judgement:
Civil Appeal No. 59 of 1952.
Appeal from the Judgment and Order dated 3rd January, 1952, of the High Court of Judicature at Patna (Ramaswami and Sarjoo Prosad JJ).
in an application under article 226 of the Constitution registered as Miscellaneous Judicial Case No. 204 of 1950.
Original Petition No. 20 of 1952 under article 32 of the Constitution was also heard along with this appea.
P. R. Das (B. Sen, with him) for the appellants.
M. C. Setalvad, Attorney General for India, and Mahabir Prasad, Advocate General of Bihar (G. N. Joshi, with them) for the respondents.
February 20.
The court delivered judgment as follows : PATANJALI SASTRI C. J. I concur in the judgment which my learned brother Mukherjea is about to deliver, but I wish to add a few words in view of the important constitutional issue involved.
The facts are simple.
The appellants obtained a settlement of about 200 bikhas of land in a village known as Sathi Farm in Bettiah Estate, in Bihar, 1131 then and ever since in the management of the Court of Wards on behalf of the disqualified proprietress who is the second respondent in this appeal.
The lands were settled at the prevailing rate of rent but the salami or premium payable was fixed at half the usual rate as a concession to the appellants who are said to be distant relations of the proprietress.
The appellants paid the salami and entered into possession of the lands on the 2nd November, 1946, and ' have since been paying the rents regularly.
On the 13th June, 1950, the Bihar Legislature passed an Act called the Sathi Lands (Restoration) Act, 1950.
The genesis of this legislation is thus explained in the counter affidavit filed on behalf of the State of Bihar, the first respondent herein.
Report against the settlement of these lands with the petitioners as well as some other lands to Sri Prajapati Mishra and the unlawful manner in which these settlements were brought about, was carried to the Working Committee of the Indian National Congress, which body, after making such enquiry as it thought fit, came to the conclusion that the settlement of these lands with the petitioners was contrary to the provisions of law and public policy and recommended that steps should be to taken by the State of Bihar to have these lands restored to the Bettiah Estate.
In pursuance thereof a request was made to the petitioners and to the said Prajapati Mishra to return the lands to Bettiah Estate.
While Sri Prajapati Mishra returned the land settled with him, the petitioners refused to do so.
The Statement of Objects and Reasons of the Sathi Lands (Restoration) Bill runs thus: "As it has been held that the settlement of Sathi lands in the District of Champaran under the Court of Wards with Sri Ram Prasad Narayan Sahi and Shri Ram Rekha Prasad Narayan Sahi is contrary to the provisions of the law and as Sri Ram Prasad Narayan Sahi and Sri Ram Rekha Narayan Sahi have refused to return the lands to the Bettiah Estate, Government 1132 have decided to enact a law to restore these lands to the Bettiah Estate." The impugned Act consists of three sections.
Section 2(1) declares that "notwithstanding anything contained in any law for the time being in force" ', the settlement obtained by the appellants is "null and void", and that "no party to the settlement or his successor in interest shall be deemed to have acquired any right or incurred any liability thereunder".
Sub section (2) provides that the appellants and their successors in interest "shall quit possession of the said land from the date of commencement of this Act and if they fail to do so, the Collector of Champaran shall eject them and restore the lands to the possession of the Bettiah Wards Estate".
Subsection (3) provides for the refund of the amount of salami money and the cost of improvement, if any, to the lessees by the estate on restoration to it of the lands in question.
In the "case" lodged in this court for the State of Bihar, the legislation is sought to be justified and its validity maintained on the following grounds: " It is well settled that a Legislature with plenary powers so long as it enacts law, within the ambit of its powers, is competent to enact a law which may be applicable generally to society or to an individual or a class of individuals only .
It is submitted that grants of the lands belonging to the Bettiah Estate made by the Court of Wards were of doubtful validity; hence they have been dealt with by the impugned Act .
No evidence has been adduced by the appellants, except a bare allegation, which has not been substantiated, that about 2000 acres of land were settled to show that persons in similar circumstances with whom similar settlements were made, were treated differently.
It is submitted that in the context the impugned Act, has a reasonable basis of classification.
" The decision of the majority of this Court in Chiran vs The Union of India(1) is relied on in suport of these contentions, In that case, however, the (1) ; , 1133 majority felt justified in upholding the legislation, though it adversely affected the rights and interest of the shareholders of a particular joint stock company, because the mismanagement of the company 's affairs prejudicially affected the production of an essential commodity and caused serious unemployment amongst a section of the community.
Mr. Justice Das and I took the 'view that legislation directed against a particular named person or corporation was obviously discriminatory and could not constitutionally be justified even if such legislation resulted in some benefit to the public.
In a system of government by political parties, I was apprehensive of the danger inherent in special enactments which deprive particular named persons of their liberty or property because the Legislature thinks them guilty of misconduct, and I said in my dissenting opinion: "Legislation based upon mismanagement or other misconduct as the differentia and made applicable to a specified individual or corporate body is not far removed from the notorious parliamentary procedure formerly employed in Britain of punishing individual delinquents by passing bills of attainder, and should not, I think receive judicial encouragement.
" My apprehensions have come true.
Recently we had before us a case from Hyderabad (Civil Appeal ,No. 63 of 1952Ameerunnissa Begum vs Mahboob Begum) ' where the duly constituted legislative authority of that State intervened in a succession dispute between two sets of rival claimants to the estate of a deceased person and " dismissed " the claim of the one and adjudged the Property to the other by making a special " law " to that effect.
And now comes this case from Bihar of an essentially similar type.
