RELIANCE LIFE INSURANCE CO LTD & ANR. versus REKHABEN NARESHBHAI RATHOD on 24 April 2019

[2019] 6 S.C.R. 733

RELIANCE LIFE INSURANCE CO LTD & ANR.

v.

REKHABEN NARESHBHAI RATHOD

(Civil Appeal No. 4261 of 2019)

APRIL 24, 2019

[DR DHANANJAYA Y CHANDRACHUD AND

HEMANT GUPTA, JJ.]

Consumer Protection Act, 1986: Deficiency of service –Insurance policy – Repudiation of claim – Spouse of the respondenttook a policy from insurance company – Two months later hesubmitted proposal for life insurance policy of the appellant-insurance company and in the proposal form, on the query as towhether the proposer was currently insured or had applied for lifeinsurance cover, his answer was in negative – Appellant issued apolicy to him – After about a year he died – Appellant repudiatedthe claim of respondent on the ground of suppression of materialfact relating to details of life insurance policies held by her husband– Consumer complaint by respondent – Held: s.45 curtails thecommon law rights of the insurer after lapse of two years from thedate the cover for life insurance was effected – However, therepudiation in the instant case was within a period of two yearsfrom the commencement of the insurance cover – The contracts ofinsurance are governed by the principle of utmost good faith – Theduty of mutual fair dealing requires all parties to a contract to befair and open with each other to create and maintain trust betweenthem – The duty of full disclosure requires that no information ofsubstance or of interest to the insurer is omitted or concealed –Whether or not the insurer would have issued a life insurance coverdespite the earlier cover of insurance is a decision which wasrequired to be taken by the insurer after duly considering all relevantfacts and circumstances – Prior to undertaking the risk, thisinformation could potentially allow the insurer to question as towhy the insured had in such a short span of time obtained twodifferent life insurance policies – Such a fact is sufficient to put theinsurer to enquiry – The information which was sought by the insurerwas indeed material to its decision as to whether or not to undertake

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Aa risk – The proposer was aware of the fact, while making adeclaration, that if any statements were untrue or inaccurate or ifany matter material to the proposal was not disclosed, the insurermay cancel the contract and forfeit the premium – The failure of theinsured to disclose the policy of insurance obtained earlier in theproposal form entitled the insurer to repudiate the claim under theBpolicy – Insurance Regulatory and Development Authority(Protection of Policyholders’ Interests) Regulations 2002 – Regn2(d).

Insurance Act 1932: s.45 – Repudiation of policy of lifeinsurance – Limitation period – Held: s.45 stipulates restrictionsCupon the insurer calling into question a policy of life insuranceafter the expiry of two years from the date on which it was effected– Beyond two years, the burden lies on the insurer to establish theinaccuracy or falsity of a statement on a material matter or thesuppression of material facts – In addition to this requirement, theDinsurer has to establish that this non-disclosure or, as the case maybe, the submission of inaccurate or false information wasfraudulently made and that the policy holder while making it knewof the falsity of the statement or of the suppression of facts whichwere material to disclose – s.45 curtails the common law rights ofthe insurer after two years have elapsed since the cover for lifeEinsurance was effected.

Doctrines/Principles: Doctrine of uberrima fidei – Insuranceis governed by the doctrine of uberrima fidei – This postulates thatthere must be complete good faith on the part of the insured – Therelationship between an insurer and the insured is recognized asFone where mutual obligations of trust and good faith are paramount– In a contract of insurance, the insured can be expected to haveinformation of which she/he has knowledge – This justifies a dutyof good faith, leading to a positive duty of disclosure – Insurance.

Insurance Regulatory and Development Authority (ProtectionGof Policyholders’ Interests) Regulations 2002: Regn 2(d) – Proposalform – Held: Regn 2(d) specifically defines the expression “proposalform” as a form which is filled by a proposer for insurance to furnishall material information required by the insurer in respect of a risk– The purpose of the disclosure is to enable the insurer to decideHwhether to accept or decline to undertake a risk – The disclosures are also intended to enable the insurer, in the event that the risk isaccepted, to determine the rates, terms and conditions on which acover is to be granted.

Insurance Regulatory and Development Authority (Protectionof Policyholders’ Interests) Regulations 2002: Regn 2(d),Explanation – Furnishing of all material information in the proposalform – Meaning of expression ‘Material’ – Held: The explanationdefines the expression “material” to mean and include “all importantessential and relevant information” for underwriting the risk to becovered by the insurer – The expression “material” in the contextof an insurance policy can be defined as any contingency or eventthat may have an impact upon the risk appetite or willingness of theinsurer to provide insurance cover – In a contract of insurance,any fact which would influence the mind of a prudent insurer indeciding whether to accept or not accept the risk is a material fact– If the proposer has knowledge of such fact, she or he is obligedto disclose it particularly while answering questions in the proposalform.

Insurance Regulatory and Development Authority (Protectionof Policyholders’ Interests) Regulations 2002: Regn 2(d) –Consequence of inaccurate answer in the proposal form – Held:An inaccurate answer will entitle the insurer to repudiate becausethere is a presumption that information sought in the proposal formis material for the purpose of entering into a contract of insurance – In a proposal form the applicant declares that she/he warrantstruth – The contractual duty so imposed is such that any suppression,untruth or inaccuracy in the statement in the proposal form will beconsidered as a breach of the duty of good faith and will render thepolicy voidable by the insurer – The finding of a materialmisrepresentation or concealment in insurance has a significanteffect upon both the insured and the insurer in the event of a dispute– In the instant case, the insurer had sought information with respectto previous insurance policies obtained by the insured – Thedisclosure of the earlier cover was material to an assessment of therisk which was being undertaken by the insurer – Prior toundertaking the risk, this information could potentially allow theinsurer to question as to why the insured had in such a short spanof time obtained two different life insurance policies – Such a fact A

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Awas sufficient to put the insurer to enquiry – The information whichwas sought by the insurer was indeed material to its decision as towhether or not to undertake a risk.

Insurance: Plea of ignorance of contents of proposal form –Held: Proposer is not absolved of the consequence of appendingBhis signatures to the proposal on the submission that he was unawareof the contents of the form that he was required to fill up – In theinstant case, the proposer duly appended his signature to theproposal form and the grant of the insurance cover was on thebasis of the statements contained in the proposal form – Barely twomonths before the contract of insurance was entered into with theCappellant, the insured had obtained another insurance cover forhis life in the sum of Rs 11 lakhs – The failure of the insured todisclose the policy of insurance obtained earlier in the proposalform entitled the insurer to repudiate the claim under the policy –The argument of the respondent that the signatures of the assuredDon the form were taken without explaining the details is notacceptable.

