1. The plaintiff (Daulat Ram) is the appellant. He filed a suit for recovery of Rs. 10,000/- on the insurance policy, which had been taken by Smt. Chawli Devi being her adopted son; he was the nominee of the policy. The policy was effective from 13-9-1955 in respect of which, it is stated, that the premiums due until the death of Smt. Chawli Devi on 30-9-1956, had been paid.

2. The suit was dismissed by the learned Commercial Sub Judge 1st Class, Delhi on 12-6-1961 on the grounds that she had no insurable interest and that she had stated in the proposal that she was literate and did not observe pardah, which statements had been proved to be incorrect. The suit was resisted toy the Life Insurance Corporation, the successor-in-interest of the Bharat Insurance Co. Ltd., also on the ground that she was suffering from diabetes which fact she had not disclosed; the finding on this question of fact was in favour of the plaintiff.

3. The most important question for consideration, it seems to us is whether Smt. Chawli Devi had an insurable interest in the policy. It has been stated by the plaintiff (P.W 6) that the premiums due in respect of insurance policies had been paid out of the funds of Smt. Chawli Devi and necessary entries were made in the books of the firm of Mehtab Rai Surai Bhan, the Joint Hindu Family firm of which she was a member. Copies of the Khata of Smt. Chawli Devi in the said firm relating to the years 1954–55. 1955–56, 1956–57 and 1957–58 were filed and marked as Ex. P.W 6/1 (The translation has been printed at pages 83 and 84). It is seen from the said translation that a sum of Rupees 3,254-15-0. as in the year 1957–58. had been carried over from, previous year in the Khata as a debit against Smt. Chawli Devi. Though the Rokar had not been filed and details had not been fully elicited from P.W 6, it had been elicited in his re-examination as follows:

“The above premiums of Shrimati Chawli Devi paid by me were debited to her account in the books of Mehtab Rai Suraj Bhan.”

4. No further question was put thereafter to P.W 6 by the insurer.

5. Shri J.P Aggarwal learned counsel for the Life Insurance Corporation of India, contends that this statement should not have been elicited in re-examination and this having been elicited in re-examination he had no further opportunity of cross-examinining the witness. It does not appear from the record that any objection was taken to the said question which was thus elicited in the re-examination. Section 138 of the Indian Evidence Act provides that the re-axamination shall be directed to the explanation of matters referred to in cross-examination and if new matter is by permission of the Court noticed in re-examination, the adverse party may further cross-examine upon that matter. It is necessary in this context to refer to the evidence given by the plaintiff both in chief-examination and in cross-examinatiom He had simply stated in chief-examination that Smt. Chawli Devi was insured with Indian Mutual Life Assurance Company (a different company) for Rs. 7,500/- in the shape of two policies of Rs. 5,000/- and Rs. 2,500/-. These policies were taken in 1953. The suit Policy was taken by her in 1955 of her own accord and not at the plaintiff's instance. He stated in cross-examination annual premium for the policy of 1954 was Rs. 554/8/-. The premium for the policies of 1953 was paid on behalf of the plaintiff from out of her account with the firm Mehtab Rai Suraj Bhan. The premium receipts in regard to those policies were filed with the income-tax authorities. For the policy in dispute a cheque of Rs. 500/- was initially given. It was signed by P.W 6 and drawn against his account in the bank in question. After the proposal was accepted by the insurer he paid Rs. 128/5/ in cash for the suit policy. The second premium was also paid by him in cash. But these premium receipts also were with the income-tax authorities. The plaintiff was adopted by Smt. Chawli Devi's husband in 1942 and her husband died in 1950. Smt. Chawli Devi took out the insurance policies only after her husband's death. In the background of the above answers the answer extracted above was elicited in re-examination. Though the ledger was produced the Rokar was not produced. In the first place it is seen that the question was allowed to be put in re-examination. What is more important is that no objection was taken to the said answer being elicited in re-examination. Even if it was a fresh matter the Court must be deemed to have permitted the said question when it recorded the said answer especially in the absence of any objection. It was the duty of the counsel, who appeared for the Life Insurance Corporation of India, if he wanted to contest the abovesaid statement to have put further questions to him. This was not done. There is no evidence contra. On the basis of the said statement of P.W 6 it must be taken to be established that the premiums were paid out of the funds of Smt. Chawli Devi though the payments were made by or on behalf of the plaintiff and corresponding entries were also made in the accounts of Mehtab Rai Suraj Bhan.

