The insurance company has the burden of proving that the insured made statements which were false to his knowledge or suppressed facts which it was material to disclose.

( 1 ) THIS is an appeal from the judgment and decree of the Court of the Subordinate Judge, Nellore, in O. S. No. 66 of 1954.

( 2 ) THE suit was by the assignee of a policy-holder for payment of the sum insured on the life of his adoptive father, Virareddi. The defendant in the action is the New India Assurance Company Limited, a Company incorporated under the Indian Companies Act, having their Head Office at Bombay and carrying on life insurance business in the former composite State of Madras through their Branch Office at Madras.

( 3 ) DURING the pendency of the appeal was enacted the Life Insurance Corporation Act (XXXI of 1956) providing for the nationalisation of life insurance business in India by transferring all such business to a Corparalion established for the purpose. By virtue of Section 7 of the-Act, all the assets and liabilities appertaining to the controlled business of all insurers were transferred to and1 vested in the Life Insurance Corporation. By reason of this provision, the Life Insurance Corporation has come on-record as the appellant.

( 4 ) IN order to appreciate the points raised in the appeal, it is necessary to state in some detail the facts out of which the controversy arises. Virareddi was born on the 20th June, 1901. He was the village munsif of Vidavalur in the District of Nellore. He was possessed of considerable landed property -- the evidence is that he had about 80 acres of land -- and he was in affluent circumstances. When he was about 30 years old, he lost his wife. He did not remarry and remained) a widower ever, since. Having had no natural issue, he adopted the plaintiff. In the year 1945, he was asked by the Revenue Department to undergo a refresher course for forty days. On grounds of ill health he applied for and got two months leave from the 7th September, 194

( 5 ) THEREAFTER he was involved in a case of rioting as could he seen from the judgment of the Sessions Court. Nellore in S. C. No. 30 of 1945. Virareddi was there convicted of an offence punishable under Section 147 of the Indian Penal Code, and sentenced to two years simple imprisonment and to a fine of Rs. 1000/-, and in default, to six months simple imprisonment. It is common ground that he was discharged from the Madras Penitentiary in 1947, after undergoing the jail term. 5. On the 21st August, 1947, Virareddi submitted a proposal to the New India Assurance Co. Ltd. , (hereinafter referred to as "the insurers") for a policy on his life for a sum of Rs. 20,000/ -. He applied for what is known as a whole life policy. In his application, Ex. B. 1, he gave his age next birth day as 47 years. The proposal contains a statement by the insured that he was in a sound state of health and that he was of sober and temperate habits. To the proposal was appended a declaration by the insured that the statement and answers were true in every particular and that he agreed that the statement and declaration along with further statement to be made before the medical examiner and declaration relative thereto should be the basis of the contract between him and the insurers and that if any untrue averment be contained therein, the contract of assurance should be absolutely null and void and all moneys paid in respect thereof should be forfeited.

( 6 ) IN the case of a policy exceeding Rs. 5,000/- the regulations of the insurers provide for the medical examination of the insured by two of their Doctors. Accordingly, D. W. 2 and another Doctor examined) the insured and recorded his personal statements. Exs. B-2 and B-3. A reference to the answers given by the insured in these statements will be made later. Both the Doctors certified that his was a first class life. Presumably because the insured was far advanced in age, the insurers intimated him that they were prepared to issue not a whole life policy but an endowment policy for thirteen years. Eventually, however, a 15 years endowment policy was agreed upon and the insurers final ac