Allowing the appeal, the Court

Conclusion

Allowing the appeal, the Court

HELD: 1. The repudiation in the instant case was within aperiod of two years from the commencement of the insuranceEcover. This assumes significance because of the provisions ofSection 45 of the Insurance Act 1932, as they stood at the materialtime. Section 45 stipulated restrictions upon the insurer callinginto question a policy of life insurance after the expiry of twoyears from the date on which it was effected. After two yearsFhave elapsed the insurer cannot call it into question on the groundthat: (i) a statement made in the proposal; or (ii) a statementmade in any report of a medical officer, referee or friend of theinsured; or (iii) a statement made in any other document leadingto the issuance of the policy was inaccurate or false, unless certainconditions are fulfilled. Those conditions are that : (a) such aGstatement was on a material matter; or (b) the statementsuppressed facts which were material to disclose andthat (i) theywere fraudulently made by the policy holder; and (ii) the policyholder knew at the time of making it that the statements werefalse or suppressed facts which were material to disclose. TheHcumulative effect of Section 45 is to restrict the right of the insurer to repudiate a policy of life insurance after a period of two yearsof the date on which the policy was effected. Beyond two years,the burden lies on the insurer to establish the inaccuracy or falsityof a statement on a material matter or the suppression of materialfacts. Moreover, in addition to this requirement, the insurer hasto establish that this non-disclosure or, as the case may be, thesubmission of inaccurate or false information was fraudulentlymade and that the policy holder while making it knew of the falsityof the statement or of the suppression of facts which were materialto disclose. [Paras 12, 13][747-C; G; 748-A-D]

2.1 Insurance is governed by the doctrine of uberrima fidei.This postulates that there must be complete good faith on thepart of the insured. The relationship between an insurer and theinsured is recognized as one where mutual obligations of trustand good faith are paramount. [Para 15][748-G-H; 749-C]

MacGillivray on Insurance Law Twelfth Edition,Sweet and Maxwell (2012) – referred to 2.2 The Insurance Regulatory and Development Authorityof India, by a notification dated 16 October 2002 issued theInsurance Regulatory and Development Authority (Protectionof Policyholders’ Interests) Regulations 2002. Regulation 2(d)specifically defines the expression “proposal form” as a formwhich is filled by a proposer for insurance to furnish all materialinformationrequired by the insurer in respect of a risk. Theexplanation defines the expression “material” to mean and include“all important essential and relevant information” for underwritingthe risk to be covered by the insurer. Regulation 4(3) stipulatesthat while filling up the proposal, the proposer is to be guided bythe provisions of Section 45. Where a proposal form is not used,the insurer under Regulation 4(4) is to record the information,confirming it within a stipulated period with the proposer andought to incorporate the information in the cover note or policy.In respect of information which is not so recorded, the onus ofproof lies on the insurer who claims that there was a suppressionof material information or that the insured provided misleadingor false information on any matter that was material to the grantof the cover. [Paras 23, 24][755-A-B, 756-B-E]

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A3. The expression “material” in the context of an insurancepolicy can be defined as any contingency or event that may havean impact upon the risk appetite or willingness of the insurer toprovide insurance cover. Materiality from the insured’sperspective is a relevant factor in determining whether theinsurance company should be able to cancel the policy arisingBout of the fault of the insured. Whether a question concealed isor is it not material is a question of fact. Materiality of a fact alsodepends on the surrounding circumstances and the nature ofinformation sought by the insurer. It covers a failure to disclosevital information which the insurer requires in order to determineCfirstly, whether or not to assume the risk of insurance, andsecondly, if it does accept the risk, upon what terms it should doso. In a contract of insurance, any fact which would influence themind of a prudent insurer in deciding whether to accept or notaccept the risk is a material fact. If the proposer has knowledge of such fact, she or he is obliged to disclose it particularly whileDanswering questions in the proposal form. [Para 25][756-E-H;757-A-D]

4. It is standard practice for the insurer to set out in theapplication a series of specific questions regarding the applicant’shealth history and other matters relevant to insurability. TheEobject of the proposal form is to gather information about apotential client, allowing the insurer to get all information whichis material to the insurer to know in order to assess the risk andfix the premium for each potential client. Proposal forms are asignificant part of the disclosure procedure and warrant accuracyFof statements. Utmost care must be exercised in filling theproposal form. In a proposal form the applicant declares that she/he warrants truth. The contractual duty so imposed is such thatany suppression, untruth or inaccuracy in the statement in theproposal form will be considered as a breach of the duty of goodfaith and will render the policy voidable by the insurer. The systemGof adequate disclosure helps buyers and sellers of insurancepolicies to meet at a common point and narrow down the gap ofinformation asymmetries. This allows the parties to serve theirinterests better and understand the true extent of the contractualagreement. The finding of a material misrepresentation or H

concealment in insurance has a significant effect upon both theinsured and the insurer in the event of a dispute. The fact it wouldinfluence the decision of a prudent insurer in deciding as towhether or not to accept a risk is a material fact. [Para 26][757-H; 758-A-D]

5. In the instant case, the insurer had sought informationwith respect to previous insurance policies obtained by theassured. The duty of full disclosure required that no informationof substance or of interest to the insurer be omitted or concealed.Whether or not the insurer would have issued a life insurancecover despite the earlier cover of insurance is a decision whichwas required to be taken by the insurer after duly considering allrelevant facts and circumstances. The disclosure of the earliercover was material to an assessment of the risk which was beingundertaken by the insurer. Prior to undertaking the risk, thisinformation could potentially allow the insurer to question as towhy the insured had in such a short span of time obtained twodifferent life insurance policies. Such a fact is sufficient to put theinsurer to enquiry. The information which was sought by theinsurer was indeed material to its decision as to whether or notto undertake a risk. [Paras 27, 28][758-F-H; 759-B]

6. The submission that the proposer was unaware of thecontents of the form that he was required to fill up or that inassigning such a response to a third party, he was absolved of theconsequence of appending his signatures to the proposal cannotbe accepted. The proposer duly appended his signature to theproposal form and the grant of the insurance cover was on thebasis of the statements contained in the proposal form. Barelytwo months before the contract of insurance was entered intowith the appellant, the insured had obtained another insurancecover for his life in the sum of Rs 11 lakhs. The failure of theinsured to disclose the policy of insurance obtained earlier in theproposal form entitled the insurer to repudiate the claim underthe policy. The argument of the respondent that the signaturesof the assured on the form were taken without explaining thedetails cannot be accepted. [Paras 29, 31][759-E-F; 760-B]

VK Srinivasa Setty v. Messers Premier Life and GeneralInsurance Co Ltd AIR 1958 Mys 53 – relied on.

