Case: Mithoolal Nayak Vs. Life Insurance Corporation Of India

unable to accept this argument as correct. It is indeed true that Mahajan Deolal was examined by as many as four doctors. It is also true that the respondent company had before it the conflicting reports of Dr. Desai and it specially asked Dr. Kapadia to examine Mahajan Deolal in view of the reports submitted by Dr. Desai. Yet, it must be pointed out that the respondent company had no means of knowing that Mahajan Deolal had been treated for the serious ailment of secondary anaemia followed by dilatation of heart, etc., in September-October, 1943 by Dr. Lakshmanan. Nor can it be said that if the respondent company had knowledge of those facts, they would not have made any difference. The principle underlying the Explanation to S. 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. We do not think that that principle applies in the present case. The terms of the policy make it clear that the averments made as to the state of health of the insured in the proposal form and the personal statement were the basis of the contract between the parties, and the circumstance that Mahajan Deolal had taken pains to falsify or conceal that he had been treated for a serious ailment by Dr. Lakshmanan only a few months before the policy was taken shows that the falsification or concealment had an important bearing in obtaining the other partys consent. A man who has so acted cannot afterwards turn round and say : "It could have made no difference if you had known the truth."In our opinion, no question of waiver arises in the circumstances of this case, nor can the appellant take advantage of the Explanation to S. 19 of the Indian Contract Act.10. Our finding on the first question makes it unnecessary for us to decide the second question, namely, whether the present appellant merely gambled on the life of Mahajan Deolal when he took the assignment on October 18, 1945. The contention of the respondent company was that the appellant had no insurable interest in the life of Mahajan Deolal and when he took the assignment of the policy on October 18, 1945 he was merely indulging in a gamble on Mahajan Deolals life; the contract was, therefore, void by reason of S. 30 of the Indian Contract Act. On behalf of the appellant, however, the contention was that S. 38 of the Insurance Act provided a complete code for assignment and transfer of insurance policies and the assignment made in favour of the appellant by Mahajan Deolal was a valid assignment in accordance with the provisions of S. 38 aforesaid. The High Court, it appears, proceeded on the footing that from the very inception the policy was taken for the benefit of the appellant on the basis of a gamble on the life of Mahajan Deolal; it said that the appellant and his brother, Dr. Motilal Nayak, knew very well that Mahajan Deolal was not likely to live very long and when the policy was taken out in 1944, it was really for the benefit of the present appellant, who soon after took an assignment on payment of the premium already paid by Mahajan Deolal and such arrears of premium as were then outstanding. It is unnecessary for us to give our decision on these contentions; because if Mahajan Deolal was himself guilty of a fraudulent suppression of material facts on which the respondent company was discharged from performing its part of the contract, the appellant who holds an assignment of the policy cannot stand on a better footing than Mahajan Deolal himself. It was argued before us that if the policy was valid in its inception, that is to say, if it was in fact effected for the use and benefit of Mahajan Deolal, who undoubtedly had an insurable interest in his own life, it could not afterwards be invalidated by assignment to a person who had no interest but who merely took it as a speculation. Our attention was drawn to several decisions on this question, American and English, noticed in para. 502 of MacGillivray on Insurance Law (Fourth Edition). We consider it unnecessary to examine those decisions or to go into the question posed therein. That question must be left to be determined in a case where it properly arises. As we have stated earlier, on our conclusion on the first question, the appellant is clearly out of Court and cannot claim the benefit if a contract which had been entered into as a result of a fraudulent suppression of material facts by Mahajan Deolal.11. This brings us to the last question, namely, whether the appellant is entitled to a refund of the money he had paid to the respondent company. Here again one of the terms of the policy was that all moneys that had been paid in consequence of the policy would belong to the company if the policy was vitiated by reason of a fraudulent suppression of material facts by the insured. We agree with the High Court that where the contract is bad on the ground of fraud, the party who has been guilty of fraud or a person who claims under him cannot ask for a refund of the money paid. It is a well-established principle that courts will not entertain an action for money had and received, where, in order to succeed, the plaintiff has to prove his own fraud. We are further in agreement with the High Court that in cases in which there is a stipulation that by reason of a breach of warranty by one of the parties to the contract, the other party shall be discharged from the performance of his part of the contract, neither S. 65 nor S. 64 of the Indian Contract Act has any application.