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1962 Supp (2) SCR 571 : AIR 1962 SC 814 : (1962) 32 Comp Cas 177

In the Supreme Court of India

(BEFORE S.K. DAS, K. SUBBA RAO AND RAGHUBAR DAYAL, JJ.)

MITHOOLAL NAYAK … Appellant;

Versus
LIFE INSURANCE CORPORATION OF INDIA … Respondent.
Civil Appeal No. 224 of 1959* , decided on January 15, 1962
Advocates who appeared in this case :
A.V. Viswanatha Sastri, Senior Advocate (S.N. Andley, Rameshwar Nath and P.L.
Vohra, Advocates of Rajinder Narain and Co., with him), for the Appellant;
S.T. Desai, Senior Advocate (R. Ganapathy Iyer and K.L. Hathi, Advocates, with
him), for the Respondent.
The Judgment of the Court was delivered by
S.K. DAS, J.— This is an appeal on a certificate granted by the High Court of
Madhya Pradesh under Article 133(1)(a) of the Constitution. The appellant is Mithoolal
Nayak, who took an assignment on 18-10-1945 of a life insurance policy on the life of
one Mahajan Deolal for a sum of Rs 25,000 in circumstances which we shall presently
state. Mahajan Deolal died on 12-11-1946. Thereafter, the appellant made a demand
against the respondent Company for a sum of Rs 26,000 and odd on the basis of the
life insurance policy which had been assigned to him. This claim or demand of the
appellant was repudiated by the respondent Company by a letter dated 10-10-1947,
which in substance stated that the insured Mahajan Deolal had been guilty of
deliberate misstatements and fraudulent suppression of material information in
answers to questions in the proposal form and the personal statement, which formed
the basis of the contract between the insurer and the insured. On the repudiation of
his claim the appellant brought the suit out of which this appeal has arisen. The suit
was originally instituted against the Oriental Government Security Life Assurance Co.
Ltd., Bombay, which issued the policy in favour of Mahajan Deolal on 13-3-1945.
Later, on the passing of the Life Insurance Corporation Act, 1956, there was a
statutory transfer of the assets and liabilities of the controlled (life) business of all
insurance companies and insurers operating in India to a Corporation known as the
Life Insurance Corporation of India. By an order of this Court made on 16-2-1960 the
said Corporation was substituted in place of the original respondent. For brevity and
convenience we shall ignore the distinction between the original respondent and the
said Corporation and refer to the respondent in this judgment as the respondent
Company. The suit was decreed by the learned Additional District Judge of Jabalpur by
his judgment dated 7-5-1949. The respondent Company then preferred an appeal to
the High Court of Madhya Pradesh. This appeal was heard by a Division Bench of the
said High Court and by a judgment dated 28-8-1956, the appeal was allowed and the
suit was dismissed with costs. It is from that appellate judgment and decree that the
present appeal has been brought to this Court.
2. We now proceed to state some of the relevant facts relating to the appeal and
the contentions urged on behalf of the appellant. Mahajan Deolal was a resident of
Village Singhpur, Tahsil Narsinghpur. It appears that he was a small landholder and
possessed several acres of land. Sometime in December 1942, Mahajan Deolal
submitted a proposal through one Rahatullah Khan, an agent of the respondent
Company at Narsinghpur, for the insurance of his life with the respondent Company for
a sum of Rs 10,000 only. Mahajan Deolal's age at that time was about 45 as stated by
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him. In the proposal form which was submitted to the respondent Company, Mahajan
Deolal mentioned the name of one Motilal Nayak, by profession a doctor, as a personal
friend who best knew the state of the health and habits etc. of the insured. This Motilal
Nayak, be it noted, is a brother of the appellant, the evidence in the record showing
that the two brothers lived together in the same house. When the proposal for
insurance of his life was made by Mahajan Deolal in December 1942, he was examined
by a doctor named Dr D.D. Desai. This doctor submitted two reports about Mahajan
Deolal: one report, it appears, was submitted with the proposal form through the
agent of the respondent Company; another report was sent in a confidential cover
along with a letter from the doctor. In this letter (Ex. D-22) the doctor explained why
he was submitting two medical reports. In substance he said that the report
submitted with the proposal form at the instance of the agent, Rahatullah Khan, was
not a correct report and the correct report was the one which he enclosed in the
confidential cover. In that report Dr Desai said that Mahajan Deolal was anaemic,
looked about 55 years old, had a dilated heart and his right lung showed indications of
an old attack of pneumonia or pleurisy. The doctor further said that the general health
of Mahajan Deolal was very much run down and he was a total physical wreck. The
doctor opined that Mahajan Deolal's life was an uninsurable life. It appears that
nothing came out of the proposal made by Mahajan Deolal for the insurance of his life
in December 1942. The evidence of the Inspector of the respondent Company shows
that on receipt of Dr Desai's reports, the respondent Company directed that Mahajan
Deolal should be further examined by the Civil Surgeon, Hoshangabad and District
Medical Officer, Railways at Jabalpur. Mahajan Deolal could not, however, be examined
by the two doctors aforesaid and according to the rules of the respondent Company
the proposal lapsed on the expiry of six months for want of completion of the medical
examination as required by the respondent Company. Then, on 16-7-1944, a second
proposal was made through the same agent of the respondent Company for the
insurance of the life of Mahajan Deolal, this time for a sum of Rs 25,000. The Inspector
of the respondent Company said in his evidence that this second proposal was made
at the instance of the same agent, Rahatullah Khan, inasmuch as the proposal of
1942, had not been rejected but had only lapsed. It appears that at the time of the
first proposal in 1942 Mahajan Deolal had paid a sum of Rs 571 and odd towards the
first premium due in case the proposal was accepted. In the personal statement
accompanying the second proposal of 16-7-1944, it was stated that an earlier proposal
for insuring the life of Mahajan Deolal was pending with the respondent Company.
