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V. Srinivasa Pillai Vs. Agent of Life Insurance Corporation of India, Madras and anr. - Court Judgment

LegalCrystal Citation
CourtChennai High Court
Decided On
Case NumberAppeal No. 43 of 1970(P), against decree of 2nd Addl. Dist. J., Pondicherry in O.S. No. 6 of 1969
Reported inAIR1977Mad381
ActsIndian Contract Act - Sections 17; Insurance Act, 1938 - Sections 45
AppellantV. Srinivasa Pillai
RespondentAgent of Life Insurance Corporation of India, Madras and anr.
Cases ReferredL.I.C. of India v. Parvathavardhiniammal
insurance - insurance policy - section 17 of indian contract act and section 45 of insurance act, 1938 - appeal against order passed by court below dismissing claim of appellant on ground of suppression of facts - intentional or willful concealment or suppression of material fact constitutes fraud which will avoid policy - appeal liable to be dismissed. - - 1. the unsuccessful plaintiff in o. 6. a contract of insurance being one uberrima fides (utmost good faith) is a contract which has special features of its own and not withstanding the fact that prima facie it is supported by consideration and has all the facts of a contract within the meaning of a contract under the indian contract act, yet has certain peculiar advantages and disadvantages depending upon the disclosure or..........judge, pondicherry, is the appellant. a policy of insurance ex. a-4 was accepted by the life insurance corporation of india (hereinafter called the corporation) under the following circumstances. the plaintiff and his wife late ranganayagi took out a joint life endowment assurance policy for rs. 25,000 and paid the premium for the first quarter and obtained a receipt on 31-12-1959. ranganayagi however died a few days later, to wit, on 17-1-1960. on information about the death, the corporation made certain investigations and found that the policy has to be repudiated since certain material facts which the insured have to furnish were not given and certain other representations which were peculiarly within the personal knowledge of the insured were incorrectly stated. the corporation.....

Ramaprasada Rao, J.

1. The unsuccessful plaintiff in O. S. No. 6/69 on the file of the Second Additional District Judge, Pondicherry, is the appellant. A policy of insurance Ex. A-4 was accepted by the Life Insurance Corporation of India (hereinafter called the Corporation) under the following circumstances. The plaintiff and his wife late Ranganayagi took out a joint life endowment assurance policy for Rs. 25,000 and paid the premium for the first quarter and obtained a receipt on 31-12-1959. Ranganayagi however died a few days later, to wit, on 17-1-1960. On information about the death, the Corporation made certain investigations and found that the policy has to be repudiated since certain material facts which the insured have to furnish were not given and certain other representations which were peculiarly within the personal knowledge of the insured were incorrectly stated. The Corporation would also take up the position that Ranganayagi who was suffering from tuberculosis suppressed the fact and that she deliberately gave the information that she had delivered a child on 18-5-1959, when on investigation it was found as seen from Exs. A-3 and A-14 that the date of birth was 31-8-1959. As under the accredited policy governing the Corporation no policy of a woman would be accepted if she gave birth to a child within six months prior to the date of proposal and also for the reason that the insured were not fair in giving the requisite and material particulars, the Corporation resisted the claim and sought for a dismissal of the suit to recover the amount payable under the policy, which suit was instituted by the plaintiff, as the husband of Ranganayagi

2. In the reply statement, the plaintiff pleaded that there was no such material misrepresentation and the contract of insurance having become final and irrevocable, the money was payable. He denied that his wife was suffering from tuberculosis and reiterated that the last child was born to the lady only on 18-5-1959. On the above material pleadings, the following issues were framed:

1. Has there been suppression of the fact in the proposal and personal statement that Renganayagi was suffering from tuberculosis ?

2. Has there been suppression of the fact that she was under treatment within five years prior to the date of proposal, and whether false statement was made that she was of sound health and did not consult doctor within five years prior to the proposal ?

3. Whether she delivered a child within six months prior to the proposal and whether false statement was made that the last delivery was only on 18-5-1959 ?

4. Whether the defendant can avoid payment of the amount insured on the above grounds ?

5. To what relief are the plaintiff entitled

The learned trial Judge found each of the issues against the plaintiff and dismissed the action. It is as against this, the present appeal has been filed.

