S.K. Chakravarti, J.
1. The only point that arises for determination in this appeal is as to whether a contract of insurance is liable to be avoided by the insurer on account of the fact that there has been a misrepresentation with regard to the quality of the goods insured.
2. M/s. Sova Chand Fushraj of Jalpaiguri booked a consignment consisting of 38 double gunny bags said to contain Pekoe Dust Tea weighing 68 maunds 35 seers under Invoice No. 4 R. R. No. A 102241 dated the 10th February, 1952 at the Jalpaiguri Railway Station on the North Eastern Railway for carriage to and delivery at Chitpore, a station on the East Indian Railway. The plaintiff claimed to be an endorsee of the Railway Receipt for valuable consideration and admittedly this consignment was insured by him, with the defendant Insurance Society, hereinafter referred as the Society, under policy M. J. 5138 dated the 20th February, 1052 and it covered all risks including theft, pilferage, nondelivery etc. The sum insured for was Rupees 14,000 and Rupees 70 as the premium due thereon was duly accepted and receipted by the defendant Society. The Consignment did not reach in time and so the Society on behalf of the plaintiff carried on correspondence with the Railways. Some months thereafter an intimation was sent by the Railways to the effect that the goods had arrived, and the plaintiff, accompanied by the lawyer of the Society, called at Chitpore Railway Station, and it was found that the consignment offered was not the consignment booked. The plaintiff thereupon refused to accept it, and admittedly, at the instance of the Society, a suit was instituted against the Railways for compensation for non-delivery of the goods. This suit was registered as Money Suit No. 18 of 1953 in the Sixth Court of the Subordinate Judge at Alipore. The Railways contested the suit alleging inter alia that the consignment was not of Pekoe Dust. The learned Subordinate Judge, on the evidence, came to the conclusion that it was ordinary dust tea which had been booked and not Pekoe Dust, that the consignment which was offered was not the consignment which had been booked, and found the value of tile consignment at the rate of Rs. 1/9/-per pound and valued the compensation for the consignment at Rs. 8593/12/-. After deducting the freight therefrom, the learned Judge found that a sum of Rs. 8,422/- would be due from the Railways to the plaintiff as compensation for non-delivery of the consignment booked and decreed the suit in part for the above sum with proportionate costs thereon (Ext. E). During the pendency of this Money Suit against the Railways, the plaintiff filed the instant suit against the Society claiming the sum of Rs. 14,000/-from it together with a sum of Rs. 3,360/-by way of interest at 8 per cent. The Society denied this liability. But the learned Judge held that the Society was liable and as admittedly a sum of Rupees 6,356.78 was received by the plaintiff from the defendant, decreed the suit in part for the balance namely for the sum of Rupees 4.643-22. The learned Judge allowed interest at the rate of 4 per cent, and reduced the claim on account of interest to Rs. 1,680/-. The result, therefore, was that he passed a decree in favour of the plaintiff for the sum of Rs. 6,323.22 with full costs.
3. Against this judgment and decree the Society has filed this appeal, and on its behalf, Mr. S. K. Lahiri, learned Advocate appearing for it submits that as the contract of insurance was in respect of Pekoe Dust Tea, whereas as a matter of fact ordinary dust tea had been booked, there has been a misrepresentation, and the contract is liable to be avoided by the Society, and, accordingly, the Society would not be liable for any sum to the plaintiff.
4. The first point in this connection that arises for determination in as to whether the consignment in question contained Pekoe Dust or ordinary dust tea. If it did contain Pekoe Dust Tea, the defendant's liability would be there and cannot be avoided. If it was ordinary dust tea which had been booked, a further question would arise as to whether in the circumstances of this case, the Society would be entitled to cancel this contract of insurance. We have already mentioned that according to the Insurance Policy (Ext. C) and the Proposal Form (Ext. B), the consignment which war, insured was Pekoe Dust Ten.
