1. The father of the plaintiff in the suits out of which these appeals arise insured his life under the following policies:
---------------------------------------------------------Date. Company. Amount.Rs.---------------------------------------------------------5-11-1934 Tropical Insurance Co., Ltd. 9,00010-5-1935 Metropolitan Insurance Co, 10,000Ltd.13-6-1935 Lakshmi Insurance Co. Ltd. 10,00025-10-1935 Hindustan Co-operative Insur- 10,000ance Society Ltd.21-11-1935 Lakshmi Insurance Co. Ltd. 10,0009-3-1936 Venus Assurance Co. Ltd. 10,00019-5-1936 New India Life Assurance Co. 10,000 Ltd.11-8-1936 Metropolitan Insurance Co. 5,000Ltd.---------------------------------------------------------
The assured died on 18th January 1937. All the insurance companies repudiated their liability on the ground that there had been material misrepresentation on the part of the assured and the plaintiff challenged their action in suits filed by him in the Court of the Subordinate Judge of Devakottai. The defence in each ease was that in the proposal form the assured had falsely stated that he had never before made a proposal for life insurance, that he had understated his age by six years and that he had falsely declared that he had not suffered from any of the diseases specified in the personal statement which he was required to sign before the Medical Officer at, the time of his medical examination. The Subordinate Judge held that these allegations were true and that consequently the companies were entitled to repudiate their liability. In the alternative the plaintiff pleaded that he was entitled to a return of the insurance premiums which his father had paid. This plea was rejected except in respect of the Tropical Insurance Co. Ltd. In that case the Subordinate Judge held that the plaintiff was entitled to recover the premiums because the policy did not embody a condition that the company was to be entitled to retain the premiums paid in the event of the policy becoming void as the result of material misrepresentation on the part of the assured. Appeal Nos. 191 to 196 of 1942 have been filed by the plaintiff and Appeal No. 197 of 1942 by the Tropical Insurance Co. Ltd. which contends that the plaintiff was not in law entitled to a refund of the premiums.
2. In 1926 the assured made a proposal to the United India Life Assurance Co. Ltd., for the issue to him of a policy for Rs. 10,000 and in 1930 he made a proposal to the Sun Life Assurance Company of Canada for the issue of a policy for Rs. 20,000. Neither of these proposals was accepted as the proposer failed to pass the medical test. The declaration made by the assured that he had never made a proposal before 1934 was false. The plaintiff averred that his father was not the person who made the proposal in 1926 to the United' India Life Assurance Co., Ltd. or in 1930 to the Sun Life Assurance Company of Canada, but his evidence was disbelieved and the Court held that in both the cases the proposer was his father. Mr. Muthukrishna Ayyar has rightly stated that he cannot dispute the identity of the proposer and consequently the finding of the Subordinate Judge that the declaration of the plaintiff's father was false will stand. This is in itself sufficient to render the policies void and it is not necessary for this Court to consider the question of the age of the proposer or the answers given by him in the course of his medical examination.
3. Mr. Muthukrishna Aiyar has, however, pressed the contention that the Subordinate Judge erred in not directing the refund of the premiums, except in one instance. He conceded that if the policy included a forfeiture clause the plaintiff would not be entitled to a refund of the premium, but he said that the condition must appear in the policy itself. In only one policy was there such a clause, that issued by the Lakshmi Insurance Co. Ltd., for Rs. 10,000, on 21st November 1935. Except in the case of that company and the Tropical Insurance Co. Ltd., the assured signed a declaration in the following terms:
I, the undersigned, do hereby solemnly declare that the above written answers and those in reply to. the questions put by the company's Medical Examiner with reference to this proposal and also the statements that I have made in connexion with this proposal 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 and I do hereby agree that this proposal and declaration shall form the basis of the contract for the proposed assurance and that in case any of my answers or statements as aforesaid is found to be untrue or misleading the contract and with it the policy that may be issued in pursuance thereof shall be null and void and all moneys which shall have been paid on account of the assurance shall be forfeited to this company. I do also agree that in the event of this my proposal for assurance being accepted and my failing to complete the contract, I shall be liable to pay the sum of Rs. 16 (Rupees sixteen only) as compensation to the company and that the said amount may be realized by the company out of my money, if any, deposited with the company and/or by legal action.
This is the declaration required by the Metropolitan Insurance Co. Ltd. There are minor differences in wording in the declarations, required by the Hindustan Co-operative Insurance Society, Ltd., the Venus Assurance Co. Ltd. and the New Indian Life Assurance Co. Ltd., but it is common ground that they were all to the same effect. The policy of the Metropolitan Insurance Co. Ltd., commences with this recital:
Whereas the Metropolitan Insurance Co. Ltd., hereinafter called 'the company' has received a proposal and declaration for assurance, which proposal and declaration with the statements contained and referred to therein the proposer named in the schedule printed on page 2 hereof has agreed shall be the basis of the assurance, and whereas the company has received the first premium for an assurance of the amount and on the terms stated in the said schedule.
The policy then proceeds:
Now this policy witnesseth that in consideration of the premises and on condition that there shall be duly paid to the company the subsequent premiums as stipulated for in the said schedule the company shall, upon proof to the satisfaction of its directors that the sum assured has become payable in terms of the said schedule, be liable to pay the amount thereof at its Head Office in Calcutta....
