Research › Search › Judgment

Punjab High Court · body

2008 DIGILAW 1747 (PNJ)

L. I. C. Of India v. Permanent Lok Adalat

2008-10-17

HEMANT GUPTA, KANWALJIT SINGH AHLUWALIA

body2008
Judgment Hemant Gupta, J. 1. The challenge in the present writ petition is to the award dated 24.2.2007, Annexure P22, passed by the Permanent Lok Adalat, Hisar, directing payment of sum assured, i. e. , Rs.1,00,000 along with interest at the rate of 10 per cent per annum from the date of death of assured till payment. 2. Dalip Singh, husband of respondent no.2 (hereinafter referred to as the assured) submitted a proposal for insurance for Rs.1,00,000 on his life on 14.9.2002. The assured made declaration regarding his state of health which was signed by him after admitting all answers to the questions in the proposal to have been recorded correctly. A declaration was also made that all the answers have been given by him after fully understanding and all the answers are true and complete in all particulars and he has not withheld any information. It was also agreed by him that the statements made in the proposal form and declaration shall be basis of the contract of assurance and if any untrue averments are contained therein, the contract of assurance shall be absolutely null and void. One of the declarations which was given by the assured was that he has not consulted any medical practitioner during last five years for any ailment requiring treatment for more than a week and that he has never been admitted to any hospital or nursing home for general check-up, observation, treatment, operation and that he has not absented from place of work on the ground of health during the last five years. The assured has also given answers in negative to the questions that the assured was not suffering from or have ever suffered from ailments pertaining to liver, stomach, heart, lungs, kidney, brain or nervous system. A duly filled in proposal form has been appended as Annexure P1 with the writ petition. The said declaration was accepted and insurance policy was issued on 19.9.2002. Clause 5 of the conditions and privileges of the insurance policy provides for forfeiture of policy in certain events. A duly filled in proposal form has been appended as Annexure P1 with the writ petition. The said declaration was accepted and insurance policy was issued on 19.9.2002. Clause 5 of the conditions and privileges of the insurance policy provides for forfeiture of policy in certain events. The said clause reads as under: " (5) Forfeiture in certain events: In case the premiums shall not be duly paid or in case any condition herein contained or endorsed herein shall be contravened or in case it is found that any untrue or incorrect statement is contained in the proposal, personal statement, declaration and connected documents or any material information is withheld, then and in every such case but subject to the provisions of section 45 of the Insurance act, 1938, wherever applicable, this policy shall be void and all claims to any benefit in virtue hereof shall cease and determine and all moneys that have been paid in consequence hereof shall belong to the Corporation excepting always in so far as relief is provided in terms of the privileges herein contained or may be lawfully granted by the Corporation. " 3. The assured died on 16.11.2004, i. e. , after two years of the issuance of insurance policy. A claim for insurance amount was lodged with the petitioner disclosing the cause of death as heart attack. Since, it was an early claim, the matter was enquired into by the petitioner and it was found that answers to the questions given by the life assured in the proposal form were false and were given with a view to influence the decision of the Corporation in accepting the proposal for insurance and that these answers were very material for the purpose of assessment of the risk. It was found that the life assured had suffered from dilated cardiomyopathy for which he had taken treatment from the hospital and was on medical leave at the time of submitting the proposal for insurance on 14.9.2002. In fact, the assured had availed medical leave from 19.8.2002 to 18.9.2002 and remained hospitalised from 1.9.2002 to 3.9.2002. Such facts were not disclosed in the proposal form. The claim arising out of the policy raised by the assured was repudiated on the ground of deliberate misstatement and withholding of material statement regarding health of the life assured at the time of submitting proposal for insurance. 4. Such facts were not disclosed in the proposal form. The claim arising out of the policy raised by the assured was repudiated on the ground of deliberate misstatement and withholding of material statement regarding health of the life assured at the time of submitting proposal for insurance. 4. Aggrieved against such repudiation, wife of assured, respondent No.2, has filed an application under section 22-C (1) of the Legal Services Authority Act, 1987, for directing the petitioner herein to pay the policy benefits. The petitioner disputed the claim for assured amount on the ground that the policy was obtained by playing fraud and suppressing material information regarding health and instead assured gave false information in the proposal form and thus, the contract was void ab initio. The plea regarding medical leave of the life assured and his admission in Sewak Sabha hospital was also specifically pleaded. 