5. There can be no doubt of the fact, that, prima facie, in view of the contract of insurance and the proposal form as also the Railway Receipt, the onus would be entirely on the defendant Society to prove that what was booked was ordinary dust tea. Mr. Labiri on behalf of the appellant relies on. the judgment in Money Suit No. 13 of 1953 to show that the consignment did actually contain ordinary dust tea and not Pekoe Dust Tea. We have read the judgment carefully and we agree with. Mr. Lahiri that the consignment in question did contain only ordinary dust tea as was found by the learned trial Judge in Money Suit No. 18 of 1953, in this suit also the plaintiff did not examine any witness to show that Pekoe Dust Tea had been booked. The judgment in Money Suit No. 18 of 1953 would certainly bind the plaintiff and the Railways, and possibly also the defendant Society, inasmuch as the evidence is undisputed that whatever was possible to be done in that suit on behalf of the present plaintiff was done by the Society itself. We have, therefore, to come to this conclusion that the consignment in question contained ordinary dust tea and not Pekoe Dust Tea and that actually there has been a misrepresentation regarding the quality of the goods, both in the proposal form as also in the Policy of Insurance.
6. Mr. Amarendra Mohan Mitra, learned Advocate appearing for the respondent, submits that even if there was any misrepresentation, it was not done wilfully by the plaintiff, and that the plaintiff had no knowledge of the quality of the article which had actually been booked. In spite of the evidence of the plaintiff, we are satisfied from the evidence that the consignment had been booked by M/s. Sova Chand Fushraj and not by the plaintiff, and, in the circumstances, the plaintiff is entitled to get the benefit of doubt in this respect, or, in other words, the evidence does not show conclusively that the plaintiff was aware of the fact that ordinary dust tea had been booked. In this connection it should also be noted that both in Money Suit No. 18 of 1953 and also in this suit, the trial courts found that the plaintiff was an endorsee for valuable consideration or, in other words, that he paid a sum of 14,000/- for it. It is a matter of common ground that ordinary dust tea could not be valued so much. That would also show that the plaintiff was not aware exactly of what was in the particular consignment in question. The conclusion, therefore, is that there has been a misrepresentation of the quality of the goods at the time of the insurance, and there has not been any fraud on the part of the plaintiff in this respect.
7. Mr. Mitra contends that In view of this finding, the Society would not be entitled to avoid the contract of insurance as it is only in a case of fraud in respect of policy of insurance, that it can be avoided and not otherwise, Mr. Lahiri, on the other hand, submits that this misrepresentation regarding the quality of the goods is sufficient by Itself to entitle the Society to treat the contract as cancelled. In our view each party has put its case in very wide terms and the truth, as usual, would lie in between, A contract of insurance Ss nonetheless a contract and the provisions of the Contract Act of 1872 would apply to such a contract The Marine Insurances Act which had come into operation on 1-8-1963 would not obviously apply to this Contract. Under Section 19 of the Contract Act an agreement is voidable at the option of the party whose consent to the agreement was caused by coercion, fraud or misrepresentation. It is, clear, therefore, from this Section that the Society is entitled to avoid a contract in case its consent was caused by misrepresentation. At the same time it cannot be stated that every misrepresentation would render the contract liable to be cancelled. That would be clear from the Explanation to Section 19. Under this Explanation a fraud or misrepresentation which did not cause the consent to a contract of the party on whom such fraud was practised, or to whom such a misrepresentation was made, does not render a contract voidable. The phraseology of Section 19 would also indicate that. It is only in case where the consent had been caused by misrepresentation that it can be avoided. Of course a contract of insurance is a contract uberrima fides, and every fact of materiality must be disclosed, otherwise there is good ground for rescission of the contract, and if there are any misstatements or suppression of material facts, the policy can be called In question, (vide New India Assurance Co. Ltd. v. Sulochana Chowdhurani, AIR 1962 Assam 65). 