2021 INSC 0803
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REPORTABLE
IN THE SUPREME COURT OF INDIA 
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.8386/2015
MANMOHAN NANDA APPELLANT(S)
VS.
UNITED INDIA ASSURANCE CO. LTD. & ANR  RESPONDENT(S)
 
J U D G M E N T
NAGARATHNA J.
1.  This   appeal   assails   order   dated   22 nd
  May,   2015,   passed   by   the
National   Consumer   Disputes   Redressal   Commission   (hereinafter
referred   to   as   “the   Commission”   for   brevity)   in   Consumer   Complaint
No.   92/2010   by   which   the   complaint   filed   by   the   appellant   was
dismissed.  
2.  The   facts   in   a   nutshell   are   that   the   appellant   had   sought   an
overseas   mediclaim   policy­   B   (hereinafter   referred   to   as   “mediclaim
policy”) as he intended to travel to the United States of America (“USA”)

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to   attend   the   wedding   of   his   sister­in­law’s   daughter.   The   appellant
was medically examined at the instance of respondent No. 1 insurance
company   prior   to   the   consideration   of   his   request   for   issuance   of   a
mediclaim policy. On his medical examination, the report categorically
noted  that  the  appellant  had   diabetes­type  II   (also  known   as  diabetes
mellitus). No other adverse medical condition was found.  
3. In   the   medical   exam   report,   a   specific   query   was   sought   as   to
whether any abnormalities were observed in the electrocardiogram test
of   the   appellant.   There   was   another   query   regarding   any   possible
illness   or   disease   for   which   the   appellant   may   require   medical
treatment   in   the   ensuing   trip   to   the   USA.   To   both   these   queries,   Dr.
Jitendra   Jain,   the   doctor   who   examined   the   appellant   had   answered
“normal”   and   “no”   respectively.   The   representative   of   the   respondent
insurer on receipt of the medical reports assured the appellant that on
verification of the same the policy would be issued. 
4.  The insurer thereafter accepted the proposal form and issued the
Overseas   Mediclaim   Business   and   Holiday   Policy   bearing   Policy
Number   190100/46/09/   44/70000008   valid   from   19 th
  May,   2009   to
1 st
  June,   2009,   to   the   appellant.   Thereafter,   the   appellant   boarded   a
flight   to   San   Francisco,   USA   on   19 th
  May,   2009   at   around   1:00   a.m.
from   Delhi   airport   and   reached   San   Francisco   on   the   same   day   at

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around   2:00   p.m.   (local   time).   On   exiting   the   customs   section   at   San
Francisco   airport,   appellant   felt   weak   and   started   sweating.   His   wife
got him admitted at the SFO Medical  Centre at San Francisco airport
and   after   he   received   initial   medical   treatment,   he   was   shifted   to   the
Mills   Peninsula   Medical   Centre   (hereinafter   referred   to   as   “Medical
Centre”   for   the   sake   of   brevity)   where   angioplasty   was   performed   on
the   appellant   on   19 th
  May,   2009   and   22 nd
  May   and   three   stents   were
inserted to remove the blockage from the heart vessels.  
5.  In   order   to   avail   the   benefit   under   the   mediclaim   policy,
appellant’s   son­in­law   contacted   M/s   Corris   International,   a   foreign
collaborator   of   respondent   No.   1   and   2,   which   was   to   provide
emergency   assistance   and   claims   administration   services   to   the
insured. M/s Corris International sought certain documents regarding
details   of   treatment   given   by   the   Medical   Centre   as   well   as   details   of
the   mediclaim   policy   for   the   purpose   of   considering   the   same   for
indemnifying the appellant. The appellant was discharged on 24 th
 May,
2009. 
6.  Two   and   a   half   months   thereafter,   appellant   started   receiving
bills   from   the   cardio   vascular   wing   of   the   Medical   Centre   and   SFO
Medical  Centre  towards  the treatment he  received at their  facility.  On
19 th
  August,   2009,   the   appellant   sent   a   letter   annexing   all   bills   in

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original as well as the discharge summary to the Divisional Manager of
respondent No. 1 at their Bhopal office. The same letter was also sent
to respondent No. 2.  
7.   On   22 nd
  August,   2009,   appellant   received   a   letter   from
respondent   No.   2   stating   that   his   claim   had   been   repudiated   as   the
appellant had a history of hyperlipidaemia and diabetes and the policy
did   not   cover   per­existing   conditions   and   complications   arising
therefrom.   The   said   repudiation   was   with   regard   to   Bill   No.1   i.e.   the
bill   raised   by   the   Medical   Centre   for   USD   2,29,719.   The   appellant
protested against the repudiation and requested his claim to be settled
on   a   priority   basis   as   the   Medical   Centre   and   the   other   centre   in   the
USA where he had taken treatment had started pressing for release of
payment.   In   this   regard   a   representation   was   sent   on   16 th
  November,
2009.   However,   by   its   letter   dated   9 th
  April,   2010,   respondent   No.1
reiterated its repudiation of the claim made by the appellant.  
8.  Being aggrieved, the appellant filed a complaint under Section 21
(9)   of   the   Consumer   Protection   Act,   1986   (hereinafter   referred   to   as
“Act”  for brevity)  against the respondents, being Consumer Complaint
No.92/2010 before the Commission. A reply was filed to the complaint
by  respondent No.1  stating  that  appellant’s  claim   was  rightly  rejected
by   respondent   No.2   on   the   ground   of   non­disclosure   of   a   pre­existing

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disease   as   the   treatment   report   of   the   appellant   showed   prior
medication   such   as   statins,   which   is   a   lipid   lowering   medicine.   The
said reply was filed on 3 rd
 March, 2011.     Respondent No.2 also filed its
reply on 27 th
  April, 2011. Appellant filed his rejoinder to the replies of
the   respondents   in   August,   2011.   Appellant   also   filed   an   additional
affidavit enclosing medical opinions of three doctors on affidavit stating
that   prescription   of   statins   to   a   person   having   diabetes­type   II   is   by
way of precaution and not because the patient would be suffering from
any   cardiovascular   disease.     Respondent   No.   1   and   2   filed   their
evidence   by   way   of   affidavit   and   thereafter   written   submissions   were
filed   by   both   sides.   Subsequently,   the   Commission   dismissed   the
complaint   filed   by   the   appellant   on   the   ground   of   non­disclosure   of
material facts. Hence this appeal by the claimant.  
9.  Before  proceeding further,  it would be useful  to  encapsulate the
reasoning of the Commission for dismissing the complaint filed by the
appellant herein, as under:  
(i)     The   Commission   concluded   that   the   complainant   had   a
history   of   hyperlipidaemia   and   peptic­ulcer   disease   in
addition to diabetes mellitus. Since this was disclosed by the
complainant   to   medical   authorities   in   the   USA,   the
Commission   found   that   there   was   no   reason   why   he   could
not   have   disclosed   the   condition   to   the     respondent­

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insurance   company   at   the   time   of   obtaining   the   mediclaim
policy.  
(ii)   That   statins   are   lipid   lowering   agents   which   are   found
beneficial   in   primary   and   secondary   prevention   of   cardio­
vascular   complications   in   diabetics.   Given   that   the
complainant   had   admitted   that   he   had   been   under   statin
medication,   it   was   found   that   he   had   a   pre­existing   disease
of which disclosure had not been made.
(iii)   The   Commission   held   that   it   was   the   duty   of   the
complainant   to   have   ensured   that   complete   facts   about   his
health   condition   were   brought   to   the   knowledge   of   the
insurance   company   at   the   time   of   obtaining   the   insurance
policy. The complainant breached this duty of disclosure and
acted in a manner contrary to the principle of  ‘uberima fides’
between the insurer and the insured.
(iv)    Having  regard  to   general  condition  10  of  the  policy,  the
Commission   found   that   for   any   sickness   for   which   insured
had   sought   advice   or   had   taken   medical   treatment   even   at
the time of issuance of policy, the insured was not entitled to
claim   benefit   under   the   policy   owing   to   the   “pre­existing
exclusion” under the policy.