3. The learned counsel for the Appellant persuasively contended that there is no adequate proof that Renganayagi was suffering from tuberculosis at or about the time when the proposal for insurance was made and on a careful and fair perusal of the relevant documents filed in the action it cannot be reasonably said that Renganayagi suppressed any material facts or gave out deliberately any misstatements, so as to mislead a public body and gain an advantage for herself. The learned Counsel for the respondent-Corporation however laid stress upon the fact that as it is now proved beyond reasonable doubt that the certificate of birth, Ex. B-19 produced by the plaintiff related to a child born to a different family and as it has been established beyond doubt and not even in dispute before us that the last child of the plaintiff was born on 31-8-1959, as seen from Exhibit A-3, there has been a deliberate misstatement regarding a positive fact and that by itself is sufficient for the Corporation to negative the claim.

4. Exs. B-1, B-5, B-2, B-6 and B-3 are all documents which are usually taken while the insured offers to take a policy of insurance. Ex. B-1 is the proposal form made by Renganayagi and B-5 is a similar proposal for insurance made by the plaintiff. It is also common ground that in case a house wife is proposed for insurance her husband also should join and only a joint policy would be issued to the insured. Obviously therefore to satisfy this rule, both the husband and wife made proposals for insurance under Exs. B-1 and B-5. Ex. B-2 is the agent's confidential report regarding late Renganayagi and Ex. B-6 is that of the plaintiff. Ex. B-3 is an important document which contains various queries printed column-wise to which the Corporation expects fair, true and just answers from the proposers. Ex. B-8 is the Manager's Confidential report on Mr. and Mrs. Srinivasa Pillai (the plaintiff). Beyond the answers rendered by the insured whilst filling up the usual and prescribed forms in connection with the contract of insurance certain declarations or personal statements were also taken from the insured.

Ex. B-7 is one such personal statement made by the plaintiff. Ex. B-9 is a joint declaration made by both the plaintiff and Renganayagi. After going through such formalities as are required prior to the acceptance of the proposal of an insured, the policy was accepted under Ex. A-4. It is singular to find in this case that the proposal emanated on December, 27, 1959 and all the formalities were completed by December 31, 1959. The end of each calendar year is always considered to be a 'red letter day' for an insurance agent for it is that day on which he should reckon and compute the quantum of business done by him for that year and contemporaneously reckon jobs commissions payable on such business done. It can therefore be fairly taken that this is one of those policies which relate to the latest half of December 1959 which ought to have been taken at the behest and persuasion of the agent concerned so that he could secure increased business by the end of the year.

5. Ranganayagi within 10 days thereafter had a set back and she had to be admitted in the General Hospital Pondicherry on 10-1-1960 and she died a week later on 17-1-1960. The plaintiff in the normal course made a claim under Exhibit B-11 and the course of correspondence between the Corporation and the plaintiff under Exs. A-7, B-12, A-8, B-15, B-16 and B-17 shows that the plaintiff was anxious to push through the claim papers and get his claim settled on the basis of the insurance policy. The other relevant documents on one of the issues framed in this connection are the documents produced by the Doctor who was examined in this case. They are Exs. A-12, B-13 and 14. The Corporation after necessary investigation discovered that the plaintiff suppressed certain material facts. It was on that basis, as we said in the opening, the claim was rejected.

6. A contract of insurance being one uberrima fides (utmost good faith) is a contract which has special features of its own and not withstanding the fact that prima facie it is supported by consideration and has all the facts of a contract within the meaning of a contract under the Indian Contract Act, yet has certain peculiar advantages and disadvantages depending upon the disclosure or non-disclosure of material facts which form the foundation to create the consensus ad idem between the insurer and the insured. It is normal to expect in a contract of insurance-utmost good faith, that is the insured is expected to answer various queries and takes upon himself the responsibility to give true and faithful in formation about himself and naturally he must be prompt and honest in answering such questions and making such disclosures. Exts. B-1 to B-9 cannot be distinctively read and understood. They are all in the channel of one transaction, namely, the proposal for insurance, and therefore they have to be read together therefore they have to be read together and the cumulative effect of that information and details contained and disclosed in them have to be referred to and interpreted.

