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Manohar Lal Vs. Life Insurance Corporation - Court Judgment

LegalCrystal Citation
CourtDelhi High Court
Decided On
Case NumberRegular First Appeal Nos. 476 of 1969
Reported inAIR1981Delhi171; [1982]52CompCas379(Delhi); 19(1981)DLT38a; ILR1980Delhi1305
ActsInsurance Act, 1938 - Sections 45
AppellantManohar Lal
RespondentLife Insurance Corporation
Advocates: R.K. Makhija and ; Arun Mohan, Advs
Cases ReferredSee Life Insurance Corporation v. Parvathavardhni
insurance act, 1938 - section 45--whether non-disclosure of main occupation of the insured in a policy of insurance or imperfect statement in the policy invalidates the insurance policy.; in the instant case, the appellant took a joint policy on his life and that on his wife from an insurance company for a period of 25 years for an amount of rs. 25,000 and paid the annual premium. the term of the policy was that in the event of the death of either of them before the date of the maturity of the policy, the sum assured would become payable to the survivor. the appellant's wife died and the appellant made a claim on the defendant in accordance with the policy taken by him. the defendant repudiated the appellant's claim on the ground that the appellant was guilty of misrepresentation in as.....avadh behari rohatgi, j. (1) the plaintiff manohar lal took a joint policy on his life and the life of his wife, sita rani. from the sun light of india insurance company limited on may 23, 1956 for a period of 25 years in the amount of rs. 25,000. he paid the annual premium of rs. 906.25. the term of the policy was that in the event of death of either of them before the date of maturity the sum assured was payable to the survivor. (2) sita rani died on june 22, 1957. the plaintiff made a claim on the defendant, life insurance corporation of india, (corporation), which took over the assets of the sun light insurance by virtue of act. 31 of 1956. the corporation by their letter dated 20/21st november, 1959 repudiated the claim on the ground that the plaintiff was guilty of fraudulent.....

Avadh Behari Rohatgi, J.

(1) The plaintiff Manohar Lal took a joint policy on his life and the life of his wife, Sita Rani. from the Sun Light of India Insurance Company Limited on May 23, 1956 for a period of 25 years in the amount of Rs. 25,000. He paid the annual premium of Rs. 906.25. The term of the policy was that in the event of death of either of them before the date of maturity the sum assured was payable to the survivor.

(2) Sita Rani died on June 22, 1957. The plaintiff made a claim on the defendant, Life Insurance Corporation of India, (Corporation), which took over the assets of the Sun Light Insurance by virtue of Act. 31 of 1956. The Corporation by their letter dated 20/21st November, 1959 repudiated the claim on the ground that the plaintiff was guilty of fraudulent misrepresentation and that there was no valid contract of insurance between the plaintiff and the Sun Light Insurance on which a claim could be made.

(3) On March 22, 1960 the plaintiff brought an action against the Corporation on the policy. He sued in forma pauperis to recover Rs. 29,125. The subordinate judge dismissed the suit on June 10, 1966. From his decision the plaintiff brought this appeal in forma pauperis.

(4) The Corporation raised three defenses to the claim. The first was that the plaintiff did not disclose truthfully his occupation. In the proposal form he filled up the question put to him was to state his :

'(C)(I) Profession. (II) Exact nature of duties.' The answer of the plaintiff was : 'Tutor and photographer'.

In the personal statement before the medical examiner on May 10, 1956 the question asked was to state:

'OCCUPATIONwith the nature of duties'. The answer of the.' plaintiff was : 'Private business.' In another personal statement on May Ii, 1956, he stated in reply to a similar question that his occupation was 'business.'

(5) It was said that the above declarations regarding occupation were misstatements because the investigation conducted by the Corporation showed that the plaintiff was in fact working is a 'labourer' in Birla Cotton Mills, Delhi at a monthly salary of Rs. 120. It was pleaded that answers to the above specific questions were material for the assessnient of the risk, i.v. in accepting or rejecting the proposal of insurance for a large sum of Rs. 25,000 and to determine the bona fides of the proponents.