Now, in the proposal form (Ex. D-11) there was a question (Question 13) to the
following effect:
“Have you within the past five years consulted any medical man for any ailment,
not necessarily confining you to your house? If so, give details and state names and
addresses of medical men consulted.”
The answer given to the question was — “No”. This answer, according to the case of
the respondent, was false and deliberately false, because, according to the evidence of
one Dr P.N. Lakshmanan, Consulting Physician at Jabalpur, Mahajan Deolal was
examined and treated by the said doctor between the dates 7-9-1943, and 6-10-1943,
when the doctor found that Mahajan Deolal was suffering from anaemia, oedema of the
feet, diarrhoea and panting on exertion. We shall advert in greater detail to the
evidence of Dr Lakshmanan at a later stage. In his personal statement accompanying
the second proposal Mahajan Deolal answered in the negative Question 12(b), the
question being as to when he was last under medical treatment and for what ailment
and how long. In the same personal statement with regard to questions, for example,
Question 5(a), 5(b) etc., as to whether he suffered from shortness of breath, anaemia,
asthma etc., Mahajan Deolal gave negative answers. The contention on behalf of the
respondent Company was that these answers in the personal statement were also
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deliberately false and constituted a fraudulent suppression of material particulars

relating to the health of the insured. With regard to the second proposal and the
personal statement accompanying it, Dr Motilal Nayak, brother of the appellant, gave a
friend's report, in which he said that Mahajan Pedal's health was good and that he had
never heard that Mahajan Deolal suffered from any illness. It is worthy of note here
that Dr Motilal Nayak himself took Mahajan Deolal to Dr Lakshmanan for treatment at
Jabalpur in September-October, 1943. On receipt of the second proposal in July, 1944,
Mahajan Deolal was examined by Dr Kapadia, who was the District Medical Officer of
the Railways at Jabalpur. Dr Kapadia reported that Mahajan Deolal was a healthy man
and looked about 52 to 54 years old. He recommended that Mahajan Deolal might be
given a policy for fourteen years. In his report Dr Kapadia noted that Mahajan Deolal
had stated that he had suffered from pneumonia four or five years ago, and that he
had also cholera some years ago. No mention, however, was made of anaemia,
asthma, shortness of breath etc. On 29-12-1944 Mahajan Deolal made a further
declaration of his good health and so also on 12-2-1945. On 13-3-1945, the policy was
issued by the respondent Company. It contained the usual terms of such life insurance
policies, one of which was that in case it would appear that any untrue or incorrect
averment had been made in the proposal form or personal statement, the policy would
be void. The first premium due on the policy was taken from the amount which was
already in deposit with the respondent Company in connection with the proposal made
in 1942. Then, on 22-5-1945, Mahajan Deolal wrote a letter to the respondent
Company in which he said that his financial condition had become suddenly worse and
that he would not be able to pay the premium for the policy. He requested that the
policy be cancelled. In the meantime the premium for 1945 not having been paid, the
policy lapsed. Then, on 28-10-1945 Mahajan Deolal made a request for revival of the
policy, but a few days before that, namely on 18-10-1945, the policy was assigned in
favour of the appellant, by an endorsement made on the policy itself. This assignment
was duly registered by the respondent Company by means of its letter dated 1-11-
1945 in which the respondent Company said that it accepted the assignment without
expressing any opinion as to its validity or effect. The respondent Company also made
an enquiry from the appellant as to whether the latter had any insurable interest in
the life of the insured and what consideration had passed from him to the insured. To
this the appellant replied that he had no insurable interest in the life of Mahajan Deolal
except that the latter was a friend and he (the appellant) had purchased the policy for
a sum of Rs 427.12 n.p. being the premium paid by him so far, because Mahajan
Deolal did not wish to continue the policy. On his request for a revival of the policy
Mahajan Deolal was again medically examined, this time by one Dr Belapurkar. Later
on 25-2-1946 he was examined by Dr Clarke. The policy was then revived on payment
of all arrears of premium, these arrears having been paid by the present appellant. On
receipt of the revival fee, the policy appears to have been revived some time in July
1946. We have already stated that Mahajan Deolal died in November, 1946. The
certificate of Dr Clarke, who was the medical attendant at the time when Mahajan
Deolal died, showed that the primary cause of death of Mahajan Deolal was malaria
followed by severe type of diarrhoea; the secondary cause was anaemia, chronic
bronchitis and enlargement of liver. In the certificate which Dr Clarke gave there was