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(v)    The Commission held that concealment or non­disclosure
of   material   facts   regarding   pre­existing   heart   ailment   was   a
valid   ground   for   repudiation   of   the   insurance   claim   by   the
respondent ­ Insurer. 
10.  We   have   heard   Mr.   Gopal   Sankarnarayanan,   learned   Senior
Counsel along with Ms. Zehra khan, learned counsel, for the appellant
and   Ms.   Sunaina   Phul,   learned   counsel   for   respondent   No.1   and
perused the material on record. 
11.  Learned   Senior   Counsel   for   appellant   submitted   that   the
appellant was about 55 years of age when he and his wife travelled to
San   Francisco,   USA   to   attend   the   wedding   of   his   sister­in­law’s
daughter.   Appellant   was   issued   overseas   mediclaim   policy   by
respondent No.1  after undergoing  the  requisite  medical  tests  namely:
1)   Blood   sugar   test,   2)   Urine   examination   3)   Electrocardiogram   test.
Dr. Jitendra Jain, Assistant Professor in the Department of Medicine,
Peoples’   Medical   College,   Bhopal,   examined   the   appellant   and
answered the medical questionnaire as provided in the proposal form.
The   mediclaim   policy,   issued   to   the   appellant   was   for   the   period
between   19 th
  May,   2009   and   1 st
  June,   2009   and   was   subsequently
extended   to   21 st
  June,   2009.   The   policy   in   question   contained   the

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nature of coverage and excluded pre­existing conditions as defined in
general   condition   10.   That   on   boarding   the   flight   to   San   Francisco
from  Delhi  airport on  19 th
  May,  2009,  the  appellant  travelled  in  good
health and was fit on the flight. It is only on arrival at San Francisco
airport   that   the   appellant   felt   weak   and   was   admitted   to   the   SFO
Medical Centre for preliminary treatment and was later shifted to the
Medical   Centre.   The   appellant   availed   the   treatment   for   which   the
charges   were   USD   2,41,932,   approximately   Rs.   1,08,86,940   at   Rs.45
per   USD.   Since   the   respondent   insurer   erroneously   repudiated   the
claim made by the appellant, the consumer complaint was filed before
the Commission. The Commission by its order dated 22 nd
  May, 2015,
without appreciating  the case of the appellant in its true perspective,
dismissed   the   complaint   on   the   ground   that   appellant   had   not
disclosed true and complete information about his health while taking
the policy and therefore the repudiation clause applied.  
12.  It  was  contended   by  learned   Senior   Counsel   along   with   learned
counsel   for   the   appellant   that   the   repudiation   of   the   contract   on   the
ground of suppression of pre­existing disease by appellant was wholly
erroneous. Our attention was drawn to the fact that respondent No.1
had   repudiated   the   claim   on   the   premise   that   the   appellant   was
suffering   from   hyperlipidaemia   at   the   time   of   seeking   the   insurance
policy   and   in   fact   had   been   prescribed   statins,   which   fact   had   not

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been disclosed to the insurer. It was contended that the appellant had
no knowledge that he was suffering from  hyperlipidaemia at the time
of submission of the proposal form. The obligation to disclose any fact
extends   only   when   the   said   fact   is   known   to   the   appellant   but   not
otherwise.   In   support   of   this   submission,   reliance   was   placed   on
Satwant Kaur Sandhu v. New India Assurance Co.  ­ (2009) 8 SCC
316 .   In   fact,   the   proposal   form   itself   stipulates   that   it   should   be
completed   to   the   best   of   the   insured’s   “knowledge   and   belief”.   The
appellant   had   stated   that   he   was   not   suffering   from   hyperlipidaemia
and that the same was diagnosed for the first time on 19 th
  May, 2009
at   the   Medical   Centre   in   San   Francisco.   The   doctor   had   noted
“hyperlipidaemia”,   under   the  column   “IMPRESSION”,  after   examining
the   appellant   on   21 st
  May,   2009,   but   the   same   did   not   find   a   place
under   “discharge   diagnosis”   issued   to   the   appellant   on   24 th
  May,
2009.   There   was   no   intention   to   suppress   any   material   fact   by   the
appellant at the time of filling the proposal form as the appellant had
no   knowledge   that   he   was   suffering   from   hyperlipidaemia   as   on   15 th
May, 2009, when the proposal form was filled by him.  
13.  It   was   next   contended   that   the   proposal   form   was   worded   in
such a manner that there was no specific query which could have led
to the appellant disclosing that he was suffering from hyperlipidaemia.
This   argument   was   made   as   an   alternative   submission   on   the

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assumption   that   the   appellant   had   in   fact   knowledge   that   he   was
suffering   from   hyperlipidaemia   at   the   time   of   filling   up   of   proposal
form seeking insurance policy.
14.  It   was   further   contended   that   the   proposal   form   and   the
insurance policy did not define the terms “pre­existing disease,” “pre­
existing   ailment,”   “pre­existing   condition”,   “disease”   or   “illness.”   That
query   number   2   of   part   2   dealing   with   “medical   history”   in   the
proposal   form   namely   “ have   you   ever   suffered   from   any   illness   or
disease up to the date of making this proposal ”, was too vague and the
appellant left the column blank. Failure to fill in all the queries in the
proposal form cannot be termed as suppression or misdeclaration vide
Canara Bank v. United India Insurance Co.  ­ (2020) 3 SCC 455 .  
15.  Further, question number 5 which read, “ Have you ever suffered
from any illness or disease or had any accident prior to the first day of
insurance ”   is   also   overarching   as   no   person   can   answer   such   a
question in the negative. Every person to whom a mediclaim policy is
offered, would have, at some point of time, suffered from some disease
or illness but for the same to be considered as a pre­existing disease,
ailment,   condition   or   illness   on   which   ground   a   claim   could   be
repudiated, there is need for a specific definition to be incorporated in
the   policy.   This   is   because   every   disease   or   illness   cannot   be

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considered as a pre­existing disease or condition so as to exclude the
benefit of the policy to a policy holder. According to the learned Senior
Counsel   for   the   appellant,   the   nature   of   a   disease   or   illness   which
would   exclude   a   policy   holder   or   an   insured   from   the   benefits   of   the
said   policy   must   be   clearly   mentioned   in   the   policy   itself.   The   same
cannot   be   vague   or   non­specific   so   as   to   enable   the   insurer   to
interpret the policy to its benefit whenever a claim is made under the
mediclaim policy. 
16.  It   was   submitted   that   for   an   insurer   to   repudiate   the   policy   it
must   establish   suppression   or   a   misrepresentation   of   material   facts
on   the   part   of   the   insured   vide   Oriental   Insurance   Co   Ltd.   v.
Mahendra   Construction   ­   (2019)   18   SCC   209   and   LIC   of   India   v.
Smt.   G.M.   Channabasamma   ­   (1991)   1   SCC   357 .   In   order   to
repudiate   the   policy,   the   insurance   company   was   also   required   to
prove the following:  
(a)   That   the   heart   attack   suffered   by   the   appellant   on   19 th
May,   2009   was   caused   by   diabetes   mellitus­type   II   and
hyperlipidaemia,  
(b)  That hyperlipidaemia was a “pre­existing condition,”

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(c)  That   this   fact   was   known   to   the   appellant   and   was
suppressed   by   him   at   the   time   of   filling   up   the   proposal
form, i.e. on 15 th
 May, 2009.  
17. Instead, respondent insurer only denied that the acute coronary
syndrome   for   which   the   complainant­appellant   herein   had   to   be
treated at the Medical Centre was a sudden and unexpected sickness.
The   respondents,   on   the   other   hand,   found   that   a   past   history   of
diabetes   mellitus   and   hyperlipidaemia   were   the   main   causes   for   the
cardiovascular  ailment for  which  the insured was treated.  In support
of this stand, the insurer filed only an affidavit of evidence of its panel
doctor,   Dr.   P.R.   Purandare,   which   merely   opined­   “ It   is   obvious   that
the insured was suffering from diabetes mellitus and hyperlipidaemia.
Also, he was taking medications for the same. ” 
18.  There was no evidence let in by the respondents to show that the
pre­existing   condition   of   diabetes   mellitus­   type   II   was   the   cause   for
the   heart   attack   suffered   by   the   appellant   on   19 th
  May,   2009   or   that
the   appellant   had   any   pre­existing   heart   related   illness,   disease   or
condition.
19.   It   was   further   urged   that   the   appellant   had   filed   discharge
summary   notes   of   the   doctors   at   the   Medical   Centre   where   he   was
treated for the period between 19 th
 May, 2009 and 24 th
 May, 2009 and

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a perusal of the said documents would indicate that the appellant was
“without   prior   coronary   history.”   That   from   the   discharge   summary
notes   per   se,   there   can   be   no   proof   of   the   appellant   suffering   from
hyperlipidaemia as on 15 th
 May, 2009 when he filled the proposal form
or   that   the   same   was   a   pre­existing   condition.   That   in   fact,   the
discharge   summary   indicated   the   “discharge   diagnosis”   given   to   the
appellant on 24 th
 May, 2009 which only mentioned:  
(a)     Acute anterior wall myocardial infraction with congestive
heart,  
(b)   Diabetes­type II.  
20. That   the   respondent   failed   to   prove   that   the   heart   attack
suffered   by   the   appellant   on   19 th
  May,   2009   was   caused   by   diabetes
mellitus­   type   II   and   hyperlipidaemia.   That   appellant   had   disclosed
that he was a diabetic and was  on medication and the tests done for
the   same   showed   good   results.   It   was   submitted   that   the   respondent
further   failed   to   prove   that   the   appellant   was   suffering   from
hyperlipidaemia at the time of filling the proposal form and had made
a false representation and suppressed material facts.  
21.  Referring   to   the   specific   terms   of   the   insurance   policy,   it   was
contented   by   the   learned   Senior   Counsel   for   appellant   that   an
insurance policy should be given a purposive interpretation  in favour
of   the   insured­   appellant   herein.   The   insurance   policy   and   its