(6) The second ground of opposition was that the plaintiff's wife, Sita Rani, was observing purdah while in her personal statement recorded on 10-5-1956 she had denied that she was a purdahnashin woman. This is the question:

Question Answer 13(a) Do you observe purda? No.

(7) The third defense was -that the plaintiff was not on good terms with his wife Sita Rani and he anticipated her early death and with a view to 'gamble' on her life and to obtain money by her death he took the policy. It was said that the plaintiff had a meagre income and he could hardly continue the policy with it and he precipitated her death. The contract of insurance was characterised as a wagering or gambling contract and, thereforee, void and unenforceabig in law. In a word what was pleaded was that the Corporation cannot be held to a contract fainted at its source.

(8) On these pleas issues were raised. The parties went to trial. Witnesses were produced on both sides. The trial judge came to the conclusion that the plaintiff was guilty of making a false statement and fraudulent concealment about his real status and volition in life inasmuch as he did not disclose that he was a labourer in Biria Mills. He took the view that the plaintiff's motive for concealment was the apprehension that if be disclosed his real status the insurance company will not grant the policy for the sum assured. On this ground he dismissed the suit.

(9) As regards the plea that Sita Rani had misstated that she did not observe purda and the allegation that the plaintiff illtreated his wife and precipitated her death and that the policy was taken with a view to gamble on her life the trial judge held that the Corporation had failed to prove this part of the case. Nor have these two defenses been pressed before me. Otherwise too on the question of purdah the Corporation's own witnesses, Mrs. Pushpa Sethi (DW 1) and Harbans Lal Chopra, insurance agent (DW 2), have categorically stated that Sita Rani did not observe purdah. On the question of plaintiff's relations with his wife, the Corporation examined one witness, Yash Paul, a cousin of Sita Rani. He deposed that the plaintiff's relations with his wife were strained and that she complained to him in the presence of her husband and her father-in-law that she was being starved to death. The trial judge rejected this testimony as worthless. I think he was right. He refused to hold that the plaintiff's motive in obtaining the policy was to 'gamble' on his wife's life. It can thereforee safely be concluded that Sita Rani did not observe purdah and there was no misslatement by her. That she died of paratyphoid after 12 days' illness, as was the plaintiff's case, ought to be accepted as a fact because the Corporation has failed to give any worthwhile evideace to prove that the plaintiff was in any manner instrumental in bringing about her early death. I, thereforee, hold that the second and the third defenses of the Corporation have no foundation in fact and are entirely untenable.

(10) There remains to consider only the defense raised about the status and occupation of the plaintiff. It is said that he misdescribed himself as a 'tutor and photographer' while he was in truth a mere labourer working in Birla Mills and living on a meagre income of Rs. 120 per month. The trial judge was of opinion that the plaintiff's evidence regarding occupation was unsatisfactory He came to the conclusion that the plaintiff's main occupation was his employment in Biria Mills which he fraudulently suppressed in the proposal to which he subscribed when the policy was issued.

(11) The plaintiff and his witnesses deposed that the plaintiff was engaged in photography and tuition work as part time jobs to supplement his meagre income from the Mills. The witnesses of the Corporation denied this. On photography the Corporation's the plaintiff was learning photography in 1955-56 and that he photographed these two witnesses, though only 'experimentally' as Dw 6 said- Fateh Singh was unable to state whether besides himself the plaintiff had photographed others also. Dw 6 said that the plaintiff was a learner in photography in 1955-56 and that it did not fetch him anything. From the evidence it is clear that the pliantiff left the service of the Mills in April 1957 and took to photography as his sole occupation thereafter. On this evidence it will not be right to hold that the plaintiff had misdescribed himself as a photographer when he filled the form. That he had taken this as a new side line is clear. That he was not earning much from it cannot be denied. The plaintiff's own estimate of income from this source was the modest figure of Rs. 90 or Rs. 100 per month.

(12) The plaintiff also called witnesses to show that he was teaching some school children in his spare time and was generally getting Rs. 10 per student from private tuition. Some parents appeared whose sons and grandsons he had taught in his after shift hours at the Mills. The plaintiff is a metriculate and that he thought of augmenting his income from private tuition is, on a balance of probabilites, not incredible. True it is that like photography this occupation of coaching private students was not very remunerative. In view of his scanty income from photography and teaching it must be held, as was held by the trial judge, that the plaintiff's main stay in life was his income as a mill worker.