5. The photocopy of policy was produced by respondent No.2 as Exh. P1 in evidence before the Permanent Lok Adalat whereas death certificate was produced as exh. P2. On the other hand, the petitioner examined Ram Niwas, RW 1, pay clerk of the office of the employer of the assured. The said witness produced the leave record of the assured and deposed that the assured had remained on leave for 31 days from 19.8.2002 to 18.9.2002. Dr. B. K. Gupta from Sewak Sabha Hospital, Hisar, was examined as RW 2 who has deposed that assured was suffering from dilation of heart and was treated for dilated cardiomyopathy. The certificate and bedhead tickets were produced as Exhs. P8 to P10. Dr. Amit Mehta was examined as RW 3 who has treated the assured at Sukhda Hospital, hisar from 2.10.2004 to 4.10.2004 and from 11.10.2004 to 13.10.2004. The assured died on 16.11.2004. 6. The Permanent Lok Adalat returned a finding under issue No.2 that the assured was suffering from dilated cardiomyopathy during the period between 19.8.2002 and 18.9.2002 and that this fact was not disclosed to the insurance company. It was held that the assured died after two years of obtaining the insurance policy but the cause of death has not been proved on the record though there was concealment of his ailment by the assured. Therefore, the petitioner was directed to make payment of the assured amount along with interest. 7. It was held that the assured died after two years of obtaining the insurance policy but the cause of death has not been proved on the record though there was concealment of his ailment by the assured. Therefore, the petitioner was directed to make payment of the assured amount along with interest. 7. Learned counsel for the petitioner has vehemently argued that the award of the Permanent Lok Adalat is patently illegal, against the provisions of section 45 of the Insurance Act, 1938 (for short the act), terms of the contract and the law applicable thereto. It is also argued that the findings recorded are against facts on record. It is contended that once issue No.2 is decided in favour of the petitioner to the effect that the assured was suffering from dilated cardiomyopathy from 19.8.2002 to 18.9.2002 and such fact having not been disclosed, the Permanent Lok Adalat committed grave legal error in holding that such a non-disclosure is not material as the assured has died after two years. It is argued that concealment of material fact relevant for the issuance of policy is a valid ground for repudiation of claim even after the expiry of two years. It is also argued that the finding that the cause of death is not available on record is factually incorrect. Therefore, it cannot be said that the ailment for which the assured was admitted in hospital has nothing to do with the cause of death of the assured. It is submitted that the said findings are factually incorrect as in the claim form, Exh. P2, itself, the cause of death disclosed is heart attack. Still, further, medical evidence such as Dr. Amit mehta, RW 3, under whom the assured was under treatment immediately before his death and that of Dr. B. K. Gupta, RW 2, sufficiently co-relate that the assured was suffering from dilated cardiomyopathy in the year 2002 when the policy was taken and that the heart attack was the cause of death. 8. Amit mehta, RW 3, under whom the assured was under treatment immediately before his death and that of Dr. B. K. Gupta, RW 2, sufficiently co-relate that the assured was suffering from dilated cardiomyopathy in the year 2002 when the policy was taken and that the heart attack was the cause of death. 8. It is also contended that in terms of section 45 of the Act, an incorrect or a false declaration given in the proposal form within a period of two years alone cannot be a ground for repudiation of the claim but if the insurer shows that such statement was on a material fact or suppressed fact which was material to be disclosed and that statement was fraudulently made or withheld by the policyholder then such incorrect or false statement will not give validity to the policy even after the expiry of two years. It is, thus, contended that inaccurate or false statement in the proposal form within a period of two years can be ignored except in situation where such statement is on material facts or had suppressed facts or made fraudulently. It is contended that the contract of insurance is uberrima fides, i. e. , of utmost good faith, therefore, non-disclosure of material facts and furnishing of incorrect and suppression of correct facts entitles the insurance company to repudiate the policy. Reliance is placed upon P. C. Chacko V/s. Chairman, l. I. C. of India, 2008 ACJ 456 (SC) and l. I. C. of India V/s. G. M. Channabasamma, 1991 ACJ 303 (SC ). It is contended that even after the expiry of two years period, incorrect statement on material matters or suppressed facts which were material to be disclosed but fraudulently made is sufficient to repudiate the policy at any point of time. 9. The issue raised is not res integra. One of the earlier judgments which has considered the duty of the assured and liability of the insurance company were examined by a Division Bench of Patna high Court in Ratan Lal V/s. Metropolitan insurance Co. Ltd. , AIR 1959 Patna 413, independent of the provisions of section 45 of the Act. 9. The issue raised is not res integra. One of the earlier judgments which has considered the duty of the assured and liability of the insurance company were examined by a Division