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components   must   be   read   as   a   whole   and   given   a   meaning   which
furthers   the   expectations   of   parties   and   also   of   the   realities   of   the
insurance   business   vide   Canara   Bank   v.   United   India   Insurance
Co. ­  (2020) 3 SCC 455 .   Further, the exemption of liability clauses in
insurance contracts are to be construed   contra proferentem , in favour
of   the   insured   in   case   of   ambiguity   vide   Sushilaben   Indravadan
Gandhi   v.   New   India   Assurance   Co.   Ltd.   ­(2021)   7   SCC
151 .   Reliance   was   also   placed   on   Hari   Om   Agarwal   v.   Oriental
Insurance   Co.   ­   2007   (98)   DRJ   246   wherein   the   Delhi   High   Court
found that repudiation of a claim towards treatment for a heart attack
on   the   ground   of   pre­existing   ailment   of   diabetes,   which   was
disclosed, was illegal because the object of the insurance policy was to
“cater to medical expenses incurred by the assured” and therefore the
exclusion clause could be overridden in light of the object.  
22.  It   was   contended   by   learned   Senior   Counsel   for   the   appellant
that the insurance company had failed to prove that the appellant had
suppressed any material fact which was in his knowledge at the time
of   filling   the   proposal   form   and   that   the   heart   attack   suffered   by   the
appellant   on   19 th
  May,   2009   arose   “out   of   a   pre­existing   condition”
and was therefore outside the purview of the insurance policy.  

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23.  As   opposed   to   the   aforesaid   arguments,   learned   counsel   for
respondent   No.1   supported   the   repudiation   of   the   policy   by   the
insurer   and   the   dismissal   of   the   complaint   by   the   Commission   on
grounds   of   misrepresentation   and   non­disclosure   of   material   facts   in
the   proposal   form,   by   the   appellant   insured.   It   was   submitted   that
had   the   appellant   disclosed   that   he   was   suffering   from
hyperlipidaemia   which   was   an   existing   disease   as   on   the   date   of   the
making   of   the   proposal,   the   insurer   may   not   have   issued   the
mediclaim   policy   to   him.   The   insured   therefore   did   not   disclose   this
vital   fact   and   had   not   answered   the   column   related   to   illness   or
disease suffered by him up to the date of the filling up of the proposal
form.   It   was   contended   that   there   was   a   specific   clause   in   the
schedule of the policy  under the heading “important”  to the following
effect : 
“Notwithstanding anything stated in the policy, it is hereby agreed
that   all   claims   occasioned   by,   happening   through   or   in
consequence   of   any   disease   which   is   existing   on   the   date   of
commencement   of   risk,   whether   specifically   declared   or   not,   the
proposal   form   completed   by   the   insured,   is   excluded   from   the
scope of the policy.”
24. It   was   also   necessary   that   the   policy   form   had   to   be   completed
disclosing all material facts and failure to do so could nullify the policy
itself. 

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25.  It   was   contended   by   learned   counsel   for   respondent   No.   1   that
the   medical   history   which   was   suppressed   by   the   appellant   in   the
proposal form required to be filled up by him prior to the issuance of
the   policy,   was   in   fact  disclosed   to   the   doctors   in   USA   where   he   was
given treatment, by stating that he was prescribed statins which is for
the   purpose   of   controlling/treating   hyperlipidaemia.   In   sum   and
substance, the submission was that the non­disclosure or the failure
to  disclose the  past medical  history  relating  to  a pre­existing  medical
condition   in   the   proposal   form   was   a   good   reason   to   repudiate   the
policy.   This   aspect   was   rightly   appreciated   by   the   Commission   and
consequently the Commission dismissed appellant’s complaint, which
Order would not call for any interference in this appeal.  
26. Learned   counsel   for   the   respective   parties   have   relied   upon
certain   judgments   of   this   Court   in   support   of   their   submissions,
which shall be referred to later.  
Points for consideration
27.  Having regard to the submissions of the learned Senior Counsel
and   learned   counsel   for   the   respective   sides,   the   following   points
would arise for our consideration:  

17
(i) Whether   the   appellant   herein   had   suppressed   or   not
disclosed   material   facts   in   the   proposal   form   which
could   have   led   the   insurer   to   repudiate   the   policy   in
question?
(ii) Whether the Commission was justified in dismissing the
complaint?
(iii) What Order?
28.  The fact that a policy namely, Overseas Mediclaim Policy­B, was
issued   by   the   respondent   insurance   company   to   the   appellant   is   not
in   dispute.   The   appellant   intended   to   travel   to   USA   to   attend   his
sister­in­law’s   daughter’s   wedding   which   was   to   take   place   in   May,
2009.   Consequently,   the   appellant   sought   an   overseas   mediclaim
policy. Dr. Jitendra Jain, the doctor who examined the appellant prior
to issuance of the policy noted as per Annexure A­2 that the appellant
had diabetes mellitus­II (DM­2) which was controlled on drugs. There
was   no   mention   of   any   past   history   of   any   disease,   operation,
accident, investigation etc. An electrocardiogram test (ECG) was taken
and the doctor noted the same as “normal.” The doctor further noted
that   there   was   no   current   illness   or   disease   which   would   possibly
require   medical   treatment   during   the   proposer’s   (appellant’s)
forthcoming trip. The doctor did not recommend any stress test. It was
also found that in the blood and urine tests of the appellant there was
no trace of sugar. The serum glucose/fasting test result showed 92%,

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which was well within the normal values i.e. between 70­110 mgs %.
The urine examination also did not reveal any abnormality. Thereafter
the appellant was requested to fill up the proposal form.
29. Before we proceed, it is necessary to discuss two aspects of the
matter   which   give   rise   to   the   controversy   in   the   present   appeal.   The
first   is   what   may   be   expressed   in   the   legal   maxim   uberrimae   fidei   or
the   principle   of   good   faith   and   the   corresponding   principle   of
disclosure   of   all   material   facts   by   the   parties   to   an   insurance   policy.
The second principle is expressed in the  contra proferentem  rule. 
Uberrimae Fidei      
30.  It   is   observed   that   insurance   contracts   are   special   contracts
based   on   the   general   principles   of   full   disclosure   inasmuch   as   a
person   seeking   insurance   is   bound   to   disclose   all   material   facts
relating to the risk involved. Law demands a higher standard of good
faith in matters of insurance contracts which is expressed in the legal
maxim  uberrimae fidei . 
31.  Mac   Gillivray   on   insurance   law   13th   Ed.   has   summarised   the
duty of an insured to disclose as under: 
“. ..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   nor   deemed   to   be

19
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 non­disclosure induced the making of the contract
on the relevant terms.”
32.  Lord   Mansfield   in   Carter   v.   Boehm   (1766)   3   Burr   1905   has
summarised the principles necessitating disclosure by the assured in
the following words:  
“Insurance   is   a   contract   of   speculation.   The   special   facts   upon
which   the   contingent   chance   is   to   be   computed   lie   most
commonly in the knowledge of the assured only; the underwriter
trusts  to his representation, and proceeds upon confidence  that
he   does   not   keep   back   any   circumstance   in   his   knowledge   to
mislead the underwriter into a belief that the circumstance does
not   exist.   The   keeping   back   such   circumstance   is   a   fraud,   and
therefore   the   policy   is   void.   Although   the   suppression   should
happen   through   mistake,   without   any   fraudulent   intention,   yet
still the underwriter is deceived and the policy is void; because
the   risk   run   is   really   different   from   the   risk   understood   and
intended   to   be   run   at   the   time   of   the   agreement.   The   policy
would   be   equally   void   against   the   underwriter   if   he
concealed...Good   faith   forbids   either   party,   by   concealing   what
he   privately   knows,   to   draw   the   other   into   a   bargain   from   his
ignorance of the fact, and his believing the contrary.”
The aforesaid principles would apply having  regard to the nature
of policy under consideration, as what is necessary to be disclosed are
“material   facts”   which   phrase   is   not   definable   as   such,   as   the   same
would depend upon the nature and extent of coverage of risk under a
particular type of policy. In simple terms, it could be understood that
any fact which has a bearing on the very foundation of the contract of
insurance   and   the   risk   to   be   covered   under   the   policy   would   be   a
“material fact”.

20
33.  Under  the   provisions  of  Insurance   Regulatory   and  Development
Authority  (Protection of Policyholders’ Interests) Regulations,2002  the
explanation   to   Section   2   (d)   defining   “proposal   form”   throws   light   on
what is the meaning  and content of “material.” For an easy reference
the definition of “proposal form” along with the explanation under the
aforesaid Regulations has been extracted as under: 
“2.   Definitions.­­In   these   regulations,   unless   the   context
otherwise requires­ 
(d)  "Proposal  Form" means  a form  to  be  filled  in by the  proposer
for insurance, for furnishing all  material information required by
the   insurer in  respect  of   a risk, in  order  to  enable   the  insurer  to
decide whether to accept or decline, to undertake the risk, and in
the event of acceptance of the risk, to determine the rates, terms
and conditions of a cover to be granted.
 