(13) The real question in this appeal is whether non-disclosure of his main occupation by the plaintiff invalidated the insurance policy. It is established on record that the plaintiff got employment in Biria Mills as an unskilled worker in 1950-51. He worked there in shifts. He was being paid according to the quantity of work he put in. He was working as a permanent machine man. His income was about Rs. 125 per month. In April 1957 he left the Mills for the world of photography.

(14) In the proposal form and the personal statement the simple question asked was: What is your occupation or profession The purpose of the question is not to enquire whether the plaintiff is engaged in a hazardous occupation. That he was separately asked in question No. 5 which reads:

'AREyou connected or likely to be connected with aviation. naval or military service or any hazardous occupation. State its exact nature.'

(15) It is not the case of the Corporation that the plaintiff was following any hazardous occupation and that they were nut prepared to accept that risk at ordinary rates. It is not their stand that the man's calling exposed him to special perils. What is said is that the non-disclosure of his real occupation by the plaintiff was in respect of a material fact and had he disclosed it the Corporation would not have accepted the risk of a person who was a mere 'labourer' in receipt of a 'meagre income' of Rs. 120 per month. It is said that the object was to induce the Corporation to enter into a contract of insurance which otherwise it would have refused had truth been told. Counsel for the Corporation went to the length of saying in his written submissions that 'it is a risk to c'iitcr into a contract with a person of little means because the poverty of the person itself is a motive for committing a fraud or some other misconduct.'. In other words, the plaintiff's sole disqualification was his poverty which disentitled him from taking a policy for Rs. 25,000, though the Corporation's actuary agreed that he would have recommended him for a policy of Rs. 5,000 but not more.

(16) This is a specious argument. The Corporation never enquired from the plaintiff about his income or his independent means in life. There is no question in the proposal paper to which he subscribed in writing regarding income or salary or sources of support. This is clear from the policy itself which says that 'this policy is free from all restrictions as to travel, residence and occupation.' This shows that neither travel, nor residence nor occupation have any 'bearing upon the risk', to use Lord Blackburn's phrase (Union Insurance Society v. George Wills 1916) 1 A.C. 281(1). It is only the hazardous occupation which makes a difference to the insurer because in that case he is not prepared to accept the risk at normal rates. Then it does 'bear upon the risk'. Then it is material to know the occupation of the man.

(17) In Halsbury's Laws of England (4th ed.) Vol. 25 p. 213, it is said that as regards proposer's status 'some latitude is given as regards occupation but the risk may well differ according to differences in occupation.' That some latitude is given as regards occupation is illustrated by an old English case which was decided more than 100 years ago. This is the case of Pen-ins v. Marine & General Travellers' Insurance (1859) 121 E R 119. A man was questioned as to his calling. He described himself as an 'esquire' whereas he was in fact engaged in trade as an iron monger and said nothing about it. It was held that this did not that he might have stated; but that only made his statement imperfect, not untrue, and the court would not deem such an omission to amount to a misrepresentation. Cockbum C. J however, dissented from the decision, and considered that by calling himself an 'esquire' the iron monger virtually described himself as of no occupation, and conveyed the impression that he was not in trade.

(18) The insurance company contended in the action brought on the policy that this was a case of misrepresentation and concealment. But the majority of the judges in the Queens Bench held in 1859 that the policy was not rendered void by the plaintiff's omission to state that he was an iron monger. The decision of the majority was affirmed on appeal by the Court of Exchequer Chamber in 1860 (See page 122 of the Report). On principle I do not see any distinction between the English case of 1859 and this Indian case of 1959, if we go by the year of repudiation of the claim.

(19) The question is whether an inaccurate description of occupation in the proposal for insuraace avoids the policy. I think not. The plaintiff would have been insured at the same rate of premium had he described himself as a factory hand or a mill worker. The same premium would have been payable in that case. There is no fraud upon the Corporation nor have they sustained any injury by plaintiff's description of himself as a photographer and tutor. I have held that the description is not untrue because the plaintiff was in fact engaged in photography and teaching. These pursuits were not very profitable it is true.

