6 Important Supreme Court Judgments April 24, 2019

1. Reliance Life Insurance Co. Ltd. v. Rekhaben Nareshbhai Rathod

Insurance Law - The fundamental principle is that insurance is governed by the doctrine of uberrima fidei. This postulates that there must be complete good faith on the part of the insured. The relationship between an insurer and the insured is recognized as one where mutual obligations of trust and good faith are paramount. [Para 15]

Insurance Law - 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.

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 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. [Para 27]

Insurance Law - Duty of disclosure in insurance contracts - Contracts of insurance are governed by the principle of utmost good faith. 

The duty of mutual fair dealing requires all parties to a contract to be fair and open with each other to create and maintain trust between them. In a contract of insurance, the insured can be expected to have information of which she/he has knowledge. This justifies a duty of good faith, leading to a positive duty of disclosure. [Para 26]

Insurance Law - The expression "material" in the context of an insurance policy can be defined as any contingency or event that may have an impact upon the risk appetite or willingness of the insurer to provide insurance cover.

Materiality from the insured’s perspective is a relevant factor in determining whether the insurance company should be able to cancel the policy arising out of the fault of the insured. Whether a question concealed is or is it not material is a question of fact. Materiality of a fact also depends on the surrounding circumstances and the nature of information sought by the insurer. It covers a failure to disclose vital information which the insurer requires in order to determine firstly, whether or not to assume the risk of insurance, and secondly, if it does accept the risk, upon what terms it should do so. The insurer is better equipped to determine the limits of risk-taking as it deals with the exercise of assessments on a day-to-day basis. In a contract of insurance, any fact which would influence the mind of a prudent insurer in deciding whether to accept or not accept the risk is a material fact. If the proposer has knowledge of such fact, she or he is obliged to disclose it particularly while answering questions in the proposal form. An inaccurate answer will entitle the insurer to repudiate because there is a presumption that information sought in the proposal form is material for the purpose of entering into a contract of insurance. [Para 25]

The Insurance Regulatory and Development Authority (Protection of Policyholders’ Interests) Regulations, 2002 - Regulations 2 (d), 4 (3) and 4 (4) - "Proposal Form" - Proposal for Insurance - "material" - Definition of.

Regulation 2(d) specifically defines the expression "proposal form" as a form which is filled by a proposer for insurance to furnish all material information required by the insurer in respect of a risk. The purpose of the disclosure is to enable the insurer to decide whether to accept or decline to undertake a risk. The disclosures are also intended to enable the insurer, in the event that the risk is accepted, to determine the rates, terms and conditions on which a cover is to be granted. The explanation defines the expression "material" to mean and include "all important essential and relevant information‖ for underwriting the risk to be covered by the insurer. Regulation 4(3) stipulates that while filling up the proposal, the proposer is to be guided by the provisions of Section 45. Where a proposal form is not used, the insurer under Regulation 4(4) is to record the information, confirming it within a stipulated period with the proposer and ought to incorporate the information in the cover note or policy. In respect of information which is not so recorded, the onus of proof lies on the insurer who claims that there was a suppression of material information or that the insured provided misleading or false information on any matter that was material to the grant of the cover. [Para 24]

The Insurance Act, 1932 - Section 45 - The Insurance Regulatory and Development Authority (Protection of Policyholders’ Interests) Regulations, 2002 - Regulations 2 (d), 4 - "Proposal Form" - Proposal for Insurance - the argument that the signatures of the assured on the form were taken without explaining the details cannot be accepted.

It is standard practice for the insurer to set out in the application a series of specific questions regarding the applicant's health history and other matters relevant to insurability. The object of the proposal form is to gather information about a potential client, allowing the insurer to get all information which is material to the insurer to know in order to assess the risk and fix the premium for each potential client. Proposal forms are a significant part of the disclosure procedure and warrant accuracy of statements. Utmost care must be exercised in filling the proposal form. In a proposal form the applicant declares that she/he warrants truth. The contractual duty so imposed is such that any suppression, untruth or inaccuracy in the statement in the proposal form will be considered as a breach of the duty of good faith and will render the policy voidable by the insurer. The system of adequate disclosure helps buyers and sellers of insurance policies to meet at a common point and narrow down the gap of information asymmetries. This allows the parties to serve their interests better and understand the true extent of the contractual agreement. [Para 26]

Insurance Law - The finding of a material misrepresentation or concealment in insurance has a significant effect upon both the insured and the insurer in the event of a dispute.