6. The learned subordinate Judge has completely ignored these aspects but has criticised the plaintiff for not producing the Rokar especially when the same was not even directed to be produced and went to the extent of drawing an adverse inference against the plaintiff from such non-production. To say the least this criticism seems neither justified nor even fair to the plaintiff.

7. During the course of the hearing before us we asked Shri Sultan Singh, learned counsel for the appellant-plaintiff, to let us know whether the details of the said payments had been entered in the Rokar. The original Rokar was shown to us containing the above entries and two extracts were taken at our instance. There is also sufficient guarantee concerning the entries having been made in the abovesaid manner in the accounts of Mehtab Rai Suraj Bhan in the shape of the assessment order which was also produced before us at our direction by Shri Sultan Singh. This was to fully ensure the truth of the above statement of the plaintiff which is by itself legal evidence. Since a public autonomous body like the Life Insurance Corporation of India is involved we only wanted to make sure of this factual position; it is to be had in the shape of the following observations in the assessment order of the Income-tax Officer. Addl. B-VIII District. New Delhi dated 3-9-1958.

“Assessed as per I.T 30. Issue demand notice and challan. Allow rebate on LIP as per rules. The assessee has also claimed rebate in respect of premium paid on the life of Smt. Chawli Devi, she being a widow of the deceased Karta. No rebate is allowable on this amount as she has not been shown as a member of H.U.F in part 3(a) of the return,”

8. If no rebate was allowed it was for the technical reason that she had not been shown as a member of H.U.F in Part 3(a) of the return. But as a matter of substance there is hardly any doubt about the rebate having been claimed in respect of the premiums paid on behalf of Smt. Chawli Devi for the suit policy.

9. We directed Shri Sultan Singh to place a copy of the Assessment Order along with certified extracts from the relevant accounts of the original entries of the accounts which were shown to us during the hearing as desired by Shri J.P Aggarwal himself. This was accordingly done by means of an application. After the conclusion of the hearing, however. Shri S.P Aggarwal, who was appearing along with Shri J.P Aggarwal for the insurer, mentioned to us that he wanted to file a reply to the said application. In the said reply averments have been made which do not even correctly set out the fact that the above documents were filed at the request of Shri J.P Aggarwal himself who wanted to see the original accounts to satisfy himself about the correctness of those entries. No explanation has been given even in the said affidavit concerning the absence of any further questioning of P.W 6 when he had made the said statement in re-examination. It has not even been stated that the abovesaid question in re-examination was objected to. The criticism that reference to the entries showing payment of premiums by Smt. Chawli Devi appearing in the accounts is by way of an afterthought is not correct. There is no substance in the contention set out in reply that the plaintiff should be cross-examined further with reference to these documents. If we wanted to see the original accounts (true extracts of which have been filed now) it was only to satisfy ourselves whether details of the entries regarding payment of the insurance premiums had been given in the accounts and whether the sum of Rs. 3254/15/- which is carried over from the previous years in the year 1957–58 (printed page 84) tallied with the entries as they actually appeared in the accounts. This was done at the instance of Shri J.P Aggarwal who wanted us to be satisfied (and also to satisfy himself) about the fact whether the details are mentioned, whether the figures tallied and whether they are supported by anything in the Income-tax Assessment Order. The Order is received as additional evidence and marked Ex. A Though the said Order alone is a sufficient guarantee of the truth of the insurance premiums for the policy having been paid out of the funds of Smt. Chawli Devi, the copies of the accounts are also marked as Ex. B because the figures entered therein tally with the Khata already produced in respect of which P.W 6 had already spoken during the course of his evidence. C.M 442 of 1972 is allowed.

10. The figures given in the Ledger are also seen to tally to the Paisa. It is worth recalling that a sum of Rs. 3,254/- 15/0 is the figure which was carried over from the previous years in the year 1957–58. The first premium was Rupees 628/5/ and for the second year also it was of a similar amount making a total of Rs. 1256/10/-. The premium paid for the Indian Mutual Life Assurance Company is Rs. 1,998/5/- and this gives us a grand total of Rs. 3254/15/- a figure which was carried over in the khata of Smt. Chawli Devi (printed page 84) for the year 1957–58. The statement made by the plaintiff in his re-examination that payment for the insurance premiums for the above policies were debited to the accounts of the joint family firm in the Khata of Smt. Chawli Devi is thus seen to be fully substantiated. We wish to make it clear that if we required the plaintiff/appellant to produce the assessment order and the original Rokar (the extracts from which have been translated and filed) it was only to be doubly assured in this regard. The said statement of the plaintiff being legal evidence and the cross-examination not even being directed in respect of it there is no legal impediment in acting upon that evidence alone even without any additional material in this regard.