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]We think that they were. We are unable to agree with the learned trial Judge that the ailments for which Mahajan Deolal was treated by Dr. Lakshmanan in September-October, 1943 were trivial or casual ailments. Nor do we think that Mahajan Deolal was likely to forget in July, 1944 that he had been treated by Dr. Lakshmanan for certain serious ailments only a few months before that date. This brings us to a consideration of the evidence of Dr. Lakshmanan. That evidence is clear and unequivocal. Dr. Lakshmanan says that Dr. Motilal Nayak brought the patient to him at Jabalpur. We have already referred to the fact that Dr. Motilal Nayak had himself made a false statement in his friends report dated July 17, 1944, when he said that he had never heard that the insured had suffered from any illness. It is impossible to believe that Dr. Motilal Nayak would not remember that he had himself taken the insured to Jabalpur for treatment by Dr. Lakshmanan who was an experienced consulting physician. Dr. Lakshmanan said that when he first examined Mahajan Deolal on September 7, 1943 he found that his condition was serious as a result of the impoverished condition of his blood, and that Mahajan Deolal was suffering from anaemia, oedema of the feet, diarrhoea and panting on exertion. The doctor asked for an examination of the blood. The pathological report supported the diagnosis that Mahajan Deolal was suffering from secondary anaemia meaning thereby that anaemia was due to lack of iron and malnutrition. Dr. Lakshmanan further found that from the symptoms disclosed the disease was a major one. Mahajan Deolal had also cardiac asthma which was a symptom of anaemia and due to dilatation of heart. Dr. Lakshmanan saw the patient again on September 9, 1943, and then again on September 16, 1943. On October 6, 1943, Mahajan Deolal himself went to Dr. Lakshmanan. On that date Dr. Lakshmanan found that anaemia had very greatly disappeared. In cross-examination Dr. Lakshmanan admitted that the anaemia, dilatation of heart and cardiac asthma from which Mahajan Deolal was suffering constituted a passing phase which might disappear by treatment. He further admitted that he did not mention cardiac asthma in his letter addressed to the respondent company. We have given our very earnest consideration to the evidence of Dr. Lakshmanan and we are unable to hold that the ailments from which Mahajan Deolal was then suffering were either trivial or casual in nature. The ailments were serious though amenable to treatment. Mahajan Deolals son gave evidence in the case and he said in his evidence that though Dr. Lakshmanan prescribed some medicine, his father did not take it. He further said that his father was a strict vegetarian. This evidence was given by the son with regard to what the doctor had said that he prescribed fresh liver juice made at home according to his directions three times a day. He also prescribed iron sulphate in tablet form with plenty of water. The son further said that during his stay at Jabalpur his father felt weakness, though he used to move about freely and was never confined to bed. The son tried to make it appear in his evidence that his father was suffering from nothing serious. Dr. Lakshmanan said in his evidence that his fees for visiting a patient at Jabalpur were Rs. 16 per visit. We agree with the High Court that if Mahajan Deolal was not suffering from any serious ailment, he would not have been taken by his physician, Dr. Motilal Nayak, from his village to Jabalpur nor would he have consulted Dr. Lakshmanan, a consulting physician of repute, for so many days on payment of Rs.16 per visit. No doubt, Mahajan Deolals son now tries to make light of the illness of his father, but Dr. Lakshmanans evidence shows clearly enough that in September-October, 1943 Mahajan Deolal was suffering from a serious type of anaemia for which he was treated by Dr. Lakshmanan. Mahajan Deolal could not have forgotten in July, 1944 that he was so treated only a few months earlier and furthermore, Mahajan Deolal must have known that it was material to disclose this fact to the respondent company. In his answers to the questions put to him he not only failed to disclose what it was material for him to disclose, but he made a false statement to the effect that he had not been treated by any doctor for any such serious ailment as anaemia or shortness of breath or asthma. In other words, there was a deliberate suppression fraudulently made by Mahajan Deolal. Fraud, according to S. 17 ofthe Indian Contract Act, 1872 (IX