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[2019] 6 S.C.R.

AMithoolal Nayak v. LIC 1962 Suppl (2) SCR 531 –distinguished.

Satwant Kaur Sandhu v. New India Assurance Co Ltd.(2009) 8 SCC 316 : [2009] 10 SCR 560 ; SaharaIndia Life Insuance Company Limited v. RayaniBRamanjaneyulu(2014) CPJ 582 ;SheoshankarRatanlalji Khamele v Life Insurance Corporation ofIndia AIR 1971 Bom 304 ; LIC of India v. Vidya Devi(2012) 3 CPJ 288 (NC) ;Dineshbhai Chandarana vLIC (2010) 3 CPJ 358 (NC) ; Condogianis v. GuardianAssurance Company Ltd. AIR 1921 PC 195 ;CLakshmishankar v. Gresham Life Assurance Society AIR1932 Bom 582 ; Life Insurance Corporation of Indiav. Smt GM Channabasamma (1991) 1 SCC 357 ; LifeInsurance Corpn of India v. Asha Goel (Smt) (2001) 2SCC 160 : [2000] 5 Suppl. SCR 646 ; United IndiaDInsurance Co Ltd v. MKJ Corporation (1996) 6 SCC428 : [1996] 5 Suppl. SCR 20 ; Modern Insulators Ltdv. Oriental Insurance Co Ltd. (2000) 2 SCC 734 : [2000]1 SCR 1076 – referred to.

Carter v Boehm (1766) 3 Burr 1905 – referred to.EMacGillivray on Insurance Law Twelfth Edition,Sweet and Maxwell (2012) – referred to Case Law Reference H

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CIVIL APPELLATE JURISDICTION : Civil Appeal No. 4261of 2019.

From the Judgment and Order dated 20.02.2015 of the NationalConsumer Disputes Redressal Commission in Revision Petition No. 359of 2015.

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E. R. Kumar, Aditya Sharma, Ms. Swati Bhardwaj, Manu Bajaj,M/s. Parekh & Co., Advs. for the Appellants.

Amar Dave, Sabyasachi De, Asit Kumar Roy, SnehasishMukherjee, Advs. for the Respondent.

The Judgment of the Court was delivered by D

DR. DHANANJAYA Y. CHANDRACHUD, J.

1. Leave granted.

2. This appeal is from a decision of the National ConsumerDisputes Redressal Commission[1] dated 20 February 2015. The StateConsumer Disputes Redressal Commission[2] at Ahmedabad allowed anappeal of the insured – respondent and sustained a claim under a policyof life insurance. This decision has been upheld in revision by the NCDRC.The insurer is hence in appeal.

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3. On 10 July 2009, the spouse of the respondent took a policy oflife insurance from Max New York Life Insurance Co Ltd, for a sum ofRs 11 lakhs. Barely two months thereafter, on 16 September 2009 hesubmitted a proposal for a life insurance term plan policy of the appellantfor an insurance cover of Rs 10 lakhs. Among the questions that theproposer was required to answer in the proposal form was whether hewas currently insured or had previously applied for life insurance cover,critical illness cover or accident benefit cover. This query was answeredin the negative. Item 17 of the proposal form required a disclosure of:

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1 “NCDRC”

2 “SCDRC”

742SUPREME COURT REPORTS

A“DETAILS OF LIFE INSURANCE POLICIES HELD/PROPOSALS APPLIED WITH LIFE INSURANCECOMPANIES (INCLUDING EXISTING POLICIES WITHRELIANCE LIFE INSURANCE COMPANY LTD.)”

The information which was required to be furnished under theBabove head included: (i) name of the life to be assured/proposer; (ii)name of company; (iii) contract/proposal number; (iv) basic sum assured;(v) sum assured under rider; and (vi) year of commencement. Theproposer was also required to furnish details in regard to the presentstatus and terms of acceptance and to fill up one of the accompanyingboxes namely: (i) declined; (ii) postponed; (iii) rated up; (iv) rejected; (v)Cin force; (vi) lapsed; and (vii) applied.

4. The proposer answered the query as to whether he wascurrently insured for a cover of life insurance, critical illness or accidentbenefit in the negative. On the details of other insurance covers held byhim, the proposer had indicated “NA” or a “not applicable” response.DThe declaration which was required to be furnished by the proposerwith the proposal form was in the following terms:

“I understand and agree that the statements in this proposal formshall be the basis of the contract between me and Reliance LifeInsurance Company Limited (“the Company”) and that if anyEstatements made by me are untrue or inaccurate or if any of thematter material to this proposal is not disclosed by me then theCompany may cancel the contract and all the premiums paid, willbe forfeited.”

5. On 22 September 2009, the appellant issued a policy of lifeFinsurance to the spouse of the respondent based on the disclosurescontained in the proposal form. The respondent’s spouse died on 8February 2010. On 24 May 2011, nearly fifteen months after the date ofdeath, the respondent, who was a nominee under the policy issued bythe appellant, submitted a claim of Rs 10 lakhs under the terms of theGpolicy. The claim was supported by a medical certificate stating that thepolicy holder had suffered from sudden chest pain prior to his death. On7 June 2011, the appellant sought copies of medical reports including, asthe case may be, death or discharge summaries together with previousmedical records of the deceased. On 14 July 2011, in response to theappellant’s e-mail dated 29 June 2011, Max New York Life InsuranceH

Co Ltd informed the appellant that the spouse of the respondent hadbeen insured with them for a sum of Rs 11 lakhs and that the claim hadbeen settled. The appellant repudiated the respondent’s claim on 30August 2011 stating thus:

“In the light of suppression of material fact, where glaring omissionto answer especially the question no (17) relating to details of thelife insurance policies held by the life assured, we are constrainedto repudiate the claim under the policy in terms of Section 45 ofthe Insurance Act 1938.”

6. On 24 February 2012 the respondent addressed a legal noticealleging a deficiency in service and then moved a consumer complaintbefore the District Consumer Disputes Redressal Forum, Bhavnagar[3].The appellant contested the claim.

7. On 31 August 2013, the District Forum dismissed the complaintinter alia, on the ground that there was a non-disclosure of the fact thatthe insured had held a previous policy in the proposal form filled up bythe proposer. The appeal filed by the respondents was, however, allowedby the SCDRC on 28 November 2014 relying on a decision of theNCDRC in Sahara India Life Insurance Company Limited v RayaniRamanjaneyulu[4]. This decision of the SCDRC was affirmed by theNCDRC on 6 February 2015, for the reason that the omission of theinsured to disclose a previous policy of insurance would not influencethe mind of a prudent insurer as held in Sahara India (supra).