The appellants assert title to certain lands in Bettiah Estate under a settlement which they claim to have lawfully obtained from the Court of Wards, while it is now alleged on behalf of the Estate that the settlement was not for the benefit of the Estate and was contrary to law, as the Court of Wards did not then " apply its (1) Since reported as ; 147 1134 mind " to that question.
This is purely a dispute between private parties and a matter for determination by duly constituted courts to which is entrusted, in every free and civilised society, the important function of adjudicating on disputed legal rights, after observing the well established procedural safeguards which include the right to be heard, the right to produce witnesses and so forth.
This is the protection which the law guarantees equally to all persons, and our Constitution prohibits by article 14 every State from denying such protection to anyone.
The appellants before us have been denied this protection.
A political Organization of the party in power decides after making such enquiry as it thought fit, that the settlement in question was " contrary to the provisions of law and public policy " and the State Legislature, basing itself on such decision, purports to declare the settlement " null and void " and directs the eviction of the appellants and the restoration of the lands to the Estate.
The reasons given for this extraordinary procedure are indeed remarkable for their disturbing implications.
It is said that "there was agitation amongst the tenants of the locality and opposition on the part of persons living in the locality against the appellants ' possession of the lands which led to breach of the peace and institution of criminal cases ".
Whenever, then, a section of the people in a locality, in 'assertion of an adverse claim, disturb a person in the quiet enjoyment of his property, the Bihar Government would seem to think that it is not necessary for the police to step in to protect him in his enjoyment until he is evicted in due course of law, but the Legislature could intervene by making a " law " to oust the person from his possession.
Legislation such as we have now before us is calculated to drain the vitality from the rule of law which our Constitution so unmistakably proclaims, and it is to be hoped that the democratic process in this country will not function along these lines.
MUKHERJEA J.
This appeal, which has come before us on a certificate granted by the High Court of 1135 Patna under article 132 (1) of the Constitution, is directed against a judgment of a Division Bench of that court, dated 3rd January, 1952, by which the learned Judges dismissed a petition of the appellants under article 226 of the Constitution.
The prayer in the petition was for a writ in the nature of mandamus, directing the opposite party, not to take any action, under an Act passed by the Bihar Legislative Assembly in 1950 and known as The Sathi Lands (Restoration) Act which was challenged as void and unconstitutional.
To appreciate the points in controversy between the parties to the proceeding, it may be necessary to narrate the material facts briefly.
Maharani Janki Koer, the respondent No. 2 in the appeal, is the present proprietress of an extensive Estate in Bihar known by the name of Bettiah Raj, which is held and managed on her behalf by the Court of Wards, Bihar, constituted under Bengal Act IX of 1879.
On 19th July, 1946, the appellants, who are two brothers and are distantly related to the Maharani, made a representation to the Government of Bihar through the Manager of the Estate, praying for settlement in raiyati right, of 200 bighas of land preferably in Sathi farm or Materia farm along with a certain quantity of waste lands.
On 20th July, 1946, the then Manager of the Wards Estate wrote a letter to the Collector of Champaran recommending that the applicants might be given settlement of the lands as prayed for, without payment of any selami.
The Collector, however, did not.
agree to this proposal, nor did the Commissioner of the Tirhut Division, and the matter then came up for consideration before the Board of Revenue which recommended that settlement might be made with the applicants provided they were agreeable to pay selami at half the usual rates.
On 14th October, 1946, the recommendation of the Revenue Board was accepted by the Provincial Government and six days later the Court of Wards accepted a cheque for Rs. 5,000 from one of the lessees, towards payment of the selami money and rent for the year 1354 F.S.
On the 2nd November, 1946, possession 1136 of the lands was given to the appellants and on the 18th of November following, the Manager of the Court of Wards recorded a formal order fixing the selami of the land at Rs. 3,988 annas odd and rent at Rs. 797 annas odd per year.
On the same day, a Hisab Bandobasti form, which is the usual form employed in the Estate for raiyati settlements, was signed by the Circle Officer on behalf of the Court of Wards and by one of the lessees for himself as well as the constituted attorney of the other lessees.
It is not disputed that the lessees continued to possess the lands since then on payment of the stipulated rent.
On the 3rd June, 1950, the Bihar Legislative Assembly passed an Act known as The Sathi Lands (Restoration) Act which received the assent of the Governor on the 13th June, 1950.
The object of the Act, as stated in the preamble, is to provide for restoration of certain lands belonging to the Bettiah Wards Estate which were settled contrary to the provisions of law in favour of certain individuals.
Section 2, which is the only material section in the Act, enacts in the first sub section that the settlement of Sathi lands (described in the schedule to the Act) on behalf of the Bettiah Court of Wards Estate with the appellants, as per order of the Manager of the Estate dated the 18th November, 1946, is declared null and void and no party to the settlement ,or his successor in interest shall be deemed to have acquired any right or incur any liability under the same.
The second sub section embodies a direction to the effect that the said lessees and their successor in interest shall quit possession of the lands from the date of the commencement of the Act and if they fail to do so, the Collector of Champaran shall eject them and restore the lands to the possession of the Bettiah Estate.
The third and the last sub section provides that the Bettiah Wards Estate shall on restoration to it of the lands pay to the lessees the selami money paid by them and also such amount as might have been spent by them in making improvements on the lands prior to the commencement of the Act.
1137 In substance, therefore, the Act declared the lease granted by the Bettiah Wards Estate to the appellants on the 18th November, 1946, to be illegal and inoperative and prescribed the mode in which this declaration was to be given effect to and the lessees evicted from the lands.