The Insurance Act, 1932 - Section 45 - 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. 

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.

Referred Cases

1. Sahara India Life Insurance Company Limited v. Rayani Ramanjaneyulu, III (2014) CPJ 582
2. LIC of India v Vidya Devi, (2012) 3 CPJ 288 (NC)
3. Dineshbhai Chandarana v. LIC, (2010) 3 CPJ 358 (NC)
4. Satwant Kaur Sandhu v. New India Assurance Co. Ltd., (2009) 8 SCC 316
5. Life Insurance Corpn of India v Asha Goel, (2001) 2 SCC 160
6. Modern Insulators Ltd. v. Oriental Insurance Co. Ltd., (2000) 2 SCC 734
7. United India Insurance Co. Ltd. v. MKJ Corporation, (1996) 6 SCC 428
8. Life Insurance Corporation of India v. GM Channabasamma, (1991) 1 SCC 357
9. Sheoshankar Ratanlalji Khamele v. Life Insurance Corporation of India, AIR 1971 Bom 304
10. Mithoolal Nayak v. LIC, 1962 Suppl (2) SCR 531
11. VK Srinivasa Setty v. Messers Premier Life and General Insurance Co. Ltd., AIR 1958 Mys 53
12. Lakshmishankar v. Gresham Life Assurance Society, AIR 1932 Bom 582
13. Great Eastern Life Assurance Company Limited v. Bai Hira, 1930 ILR Vol.LV 124
14. Condogianis v. Guardian Assurance Company Ltd., AIR 1921 PC 195
15. Carter v. Boehm, (1766) 3 Burr 1905

Case Number : C.A. No. 4261 of 2019 24-04-2019

Petitioner's Advocate : Parekh & Co. 

Bench : Hon'ble Dr. Justice D.Y. Chandrachud, Hon'ble Mr. Justice Hemant Gupta

Judgment By : Hon'ble Dr. Justice D.Y. Chandrachud

2. Alka Shukla v. Life Insurance Corporation of India

Accident - An accident postulates a mishap or an untoward happening, something which is unexpected and unforeseen. A bodily injury caused by an accident is not limited to any visible physical marks in the form of lesions, abrasions or broken bones on the body. A bodily injury can be caused by violent means that are external and relate to the use of strong physical force or even threatening someone by the use of violent words or actions.

In the present case, there is no evidence to show that any bodily injuries were suffered due to the fall from the motorcycle or that they led to the assured suffering a heart attack. There is no evidence to show that the accident took place as a result of any outward, violent and visible means. The assured died as a result of a heart attack which was not attributable to the accident. For the above reasons, we are of the view that the judgment of the NCDRC dated 29 April 2016 does not suffer from any error. The appeal shall accordingly stand dismissed. There shall be no order as to costs.

Case Number : C.A. No. 3413 of 2019 24-04-2019

Petitioner's Advocate : Divya Roy

Bench : Hon'ble Dr. Justice D.Y. Chandrachud, Hon'ble Mr. Justice Hemant Gupta

Judgment By : Hon'ble Dr. Justice D.Y. Chandrachud

3. Dipakbhai Jagdishchndra Patel v. The State of Gujarat

Constitution of India - Article 20 (3) - Unless a person is accused of an offence, he cannot claim the protection of Article 20 (3).

The Code of Criminal Procedure, 1973 - Section 482 - The Indian Penal Code, 1860 - Sections 489B and 489C - Using as genuine, forged or counterfeit currency-notes or bank-notes - Possession of forged or counterfeit currency-notes or bank-notes.