(20) But it is said that had the plaintiff truly described himself as a worker further enquiry would have been made which might have resulted in the rejection of the proposal. I think occupation was not a material fact unless it was hazardous in nature to which question No. 5 is separately addressed. This separate question (Question No. 5) tends strongly to show that answer to the question regarding occupation when it is not hazardous is not a material matter. It would be so if income were asked. Income may be asked to find out the assured's capacity to pay the premium regularly. But there is no risk to the insurer if the assured is unable to pay the premium. The policy lapses. The assured losses. The insurer is not worse of. He has already received one year's premium, as in this case. The proposer's financial circumstances may change for better or worse. He may or may not be in a position to continue the policy. Occupation will be material if it affects the risk. Some occupations arc more hazardous than others.

(21) In this case the statement regarding occupation is true so far as it goes. The concealment of his occupation as a worker in the Mills has not been shown to me to be material, and as no fraud was involved in it, it is not such a concealment as can be held to render the policy void. At best the plaintiff has not stated all that he might have stated. The statement is not untrue but simply imperfect. He has not told an untruth. There is no falsehood in his statement. I should be sorry to be obliged to decide against the plaintiff's honest and just claim.

(22) In Chitty on Contracts (24th ed.) Vol. 2 p. 701 it is said :

'STATEMENTSare considered as a whole and will not constitute misrepresentations if inaccurate only in trivial or immaterial particulars which did not colour the whole picture.'

(23) In Mac Gilivray on Insurance Law it is said that 'if the omission amounts only to non-distlosure, it cannot affect the validity of the policy unless it was material to the risk.' (4th ed. Vol. I p. 402). A more accurate statement by the plaintiff about his service in the Mills would not have varied the premium and thereforee the error is not material.

(24) Section 45 of the Insurance Act 1938 provides that no contract shall be avoided by reason of the inaccuracy of a statement in the proposal leading to the issue of a policy unless it is material to the contract. The question of materiality in any contract of insurance is a question of fact. It is 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 [See Mutual Life Insurance Co. v. Onterio Metal Products 1925 Ac 344 . Rules of universal application are not thereforee to be expected. One illustration can usefully be given from an American case. It is not a false representation for a pregnant woman to state that she is in sound bodily health, and she is not required to inform the company of her pregnancy. (Merriman v. Grand Lodge, 77 Neb 544) (4).

(25) Section 45 lays down in unmistakable language (1) that no policy shall be avoided by reason merely of any misrepresentation or inaccuracy in a statement made by the insured in the proposal form, whatever the terms of the policy might otherwise import, and (2) that any misrepresentation which may avoid the contract must be a misrepresentation or suppression of a fact and must be material to the contract (3) misrepresentation or suppression has to be fraudulent to avoid the policy, and (4) the policy holder must have known at the time of making the statement that it was false or that it suppressed facts, which it was material to disclose. Any inaccuracy on any point in any of the answers, however immaterial, cannot be fatal to the policy. (See Mithnolal Nayak v. Life Insurance Corporation of India, : AIR1962SC814 .

(26) Counsel for the Corporation maintained that had the plaintiff disclosed that he was a labourer in the Mills the insurers would have been put on a 'trail of inquiry', to use his expression, which would have revealed to them his meagre means. This argument is, in my opinion, unsound. It amounts to saying that even if the non-disclosure on which the insurer is entitled to rely is not in itself sufficient turn his purpose, it would have led him to the discovery of a different nondisclosure, i.e. income, on which, ex hypothesi, he is net entitled to rely. The cause of complaint is suppression of occupation as a worker. Not of income, meagre though it was. But it is said that it would have put the insurer on track of the income. If the policy does not allow the question of income from entering by the front door, it can- not be allowed to climb in through the window. (See Zurich General Accident and Liability Insurance Co. v. Morrison (1942) 2 Kb 53 (59) per Lord Greene M. R.)