mention of certain other medical practitioners who had attended Mahajan Deolal at the
time of his death. One of such medical practitioners mentioned in the certificate was
Dr Lakshmanan. On receipt of this certificate the respondent Company got into touch
with Dr Lakshmanan and discovered from him that Mahajan Deolal had been treated in
September-October 1943 by Dr Lakshmanan for ailments which, according to the
doctor, were of a serious nature.
3. Several issues were tried between the parties in the trial court. But the four
questions which were argued in the High Court and on which the fate of the appeal
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depends were these:
(1) Whether the policy was vitiated by fraudulent suppression of material facts
by Mahajan Deolal?
(2) Whether the present appellant had no insurable interest in the life of the
insured, and if so, can he sue on the policy?
(3) Whether the respondent Company had issued the policy with full knowledge
of the facts relating to the health of the insured and if so, is it estopped from
contesting the validity of the policy? and
(4) Whether in any event the appellant is entitled to refund of the money he had
paid to the respondent Company?
4. These are the four questions which have been agitated before us and we shall
deal with such of them as are necessary for deciding this appeal.
5. So far as the first question is concerned, the learned trial Judge found that
though Mahajan Deolal had given a negative answer to Question 13 in the proposal
form and to Questions 5(a), 5(b), 5(f) and 12(b) in the personal statement, these
answers though not strictly accurate, furnished no grounds for repudiating the claim of
the appellant by the respondent Company, inasmuch as Section 45 of the Insurance
Act, 1938 (Act 4 of 1938) applied and the answers did not amount to a fraudulent
suppression of material facts by the policy-holder within the meaning of that section.
The learned trial Judge found that the ailments for which Dr Lakshmanan treated
Mahajan Deolal in September-October 1943 were of a casual or trivial nature and the
failure of the policy-holder to disclose those ailments did not attract the second part of
Section 45 of the Insurance Act. The High Court came to a contrary conclusion and
held that even applying Section 45 of the Insurance Act, the policy-holder was guilty
of a fraudulent suppression of material facts relating to his health within the meaning
of that section and the respondent Company was entitled to avoid the contract on that
ground.
6. On behalf of the appellant it has been argued before us that the finding of the
learned trial Judge on this question was the correct finding and that the High Court
was wrong in arriving at a contrary finding on this question in view of the evidence
given in the case. The judgment of the High Court is a judgment in reversal and the
appellant has a right of appeal under Article 133(1)(a) of the Constitution inasmuch as
the value of the subject-matter of the dispute in the court of first instance and still in
dispute is more than Rs 20,000. We have, therefore, allowed learned counsel for the
parties to take us through the evidence in the case. On a consideration of that
evidence we have come to the conclusion that the finding of the High Court is the
correct finding.
7. We shall presently consider the evidence, but it may be advantageous to read
first Section 45 of the Insurance Act, 1938, as it stood at the relevant time. The
section, so far as it is relevant for our purpose, is in these terms:
“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….”
It would be noticed that the operating part of Section 45 states in effect (so far as it is
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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 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 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, then the insurer can call in question the policy effected as a
result of such inaccurate or false statement. In the case before us the policy was
issued on 13-3-1945 and it was to come into effect from 15-1-1945. The amount
insured was payable after 15-1-1968 or at the death of the insured, if earlier. The
respondent Company repudiated the claim by its letter dated 10-10-1947. Obviously,
therefore, two years had expired from the date on which the policy was effected. We
are clearly of the opinion that Section 45 of the Insurance Act applies in the present
case in view of the clear terms in which the section is worded, though learned counsel
for the respondent Company sought, at one stage, to argue that the revival of the
policy some time in July 1946 constituted in law a new contract between the parties
and if two years were to be counted from July, 1946, then the period of two years had
not expired from the date of the revival. Whether the revival of a lapsed policy
constitutes a new contract or not for other purposes, it is clear from the wording of the
operative part of Section 45 that the period of two years for the purpose of the section
has to be calculated from the date on which the policy was originally effected; in the
present case this can only mean the date on which the policy (Ex. P-2) was effected.