Bench of Patna high Court in Ratan Lal V/s. Metropolitan insurance Co. Ltd. , AIR 1959 Patna 413, independent of the provisions of section 45 of the Act. The said case is in respect of death of assured within a period of six months but it was held that the contracts of insurance including the contracts of life assured are contracts uberrima fides and every fact which is material must be disclosed otherwise there is good ground for rescission. It was held that this duty to disclose continues up to the conclusion of the contract and covers any material alteration in the character of the risk which may take place between proposal and acceptance. It was held to the following effect: "the well settled law in the field of insurance is that contracts of insurance including the contracts of life assurance are contracts uberrima fides are every fact which is material must be disclosed otherwise there is a good ground for rescission. And this duty to disclose continues up to the conclusion of the contract and covers any material alteration in the character of the risk which may take place between proposal and acceptance. Looker V/s. Law Union and Rock Insurance Co. , (1928) 1 KB 554, Jessel, M. R. in London Assurance Co. V/s. Monsel, (1879) 11 Ch D 363 observed: as regards the general principle, I am not prepared to lay down as making any difference in substance between one contract of assurance and another. Whether it is life, or fire, or marine insurance, I take it good faith is required in all cases and though there may be certain circumstances from the peculiar nature of marine insurance, which requires to be disclosed, and which do not apply to the other contracts of insurance, that is rather in my opinion an illustration of the application of the principle than a distinction of principle. therefore, in this case non-disclosure of material facts even in the absence of misrepresentation or fraud may make the contract voidable at the instance of the parties to whom uberrima fides is due. But then in such cases sometimes a ticklish question arises as to what is a material fact. therefore, in this case non-disclosure of material facts even in the absence of misrepresentation or fraud may make the contract voidable at the instance of the parties to whom uberrima fides is due. But then in such cases sometimes a ticklish question arises as to what is a material fact. Authorities say that any fact which tends to suggest that the life insured is likely to fall short of the average duration is a material fact, Thomson v. Weems, (1884) 9 AC 671; and rightly so for after all life assurance is nothing but a scientific assessment of an average duration of a life, and that is not possible unless all correct data about that life are diligently and faithfully made available to the company. But then the border line between what is material and what is not material is more often than not so faint and dim and there is always a danger of one being taken for the other. Therefore, in order to avoid this danger one has to be careful while drawing a distinction between what is illness or material change in health and what is ordinary simple disorder. A disorder is not one tending to shorten life simply from the circumstances that the assured dies from it Watson V/s. Mainwaring, (1813) 4 Taunt 763. A good health means reasonably good health Yorke V/s. Yorkshire Insurance, (1918) 1 KB 662; and National Mutual v. Smallfield, (1922) NZ Law 1074. A warranty of good health can never mean that a man has not in him the seeds of some disorder. We are all born with the seeds of mortality in us, Willis v. Poole, (1780) 2, Parks Marine Insurance, 8th Edn. , p.935. Life insurance is peculiar in that the assured is often ignorant as to the fact most material in assessing the premium - the state of his own health. Though he may have a general idea as to his own physical well-being, he may well be unaware of an incipient but a deadly disease within his system that a doctor might have diagnosed. The rule is, warranties apart, that the insurer may only avoid the policy if the assured knowingly misrepresents his state of health. It is true that is not consistent with what Roche, J. laid down in Graham V/s. Western Australian Insurance, (1931) 40 LR 64. The rule is, warranties apart, that the insurer may only avoid the policy if the assured knowingly misrepresents his state of health. It is true that is not consistent with what Roche, J. laid down in Graham V/s. Western Australian Insurance, (1931) 40 LR 64. According to that learned Judge, the principle had been settled for years that if there is information given, be it quite innocent, which is not a matter of contract and never becomes a matter of contract, yet, nevertheless if it is inaccurate, it can be used to avoid the policy or policies in question. It, however, appears from authorities that though this may be true as to marine risks but so far as life insurance is concerned, that does appear to stand on a special position in this respect, as is evident also from the discussion made in Halsburys Laws of england, Vol.18, Art.588. Therein a distinction has been drawn between misrepresentation and non-disclosure and in the course of that it has been observed: since, however, the duty to disclose is limited to facts within the knowledge of the assured, a mistaken statement about a material fact [wheelton V/s. Hardisty, (1858) 8 E and B 232] made honestly, that is, with belief in its truth, will not affect