8. On 14 May 2015, this Court while issuing a notice, stayed theexecution of the decision of the NCDRC, subject to the appellantdepositing 50 percent of the decretal amount before the District Forum.The respondent was permitted to withdraw the amount on deposit.Pursuant to the interim order of 1 June 2015, the appellant handed overa demand draft in the amount of Rs 16,18,987 drawn on the State Bankof India to the respondent, which has been encashed.

9. Learned counsel appearing on behalf of the appellant submitsthat:

(i) In spite of the specific disclosures required in item 17 of theproposal form, the proposer suppressed the fact that he had an existingpolicy of insurance. In answering the query in the negative the proposer 3 “District Forum”

4 III (2014) CPJ 582

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Asubmitted ex facie false information. This was in breach of the boundenduty of the proposer to furnish full and complete details in response tothe queries contained in the proposal form;

(ii) The commencement date of the policy being 22 September2009, the claim in the present case was repudiated within two years, onB30 August 2011, due to the non-disclosure of the previous life insurancepolicy held by the proposer. If the information sought by the insurer inthe proposal form is not disclosed, is suppressed or if a false answer isfurnished by the proposer, the insurer is entitled to repudiate the insurancepolicy or any claim arising from it under Sections 17 and 19 of the ContractAct 1872 (Mithoolal Nayak v LIC[5]);C

(iii) In a case covered by (ii) above, the insurer is not required toestablish that the non-disclosure, suppression or falsity of response bythe proposer is material. This is for the reason that it is for the insurer,and not the proposer, to determine whether the information which hasspecifically been sought in the proposal form is material or otherwiseD(Satwant Kaur Sandhu v New India Assurance Co Ltd[6]);

(iv) It is only when an insurer seeks to repudiate a policy of lifeinsurance or a claim arising under it after two years of the effective dateof the policy that by reason of Section 45 of the Insurance Act 1938, theinsurer will have to demonstrate that the information sought in theEproposal form was material;

(v) Disclosure of a pre-existing life insurance cover of the proposeris necessary to enable the insurer to assess the human life value of theproposer before the issuance of a policy. The consequence of non-disclosure of a pre-existing cover is that the insurer is unable to assessFthe real risk. This is an important facet of financial under-writing;

(vi) Section 45 modifies the common law where a life insurancepolicy is repudiated due to a misstatement or suppression of facts aftertwo years have expired from the date of commencement of the policy.A repudiation within two years is not governed by Section 45G(Sheoshankar Ratanlalji Khamele v Life Insurance Corporationof India[7]); H

5 1962 Suppl (2) SCR 531

6 (2009) 8 SCC 316

7 AIR 1971 Bom 304

(vii) The judgment of the NCDRC is contrary to the law laiddown by this Court in Satwant Kaur Sandhu (supra) and the earlierdecisions of the NCDRC itself (LIC of India v Vidya Devi[8]andDineshbhai Chandarana v LIC[9]);

(viii) In Sahara India (supra) which was relied upon by theNCDRC, the earlier decision in Vidya Devi (supra) which in turn hadfollowed Chandarana (supra) was noticed but erroneously not followed.Vidya Devi and Chandarana specifically, dealt with non-disclosure ofthe previous policies by the insurer in the proposal form and upheld therepudiation of the claim by the insurer;

(ix) In Vidya Devi, the NCDRC rejected the argument that thesuppression of a previous policy was not material since the insured wasan illiterate person had affixed a signature on blank papers; and

(x) In Condogianis v Guardian Assurance Company Ltd[10],the Privy Council has held that even a partial non-disclosure or ambiguousdisclosure regarding the previous policies in the proposal form vitiatesthe policy, which is thus liable to be rescinded.

On the above grounds, a challenge has been addressed to thejudgment of the NCDRC.

10. On the other hand, learned counsel appearing on behalf of therespondent supported the decision appealed against, urging that:

(i) The insurance agent induced the insured to take a policy of lifeinsurance by taking his signature on a blank proposal form together withthe premium in cash. The insured was not conversant with English andit was the duty of the insurer to translate the proposal form into Gujarati.The proposal form was either filled in by the appellants or their agentand the witness was unknown to the insured;

(ii) Though in the letter of repudiation dated 30 August 2011, itwas only the alleged suppression of a previous policy which was pressedin aid, the appellants sought to support the repudiation before theconsumer forum on the ground that there was a pre-existing urinarybladder ailment. The insured had suffered from the infection in 2002,several years before the submission of the proposal form; 8 (2012) 3 CPJ 288 (NC)

9 (2010) 3 CPJ 358 (NC)

10 AIR 1921 PC 195

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(iii) A non-disclosure of a previous insurance policy cannot be avalid ground for repudiation of the claim. There is no prohibition in lawfrom a person holding any number of life insurance policies from differentinsurers. The insurer has admitted that the death of the insured on 8February 2010 was due to a heart attack and hence the claim was coveredwithin the terms of the policy; B

(iv) The non-disclosure of a previous insurance cover is not ofany material consequence under Section 45 of the Insurance Act 1932.The alleged omission or commission is not of any material consequenceand would have not influenced the mind of the appellant while issuingthe policy nor would it affect the rate of premium; and C

(v) A Special Leave Petition [SLP (C) No 130740 of 2014] againstthe decision of the NCDRC in Sahara India (supra) has been dismissed.

On the above grounds, learned counsel appearing on behalf of therespondent supported the view of the NCDRC.

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11. While considering the rival submissions, it is necessary topreface our analysis with reference to two basic facts. The first pertainsto the nature of the disclosure made by the insured in the proposal form.The second relates to the ground for repudiation of the claim. Theproposal form required a specific disclosure of the life insurance policiesEheld by the proposer and all proposals submitted to life insurancecompanies, including the appellant. The proposer was called upon tofurnish a full disclosure of covers for life insurance, critical illness oraccident benefit under which the proposer was currently insured or forwhich the proposer had applied. The answer to this was given in thenegative. Furthermore, item 17 of the proposal form required a detailedFdisclosure of the other insurance policies held by the proposer includingthe sum assured. A disclosure was also required of the status of pendingproposals. These were answered with a “not applicable” response,following the statement that the proposer did not hold any other insurancecover. The fact that two months prior to the policy which was obtainedGfrom the appellant on 16 September 2009, the insured had obtained apolicy from Max New York Life Insurance Co Ltd in the amount of Rs11 lakhs has now been admitted. There was evidently a non-disclosureof the earlier cover for life insurance held by the insured.

