Supreme Court of India
MAHAKALI SUJATHAversusTHE BRANCH MANAGER, FUTURE GENERALI INDIA LIFE INSURANCE COMPANY LIMITED & ANOTHER
- Citation
- 2024 INSC 296
- Decided
- 10 April 2024
- Disposal
- Appeal(s) allowed
- Bench
- B V NAGARATHNA
Holding
The insurer must prove material suppression and fraud, and having failed to produce corroborative evidence, the repudiation was unjustified, so the NCDRC order is set aside and the claim awarded.
Summary
The appellant, daughter and nominee of a deceased insured, claimed death benefits under two life insurance policies, which the insurer repudiated alleging that the insured had concealed multiple other policies. The insurer relied on an unauthenticated tabulation of fifteen alleged policies without producing any documentary evidence, and the NCDRC upheld the repudiation. The Supreme Court examined Section 45 of the Insurance Act, 1938, which requires the insurer to prove material suppression and fraud after two years, and applied the principles of burden of proof under the Evidence Act, 1872. It held that the insurer had not discharged its evidentiary burden, the tabulation was insufficient, and the answers to the proposal form queries were not proven to be material non‑disclosure. Consequently, the Court set aside the NCDRC order, directed payment of the claim with interest, and allowed the appeal.
Issues considered
- The insurer's right to repudiate the claim on the ground of alleged non‑disclosure of previous policies under Section 45 of the Insurance Act, 1938.
- Whether the burden of proof of material suppression and fraud lies on the insurer.
- Whether the NCDRC correctly accepted the insurer's unauthenticated tabulation as proof of other policies.
- Whether the negative answers to the proposal‑form queries constitute material non‑disclosure.
- The applicability of the contra proferentem rule to ambiguous queries in the proposal form.
Legislation cited
- Evidence Act, 1872s. 101, s. 102, s. 103, s. 104, s. 105, s. 106
- Insurance Act, 1938s. 45
- Insurance Regulatory and Development Authority (Protection of Policyholders’ Interests) Regulations, 2002
Subjects
InsuranceEvidenceBurden of proofOnus of proofMaterial suppression of informationPrevious insurance policiesRepudiation of insurance claimCorroborative evidenceInsurance policiesInsurance contractsUberrimae fideiReciprocal dutiesMaterial factConsumer ForaContra proferentem ruleProposal form
Judgment
[2024] 4 S.C.R. 724 : 2024 INSC 296
Mahakali Sujatha
v.
The Branch Manager, Future Generali India Life Insurance
Company Limited & Another
(Civil Appeal No. 3821 of 2024)
10 April 2024
[B.V. Nagarathna* and Augustine George Masih, JJ.]
Issue for Consideration
The present civil appeal has been filed by the complainant, who
is the daughter of the insured-deceased, who is also the nominee
under the subject life insurance policies of her late father. The
controversy in the present case pertains to the factum of repudiation
of the insurance claim of the complainant on the ground of the
material suppression of information regarding the previous policies
allegedly held by the insured-deceased, while taking the life
insurance policy from the respondent insurance company. Whether,
the respondent insurance company herein was correct in repudiating
the claim of the appellant on the ground of suppression of material
information pertaining to the existing policies with other insurers.
Headnotes
Insurance Act, 1938 – s.45, before the 2014 amendment
– Evidence Act, 1872 – Burden of proof – Onus of proof –
Repudiation of insurance claim of the complainant on the
ground of the material suppression of information regarding
the previous policies – Consumer complaint filed – The
District Commission allowed the complaint on the ground
that no documentary evidence was available to show that
deceased-insured had taken various insurance policies from
other companies – The State Commission upheld the order of
the District Commission – However, the NCDRC observed that
the respondent insurance company had given details of the
aforesaid policies by way of affidavit and the same was not
denied by the complainant in her affidavit – Therefore, NCDRC
concluded that deceased insured had withheld information
in respect of several insurance policies which he had taken
from other insurers – Correctness:
* Author
[2024] 4 S.C.R. 725
Mahakali Sujatha v. The Branch Manager, Future Generali
India Life Insurance Company Limited & another
Held: As per the language and interpretation of Section 45, the
insurer cannot question the policy after the expiry of the time
period and if it does, then the burden rests on the insurer to
establish materiality of the fact suppressed and the knowledge
of the insured about such suppression, so that the repudiation
of the claim could be justified by the insurer – In the present
case, the onus was on the insurer to show that the insured had
fraudulently given false information and the said information was
related to a material fact – The respondent insurance company
has produced no documentary evidence whatsoever before
the District Forum to prove its allegation that the insured had
taken multiple insurance policies from different companies and
had suppressed the same – Before the State Commission, the
respondent had provided a tabulation of the 15 different policies
taken by the insured-deceased – However, the said tabulation
was not supported by any other documentary evidence, like
the policy documents of these other policies, or pleadings in
courts, or such other corroborative evidence – The NCDRC had
accepted the averment of the respondents, without demanding
corroborative documentary evidence in support of the said fact
– The approach adopted by the NCDRC was not correct – The
cardinal principle of burden of proof in the law of evidence
is that “he who asserts must prove”, which means that if the
respondents herein had asserted that the insured had already
taken fifteen more policies, then it was incumbent on them
to prove this fact by leading necessary evidence – The onus
cannot be shifted on the appellant to deal with issues that have
merely been alleged by the respondents, without producing any
evidence to support that allegation – The respondents have
merely provided a tabulation of information about the other
policies held by the insured-deceased – The table produced is
incomplete and contradictory as far as the date of birth of the
insured is concerned – Therefore, the NCDRC could not have
relied upon the said tabulation and put the onus on the appellant
to deal with that issue in her complaint and thereby considered
the said averment as proved or proceeded to prove the stance
of the opposite party – The repudiation of the policy was without
any basis or justification – Thus, the impugned order passed by
the NCDRC set aside. [Paras 16,17, 48, 49, 50]
Principle/Doctrine – uberrimae fidei – Insurance – Reciprocal
duties:
726 [2024] 4 S.C.R.