the validity of the contract [anderson V/s. Fitzerald, (1853) 4 HL Cas 484], unless there is an express condition that it shall do so. it may be said that the present case is one where there was a condition imposed on the assured and accepted by him that in case he fell ill or there was any change in his health between the date of the proposal and the date of his acceptance by the company, he would send an intimation of that event to the company. But in this connection it has to be remembered that a statement which is expressed to depend upon the assureds state of mind will not be untrue simply because he was unaware of the true facts [wheelton V/s. Hardisty, (1858) 8 Eandb 232]. Therefore, if in his honest judgment there was no illness or any change of health but only an ordinary disorder, the mere non-communication of that event to the company cannot be a ground for the insurer to avoid the policy. Therefore, if in his honest judgment there was no illness or any change of health but only an ordinary disorder, the mere non-communication of that event to the company cannot be a ground for the insurer to avoid the policy. This, in my opinion, in ultimate analysis always turns out to be a question of fact whether any particular physical nervous disorder amounts to an illness or is a mere disorder. Looked at, therefore, from these points of view that we have to approach the present case. " 10. The aforesaid judgment has explained minutely a material fact which is sufficient for repudiation of the contract. It was examined that though the person may have a general idea as to his own physical well-being, he may well be unaware of an incipient but deadly disease within his system that a doctor might have diagnosed. It was held that the rule is, warranties apart, that insurers may only avoid the policy if the assured knowingly misrepresents his state of health. Therefore, if in his honest judgment there was no illness or any change of health but only an ordinary disorder, the mere non-communication of that event to the company cannot be a ground for the insurer to avoid the policy. Thus, it can be said that material fact is not an ordinary disorder of health and does not include the disease which a doctor might have diagnosed. 11. In All India General Insurance Co. Ltd. V/s. S. P. Maheshwari, AIR 1960 Mad 484, a Division Bench of Madras High court has examined the codification of law of insurance, particularly consequences of enactment of section 45 of the Act. It was a case where the claim was lodged within 2 years of taking of policy. The Division bench has examined and explained the difference between warranty and representation in respect of contract of insurance. It was held to the following effect: " (10) One great principle of insurance law is that a contract of insurance is based upon utmost good faith uberrima fides; in fact it is the fundamental basis upon which all contracts of insurance are made. In this respect there is no difference between one contract of insurance and another. It was held to the following effect: " (10) One great principle of insurance law is that a contract of insurance is based upon utmost good faith uberrima fides; in fact it is the fundamental basis upon which all contracts of insurance are made. In this respect there is no difference between one contract of insurance and another. Whether it be life or fire or marine the understanding is that contract is uberrima fides and though there may be certain circumstances from the peculiar nature of marine insurance which require to be disclosed and which do not apply to other contracts of insurance, that is rather an illustration of the application of the principle, than a distinction in principle. From the very fact that the contract involves a risk and that it purports to shift the risk from one party to the other, each one is required to be absolutely innocent of every circumstance which goes to influence the judgment of the other while entering into the transaction. Mutual trust and confidence is the basis upon which the parties proceed. The insurer trusts to the representations of the assured and proceeds upon the confidence that he does not keep back any circumstance in his knowledge, so as to mislead the insurer into a belief that the circumstance does not exist, or to induce him to estimate the risk as if it did not. On the other hand, the assured relies upon the honesty of the insurer for the communication of every fact which he ought to know before he invests his money and the non-disclosure of which will affect his judgment, as for instance, where the insurer grants a policy where he will never run any risk thereunder: this duty to disclose not only exists at the time of entering into the contract but continues during its subsistence and after the risk has happened. (17) The duty of disclosure comes under two heads, viz. , (i) representation and (ii) warranties; representations which are made the basis of the contract and those which do not constitute the basis of the contract of insurance. The former are known as warranties. A representation is not strictly speaking a part of the contract of insurance or of the essence of it, but rather something collateral or preliminary and in the nature of an inducement to it. The former are known as warranties. A representation is not strictly speaking a part of the contract of insurance or of the essence of it, but rather something collateral or preliminary and in the nature of an