Explanation: "Material" for the purpose of these regulations shall
mean   and   include   all   important,   essential   and   relevant
information  in  the  context   of  underwriting  the   risk  to   be  covered
by the insurer.”
Thus,   the   Regulation   also   defines   the   word   "material"   to   mean
and   include   all   "important",   "essential"   and   "relevant"   information   in
the   context   of   guiding   the   insurer   in   deciding   whether   to   undertake
the risk or not. 
34.  Just as the insured has a duty to disclose all material facts, the
insurer must also inform the insured about the terms and conditions
of   the   policy   that   is   going   to   be   issued   to   him   and   must   strictly
conform   to   the   statements   in   the   proposal   form   or   prospectus,   or

21
those   made   through   his   agents.   Thus,   the   principle   of   utmost   good
faith imposes meaningful reciprocal duties owed by the insured to the
insurer   and   vice   versa .   This   inherent   duty   of   disclosure   was   a
common   law   duty   of   good   faith   originally   founded   in   equity   but   has
later been statutorily recognised as noted above. It is also open to the
parties entering into a contract to extend the duty or restrict it by the
terms of the contract. 
35.  The duty of the insured to observe utmost good faith is enforced
by requiring him to respond to a proposal form which is so framed to
seek   all   relevant   information   to   be   incorporated   in   the   policy   and   to
make   it   the   basis   of   a   contract.   The   contractual   duty   so   imposed   is
that any suppression or falsity in the statements in the proposal form
would   result   in   a   breach   of   duty   of   good   faith   and   would   render   the
policy   voidable   and   consequently   repudiate   it   at   the   instance   of   the
insurer.  
36. In relation to the duty of disclosure on the insured, any fact which
would   influence   the   judgment   of   a   prudent   insurer   and   not   a
particular   insurer   is   a   material   fact.   The   test   is,   whether,   the
circumstances   in   question   would   influence   the   prudent   insurer   and
not   whether   it   might   influence   him   vide   Reynolds   v.   Phoenix

22
Assurance Co. Ltd.   (1978) 2 Lloyd’s Rep. 440.   Hence the test is to
be of a prudent insurer while issuing a policy of insurance. 
37.  The basic test hinges on whether the mind of a prudent insurer
would be affected, either in deciding whether to take the risk at all or
in fixing the premium, by knowledge of a particular fact if it had been
disclosed.   Therefore, the fact must be one affecting the risk. If it has
no  bearing  on  the   risk  it need  not be  disclosed  and  if   it  would  do  no
more   than   cause   insurers   to   make   inquiries   delaying   issue   of   the
insurance,   it   is   not   material   if   the   result   of   the   inquiries   would   have
no effect on a prudent insurer.
38.  Whether a fact is material will depend on the circumstances, as
proved by evidence, of the particular case.  It is for the court to rule as
a matter of law, whether, a particular fact is capable of being material
and to give directions as to the test to be applied.   Rules of universal
application   are   not  therefore   to   be   expected,   but   the   propositions   set
out in the following paragraphs are well established :
(a) Any fact is material which leads to the inference, in the
circumstances of the particular case, that the subject matter
of   insurance   is   not   an   ordinary   risk,   but   is   exceptionally
liable   to   be   affected   by   the   peril   insured   against.     This   is
referred to as the ‘physical hazard”.

23
(b) Any   fact   is   material   which   leads   to   the   inference   that
the   particular   proposer   is   a   person,   or   one   of   a   class   of
persons, whose proposal for insurance ought to be subjected
at all   or  accepted  at a  normal  rate.    This   is  usually  referred
to as the ‘moral hazard’.
The   materiality   of   a   particular   fact   is   determined   by   the
circumstances of each case and is a question of fact. 
39. If   a   fact,   although   material,   is   one   which   the   proposer   did   not
and  could  not in  the particular  circumstances have been  expected  to
know,   or   if   its   materiality   would   not   have   been   apparent   to   a
reasonable man, his failure to disclose it is not a breach of his duty.  
40.  Full   disclosure   must   be   made   of   all   relevant   facts   and   matters
that   have   occurred   up   to   the   time   at   which   there   is   a   concluded
contract.   It   follows   from   this   principle   that   the   materiality   of   a
particular fact is determined by the circumstances existing at the time
when   it   ought   to   have   been   disclosed,   and   not   by   the   events   which
may   subsequently   transpire.     The   duty   to   make   full   disclosure
continues   to   apply   throughout   negotiations   for   the   contract   but   it
comes   to   an   end   when   the   contract   is   concluded;   therefore,   material
facts which come to the proposer’s knowledge subsequently need not
be disclosed. 

24
41. Thus,   a   proposer   is   under   a   duty   to   disclose   to   the   insurer   all
material facts as are within his knowledge.  The proposer is presumed
to   know   all   the   facts   and   circumstances   concerning   the   proposed
insurance.     Whilst   the   proposer   can   only   disclose   what   is   known   to
him,   the   proposer’s   duty   of   disclosure   is   not   confined   to   his   actual
knowledge,   it   also   extends   to   those   material   facts   which,   in   the
ordinary course of business, he ought to know.  However, the assured
is not under a duty to disclose facts which he did not know and which
he   could   not   reasonably   be   expected   to   know   at   the   material   time.
The   second   aspect   of   the   duty   of   good   faith   arises   in   relation   to
representations   made   during   the   course   of   negotiations,   and   for   this
purpose   all   statements   in   relation   to   material   facts   made   by   the
proposer during the course of negotiations for the contract constitute
representations and must be made in good faith. 
42.  The   basic   rules   to   be   observed   in   making   a   proposal   for
insurance may be summarized as follows :
(a) A   fair   and   reasonable   construction   must   be   put   upon
the   language   of   the   question   which   is   asked,   and   the
answer given will be similarly construed. This involves
close attention to the language used in either case, as
the   question   may   be   so   framed   that   an   unqualified
answer   amounts   to   an   assertion   by   the   proposer   that

25
he has knowledge of the facts and that the knowledge
is   being   imparted.     However,   provided   these   canons
are observed, accuracy in all matters of substance will
suffice and misstatements or omissions in trifling and
insubstantial respects will be ignored.
(b) Carelessness   is   no   excuse,   unless   the   error   is   so
obvious that no one could be regarded as misled. If the
proposer puts ‘no’ when he means ‘yes’ it will not avail
him   to   say   it   was   a   slip   of   the   pen;   the   answer   is
plainly the reverse of the truth.
(c) An   answer   which   is   literally   accurate,   so   far   as   it
extends, will not suffice if it is misleading by reason of
what   is   not   stated.   It   may   be   quite   accurate   for   the
proposer to state that he has made a claim previously
on an insurance company, but the answer is untrue if
in fact he has made more than one. 
(d) Where   the   space   for   an   answer   is   left   blank,   leaving
the   question   un­answered,   the   reasonable   inference
may be that there is nothing to enter as an answer.  If
in   fact   there   is   something   to   enter   as   an   answer,   the
insurers   are   misled   in   that   their   reasonable   inference
is   belied.     It   will   then   be   a   matter   of   construction

26
whether   this   is   a   mere   non­disclosure,   the   proposer
having made no positive statement at all, or whether in
substance he is to be regarded as having asserted that
there is in fact nothing to state.
(e) Where   an   answer   is   unsatisfactory,   as   being   on   the
face of it incomplete or inconsistent the insurers may,
as  reasonable  men,  be  regarded  as  put  on  inquiry,  so
that if they issue a policy without any further enquiry
they   are   assumed   to   have   waived   any   further
information.   However,   having   regard   to   the   inference
mentioned   in   head   (4)   above,   the   mere   leaving   of   a
blank space will not normally be regarded as sufficient
to put the insurers on inquiry.
(f) A   proposer   may   find   it   convenient   to   bracket  together
two   or   more   questions   and   give   a   composite   answer.
There   is   no   objection   to   his   doing   so,   provided   the
insurers   are   given   adequate   and   accurate   information
on all points covered by the questions.
(g) Any answer given, however accurate and honest at the
time   it   was   written   down,   must   be   corrected   if,   up   to
the   time   of   acceptance   of   the   proposal,   any   event   or