The second aspect of the case which merits to be noticed is thatthe repudiation of the claim on 30 August 2011 was on the ground that H

there was a non-disclosure of a material fact on the part of the insuredin not disclosing that he held a prior insurance cover. The insurer statedthat if this was to be disclosed in the proposal form, it would have calledfor and evaluated financial income documents together with the termsfor the acceptance of the cover. Though the insurer has subsequently,during the pendency of the proceedings made an effort to sustain itsrepudiation on the ground that the insured had a pre-existing illness whichwas not disclosed, it is necessary to record that this was not pressed inaid during the hearing before this Court.

12. The repudiation in the present case was within a period oftwo years from the commencement of the insurance cover. This assumessignificance because of the provisions of Section 45 of the InsuranceAct 1932, as they stood at the material time:

“45 No policy of life insurance effected before the commencementof this Act shall after the expiry of two years from the date ofcommencement of this Act and no policy of life insurance effectedafter the coming into force of this Act shall, after the expiry oftwo years from the date on which it was effected be called inquestion by an insurer on the ground that statement made in theproposal or in any report of a medical officer, or referee, or friendof the insured, or in any other document leading to the issue of thepolicy, was inaccurate or false, unless the insurer shows that suchstatement was on a material matter or suppressed facts which itwas material to disclose and that it was fraudulently made by thepolicy-holder and that the policy-holder knew at the time of makingit that the statement was false or that it suppressed facts which itwas material to disclose.

Provided that nothing in this section shall prevent the insurer fromcalling for proof of age at any time if he is entitled to do so, and nopolicy shall be deemed to be called in question merely becausethe terms of the policy are adjusted on subsequent proof that theage of the life insured was incorrectly stated in the proposal”.

13. Section 45 stipulates restrictions upon the insurer calling intoquestion a policy of life insurance after the expiry of two years from thedate on which it was effected[11]. After two years have elapsed the 11 There is a similar restriction in the case of policies effected before the commencementof the Insurance Act 1932 after the expiry of two years from the date of thecommencement of the Act, which is not material for the present case.

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Ainsurer cannot call it into question on the ground that: (i) a statementmade in the proposal; or (ii) a statement made in any report of a medicalofficer, referee or friend of the insured; or (iii) a statement made in anyother document leading to the issuance of the policy was inaccurate orfalse, unless certain conditions are fulfilled. Those conditions are that :(a) such a statement was on a material matter; or (b) the statementBsuppressed facts which were material to disclose andthat (i) they werefraudulently made by the policy holder; and (ii) the policy holder knew atthe time of making it that the statements were false or suppressed factswhich were material to disclose. The cumulative effect of Section 45 isto restrict the right of the insurer to repudiate a policy of life insuranceCafter a period of two years of the date on which the policy was effected.Beyond two years, the burden lies on the insurer to establish theinaccuracy or falsity of a statement on a material matter or the suppressionof material facts. Moreover, in addition to this requirement, the insurerhas to establish that this non-disclosure or, as the case may be, the submission of inaccurate or false information was fraudulently madeDand that the policy holder while making it knew of the falsity of thestatement or of the suppression of facts which were material to disclose.

Arguments

14. Section 45 curtails the common law rights of the insurer aftertwo years have elapsed since the cover for life insurance was effected.In the present case, the Court is called upon to determine the nature ofEthe authority of the insurer where a policy of life insurance or a claimunder it is sought to be repudiated withintwo years. The insurer submitsthat within a period of two years, its right to repudiate the respondent’sclaim is untrammelled and is not subject to the conditions which applybeyond two years. On the other hand, the submission of the respondentFis that even within a period of two years, a non-disclosure or suppressionmust be of a material fact to justify a repudiation. In other words, beforea non-disclosure can be utilized as a ground to repudiate, it must pertainto a realm where it can be found that the non-disclosure was of acircumstance or fact which would have affected the decision of the insurer regarding whether or not to grant a cover.G

15. The fundamental principle is that insurance is governed by thedoctrine of uberrima fidei. This postulates that there must be completegood faith on the part of the insured. This principle has been formulatedin MacGillivray on Insurance Law[12]succinctly, thus:

“[Subject to certain qualifications considered below], the assuredmust disclose to the insurer all facts material to an insurer’sappraisal of the risk which are known or deemed to be known bythe assured but neither known or deemed to be known by theinsurer. Breach of this duty by the assured entitles the insurer toavoid the contract of insurance so long as he can show that thenon-disclosure induced the making of the contract on the relevantterms…”

The relationship between an insurer and the insured is recognizedas one where mutual obligations of trust and good faith are paramount.

16. In Condogianis (supra), the Privy Council dealt with an appealby Special Leave from a judgment of the High Court of Australia. Theappellant had claimed a declaration under a policy of insurance that theinsurer was liable to pay him for a loss sustained as a consequence of afire. In response to the requirement of disclosing whether the proponenthad ever been a claimant of a fire insurance company in respect of theproperty proposed or any other property, the insurer had disclosed oneclaim which had been made in the past but omitted to disclose another, inrespect of the burning of a motor car. The terms of the declarationwere as follows:

“5. This proposal is the basis of the contract and is to be taken aspart of the policy and (if accepted) the particulars are to be deemedexpress and continuing warranties furnished by or on behalf ofthe proponent; and any questions remaining unanswered will bedeemed to be replied to in the negative. The proposal is madesubject to the Company’s conditions as printed any/or written inthe policy to be issued hereon, and which are hereby accepted bythe proponent.”

Lord Justice Shaw, speaking for the Privy Council held:

“6. The case accordingly is one of express warranty: If in point offact the answer is untrue, the warranty still holds, notwithstandingthat the untruth might have arisen inadvertently and without anykind of fraud. Secondly, the materiality of the untruth is not inissue; the parties having settled for themselves—by making thefact the basis of the contract, and giving a warranty—that asbetween them their agreement on that subject precluded all inquiryinto the issue of materiality. In the language of Lord Eldon AB

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Ain Newcastle Fire Insurance Co. v. Macmorran [(1815) 3 Dow.255.] .

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Ain Newcastle Fire Insurance Co. v. Macmorran [(1815) 3 Dow.255.] .

“It is a first principle in the law of insurance, on all occasions, thatwhere a representation is material it must be complied with—ifimmaterial, that immateriality may be inquired into and shown;Bbut that if there is a warranty it is part of the contract that thematter is such as it is represented to be. Therefore the materialityor immateriality signifies nothing.””

17. This principle was followed by the Bombay High Court inLakshmishankar v Gresham Life Assurance Society[13] where it wasCheld:

“… where the representations, statement and agreements madeby an assured in his application for a policy of life assurance aremade a basic condition of the contract by the policy of lifeassurance, the truth of the statements contained in the proposalDare, apart from the question of their materiality, the condition ofthe liability of the assurance company. It would therefore followthat the defendant company was entitled to repudiate its liabilityon account of the untrue statement contained in the proposal formand in the examination by the medical examiner...”

