mental element ought legitimately to be borne not by the insured by by the insurer. The reason therefore is not far to seek.Contracts of insurance, as I have already stated, are contracts uberrimae fidei. The well established meaning of that term is that in contracts, of that type of parties are required not to deal with each other at arms length, but on the basis of mutual good faith. The well known difference between contracts uberrimae fidei and ordinary contracts is that, whereas in the case of the latter there may not always be a duty to make a voluntary disclosure of a material fact, there is in the case of the former a duty resting on one party to voluntarily disclose to the other party a fact or circumstance known to the former which he further knows is likely to influence the judgment or decision of the other party whether or not to enter into the contract. There will be a breach of good faith only if a material fact of that character was known to the party was is charged with breach of faith subsequently. If, on the other hand a party was not aware of a certain fact which, if known, would have influenced the judgment of the other party in regard to entering into contract, he cannot even be said to have failed to disclose the fact, much less therefore can he be said to have acted in bad faith.
10. The position so stated on an examination of the principle finds support, in my opinion, from almost every case cited on behalf of the appellant. Among them, kesava Seethamma v. Bombay Life Assurance Co. A.I.R.1954 Mys.134. was a case in which before invalidating a policy the court held upon evidence that the proposer had made a statement which was false to his knowledge. In Braham Dutt Sharma v Life Insurance Corporation : AIR1966All474 . the fact that a false proposer had made a statement was made knowingly or deliberately was obvious from the circumstance that the facts in respect of which the said statement had been made were the occupation and residence of the proposer. Similar was the position of facts in All India General Insurance Co. v. Maheshwari : AIR1960Mad484 . and New India Assurance Co. v. Sulochana Chowdhurani A.I.R.1962 Assam 65. Both are cases in which heavy drunkards stated that they were taking liquor only very occasionally. There are all cases in which the proof of falsity of the statement was itself proof of the fact that the person making the statement knew them to be false because they were all circumstance affecting him personally and of which he could not but be aware. In V.K. Srinivasa Setty v. Premier Life and General Insurance CO Ltd. A.I.R.1958 Mys.53. the particular position discussed was whether a statement contained in a proposal written for his benefit by the agent of the insurance company which the agent knew to be false can or cannot be said to be a statement made by the proposer himself which knew to be false. Their Lordships pointed out that, in the circumstances, the agent while writing a proposal, was acting as agent of the proposer and that, therefore, his knowledge may, in the circumstance, be imputed to the proposer himself. There is not anything in that ruling which militates against the proposition already stated by me.
11. That being the position in law, the finding of the courts below on the question whether Venkatappa Setty knew or did not know of the loading of his premium by the Oriental Insurance Company becomes a finding of fact and the mere fact that the lower appellate court has taken a view different from that taken by the trial court makes no difference whatever.
12. I may also add that, though prima facie on the evidence placed on record the view taken by the trial court may appear to be equally likely, as a matter of inference to be drawn from acts clearly established by evidence, the opinion of the lower appellate court appears to me to be more acceptable. The only person examined on the question of knowledge, namely, L.F.C. Vaz, who was working in the Oriental Life Insurance Company at the relevant period, does not know and is not able to state whether the decision of the company to load the premium was intimated to the proposer, Venkatappa Setty. The documents, exhibits D-5 and D-6 , which are a letter and an enclosure from the Oriental Insurance Company to the Mysore Government Insurance Department, are similarly devoid of the most material information as to the exact date on which the proposal was so accepted with a load in the premium by the Oriental Insurance Company. It is pointed out to me that the proposal itself which resulted in that policy contains material to show that premium was undertaken to be paid quarterly and that, therefore, we may take it that at least one premium might have been paid by Venkatappa Setty before he made the proposal, exhibit D-17, resulting in the suit policy.But I decline to embark upon speculation when the defendant- appellant, who has examined one witness to speak to facts relating to that Oriental insurance policy, has refrained from eliciting from him or causing papers to be produced through him, which would have placed these matters beyond doubt.
13. The result is that the second appeal has to be and is hereby dismissed with costs.