11. In this view, if the policy was taken in the name of Smt. Chawli Devi and the premiums were paid out of her funds there could be no question of Smt. Chawli Devi or even the plaintiff not having any insurable interest in the said policy.

12. Even in the view that advances had been made to Smt. Chawli Devi, a member of the Joint Hindu Family firm for the purpose of effecting her insurance policy she alone and not the firm would be entitled to the benefits of the policy. This was so held by a Division Bench of the Madras High Court in Bengal Insurance and Real Property Co. Ltd. v. Velayammal, (AIR 1937 Mad 571). It was held in that case that a profit made by a member of a joint family from the enjoyment of joint property without detriment to it is his separate self-acquired property. When money is given to a member of a family by the manager from family funds to be spent by him for his own personal use, any (profit made by such member from such money is not a family acquisition but it is the separate self-acquired property of such member. In the present case, however, the said policy is not, claimed to be a family asset. Even then it would help only the plaintiff. The insurance company alone has now raised question of insurable interest. In no view of the matter, therefore, the insurer can contend that there was no insurable interest.

13. The further question for consideration is whether the suit policy has become vitiated by reason of any misrepresentation made by Smt. Chawli Devi on a material matter. The learned Subordinate Judge has found that the policy was vitiated by reason of the two statements of Smt. Chawli Devi concerning literacy and pardah being found to be incorrect; the finding however, was in the plaintiff's favour concerning the plea of the Life Insurance Corporation that she was suffering from diabetes. On this aspect the learned Subordinate Judge has not even paid any attention to Section 45 of the Insurance Act. 1938 which reads as follows:

“45. Policy not to 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.”

14. The words underlined were substituted by Act 13 of 1941 and the amendment came into effect from 1-9-1950. The significance of Section 45 was brought out by the Supreme Court in Mithoolal Nayak v. Life Insurance Corpn. of India, (AIR 1962 SC 814). It was pointed out that the period of 2 years prescribed in Section 45 has to be calculated from the date on which the policy was originally effected. When the claim is repudiated by the insurer after the expiry of the 2 year period three conditions are necessary for Section 45 to apply—

(a) that statement must be on a material matter or must suppress facts which it was material to disclose.

(b) the suppression must be fraudulently made by the policy-holder, and

(c) the policy-holder must have known at the time of making the statement that it was false or that it suppressed facts which it was material to disclose.

15. In that case the question arose concerning revival of a lapsed policy. The policy had been issued on 13-3-1945 and it was to come into effect from 15-1-1945. The claim was repudiated by the insurer only on 10-10-1947 after the expiry of 2 years. The insured had died in November, 1946. On account of the policy having been repudiated more than two years after its commencement the Supreme Court invoked Section 45 and also discussed the conditions necessary for complying with the said Section. It is not necessary, therefore, that the insured should have been alive for two years after the policy was effected. Section 45 would therefore, apply to every case where repudiation is made more than 2 years from the date on which the policy is effected irrespective of whether the insured died before the expiry of the said 2 years or not.

16. The abovesaid decision was followed by a decision of a Division Bench of the Madras High Court in Life Insurance Corpn. of India v. Janaki Ammal, (AIR 1968 Mad 324), In that case the policy-holder had taken the policy on 18-2-1954 and had died on 18-8-1955 within two years of the taking of the policy. The liability on the policy was repudiated by the Life Insurance Corporation only on 10-8-1959, more than two years after the date of the policy. It was held that the case was governed by the principles indicated by the Supreme Court in the above case and that the burden lay on the insurer to prove that the above-said conditions were present.

17. In dealing with a case arising under Section 45 of the Act no material assistance can be derived from the English cases or even the cases decided in India prior to Section 45 being placed on the statute book about the kind of misrepresentation or suppression which vitiates an insurance policy. The learned Subordinate Judge, while discussing a few decided cases on the subject has not kept in mind the nature of the change introduced by Section 45 of the Act. Every insurance contract is no doubt a contract Uberrima fide. But when the insurer challenges the contract of insurance only after the expiry of two years of its being effected he cannot seek to avoid the policy except when there is any false statement or suppression concerning a “material matter.” In other words, it is not every false statement or suppression that can ipso facto enable the insurer to avoid the policy when it is repudiated after the expiry of two years from the date of the insurance contract being effected; after the expiry of two years the three necessary conditions, as explained by the Supreme Court, must be established.