On the 28th August, 1950, the appellants filed the petition, out of which this appeal arises, under article 226 of the Constitution in the High Court of Patna, challenging the validity of The Sathi Lands Act and praying for a writ upon the respondents restraining them from taking any steps under the said Act, or from interfering with the possession of the appellants in respect of the lands comprised in the lease.
It was asserted by the petitioners that in passing the impugned legislation the Bihar Legislature actually usurped the power of the judiciary and the enactment was not a law at all in the proper sense of the expression.
The other material contentions raised were that the legislation was void as it conflicted with the fundamental rights of the petitioners guaranteed under articles 14, 19(1) (f) and 31 of the Constitution.
The respondents opposite parties in resisting the petitioners ' prayer stated inter alia in their counter affidavit that the settlement of the lands in question with the appellants by the Court of Wards, was not for the benefit of the estate or advantage of the ward and that the transaction was entered into by the Wards Estate without properly applying their mind to it.
It was stated further that after the settlement was made, there was a good deal of agitation among the tenants in the locality which led to the institution of certain criminal proceedings.
In these circumstances, the matter was brought to the notice of the Working Committee of the Indian National Congress and the Working Committee was of opinion that the settlement of these lands was against public interest.
The lessees, therefore, were asked to vacate the lands and on their refusal the legislation in question was passed.
The petition was heard by a Division Bench consisting of Ramaswami and Sarjoo Pershad JJ.
Ramaswami J. 1138 decided all the points raised by the petitioners against them and held that the Act was neither ultra vires the Bihar Legislature nor was void under article 13(1) of the Constitution.
The learned Judge was further of opinion that it was not a fit case for interference by the High Court under article 226 of the Constitution.
The other learned Judge expressed considerable doubts as to whether a legislation of this type, which in form and substance was a decree of a court of law, was within the competence of the legislature and warranted by the Constitution.
He agreed, however, with his learned colleague that the case was not such as to justify an interference of the High Court in exercise of its discretionary powers under article 226 of the Constitution.
The remedy of the petitioners might lie, according to him, in a regularly constituted suit.
The result, therefore, was that the appellants ' petition was dismissed and it is the propriety of this judgment that has been assailed before us in this appeal.
Mr. P. R. Das, who appeared in support of the appeal, put forward at the forefront of his arguments, the contention raised on behalf of his client in the court below that the impugned legislation was void by reason of its violating the fundamental rights of the appellants under article 14 of the Constitution.
The point appeared to us to be of substance and after hearing the learned Attorney General on this point we were satisfied that the contention of Mr. Das was well founded and entitled to prevail, irrespective of any other ground that might be raised in this appeal.
There have been a number of decisions by this court where the question regarding the nature and scope of the guarantee implied in the equal protection clause of the Constitution came up for consideration and the general principles can be taken to be fairly well settled.
What this clause aims at is to strike down hostile discrimination or oppression or inequality.
As the guarantee applies to all persons similarly situated, it is certainly open to the legislature to classify persons and things to achieve particular legislative objects; 1139 but such selection or differentiation must not be arbitrary and should rest upon a rational basis, having regard to the object which the legislature has in view.
It cannot be disputed that the legislation in the present case has singled out two individuals and one solitary transaction entered into between them and another private party, namely, the Bettiah Wards Estate and has declared the transaction to be a nullity on the ground that it is contrary to the provisions of law, although there has been no adjudication on this point by any judicial tribunal.
It is not necessary for our present purpose to embark upon a discussion as to how far the doctrine of 'separation of powers has been recognised in our Constitution and whether the legislature can arrogate to itself the powers of the judiciary and proceed to decide disputes between private parties by making a declaration of the rights of one against the other.
It is also unnecessary to attempt to specify the limits within which any legislation, dealing with private rights, is possible within the purview of our Constitution.
On one point our Constitution is clear and explicit, namely, that no law is valid which takes away or abridges the fundamental rights guaranteed under Part III of the Constitution.
There can be no question, therefore, that if the legislation in the present case comes within the mischief of article 14 of the Constitution, it has got to be declared invalid.
This leads us to the question as to whether the impugned enactment is, in fact, discriminatory and if So, whether the discrimination made by it can be justified on any principle of reasonable classification ? The appellants, it is not disputed, are only two amongst numerous leaseholders who hold lands in raiyati right under the Bettiah Wards Estate.
It cannot also be disputed that the lands were settled with them on the recommendation of the Board of Revenue after due consideration of the respective views put forward by the Manager of the Estate on the one hand and the Collector and the Divisional Commissioner on the other.
The appellants are admittedly paying rents which are normally assessed on lands of similar 1140 description in the locality.
The learned AttorneyGeneral referred in this connection to the provisions of section 18 of the Court of Wards Act and argued that the lease in dispute was granted in contravention of that section.
Section 18 of the Court of Wards Act provides as follows: "The Court may sanction the giving of leases or farms of any property under its charge . and may direct the doing of all such other acts as it may judge to be most for the benefit of the property and the advantage of the Ward".
Apparently it makes the Court of Wards the sole judge of the benefit to the estate or advantage of the ward.
But it is said that the Court of Wards did not apply its mind properly to this matter when it granted lease to the appellants at half the usual rate of selami.
The Wards Estate thus suffered loss to the extent of nearly Rs. 4,000 which could legitimately have been recovered from any other lessee.
This contention does not impress us much; the utmost that can be said is that this could have been put forward, for what it is worth and with what result, nobody can say, as a ground for setting aside the lease in a court of law.
But that is not the question which is relevant for our present purpose at all; we were not called upon to decide whether or not the lease was a proper one or beneficial to the estate.