27
circumstance   supervenes   to   make   it   inaccurate   or
misleading.
[Source : Halsbury’s Laws of England, Fourth Edition, Para 
375, Vol.25 : Insurance]
43.  Sometimes   the   standard   of   duty   of   disclosure   imposed   on   the
insured   could   make   the   insured   vulnerable   as   the   statements   in   the
proposal   form   could   be   held   against   the   insured.   Conversely,   certain
clauses  in the  policy  of  insurance  could  be interpreted  in light of the
contra proferentem  rule as against the insurer. In order to seek specific
information   from   the   insured,   the   proposal   form   must   have   specific
questions so as obtain clarity as to the underlying risks in the policy,
which are greater than the normal risks.  
Contra Proferentem Rule
44.  The   Contra   Proferentem   Rule   has   an   ancient   genesis.   When
words are to be construed, resulting in two alternative interpretations
then, the interpretation which is against the person using or drafting
the   words   or   expressions   which   have   given   rise   to   the   difficulty   in
construction,   applies.   This   Rule   is   often   invoked   while   interpreting
standard   form   contracts.   Such   contracts   heavily   comprise   of   forms
with   printed   terms   which   are   invariably   used   for   the   same   kind   of
contracts. Also, such contracts are harshly worded against individuals

28
and   not   read   and   understood   most   often,   resulting   in   grave   legal
implications.   When   such   standard   form   contracts   ordinarily   contain
exception   clauses,   they   are   invariably   construed   contra   proferentem
rule  against the person who has drafted the same. 
45.  Some   of   the   judgments   which   have   considered   the   contra
proferentem  rule are referred to as under :
a)  In   General   Assurance   Society   Ltd.,   v.   Chandmull
Jain   ­ AIR  1966 SC 1644 , it was held that where there
is  an  ambiguity   in  the   contract  of  insurance  or  doubt,  it
has   to   be   construed   contra   proferentem   against   the
Insurance Company. 
b)  In   Delhi   Development   Authority   v.   Durga   Chand
Kaushish  ­ AIR 1973 SC 2609 , it was observed: 
"In   construing   a   document   one   must   have   regard,
not to the presumed intention of the parties, but to
the   meaning   of   the   words   they   have   used.   If   two
interpretations   of   the   document   are   possible,   the
one   which   would   give   effect   and   meaning   to   all   its
parts   should   be   adopted   and   for   the   purpose,   the
words creating uncertainty in the document can be
ignored." 
c)  Further,   in   Central   Bank   of   India   v.   Hartford   Fire
Insurance Co. Ltd.  AIR 1965 SC 1288 , it was held: 

29
"What is called the contra proferentem rule should
be   applied   and   as   the   policy   was   in   a   standard
form   contract   prepared   by   the   insurer   alone,   it
should   be   interpreted   in   a   way   that   would   be
favourable to the assured." 
d)  In   Md.   Kamgarh   Shah   v.   Jagdish   Chandra   AIR  1960
SC 953 , it was observed that where there is an ambiguity
it   is   the   duty   of   the   court   to   look   at   all   the   parts   of   the
document   to   ascertain   what   was   really   intended   by   the
parties.   But   even   here   the   rule   has   to   be   borne   in   mind
that the document being the grantor's document it has to
be   interpreted   strictly   against   him   and   in   favour   of   the
grantee. 
e)  In   United   India   Insurance   Co.   Ltd.   v.   Orient
Treasures   (P)   (2016)   3   SCC   49   this   Court   quoted
Halsbury’s laws of England (5th Ed. Vol. 60, Para 105) on
the  Contra Proferentem  rule as under : 
“Contra   proferentem   rule.­Where   there   is
ambiguity   in   the   policy   the   court   will   apply   the
contra   proferentem   rule.   Where   a   policy   is
produced   by   the   insurers,   it   is   their   business   to
see   that   precision   and   clarity   are   attained   and,   if
they fail to do so, the ambiguity will be resolved by
adopting   the   construction   favourable   to   the
insured.   Similarly,   as   regards   language   which
emanates   from   the   insured,   such   as   the   language
used in answer to questions in the proposal or in a
slip, a  construction favourable  to the insurers will
prevail   if   the   insured   has   created   any   ambiguity.
This   rule,   however,   only   becomes   operative   where
the   words   are   truly   ambiguous;   it   is   a   Rule   for
resolving  ambiguity  and it  cannot  be invoked with

30
a   view   to   creating   a   doubt.   Therefore,   where   the
words   used   are   free   from   ambiguity   in   the   sense
that,   fairly   and   reasonably   construed,   they   admit
of only one meaning, the Rule has no application.” 
f)  Learned   counsel   for   the   appellant   have   relied   upon
Sushilaben  Indravadan  Gandhi   and  Ors.   v.   The   New
India   Assurance   Co.   Ltd.   and   Ors.   (2021)   7   SCC   151
wherein   it   was   observed   that   any   exemption   of   liability
clause   in   an   insurance   contract   must   be   construed,   in
case of ambiguity,  contra proferentem  against the insurer.
In   the   said   case   reliance   was   placed   on   Export   Credit
Guarantee   Society   v.   Garg   Sons   International   (2014)
1 SCC 686  wherein this court held as under: 
“The insured cannot claim anything more than what
is covered by the insurance policy. "The terms of the
contract   have   to   be   construed   strictly,   without
altering the nature of the contract as the same may
affect   the   interests   of   the   parties   adversely."   The
clauses   of   an   insurance   policy   have   to   be   read   as
they   are.   Consequently,   the   terms   of   the   insurance
policy,   that   fix   the   responsibility   of   the   insurance
company   must   also   be   read   strictly.   The   contract
must be read as a whole and every attempt should
be made to harmonise the terms thereof, keeping in
mind   that   the   Rule   of   contra   proferentem   does   not
apply in case of commercial contract, for the reason
that   a   Clause   in   a   commercial   contract   is   bilateral
and has mutually been agreed upon.” 
46. Delving on the facts of the case and on consideration of     IMT­5
and IMT­16 of the comprehensive private car (B) policy with regard to

31
the   limitation   of   liability   clause,   it   was   observed   that   the   contra
proferentem   rule applies in case of real ambiguity and if on a reading
of the whole policy the meaning of the clauses of a contract are clear
there is no room for the application of the doctrine. On the facts of the
said   case,   the   appeal   was   allowed   by   holding   that   the   insurance
company   was   liable   to   pay   the   entire   amount  claimed.   The   said   case
arose   from   an   appeal   against   the   order   of   the   High   Court   of   Gujarat
wherein the Court had directed that the liability of the insurer shall be
limited   to   a   sum   of   Rs.   25,000/­   and   the   remaining   claim   amount
shall be payable by the employer (hospital) of the deceased. Ambiguity
arising   with   regard   to   the   interpretation   of   the   term   ‘employee’   as
appearing in the limitation of liability clause in the insurance contract
was   construed   contra   proferentem   against   the   insurance   company   by
holding   that   the   deceased   was   not   an   employee   of   the   hospital   and
that   therefore,   the   entire   liability   would   lie   upon   the   insurer.   This
Court,   therefore,   required   the   insurer   therein   to   pay   the   entire   claim
amount to the wife of the deceased. 
47. MacGillivray   on   Insurance   Law   (9th   Ed.,   Sweet   and   Maxwell
London, 1997 at p. 280) deals  with the rule of   Contra Proferentem   as
under : 
“The   contra   proferentem   Rule   of   construction   arises   only
where   there   is   a   wording   employed   by   those   drafting   the
Clause   which   leaves   the   court   unable   to   decide   by   ordinary

32
principles of interpretation which of two meanings is the right
one. 'One must not use the Rule to create the ambiguity ­ one
must find the ambiguity first.' The words should receive their
ordinary and  natural  meaning  unless  that  is  displaced  by a
real   ambiguity   either   appearing   on   the   face   of   the   policy   or,
possibly,   by   extrinsic   evidence   of   surrounding
circumstances.” 
48. Colinvaux’s   Law   of   Insurance   (6th   Ed.,   1990   at   p.   42)   has
elucidated on the said rule in the following words: 
“Quite   apart   from   contradictory   clauses   in   policies,
ambiguities are common in them and it is often very uncertain
what the parties to them mean. In such cases the Rule is that
the  policy, being  drafted  in language  chosen  by the  insurers,
must   be   taken   most   strongly   against   them.   It   is   construed
contra   proferentem,   against   those   who   offer   it.   In   a   doubtful
case   the   turn   of   the   scale   ought   to   be   given   against   the
speaker,   because   he   has   not   clearly   and   fully   expressed
himself.   Nothing   is   easier   than   for   the   insurers   to   express
themselves   in   plain   terms.   The   assured   cannot   put   his   own
meaning upon a policy, but, where it is ambiguous, it is to be
construed   in   the   sense   in   which   he   might   reasonably   have
understood   it.   If   the   insurers   wish   to   escape   liability   under
given   circumstances,   they   must   use   words   admitting   of   no
possible doubt.” 
49.  The   aforesaid   principles   could   be   applied   to   the   present   case
having regard to  the nature of the policy  in question i.e. a mediclaim
policy,   the   specific   queries   in   the   proposal   form   and   the   answers
thereto   given   by   the   appellant   in   the   context   of   the   general   and
specific clauses therein.