(27) The insurance policy recites that the proposal and the declaration containing the replies given by the assured to the questions put by the medical examiner shall form 'the basis of this contract' of insurance between the assured and the insurance company. In the proposal form and the personal statement filled up before the policy was issued the intending assured was required to state his occupation and nothing more. There he said that he was a photographer and a tutor. He did not disclose that he was also a mill worker. After the death of his wife when he made the claim he found himself accused of having given' a false answer. He was accused of everything-misrepresentation, suppression, concealment, non disclosure, untrue averment.

(28) The ground of complaint is two fold. One that the plaintiff was guilty of misrepresentation and secondly of concealment. It is said that he misrepresented himself as a photographer and tutor which he was not and that in fact he was a labourer which he really concealed. What is said is that if the assured had disclosed to the insurer they would have made enquiries which would have led them to discover the income of the plaintiff. It is pleaded in' the written statement that when Sita Rani died and the claim was made the insurance company conducted investigations and it transpired that the plaintiff was working as labourer in Biria Cotton Mills at a total monthly remuneration of Rs. 120. It is contended that had this fact been disclosed it might have led to the rejection of the plaintiff's proposal of insurance for a 'huge sum' of Rs. 25,000.

(29) The case of the insurance company is that the plaintiff's financial status was not such that he could afford a policy for such a 'huge amount' or that a prudent insurer would have given him one for this large sum. The plaintiff's meagre income colours the whole of their evidence.

(30) The Corporation called in evidence an actuary, one M. L. Aggarwal. He said that he was an expert in life insurance business. He stated that with regard to a proponent the actuary has to consider his financial status and the standard of living. He elaborated tills point and said :

'Iwould be prepared to grant a policy of Rs. 25,000 to a person in Delhi who states his income as tutor and photographer. I would take it a case of an overinsurance involving considerable moral hazard, if a proposal for Rs. 25,000 is received on he life of a labourer in a mill. To a person earning Rs. 125 to Rs. 150 per month I would not grant a policy for more than Rs. 2000 to Rs. 5000. Because we go by financial status we would consider a labourer in a nill at a lower level than others having an income of say Rs. 400 to Rs. 500 per month. A labourer in a mill will not of course be considered a respectable for determining the amount of insurance that can be granted to him.'

(31) In cross-examination the witness was asked if there was any specific column requiring the proponent to state his income. He admitted that there was none. He said :

'THEREis no specific column in the aforesaid form inquiring if the income of the proponent is sufficient to pay the premium.'

(32) This expert opinion was sought to be tendered in evidence to show that the income of the proponent was a material fact. This is the substance of the expert's evidence.

(33) To the evidence of the expert I attach little weight. In many cases the fact speaks for itself and no evidence of experts as to insurance practice is required. Materiality is not, however, a question of belief or opinion tested subjectively. Halsbury 4th ed. Vol 25 para 370). In Mac Gillivray on Insurance Law, 5th ed. (1961) Vol. I p. 899 it is said :

'BUTbecause expert evidence of the materiality of certain facts may be admissible, it by no means follows that such evidence is required or admitted in every case. Some facts are so obviously material and other facts so obviously immaterial that the Court would dedine to hear evidence to the contrary. It is only when the matter is not so obvious one way or the other that evidence is necessary or admissible.'

(34) It appears to me that in this case the matter is so obvious that I ought to form my own' judgment from such knowledge as I have of insurance matters. It is unnecessary to see through the eyes of an expert.

(35) The plaintiff was never asked about his income. There is no question of any misstatement about income. In fact there was no statement about it. None was asked for. Whether he was a man of affluent or humble circumstances was never asked from the plaintiff. He was a petty photographer and a poor teacher when he took the policy. The evidence shows this. He was also a worker in the mills. It is uncharitable to call him a mere 'labourer'. The evidence of a witness called from Birla Mills (DW-7) shows that the plaintiff joined the employment of Biria Mills on 7th July, 1951 as 'a worker'. As a worker he was entitled to wages, bonus, leave, security of employment etc. But to call him a labourer is to deny the dignity of labour which attaches to a worker. The object of calling him a 'labourer' in the written statement is to disperage his station in life. His 'meagre income' and the 'huge amount' of the policy are placed in juxtaposition to highlight his extreme poverty. The insurer now derides the policy holder. But the plaintiff never made any representation about his income to the derider and the scoffer . He never said that he was a man of substance or that he was rolling in wealth, lo fact no enquiry was ever made from him. But now the Corporation. the successor of the insurance company, is attributing an importance to the question of income beyond all proportions.