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Held: Just as the insured has a duty to disclose all material
facts, the insurer must also inform the insured about the terms
and conditions of the policy that is going to be issued to him and
must strictly conform to the statements in the proposal form or
prospectus, or those made through his agents – Thus, the principle
of utmost good faith imposes meaningful reciprocal duties owed
by the insured to the insurer and vice versa. [Para 22]
Insurance Regulatory and Development Authority (Protection
of Policyholders’ Interests) Regulations, 2002 – A fact, whether
material or not – Propositions:
Held: Whether a fact is material will depend on the circumstances,
as proved by evidence, of the particular case – It is for the court
to rule as a matter of law, whether, a particular fact is capable of
being material and to give directions as to the test to be applied
– Rules of universal application are not therefore to be expected,
but the propositions as set out are well established: (a) Any fact
is material which leads to the inference, in the circumstances
of the particular case, that the subject matter of insurance is
not an ordinary risk, but is exceptionally liable to be affected by
the peril insured against – This is referred to as the “physical
hazard”; (b) Any fact is material which leads to the inference
that the particular proposer is a person, or one of a class of
persons, whose proposal for insurance ought to be subjected
at all or accepted at a normal rate – This is usually referred to
as the “moral hazard”; (c) The materiality of a particular fact is
determined by the circumstances of each case and is a question
of fact. [Para 26]
Evidence Act, 1872 – Burden of proof and onus of proof –
Consumer Fora:
Held: Though the proceedings before the Consumer Fora are
in the nature of a summary proceeding – Yet the elementary
principles of burden of proof and onus of proof would apply –
Section 101 of the Evidence Act states that whoever desires any
Court to give judgment as to any legal right or liability dependent
on the existence of facts which he asserts, must prove that those
facts exist – When a person is bound to prove the existence of
any fact, it is said that the burden of proof lies on that person
– Section 102 of the Evidence Act provides a test regarding on
whom the burden of proof would lie, namely, that the burden lies
[2024] 4 S.C.R. 727
Mahakali Sujatha v. The Branch Manager, Future Generali
India Life Insurance Company Limited & another
on the person who would fail if no evidence were given on either
side – There are however exceptions to the general rule as to
the burden of proof as enunciated in Sections 101 and 102 of the
Evidence Act, 1872, i.e., in the context of the burden of adducing
evidence: (i) when a rebuttable presumption of law exists in favour
of a party, the onus is on the other side to rebut it; (ii) when any
fact is especially within the knowledge of any person, the burden
of proving it is on him (Section 106) – In some cases, the burden
of proof is cast by statute on particular parties (Sections 103 and
105). [Paras 41, 42]
Evidence Act, 1872 – Burden of proof and onus of proof –
Distinction between:
Held: There is an essential distinction between burden of proof
and onus of proof; burden of proof lies upon a person who
has to prove the fact and which never shifts but onus of proof
shifts – Such a shifting of onus is a continuous process in the
evaluation of evidence – For instance, in a suit for possession
based on the title, once the plaintiff has been able to create a high
degree of probability so as to shift the onus on the defendant,
it is for the defendant to discharge his onus and in the absence
thereof, the burden of proof lying on the plaintiff shall be held to
have been discharged so as to amount to proof of the plaintiff’s
title. [Para 43]
Evidence – Burden of proof – Insurance contracts – Non-
disclosure of a material fact:
Held: In the context of insurance contracts, the burden is on the
insurer to prove the allegation of non-disclosure of a material fact
and that the non-disclosure was fraudulent – Thus, the burden of
proving the fact, which excludes the liability of the insurer to pay
compensation, lies on the insurer alone and no one else. [Para 45]
Word and Phrases – Contra proferentem rule:
Held: In United India Insurance Co. Ltd. v. Orient Treasures (P)
Ltd., (2016) 3 SCC 49, the Supreme Court quoted Halsbury’s
Laws of England (5th Edn. Vol. 60, Para 105) on the contra
proferentem rule – Where there is ambiguity in the policy the
court will apply the contra proferentem rule – Where a policy is
produced by the insurers, it is their business to see that precision
and clarity are attained and, if they fail to do so, the ambiguity
728 [2024] 4 S.C.R.
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will be resolved by adopting the construction favourable to the
insured. [Para 40]
Case Law Cited
Manmohan Nanda v. United India Insurance Co. Ltd.
[2021] 11 SCR 1138 : (2022) 4 SCC 582 – relied on.
Reliance Life Insurance Co Ltd v. Rekhaben Nareshbhai
Rathod [2019] 6 SCR 733 : (2019) 6 SCC 175; Mithoolal
Nayak v. Life Insurance Corporation of India [1962]
Supp. 2 SCR 571 : AIR 1962 SC 814;Venkatachala
Gounder v. Arulmigu Viswesaraswami and VP Temple
[2003] Supp. 4 SCR 450 : (2003) 8 SCC 752; Shobika
Attire v. New India Assurance Co. Ltd. [2006] Supp. 6
SCR 266 : (2006) 8 SCC 35 – referred to.
Sahara India Life Insurance Co. Ltd. v. Rayani
Ramanjaneyulu 2014 SCC OnLine NCDRC 525 :
(2014) 3 CPJ 582 – referred to.
Carter v. Boehm (1766) 3 Burr 1905; Reynolds v.
Phoenix Assurance Co. Ltd. (1978) 2 Lloyd’s Rep.
440 – referred to.
Books and Periodicals cited
MacGillivray on Insurance Law, (12th Edn., Sweet &
Maxwell, London, 2012 at p. 477); Halsbury’s Laws of
England, Fourth Edition, Para 375, Vol. 25 : Insurance;
Sarkar, Law of Evidence, 20th Edition, Volume-2,
LexisNexis – referred to.
List of Acts
Insurance Act, 1938; Evidence Act, 1872; Insurance Regulatory
and Development Authority (Protection of Policyholders’ Interests)
Regulations, 2002.
List of Keywords
Insurance; Evidence; Burden of proof; Onus of proof; Material
suppression of information; Previous insurance policies; Repudiation
of insurance claim; Corroborative evidence; Insurance policies;
Insurance contracts; Uberrimae fidei; Reciprocal duties; Material
fact; Consumer Fora; Contra proferentem rule; Proposal form.
[2024] 4 S.C.R. 729
Mahakali Sujatha v. The Branch Manager, Future Generali
India Life Insurance Company Limited & another
Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3821 of 2024
From the Judgment and Order dated 22.07.2019 of the National
Consumers Disputes Redressal Commission, New Delhi in RP No.
1268 of 2019
Appearances for Parties
Venkateswara Rao Anumolu, Sunny Kumar, Advs. for the Appellant.
Praveen Mahajan, Ms. Adviteeya, Nishant Sharma, Rakesh K.
Sharma, Advs. for the Respondents.
Judgment / Order of the Supreme Court
Judgment
B.V. Nagarathna, J.
1. The present civil appeal has been filed by the complainant, who is
the daughter of the insured-deceased Sri Siriveri Venkateswarlu,
who is also the nominee under the subject life insurance policies of
her late father. The appellant is assailing the order dated 22.07.2019
passed by the National Consumer Disputes Redressal Commission,
New Delhi (hereinafter referred to as “NCDRC”) in Revision Petition
No.1268 of 2019.
2. By the impugned order, the NCDRC has allowed the revision petition
filed by the respondent-opposite party, thereby setting aside the orders
passed by the District Consumer Forum and the State Consumer
Forum and sustaining the repudiation of the complainant’s claim by
the opposite party insurer-company.
3. The brief facts giving rise to the present appeal are as follows:
3.1. For the sake of convenience, the parties shall be referred to
as complainant and opposite party.
3.2. Late Sri Siriveri Venkateswarlu, father of the complainant,
obtained two insurance policies from the opposite party – one
on 05.05.2009, for a sum of Rs. 4,50,000/-, and the other on
22.03.2010, for a sum of Rs. 4,80,000/-. Under the said two
policies, in the event of death by accident, twice the sum assured
was payable by the insurer. In the application form of the policy,
730 [2024] 4 S.C.R.
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the insured had been asked about the details of his existing life
insurance policies with any other insurer, and the insured had
answered the same in the negative. The complainant, being the
daughter of the policy holder Late Sri Siriveri Venkateswarlu,
was nominated to receive the proceeds under both the policies.
3.3. On 28.02.2011, the policy holder unfortunately lost his life in
a train accident, leaving behind the complainant alone as his
legal heir as well as nominee for death benefits. Immediately
thereafter, the complainant approached the opposite party
and informed about the death of her father and they advised
the complainant to submit a claim form along with necessary
documents which she did. However, by letter dated 31.12.2011,
the complainant’s claims were repudiated by the opposite party.
3.4. The claim of the complainant was repudiated on the ground that
the policy holder had suppressed material facts in his application
form with respect to existing life insurance policies from other
insurers. Upon investigation by the opposite party, it was found
that the insured had substantial life insurance cover with other
insurance companies, even prior to the date of his application.
After an evaluation of all facts and documents submitted and
circumstances of the case, the opposite party came to the
conclusion that the replies to the questions in the application
form were incorrect, in as much as the opposite party held
documentary proof in support of the same. They observed that
had such information been disclosed, their underwriting decision
would have materially changed. It was further remarked that
the contract of insurance is based on the principle of utmost
good faith and the company relies on the information provided
by the life insured in the application for insurance. Thus, the
claim was held to be not valid and the liability to pay under the
policy was repudiated by the insurer.
3.5. Being aggrieved by the repudiation of the claim, the complainant
approached the concerned District Forum by way of a consumer
complaint, bearing CC No.8 of 2014. The District Commission at
Vijaywada, Krishna District, by order dated 27.08.2014, allowed
the consumer complaint, on the ground that no documentary
evidence was available to show that the deceased-insured had
taken various insurance policies from various other companies.