From that date a period of two years had clearly expired when the respondent
Company repudiated the claim. 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 insured in 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 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.
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. This brings us to a
consideration of the evidence of Dr Lakshmanan. That evidence is clear and
unequivocal. Dr Lakshmanan says that Dr Motilal Nayak brought the patient to him at
Jabalpur. We have already referred to the fact that Dr Motilal Nayak had himself made
a false statement in his friend's report dated 17-7-1944, when he said that he had
never heard that the insured had suffered from any illness. It is impossible to believe
that Dr Motilal Nayak would not remember that he had himself taken the insured to
Jabalpur for treatment by Dr Lakshmanan who was an experienced consulting
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physician. Dr Lakshmanan said that when he first examined Mahajan Deolal on 7-9-
1943 he found that his condition was serious as a result of the impoverished condition
of his blood, and that Mahajan Deolal was suffering from anaemia, oedema of the feet,
diarrhoea and panting on exertion. The doctor asked for an examination of the blood.
The pathological report supported the diagnosis that Mahajan Deolal was suffering
from secondary anaemia meaning thereby that anaemia was due to lack of iron and
malnutrition. Dr Lakshmanan further found that from the symptoms disclosed the
disease was a major one. Mahajan Deolal had also cardiac asthma which was a
symptom of anaemia and due to dilatation of heart. Dr Lakshmanan saw the patient
again on 9-9-1943, and then again on 16-9-1943. On 6-10-1943, Mahajan Deolal
himself went to Dr Lakshmanan. On that date Dr Lakshmanan found that anaemia had
very greatly disappeared. In cross-examination Dr Lakshmanan admitted that the
anaemia, dilatation of heart and cardiac asthma from which Mahajan Deolal was
suffering constituted a passing phase which might disappear by treatment. He further
admitted that he did not mention cardiac asthma in his letter addressed to the
respondent Company. We have given our very earnest consideration to the evidence of
Dr Lakshmanan and we are unable to hold that the ailments from which Mahajan
Deolal was then suffering were either trivial or casual in nature. The ailments were
serious though amenable to treatment. Mahajan Deolal's son gave evidence in the case
and he said in his evidence that though Dr Lakshmanan prescribed some medicine, his
father did not take it. He further said that his father was a strict vegetarian. This
evidence was given by the son with regard to what the doctor had said that he
prescribed fresh liver juice made at home according to his directions three times a
day. He also prescribed iron sulphate in tablet form with plenty of water. The son
further said that during his stay at Jabalpur his father felt weakness, though he used
to move about freely and was never confined to bed. The son tried to make it appear
in his evidence that his father was suffering from nothing serious. Dr Lakshmanan said
in his evidence that his fees for visiting a patient at Jabalpur were Rs 16 per visit. We
agree with the High Court that if Mahajan Deolal was not suffering from any serious
ailment, he would not have been taken by his physician, Dr Motilal Nayak, from his
village to Jabalpur nor would he have consulted Dr Lakshmanan, a consulting
physician of repute, for so many days on payment of Rs. 16 per visit. No doubt,
Mahajan Deolal's son now tries to make light of the illness of his father, but Dr
Lakshmanan's evidence shows clearly enough that in September-October 1943
Mahajan Deolal was suffering from a serious type of anaemia for which he was treated
by Dr Lakshmanan. Mahajan Deolal could not have forgotten in July, 1944 that he was
so treated only a few months earlier and furthermore, Mahajan Deolal must have
known that it was material to disclose this fact to the respondent Company. In his
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 a 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 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
fraudulent suppression of material facts when he made his statements on 16-7-1944,
statements which he must have known were deliberately false. Therefore, we are in
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agreement with the High Court in answering the first question against the appellant.