The question for our decision is, whether the statute contains discriminatory provisions so far as the appellants are concerned and if so, whether these discriminations could be reasonably justified ? It is clearly stated in paragraph 9 of the affidavit made by the appellants in support of their petition that there are numerous other persons to whom leases on similar terms were granted by the Bettiah Wards Estate.
Clauses (b), (c) and (d) of paragraph 9 of the affidavit stand thus: "(b) In this long course of management by tile Court of Wards, leases or settlement of lands used to be made without any selami on proper rent.
This state of affairs continued down to recent times during 1141 which period thousands of bighas were so settled with numerous persons; (c) in 1945 the authorities decided to make settlements on large scale with war returned soldiers on a selami equal to 5 times the average rent prevailing in the locality for similar lands; (d) in 1946, 1947, 1948 and 1949 a good number of settlements covering about 2000 acres of lands were settled on the basis of IO years ' rental obtaining in the locality and in some cases for good reasons, at five years ' rental." In paragraph 12 of the counter affidavit put in on behalf of the respondents, these statements are not denied.
In fact, they are admitted and the only thing said is, that these leases were granted in due course of management.
Ramaswami J. has dismissed this part of the case by simply remarking that no details of these settlements were furnished by the appellants; but no details were at all necessary when the correctness of the statements was not challenged by the respondents.
It will be interesting to note that the respondents themselves in paragraph 10 of their counter affidavit mentioned the name of Shri Prajapati Mishra as one of the persons with whom similar settlement of lands was made by the Bettiah Estate.
It is stated in that paragraph that the cases of the appellants as well as of Prajapati Mishra were brought to the notice of the Working Committee of the Indian National Congress and the Committee came to the conclusion that both the settlements were contrary to the provisions of law.
Thereupon a request was made to both these sets of lessees to restore their lands to the Estate, but whereas Prajapati Mishra returned his lands to the Bettiah Estate, the appellants refused to do so.
In reply to this statement, the appellants stated in their rejoinder that the said Prajapati Mishra did not vacate the land,% but created a trust in respect of the same, he being the chairman of the board Of trustees and the lands were still in possession of the board of trustees.
Strangely, as it seems, the State of Bihar raked up this matter again in a 148 1142 further affidavit where it was admitted that the said Prajapati Mishra did execute a trust and that the trustees took possession of the property.
It was stated, however, that Prajapati Mishra, who was one of the trustees, did actually surrender the lands in two installments but the other trustees did not, and hence legal advice was being taken to find out ways and means of recovering the property from them.
The whole thing smacks of disingenuousness and the State of Bihar, it seems, was not well advised in rely ing upon facts like these in their attempt to repel the appellants ' attack on the legislation on the ground of discrimination.
Be that as it may, there is no doubt that the appellants were not the only lessees under the Bettiah Estate who got settlement of lands at a selami of five years ' rental.
On the sworn statements of the appellants, which are not challenged by the other side, it appears that there are numerous persons occupying the same position as the appellants, who however were not subjected to this expropriatory legislation.
But the vice in this legislation goes much deeper than this.
It is not merely a question of treating the appellants differently from the other lessees under the Wards Estate, with whom settlements of land have been made on similar or identical terms.
If a lease has been given by a Court of Wards, which is not for the benefit of the estate or advantage of the ward, it is for a court of ,law to decide whether it is warranted by the terms of the Court of Wards Act.
If the lessor proceeds to cancel the lease, the lessee has a legal right to defend his claim and satisfy the court that the lease is not in contravention of law.
If, on the other hand, the lessee is actually dispossessed, he has a right to sue in court for recovery of possession of the property on establishing that he has been illegally turned out.
The dispute here, is a legal dispute pure and simple between two private parties.
What the Legislature has done is to single out these two individuals and deny them the right which every Indian citizen possesses to have his rights adju dicated upon by a judicial tribunal in accordance with 1143 the law which applies to his case.
The meanest of citizens has a right of access to a court of law for the redress of his just grievances and it is of this right that the appellants have been deprived by this Act.
It is impossible to conceive of a worse form of discrimination than the one which differentiates a particular individual from all his fellow subjects and visits him with a disability which is not imposed upon anybody else and against which even the right of complaint is taken away.
The learned Attorney General, who placed his case with his usual fairness and ability, could not put forward any convincing or satisfactory reason upon which this legislation could be justified.
It is true that the presumption is in favour of the constitutionality of a legislative enactment and it has to be presumed that a Legislature understands and correctly appreciates the needs of its own people.
But when on the face of a statute there is no classification at all, and no attempt has been made to select any individual or group with reference to any differentiating attribute peculiar to that individual or group and not possessed by others, this presumption is of little or no assistance.
to the State.
We may repeat with profit what was said by Mr. Justice Brewer in Gulf Colorado etc.
Co. vs Ellis(1) that "to carry the presumption to the extent of holding that there must be some undisclosed and unknown reason for subjecting certain" individuals or corporations to hostile and discriminatory legislation is to make the protection clauses of the Fourteenth Amendment a mere rope of sand".
In our opinion, the present case comes directly within the principle enunciated by this court in Ameerunnissa, Begum vs Mahboob Begum(2 ).
The result is that we allow the appeal and set aside the judgment of the High Court.
A writ in the nature of mandamus shall issue directing the respondents not to take any steps in pursuance of The Sathi Lands (Restoration) Act of 1950 or to interfere with the possession of the appellants in respect to the lands (1) 165 U section 150.
(2) [1953] S.C.R 404.
1144 comprised in the lease referred to in that Act.
The appellants will have their costs in both courts.