[2024] 4 S.C.R. 731
Mahakali Sujatha v. The Branch Manager, Future Generali
India Life Insurance Company Limited & another
The Commission found deficiency of services on the part of the
opposite party in repudiating the claim filed by the complainant
and therefore directed the opposite parties to pay the insurance
amount of Rs.7,50,000/- + Rs.9,60,000/- under two policies
jointly and severally with interest at the rate of 6% per annum
from 31.12.2011, i.e., the date of repudiation of the claim of the
complainant, till realisation, along with costs of Rs. 2000/- to
the complainant.
3.6. Being aggrieved, the insured/opposite party filed an appeal
bearing FA No.94 of 2015 before the concerned State Consumer
Forum at Vijaywada. The State Commission observed that there
was absolutely no material produced by the opposite party
before the Forum to prove the allegation of suppression. The
documents attempted to be produced were neither original nor
certified nor authenticated. However, even assuming that there
were existing policies, still the non-disclosure of pre-existing
policies does not amount to suppression of material facts.
Reliance for the same was placed on some previous judgments
of the NCDRC. Hence, the claim could not have been said
to be vitiated by fraud. The opposite parties were not right in
repudiating the claim. The State Commission therefore, by its
order dated 11.12.2018, dismissed the appeal of the opposite
party and upheld the order of the District Commission.
3.7. The opposite party thereafter approached the NCDRC through
Revision Petition No.1268 of 2019, challenging the order passed
by the State Commission in FA No.94 of 2015. The NCDRC,
vide impugned judgment, agreed with the opposite party that
the deceased-insured had withheld the information in respect
of several insurance policies which he had taken from other
insurers. The NCDRC observed that on the one hand, the
opposite party had duly stated the details of the other policies
in their affidavit, but on the other, the complainant, even in her
affidavit filed by way of evidence, did not claim that the policies
mentioned in the written version of the opposite party had not
been taken by the deceased. Reliance was further placed by
the NCDRC on the judgment of this Court in Reliance Life
Insurance Co Ltd vs. Rekhaben Nareshbhai Rathod, (2019)
6 SCC 175, (“Rekhaben”) wherein the repudiation of the claim
732 [2024] 4 S.C.R.
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due to suppression of the fact of other existing insurance policies
was upheld by the Supreme Court. The NCDRC held that the
Supreme Court’s judgment would prevail over the judgments of
the NCDRC relied upon by the State Consumer forum and thus,
the revision petition was allowed and the consumer complaint
was dismissed.
4. Hence, the complainant has preferred the present Special Leave
Petition against the impugned judgment of the NCDRC.
5. We have heard learned counsel for the Appellant, Sri Venkateswara
Rao Anumolu and learned counsel for the Respondent, Sri Praveen
Mahajan for the insurer. The controversy in the present case pertains
to the factum of repudiation of the insurance claim of the Complainant
on the ground of the material suppression of information regarding
the previous policies allegedly held by the insured-deceased, while
taking the life insurance policy from the Opposite Party.
6. Learned counsel for the appellant submitted that the insurance
company has not proved that appellant’s father had any other
insurance policy while taking the insurance policy from the opposite
party. Thus, there has been no material suppression of fact in the
application form with respect to holding any previous policy by the
insured-deceased or his family members.
7. It was further submitted by the appellant that the NCDRC was
incorrect in upholding the repudiation of claim in the absence of an
iota of documentary evidence on record to support the contention
that the insured-deceased had suppressed any fact under Clause
6 of the Proposal Form about the previous policies issued by other
insurers. The respondent has merely alleged the fact of multiple
insurance policies of the insured-deceased through their affidavit of
evidence but had not discharged their burden of proof by leading
any documentary evidence to support their allegation.
8. Per Contra, learned counsel for the respondent has supported
the judgment of the NCDRC and has further contended that the
insured-deceased had taken fifteen other insurance policies worth
Rs.71,27,702/- prior to the issuance of the subject policies by them.
These policies were not disclosed in the proposal forms and had the
respondent been aware about these other insurance policies with
other insurance companies and the existing risk cover at the time
[2024] 4 S.C.R. 733
Mahakali Sujatha v. The Branch Manager, Future Generali
India Life Insurance Company Limited & another
of assessment of risk under the subject policies, they would have
certainly not issued the subject policies to the insured-deceased.
Thus, the insured-deceased has suppressed the material fact and
the claim has been rightly repudiated on this ground alone.
9. Learned counsel for the respondent further submitted that the policy
of life insurance is based upon the principle of “uberrimae fidei”, i.e.,
utmost good faith. When a specific fact is asked for in the proposal
form, an assured is under a solemn obligation to make a true and
full disclosure of the information on the subject which is within the
best of his knowledge. In the present case as well, the insured-
deceased was under the obligation to make complete and honest
disclosure of all the facts and materials at the time of filling of the
proposal form. The failure to do so shows the mala fide intention
on the part of the insured-deceased and renders the policy invalid,
void ab-initio, inoperative and unenforceable.
10. Learned counsel for the respondent also relied upon the judgment
of this court in the case of Rekhaben, which is contended to be
similar in facts to the present case and where this Court allowed
the repudiation of the insurance claim on the ground of material
suppression of information about the previously taken insurance
policies.
11. Having heard the learned counsel for the respective parties, the point
that arises for consideration before this Court in the present Civil
Appeal, is, whether, the respondent herein was correct in repudiating
the claim of the appellant on the ground of suppression of material
information pertaining to the existing policies with other insurers.
12. In order to answer the aforesaid question, it would be useful to
recapitulate the relevant provisions of the law of insurance and
evidence, vis-à-vis burden of proof and the method of discharging
that burden of proof to prove an alleged fact, which is suppression
of a material fact while seeking an insurance policy from an insurer.
13. The repudiation of an insurance claim is largely governed by Section
45 of the Insurance Act, 1938. Section 45 is a special provision of
law, which bars the calling in question of an insurance policy beyond
expiry of the stipulated period, except in a few circumstances that
have to be proved by the insurer. The relevant part of the said
provision, as it stood at the material time, is reproduced as under:
734 [2024] 4 S.C.R.
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“45. Policy not be called in question on ground of mis-
statement after two years.- 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 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:
Provided that nothing in this section shall prevent the
insurer from calling for proof of age at any time if he is
entitled to do so, and no policy shall be deemed to be
called in question merely because the terms of the policy
are adjusted on subsequent proof that the age of the life
insured was incorrectly stated in the proposal.”
14. A three-judge bench of this court in Mithoolal Nayak vs. Life
Insurance Corporation of India, AIR 1962 SC 814, explained the
scope of the operating part of Section 45 as under:
“7….It would be noticed that the operating part of S. 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
[2024] 4 S.C.R. 735
Mahakali Sujatha v. The Branch Manager, Future Generali
India Life Insurance Company Limited & another
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.”
15. The scope of Section 45 was dealt with by this Court in the case of
Rekhaben as follows:
“14. Section 45 stipulates restrictions upon the insurer
calling into question a policy of life insurance after the
expiry of two years from the date on which it was effected.
After two years have elapsed the insurer cannot call it into
question on the ground that: (i) a statement made in the
proposal; or (ii) a statement made in any report of a medical
officer, referee or friend of the insured; or (iii) a statement
made in any other document leading to the issuance of the
policy was inaccurate or false, unless certain conditions are
fulfilled. Those conditions are that: (a) such a statement
was on a material matter; or (b) the statement suppressed
facts which were material to disclose and that (i) they were
fraudulently made by the policy holder; and (ii) the policy-
holder knew at the time of making it that the statements
were false or suppressed facts which were material to
disclose. The cumulative effect of Section 45 is to restrict
the right of the insurer to repudiate a policy of life insurance
after 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 the inaccuracy or falsity of a statement
on a material matter or the suppression of material facts.