inducement to it. A false representation unlike a false warranty will not operate to vitiate the contract or avoid the policy unless it relates to a fact actually material or clearly intended to be made material by the agreement of the parties. It is sufficient if the representation is substantially true. A misrepresentation renders the policy void on the ground of fraud while miscompliance with a warranty operates as an express breach of the contract. A stipulation inserted in writing on the face of the policy on the literal truth or fulfilment of which the validity of the entire contract depends is a warranty. The stipulation is considered to be on the fact of the policy although it may be written in the margin or transversely or on a subjoined paper referred to in the policy. " 12. The effect of warranty is, if any point of answer to the question is untrue then notwithstanding the untruth might have arisen inadvertently and without any fraud, the claim can be repudiated. It was held to the following effect: " (18 ). . . Thus, if a person effecting a policy of insurance says i warrant such and such things which are here stated and that is part of the contract, then, whether they are material or not is quite unimportant; the party must adhere to his warranty, whether material or immaterial. But if the party makes no warranty at all but, simply makes a certain statement, if that statement has been made bona fide unless it is material, it does not signify whether it is false or not false. Indeed, whether made bona fide or not if it is not material, the untruth is quite unimportant. If there is no fraud in a representation it is perfectly clear that it cannot affect the contract; and even if material but there is no fraud in it and if forms no part of the contract, it cannot vitiate the right of the party to recover. " 13. If there is no fraud in a representation it is perfectly clear that it cannot affect the contract; and even if material but there is no fraud in it and if forms no part of the contract, it cannot vitiate the right of the party to recover. " 13. While explaining that what is meant by representation, it was held to mean a verbal and written statement made by the assured to the underwriter, at or before the making of the contract, as to existence of some fact or state of facts calculated to induce the underwriter more readily to assume the risk, by diminishing the estimate he would otherwise have formed of it. The representation was found to be of two kinds: (i) a positive affirmation, based upon knowledge that the facts represented either do or will exist; and (ii) a mere declaration of belief or expectation that such facts do or will exist. It was found that the main distinction between representation and warranty is that as a general rule answers to questions are representations and not warranties. In the case of a warranty, materiality or immateriality of the fact warranted signifies nothing. Its incorrectness constitutes a defence to an action on the policy, but in case of representation, the insurer can avoid the policy only by proving that the statement is false and fraudulent or that it was false and material to risk. The court held as under: " (20) Representations may be of two kinds: (i) a positive affirmation, based upon knowledge that the facts represented either do or will exist; and (ii) a mere declaration of belief or expectation that such facts do or will exist. The Marine insurance Act, 1906, recognises the above classification by declaring that a representation may be either a representation as to a matter of fact, or as to a matter of expectation or belief. Though arnold (Arnold on the Law of Marine insurance and Average, 14th Edn. , S.527) refers to a third class of representation, viz. , a mere communication of information received from others; this supposed third class must always fall within one or of the two classes specified above. Representations of the first kind are called positive representations which again are sub-divided into (1)affirmative and (2) promissory, while representations of the second kind are called representations of statements of expectation. , a mere communication of information received from others; this supposed third class must always fall within one or of the two classes specified above. Representations of the first kind are called positive representations which again are sub-divided into (1)affirmative and (2) promissory, while representations of the second kind are called representations of statements of expectation. (21) Therefore, the main distinction between representation and warranty is that as a general rule, answers to questions are representations and not warranties, though it is possible for persons to stipulate that answers to certain questions shall be the basis of contract, in which case they become part of the warranties. In the case of a warranty materiality or immateriality of the fact warranted signifies nothing. Its incorrectness constitutes a defence to an action on the policy, even though it be not material and be made in perfect good faith. But, in the case of a representation, the insurer can avoid the policy only by proving that the statement is false and fraudulent or that it was false and material to the risk. In other words, it is only a material misrepresentation that can avoid a policy if the truth of the facts contained in the representation be not warranted by the policy. (24) To sum up, in policies of life