VIVIAN BOSE J. I am in entire agreement with my Lord the Chief Justice and with my learned brother Mukherjea.
GHULAM HASAN J.
I agree with my Lord the Chief Justice and with my brother Mukherjea.
BHAGWATI J. I entirely agree with the judgment just delivered by my Lord the Chief Justice and my brother Mukherjea and there is nothing which I can usefully add.
Appeal allowed.

dataset_name: IN-Abs

summary:
The Court of Wards granted to the appellants a large area of land belonging to the Bettiah Raj which was then under the management of the Court of Wards, on the recommendation of the Board of Revenue, at half the usual rates.
A few years later, the Working Committee of the Indian National Congress expressed the opinion that the settlement of the lands was against public interest, and in 1950, the Bihar Legislature passed an Act called the Sathi Lands (Restoration) Act, 1950, which declared that, notwithstanding anything contained in any law for the time being in force the settlement granted to the appellants shall be null and void and that no party to the settlement or his successors in interest shall be deemed to have acquired any right or incurred any liability thereunder, and empowered the Collector to eject the appellants if they refused to restore the lands.
The appellants, alleging that the Act was unconstitutional, applied under article 226 of the Constitution for a writ of mandamus against the State of Bihar restraining it from taking any action under the Act.
It was found that there were several other settlements of lands belonging to the Bettiah Raj on similar terms against which the Government had taken no action: Held, that the dispute between the appellants and the State was really a private dispute and a matter to be determined by a judicial tribunal in accordance with the law applicable to the case, and, as the Legislature had, in passing the impugned enactment singled out the appellants and deprived them of their right to 1130 have this dispute adjudicated upon by a duly constituted Court, the enactment contravened the provisions of article 14 of the Constitution which guarantees to every citizen the equal protection of the laws, and was void.
Legislation which singles out a particular individual from his fellow subjects and visits him with a disability which is not imposed upon the others and against which even the right of complaint is taken away is highly discriminatory.
Though the presumption is in favour of the constitutionality of a legislative enactment and it has to be presumed that a Legislature understands and correctly appreciates the needs of its own people, yet when on the face of a statute there is no classification at all, and no attempt has been made to select any individual or group with reference to any differentiating attribute peculiar to that individual or group and not possessed by others, this presumption is of little or no assistance to the State.
Ameerunnissa Begum vs Mahboob Begum ; and Gulf of Colorado etc.
Co. vs Ellis ; referred to.


judgement:
No. 224 of 1959.
Appeal from the judgment and decree dated August 28, 1956, of the Madhya Pradesh High Court in F.A. No. 90 of 1949.
A. V. Viswanatha Sastri, section N. Andley, Rameshwar Nath and P.L. Vohra, for the appellant.
section T. Desai, R. Ganapathy Iyer and K. L. Hathi, for the respondent.
January 15 The Judgment of the Court was delivered by section K. DAS, J.
This is an appeal on a certificate granted by the High Court of Madhya Pradesh under article 133 (1) (a) of the Constitution, The appellant is Mithoolal Nayak, who took an assignment on october 18, 1945 of a life insurance policy on the life of one Mahajan Deolal for a sum of Rs. 25,000/ in circumstances which we shall presently state.
Mahajan Deolal died on November 12, 1946 573 Thereafter, the appellant made a demand against the respondent company for a sum of Rs. 26,000/ and odd on the basis of the life insurance policy which had been assigned to him.
This claim or demand of the appellant was repudiated by the respondent company by a letter dated October 10, 1947, which in substance stated that the insured Mahajan Deolal had been guilty of deliberate mis statements and fraudulent suppression of material information in answers to questions in the proposal form and the personal statement, which formed the basis of the contract between the insurer and the insured.
On the repudiation of his claim the appellant brought the suit out of which this appeal has arisen.
The suit was originally instituted against the oriental Government Security Life Assurance co. Ltd., Bombay, which issued the policy in favour of Mahajan Deolal on March 13, 1945.
Latter, on the passing of the life Insurance corporation Act, 1956, there was a statutory transfer of the assets and liabilities of the controlled (life) business of all insurance companies and insurers operating in India to a Corporation known as the Life Insurance Corporation of India.
By an order of this Court made on February 16, 1960, the said Corporation was substituted in place of the original respondent.
For brevity as convenience we shall ignore the distinction between the original respondent and the said Corporation and refer to the respondent in this judgment as the respondent company.
The Suit was decreed by the learned Additional District Judgment of Jabalpur by his judgment dated May 7, 1949.
The respondent company then preferred an appeal to the High Court of Madhya Pradesh.
This appeal was heard by a Division Bench of the said High Court and by a judgment dated August 28, 1956, the appeal was allowed and the suit was dismissed with costs.
It is from 574 that appellate judgment and decree that the present appeal has been brought to this Court.
We now proceed to state some of the relevant facts relating to the appeal and the contentions urged on behalf of the appellant.
Mahajan Deolal was a resident of.
village Singhpur, Tehsil Narsinghpur.
It appears that he was a small landholder and possessed several acres of land.
Sometime in December, 1942, Mahajan Deolal submitted a proposal through one Rahatullah Khan, an agent of the respondent company at Narsingpur, for the insurance of his life with the respondent company for a sum of Rs. 10,000/ only.
Mahajan Deolal 's age at that time was about 45 as stated by him.
In the proposal form which was submitted to the respondent company, Mahajan Deolal mentioned the name of one Motilal Nayak, by profession a doctor, as a personal friend who best knew the state of the health and habits etc.
of the insured.
This Motilal Nayak, be it noted, is a brother of the appellant, the evidence in the record showing that the two brothers lived together in the same house.
