1. The Hindusthan General Insurance Society Ltd., by its General Secretary, the defendant in a suit for recovering of a sum of Rupees 3715-20. on the basis of an insurance policy taken by him, is the appellant in this Letters Patent Appeal.
2. The plaintiff has insured his lorry MDS -4779 with the defendant. Theperiod of insurance was from 11-8-1962 to 10-8-1963. On 25-1-1963, the lorry met with an accident, as a result of which the claim was made by the plaintiff.
3. The only point that arises in this Letters Patent Appeal is whether the Insurance Company can repudiate its liability under the Policy on the around that there was a material misrepresentation in his proposal for the issue of the policy. In the proposal made by the plaintiff, the particulars of the vehicle to be insured is given as follows :
Registered number of the vehicleMDS 4779 Make of vehicleTata Mercedes BenzTYPE of bodyOpenTreasury Horse power or C. C. 30.2Year of manufacture 1961Proposer's estimate of present valueRs. 35000
Under the column 'Licensed carrying capacity', which is important for our purpose, the capacity is mentioned as '5 tons'.
4. On this proposal, a policy was issued by the defendant on 20-8-1962. The particulars given in the proposal, as copied in the column relating to the description of the vehicle and in the column 'Limitation as to use', the policy provides as follows:--
'Warranted that the weight of the goods carried by the withindescribed vehicle shall at no time exceed 5 tons or the licensed carrying capacity of the vehicle whichever is less.'
It is common ground that the description given in the proposal as the carrying capacity licensed as 5 tons is not correct. The licensed capacity is admitted to be 5,392 tons. The point that arises for consideration is whether the furnishing of an incorrect information, viz., the licensed carrying capacity as 5 tons, when it was actually higher, is a material misrepresentation, which would entitle the Insurance company to repudiate the policy. Lengthy arguments were addressed as to file nature of contract uberrima fides, and as to whether misrepresentation is necessary when the basis of a contract was the statement in the proposal.
5. We do not propose to refer to the cases cited or discuss the law on this aspect, for the appeal can be disposed of on merits.
6. The trial Court found that the company would not have accepted the risk at a lower premium for a lorry, which called for higher premium as per the schedule of rates of the defendant. It found that but for the misdescription given in the proposal, the defendant would not have accepted the risk of thelorry at the rate of the premium paid for it. Therefore, he concluded that the misdescription with regard to the carrying capacity of the vehicle is a material misrepresentation and that the defendant company is entitled to avoid the insurance on account of this.
7. The lower appellate Court expressed the same view. It held that the statement of the assured found in the proposal in relation to the carrying capacity of the vehicle was a material statement, which went to the root of the contract and was not descriptive of the risk and the insurance company was entitled to avoid the contract.
8. In the second appeal, the learned Judge took a different view and held that the insurance company cannot repudiate its liability. We will refer to the reasons of the learned Judge presently.
9. We have no hesitation in accepting the conclusion arrived at by the trial Court and the lower appellate Court. While admittedly, the licensed carrying capacity was 5,392 tons, in the proposal form, carrying capacity was mentioned as 5 tons. It may be noted that according to the schedule of rates of insurance premium a lorry with more than 5 tons capacity will have to Pay Rs. 150/- for each additional ton or part thereof. There is an additional fee regarding liability to public risks, which is in the order of about Rs. 20. If the proposal had mentioned that the licensed capacity was more than 5 tons, the Insurance company would certainly have demanded a higher premium. The policy provides that the weight of the goods carried in the vehicle shall at no time exceed 5 tons or the licensed carrying capacity of the vehicle. whichever is less. If the licensed capacity was higher than 5 tons it would have charged the higher premium and would have permitted the lorry to carry up to the licensed capacity.
10. In our view, it is clearly because of the misrepresentation in the proposal form that the licensed carrying capacity was 5 tons the Insurance company issued this policy, at this rate and on these terms. As the Insurance company had been induced because of the misrepresentation, the company is entitled to repudiate the contract.
The learned Judge stated the law asfollows;
'It would be seen from the facts set out in this case that the insurance company has stipulated that the proposal shall be the basis of the contract and the proposal shall be deemed to have been incorporated in the policy. In cases of such policies.
it is now well settled that the answers to the questions of the proposal form were the-basis of or condition precedent to the liability of the insurer under the contract. As already stated, it is unnecessary for us to go into the question of law for on facts, we are satisfied that the Insurance Company was. in fact, misled by the misrepresentation. The basis of the learned Judge's conclusion is the clause in the insurance policy, which runs as follows;
'Warranted that the weight of the goods carried by the withindescribed vehicle shall at no time exceed five tons or the licensed carrying capacity of the vehicle, whichever is less.' The learned Judge was of the view that the term of the Policy would mean that the insured is liable to pay premium on the basis that the vehicle could carry only five tons irrespective of its licensed carrying capacity. Great stress was laid by the learned Judge on the words' whichever is less' as they contemplated that the licensed carrying capacity might be more at the time of the issue of the policy, or increased subsequently. According to the learned Judge. unless the lorry carried a load of more than five tons, the policy would cover the risk. We are unable to accept this contention, for we are of the view that the learned. Judge has not considered the question as to whether the Insurance company was misled by the misrepresentation or not. The learned Judge has completely missed the fact that if the carrying capacity is over five tons, the Insurance company is entitled to charge a higher premium of Rs. 150 and the Insurance company would certainly not have issued the policy without collecting the extra sum of Rs. 150 in any event.
11. In these circumstances, we are unable to accept the view of the learned Judge that the clause under the policy was intended to cover risks only when the lorry was carrying less than five tons and that there was no misrepresentation. We are satisfied that there had been material misrepresentation in the proposal form regarding the licenced carrying capacity but for which the Insurance company would not have issued the policy. In the circumstances, the Insurance Company is entitled to repudiate the claim. We allow the appeal with costs.