Mithoolal Nayak v. Life Insurance Corporation of India AIR 1962 SC 814
FACTS-
- Mithoolal Nayak (the appellant) took an assignment on 18-10-1945 of a life insurance policy on the life of Mahajan Deolal for Rs 25,000.
- Mahajan Deolal died on 12-11-1946.
- Mithoolal Nayak demanded Rs 26,000 from the Life Insurance Corporation of India (respondent) based on the assigned policy, but it was repudiated.
- The respondent claimed Mahajan Deolal made false statements and fraudulent suppression of material information in the proposal form, leading to the repudiation. Therefore, no claim regarding the policy can be made.
- The Additional District Judge of Jabalpur decided the matter in favour of the appellant- claimant.
- The HC decided the matter in favour of respondent and dismissed the suit.
- Hence, the present appeal before SC.
- The appellant, Mithoolal Nayak, argued that the policy should not be invalidated based on the inaccurate statements made by Mahajan Deolal in the proposal form and personal statement.
- He invoked Section 45 of the Insurance Act, 1938, claiming that Mahajan Deolal's statements did not amount to fraudulent suppression of material facts.
- Additionally, he argued that the respondent company had full knowledge of Mahajan Deolal's health status through various medical examinations, so it couldn't repudiate the claim based on the inaccurate statements.
- The respondent company argued that Mahajan Deolal had fraudulently suppressed material facts regarding his health, which invalidated the policy.
- They contended that Mahajan Deolal's failure to disclose his serious ailments, despite medical treatment, constituted fraudulent suppression.
- Furthermore, they disputed the appellant's claim of having no insurable interest in Mahajan Deolal's life and argued that the appellant merely gambled on his life, rendering the contract void under Section 30 of the Indian Contract Act.
- Finally, they maintained that the appellant couldn't claim a refund of the money paid due to the fraudulent nature of the policy.
ISSUES-
- Whether the policy was vitiated by fraudulent suppression of material facts by Mahajan Deolal?
- Whether Mithoolal Nayak had insurable interest in Mahajan Deolal's life and can sue on the policy?
- Whether the respondent had issued the policy with full knowledge of the facts and is estopped from contesting its validity?
- Whether Mithoolal Nayak is entitled to a refund of the money paid to the respondent?
RULE-
- Section 45 of the Insurance Act, 1938, prevents insurers from questioning policies after a certain period unless there is fraudulent suppression of material facts by the policyholder.
- For Section 45 to apply, three conditions must be met: the statement must be on a material matter or suppress material facts; the suppression must be fraudulently made by the policyholder; and the policyholder must have known the statement was false or suppressed facts.
- Courts will not entertain actions for refund where the claimant has been guilty of fraud.
HELD-
- Mahajan Deolal failed to disclose treatment for serious ailments to the insurer, constituting fraudulent suppression of material facts.
- Mahajan Deolal's son attempted to downplay his father's illness, but medical evidence confirmed its seriousness. As Dr Lakshmanan clearly stated during his examination in court, that Mahajan Deolal was suffering from anaemia, oedema of the feet, diarrhoea and panting on exertion.
- The assignment of the policy to Mithoolal Nayak(appellant) does not absolve him of the policy's fraudulent inception. the appellant is clearly out of Court and cannot claim the benefit of a contract which had been entered into as a result of a fraudulent suppression of material facts by Mahajan Deolal.
- Mithoolal Nayak is not entitled to a refund of the money paid to the respondent.
- The appeal is dismissed, affirming the High Court's decision.
- All the issues were decided in favour of the respondent.
COMMENTARIES RATIO/NOTE-
- [[s 45] Policy not be called in question on ground of misstatement after three years. —
- [s 45.4] Scope
This section, earlier made a policy of life insurance incontestable (i) when such policy was issued before the commencement of the Insurance Act after the expiry of two years from the commencement of the said Act; and (ii) when such policy was issued after the commencement of the said Act, it would remain incontestable after the expiry of two years from the date of issue. But such incontestability must relate to mis-statements or untrue answers and unless the insurer can establish that—
(a)such statement was on a material matter; or
(b)it suppressed facts which it was material to disclose;
(c)it was fraudulently made by the policy-holder; and
(d)that the policy-holder knew at the time of making it that the statement was false; or that it suppressed facts which it was material to disclose [Lakshmi Insurance Co Ltd v Bibi Padmawati, AIR 1961 Punj 253].