33
50. But   before   entering   upon   the   factual   controversy   in   the   instant
case, it would be useful to discuss the relevant judgments cited at the
Bar :  
(i) Learned   Senior   Counsel   for   appellant   have   relied   upon
the   following   judgments   in   support   of   the   claim   of   the
appellant :­  
a)   Satwant   Kaur   Sandhu   v.   New   India
Assurance Co.  (2009) 8 SCC 316 : 
In   the   said   case   the   husband   of   the   appellant
therein   had   taken   a   mediclaim   policy   provided   by   the
respondent insurer  therein for the  period from 7 th
  May,
1990   to   6 th
  May,   1991.   The   appellant   therein   suddenly
fell   ill   and   was   admitted   to   a  hospital   in   Ludhiana  and
thereafter   to   a   health   centre   in   Chennai   where   his
condition deteriorated ultimately leading to his death on
26 th
  December,   1990.   The   insurance   company   therein
was   informed   about   his   death   and   a   claim   for
reimbursement   was   made.   The   respondent   insurer
therein   made   inquiries   from   Madras   Institute   of
Nephrology   (Health   Centre)   and   obtained   a   certificate
dated   6 th
  May,   1992,   stating   that   the   deceased   was   a
known   case   of   “chronic   renal   failure/diabetic

34
nephropathy”  and  that the complainant was on regular
haemodialysis   at   his   place   leading   to   his   death.   The
insurance   company   therein   repudiated   the   claim.   The
core question considered by this Court in the said case
was   whether   the   fact   that   the   policy   holder   was
suffering  from  chronic  diabetes  and  renal   failure  at  the
time   of   taking   out   the   mediclaim   policy   was   a   material
fact and therefore, on account of non­disclosure of  this
fact   in   the   proposal   form,   the   respondent   Insurance
Company was justified in law in repudiating the claim of
the appellant therein.  
This   Court   dealt   with   the   concept   of   material   fact
and observed at para 20 as under:  
“20.  The  upshot  of  the  entire  discussion  is  that
in   a   Contract   of   Insurance,   any   fact   which
would   influence   the   mind   of   a   prudent   insurer
in   deciding   whether   to   accept   or   not   to   accept
the  risk is  a "material  fact". If  the  proposer has
knowledge of such fact, he is obliged to disclose
it particularly while  answering questions  in the
proposal  form. Needless   to   emphasise   that   any
inaccurate   answer   will   entitle   the   insurer   to
repudiate   his   liability   because   there   is   clear
presumption   that   any   information   sought   for   in
the proposal form is material for the  purpose of
entering into a Contract of Insurance.” 
Ultimately this Court held as under: 
“21.   Bearing   in   mind   the   aforestated   legal
position,   we   may   advert   to   the   facts   in   hand.

35
As   noted   earlier,   the   proposal   form   contained
the following two questions:
 
Details   of   illness   which   may   require
treatment in the near future; 
Details of treatment/surgical operation in
the last two months. 
  Answers   given   by   the   proposer   to   the   two
questions   were   "Sound   Health"   and   "Nil"
respectively.   It   would   be   beyond   anybody's
comprehension that the insured was not aware
of   the   state   of   his   health   and   the   fact   that   he
was   suffering   from   diabetes   as   also   chronic
Renal   failure,   more   so   when   he   was   stated   to
be on regular haemodialysis. There can hardly
be   any   scope   for   doubt   that   the   information
required   in   the   afore­   extracted   questions   was
on   material   facts   and   answers   given   to   those
questions   were   definitely   factors   which   would
have   influenced   and   guided   the   respondent   ­
Insurance   Company   to   enter   into   the   Contract
of Mediclaim Insurance with the insured.” 
Learned   counsel   for   the   respondent   insurer   has
also   relied   upon   Satwant   Kaur   Sandhu   supra   and
has   emphasised   on   para   20   of   the   said   judgment
extracted above.  
It was observed that there was clear suppression
of   material   facts   relating   to   the   health   of   the   insured
and   that   therefore,   the   respondent   insurer   was   fully
justified in repudiating the insurance contract. But the
aforesaid   judgment   is   sought   to   be   distinguished   by
learned counsel for appellant. 

36
(b)   In   LIC of India v. Smt. G.M. Channabasemma
(1991)   1   SCC   357,   it   was   observed   that   there   is   an
obligation upon the assured to disclose all material facts
which may be relevant to the insurer but after issuing a
policy, the burden of proving that the insured had made
false   representations   and   suppressed   material   facts   is
on   the   insurer.   In   the   said   case,   it   was   held   that   the
physician’s   statement  did  not lead  to  a  conclusion   that
the   respondent   therein   was   influenced   by   a   serious
disease for a long time. On consideration of the evidence
led   by   the   parties   therein,   it   was   observed   that   the
insurer   had   failed   to   prove   that   the   insured   was
suffering   from   diabetes   or   tuberculosis   at   the   time   of
filling   up   the   proposals   for   the   policies   or   that   he   had
given any false answer in his statements or suppressed
any material fact which he was under a duty to disclose.
The   finding   of   the   Trial   Court   that   the   assured   had
committed   fraud   on   the   insurer   while   taking   out   the
policies was reversed and the appeal was allowed.
(c)   Canara   Bank   v.   United   India   Insurance   Co.
(2020)   3   SCC   455 ,   is   a   case   in   which   this   Court   held
that   if   a   column   is   left   blank,   the   insurance   company

37
should   ask   the   insured   to   fill   up   the   column.   If   the
insurance   company   while   accepting   the   proposal   form
does   not   ask   the   insured   to   clarify   any   ambiguity   then
the insurance company after accepting premium cannot
urge   that   there   was   a   wrong   declaration   made   by   the
insured.   Leaving   out   a   column   blank   does   not   mean
that   there   was   a   misdescription   of   facts.   To   make   a
contract void, the non­disclosure should be of some very
material   fact.   Therefore,   the   insurer   therein   was
directed   to   indemnify   the   insured   in   the   case.   The
judgment   in   Satwant   Kaur   Sandhu   (supra)   was
distinguished and held not applicable in this case.  
d)   Hari Om Agarwal v. Oriental Insurance Co.   2007
(98)   DRJ   246,   is   a   decision   on   a   mediclaim   policy.   In
the said case, it was held that the insured had suffered
from   diabetes   as   well   as   hypertension   at   the   time   of
submission of the proposal. The insured was advised to
undergo   ECG   which   he   did.   Thereafter,   the   proposal
was accepted and the cover note was issued. Clause 4.1
of   the   policy   therein   came   up   for   interpretation.   It   was
observed that hypertension and diabetes could lead to a
host   of   ailments   such   as   stroke,   cardiac   disease,   renal

38
failure,   liver   disorder,   depending   upon   various   factors.
Such   ailments   can   equally   arise   in   non­diabetics   and
those   without   hypertension.   Giving   a   contextual
interpretation   to   clause   4.1   of   the   policy,   it   was
observed   that   such   an   interpretation   was   necessary   to
avoid rendering a medical cover meaningless. Hence the
main   purpose   rule   was   pressed   into   service   by   holding
that   clause   4.1   of   the   said   policy   could   not   be   used   to
override the primary liability of the insurer.  
(ii)  The   following   citations   were   relied   upon   by   learned
counsel for respondent No. 1 in support of validity of the
repudiation of the insurance claim: 
a)   Reliance   Life   Insurance   v.   Rekhaben   Nareshbhai
Rathod , (2019) 6 SCC 175,  is a  case where the insured
therein,   while   seeking   a   life   insurance   policy   failed   to
disclose   in   the   proposal   form   that   he   had   earlier
obtained   another   insurance   cover   for   his   life,   two
months   before   obtaining   the   policy   in   question.   The
spouse   of   the   assured   therein   submitted   a   claim   under
the   terms   of   the   policy   after   the   death   of   the   assured.
The   insurance   company   repudiated   the   claim   on   the
ground   of   non­disclosure   of   the   fact   that   insured   had

39
taken   out   another   policy   to   insure   his   life   before
obtaining   the   policy   in   question.   The   State   Commission
found   that   the   repudiation   of   claim   was   unjustified   as
the omission of the insured to disclose a previous policy
of   insurance   would   not   have   influenced   the   mind   of   a
prudent   insurer.   The   National   Commission   affirmed   the
findings   of   the   State   Commission.   In   an   appeal   before
this Court, the decision of the National Commission was
reversed   and   the   Court   allowed   the   claim   to   be
repudiated by the insurer. It was held that the disclosure
of the earlier cover was material to an assessment of the
risk   which   was   being   undertaken   by   the   insurer.   The
duty   of   full   disclosure   required   that   no   information   of
substance   or   interest   to   the   insurer   be   omitted   or
concealed.  
b)   In   Life   Insurance   Corporation   of   India   v.   Manish
Gupta , (2019) 11 SCC 371 , the respondent therein had
obtained   a   mediclaim   policy   from   the   appellant   insurer.
The   proposal   form   sought   disclosure   of   health   details
and   medical   information   of   the   assured.   With   regard   to
the   query   as   to   whether   the   proposer/assured   had
suffered   from   any   “cardio­vascular   disease   e.g.