9. We may here dispose of the third question. Learned counsel for the appellant has
argued before us that Mahajan Deolal was examined under the direction of the
respondent Company by as many as four doctors, namely, Dr Desai, Dr Kapadia, Dr
Belapurkar and Dr Clarke. It is further pointed out that Mahajan Deolal had correctly
disclosed that he had suffered previously from malaria, pneumonia and cholera. Dr
Kapadia, it is pointed out, was specifically asked to examine Mahajan Deolal in view of
the conflicting reports which Dr Desai had earlier submitted. On these facts, the
argument has been that the respondent Company had full knowledge of all facts
relevant to the state of health of Mahajan Deolal and having knowledge of the full
facts, it was not open to the respondent Company to call the policy in question on the
basis of the answers given by Mahajan Deolal in the proposal form and the personal
statement, even though those answers were inaccurate. Learned counsel for the
appellant has referred us to the Explanation to Section 19 of the Indian Contract Act in
support of his argument. We are unable to accept this argument as correct. It is
indeed true that Mahajan Deolal was examined by as many as four doctors. It is also
true that the respondent Company had before it the conflicting reports of Dr Desai and
it specially asked Dr Kapadia to examine Mahajan Deolal in view of the reports
submitted by Dr Desai. Yet, it must be pointed out that the respondent Company had
no means of knowing that Mahajan Deolal had been treated for the serious ailment of
secondary anaemia followed by dilatation of heart, etc., in September-October 1943 by
Dr Lakshmanan. Nor can it be said that if the respondent Company had knowledge of
those facts, they would not have made any difference. 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 make it clear that the averments made as to
the state of health of the insured 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
party's 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 the Indian Contract Act.
10. Our finding on the first question makes it unnecessary for us to decide the
second question, namely, whether the present appellant merely gambled on the life of
Mahajan Deolal when he took the assignment on 18-10-1945. The contention of the
respondent Company was that the appellant had no insurable interest in the life of
Mahajan Deolal and when he took the assignment of the policy on 18-10-1945 he was
merely indulging in a gamble on Mahajan Deolal's life; the contract was, therefore,
void by reason of Section 30 of the Indian Contract Act. On behalf of the appellant,
however, the contention was that Section 38 of the Insurance Act provided a complete
code for assignment and transfer of insurance policies and the assignment made in
favour of the appellant by Mahajan Deolal was a valid assignment in accordance with
the provisions of Section 38 aforesaid. The High Court, it appears, proceeded on the
footing that from the very inception the policy was taken for the benefit of the
appellant on the basis of a gamble on the life of Mahajan Deolal; it said that the
appellant and his brother, Dr Motilal Nayak, knew very well that Mahajan Deolal was
not likely to live very long and when the policy was taken out in 1944, it was really for
the benefit of the present appellant, who soon after took an assignment on payment of
the premium already paid by Mahajan Deolal and such arrears of premium as were
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then outstanding. It is unnecessary for us to give our decision on these contentions;
because if Mahajan Deolal was himself guilty of a fraudulent suppression of material
facts on which the respondent Company was discharged from performing its part of
the contract, the appellant who holds an assignment of the policy cannot stand on a
better footing than Mahajan Deolal himself. It was argued before us that if the policy
was valid in its inception, that is to say, if it was in fact effected for the use and
benefit of Mahajan Deolal, who undoubtedly had an insurable interest in his own life, it
could not afterwards be invalidated by assignment to a person who had no interest but
who merely took it as a speculation. Our attention was drawn to several decisions on
this question, American and English, noticed in para 502 of MacGillivray on Insurance
Law (4th Edn.). We consider it unnecessary to examine those decisions or to go into
the question posed therein. That question must be left to be determined in a case
where it properly arises. As we have stated earlier, on our conclusion on the first
question, the appellant is clearly out of Court and cannot claim the benefit of a
contract which had been entered into as a result of a fraudulent suppression of
material facts by Mahajan Deolal.
11. This brings us to the last question, namely, whether the appellant is entitled to
a refund of the money he had paid to the respondent Company. Here again one of the
terms of the policy was that all moneys that had been paid in consequence of the
policy would belong to the Company if the policy was vitiated by reason of a faudulent
suppression of material facts by the insured. We agree with the High Court that where
the contract is bad on the ground of fraud, the party who has been guilty of fraud or a
person who claims under him cannot ask for a refund of the money paid. It is a well-
established principle that courts will not entertain an action for money had and
received, where, in order to succeed, the plaintiff has to prove his own fraud. We are
further in agreement with the High Court that in cases in which there is a stipulation
that by reason of a breach of warranty by one of the parties to the contract, the other
party shall be discharged from the performance of his part of the contract, neither
Section 65 nor Section 64 of the Indian Contract Act has any application.
12. For the reasons given above we have come to the conclusion that there is no
merit in the appeal. The appeal is accordingly dismissed with costs.
———
*Appeal from the Judgment and Decree dated the 28-8-1956, of the Madhya Pradesh High Court in FA No. 90 of
1949.

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