7. In the first instance, it is the insured's primary responsibility to answer the details which he or she has to compulsorily reply to besides furnishing such material information and true facts relating to himself or herself. the knowledge of such facts being not known or capable of being known to others. In particular when a lady is involved in a contract of insurance it is always necessary that the policy should be a joint policy in the policy should be a joint policy in the sense that both the husband and wife should join together unless otherwise exempted by the corporation. One peculiar feature of a policy in which a married lady is involved is that the Corporation does not accept the insurance policy if the lady concerned is either pregnant or if she has delivered a child within six months prior to the date of the proposal. In the case of pregnancy probably the Corporation might consider giving of an exception but, according to the Manual of Instructions given to their agents--Ex. B-22, it is made clear that proposals for assurance on the lives of ladies after a child birth will be considered only six months after delivery.

Where the menstruation has not been re-established even after six months from the date of delivery, the acceptance of proposals in such cases will be subject to the one year pregnancy clause. This special requirement as regards assurance on the lives of ladies is followed up by an express prohibition clause which reads that proposals will not be entertained on the lives of ladies, inter alia, where six months have not elapsed since last confinement. That the above are the administrative instructions which govern the employees of the Corporation whilst they exercise their functions as such are not in dispute. Therefore the question is as to what are the relative obligations or duties as between an insurer and insured ?

8. Contracts of insurance are based on the rocky foundation of utmost good faith. Such good faith is not a matter of art but has to be really and sincerely appreciated by the insured who propose their lives for insurance with the Corporation. It is because of the heavy social responsibility involved. the Corporation have laid down certain norms and guidelines which, to a normal person, may appear to be very stringent. Take for instance, Exs. B-1, B-2, B-5, B-6 and B-3. These forms contain various types of questionnaire which the insured is expected to answer diligently and truly. Among other things, Ex. B-3 contains column 12, which is particularly applicable for females. In Cl. 12(g) she should state the date of last delivery. We are now casually referring to these excerpts to show that the series of documents which an insured has to carefully peruse and answer in the course of the proposal for assurance are may and varied and any misapplication of the mind resulting in a misrepresentation of the disclosable fact, would ultimately strike at the root of the contract.

9. Having regard to the weight of such representations and the sincerity behind it we could classify such information which the insured is bound to give under the following heads: (a) Voluntary information; (b) answers to questions; (c) submission of details which are within the exclusive knowledge of the insured; and (d) details which evolve round immaterial particulars. In so far as voluntary information is concerned, the answers to queries or even submission of details regarding insignificant matters the insured might commit a bona fide mistake. If such answers or particulars do not strike at the foundation of the good faith contract, courts are very lenient towards the insured. But in a case where the insured gives such details which are exclusively within his or her knowledge then the question becomes somewhat difficult. There again the representations may be of two kinds that which is innocuous and that if proved to be false shakes the very foundation of the uberrima fides contract.

Not all information an insured gives in answer to an agent or in certain circumstances volunteered by the insured which ultimately is bound to be not quite correct is likely to shake such foundation of the contract. But all depends upon the facts and circumstances of each case. It is by now very clear that if in the information given either in answer to a question or in a declaration which the insured has to filed or in the matter of furnishing of details which are within the sole knowledge of the insured, there is a departure from truth and that is discovered by the Corporation, then it would be very difficult for the insured to sustain the claim on a prior considerations of bona fide belief and want of knowledge.

10. The Supreme Court in Mithoolal v. L. I. C. of India : AIR1962SC814 observed that consideration of material facts when making a proposal for insurance by one having knowledge and belief of fact would fall under S. 17 of the Contract Act and the policy issued would be vitiated thereby. The principle appears to be that if a fact which materially influences the making or not making a contract or determining whether to accept or not to accept the risk is a material fact it has to be correctly stated.

11. We have been harping upon the duties of the insured. There are reciprocal obligations on the insurer correlative to the duties of the insured himself. The insurer cannot take undue advantage of incorrect representation or material furnished by the insured which is harmless or which does not strike at the root of uberrima fides. Probably this was in view of the legislation when it introduced S. 45 of the Insurance Act which provides that if such a representation which is harmless or sometimes even harmful was allowed to continue and nothing happened to the insured for a period of two years from the date of acceptance of the policy then the insurer cannot ordinarily rely upon such a wrong detail. But the position however which is unassailable is that if the insured has knowledge of a fact which others cannot ordinarily have, then he should not indulge himself in suppressio veri suggestio falsi by making a suggestion which is false or suppressing a matter which is true. If deliberateness is writ large in the material furnished by the insured and if the documents disclose that the insured applied his mind at the time when a particular detail was called for then the court will be justified in coming to a conclusion that there has been an avoidance of a legal or moral duty on the part of the insured and would accept the contention of the Corporation that the claim is not maintainable.