40
palpitations,   heart   attack,   stroke,   chest   pain,”   the
assured   answered   in   the   negative.   The   assured
underwent   a   mitral   valve   replacement   surgery.   A   claim
for treatment expenses  was  made by the  hospital  where
treatment   was   administered   and   the   said   claim   was
repudiated   by   the   insurer   on   the   ground   of   non­
disclosure   of   pre­existing   cardiac   condition.   An   appeal
filed   before   this   Court   was   allowed.   This   Court,   on
consideration   of   documentary   material   placed   before   it
found   that   the   discharge   card   of   the   assured   recorded
his history of “rheumatic heart disease since childhood.”
This Court therefore allowed the repudiation of claim by
the insurer on the ground that the assured had failed to
disclose, at the time of seeking the mediclaim   policy, that
he   had   suffered   from   rheumatic   heart   disease   since
childhood.
51.  We have also considered the following judgments :
c)   In   Branch   Manager   Bajaj   Allianz   Life   Insurance
Co.   v.   Dalbir   Kaur   ­   AIR   2020   SC   5210,   a   proposal
form   was   submitted   to   the   appellant   therein   for   a   life
insurance   policy   containing   questions   pertaining   to   the
health and medical history of the proposer and required

41
a   specific   disclosure   as   to   whether   the   proposer   had
undergone   any   treatment.   The   proposer   answered   the
queries   in   the   negative.   Further   a   query   regarding
specific   diseases   or   disorders   suffered   was   also
responded to in the negative. A policy of insurance was
issued by the insurer on 12 th
 August, 2014, insuring the
life of the proposer for a sum of Rs. 8.50 lakhs payable
on   maturity   with   the   death   benefit  of   Rs.   17   lakhs.   On
12 th
 September, 2014, the insured, Kulwant Singh, died
giving   rise   to   a   claim   under   the   policy.   The   claim   was
subjected   to   an   independent   investigation   and   the
records   revealed   that   the   deceased   had   been   suffering
from hepatitis C. The claim was repudiated giving rise to
a consumer complaint which was allowed by the District
Forum.   The   appeal   before   the   State   Forum   was   also
dismissed,   so   also   by   the   National   Commission,   the
revision   was   dismissed.   Being   aggrieved   the   insurance
company   had   preferred   an   appeal   before   this   Court.   It
was held that the investigation conducted by the insurer
in the said case clearly indicated that the deceased was
suffering   from   a   pre­existing   medical   condition   which
was not disclosed to the insurer despite specific queries

42
relating   to   any   ailment,   hospitalisation   or   treatment
undergone by the proposer in column 22 of the proposal
form   therein.   Hence   the   judgment   of   the   Commission
was   set   aside   but   since   the   claim   amount   was   paid   to
the respondent, exercising jurisdiction under Article 142
of the Constitution it was directed that no recoveries be
made by the respondent insurer therein.  
In   the   aforesaid   judgment,   this   Court
distinguished   Sulbha   Prakash   Motegaonkar   and
Ors.   v.   Life   Insurance   Corporation   of   India ,   Civil
Appeal No. 8245/2015   decided on 5 th
  October, 2015,
by   holding   that   in   the   said   case   the   assured   therein
suffered   myocardial   infraction   and   succumbed   to   it.
The   claim   was   repudiated   by   the   insurance   company
on   the   ground   that  there   was   a   suppression   of   a   pre­
existing lumbar spondylitis. It was in this background
that this Court held that the alleged concealment was
of   such   a   nature   that   would   not   dis­entitle   the
deceased from getting his life insured. In other words,
the   pre­existing   ailment   was   clearly   unrelated   to   the
cause of death. 

43
52. On   a   consideration   of   the   aforesaid   judgments,   the   following
principles would emerge:
(i) There   is   a   duty   or   obligation   of   disclosure   by   the
insured   regarding   any   material   fact   at   the   time   of
making   the   proposal.   What   constitutes   a   material   fact
would   depend   upon   the   nature   of   the   insurance   policy
to   be   taken,   the   risk   to   be   covered,   as   well   as   the
queries that are raised in the proposal form.
(ii) What   may   be   a   material   fact   in   a   case   would   also
depend   upon   the   health   and   medical   condition   of   the
proposer.
(iii) If specific queries are made in a proposal form then it is
expected that specific answers are given by the insured
who is bound by the duty to disclose all material facts.
(iv) If   any   query   or   column   in  a  proposal   form  is  left  blank
then the insurance company must ask the insured to fill
it   up.   If   in   spite   of   any   column   being   left   blank,   the
insurance   company   accepts   the   premium   and   issues   a
policy, it cannot at a later stage, when a claim is made
under   the   policy,   say   that   there   was   a   suppression   or
non­disclosure of a material fact, and seek to repudiate
the claim.

44
(v) The   insurance   company   has   the   right   to   seek   details
regarding   medical   condition,   if   any,   of   the   proposer   by
getting the proposer examined by one of its empanelled
doctors.   If,   on   the   consideration   of   the   medical   report,
the   insurance   company   is   satisfied   about   the   medical
condition   of   the   proposer   and   that   there   is   no   risk   of
pre­existing   illness,   and   on   such   satisfaction   it   has
issued   the   policy,   it   cannot   thereafter,   contend   that
there   was   a   possible   pre­existing   illness   or   sickness
which   has   led   to   the   claim   being   made   by   the   insured
and for that reason repudiate the claim.
(vi) The insurer must be able to assess the likely risks that
may   arise   from   the   status   of   health   and   existing
disease, if any, disclosed by the insured in the proposal
form   before   issuing   the   insurance   policy.   Once   the
policy   has   been   issued   after   assessing   the   medical
condition   of   the   insured,   the   insurer   cannot   repudiate
the claim by citing an  existing medical  condition  which
was   disclosed   by   the   insured   in   the   proposal   form,
which condition has led to a particular risk in respect of
which the claim has been made by the insured. 

45
(vii) In   other   words,   a   prudent   insurer   has   to   gauge   the
possible   risk   that   the   policy   would   have   to   cover   and
accordingly   decide   to   either   accept   the   proposal   form
and issue a policy or decline to do so. Such an exercise
is dependant on the queries made in the proposal  form
and   the   answer   to   the   said   queries   given   by   the
proposer.
53. We shall now consider the facts of the present case. The relevant
portion   of   proposal   form   for   the   overseas   mediclaim   policy­B   is
extracted as under:  
UNITED INDIA INSURANCE COMPANY LIMITED
Regd. & Head Office United India House 24, Whites Road,
CHENNAI­600 014
PROPOSAL FORM FOR OVERSEAS MEDICLAIM POLICY­B
(Business & Holiday)
(To be submitted in Original with 2 Copies)
(Available to persons in the age group of 6 months to 70 years)
IMPORTANT
PLEASE   MAKE   SURE   YOU   READ   AND   FULLY   UNDERSTAND
THIS   DOCUMENT   BEFORE   YOU   TRAVEL   FROM   THE
REPUBLIC OF INDIA
FAILURE   TO   FOLLOW   THE   INSTRUCTION   GIVEN   COULD
RESULT   IN   REJECTION   OF   ANY   CLAIM   THAT   MIGHT   BE
MADE
THE   OVERSEAS   MEDICLAIM   POLICY   PROVIDES   INDEMNITY
FOR   EXPENSES   NECESSARILY   INCURRED   FOR   IMMEDIATE
TREATMENT   OF   ILLNESS,   DISEASES   CONTRACTED   OR
INJURY   FIRST   SUSTAINED   (DURING   THE   PERIOD   OF
INSURANCE   OF   OVERSEAS   TRAVEL   SUBJECT   TO   POLICY
TERMS   &   CONDITIONS)   AND   IN   ADDITION   ALSO   PERSONAL
ACCIDENT TOTAL  LOSS OF  CHECKED  BAGGAGE,  DELAY OF
CHECKED   BAGGAGE,   LOSS   OF   PASSPORT   AND   PERSONAL
LIABILITY COVERS (DURING THE PERIOD OF INSURANCE OF
OVERSEAS   TRAVEL   SUBJECT   TO   POLICY   TERMS   &
CONDITIONS).
IN   THE   ABSENCE   OF   MEDICAL   REPORTS   AS   SPECIFIED   IN