18. We have not been persuaded that any statement concerning the literacy of the insured or observing pardah was “material” within the meaning of Section 45 of the Act. Nothing has been placed on record for us to hold that the statement concerning the above two aspects are “material” within the meaning of Section 45 of the Act. The insured had signed her name in Hindi, she was not a marks-woman, she was at least able to sign her name which might by itself probably take her at least slightly above the standard of absolute illiteracy; but then there are several shades of semi-literacy. We have not been told that what material bearing this has on an insurance policy. Even respecting Pardah there are several variations; a person completely covering herself or the Sari alone covering her head wholly or one partially etc. There is no question here of any identity of the insured, it is not stated that the insurance policy had not been effected by Smt. Chawli Devi, but by a different person. We have not been told how assuming she was observing pardah to any extent, it was material. We have seen how it is not enough when the insurer seeks to avoid the policy more than two years after it was effected to merely show that there has been some false statement, however immaterial.

19. We are, therefore, only left with the question regarding whether the insured was suffering from diabetes. On this question the finding of the learned Subordinate Judge, with which we are in complete agreement, is against the insurer. Shri K.R Sardana, a Claims Inspector of the Bharat Insurance Company between 1943 and 1957, claimed to have conducted an investigation concerning the death of Smt. Chawli Devi. He contacted Dr. R.V Singh, who has been examined as D.W 2 and obtained a certificate from him. On 8-4-1957 Dr. Singh had stated in his certificate (Ex. D-4 printed page 112) that Smt. Chawli Devi had been going to him for treatment since 1952. She went to him in 1952 and 1953 for fever or cough once or twice a year but in 1954 she went to him complaining of weakness and frequency of urination. Her urine was examined by some pathologist (not disclosed). Since she had sugar in her urine he advised Insulin 40 units per day. He went to the extent of stating that 2-3% sugar in her urine was noticed; she had been going to him up to March, 1955, but only for cough, fever etc. She never took treatment for more than 3/4 days when she became all right. He did not attend on her during her last illness.

20. Dr. Singh issued another certificate on 18-4-1957 (Ex. D-3. printed page (111)) as follows:—

“She attended my dispensary for fever and cough in 1952 and ‘53 on 16-8-1952 and 17-8-1952. Again, on 12-5-1952 and 14-5-1953 for the same trouble. Then she attended on 6-1-1955 for weakness and fever. She was given medicine on 7-1-1955, 9-1-1955, 13-1-1955, 115-1-1955. 16-1-1955. when she was cured. On 31-8-1955 she again came for treatment. This time she was given infections, mix. & Tab, on 31-8-1955 and 1-9-1955. On 2-9-1955 and 4-9-1955 she was put on tablets and mixture. She was advised Urine Test when it was verified for sugar and she took Insulin 40 units (as far as I remember). On 6-9-1955 and 7-9-1955 when she discontinued and started taking Insulin etc. at home by some other men. She was advised to continue insulin for pretty long time.”

21. D.W 3 had stated in cross-examination as follows.

“I saw the record of Dr. Singh on or about 18th April, when he gave Ext. D-3 to me. In the record with Dr. Singh, the name of the plaintiff's mother was there. The nature of medicine given was also stated therein — the giving of mixture, tablets, or insulin injection. As far as I remember it was recorded therein. ‘Daulat Ram's mother Jogiwara Delhi’. I verified earlier and found that the contents of the reports Exs. D-3 and D-4 were correct”.

(Emphasis added)

22. But then he was flatly contradicted on this aspect by D.W 2 who stated as follows:

“The entry under date 12-5-1953 reads ‘Chawli Devi — Rs. 1/8/-’. The entry under date 14-5-1953 reads ‘Chawli Devi. As/15/-. The entry under date 7-1-1955 reads ‘Chawli Devi — Rs. 1/8/-. Same is entry under date 9-1-1955. The entry under date 13-1-1955 reads ‘Chawli Devi 1/11/-’. Same is the entry under date 15-1-1955 and 16-1-1956. The entry under date 31-8-1955 reads ‘Chawli Devi — Rs. 5/8/-’. The entries under date 31-8-1955 are recorded on the page pasted at the Back of the note book cover. The statements in Exts. D-3, D-4 reg. the nature of ailments for which. I treated Mst. Chawli were being recorded by me in Exs. D-3 and D-4 on the basis of my memory only.”

