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TMI Blog2019 (4) TMI 2048X X X X Extracts X X X X X X X X Extracts X X X X ..... CDRC had allowed an insurance claim in the amount of Rs. 23.84 lakhs, together with interest at the rate of 7% per annum from the date of the institution of the complaint. 3 The respondent, Mahendra Construction, was the original complainant before the SCDRC. The respondent purchased a hydraulic excavator machine in 2004-05. The excavator was insured with New India Assurance Company Limited from 15 November 2004 to 14 November 2005. A claim was lodged under the insurance policy on 12 April 2005 on the ground that the excavator had been set on fire by Naxalites. The claim was settled by the earlier insurer. According to the respondent, the machine was under repair until 10 October 2006. 4 On 10 October 2006, the excavator was insured with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company Limited had been "enclosed". 7 In appeal, the NCDRC held that since the previous insurance policy was annexed to the proposal, the appellant could have known of the claims lodged with the previous insurer on making an enquiry. Alternatively, it was held that if there was a nondisclosure of information under paragraph 25(g), the appellant could have returned the proposal. The NCDRC held that the insurer could have discovered the true state of facts with the exercise of ordinary diligence and was, hence, not justified in repudiating the claim. 8 Learned counsel appearing on behalf of the appellant has drawn the attention of the Court to the disclosure which was required to be made in paragraph 25(g) of the proposal for insurance. P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NCDRC is flawed. Insurance is governed by the principle of utmost good faith, which imposes a duty of disclosure on the insured with regard to material facts. In MacGillivray on Insurance Law Twelfth Edition, Sweet and Maxwell (2012) the rule concerning duty of disclosure is stated in the following terms: "[Subject to certain qualifications considered below], the assured must disclose to the insurer all facts material to an insurer's appraisal of the risk which are known or deemed to be known by the assured but neither known or deemed to be known by the insurer. Breach of this duty by the assured entitles the insurer to avoid the contract of insurance so long as he can show that the non-disclosure induced the making of the contract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he person intending to take the policy and it could not be ascertained by reasonable enquiry by a prudent person." (Emphasis supplied) In Satwant Kaur Sandhu v New India Assurance Co. Ltd (2009) 8 SCC 316, a two-judge Bench of this Court held that under a contract of insurance, the insured is under a "solemn obligation" to make a true and full disclosure of information asked for in the proposal form: "18...Nonetheless, it is a contract of insurance falling in the category of contract uberrimae fidei, meaning a contract of utmost good faith on the part of the assured. Thus, it needs little emphasis that when an information on a specific aspect is asked for in the proposal form, an assured is under a solemn obligation to make a true an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er. The insurer has placed on the record the best possible evidence in support of the plea that there was a misrepresentation and a suppression of material facts. The mere disclosure of a previous insurance policy did not discharge the obligation which was cast on the respondent, as the proposer, to make a full, true and complete disclosure of the claims which were lodged under the previous policy in the preceding three years. The proposal form contained a specific question regarding claims lodged in the preceding three years. The respondent was under a bounden duty to disclose that the excavator was previously insured with another insurer and that a claim for damage to the excavator on 12 April 2005 had been settled. It was only in the aff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nclosed" in paragraph 25(g). The averment in paragraph 8 of the complaint was specifically denied by the insurer. But, that apart, it is evident on a bare reading of the proposal form that material information which was required to be disclosed was suppressed by the insured. The proposal form contains a declaration of the insured that the statements which are made are true to the knowledge of the proposer and the declaration forms the basis of the contract with the insurer. 14 In the circumstances, the decision of the SCDRC to allow the claim was erroneous and the NCDRC equally erred in affirming the decision. 15 Learned counsel appearing on behalf of the insured urged that the respondent relied on the Administrative Officer who filled in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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