When the proposal for insurance of his life was made by Mahajan Deolal in December 1942, he was examined by a doctor named Dr. D. D. Desai.
This doctor submitted two reports about Mahajan Deolal; one report, it appears, was admitted with the proposal form through the agent of the respondent company; another report was sent in a confidential cover along with a letter from the doctor.
In this letter (exhibit D 22) the doctor explained why he was submitting two medical reports.
In substance he said that the report submitted with the proposal form at the instance of the agent, Rahatullah Khan, was not a correct report and the correct report was the one which he enclosed in the confidential cover.
In that report Dr. Desai said that Mahajan Deolal 575 was anaemic, looked about 55 years old, had a dilated heart and his right lung showed indications of an old attack of pneumonia or pleurisy.
The doctor further said that the general health of Mahajan Deolal was very much run down and he was a total physical wreck.
The doctor opined that Mahajan Deolal ' life was an uninsurable life.
It appears that nothing came out of the proposal made by Mahajan Deolal for the insurance of his life in December, 1942.
The evidence of the Inspector of the respondent company shows that on receipt of Dr. Desai 's reports, the respondent company directed that Mahajan Deolal should be further examined by the Civil Surgeon, Hoshangabad and District Medical officer, Railways at Jabalpur.
Mahajan Deolal could not, however, be examined by the two doctors aforesaid and according to the rules of the respondent company the proposal lapsed on the expiry of six months for want of completion of the medical examination as required by the respondent company.
Then, on July 16, 1944, a second proposal was made through the same agent of the respondent company for the insurance of the life of Mahajan Deolal, this time for a sum of Rs. 25,000/ .
The Inspector of the respondent company said in his evidence that this second proposal was made at the instance of the same agent, Rahatullah Khan inasmuch as the proposal of 1942 had not been rejected but had only lapsed.
It appears that at the time of the first proposal in 1942 Mahajan Deolal had paid a sum of Rs. 571/ and odd towards the first premium due in case the proposal was accepted.
In the personal statement, accompanying the second proposal of July 16, 1944, it was stated that an earlier proposal for insuring the life of Mahajan Deolal was pending with the respondent company.
Now, in the proposal form (exhibit D 11) there was a question (question No. 13) to the following effect: 576 "Have you within the past five years consulted any medical man for any ailment, not necessarily confining you to your house? If so, give details and state names and addresses of medical man consulted.
" The answer given to the question was "No".
This answer, according to the case of the respondent, was false and deliberately false.
because, according to the evidence of one Dr. P.N Lakshmanan, Consulting Physician at Jabalpur, Mahajan Deolal was examined and treated by the said doctor between the dates September 7, 1943, and October 6, 1943, when the doctor found that Mahajan Deolal was suffering from anaemia, oedema of the feet, diarrhoea and panting on exertion.
We shall advert in greater detail to the evidence of Dr. Lakshmanan at a later stage.
In his personal statement accompanying the second proposal Mahajan Deolal answered in the negative question 12(b), the question being as to when he was last under medical treatment and for what ailment and how long.
In the same personal statement with regard to questions, for example, question nos.
5(a); 5(b) etc., as to whether he suffered from shortness of breath, anaemia, asthma etc, Mahajan Deolal gave negative answers.
The contention on behalf of the respondent company was that these answers in the personal statement were also deliberately false and constituted a fraudulent suppression of material particulars relating to the health of the insured.
With regard to the second proposal and the personal statement accompanying it, Dr. Motilal Nayak, brother of the appellant, gave a friend 's report, in which he said that Mahajan Deolal health was good and that he had never heard that Mohajan Deolal suffered from any illness.
It is worthy of note here that Dr. Motilal Nayak himself took Mahajan Deolal to Dr. Lakshmanan for treatment at Jabalpur in September October., 1943.
On receipt 577 of the second proposal in July, 1944, Mahajan Deolal was examined by Dr. Kapadia, who was the District Medical officer of the Railways at Jabalpur.
Dr. Kapadia reported that Mahajan Deolal was a healthy man and looked about 52 to 54 years old.
He recommended that Mahajan Deolal might be given a policy of fourteen years.
In his report Dr. Kapadia noted that Mahajan Deolal had stated that he had suffered from pneurnonia four or five years ago, and that he had also cholera some years ago.
No mention, however, was made of anaemia, asthma, shortness of breath etc.
On December 29, 1944, Mahajan Deolal made a further declaration of his good health and so also on February 12, 1945.
On March 13, 1945, the policy was issued by the respondent company.
It contained the usual terms of such life insurance policies, one of which was that in case it would appear that any untrue or incorrect averment had been made in the proposal form or personal statement, the policy would be void.
The first premium due on the policy was taken from the amount which was already in deposit with the respondent company in connection with the proposal made in 1942.
Then, on May 22, 1945, Mahajan Deolal wrote a letter to the respondent company in which he said that his financial condition had become suddenly worse and that he would not be able to pay the premium for the policy.
He requested that the policy be cancelled.
In the meantime the premium for 1945 not having been paid, the policy lapsed.
Then, on October 28, 1945, Mahajan Deolal made a request for revival of the policy, but a few days before that, namely on October 18, 1945, the policy was assigned in favour of the appellant, by an endorsement made on the policy itself.
This assignment was duly registered by the respondent company by means of its letter dated November 1, 1945 in which the respondent company said that it accepted the assignment without expressing any opinion as to its validity or 578 effect.
The respondent company also made an enquiry from the appellant as to whether the latter had any insurable interest in the life of the insured and what consideration had passed from him to the insured.