Moreover, in addition to this requirement, the insurer has
to establish that this non-disclosure or, as the case may
be, the submission of inaccurate or false information was
fraudulently made and that the policy-holder while making
it knew of the falsity of the statement or of the suppression
of facts which were material to disclose.”
(emphasis by us)
736 [2024] 4 S.C.R.
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16. Since the present case deals with a policy and its repudiation before
the 2014 amendment to Section 45 of the Insurance Act, the pre-
amendment time period of two years would be applicable to the
case. As per the aforesaid language and interpretation of Section
45, the insurer cannot question the policy after the expiry of the
time period and if it does, then the burden rests on the insurer to
establish materiality of the fact suppressed and the knowledge of
the insured about such suppression, so that the repudiation of the
claim could be justified by the insurer.
17. In the present case, the onus was on the insurer to show that
the insured had fraudulently given false information and the said
information was related to a material fact. The second aspect of the
controversy would be dealt with first.
18. For a better appreciation of the controversy, it would be important
to analyse the maxim of uberrimae fidei that governs the insurance
contracts. It may also be observed that insurance contracts are
special contracts based on the general principles of full disclosure
inasmuch as a person seeking insurance is bound to disclose all
material facts relating to the risk involved. Law demands a higher
standard of good faith in matters of insurance contracts which is
expressed in the legal maxim uberrimae fidei. The plea of utmost good
faith has also been taken by the respondent, for contending that the
insured-deceased had a duty to disclose the details of the previous
policies, as the same was sought in the application form. However,
the insured failed in his duty to correctly answer the question about
his previous policies. The law relating to the maxim uberrimae fidei
was dealt with by this Court in the case of Manmohan Nanda vs.
United India Insurance Co. Ltd., (2022) 4 SCC 582, (“Manmohan
Nanda”). The same could be discussed at this stage with reference
to legal authorities as well as relevant provisions of law.
19. MacGillivray on Insurance Law, (12th Edn., Sweet & Maxwell,
London, 2012 at p. 477) has summarised the duty of an insured to
disclose as under:
“... the assured must disclose to the insurer all facts material
to an insurer’s appraisal of the risk which are known or
deemed to be known by the assured but neither known nor
deemed to be known by the insurer. Breach of this duty
[2024] 4 S.C.R. 737
Mahakali Sujatha v. The Branch Manager, Future Generali
India Life Insurance Company Limited & another
by the assured entitles the insurer to avoid the contract of
insurance so long as he can show that the non-disclosure
induced the making of the contract on the relevant terms.”
20. Lord Mansfield in Carter vs. Boehm, (1766) 3 Burr 1905 has
summarised the principles necessitating disclosure by the assured
in the following words:
“Insurance is a contract of speculation.
The special facts upon which the contingent chance is to
be computed, lie most commonly in the knowledge of the
assured only; the under-writer trusts to his representation,
and proceeds upon confidence that he does not keep back
any circumstance in his knowledge, to mislead the under-
writer into a belief that the circumstance does not exist …
The keeping back such circumstance is a fraud, and
therefore the policy is void. Although the suppression
should happen through mistake, without any fraudulent
intention; yet still the under-writer is deceived and the
policy is void; because the risk run is really different from
the risk understood and intended to be run, at the time
of the agreement.
The policy would be equally void against the under-writer
if he concealed; ...
Good faith forbids either party, by concealing what he
privately knows, to draw the other into a bargain from
his ignorance of the fact, and his believing the contrary.”
The aforesaid principles would apply having regard to the nature of
policy under consideration, as what is necessary to be disclosed are
“material facts” which phrase is not definable as such, as the same
would depend upon the nature and extent of coverage of risk under a
particular type of policy. In simple terms, it could be understood that
any fact which has a bearing on the very foundation of the contract
of insurance and the risk to be covered under the policy would be
a “material fact”.
21. Under the provisions of Insurance Regulatory and Development
Authority (Protection of Policyholders’ Interests) Regulations, 2002
the explanation to Section 2 (d) defining “proposal form” throws
738 [2024] 4 S.C.R.
Digital Supreme Court Reports
light on what is the meaning and content of “material.” For an easy
reference the definition of “proposal form” along with the explanation
under the aforesaid Regulations has been extracted as under:
“2. Definitions. In these regulations, unless the context
otherwise requires-
xxx
(d) “Proposal Form” means a form to be filled in by
the proposer for insurance, for furnishing all material
information required by the insurer in respect of a risk, in
order to enable the insurer to decide whether to accept
or decline, to undertake the risk, and in the event of
acceptance of the risk, to determine the rates, terms and
conditions of a cover to be granted.
Explanation: “Material” for the purpose of these regulations
shall mean and include all important, essential and relevant
information in the context of underwriting the risk to be
covered by the insurer.”
Thus, the Regulation also defines the word “material” to
mean and include all “important”, “essential” and “relevant”
information in the context of guiding the insurer in deciding
whether to undertake the risk or not.”
22. Just as the insured has a duty to disclose all material facts, the
insurer must also inform the insured about the terms and conditions
of the policy that is going to be issued to him and must strictly
conform to the statements in the proposal form or prospectus, or
those made through his agents. Thus, the principle of utmost good
faith imposes meaningful reciprocal duties owed by the insured to
the insurer and vice versa. This inherent duty of disclosure was a
common law duty of good faith originally founded in equity but has
later been statutorily recognised as noted above. It is also open to
the parties entering into a contract to extend the duty or restrict it
by the terms of the contract.
23. The duty of the insured to observe utmost good faith is enforced by
requiring him to respond to a proposal form which is so framed to seek
all relevant information to be incorporated in the policy and to make it
the basis of a contract. The contractual duty so imposed is that any
[2024] 4 S.C.R. 739
Mahakali Sujatha v. The Branch Manager, Future Generali
India Life Insurance Company Limited & another
suppression or falsity in the statements in the proposal form would
result in a breach of duty of good faith and would render the policy
voidable and consequently repudiate it at the instance of the insurer.
24. In relation to the duty of disclosure on the insured, any fact which
would influence the judgment of a prudent insurer and not a particular
insurer is a material fact. The test is, whether, the circumstances
in question would influence the prudent insurer and not whether it
might influence him vide Reynolds vs. Phoenix Assurance Co. Ltd.,
(1978) 2 Lloyd’s Rep. 440. Hence, the test is to be of a prudent
insurer while issuing a policy of insurance.
25. The basic test hinges on whether the mind of a prudent insurer
would be affected, either in deciding whether to take the risk at all
or in fixing the premium, by knowledge of a particular fact if it had
been disclosed. Therefore, the fact must be one affecting the risk. If
it has no bearing on the risk it need not be disclosed and if it would
do no more than cause insurers to make inquiries delaying issue
of the insurance, it is not material if the result of the inquiries would
have no effect on a prudent insurer.
26. Whether a fact is material will depend on the circumstances, as
proved by evidence, of the particular case. It is for the court to rule
as a matter of law, whether, a particular fact is capable of being
material and to give directions as to the test to be applied. Rules
of universal application are not therefore to be expected, but the
propositions set out in the following paragraphs are well established:
(a) Any fact is material which leads to the inference, in
the circumstances of the particular case, that the
subject matter of insurance is not an ordinary risk,
but is exceptionally liable to be affected by the peril
insured against. This is referred to as the “physical
hazard”.
(b) Any fact is material which leads to the inference that
the particular proposer is a person, or one of a class
of persons, whose proposal for insurance ought to be
subjected at all or accepted at a normal rate. This is
usually referred to as the “moral hazard”.
(c) The materiality of a particular fact is determined by the
circumstances of each case and is a question of fact.
740 [2024] 4 S.C.R.
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27. If a fact, although material, is one which the proposer did not and
could not in the particular circumstances have been expected to know,
or if its materiality would not have been apparent to a reasonable
man, his failure to disclose it is not a breach of his duty.
28. Full disclosure must be made of all relevant facts and matters that
have occurred up to the time at which there is a concluded contract.