Again it is common ground that the other policies, except those issued by the Lakshmi Insurance Co. Ltd., and the Tropical Insurance Co. Ltd., are substantially the same. It will be observed that the declaration signed by the assured contains an agreement by him that the company shall have the right to repudiate the policy and to forfeit all moneys paid by way of premiums in the event of any statement made by him proving to be untrue or misleading. This is sufficient in law to justify the forfeiture of the premiums, but when the policy itself declares that the proposal and the declaration form the basis of the assurance there is no room for argument to the contrary. In The Oriental Government Security Life Assurance Co., Ltd. v. Narasimhachari (1902) 25 Mad. 183, this Court held that neither Section 64 nor Section 65, Contract Act, applied to a case in which the policy of life insurance becomes void by reason of a breach of warranty on the part of the assured. Therefore the plaintiff cannot call these sections in aid and in all cases but one he is faced with his own agreement that the company should have the right of forfeiture in such circumstances. This is not all against him as we shall presently indicate.
4. Mr. Muthukrishna Aiyer has suggested that the decision of this Court in Krishna Chettiar v. Velayee Ammal A.I.R. 1938 Mad. 604 has bearing and aids him in his contention that the policy itself must embody the agreement, but an examination of the judgment shows that this is not the case. The Court there had to consider the effect of Section 6, Married Women's Property Act. That section states that a policy of insurance effected by a married man on his own life, and expressed on the face of it to be for the benefit of his wife, or of his wife and children, or any of them, shall enure and be deemed to be a trust for the benefit of his wife, or of his wife and children, or any of them, as the case may be. The question was whether the statements in the proposal form were to be regarded as part of the policy and the Court held that they should be so regarded because this was expressly provided for in the policy. That decision is confined to the interpretation of the section and nothing said in the judgment has application here.
5. In order to permit an insurance company to forfeit premiums paid in such a case as this it is not necessary that there should be an agreement to this effect. In England the right of a company to forfeit without an agreement has always been recognised in law, although equity required a company seeking the cancellation of the policy, to return the premiums paid as a condition for the grant of relief. Our attention has been drawn to the following passage in ' Macgillivray on Insurance Law,' Edn. 2, page 962:
Probably the principle upon which premiums are returnable in the case of fraud is equally applicable to all classes of insurance, and is as follows. If an action is brought at law to recover the insurance moneys, the insurers may defend on the ground of fraud, and are not bound to tender a return of premiums. The assured cannot bring a separate action or counter-claim for a return of premiums because in order to do so he would have to allege his own fraud. If, however, an insurer seeks relief which is purely equitable, and which could in former days have been obtained only in a Court of equity he must offer to return the premiums in respect of which he has never been on the risk. The insurer cannot therefore even on the ground of fraud, bring an action for rescission and delivery up of the policy without offering to return the premiums received. And possibly the Court would require a return of premiums in such cases even although there is an express provision in the policy that the premiums shall be forfeited to the company.
In view of the decision of the Court of appeal in Rivaz v. Geruss (1880) 6 Q.B.D. 222 this statement of the law so far as it concerns the Court of Chancery may be open to question. That was an action for the cancellation of a policy of insurance on the ground of concealment of material facts and it was expressly held that the defendant was not entitled to the return of his premiums. The statement is undoubtedly correct so far the present actions are concerned. It is a well-established principle that Courts will not entertain an action for money had and received where, in order to succeed, the plaintiff has to prove his own fraud, and the plaintiff's claim for the return of the premiums must be taken to be a claim for money had and received. This principle was discussed by the Court of appeal in the recent case in Berg v. Sadler and Moore (1937) 2 K.B. 158. The Master of the Rolls (Lord Wright) there said:
To maintain an action for money had and received he-'the plaintiff in that case' - has to prove the exact circumstances in which the money was paid, and the circumstances which he says entitle him on grounds of justice to have an order for repayment. If, however, he proceeds to that proof he can only establish his claim by proving facts which show that he was engaged in a criminal attempt to obtain goods by false pretences. The Court on well established principles will refuse to give its aid to any claim which can only be established by proving facts of that nature.
Romer L. J. said:
The money was paid by the plaintiff to the defendants in the course and for the purposes of an attempt on the part of the plaintiff to defraud the defendants. The fact that, owing to the vigilance of the defendants, the attempt was frustrated is, in my opinion, wholly immaterial.
Scott L. J. said:
He says he claims for money had and received upon the total failure of consideration of his contract The contract was, however, fraudulently induced. In my opinion, he is inevitably invoking the assistance of the Court to enforce that illegal contract when he frames his claim in that way and the maxim applies. Any other judgment would be contrary to the basic principles of justice.
In the present cases the assured induced the insurance companies to issue policies as the result of fraudulent concealment of material facts. In order to obtain the return of the premiums the plaintiff has to call in aid his father's fraud, and this the Court cannot allow. It follows that the Subordinate Judge erred in holding that the plaintiff was entitled to recover the premiums from the Tropical Insurance Co. Ltd., notwithstanding that there was no agreement between the assured and the company for forfeiture. For the reasons given the appeals filed by the plaintiff will be dismissed with costs and the appeal filed by the Tropical Insurance Co. Ltd., will be allowed with costs here and below.