To this the appellant replied that he had no insurable interest in the life of Mahajan Deolal except that the latter was a friend and he (the appellant) had purchased the policy for a sum of Rs. 427.12 nP. being the premium paid by him so far, because Mahajan Deolal did not with to continue the policy.
On his request for a revival of the policy Mahajan Deolal was again medically examined, this time by one Dr. Belapurkar.
Later on February 25, 1946, he was examined by Dr. Clarke.
The policy was then revived on payment of all arrears of premium, these arrears having been paid by the present appellant.
On receipt of the revival fee, the policy appears to have been revived some time in July, 1946.
We have already stated that Mahajan Deolal died in November, 1946.
The certificate of Dr. Clarke, who was the medical attendant at the time when Mahajan Deolal died, showed that the primary, cause of death of Mahajan Deolal was malaria followed by severe type of diarrhoea; the secondary cause was anaemia, chronic bronchitis and enlargement of liver.
In the certificate which Dr. Clarke gave there was mention of certain other medical practitioners who had attended Mahajan Deolal at the time of his death.
One of such medical practitioners mentioned in the certificate was Dr. Lakshmanan.
On receipt of this certificate the respondent company got into touch with Dr. Lakshmanan and discovered from him that Mahajan Deolal had been treated in September October, 1943, by Dr. Lakshmanan for ailments which, according to the doctor, were of a serious nature.
Several issues were tried between the parties in the trial court.
But the four questions which 579 were argued in the High Court and on which the fate of the appeal depends were these: (1) Whether the policy was vitiated by fraudulent suppression of material facts by Mahajan Deolal ? (2) Whether the present appellant had no insurable interest in the life of the insured, and if so, can he sue on the policy ? (3) Whether the respondent company had issued the policy with full knowledge of the facts relating to the health of the insured and if so, is it estopped from contesting the validity of the policy ? and (4) Whether in any event the appellant is entitled to refund of the money he had paid to the respondent company ? These are the four questions which have been agitated before us and we shall deal with such of them as are necessary for deciding this appeal.
So far as the first question is concerned, the learned trial Judge found that though Mahajan.
Deolal had given a negative answer to question no, 13 in the proposal form and to questions nos.
5(a), 5(b), 5 (f) and 12(b) in the personal statement, these answers though not strictly accurate, furnished no grounds for repudiating the claim of the appellant by the respondent company, in as much as s.45 of the (4 of 1938) applied and the answers did not amount to a fraudulent suppression of material facts by the policy holder within the meaning of that section.
The learned trial Judge found that the ailments for which Dr. Lakshmanan treated Mahajan Deolal in September October, 1943, were of a causal or trivial nature and the failure of the policy holder to disclose those ailments did not attract the second part of 580 section 45 of the .
The High Court came to a contrary conclusion and held that even applying section 45 of the , the policy holder was guilty of a fraudulent suppression of material facts relating to his health within the meaning of that section and the respondent company was entitled to avoid the contract on that ground.
On behalf of the appellant it has been argued before us that the finding of the learned trial Judge on this question was the correct finding and that the High Court was wrong in arriving at a contrary finding on this question in view of the evidence given in the case.
The judgment of the High Court is a judgment in reversal and the appellant has a right of appeal under article 133(1)(a) of the Constitution in as much as the value of the subject matter of the dispute in the court of first instance and still in dispute is more than Rs. 20,000/ .
We have, therefore, allowed learned counsel for the parties to take us through the evidence in the case.
On a consideration of that evidence we have come to the conclusion that the finding of the High Court is the correct finding.
We shall presently consider the evidence, but it may be advantageous to read first section 45 of the , as it stood at the relevant time.
The section, so far as it is relevant for our purpose, is in these terms: "No policy of life insurance effected before the commencement of this Act shall after the expiry of two years from the date of commencement of this Act and no policy of life insurance effected after the coming into force of this Act shall, after the expiry of two years from the date on which it was effected, be called in question by an insurer on the ground that a statement made in the proposal for insurance or in any report of a medical officer, or referee, or friend of the insured, or in any other document leading to 581 the issue of the policy, was inaccurate or false, unless the insurer shows that such statement was on a material matter or suppressed facts which it was material to disclose and that it was fraudulently made by the policy holder and 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.
x x x x x x" It would be noticed that the operating part of section 45 states in effect (so far as is relevant for our purpose) that no policy of life insurance effected after the coming into force of the Act shall, after the expiry of two years from the date on which it was effected, be called in question by an insurer on the ground that a statement made in the proposal for insurance or in any report of a medical officer, or referee, or friend of the insured, or in any other document leading to the issue of the policy, was inaccurate or false; the second part of the section is in the nature of a proviso which creates an exception.
It says in effect that if the insurer shows that such statement was on a material matter or suppressed facts which it was material to disclose and that it was fraudulently made by the policyholder and 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, then the insurer can call in question the policy effected as a result of such inaccurate or false statement.
In the case before us the policy was issued on March 13, 1945, and it was to come into effect from January 15, 1945.
The amount insured was payable after January 15, 1968, or at the death of the insured, if earlier.
The respondent company repudiated the claim by its letter dated October 10, 1947.
Obviously, therefore, two years had expired from the date on which the policy was effected.
We are clearly of the opinion that section 45 of the applies in the present case in 582 view of the clear terms in which the section is worded, though learned counsel for the respondent company sought, at one stage, to argue that the revival of the policy some time in July, 1946, constituted in law a new contract between the parties and if two years were to be counted from July, 1946, then the period of two years had not expired from the date of the revival.