It follows from this principle that the materiality of a particular fact
is determined by the circumstances existing at the time when it
ought to have been disclosed, and not by the events which may
subsequently transpire. The duty to make full disclosure continues to
apply throughout negotiations for the contract but it comes to an end
when the contract is concluded; therefore, material facts which come
to the proposer’s knowledge subsequently need not be disclosed.
29. Thus, a proposer is under a duty to disclose to the insurer all material
facts as are within his knowledge. The proposer is presumed to know
all the facts and circumstances concerning the proposed insurance.
Whilst the proposer can only disclose what is known to him, the
proposer’s duty of disclosure is not confined to his actual knowledge,
it also extends to those material facts which, in the ordinary course
of business, he ought to know. However, the assured is not under a
duty to disclose facts which he did not know and which he could not
reasonably be expected to know at the material time. The second
aspect of the duty of good faith arises in relation to representations
made during the course of negotiations, and for this purpose all
statements in relation to material facts made by the proposer during
the course of negotiations for the contract constitute representations
and must be made in good faith.
30. The basic rules to be observed in making a proposal for insurance
may be summarized as follows:
(a) A fair and reasonable construction must be put upon
the language of the question which is asked, and the
answer given will be similarly construed. This involves
close attention to the language used in either case,
as the question may be so framed that an unqualified
answer amounts to an assertion by the proposer that
he has knowledge of the facts and that the knowledge
is being imparted. However, provided these canons
are observed, accuracy in all matters of substance
[2024] 4 S.C.R. 741
Mahakali Sujatha v. The Branch Manager, Future Generali
India Life Insurance Company Limited & another
will suffice and misstatements or omissions in trifling
and insubstantial respects will be ignored.
(b) Carelessness is no excuse, unless the error is so
obvious that no one could be regarded as misled. If
the proposer puts ‘no’ when he means ‘yes’ it will not
avail him to say it was a slip of the pen; the answer
is plainly the reverse of the truth.
(c) An answer which is literally accurate, so far as it
extends, will not suffice if it is misleading by reason
of what is not stated. It may be quite accurate for the
proposer to state that he has made a claim previously
on an insurance company, but the answer is untrue
if in fact he has made more than one.
(d) Where the space for an answer is left blank, leaving
the question un-answered, the reasonable inference
may be that there is nothing to enter as an answer. If
in fact there is something to enter as an answer, the
insurers are misled in that their reasonable inference
is belied. It will then be a matter of construction
whether this is a mere non-disclosure, the proposer
having made no positive statement at all, or whether
in substance he is to be regarded as having asserted
that there is in fact nothing to state.
(e) Where an answer is unsatisfactory, as being on the
face of it incomplete or inconsistent the insurers may,
as reasonable men, be regarded as put on inquiry,
so that if they issue a policy without any further
enquiry they are assumed to have waived any further
information. However, having regard to the inference
mentioned in head (4) above, the mere leaving of a
blank space will not normally be regarded as sufficient
to put the insurers on inquiry.
(f) A proposer may find it convenient to bracket together
two or more questions and give a composite answer.
There is no objection to his doing so, provided the
insurers are given adequate and accurate information
on all points covered by the questions.
742 [2024] 4 S.C.R.
Digital Supreme Court Reports
(g) Any answer given, however accurate and honest at
the time it was written down, must be corrected if, up
to the time of acceptance of the proposal, any event
or circumstance supervenes to make it inaccurate
or misleading.
[Source : Halsbury’s Laws of England, Fourth Edition,
Para 375, Vol.25 : Insurance]
31. Sometimes the standard of duty of disclosure imposed on the insured
could make the insured vulnerable as the statements in the proposal
form could be held against the insured. Conversely, certain clauses
in the policy of insurance could be interpreted in light of the contra
proferentem rule as against the insurer. In order to seek specific
information from the insured, the proposal form must have specific
questions so as to obtain clarity as to the underlying risks in the
policy, which are greater than the normal risks.
32. From the aforementioned discussion, it is clear that the principle of
utmost good faith puts reciprocal duties of disclosure on both parties
to the contract of insurance. These reciprocal duties mandate that
both the parties make complete disclosure to each other, so that the
parties can take an informed decision and a fair contract of insurance
exists between them. No material facts should be suppressed, which
may have a bearing on the risk being insured and the decision of
the party to undertake that risk. However, not every question can
be said to be material fact and the materiality of a fact has to be
adjudged as per the rules stated in the aforementioned judgment.
33. Whether the information with regard to previous policies from other
insurers is a material fact or not has already been dealt with by
this Court in the judgment of Rekhaben. The facts of the said case
were that the insured therein had taken a policy of life insurance
from Max New York Life Insurance Co. Ltd. on 10.07.2009 for a sum
of Rs. 11 lakhs. Barely two months thereafter, on 16.09.2009, the
insured submitted a proposal for a life insurance term plan policy
of Reliance Life Insurance Co Ltd for an insurance cover of Rs. 10
lakhs. One of the questions that the proposer was required to answer
in the proposal form was whether he was currently insured or had
previously applied for life insurance cover, critical illness cover or
accident benefit cover. This query was answered in the negative.
In substance, the information regarding life insurance policy earlier
[2024] 4 S.C.R. 743
Mahakali Sujatha v. The Branch Manager, Future Generali
India Life Insurance Company Limited & another
taken had to be mentioned. The query was answered as “NA” or “not
applicable” response. The appellant company therein issued a policy
of life insurance to the spouse of the respondent on 22.09.2009. The
respondent spouse died on 08.02.2010. A claim for payment of Rs.10
lakhs was submitted. On coming to know that the spouse of the
respondent therein had been insured with another private insurance
company for a sum of Rs.11 lakhs and that the claim had been settled,
the appellant company repudiated the claim stating that there was
suppression of material fact inasmuch as there was glaring omission
in the mentioning of details of the life insurance policy held by the
life assured with other company. Being aggrieved by the repudiation,
the respondent in the said case filed a consumer complaint which
was dismissed on the ground that there was non-disclosure of the
fact that the insured had held a previous policy in the proposal form
filled up by the proposer. The appeal filed by the respondent was,
however, allowed based on a decision of the NCDRC in Sahara
India Life Insurance Co. Ltd. vs. Rayani Ramanjaneyulu, 2014
SCC OnLine NCDRC 525 : (2014) 3 CPJ 582 (“Sahara India”). The
decision of the State Consumer Disputes Redressal Commission was
affirmed by NCDRC for the reason that the omission of the insured
to disclose a previous policy of insurance would not influence the
mind of a prudent insurer, as held in Sahara India.
34. The question before this Court in the aforesaid case was, whether,
the repudiation could be sustained on the grounds of suppression of
information about other insurance policies. It is pertinent to note that
the insured therein had admitted the non-disclosure of the earlier cover
for life insurance held by him, but argued that the non-disclosure of
such information was not a material fact whose suppression would
allow for repudiation of the claim under Section 45. Therefore, the
Court ruled in favour of the insurance company and held that such
suppression was indeed a material suppression of information, as it
had a bearing on the decision of the insurer to enter into the contract
of insurance or not. The court thereunder held as follows:
“32. In the present case, the insurer had sought information
with respect to previous insurance policies obtained by
the assured. The duty of full disclosure required that no
information of substance or of interest to the insurer be
omitted or concealed. Whether or not the insurer would
have issued a life insurance cover despite the earlier cover
744 [2024] 4 S.C.R.
Digital Supreme Court Reports
of insurance is a decision which was required to be taken
by the insurer after duly considering all relevant facts and
circumstances. The disclosure of the earlier cover was
material to an assessment of the risk which was being
undertaken by the insurer. Prior to undertaking the risk, this
information could potentially allow the insurer to question
as to why the insured had in such a short span of time
obtained two different life insurance policies. Such a fact
is sufficient to put the insurer to enquiry.