(36) This single factor of meagre income colours the whole of then- evidence, as I have said. It looms large on the horizon. It dominates the landscape. The entire defense is founded upon' this edifice of 'mea- gre income.' It is said that the plaintiff at the time of making the statement leading to the policy was a man of straw. I do not agree. The evidence shows that he was earning nearly Rs. 300 per month. The solid fact remains that regardless of income and his humble circmstances in life the policy was issued to the plaintiff by an insurance company keen to get as much insurance business as possible in the days of pre-nationalisation and free competition. It there is no statement about income there can be no misstatement about it. I am convinced that had the fact complained of been disclosed the assured would have got exactly the same policy that was issued in this case and consequen- tly it was not obtained by non-disclosure of a material fact

(37) The fact is that what the Corporation regards as material is income. But they cannot rely on it as a defelice because it was never asked from the plaintiff. If financial status of the proponent is a material fact in the eyes of the insurers they should ask the question in plain terms. And if they do not I will say with Bankes L. J. that they are laying 'mere traps to catch the unwary.' [See Woodall v. Pearl Insurance Company (1919) 1 K. B. 593 . If the policies are I do not say designedly mere traps, the insurance companies must not be surprised if they are construed strictly against them. To attribute a quite unwarrantable importance to the income of the intending assured is to take him by surprise. Because afterwards he is accused of having given a false answer.

(38) Now I come to the law. Under the general law of insurance an insurer can avoid a policy if he proved that there has been misrepresentation or concealment of material fact by the assured. What is material is that which would influence the mind of a prudent insurer in deciding whether or not to take the risk, and if so, at what premium. I myself once tried on the original side a suit where the Corporation was enabled to escape liability because the material fact of the assured's heart trouble was fraudulently concealed from the insurer. (See Krishnawanti v. LJ.C. of India, : AIR1975Delhi19 .

(39) Materiality has to be decided on all the circumstances of the case. In this connection I will refer to the instructive case of Re Sweeney and Kennedy's Arbitration (1949) 82 LlL R 294 ). The question asked in the proposal was : Whether any of the proponent drivers was under 21 years of age And this was answered : No. An accident happened while the plaintiff's son, who was under 21, was driving. Mr. Justice Kingsmill Moore after referring to the fact that the law by granting a license to drive to the, son assumed he was competent to drive, said :

'IFinsurers take a different view of the law it is open to them indeed I would say, incumbent upon them to make this clear by the insertion of specific provision in the policy and not to attempt to secure their ends by a side wind.'

(40) It is said that in this case by a material misrepresentation the insurance company was induced to enter into the contract of insurance. I do not agree. They have not been deceived in any material particular. The assured's income cannot be inferred from the fact that the question of calling was answered, and that the party questioned declared that his answers were true. Although they have taken the premium they, the insurers, now claim they are protected from paying the amount of the policy on the specious ground that the income was not disclosed to them and thereforee the policy is void. The whole point thereforee turns on this. What was not asked from the proponent at the time he made the proposal and the personal statement obviously cannot form the 'basis of the contract'. There is no statement on the subject of income in the proposal or any other document 'leading to the issue of the policy', to use the words of section 45. Otherwise, one would be admitting by one door that against which the other was closed.

(41) What effect is to be given to the materiality of the question asked about occupation To see what is to ensue if the statement is inaccurate I will have to see whether the question of income meagre or substantial was at any time raised before the policy was issued. Was it asked from the assured The evidence entirely fails to convince me that the insurers, had they been told of the plaintiff being a mill worker, would have declined to issue a policy on precisely the same terms as those on which they did issue the policy in question. The witnesses on behalf of the Corporation have made a mountain of a mole hill, namely, the meagre means of the man.