The Code of Criminal Procedure, 1973 - Sections 227 and 228 - Law Relating to Framing of Charge and Discharge - 

The Indian Evidence Act, 1872 - Sections 25, 26  and 30 - Confession by accused while in custody of police not to be proved against him - Consideration of proved confession affecting person making it and others jointly under trial for same offence. 

The Code of Criminal Procedure, 1973 - Section 161 - Can a person, who is accused of an offence, be examined under Section 161 of the Cr.P.C. ? Held, A person who stands in the shoes of the accused being named in the First Information Report, can be examined by the Police Officer under Section 161 of the Cr.PC.

The Code of Criminal Procedure, 1973 - Section 162 - Whether the statement given by a person who stands in the shoes of an accused and who gives a statement, whether the statement is admissible in law?

The Indian Evidence Act, 1872 - Sections 17 and 21 - Admission - Proof of admissions against persons making them, and by or on their behalf.

Facts of the Case

Proceeding on the basis that it is a confession by a co-accused and still proceeding further that there is a joint trial of the accused and that they are accused of the same offences (ignoring the fact that other accused are absconding and appellant appears to be proceeded against on his own) and having found that there is no recovery from the residence of the appellant of the counterfeit notes and that there is no other material on the basis of which even a strong suspicion could be aroused, we would find that the mandate of the law requires us to free the appellant from being proceeded against. Accordingly, we allow the appeal and the petition filed under Section 482 of the Cr.PC. The Order impugned passed by the Sessions Judge framing the charge against the appellant will stand set aside and the appellant will stand discharged.

Case Number : Crl.A. No. 714 of 2019 24-04-2019

Petitioner's Advocate : Taruna Singh Gohil

Bench : Hon'ble Mr. Justice Ashok Bhushan, Hon'ble Mr. Justice K M. Joseph

Judgment By : Hon'ble Mr. Justice K.M. Joseph

4. Cheriyath Jyothi v. Sainudeen

The Legal Services Authorities Act, 1987 - Section 19 - the scope of the award was limited to removal of the structure as it existed at the relevant time. No direction has been issued to respondent No.1 to forebear from carrying on his legitimate activities, including business activities, from the stated plot occupied by him. If the activities of the respondent are in violation of any law or regulation, it would be open to the appellant to approach the concerned statutory authority or appropriate forum and seek relief in that regard as per law.

Case Number : C.A. No. 1424 of 2016 24-04-2019
Petitioner's Advocate : Petitioner-in-person
Bench : Hon'ble Mr. Justice A.M. Khanwilkar, Hon'ble Mr. Justice Ajay Rastogi
Judgment By : Hon'ble Mr. Justice A.M. Khanwilkar

5. Delhi Develpment Authority v. Nalwa Sons Investment Ltd.

Company Law - If the original lessee (respondent No.1, a public limited company) in respect of the plot given on lease by the appellant, transfers the same to another public limited company, albeit an alter ego of the former, consequent to an order of 2 arrangement and demerger passed by the Company Judge, then whether it is liable to pay 50% unearned increase (UEI) on the market value of the plot to the appellant (lessor)?

Case Number : C.A. No. 4260 of 2019 24-04-2019
Petitioner's Advocate : Binu Tamta
Bench : Hon'ble Mr. Justice A.M. Khanwilkar, Hon'ble Mr. Justice Ajay Rastogi
Judgment By : Hon'ble Mr. Justice A.M. Khanwilkar

6. Hari Steel and General Industries Ltd. v. Daljit Singh

The Code of Civil Procedure, 1908 - Order XII Rule 6 - Judgment on Admissions - Categorical and unconditional admissions alone can be considered for the purpose of grant of relief under Order XII Rule 6 of CPC.

Case Number : C.A. No. 4265 of 2019 24-04-2019
Petitioner's Advocate : (Mrs.) Vipin Gupta
Bench : Hon'ble Mrs. Justice R. Banumathi, Hon'ble Mr. Justice R. Subhash Reddy
Judgment By : Hon'ble Mr. Justice R. Subhash Reddy