33. The learned counsel appearing on behalf of the insurer
submitted that where a warranty has been furnished by the
proposer in terms of a declaration in the proposal form,
the requirement of the information being material should
not be insisted upon and the insurer would be at liberty
to avoid its liability irrespective of whether the information
which is sought is material or otherwise. For the purposes
of the present case, it is sufficient for this Court to hold in
the present facts that the information which was sought
by the insurer was indeed material to its decision as to
whether or not to undertake a risk. The proposer was
aware of the fact, while making a declaration, that if any
statements were untrue or inaccurate 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 formulates the principle thus:
“…In more recent cases it has been held that
all-important element in such a declaration is
the phrase which makes the declaration the
“basis of contract”. These words alone show
that the proposer is warranting the truth of his
statements, so that in the event of a breach this
warranty, the insurer can repudiate the liability on
the policy irrespective of issues of materiality.”
34. We are not impressed with the submission that the
proposer was unaware of the contents of the form that he
was required to fill up or that in assigning such a response
to a third party, he was absolved of the consequence of
appending his signatures to the proposal. The proposer
duly appended his signature to the proposal form and
[2024] 4 S.C.R. 745
Mahakali Sujatha v. The Branch Manager, Future Generali
India Life Insurance Company Limited & another
the grant of the insurance cover was on the basis of the
statements contained in the proposal form. Barely two
months before the contract of insurance was entered
into with the appellant, the insured had obtained another
insurance cover for his life in the sum of Rs 11 lakhs. We
are of the view that the failure of the insured to disclose
the policy of insurance obtained earlier in the proposal form
entitled the insurer to repudiate the claim under the policy.”
35. However, the aforesaid judgment is distinguishable from the present
case, insofar as there is no admission by the appellant herein of
any previous policies taken by the insured. In that case, after the
admission by the policy holder, the Court was tasked only with the
question of whether the fact about previous polices qualified to
be a “material fact” that was suppressed. However, in the present
case, in light of Section 45 of the Insurance Act, 1938, the burden
rests on the insurer to prove before the Court that the insured had
suppressed the information about the previous policies. This burden
of proof has to be duly discharged by the insurer in accordance with
the law of evidence.
36. In the instant case, NCDRC has extracted from the letter dated
31.12.2011, by which the claim of the appellant was repudiated,
and has relied upon the reply filed by respondent company before
the District Forum wherein details of as many as fifteen insurance
policies taken from various insurers, other than the policy taken from
the respondent company, have been given as under:
Sl. Insurers Policy No. Issue RCD Sum Date of
No. Date assured birth
declared
1. Kotak 1839610 11.01.2010 11.01.2010 5,00,000/- 14.7.1960
2. Bharti Axa Life 5003353827 Not known 28.3.2009 7,50,000/- 12.9.1960
3. Aviva ASP2610613 Not known 09.6.2009 10,00,000/- 12.7.1960
4. Reliance Life 13231705 Not known 17.12.2008 2,00,000/- 6.7.1959
Insurance
5. Reliance Life 13741094 Not known 11.2.2009 5,00,000/- 14.7.1960
Insurance
6. HDFC 13061074 Not known 29.8.2009 4,80,000/- NA
Standard Life
7. HDFC 12695703 Not known 21.3.2009 4,80,000/- NA
Standard Life
746 [2024] 4 S.C.R.
Digital Supreme Court Reports
8. Max New York 809471329 Not known 27.1.2009 5,75,289/- 14.7.1960
Life
9. Max New York 388825572 Not known 30.9.2009 4,24,711/- 14.7.1960
Life
10. Birla 2489174 Not known 28.1.2009 1,33,461/- 14.7.1960
11. Birla 2490595 Not known 28.1.2009 2,60,241/- 14.7.1960
12. Birla 3121574 Not known 3.8.2009 5,00,000/- 14.7.1960
13. Birla 3956699 Not known 17.3.2010 3,24,000/- 14.7.1960
14. IDBI Not given Not known 20.4.2010 5,00,000/- 14.7.1960
15. IDBI Not given Not known 28.04….. 5,00,000/- 14.7.1960
Total 71,27,702/-
Total: Seventy-one lac twenty-seven thousand seven hundred and two only
37. A mere perusal of the aforesaid table would indicate that the date of
birth declared are different and the date of issuance has not been
stated except in respect of one policy. It is also not known from the
table to whom the said policies were issued. However, the NCDRC
has observed that the appellant-complainant had not alleged in
her complaint that no other insurance policy had been taken by
the deceased. In the affidavit of the complainant, the fact that
insurance policies were taken from other insurers was not denied.
The respondent insurance company had given details of the aforesaid
policies by way of an affidavit. Therefore, NCDRC concluded that
deceased insured had withheld information in respect of several
insurance policies which he had taken from other insurers.
38. Placing reliance on Rekhaben, the NCDRC observed that Sahara
India had been overruled in Rekhaben and therefore consumer
complaint was dismissed. We find that the approach of the NCDRC
is erroneous for the following reasons:
i) Firstly, the NCDRC has failed to note that the details of the
policies extracted in the table above do not state as in whose
name the said policies were issued. On perusal of the dates of
birth declared in the policies, it is not clear as to whose dates
of birth are stated therein.
ii) Secondly, the dates of issuance of policies have not been
mentioned. More significantly, by merely mentioning the details
as above stated would not establish the case of the insurance
company. There was no corroboration of the said fact either by
producing copies of the aforesaid policies or by examining the
[2024] 4 S.C.R. 747
Mahakali Sujatha v. The Branch Manager, Future Generali
India Life Insurance Company Limited & another
officers of the various insurance companies which had issued
the policies so as to establish the fact that the said policies had
indeed been issued to the insured in order to prove material
suppression of the fact of other policies obtained by the insurer
in the proposal form. In the absence of any corroboration of
the aforesaid details by letting in proper evidence, the mere
mentioning of the half baked details in the affidavit would not
amount to proof of the said fact. The NCDRC has thus failed
to take note of the fact that the aforesaid details have not been
supported by other corroborative evidence. The mere mentioning
of certain details in an affidavit of evidence is not proof of the
facts unless that is supported either by other documentary and/
or oral evidence.
iii) Further, the NCDRC was also not right in finding fault with the
complainant not mentioning in her affidavit the evidence that
the insured had taken policies from other insurance companies
and that the details given in the version of the respondent
company were not true.
39. Next, we also find that the declaration form asked the following queries
which were accordingly answered in the negative. The queries are
extracted as under:
“6.1 Details of applications submitted to & existing life
insurance policies with future Generali and with any insurer.
(In case of housewife, major student or minor life to be
Assured please give details of husbands and parents
insurance also)
6.2 Whether any proposal for life cover or critical illness
Rider or Accident and Disability Benefit Rider, application
for revival of any Policy has been made to any life insurer,
declined/postponed/dropped/accepted or revived at
modified rates”
On a reading of Query 6.1, what was sought was details of applications
submitted to and existing life insurance policies with Future Generali
(respondent company) and with any (other) insurer. Further details
sought were in case of housewife, major student or minor life to be
assured and to give details of husband’s and parents’ insurance also.
It is not clear as to whether Query 6.1 referred to details of insurance
748 [2024] 4 S.C.R.
Digital Supreme Court Reports
policy of the proposer with Future Generali and with any other insurer,
as what was also sought was details of wife, major student or a minor
life to be assured and to give details of the husband’s and parents’
insurance. Therefore, it is not clear from reading of Query 6.1 as
to whether details of insurance policy of the insured with Future
Generali and with other insurer were sought or the query related to
the details of husband and parents’ insurance policy being disclosed
in case the insured was a housewife, major student or a minor life
when the insured was a housewife or a minor child. The insured in
the instant case did not belong to either the two categories. Query
6.2 was, whether any proposal for life cover or critical illness rider
or accident and disability benefit rider, application for revival of
any policy had been made to any life insurer, declined/postponed/
dropped/accepted or revived at modified rates. The answer to the
said queries were given by the insured in the negative.