(42) It is said that a true answer about occupation would have put the Corporation on inquiry as to the man's resources. In Guardian; Assurance Company Ltd. v. Condogianis(1919) 26 C L R 231, Mr. Justice Isaacs at p. 246 says

'ANDit must be remembered that unless the matter itself is directly material it is not open to the Company to say that it might have been indirectly material as leading to the discovery of other matters.'

(43) Although this was said in a dissending judgment which was not upheld by the Judicial Committee of the Privy Council, this part has been accepted as a correct statement of law in a recent case in Australia : Babatsikos v. Car owners' Mutual Insurance Co. Ltd. (1970) 2 L R 314 (II).

(44) I am not satisfied on the evidence of the expert that materiality has been established. If insurers want to know a man's means it is incumbent on them to ask a specific question and not to attempt to secure their ends by a side wind. Law knows of no such thing as 'constructive materiality'. On the whole case I have come to the conclusion that the Corporation has not discharged the burden of proving materiality.

(45) In India section 45 will govern the assured whatever the terms of the policy might otherwise import. The field of disclosure is defined by the legislature so that scales are not unduly weighted against the assured. The 'basis of the contract' theory does not apply. Otherwise the duty of disclosure will be enlarged by the express terms of the contract and the insurers will take extensive, and indeed unfair, advantage of the contractual freedom, as experience in the past has shown both in England and India. [See Dawsons Ltd- v. Bonnin (1922) A. C. 413 .

(46) What section 45 was designed to do was to abrogate the 'basis of the contract' clause and to provide that in future cases where it is sought to avoid insurance contract on the ground of incorrect statements in proposals or other documents, fraud and materiality in fact had to be shown and that materiality imputed or inferred by contract or by the asking of the question was no longer sufficient.

(47) The policy in the present case was repudiated after more than two years. It was done by letter dated 20/21st November, 1959. The burden under section 45 is on the insurer to show that the suppression of the fact that the plaintiff was a mill worker was a circumstance which it was material to disclose and its suppression was fraudulent and that the policy holder knew at the time of making it that his statement about occupation was false and that it suppressed facts which it was material to disclose. Nothing short of deliberate fraud has to be proved by the insurer if the policy is called in question after two years. I have come to the conclusion that the Corporation has utterly failed to discharge the onus.

(48) I think the insured has been very badly treated I should say shabbily. They have taken his premium. They have not been in the least bit misled by the answers which he has made. The insurer disputed the policy on three grounds. The second and third grounds were frivolous. They bring no credit, to the insurer. The first ground, of course, prevailed with the trial judge. But I think on the evidence led the insurer has not been able to prove his affirmative case. There was no question by the interlocator to the answerer about income. On occupation there was one. The plaintiff's answer to it cannot be said to have been made in had faith. There is no evidence to show this.

(49) The insurer has to show that misrepresentation or concealment is fraudulent. If it is innocent misrepresentation it will not be a ground to question the policy. It is true that the contract of insurance is one uberrimae fidei. But misrepresentation or concealment must be fraudulent to the knowledge of the policy holder 'at the time of making' the statement. Under s. 45 neither the English 'basis of the contract' theory nor the doctrine of warranty and its truthfulness will apply. Section 45 is a first step towards the statutory control of insurance contracts. In 1908 Fletcher Moulton L.J. said :

'Iwish I could adequately warn the public against such practices (i.e. traps) on the part of the insurance offices. I am satisfied that few of those who insure have any idea how completely they leave themselves in the hands 'of the insurers should the latter wish to dispute the policy when it falls in' [Joel v. Law Union and Crown Insurance Company (1908) 2 Kb 863. In the same vein Indian judges have given timely warning that to inspire confidence in the public claims ought not to be resisted on frivolous and reckless grounds'. This responsibility is all the greater after the insurance business has been nationalised [See Life Insurance Corporation v. Parvathavardhni, : AIR1965Mad357 .

(50) For these reasons I allow the appeal and set aside the judgment of the trial court and pass a decree for Rs. 25,000 with interest at 6 per cent per annum from the date of the suit till realisation and costs here and in the court below.

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