E18. In Sheoshankar (supra), a Division Bench of the BombayHigh Court noted:

“The law with respect to insurance previously was that any mis-statement on the part of the assured while making the proposal orat any stage thereafter avoided the contract of policy and theinsurer was not liable for the claim on such policy.FIn Condogianis v. G. Assurance Co., Ltd. [[1921] A.I.R. P.C.195.], their Lordships pointed out that if in point of fact the answeris untrue, the warranty still holds, notwithstanding that the untruthmight have arisen inadvertently and without any kind of fraud.Secondly, the materiality of the untruth is not in issue; the partiesGhaving settled for themselves—by making the fact the basis ofcontract and giving warranty—that as between them theiragreement on that subject precluded all inquiry into the issue ofmateriality…”

13 AIR 1932 Bom 582. Also see Great Eastern Life Assurance Company Limited v BaiHHira - 1930 ILR Vol.LV 124

The High Court observed that the law of insurance had, however,undergone a material change by the enactment of Section 45 of theInsurance Act 1938. Explaining the provisions of Section 45 the HighCourt held:

“… The section is divided into two parts. Under the first part, ifthe insurer calls in question the policy within a period of two yearsfrom the date on which it was effected, then the insurer companyhas only to show that a statement made in the proposal for insurance,or in any report of a medical officer, or referee, or friend of theinsured, or in any other document, leading to the issue of the policywas inaccurate or false. Even an incorrect statement which maynot be on a material fact and suppression of fact which may notbe on a material point, would be enough for the insurer companyto avoid the contract of policy under this part. Under the secondpart, where a period of two years expired after the date of policywas effected without any challenge to it by the insurer, the insurercould call it in question only on showing that such statement bythe insured was on a material matter or suppressed facts which itwas material to disclose and that it was fraudulently made by thepolicy holder and that the policy-holder knew at the time of makingit that the statement was false or that it suppressed facts which itwas material to disclose. The question as to the date on which thepolicy could be said to be effected and the date on which theproposal can be said to have been accepted assumes importancein this case as on the determination of this question will dependwhether the repudiation by the insurer has been within two yearsor after a period of two years from the date on which the policywas effected.”

19. In Mithoolal (supra), a Bench of three learned Judges of thisCourt dealt with a case where a policy had been issued on 13 March1945. The policy came into effect from 15 January 1945. The amountinsured was payable after 15 January 1968 or at the death of the insured,if earlier. The insurer repudiated its claim on 10 October 1947. Hencethe provisions of Section 45 were applicable. The three Judge Benchrejected the submission that a period of two years had not expired fromthe date of the revival of the policy, holding that from Section 45 it wasevident that the period of two years can only mean the date on whichthe policy was effected. From that date a period of two years had clearly A

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Aelapsed when the insurer repudiated the claim. The significance of thedecision in Mithoolal (supra) for this case lies in the fact that the Courtspecifically kept open the issue about what would govern a case whereSection 45 did not apply:

“… As we think that Section 45 of the Insurance Act applied inBthe present case, we are relieved of the task of examining thelegal position that would follow as a result of inaccurate statementsmade by the insured in the proposal form or the personal statementetc. in a case where Section 45 does not apply and where theaverments made in the proposal form and in the proposal statementare made the basis of the contract.”

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Mithoolal (supra) was a case involving a repudiation beyond twoyears, where Section 45 was applicable. The present case involves arepudiation within two years. The question which was left open inDMithoolal has squarely arisen.

20. In Life Insurance Corporation of India v Smt GMChannabasamma[14], a two Judge Bench of this Court held:

“7. … It is well settled that a contract of insurance iscontract uberrima fides and there must be complete good faithEon the part of the assured. The assured is thus under a solemnobligation to make full disclosure of material facts which may berelevant for the insurer to take into account while deciding whetherthe proposal should be accepted or not. While making a disclosureof the relevant facts, the duty of the insured to state them correctlycannot be diluted. Section 45 of the Act has made special provisionsFfor a life insurance policy if it is called in question by the insurerafter the expiry of two years from the date on which it waseffected. Having regard to the facts of the present case, learnedcounsel for the parties have rightly stated that this distinction isnot material in the present appeal. If the allegations of fact madeGon behalf of the appellant Company are found to be correct, allthe three conditions mentioned in the section and discussedin Mithoolal Nayak v. Life Insurance Corporation ofIndia [1962 Supp 2 SCR 571 : AIR 1962 SC 814 : (1962) 32Comp Cas 177] must be held to have been satisfied...”

21. The decision of this Court in Life Insurance Corpn of Indiav Asha Goel (Smt)[15] considered a situation in which a claim under alife insurance policy was repudiated on the ground that the insuredsuppressed facts pertaining to the condition of health. The Single Judgeof the High Court held that a writ petition under Article 226 could bemaintained against the Life Insurance Corporation and that the insurerhad failed to discharge its burden under Section 45 of the Insurance Act1932. A Division Bench of the High Court held in appeal that there wassome substance in the complaint that the insurer ought to have beengiven an opportunity to lead evidence to discharge the onus of justifyingthe rejection. The matter was accordingly remanded. The insurer thenmoved to this Court challenging the maintainability of a writ petitionunder Article 226 of the Constitution before the High Court. This Courtheld that where a dispute in regard to a repudiation of a claim raises aserious matter requiring oral and documentary evidence, the appropriateremedy would be a civil suit and not a writ petition. After elaboratingthe requirements of Section 45, this Court held:

“12. ... The contracts of insurance including the contract of lifeassurance are contracts uberrima fides and every fact of material(sic material fact) must be disclosed, otherwise, there is goodground for rescission of the contract. The duty to disclose materialfacts continues right up to the conclusion of the contract and alsoimplies any material alteration in the character of the risk whichmay take place between the proposal and its acceptance. If thereare any misstatements or suppression of material facts, the policycan be called into question. For determination of the questionwhether there has been suppression of any material facts it maybe necessary to also examine whether the suppression relates toa fact which is in the exclusive knowledge of the person intendingto take the policy and it could not be ascertained by reasonableenquiry by a prudent person.”

