Back
1970 Supreme(Bom) 95
IN THE HIGH COURT OF BOMBAY
(D.B. Padhye and M.N. Chandurkar JJ. )
SHEOSHANKAR (Plaintiff) - Appellant
Versus
LIFE INSURANCE CORPORATION OF INDIA, Bombay (Defendant) - Respondent
Advocates appeared
For appellant - V.R. Manohor.
For respondent - A.S. Bobde and M.L. Vaidya.
The date on which a policy of life insurance is effected is the date from which the risk on the life of the insured is covered, and not the date of the formal document of policy. A mere alteration or modification of the terms of a contract does not amount to its rescission. In order to avoid a policy of life insurance under the second part of section 45 of the Insurance Act, 1938, the insurer must show that the statement made by the insured was not only inaccurate or false, but such statement was on a material matter and that the policy holder knew at the time of making it that the statement was false or that the insurer must show that the insured suppressed facts which it was material to disclose and that the policy holder knew at the time of making it that he suppressed facts which it was material to disclose.
Headnote:
INSURANCE - LIFE INSURANCE - REPUDIATION OF CLAIM - FALSE STATEMENTS AND SUPPRESSION OF MATERIAL FACTS - EFFECT - INSURANCE ACT, 1938, SECTION 45 - APPLICABILITY - DATE OF EFFECT OF POLICY - INTERPRETATION - NOVATION OF CONTRACT - MATERIALITY OF FACTS - FRAUDULENT INTENT - BURDEN OF PROOF.
Fact of the Case:
The plaintiff took out a joint life insurance policy with the Indian Mercantile Insurance Company for a sum of Rs. 50,000 on the lives of himself and his wife, Kamalabai. Prior to this, the plaintiff had made another proposal for insurance on the joint lives of himself and his wife with the Ruby General Insurance Company for a sum of Rs. 30,000. The Ruby General Insurance Company, however, was willing to insure the joint lives for a sum of Rs. 10,000 only. The plaintiff and his wife refused this counterproposal and informed the Ruby General Insurance Company that they were not willing to complete the same. Subsequently, the plaintiff and his wife made a proposal for insurance with the Indian Mercantile Insurance Company for a sum of Rs. 40,000. This proposal was accepted by the company and a policy was issued for the said amount. Later, the plaintiff requested the company to increase the amount of insurance from Rs. 40,000 to Rs. 50,000, which was agreed to by the company. The company issued a revised policy for the increased amount. Kamalabai fell ill and died on September 7, 1956. The plaintiff made a claim on the policy, but the company repudiated the claim on the ground that Kamalabai had withheld correct information regarding her health at the time of effecting the assurance. The plaintiff filed a suit for recovery of the amount on the insurance policy.
Finding of the Court:
The court held that the policy became effective on August 4, 1956, the date from which the risk on the life of the insured was covered. The repudiation of the claim by the company on August 13, 1958, was beyond a period of two years from the date on which the policy was effected. Therefore, the company had to establish the matters mentioned in the second part of section 45 of the Insurance Act, 1938. The court further held that the increase in the amount of insurance from Rs. 40,000 to Rs. 50,000 did not amount to a novation of contract, but was simply a modification of the old contract without altering its material terms. The court also held that the company had shown that the plaintiff and his wife had made false statements on material matters and suppressed facts which it was material to disclose. The plaintiff and his wife knew at the time of making the statements that they were false and that they were suppressing facts which it was material to disclose. The court concluded that the contract of insurance entered into with the Indian Mercantile Insurance Company was vitiated and not binding on the defendant. The policy in suit on which the plaintiff based his claim was, therefore, void and the plaintiff was not entitled to make any claim on the basis of the aforesaid policy.
Issues: 1. Whether the policy became effective on August 4, 1956, the date from which the risk on the life of the insured was covered, or on a later date? 2. Whether the increase in the amount of insurance from Rs. 40,000 to Rs. 50,000 amounted to a novation of contract? 3. Whether the company had shown that the plaintiff and his wife had made false statements on material matters and suppressed facts which it was material to disclose? 4. Whether the plaintiff and his wife knew at the time of making the statements that they were false and that they were suppressing facts which it was material to disclose?