insurance there is an understanding that the contract is uberrima fides and no party is allowed to play hide and seek but each will have to place his cards on the table; and even mental reservations of any kind are not allowed. This uberrima fides is a two-way traffic contracts of insurance, being contracts of faith, imposition by either party will constitute good ground for avoidance. (27) This brings us on finally to the topics of non-disclosure or misrepresentation which are practically the positive and negative aspects of the same thing. The effect of misrepresentation on the contract is precisely the same as that of non-disclosure; it affords the aggrieved party a ground for avoiding the contract. There are a number of dicta and one decision to the effect that life insurance is an exception to the general rule that innocent misrepresentation may afford grounds for avoiding a policy and that misrepresentation must be fraudulent to have this effect upon a policy of life insurance. There are a number of dicta and one decision to the effect that life insurance is an exception to the general rule that innocent misrepresentation may afford grounds for avoiding a policy and that misrepresentation must be fraudulent to have this effect upon a policy of life insurance. But in order to give the insurer grounds for avoidance both under non-disclosure as well as misrepresentations, both must relate only to material information. (28) What facts are material, the concealment of which or misrepresentation of which, would afford a ground for the avoidance of the policy?" 14. After referring to principles of life insurance, the court held that the rule, therefore is, warranties apart, that the insurers may only avoid the policy if the assured knowingly misrepresents his state of health as he is bound to disclose no more than what he actually knows. He is not bound to disclose facts which he does not know or facts not within the knowledge of insurer. Honble Justice Anantanarayanan, while agreeing with the view of Honble justice Ramaswami, in the aforesaid judgment held that section 45 of the Act has remedied the grave hardship resulting from the doctrine that misrepresentation within the warranty even with reference to the most trivial or non-material details would vitiate the contract. The said provision has been enacted with the intention that application of rigid and stringent rule of warranty to trivial or inconsequential misrepresentation ought to be mitigated in the interest of justice. The court concluded to the following effect: " (44) This, to a considerable extent, does mitigates the rigour of the rule that the most trivial misrepresentation within the ambit of the warranty, might still be a good enough defence for the insurance company to refuse payment on the policy. (47 ). . . We can thus see that great injury might be caused by the refusal of the insurance company to honour the contract, because of an alleged non-disclosure relating to some very minor ailment, which had no reference at all to the life expectation. Secondly, I think that, having the great advantage of codification, we should go further and indicate that even within the two-year period, only misrepresentation which are material, in the sense of having some effect upon life expectation, whether direct or indirect, should be allowed in defence for avoidance of the contract. Secondly, I think that, having the great advantage of codification, we should go further and indicate that even within the two-year period, only misrepresentation which are material, in the sense of having some effect upon life expectation, whether direct or indirect, should be allowed in defence for avoidance of the contract. Of course, within this period, the further conditions laid down in section 45 need not be made applicable. For instance, it may not at all be necessary to lay down that the policyholder knew that the statement was false, or that he fraudulently suppressed this knowledge. But if the law is to be retained, as it stands, cases of hardship and injustice might arise, within the two years period, which the courts would be powerless to remedy, since the principle of warranty would hold the field. . . " 15. A reading of the aforesaid judgment leads to the fact that the duty of disclosure comes under two heads, i. e. , representation and warranties. The warranties are representations which made the basis of the contract. A representation is collateral or preliminary or in the nature of an inducement to the policy of insurance. A false representation will not operate to vitiate the contract or avoid the policy unless it relates to a fact actually material or clearly intended to be made material by the agreement of the parties. A misrepresentation renders the policy void on the ground of fraud. In the case of representation, the insurer can avoid the policy only by proving that the statement is false and fraudulent or that it was false and material to the risk. Thus, the common thread in the case of warranties or representation is a fact actually material or intended to be made material by the agreement of the parties. The misrepresentations which are material having effect upon life expectation, whether direct or indirect, are the possible defence for avoidance of the contract. 16. The case of Mithoolal Nayak V/s. L. I. C. of India, AIR 1962 SC 814, is almost pari materia with the facts of the present case. That was a case where the assured has died after two years. It was held to the following effect: ". . . 