of 1872), means and includes inter alia any of the following acts committed by a party to a contract with intent to deceive another party or to induce him to enter into a contract-(1) the suggestion, as to a fact, of that which is not true by one who does not believe it to be true; and(2) the active concealment of a fact by one having knowledge or belief of the fact. Judged by the standard laid down in S. 17, Mahajan Deolal was clearly guilty of a fraudulent suppression of material facts when he made his statements on July 16, 1944, statements which he must have known were deliberately false. Therefore, we are in agreement with the High Court in answering the first question against theis indeed true that Mahajan Deolal was examined by as many as four doctors. It is also true that the respondent company had before it the conflicting reports of Dr. Desai and it specially asked Dr. Kapadia to examine Mahajan Deolal in view of the reports submitted by Dr. Desai. Yet, it must be pointed out that the respondent company had no means of knowing that Mahajan Deolal had been treated for the serious ailment of secondary anaemia followed by dilatation of heart, etc., in September-October, 1943 by Dr. Lakshmanan. Nor can it be said that if the respondent company had knowledge of those facts, they would not have made any difference. The principle underlying the Explanation to S. 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. We do not think that that principle applies in the present case. The terms of the policy make it clear that the averments made as to the state of health of the insured in the proposal form and the personal statement were the basis of the contract between the parties, and the circumstance that Mahajan Deolal had taken pains to falsify or conceal that he had been treated for a serious ailment by Dr. Lakshmanan only a few months before the policy was taken shows that the falsification or concealment had an important bearing in obtaining the other partys consent. A man who has so acted cannot afterwards turn round and say : "It could have made no difference if you had known the truth."In our opinion, no question of waiver arises in the circumstances of this case, nor can the appellant take advantage of the Explanation to S. 19 of the Indian ContractHigh Court, it appears, proceeded on the footing that from the very inception the policy was taken for the benefit of the appellant on the basis of a gamble on the life of Mahajan Deolal; it said that the appellant and his brother, Dr. Motilal Nayak, knew very well that Mahajan Deolal was not likely to live very long and when the policy was taken out in 1944, it was really for the benefit of the present appellant, who soon after took an assignment on payment of the premium already paid by Mahajan Deolal and such arrears of premium as were then outstanding. It is unnecessary for us to give our decision on these contentions; because if Mahajan Deolal was himself guilty of a fraudulent suppression of material facts on which the respondent company was discharged from performing its part of the contract, the appellant who holds an assignment of the policy cannot stand on a better footing than Mahajan Deolal himself. It was argued before us that if the policy was valid in its inception, that is to say, if it was in fact effected for the use and benefit of Mahajan Deolal, who undoubtedly had an insurable interest in his own life, it could not afterwards be invalidated by assignment to a person who had no interest but who merely took it as a speculation. Our attention was drawn to several decisions on this question, American and English, noticed in para. 502 of MacGillivray on Insurance Law (Fourth Edition). We consider it unnecessary to examine those decisions or to go into the question posed therein. That question must be left to be determined in a case where it properly arises. As we have stated earlier, on our conclusion on the first question, the appellant is clearly out of Court and cannot claim the benefit if a contract which had been entered into as a result of a fraudulent suppression of material facts by Mahajanagain one of the terms of the policy was that all moneys that had been paid in consequence of the policy would belong to the company if the policy was vitiated by reason of a fraudulent suppression of material facts by the insured. We agree with the High Court that where the contract is bad on the ground of fraud, the party who has been guilty of fraud or a person who claims under him cannot ask for a refund of the money paid. It is a well-established principle that courts will not entertain an action for money had and received, where, in order to succeed, the plaintiff has to prove his own fraud. We are further in agreement with the High Court that in cases in which there is a stipulation that by reason of a breach of warranty by one of the parties to the contract, the other party shall be discharged from the performance of his part of the contract, neither S. 65 nor S. 64 of the Indian Contract Act has any application.