Mithoolal Nayak vs Life Insurance Corporation Of … on 15 January, 1962 – Case Summary

In the case of Mithoolal Nayak vs Life Insurance Corporation of India, adjudicated by the Supreme Court of India on 15th January 1962, the court examined the validity of a life insurance policy and the implications of fraudulent suppression of material facts by the policyholder. The case was presided over by Justice S.K. Das, along with Justices K. Subbarao and Raghubar Dayal.

Facts of the Case

In 1942, Mithoolal Nayak (M) sent a proposal for the insurance of his life. He was examined by Dr. D, who submitted two reports, one with the proposal form and one confidential. The confidential report indicated that M was anaemic, had a dilated heart, and his right lung showed indications of an old attack of pneumonia or pleurisy. This proposal lapsed due to non-completion of the medical examination as required by the insurance company.

In 1944, M made a second proposal for insurance of his life. He did not disclose any of his ailments and falsely stated that he had not consulted any medical man for any ailment within the last five years. After a medical examination by Dr. K, the proposal was accepted, and a policy for Rs. 25,000/- was issued on March 13, 1945. The policy lapsed for non-payment of premium but was revived in July 1946. In November 1946, M died. His assignee, the appellant, made a demand for Rs. 26,000/- but the Company repudiated it on the ground that the policy had been obtained by deliberate mis-statement and fraudulent suppression of material facts.

Issues Raised

The appellant filed a suit to recover the amount of the policy contending that section 45 of the Insurance Act barred the company from calling in question the policy after two years on the ground that any statement made in the proposal was inaccurate or false.

Court’s Observations

The court held that the policy-holder was guilty of fraudulent suppression of material facts relating to his health and the Company was entitled to avoid the contract. Section 45 of the Insurance Act applied to the case as two years had lapsed since the policy was effected. The court further held that the company was entitled to repudiate the contract even after the expiry of two years if three conditions were fulfilled: (a) the statement was on a material matter or there was suppression of facts which it was material to disclose; (b) the suppression was fraudulently made by the policy-holder, and (c) the policy-holder must have known at the time of the making of the statement that it was false or that it suppressed facts which it was material to disclose.

The court also held that the appellant was not entitled even to a refund of the money paid as premium as one of the terms of the policy was that all monies paid belonged to the company if the policy was vitiated by fraudulent suppression of material facts.

Conclusion

The case of Mithoolal Nayak vs Life Insurance Corporation of India is a landmark case that underscores the importance of full and honest disclosure by the policyholder at the time of taking a life insurance policy. It also highlights the implications of fraudulent suppression of material facts and the insurer’s right to repudiate the contract in such cases.