12. In the instant case, a perusal of Ex. B-3 shows that the insured Renganayagi at the time when she filled up the column 12(g) had to think and fill it up. There is a scoring of a date against this column and a refilling of the date 18-5-1959 instead. Even in Ex. B-7, which is again a personal statement given by the plaintiff, we find a numeral 7 over written over 6 in the column regarding age. These two documents coupled with the fact that they remained unexplained till now as the plaintiff has not chosen to get into the box and explain, make it appear that both the insured (plaintiff and his wife) were conscious that they should correctly answer the query or furnish truthful information regarding the questions covered in the above column. In those circumstances it would appear that both the husband and wife made a joint declaration under Ex. B-9 saying that all the statements and replies given in the formal documents signed before acceptance were true and they would also add that the said statement s and answers shall be the basis of the contract of assurance between them and the Corporation and if any untrue averment be contained therein, the said contract shall be absolutely null and void. No doubt, normally, nullity does not arise from a mutual contract between parties if it is otherwise enforceable under law. But as we said if the above representation regarding the date of birth of the last child to Renganayagi is wrong, as is now proved to be a false declaration, then it has to seen whether the Corporation is till liable to respect the claim made by the survivor of the insured, namely, the plaintiff.

13. Before we consider this aspect we would like to state at this stage that the plaintiff who was throughout a shadow of his wife, who was the principal insured in the case and who obviously assisted her in the filling up of the required forms, etc. and in completing the formalities would avoid the box for reasons well known to him. It may be that he did not want to perjure himself or he wanted to avoid the box to avoid searching cross-examinations. Whatever may be the reason, he kept himself away from the box and no explanation has been given as to why he stood out of it.

14. The learned counsel for the appellant would however say that whatever may be the implication in the non-examination of the plaintiff, the corrections in Exs. B-3 and B-7 may be due to the fact that the insured were not very sure of the birth of the last child and as in the ultimate analysis the date furnished happens to be an incorrect one, it cannot be said that the insured have wantonly or deliberately given a statement knowing it to be false. We are unable to agree with this contention. If at all anyone would speak to the birth of a child, it is the mother in the first of a child and particularly a few months before the proposal for insurance in this case, should be fresh and green in the minds of the parents or at least the month in which the baby was born should be fresh in their minds. Whilst it appears in this case that Ex. B-19, the document produced by the respondent herein originally, was not referable to the family of the plaintiff at all. Ex. A-3 which is a document which is not in controversy, establishes that the child was born on 31-8-1959.

15. Applying the principle that the proposals of ladies would not be accepted if she last delivered a child within six months prior to the date of proposal, the Corporation-it could reasonably be presumed-would not have accepted this proposal at all if there was a true disclosure of this material fact. It may be, as was contended, not a deliberate false statement, but it is certainly a suppression of a material fact. That is because the primary information of the birth of a child being within the exclusive knowledge of the parents and that not having been correctly given at the appropriate time in the relevant form it appears to us that there has been a deliberate omission and a conscious avoidance of duty on the part of the insured.

16. In Balkrishna v. New Indian Assurance Co. : AIR1959Pat102 , Division Bench of that Court for the reason that the family did not correctly give the source of her income observed:

'If any of the statements in the proposal form or the declaration form accompanying the proposal form made by the assured and which have been made the basis of the contract are found to be untrue, the contract of insurance would be void and unenforceable in law, irrespective of the question whether the statement, concerned is of a material nature or not'.