22. In Satwant Kaur (supra) this Court considered a case whicharose from a decision of the NCDRC. The insurer had repudiated aclaim under a health insurance policy on the ground that the policy holderwas suffering from chronic diabetes and renal failure. This, accordingto the insurer, was a material fact a non-disclosure of which in theproposal form justified repudiation of the claim. Section 45, which applies A

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Ato policies of life insurance, was not applicable since the case related toa mediclaim policy. Justice DK Jain, speaking for the Bench of twolearned Judges, held:

“18. A mediclaim policy is a non-life insurance policy meant toassure the policy-holder in respect of certain expenses pertainingBto injury, accidents or hospitalisations. Nonetheless, it is a contractof insurance falling in the category of contract uberrima fidei,meaning a contract of utmost good faith on the part of the assured.Thus, it needs little emphasis that when an information on a specificaspect is asked for in the proposal form, an assured is under asolemn obligation to make a true and full disclosure of theCinformation on the subject which is within his knowledge. It isnot for the proposer to determine whether the informationsought for is material for the purpose of the policy or not.Of course, the obligation to disclose extends only to factswhich are known to the applicant and not to what he oughtDto have known. The obligation to disclose necessarilydepends upon the knowledge one possesses. His opinionof the materiality of that knowledge is of no moment.(See Joel v. Law Union & Crown Insurance Co. [(1908) 2 KB863 (CA)] )”

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In taking this view, the Court relied upon the earlier decisions inUnited India Insurance Co Ltd v MKJ Corporation[16] and ModernInsulators Ltd v Oriental Insurance Co Ltd[17]. Adverting to theexpression “material fact” this Court explained it as:F“22. … any fact which would influence the judgment of a prudentinsurer in fixing the premium or determining whether he wouldlike to accept the risk. Any fact which goes to the root of thecontract of insurance and has a bearing on the risk involved wouldbe “material”.

GIn a situation which was not governed by Section 45, this Courtapplied the fundamental tenet of insurance law namely, utmost goodfaith.

16 (1996) 6 SCC 428H17 (2000) 2 SCC 734

23. The Insurance Regulatory and Development Authority of India,by a notification dated 16 October 2002 issued the Insurance Regulatoryand Development Authority (Protection of Policyholders’ Interests)Regulations 2002. The expression “proposal form” is defined inRegulation 2(d) thus:

“2(d) ”Proposal form” means a form to be filled in by the proposerfor insurance, for furnishing all material information required bythe insurer in respect of a risk, in order to enable the insurer todecide whether to accept or decline, to undertake the risk, and inthe event of acceptance of the risk, to determine the rates, termsand conditions of a cover to be granted.

Explanation: “Material” for the purpose of these regulations shallmean and include all important, essential and relevant informationin the context of underwriting the risk to be covered by the insurer.”

Regulation 4, deals with proposals for insurance and is in thefollowing terms:

“4. Proposal for insurance

(1) Except in cases of a marine insurance cover, where currentmarket practices do not insist on a written proposal form, in allcases, a proposal for grant of a cover, either for life business orfor general business, must be evidenced by a written document.It is the duty of an insurer to furnish to the insured free of charge,within 30 days of the acceptance of a proposal, a copy of theproposal form.

(2) Forms and documents used in the grant of cover may, dependingupon the circumstances of each case, be made available inlanguages recognised under the Constitution of India.

(3) In filling the form of proposal, the prospect is to be guided bythe provisions of Section 45 of the Act. Any proposal form seekinginformation for grant of life cover may prominently state thereinthe requirements of Section 45 of the Act.

(4) Where a proposal form is not used, the insurer shall record theinformation obtained orally or in writing, and confirm it within aperiod of 15 days thereof with the proposer and incorporate the A

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Ainformation in its cover note or policy. The onus of proof shall restwith the insurer in respect of any information not so recorded,where the insurer claims that the proposer suppressed any materialinformation or provided misleading or false information on anymatter material to the grant of a cover.”

B24. Regulation 2(d) specifically defines the expression “proposalform” as a form which is filled by a proposer for insurance to furnish allmaterial informationrequired by the insurer in respect of a risk. Thepurpose of the disclosure is to enable the insurer to decide whether toaccept or decline to undertake a risk. The disclosures are also intendedto enable the insurer, in the event that the risk is accepted, to determineCthe rates, terms and conditions on which a cover is to be granted. Theexplanation defines the expression “material” to mean and include “allimportant essential and relevant information” for underwriting the riskto be covered by the insurer. Regulation 4(3) stipulates that while fillingup the proposal, the proposer is to be guided by the provisions of SectionD45. Where a proposal form is not used, the insurer under Regulation4(4) is to record the information, confirming it within a stipulated periodwith the proposer and ought to incorporate the information in the covernote or policy. In respect of information which is not so recorded, theonus of proof lies on the insurer who claims that there was a suppressionof material information or that the insured provided misleading or falseEinformation on any matter that was material to the grant of the cover.

25. The expression “material” in the context of an insurance policycan be defined as any contingency or event that may have an impactupon the risk appetite or willingness of the insurer to provide insurancecover. In MacGillivray on Insurance Law[18] it is observed thus:F

“The opinion of the particular assured as to the materiality of afact will not as a rule be considered, because it follows from theaccepted test of materiality that the question is whether a prudentinsurer would have considered that any particular circumstancewas a material fact and not whether the assured believed it so ...”GMateriality from the insured’s perspective is a relevant factor indetermining whether the insurance company should be able to cancelthe policy arising out of the fault of the insured. Whether a question concealed is or is it not material is a question of fact. As this Court heldin Satwant Kaur (supra):

“Any fact which goes to the root of the contract of insurance andhas a bearing on the risk involved would be “material”.”

Materiality of a fact also depends on the surrounding circumstancesand the nature of information sought by the insurer. It covers a failure todisclose vital information which the insurer requires in order to determinefirstly, whether or not to assume the risk of insurance, and secondly, if itdoes accept the risk, upon what terms it should do so. The insurer isbetter equipped to determine the limits of risk-taking as it deals with theexercise of assessments on a day-to-day basis. In a contract of insurance,any fact which would influence the mind of a prudent insurer in decidingwhether to accept or not accept the risk is a material fact. If the proposerhas knowledge of such fact, she or he is obliged to disclose it particularlywhile answering questions in the proposal form. An inaccurate answerwill entitle the insurer to repudiate because there is a presumption thatinformation sought in the proposal form is material for the purpose ofentering into a contract of insurance.

26. Contracts of insurance are governed by the principle of utmostgood faith. The duty of mutual fair dealing requires all parties to a contractto be fair and open with each other to create and maintain trust betweenthem. In a contract of insurance, the insured can be expected to haveinformation of which she/he has knowledge. This justifies a duty of goodfaith, leading to a positive duty of disclosure. The duty of disclosure ininsurance contracts was established in a King’s Bench decision in Carterv Boehm[19], where Lord Mansfield held thus:

“Insurance is a contract upon speculation. The special facts, uponwhich the contingent chance is to be computed, lie most commonlyin the knowledge of the insured only; the under-writer trusts to hisrepresentation, and proceeds upon confidence that he does notkeep back any circumstance in his knowledge, to mislead the under-writer into a belief that the circumstance does not exist, and toinduce him to estimate the risque, as if it did not exist.”