Ratio Decidendi: 1. The date on which a policy of life insurance is effected is the date from which the risk on the life of the insured is covered, and not the date of the formal document of policy. 2. A mere alteration or modification of the terms of a contract does not amount to its rescission. Such modifications are read into and become part and parcel of the original contract, and the original terms also continue to be part of the contract and are not rescinded and/or superseded except in so far as they are inconsistent with the modifications. 3. In order to avoid a policy of life insurance under the second part of section 45 of the Insurance Act, 1938, the insurer must show that the statement made by the insured was not only inaccurate or false, but such statement was on a material matter and that the policy holder knew at the time of making it that the statement was false or that the insurer must show that the insured suppressed facts which it was material to disclose and that the policy holder knew at the time of making it that he suppressed facts which it was material to disclose.
Final Decision: The appeal was dismissed with costs.
PADHYE J. - This is a plaintiff-appeal whose suit for the recovery of the amount on an insurance policy has been dismissed by the trial Court. The insurance was originally taken with the Indian Mercantile Insurance Company Limited, but subsequently the Life Insurance Corporation of India took over the management of all the Life Insurance Companies including the Indian Mercantile Company Limited with effect from September 1, 1956 and hence the defendant Life Insurance Corporation of India is held liable for the claim. The original policy which bears the No. 36348 with the Indian Mercantile Insurance Company Limited was for an amount of Rs. 50,000 on joint lives of the present plaintiff and his wife, deceased Kamalabai. Prior to the taking of the instant insurance, the plaintiff had made earlier another proposal on the joint lives of himself and his wife Kamalabai with the Ruby General Insurance Company Limited for a sum of Rs. 30,000 on April 17, 1956. With this proposal the assured, namely, the plaintiff and his wife had given their personal statements and the agent through whom the policy was taken also made his report and the proposal being for a sum in excess of Rs. 25,000, medical examiners report was also submitted. The medical examiner had to fill in two forms, one based on the answers given by the assured and the second on his medical examination of the assured. The Ruby General Insurance Company, however, did not accept the proposal for the sum of Rs. 30,000 as proposed, but was willing to insure the joint lives for a sum of Rs. 10,000. The counter proposal of the Ruby General Insurance Company WB&, however, not acceptable to the proposers and by a letter addressed by one G. V. Pendhari, who was an Insurance Agent to the Life Superintendent, Ruby General Insurance Company Limited, with copy to the Provisional Manager, Bombay, he informed the Ruby General Insurance Company that the proposers were not willing to complete the same and the proposal may be cancelled without any liability.
A letter was also addressed by the plaintiff on August 6, 1956 to the Divisional Manager, Ruby General Insurance Company Limited, Bombay informing it that since the Company was accepting the proposal only for an amount of Rs. 10,000 he was unable to complete its proposal since his proposal had not been accepted as proposed. It is, however, not known as to when the Counter proposal to accept the insurance for Rs. 10,000 was made by the Ruby General Insurance Company. According to the plaintiff, he came to know about the reduced proposal on August 5, 1956 through the agent; whereas according to the defendant, the plaintiff must have come to know about this reduced proposal even before the proposal to the Indian Mercantile Insurance Company Limited was made by the plaintiff and his wife.
2. The plaintiff states in the plaint that a proposal for insurance on the joint lives of the plaintiff and his wife was made on July 15, 1956 with the Indian Mercantile Insurance Company for a sum of Rs. 40,000. There are, however, two proposal forms which are Exhs. D-2 and D-4 of July 15, 1956 and July 23, 1956. In these proposal forms the proposed assured gave the details which are required to be answered as per the questionnaire in the proposal forms. Questions Nos. 7 and 8 in the said proposal forms seek information as to whether any proposal on the proposers life has been or is about to be made to any other Company or Companies and question No.8 requires the proposer to say whether he has been insured in this or any other Company. Question No.9 seeks information as to the result of such proposal. The answer to question No. 7 was given in the negative and in answer to the question No.8, the proposers stated that they were insured with the Ruby General Insurance Company Ltd. for an amount of Rs. 30,000 for the joint life and in answer to the question No.9 (d) which is: "has the proposal been accepted on terms otherwise than as proposed? If so, gi