Of course, the proposition has been very broadly stated by the learned Judges. But suffice it however to say that in the instant case there has been a suppression of a fact which is to the knowledge of the parents and no acceptable explanation having been given by the husband who is the plaintiff in the action, it has to be reasonably inferred that there was a design or motive behind the insured in prevaricating in furnishing the material information. It is not in dispute that if the correct date of birth was recorded by the insured the Corporation would not have accepted the proposal. If indeed they have accepted the proposal and issued a policy they would be the sufferers for it. But on the basis of the suppressed or deliberate incorrect information they acted and, in our view, they could avoid the contract on the ground that under Ex. B-9 the parties themselves vouched to the correctness of such statement and also held out that the contract could be null and void if any particulars in such statements were found to be incorrect. No doubt, the Insurance Act of 1938 was not applicable to the State of Pondicherry at the time when the policy was issued. But in a book--Traite Pratique of Droit Civil Francais by Marcel Planiol and Georges Ripert (Volume II Page 693) Art. 21 states:

'Independently of ordinary cause of nullity, and subject to provision of Art. 81, the contract of insurance is null in case of reticence of intentional false declaration on the part of the insured...'. This is a undoubtedly in consonance with the well laid principle which was accepted by our courts of law while applying the ordinary nations which revolve round a contract uberrima fides.

17. In A.I.G. Insurance Co v. S.P. Maheshwari : AIR1960Mad484 , a Division Bench of our Court quoting Corpus Juris Secundum adopted the following edict therein; 'An intentional or wilful concealment or suppression of a material fact constitutes a fraud which will avoid the policy'.

18. In L. I. C. of India v. Parvathavardhini Ammal, : AIR1965Mad357 , the learned Judges ruled out the application of caveat emptor to uberrima fides contracts and said that non-disclosure of material facts would go to the root--it being regarded as fatal to the validity of the contract. In the instant case, therefore, we are bound to conclude that Renganayagi, as the primary insured and the plaintiff, who was running the race along with her, deliberately gave the incorrect information regarding the date of birth of the last child and that information obviously goes to the root of the matter as it is the avowed policy of the Corporation that no policy on the life of a female is accepted if she has delivered a child within six months prior to the date of the proposal. This is enough to dispose of the appeal. But the learned counsel for the appellant referred to the facts revolving on the other issue also.

19. We may at once state that the Corporation has not established beyond doubt that the lady was suffering from tuberculosis on the date when she was admitted into the Hospital. P.W. 1, who is the family doctor to the plaintiff, would swear that Renganayagi was not suffering from tuberculosis and that if he had any doubt that either before or after delivery she was suffering from tuberculosis he would have referred to a T.B. Specialist. He would also say that vomiting of blood might suddenly occur due to peptic ulcer. D.W. 1, is the only doctor examined on the side of the defendants and he is not a specialist in T. B. He was not in charge of the T. B. ward in the hospital in which Renganayagi was admitted. He was of course attending on her but not regularly for all the seven days in which she was in the Hospital. He should concede that Dr. Paviot was T. B. Specialist in the Hospital and he did not ask Dr. Paviot to give a report as to whether Renganayagi was suffering from tuberculosis.

He would say that mantouxtest was one of the positive tests to show whether a person suffers from tuberculosis or not but he was not sure whether such a test was done on Renganayagi. He would only say that he issued the certificate--Ex. B-14 and that he meant that the patient was suffering from tuberculosis of the lungs because he saw blood coming out of her mouth. The certificate of treatment has not been produced excepting Ex. B-13 which is a report from which he would speculate in the witness box about the disease which inflicted Rengenayagi. From the nature of the evidence given by the General Practitioner, as he is not as expert, who would not even take an X-ray to find out there was tuberculosis of the lung, we are unable to place reliance on his testimony to hold that Ranganayaki was suffering from tuberculosis. It is unnecessary to go into the question any more. We express our dissent on the finding of the lower court on this issue.

20. The plaintiff has suffered enough. He is losing the appeal as well. We have already said that the Corporation should not only do justice but appear to do it. As pointed out by the learned Judges in L.I.C. of India v. Parvathavardhiniammal, : AIR1965Mad357 Life Insurance Corporation should not put up a fight on the pattern of ordinary litigant. We have already referred to normal state of affairs which has been referred to by other High Court also in their judgments about the awakening in a zealous agent to bring about a contract of insurance by persuasion and by his ability and that too in record time without giving full opportunity to the insured to think and give out the particulars.

21. The appeal is therefore dismissed but there will be no order as to costs in this appeal and the decree as to costs in the trial court, in the peculiar circumstances of the case, is set aside.

22. Appeal dismissed.

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