23. The entry dated 31-8-1955 in respect of Rs. 5/8/- was seen to be on a page pasted at the back of the cover of the register. The learned Subordinate Judge observed that this itself made the entry very suspicious and doubtful, especially when D.W 2 had himself admitted in cross-examination that the facts stated by him in the certificate (Ex. D-4) were given by him from memory and has not got from any record. His memory in respect of other patients was tested in cross-examination; the learned Subordinate Judge has rightly observed that his memory had failed miserably in those cases. Even Exs. D-3 and D-4 were got typed by a typist. It was not even explained how D.W 2 came in possession of those typed copies; he had no typist with him. The learned Subordinate Judge has commented upon the evidence pertaining to the preparation and procuring of the certificates as being suspicious. We are left with a feeling that these (even like the statement Ex. D-1.A got ready by P.W 6) were got ready by D.W 3 himself. It is surprising in the extreme how D.W 2 could bring himself to mention, more than two years after he claims to have treated Smt. Chawli Devi, the actual drug he injected into her without even having any record before him showing what drug was administered. He was able to say that he gave an injection only from the entry concerning the injection given to her. Ex. D-4 reads as if the urine was tested in 1954; this was mentioned as September, 1955 in the later certificate (Ex. D-3). It is common knowledge that any diabetic would have to take Insulin for a prolonged period of time and that two or three injections would hardly be enough. There is no report of any pathologist nor does any entry pertaining to Smt. Chawli Devi refer to the content of the pathologist's report showing that her urine was examined and that it contained sugar. General practitioners of medicine have facilities for at least testing urine themselves with a view to administering Insulin injections and vary the dosage according to the quantity of sugar present in the sample of urine. Judicial notice may be taken of the fact that general practitioners do not have to depend on a pathologist every time they give Insulin Injections which have to be taken regularly if diabetes is to be kept under control by administering Insulin.

24. D.W 2 did not say that he ever told Smt. Chawli Devi about there being sugar in the sample of her urine. He only stated that he had prescribed Insulin injections; he had not stated that he explained to her the kind of drug he was giving her or that she was suffering from diabetes. It is not his version that he advised or got done any Glucose tolerance test in order to come to a reliable diagnosis. It is common knowledge that mere occasional presence of sugar in the urine or the absence of it could not by itself indicate that either the patient was or was not suffering from diabetes, for this might even depend upon the renal threshold of the patient. It is however, needless to be detained further by this aspect, because we are thoroughly un-impressed by the evidence of D.Ws 2 and 3; we are in agreement with the learned Subordinate Judge that their evidence cannot be safely accepted. Nor is it necessary to discuss at any length the evidence of P.W 4 (Dr. K.D Khanna) who had been seeing Smt. Chawli Devi for about 6 or 7 years. She was having normal health prior to her having an attack of paralysis, sometime prior to her death. The prescriptions given have also been filed; in one of them (Ex. D-1/2) she had been prescribed (intravenous) Glucose injections which were not likely if she had diabetes, particularly without measures being taken at the same time to control the sugar in her blood. P.W 4 was positive that she did not suffer from diabetes. She had an accident shortly prior to her death.

25. It seems a pity that this claim has been resisted in this manner by the insurer. While it is the duty of the insurer to expose the falsity in statements made by the insured care has yet to be taken to refrain from contesting a claim on untenable grounds. On the materials placed on record and what D.W 2 had before him there is nothing to suggest that the insured in this case was suffering from diabetes. It was admitted by D.W 2 that he is now on the panel of doctors of the Life Insurance Corporation of India and that he was not on the said panel when he had issued the said certificate. The learned Subordinate Judge has commented on this fact and was led to disbelieve his evidence on the ground that he had come forward with such evidence to defeat the claim based on the insurance policy, in order to get himself included in the panel of doctors in the L.I.C This may be a harsh view to take but by the kind of evidence D.W gave even without being supported by his own record and as a matter of mere recollection that the insured was suffering from diabetes, he easily lent himself to such a charge being made against, him.

26. We are however, concerned only with whether it has been proved by the insurer that the insured was suffering from diabetes that she knew that she was suffering from diabetes and had still suppressed the said information falsely from the Company. The burden to prove all these facts lay very heavily on the insurer when the policy was not challenged within two years after it had been effected; the said burden has not been discharged. It is needless to point out that the public interest which is served by inducing more and more persons coming forward to insure their lives, should not be defeated by the feeling that is likely to be generated by this kind of a defence that claims based on insurance policies will be sought to be defeated by procuring even unreliable testimony.

27. The judgment and decree of the learned Subordinate Judge is set aside and the plaintiff/appellant's suit is decreed with costs both in the trial Court and in this Court, as prayed for. The appeal is accepted accordingly.

28. Appeal allowed.