16. The case of Mithoolal Nayak V/s. L. I. C. of India, AIR 1962 SC 814, is almost pari materia with the facts of the present case. That was a case where the assured has died after two years. It was held to the following effect: ". . . As we think that section 45 of the insurance Act 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 assured to 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. (8) 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 policyholder; and (c) the policyholder 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 case. We think that they were. We are unable to agree with the learned trial Judge that the ailments for which Mahajan Deolal was treated by dr. Lakshmanan in September-October 1943 were trivial or casual ailments. Nor do we think that Mahajan Deolal was likely to forget in July 1944 that he had been treated by Dr. Lakshmanan for certain serious ailments only a few months before that date. . . Mahajan Deolal must have known that it was material to disclose that fact to the respondent company. In the answers to the questions put to him he not only failed to disclose what it was material for him to disclose, but he made a false statement to the effect that he had not been treated by any doctor for any such serious ailment as anaemia or shortness of breath or asthma. In other words, there was deliberate suppression fraudulently made by mahajan Deolal. In other words, there was deliberate suppression fraudulently made by mahajan Deolal. fraud, according to section 17 of the Indian Contract Act, 1872 (9 of 1872) means and includes, inter alia, any of the following acts committed by a party to a contract with the 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 statement on 16.7.1944, 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. (9 ). . . 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 that principle applies in the present case. The terms of the policy made it clear that the averments made as to the state of health of the assured in the proposal form and the personal statement were the basis of the contract between the parties and the circumstance that Mahajan Deolal had taken pains to falsify or conceal that he had been treated for a serious ailment by Dr. Lakshmanan only a few months before the policy was taken shows that the falsification or concealment had an important bearing in obtaining the other partys consent. A man who has so acted cannot afterwards turn round and say: it could have made no difference if you had known the truth. In our opinion, no question of waiver arises in the circumstances of this case, nor can the appellant take advantage of the Explanation to section 19 of Indian Contract Act. " 17. A man who has so acted cannot afterwards turn round and say: it could have made no difference if you had known the truth. In our opinion, no question of waiver arises in the circumstances of this case, nor can the appellant take advantage of the Explanation to section 19 of Indian Contract Act. " 17. In L. I. C. of India V/s. G. M. Channabasamma, 1991 ACJ 303 (SC), Supreme court held that the assured is under solemn obligation to make full disclosure of material facts which may be relevant for the insurer to take into account while deciding whether the proposal should be accepted or not. 18. In P. C. Chacko V/s. Chairman, L. I. C. of India, 2008 ACJ 456 (SC), Honble supreme Court was considering a claim lodged for the assured who died within six months of taking the policy. The judgments of S. P. Maheshwaris case, AIR 1960 madras 484 and Ratan Lals case, AIR 1959 Patna 413, were referred to and the judgment of the Division Bench of the high Court dismissing the suit of the legal representatives of the deceased assured was maintained. 19. In the present case, the assured has not disclosed the factum of his ailment though he was on medical leave when he filled up the proposal form. Such material fact cannot be said to be trivial which could be ignored by the assured saved by section 45 of the Act. Non-disclosure of such material fact and the fact that cause of death is heart attack, on account of which the deceased was on medical leave, clearly disentitles the assured to claim compensation. It is a case of misrepresentation of a material fact which vitiates the contract of life insurance. The fact that deceased has survived for a period of two years is of no consequence. Such condition is a condition of valid enforceable contract available to the insurance company under section 17 of the Contract Act, 1872. Sec.45 of the Act deals only with trivial incorrect statements made in the proposal form to deny liberty to the insurance company to avoid insurance contract within period of two years. But where the material facts have been withheld or incorrect information furnished, the contract of insurance, independent of section 45 of the Act, would entitle the insurance company to repudiate the claim. 20. But where the material facts have been withheld or incorrect information furnished, the contract of insurance, independent of section 45 of the Act, would entitle the insurance company to repudiate the claim. 20. In view of the above, we are of the opinion that the award of Permanent Lok adalat is not based upon correct interpretation of section 45 of the Act. Thus, we allow the present writ petition and set aside the award dated 24.2.2007, Annexure P22 with no order as to costs. Petition allowed.