Considering Query 6.2, firstly, it is noted that the deceased proposer
had stated in the negative with regard to making of any application
for revival of any policy. There is no evidence whatsoever let in by
the respondent insurance company that there was an application
made for revival of any policy of the insured which had either been
declined/postponed/dropped/accepted or revived at modified rates.
Therefore, the answer in the negative given to Query 6.2 cannot
be held as against the appellant herein. In the circumstances, the
NCDRC could not have concluded that when the answer “NO” was
written to Query 6.2, there was any suppression of material fact.
40. Insofar as the Query 6.1 is concerned, it is noted that the same is not
clear and it is not known in what context the details of the insured
were sought with regard to any existing life insurance policy. On a
reading of Query 6.1 holistically, it is also not clear regarding the
nature of information that was sought by the respondent insurance
company as discussed above. The answer given by the insured to
the Query 6.1 was thus in the negative. In this backdrop, can it be
said that there was a suppression of material fact by the insured in
the proposal form. In this context, it is necessary to place reliance
on the contra proferentem rule. This Court in the case of Manmohan
Nanda, discussed the rule of contra proferentem as under:
“45. The contra proferentem rule has an ancient genesis.
When words are to be construed, resulting in two alternative
[2024] 4 S.C.R. 749
Mahakali Sujatha v. The Branch Manager, Future Generali
India Life Insurance Company Limited & another
interpretations then, the interpretation which is against the
person using or drafting the words or expressions which
have given rise to the difficulty in construction, applies.
This rule is often invoked while interpreting standard form
contracts. Such contracts heavily comprise of forms with
printed terms which are invariably used for the same kind
of contracts. Also, such contracts are harshly worded
against individuals and not read and understood most often,
resulting in grave legal implications. When such standard
form contracts ordinarily contain exception clauses, they
are invariably construed contra proferentem rule against
the person who has drafted the same.
46. Some of the judgments which have considered the
contra proferentem rule are referred to as under:
46.1. In General Assurance Society Ltd. v. Chandumull
Jain, AIR 1966 SC 1644, it was held that where there is
an ambiguity in the contract of insurance or doubt, it has
to be construed contra proferentem against the insurance
company.
46.2. In DDA v. Durga Chand Kaushish, AIR 1973 SC
2609, it was observed:
“In construing document one must have regard,
not to the presumed intention of the parties, but
to the meaning of the words they have used. If
two interpretations of the document are possible,
the one which would give effect and meaning
to all its parts should be adopted and for the
purpose, the words creating uncertainty in the
document can be ignored.”
46.3. Further, in Central Bank of India Ltd. v. Hartford Fire
Insurance Co. Ltd., AIR 1965 SC 1288, it was held:
“11. … what is called the contra proferentem
rule should be applied and as the policy was
in a standard form contract prepared by the
insurer alone, it should be interpreted in a way
that would be favourable to the assured.”
750 [2024] 4 S.C.R.
Digital Supreme Court Reports
46.4. In Sahebzada Mohammad Kamgarh Shah v. Jagdish
Chandra Deo Dhabal Deb, AIR 1960 SC 953, it was
observed that where there is an ambiguity it is the duty of
the court to look at all the parts of the document to ascertain
what was really intended by the parties. But even here the
rule has to be borne in mind that the document being the
grantor’s document it has to be interpreted strictly against
him and in favour of the grantee.
46.5. In United India Insurance Co. Ltd. v. Orient Treasures
(P) Ltd., (2016) 3 SCC 49 , this Court quoted Halsbury’s
Laws of England (5th Edn. Vol. 60, Para 105) on the contra
proferentem rule as under:
“37. … Contra proferentem rule.—Where there
is ambiguity in the policy the court will apply
the contra proferentem rule. Where a policy is
produced by the insurers, it is their business to
see that precision and clarity are attained and, if
they fail to do so, the ambiguity will be resolved
by adopting the construction favourable to
the insured. Similarly, as regards language
which emanates from the insured, such as the
language used in answer to questions in the
proposal or in a slip, a construction favourable
to the insurers will prevail if the insured has
created any ambiguity. This rule, however,
only becomes operative where the words
are truly ambiguous; it is a rule for resolving
ambiguity and it cannot be invoked with a
view to creating a doubt. Therefore, where
the words used are free from ambiguity in the
sense that, fairly and reasonably construed,
they admit of only one meaning, the rule has
no application.”
46.6. The learned counsel for the appellant have relied upon
Sushilaben Indravadan Gandhi v. New India Assurance Co.
Ltd., (2021) 7 SCC 151, wherein it was observed that any
exemption of liability clause in an insurance contract must
be construed, in case of ambiguity, contra proferentem
[2024] 4 S.C.R. 751
Mahakali Sujatha v. The Branch Manager, Future Generali
India Life Insurance Company Limited & another
against the insurer. In the said case reliance was placed
on Export Credit Guarantee Corpn. (India) Ltd. v. Garg
Sons International, (2014) 1 SCC 686, wherein this Court
held as under :
“39. … 11. The insured cannot claim anything
more than what is covered by the insurance
policy. “The terms of the contract have to be
construed strictly, without altering the nature
of the contract as the same may affect the
interests of the parties adversely.” The clauses
of an insurance policy have to be read as they
are. Consequently, the terms of the insurance
policy, that fix the responsibility of the Insurance
Company must also be read strictly. The
contract must be read as a whole and every
attempt should be made to harmonise the
terms thereof, keeping in mind that the rule
of contra proferentem does not apply in case
of commercial contract, for the reason that a
clause in a commercial contract is bilateral and
has mutually been agreed upon.”
Having regard to the aforesaid discussion on contra proferentem rule,
it is noted that the Queries 6.1 and 6.2 are not clear in themselves
as we have discussed the same above. Therefore, the answer given
by the deceased cannot be taken in a manner so as to negate the
benefit of the policy by repudiation of the same on the demise of
the insured.
41. At this stage, we may also dilate on the aspect of burden of proof.
Though the proceedings before the Consumer Fora are in the nature
of a summary proceeding. Yet the elementary principles of burden of
proof and onus of proof would apply. This is relevant for the reason
that no corroborative evidence to what has been deposed in the
affidavit is let in by the insurance company in order to establish a
valid repudiation of the claim in the instant case. Section 101 of the
Evidence Act, 1872 states that whoever desires any Court to give
judgment as to any legal right or liability dependent on the existence
of facts which he asserts, must prove that those facts exist. When
a person is bound to prove the existence of any fact, it is said that
the burden of proof lies on that person. This Section clearly states
752 [2024] 4 S.C.R.
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that the burden of proving a fact rests on the party who substantially
asserts the affirmative of the issue and not upon the party who denies
it; for a negative is usually incapable of proof. Simply put, it is easier
to prove an affirmative than a negative. In other words, the burden
of proving a fact always lies upon the person who asserts the same.
Until such burden is discharged, the other party is not required to
be called upon to prove his case. The court has to examine as to
whether the person upon whom burden lies has been able to discharge
his burden. Further, things which are admitted need not be proved.
Whether the burden of proof has been discharged by a party to the
lis or not would depend upon the facts and circumstances of the
case. The party on whom the burden lies has to stand on his own
and he cannot take advantage of the weakness or omissions of the
opposite party. Thus, the burden of proving a claim or defence is
on the party who asserts it.
42. Section 102 of the Evidence Act, 1872 provides a test regarding on
whom the burden of proof would lie, namely, that the burden lies
on the person who would fail if no evidence were given on either
side. Whenever the law places a burden of proof upon a party,
a presumption operates against it. Hence, burden of proof and
presumptions have to be considered together. There are however
exceptions to the general rule as to the burden of proof as enunciated
in Sections 101 and 102 of the Evidence Act, 1872, i.e., in the context
of the burden of adducing evidence: (i) when a rebuttable presumption
of law exists in favour of a party, the onus is on the other side to
rebut it; (ii) when any fact is especially within the knowledge of any
person, the burden of proving it is on him (Section 106). In some
cases, the burden of proof is cast by statute on particular parties
(Sections 103 and 105).