'There must be utmost good faith on the part of the assured. This imposes a duty and an obligation on the assured to make a full disclosure of all material facts which would affect the mind of the insurer whether to accept the risk or not, and on what terms. The duty is to disclose material facts only. A fact which is the subject-matter of a question In the proposal which the assured is required to answer must be considered to be a material fact, so that a false answer will viti-ate the policy in terms of the contract itself. But a fact may be a material fact, even though it is not the subject-matter of a question in the proposal, if the knowledge of that fact will affect the mind of an ordinary insurer to accept the risk. If it is so, it is a material fact and non-disclosure or concealment of such a material fact will avoid the policy, even though there is no fraud and the concealment is innocent.' (vide Rohini Nandan Goswami v. Ocean Accident and Guarantee Corporation Ltd., : AIR1960Cal696 ). Incidentally this decision would also negative the plea raised by Mr. Mitter to the effect that it is only when fraud Is proved on the part of the assured, that a contract can be avoided. It Is clear, therefore, from the decisions referred to above, that It is not each and every misrepresentation which would render a contract of insurance liable to be avoided. But if the misrepresentation is on a material fact, only then, it can be questioned. Now what would be a material fact would depend on the facts and circumstances of the particular case. In the Calcutta case referred to above, it has been laid down that it would be a material fact if the knowledge of that fact would affect the mind of an ordinary insurer to accept the risk, or in other words, the insurer would not have taken the risk if that had been within his own knowledge. The question in that case which has to be asked is, as to whether, if the insurer had known that the goods in question were ordinary dust tea, would it have accepted the risk for the sum of Ruppes 14,000/-? The answer to this question can only be found from the facts and circumstances of this case. The proposal form as also the Policy of Insurance, have been made exhibits in this particular case. The proposal form is Ext. B. It is in the printed form of the Society and the relevant columns are Marks, Number, Goods, Amount. It should be noted that there is no column for showing the quality of the goods, or even the price thereof. There is nothing to show that it was necessary for the insurer (sic proposer?) to mention the particular brand or quality of tea while making the proposal for insurance. As the form stands, it would quite suffice even if the proposer had simply mentioned 'tea' and nothing else. Mr. Lahiri on behalf of the Society has contended that the price of tea has been over valued and even first class tea would cost much less. That may be a fact. But it being a valued policy, the Society is not entitled to challenge the valuation thereof. As a matter of fact, we do not find that the proper price of the goods sought to be insured, has got anvthing, so to say, to do with the amount for which it is insured. The proposal form, does not, as we have already indicated, call upon the proposer to mention the price or the value of the goods sought to be insured with the defendant Society. Moreover, it was quite easy for the Society to find out the price of best quality tea in the market as everything was done by the Society's Agent at Jalpaiguri which is the centre of tea industries in North Bengal, Even in the written statement it has not been stated that the contract is liable to be set aside or cancelled because the tea which had been booked was not Pekoe Dust Tea but ordinary tea, and that if the Society had been aware of that, it would not have insured the consignment for the sum of Rupees 14,000/-. When the original written statement was filed the money suit against the Railways was pending and, therefore, it can be understood that the Society had to leave it a bit vague and could not take a firm stand on the point. But it appears that after the suit against the Railways had been decreed, the Society filed additional written statement and even then the point which we have referred to above and which would be the most vital point in this case, had not been taken. The evidence adduced also does not show that the Society's consent had been obtained by this misrepresentation, or, in other words, that the Society would not have agreed to insure the consignment for the sum of Rupees 14,000/- if it had been aware of the fact that it contained only ordinary dust tea. There has been a prolonged correspondence between the parties regarding the liability of the Society to the plaintiff, and no such point appears to have been taken, The Society satisfied itself by examining, Mr. Das Gupta, its Branch Secretary at Jalpaiguri. Mr, Das Gupta was the gentleman who did everything for the Society in connection with the issue of this policy or the subsequent prosecution of the suit against the Railways, or the correspondence on behalf of the Society. He nowhere has stated that he would not have agreed to issue this policy if he had known that it contained ordinary dust tea. Taking into account all these facts and circumstances, we are of opinion that the quality of the tea or its real value had nothing to do with the issue of this policy and the mention of the fact that it was Pekoe Dust Tea was a gratuitous one, having been, so to say taken bodily out of the railway receipt In this view of the matter the misrepresentation would not be on a material point at all, and the Society would not therefore, be entitled to rely on this misrepresentation to impeach the contract it had entered into. The Society had accepted the premium, issued the policy, and it is a matter of common knowledge that there is always an element of risk in an insurance policy for. the insurer, and, if, in this particular case, the risk has materialised, the Society can make no grievance of it.
