M/S. SOHANLAL SAMPATLAL Vs. UNION OF INDIA

JUDGEMENT

(1.) : The question of general importance that arises in this Revisional Application by the original plaintiffs is "whether an insured, who declared the value of Gold Coins or bullion delivered by him for transmission by post in excess of its actual value is not entitled to recover compensation from the insurer - the Government of India - on the ground that the value declared was in excess of the actual value". In the Full Court Application No. 2 of 1959 arising out of Suit No. 176/794 of 1955, in the Court of Small Causes at Bombay the actual value of gold delivered by the plaintiffs for transmission by post was Rs. 2,496. The gold was lost in the course of transit. For the purposes of insurance the plaintiffs had declared the value of gold at Rs. 2,500. The plaintiffs' suit was to recover the sum of Rs. 2,500 as compensation under the insurance effected by the Union of India through its Postal Department. The trial Court passed decree in favour of the plaintiffs for Rs. 2,496. The Full Court of the Court of Small Causes dismissed the plaintiffs' suit, The Full Court observed:-

(2.) The contention on behalf of the plaintiffs is that the opinion expressed and observations made by the Full Court of the Court of Small Causes in Full Court Application No. 2 of 1959 are altogether unwarranted and cannot be justified having regard to the general law of insurance and also the relevant sections of the Indian Post Office Act and the rules made thereunder. The question is of general public importance and it is necessary that this Court should in this Revisional Application consider the true effect of the relevant sections and rules. On behalf of the Union of India, the learned Assistant Government Pleader, Mr. Abhyankar, has submitted that the true effect of the provisions in the Indian Post Office Act and the rules made thereunder is that slightest difference in the declared value of gold delivered for transmission by post under insurance and its actual value renders the insurance void and in the result the Union of India as insurer becomes discharged from liability to pay compensation for loss of such gold.

(3.) The following requires to be stated at the outset. Contract of insurance being a contract of indemnity an insured can never recover from an insurer compensation in excess of the real value of loss or damage suffered. The contract of insurance involves uberrima fides, utmost good faith - on the part of the proposed insured; but in India the law from which this position results is in the Contract Act and particularly the sections dealing with fraud, misrepresentation and mistake. It needs to be stated that thus the law is the general law involved in the matter of all contracts and not particularly different. It is the duty of the proposed Insured to disclose all material facts. Those are facts which affect the risk involved, the amount to be charged as premia or fees and cannot be ordinarily ascertained by an insurer. Information given or facts stated which are mere misstatements and do not involve fraud cannot and do not avoid or affect the liability of an insurer. This, however, is not true in respect of statements which are agreed to be and made the very basis of the ultimate and/or resulting contract of insurance. The burden of proof that he is discharged from liability because of fraud and misrepresentation and mistake or Incorrect statements made in respect of matters agreed to be and/or made the very basis of the contract of insurance is always on and liable to be strictly discharged by the insurer.