43. There is an essential distinction between burden of proof and
onus of proof; burden of proof lies upon a person who has to
prove the fact and which never shifts but onus of proof shifts.
Such a shifting of onus is a continuous process in the evaluation
of evidence. For instance, in a suit for possession based on the
title, once the plaintiff has been able to create a high degree of
probability so as to shift the onus on the defendant, it is for the
defendant to discharge his onus and in the absence thereof, the
burden of proof lying on the plaintiff shall be held to have been
discharged so as to amount to proof of the plaintiff’s title vide RVE
[2024] 4 S.C.R. 753
Mahakali Sujatha v. The Branch Manager, Future Generali
India Life Insurance Company Limited & another
Venkatachala Gounder vs. Arulmigu Viswesaraswami and VP
Temple, (2003) 8 SCC 752.
44. In a claim against the insurance company for compensation, where
the appellants in the said case had discharged the initial burden
regarding destruction, damage of the showroom and the stocks
therein by fire and riot in support of the claim under the insurance
policy, it was for the insurance company to disprove such claim with
evidence, if any, vide Shobika Attire vs. New India Assurance Co.
Ltd., (2006) 8 SCC 35.
45. Section 103 of the Evidence Act, 1872 states that the burden of proof
as to any particular fact lies on that person who wishes the Court to
believe in its existence, unless it is provided by any law that the proof
of that fact shall lie on any particular person. This Section enlarges
the scope of the general rule in Section 101 that the burden of proof
lies on the person who asserts the affirmative of the issue. Further,
Section 104 of the said Act states that the burden of proving any
fact necessary to be proved in order to enable any person to give
evidence of any other fact is on the person who wishes to give such
evidence. The import of this Section is that the person who is legally
entitled to give evidence has the burden to render such evidence. In
other words, it is incumbent on each party to discharge the burden of
proof, which rests upon him. In the context of insurance contracts, the
burden is on the insurer to prove the allegation of non-disclosure of
a material fact and that the non-disclosure was fraudulent. Thus, the
burden of proving the fact, which excludes the liability of the insurer
to pay compensation, lies on the insurer alone and no one else.
46. Section 106 of the Evidence Act, 1872 states that when any fact is
especially within the knowledge of any person, the burden of proving
that fact is upon him. This Section applies only to parties to the suit
or proceeding. It cannot apply when the fact is such as to be capable
of being known also by persons other than the parties. (Source:
Sarkar, Law of Evidence, 20th Edition, Volume-2, LexisNexis)
47. In light of the aforesaid discussion on burden of proof, it has to
be analysed if the respondent in the present case has adequately
discharged his burden of proof about the fact of suppression of
previous life insurance policies of the insured.
48. The respondent insurance company has produced no documentary
evidence whatsoever before the District Forum to prove its allegation
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that the insured had taken multiple insurance policies from different
companies and had suppressed the same. The District Forum had
therefore concluded that there was no documentary evidence to
show that the deceased-life insured had taken various insurance
policies except an averment and on that basis the repudiation was
held to be wrong. Before the State Commission, the respondent
had provided a tabulation of the 15 different policies taken by the
insured-deceased, amounting to Rs.71,27,702/-. The same has been
extracted above. However, the said tabulation was not supported by
any other documentary evidence, like the policy documents of these
other policies, or pleadings in courts, or such other corroborative
evidence. The respondent sought to mark a bunch of documents
before the State Commission, which related to the policy papers of
the insured with another insurer, i.e., Kotak Life Insurance. However,
the respondent was not granted permission by the State Commission,
as the said documents were neither original, nor certified, nor
authenticated. Apart from this, there was no effort made by the
respondent to bring any authenticated material on record. Thus, in
the absence of any evidence to prove that the insured-deceased
possessed some insurance policies from other insurance companies,
the State Commission upheld the decision of the District Forum in
setting aside the repudiation of the claim by the respondent.
49. Before the NCDRC, the respondent again provided the aforesaid
tabulation of policies of the insured-deceased. The respondents in
their affidavit stated that the insured-deceased had taken multiple
insurance policies before taking the policy from them. The NCDRC
however accepted the averment of the respondents, without
demanding corroborative documentary evidence in support of the
said fact. The NCDRC, on the contrary, also held that the fact about
multiple policies was not dealt with by the appellant in her complaint
or evidence affidavit and this therefore proved that the insured had
indeed taken the policies from multiple companies as claimed by
the respondents.
50. The aforesaid approach adopted by the NCDRC is, in our view,
not correct. The cardinal principle of burden of proof in the law of
evidence is that “he who asserts must prove”, which means that if
the respondents herein had asserted that the insured had already
taken fifteen more policies, then it was incumbent on them to prove
this fact by leading necessary evidence. The onus cannot be shifted
[2024] 4 S.C.R. 755
Mahakali Sujatha v. The Branch Manager, Future Generali
India Life Insurance Company Limited & another
on the appellant to deal with issues that have merely been alleged
by the respondents, without producing any evidence to support that
allegation. The respondents have merely provided a tabulation of
information about the other policies held by the insured-deceased.
The said tabulation also has missing information with respect to policy
numbers and issuing dates and bears different dates of births. Further,
this information hasn’t been supported with any other documents to
prove the averment in accordance with law. No officer of any other
insurance company was examined to corroborate the table of policies
said to have been taken by the deceased policy holder, father of the
appellant herein. Moreover, the table produced is incomplete and
contradictory as far as the date of birth of the insured is concerned.
Therefore, in our view, the NCDRC could not have relied upon the
said tabulation and put the onus on the appellant to deal with that
issue in her complaint and thereby considered the said averment
as proved or proceeded to prove the stance of the opposite party.
A fact has to be duly proved as per the Evidence Act, 1872 and the
burden to prove a fact rests upon the person asserting such a fact.
Without adequate evidence to prove the fact of previous policies, it
was incorrect to expect the appellant to deal with the said fact herself
in the complaint or the evidence affidavit, since as per the appellant,
there did not exist any previous policy and thus, the onus couldn’t
have been put on the appellant to prove what was non-existent
according to the appellant.
51. The respondents, vide their counter affidavit before this court, have
sought to produce some documents to substantiate their claim of
other existing insurance policies of the insured-deceased, but the
same cannot be permitted to be exhibited at this stage, that too,
in an appeal filed by the complainant who is the beneficiary under
the policies in question. Any documentary evidence sought to be
relied upon by the respondent ought to have been led before the
District Forum but the same was not done. It was before the District
Forum that the evidence was led and examined and at that stage,
the respondent did not take adequate steps to lead any oral or
documentary evidence to prove their assertion. Their attempt to annex
documents in support of their claim before the State Commission was
also declined due to the presentation of unauthenticated documents.
Therefore, it can be safely concluded that the respondents have
failed to adequately prove the fact that the insured-deceased had
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fraudulently suppressed the information about the existing policies
with other insurance companies while entering into the insurance
contracts with the respondents herein in the present case. Therefore,
the repudiation of the policy was without any basis or justification.
52. Moreover, we have also held on the facts of this case having regard
to the nature of queries in Query Nos.6.1 and 6.2, there was no
suppression of any material fact as per our earlier discussion based
on the contra proferentem rule.
53. In light of the above discussion, the impugned order dated 22.07.2019
passed by the NCDRC in Revision Petition No.1268 of 2019 is set
aside. The respondent company is directed to make the payment
of the insurance claim under both the policies to the appellant,
amounting to Rs. 7,50,000/- and Rs. 9,60,000/-, with interest at the
rate of 7% per annum from the date of filing the complaint, till the
actual realisation.
54. The appeal stands allowed in the aforesaid terms.
55. Parties to bear their respective costs.
Headnotes prepared by: Ankit Gyan Result of the case:
Appeal allowed.
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