Whether the revival of a lapsed policy constitutes a new contract or not for other purposes, it is clear from the wording of the operative part of section 45 that the period of two years for the purpose of the section has to be calculated from the date on which the policy was originally effected; in the present case this can only mean the date on which the policy (exhibit P 2) was effected.
From that date a period of two years had clearly expired when the respondent company repudiated the claim.
As we think that section 45 of the applies in the present case, we are relieved of the task of examining the legal position that would follow as a result of inaccurate statements made by the insured in the proposal form or the personal statement etc.
in a case where section 45 does not apply and where the averments made in the proposal form and in the personal statement are made the basis of the contract.
The three conditions for the application of the second part of section 45 are (a) the statement must be on a material matter or must suppress facts which it was material to disclose; (b) the suppression must be fraudulently made by the policy holder; and (c) the policy holder must have known at the time of making the statement that it was false or that it suppressed facts which it was material to disclose.
The crucial question before us is whether these three conditions were fulfilled in the present 583 case.
We think that they were.
We are unable to agree with the learned trial Judge that the ailments for which Mahajan Deohal 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 friend 's 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. Lakshmana.
On that date Dr. Lakshmanan found that 584 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 continued 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 Deolal 's 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 from 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 Deolal 's son now tries to make light of the illness of his father but Dr. Lakshmanan 's evidence shows elearly enough that in September October, 1943.
Mahajan 585 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 answer 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 section 17 of the (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 section 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 the appellant.
We may here dispose of the third question.
Learned counsel for the appellant has argued before us that Mahajan Deolal was examined under the direction of the respondent company by as many as four doctors, namely, Dr. Desai, Dr. Kapadia, Dr. Belapurkar and Dr. Clarke.
It is further pointed out that Mahajan Deolal had correctly 586 disclosed that he had suffered previously from malaria, pneumonia and cholera.
Dr. Kapadia, it is pointed out, was specifically asked to examine Mahajan Deolal in view of the conflicting reports which Dr. Desai had earlier submitted.
On these facts, the argument has been that the respondent company had full knowledge of all facts relevant to the state of health of Mahajan Deolal and having knowledge of the full facts, it was not open to the respondent company to call the policy in question on the basis of the answers given by Mahajan Deolal in the proposal form and the personal statement, even though those answers were inaccurate.
Learned counsel for the appellant has referred us to the Explanation to section 19 of the in support of his argument.
We are 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 section 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 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 587 parties, and the circumstance that Mahajan Deolal had taken paint 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 party 's consent.
A man who has so acted cannot after wards 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 section 19 of the .
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 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 Deolal 's life; the contract was therefore, void by reason of section 30 of the .
On behalf of the appellant, however, the contention was that section 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 section 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 588 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 is 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 can not claim the benefit of a contract which had been entered into as a result of a fraudulent suppression of material facts by Mahajan Deolal.
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 can not 589 ask for a refund of the money paid.
It is a well established principal 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 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 section 65 nor section 64 of the has any application.
For the reasons given above we have come to the conclusion that there in no merit in the appeal.
The appeal is accordingly dismissed with costs.
Appeal dismissed.

summary:
In 1942, one M sent a proposal for the insurance of his life.
He was examined by Dr. D who submitted two reports, one with the proposal form and one confidential.
The confidential report showed that M was anaemic, had a dilated heart and his right lung showed indications of an old attack of pneumonia or pleurisy and that he was a total physical wreck.
Nothing came out of this proposal and it lapsed.
In 1943, M consulted and was treated by one Dr. L for anaemia oedema of the feet, diarrhoea and panting on exertion.
In 1944, M made a second proposal for insurance of his life.
Against the question in the proposal form whether he had consulted any medical man for any ailment within the last five years, he gave the answer, "Nor '.
He also did not disclose any of his ailments.
After medical examination by one Dr. K the proposal was accepted and a policy for Rs. 25,000/ was issued on March 13, 1945.
The policy lapsed for non payment of premium but was revived in July, 1946.
In November, 1946, M died.
His assignee, the appellant, made a demand for Rs. 26,000/ but the Company on October 10, 1947, repudiated it on the ground that the policy had been obtained by deliberate mis statement and fraudulent suppression of material facts.
Thereupon, the appellant filed a suit to recover the amount of the policy contending that section 45 Insurance Act, barred the company from calling in question the policy after two years on the ground that any statement made in the proposal was inaccurate or false. ^ Held, that the policy holder was guilty of fraudulent suppression of material facts relating to his health and the Company was entitled to avoid the contract.
Section 45 Insurance Act applied to the case as two years had lapsed since the policy was effected; in view of the language of s.45 the two years could not be counted from the date of the revival of the policy.
The second part of section 45 entitled the company to repudiate the contract even after the expiry 572 of two years if three conditions were fulfilled viz. (a) the statement was on a material matter or there was suppression of facts which it was material to disclose; (b) the suppression was fraudulently made by the policy holder, and (c) the policy holder must have known at the time of the making of the statement that it was false or that it suppressed facts which it was material to disclose.
When M was treated in 1943 by Dr. L he was suffering from serious ailments.
He must have known that it was material to disclose this but made a false statement that he had not been treated by any doctor for any serious ailment.
There was deliberate suppression fraudulently made by M. Even though the Company had got M examined by four doctors before issuing the policy, it was not estopped from questioning the policy.
It had no means of knowing that M had been treated by Dr. L for serious ailments.
Held, further, that the appellant was not entitled even to a refund of the money paid as premium as one of the terms of the policy was that all monies paid belonged to the company if the policy was vitiated by fraudulent suppression of material facts.
To such a contract neither section 65 nor section 64 of the Indian Contract had any application.