8. The result is that we agree with the findings of the learned trial Judge and hold that the Society cannot avoid this contract and that the suit has been rightly decreed. The appeal, therefore, fails and is dismissed. Each party will bear its own costs in this Court.
9. Before we conclude we must place on record our appreciation of the services rendered to us by the learned Counsel on either side and their juniors.
Salil Kumar Datta, J.
10. I agree that the appeal fails and should be dismissed as proposed by my learned brother. I would however add a few words in support of the decision we have come to.
11. The suit was for recovery of money covered by transit insurance policy issued by the defendant in respect of a consignment of Pekoe dust teas. The facts of the case have been stated in elaborate details in the judgment of my learned brother. There is and can be no dispute that the relation between the parties is governed, in absence of any codified law, by the provisions of the Contract Act, 1872. It may be mentioned here that insurance law in this respect was since codified by the Marine Insurance Act, 1963, which has come in force on August 1, 1963 and covers land risks. Under its Section 19, it is provided that a contract of marine insurance is based upon the utmost good faith which if not observed by either party, may be avoided by the other party. In Section 20, the assured is required to disclose to the insurer, before the contract is concluded, every material circumstance known to the assured and he is to be deemed to know every circumstance which, in ordinary course of business, ought to be known to him and if the assured fails to make the disclosure the insurer may avoid the contract. It is also provided inter alia that every circumstance is material which would influence the judgment of a prudent insurer in fixing the premium or determining whether he will take the risk.
12. On the principles about disclosure and representation as laid down in the said Act, Mr. Siti Kantha Lahiri, the learned Advocate for the defendant insurer, the appellant before us, contended that the plaintiff assured made a misrepresentation about the quality of goods as Pekoe dust tea while it was in fact dust tea as found in the suit filed by the assured against the railways and on the basis of such representation the risk was taken and policy was issued. As the representation was untrue, which was the basis of the contract the insured was entitled to avoid the contract under the above principles or even under Section 19 of the Contract Act.
13. It is obvious that the provisions of the Marine Insurance Act, 1963, have no application to this case but even then similar provisions are also contained in Section 19 of the Contract Act which is as follows :
'19. Voidability of agreements without free consent.-- When consent to an agreement is caused by coercion, fraud or misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so caused. A party to a contract, whose consent was caused by fraud or misrepresentation, may, if he thinks fit, insist that the contract shall be performed, and that he shall be put in the position in which he would have been if the representations made had been true.
* * * * *Explanation--A fraud or misrepresentation which did not cause the consent to a contract of the party on whom such fraud was practised, or to whom such misrepresentation was made, does not render a contract voidable.'
There can be no doubt again that the finding in the suit against the railways that ordinary dust teas and not pekoe dust teas were despatched is binding on the plaintiff assured and we are not in a position to accept the contention of Mr. Amarendra Mohan Mitra, the learned counsel for the plaintiff respondent, to the contrary. Even at the hearing of the present suit, no evidence has been adduced by the plaintiff to establish that pekoe dust teas were despatched by the Railway receipt covering the consignment which formed the subject-matter of the risk under the policy. None the less, we also do not find any evidence that the assured was aware, before he made the representation to the insured, that the consignment was not pekoe dust teas but ordinary dust teas. The plaintiff respondent may therefore be acquitted of ony charge of fraudulent misrepresentation to the insurer though as a prudent business man he should have known the fact that teas in dispute covered by the railway receipt were not pekoe dust teas as represented.
14. The question of the representation being fraudulent or innocent has little bearing on the voidability of contract under Section 19. It was observed in Mithoolal Kayak v. Life Insurance Corporation of India, : AIR1962SC814 that--
'The principle underlying the Explanation to Section 19 of the Contract Act is that a false representation, whether fraudulent or innocent, is irrelevant if it has not induced the party to whom it is made to act upon it by entering into a contract.'