It is standard practice for the insurer to set out in the application aseries of specific questions regarding the applicant’s health history and A

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Aother matters relevant to insurability. The object of the proposal form isto gather information about a potential client, allowing the insurer to getall information which is material to the insurer to know in order to assessthe risk and fix the premium for each potential client. Proposal formsare a significant part of the disclosure procedure and warrant accuracyof statements. Utmost care must be exercised in filling the proposalBform. In a proposal form the applicant declares that she/he warrantstruth. The contractual duty so imposed is such that any suppression,untruth or inaccuracy in the statement in the proposal form will beconsidered as a breach of the duty of good faith and will render thepolicy voidable by the insurer. The system of adequate disclosure helpsCbuyers and sellers of insurance policies to meet at a common point andnarrow down the gap of information asymmetries. This allows the partiesto serve their interests better and understand the true extent of thecontractual agreement.

The finding of a material misrepresentation or concealment inDinsurance has a significant effect upon both the insured and the insurerin the event of a dispute. The fact it would influence the decision of aprudent insurer in deciding as to whether or not to accept a risk is amaterial fact. As this Court held in Satwant Kaur (supra) “there is aclear presumption that any information sought for in the proposal form ismaterial for the purpose of entering into a contract of insurance”. EachErepresentation or statement may be material to the risk. The insurancecompany may still offer insurance protection on altered terms.

27. In the present case, the insurer had sought information withrespect to previous insurance policies obtained by the assured. The dutyof full disclosure required that no information of substance or of interestFto the insurer be omitted or concealed. Whether or not the insurer wouldhave issued a life insurance cover despite the earlier cover of insuranceis a decision which was required to be taken by the insurer after dulyconsidering all relevant facts and circumstances. The disclosure of theearlier cover was material to an assessment of the risk which was beingGundertaken by the insurer. Prior to undertaking the risk, this informationcould potentially allow the insurer to question as to why the insured hadin such a short span of time obtained two different life insurance policies.Such a fact is sufficient to put the insurer to enquiry.

28. Learned counsel appearing on behalf of the insurer submittedthat where a warranty has been furnished by the proposer in terms of adeclaration in the proposal form, the requirement of the information beingmaterial should not be insisted upon and the insurer would be at liberty toavoid its liability irrespective of whether the information which is soughtis material or otherwise. For the purposes of the present case, it issufficient for this Court to hold in the present facts that the informationwhich was sought by the insurer was indeed material to its decision as towhether or not to undertake a risk. The proposer was aware of the fact,while making a declaration, that if any statements were untrue orinaccurate or if any matter material to the proposal was not disclosed,the insurer may cancel the contract and forfeit the premium.MacGillivray on Insurance Law[20] formulates the principle thus:

“… In more recent cases it has been held that all-important elementin such a declaration is the phrase which makes the declarationthe “basis of contract”. These words alone show that the proposeris warranting the truth of his statements, so that in the event of abreach this warranty, the insurer can repudiate the liability on thepolicy irrespective of issues of materiality”

29. We are not impressed with the submission that the proposerwas unaware of the contents of the form that he was required to fill upor that in assigning such a response to a third party, he was absolved ofthe consequence of appending his signatures to the proposal. The proposerduly appended his signature to the proposal form and the grant of theinsurance cover was on the basis of the statements contained in theproposal form. Barely two months before the contract of insurance wasentered into with the appellant, the insured had obtained another insurancecover for his life in the sum of Rs 11 lakhs. We are of the view that thefailure of the insured to disclose the policy of insurance obtained earlierin the proposal form entitled the insurer to repudiate the claim under thepolicy.

30. We may note at this stage, that the view which was taken bythe NCDRC in the present case was contrary to its earlier decision inVidya Devi (supra). In that case, the NCDRC upheld the repudiation ofan insurance claim under a life insurance cover by the LIC on the groundof a non-disclosure of previous insurance policies. In taking this view, 20 Twelfth Edition, Sweet and Maxwell (2012). See Pg. 257 for cases relied upon.

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Athe NCDRC relied on its earlier decision in Chandarana (supra).Subsequently in Sahara India (supra), the NCDRC took a contraryview. Having noticed its earlier decisions, the NCDRC did not evenattempt to distinguish them. Indeed, the earlier decisions were bindingon the NCDRC. This line of approach on the part of the NCDRC mustbe disapproved.B

31. Finally, the argument of the respondent that the signatures ofthe assured on the form were taken without explaining the details cannotbe accepted. A similar argument was correctly rejected in a decision ofa Division Bench of the Mysore High Court in VK Srinivasa Setty vMessers Premier Life and General Insurance Co Ltd[21] where itCwas held:

“ Now it is clear that a person who affixes his signature to aproposal which contains a statement which is not true, cannotordinarily escape from the consequence arising therefrom bypleading that he chose to sign the proposal containing suchDstatement without either reading or understanding it. That isbecause, in filling up the proposal form, the agent normally, ceasesto act as agent of the insurer but becomes the agent of the insuredand no agent can be assumed to have authority from the insurerto write the answers in the proposal form.

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If an agent nevertheless does that, he becomes merely theamanuensis of the insured, and his knowledge of the untruth orinaccuracy of any statement contained in the form of proposaldoes not become the knowledge of the insurer. Further, apart fromany question of imputed knowledge, the insured by signing thatFproposal adopts those answers and makes them his own and thatwould clearly be so, whether the insured signed the proposalwithout reading or understanding it, it being irrelevant to considerhow the inaccuracy arose if he has contracted, as the plaintiff hasdone in this case that his written answers shall be accurate.”

G32. For the reasons which we have adduced, we are of the viewthat the SCDRC was in error in reversing the judgment of the DistrictForum. The NCDRC has similarly erred in affirming the view of theSCDRC. We, accordingly, allow the appeal and set aside the impugned RELIANCE LIFE INSURANCE CO. LTD. v. REKHABENNARESHBHAI RATHOD [DR. DHANANJAYA Y. CHANDRACHUD, J.]

judgment and order of the NCDRC dated 20 February 2015. Theconsumer complaint filed by the respondent shall stand dismissed.

33. By the interim order of this Court dated 14 May 2015, therespondent was permitted to withdraw 50 per cent of the decretal amount,unconditionally. Since the respondent has done so, we are of the viewthat the ends of justice would require a direction by this Court underArticle 142 of the Constitution that the amount which has been withdrawnby the respondent shall not be recovered. We order accordingly. Subjectto the aforesaid direction, the appeal shall stand allowed. There will beno order as to costs.

Devika Gujral

Appeal allowed.

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