According to the explanation to Section 19 of the Contract Act, a misrepresentation which does not cause the consent to a contract of the party on whom such misrepresentation is made, does not render a contract voidable. The relevant factor for consideration is thus whether the misrepresentation was on any material facts which had a bearing on the risk undertaken by the insurer. It is settled law that a contract of insurance is contract uberrirna fides and there must be utmost good faith on the part of the assured, imposing an obligation on the assured to disclose all material facts which would affect the mind of the insurer to take at all the risk and if so on what terms. As was observed in Dawsons Ltd. v. Bonnin, (1922) 2 AC 413, every fact would be a material fact which would if known reasonably affect the mind of a prudent and experienced insurer in deciding whether they would accept the risk or in fixing the amount of premium to be charged or the conditions of such acceptance. In Rohini Nandan v. Ocean Accident and Guarantee Corporation Ltd., : AIR1960Cal696 , it was observed :
'Whether a particular fact is material depends upon the circumstances of a particular case. Evidence of materiality is not always necessary. Materiality of a particular fact may be obvious from its very nature. The test to determine materially is whether the fact has any bearing on the risk undertaken by the insurer. If the fact has any bearing on the risk it is a material fact; if not it is immaterial.'
15. On the above principles, we shall have to consider in this case whether the non-disclosure of dust teas in place of pekoe dust teas had any bear-ins on the risk undertaken by the insurer. On the materials as also on the evidence of the plaintiff, it appears that the risk was undertaken by insurer on the representation that the consignment was of pekoe dust tea. It however does not appear on the materials that the quality of tea had anything to do with the acceptance of the risk. In fact on the printed proposal form for insurance issued by the insurer there is no space or column for mentioning the quality of article to he insured. The proposal contains columns for mark and number of goods and also the value given by the assured on the basis whereof the premium was calculated and paid. There is therefore no escape from the conclusion that the insurer was concerned only with the goods and the number and the value thereof only for purposes of premium and the quality of teas or the non-disclosure of teas as being of ordinary dust quality had no bearing on the acceptance of the risk. If we turn to the evidence addvced by the insurer we search in vain for spy evidence oral or documentary to the effect that the said misrepresentation induced the insurer to accept the risk and caused its consent. If again we turn to pleadings, there is no averment in the written statement filed by insurer that but for such representation the risk was accepted by it and otherwise the insurer would not have consented to the contract of insurance. The averments made in paragraph 3 of the written statement are not sufficient to impeach the contract for the purposes of its avoidance. There is again no issue on the question of the insured's claim for avoidance of the contract on the ground of misrepresentation. It is, therefore, not possible to accept the contentions of the insurer appellant that it is entitled to avoid the contract for concealment of a fact which had no bearing on the insurer in accepting the risk.
16. The quantum of money to which the assured is entitled under the policy has also been disputed by the insurer, relying on the decisions in Chandmull Jain v. General Insurance Society Ltd., 63 Cal WN 367 = (AIR 1950 Cal 558). It was contended on the basis of the above decision that the assured must establish the actual loss suffered by him before a decree can be passed in his favour. In the above case, the policies which were against fire and other risks were not valued ones. Accordingly the principles laid down therein have no application in the present case. A contract of Marine Insurance is an agreement whereby the insurer undertakes to indemnify the assured in, the manner and to the extent thereby agreed against losses in transit. The terms have been embodied in the policy which is valued at Rupees 14,000/- as the amount of indemnity and the insured thereby agreed to indemnify the assured to the extent of the value of the policy and there can be, as it appears, no plea to defeat the claim on ground of excessive valuation for valued policies. The insured in view of the loss of the goods has therefore to indemnify the assured in the present case to the extent of the value of the policy less the amount received from railways for non-delivery. There is therefore no substance in this contention of the appellant.
17. I agree that the appeal in the circumstances should be dismissed without costs as proposed.