46
ITEM   II   B   SUM   INSURED   WILL   STAND   REDUCED   TO   AN
EQUIVALENT   AMOUNT   OF   US   $   10,000   IN   RESPECT   OF
MEDICAL   EXPENSES   INCURRED   THROUGH   ILLNESS   OR
DISEASE  ONLY,  SUBJECT   TO EXCLUSION  OF PRE­EXISTING
DISEASE.
THE   ATTENTION   OF   THE   PROPOSER   IS   DRAWN   TO   ITEM   II
(MEDICAL   HISTORY)   OF   THE   PROPOSAL   FORM   ESPECIALLY
IN   RELATION   TO   PREVIOUS   TREATMENT   FOR   ILLNESS   OR
DISEASE   SUCH   AS   RENAL   DISORDERS,   OR   DISEASES
CEREBRAL   OR   VASCULAR   STROKES,   HEART   AILMENT   OF
ANY   KIND,   MALIGNANCY,   TUBERCULOSES,   ENCEPHALITIS,
NEUROLOGICAL   DISORDERS,   GALL   BLADDER   DISORDER,
ARTHRITIS   REQUIRING   SURGERY   AND   IF   ANY   TREATMENT
HAS BEEN RECEIVED FOR ANY OF THE ABOVE DISORDERS
AT   ANY   TIME   IN   THE   PAST,   SUCH   TREATMENT   MUST   BE
DISCLOSED TO THE POLICY ISSUING OFFICE.
NEITHER   THE   INSURERS   NOR   CLAIMS   SETTLING   AGENTS
SHALL   BE   RESPONSIBLE   FOR   THE   AVAILABILITY,   QUALITY
OR   RESULTS   OF   ANY   MEDICAL   TREATMENT   OR   THE
FAILURE OF THE INSURED TO OBTAIN MEDICA TREATMENT.
THE   PROPOSAL   FORM   SHOULD   BE   COMPLETED   TO   THE
BEST   OF   YOUR   KNOWLEDGE   &   BELIEF   &   ALL   MATERIAL
FACTS   SHOULD   BE   DISCLOSED   FAILURE   TO   DO   SO   MAY
NULLIFY COVER UNDER THE POLICY ISSUED.
NOTE:   Plan   A­1,   A­27,   A­3   (Worldwide   travel   excluding
USA/Canada)
Plan   B­1,   B­2,   B­3   &   B­4   (Worldwide   travel   including
USA/Canada)
Plan   E­1   &   E­2   (Corporate   Frequent   Travel   to   all   destinations
including USA/Canada)
IF
a) The   proposer   is   travelling   to   USA   &/or   Canada   &   is
above 40 years, OR
b) The   proposer   is   travelling   to   any   other   country   and   is
above 60 years, OR
c) Answer to questions in II(A) reveal that the proposer had
suffered   any   time   the   past   or   is   suffering   from   any
disease/illness.
The Proposal form should be accompanied with 1) ECG printout
with   report   &   2)   fasting  blood   sugar   &   urine   sugar   urine   strip
test report of any other medical report required by the company
etc. along with the attached questionnaire II(B) to be completed
&   signed   by   the   doctor   with   minimum   M.D.   qualification
conducting   the   test.   In   the   absence   of   such   medical   tests   &
reports   due   to   a   shortage   of   time   before   travel,   cover   may   still
be   granted   subject   to   a   satisfactory   proposal   form   by   the   sum
insured   under   policy,   in   respect   of   expenses   incurred   for   the
treatment   of   illness   disease   shall   be   restricted   to   US   $   10,000
only,   which   shall   not   cover   the   cost   of   Medical   treatment   for
pre­existing   disease.   In   case   of   accident   however   the   full   sum
insured benefit would be available.

47
54.  The proposal form was submitted by the appellant on 15 th
  May,
2009. The proposed date of departure of the appellant to USA was 19 th
May, 2009.   As required, the proposal form was accompanied with: (a)
ECG test printout with report, (b) fasting blood sugar and urine strip
test report. The proposal form also stated :
“In   the   absence   of   such   medical   tests   and   reports   due   to   a
shortage of time before travel, cover may still be granted subject
to   a   satisfactory   proposal   form   by   the   sum   assured   under   the
policy,   in   respect   of   expenses   incurred   for   the   treatment   of
illness,   disease   shall   be   restricted   to   US   10,000   Dollars   only
which   shall   not   cover   the   cost   of   medical   treatment   for   pre­
existing   disease.   In   case   of   accident,   however,   the   full   sum   of
insured benefit will be available.” 
55.  Learned   counsel   for   the   insurer   contended   that   in   the   columns
dealing with medical history ­ query no. 2 which reads,  “have you ever
suffered   from   any   illness   or   disease   up   to   the   date   of   making   this
proposal”   no   answer   was   given   by   the   appellant.   Hence,   there   was
suppression  of  the   fact  that  the  appellant  was  suffering  from  a heart
disease   for   which   he   was   prescribed   statins   and   the   said   fact   was
material fact as it related to a pre­existing disease or illness which is
excluded under the policy. In support of this submission, reliance was
placed on the following clause:  
“IMPORTANT
Notwithstanding   anything   stated   in   the   policy   it   is   hereby   and
agreed   that   all   claims   occasioned   by,   happening   through   or   in
consequence   of   any   disease   which   is   existing   at   the   date   of
commencement   of   risk,   whether   specifically   declared   or   not,   the
proposal   form   completed   by   the   insured,   is   excluded   from   the
scope of the policy.”  

48
In   support   of   this   clause,   reliance   was   placed   on   clause   10   (b)
(typed   as   11   (b)   in   Annexure   A­6.)   and   10   (c)   which   state   that   the
policy was not designed to provide an indemnity in respect of medical
services,   the   need   for   which   arises   out   of   a   pre­existing   condition   as
defined   under   clause   10   (b).   A   pre­existing   condition   was   defined   to
mean   “any  sickness  for   which  the  insured  person  had  sought  medical
advice or had taken medical treatment in the preceding 10 months prior
to the commencement of travel.” 
56.   It   was   contended   that   there   was   non­disclosure   or   suppression
of the fact that the appellant had been advised to take statins owing to
a   cholesterol   problem,   which   is   a   risk­factor   for   cardiac   disease   and
this   fact   was   not   disclosed   in   the   proposal   form   whereas   it   was
mentioned to the doctor who treated the appellant in USA. Hence the
repudiation of the policy was justified.  
57.   We   have   considered   the   aforesaid   submissions   in   light   of   the
relevant clauses in the proposal form and by taking into consideration
the arguments of the learned Senior Counsel for the appellant. 
58.   On   a   reading   of   the   queries   pertaining   to   medical   history   it   is
noted as under: 

49
(i) Query no. 1 which reads,   “are you in good health and free
from physical  and  mental disease  and  infirmity?”   The answer
given was  “yes.”
This   indicates   the   current   status   of   health   at   the   time   of
filling up of the proposal form.
(ii)   On   the   other   hand,   query   no.   2   which   reads   “have   you
ever   suffered   from   any   illness   or   disease   up   to   the   date   of
making   this   proposal?”,   is   a   query   with   regard   to   the   past
health condition of the insured.
(iii) The above is discerned from  query no. 4 which reads,
“have   you   ever   been   admitted   to   any   hospital,   nursing
home/clinic for treatment or observation?”  
(iv) Query no. 5 which reads,   “have you suffered from any
illness   or   disease   or   had   an   accident   prior   to   the   first   day   of
insurance?”  
59. On a contextual and conjoint reading of the aforesaid queries it is
evident   that   the   object   of   seeking   answers   from   a   proposer   to   the
aforesaid   queries   was,   as   a   prudent   insurer   to   discern   whether   the
proposer   had   any   pre­existing   condition   for   which   he   had   taken
medical   advice   or   medical   treatment   in   the   12   months   preceding   the
commencement   of   travel.   Any   disclosure   of   an   illness   or   disease
suffered/diagnosed   in   12   months   preceding   the   commencement   of
travel   would   indicate   a   pre­existing   condition   which   fact   may   lead   a
prudent   insurer   not   to   provide   an   indemnity   in   respect   of   medical

50
services,   the   need   for   which   may   arise   during   the   term   of   the
mediclaim policy or lead the insurer to reduce the scope and coverage
of risk under the policy. 
60.   In   the   instant   case,   since   the   appellant   herein   answered   query
no.   1   in   the   affirmative   and   query   no.   4   and   5   in   the   negative   it
implies   that   he   did   not   suffer   from   any   illness   or   disease   up   to   the
date   of   making   his   proposal   apart   from   what   had   been   disclosed   by
him,   namely   diabetes   mellitus­II.   The   respondent   insurer   being
appraised   about   the   said   medical   condition   of   the   appellant,   issued
policy   to   the   appellant   herein.   The   respondent   insurer   did   not
consider the said medical condition of the appellant as a risk factor for
any   possible   cardiac   ailment   during   the   term   of   the   policy   so   as   to
decline acceptance of the proposal form and issuance of the mediclaim
policy.     Also,   report   of   the   ECG   was   considered   by   one   of   the   panel
doctors   of   respondent­insurer   and   having   found   the   same   to   be
normal, the policy was issued to the appellant.
61. That apart, query no. 8 in the policy is worded in following terms: 
“Please give details of any knowledge of any positive existence of
any   ailment,   sickness   or   injury   which   may   require   medical
attention whist on tour abroad.”
The answer to the same was  “NIL.”    

51
62.  In   support   of   the   aforesaid   answer,   the   submission   of   learned
Senior Counsel along with learned counsel for appellant was that ECG
report   and   blood   and   urine   test   reports   were   given   as   the   appellant
had   knowledge   of   his   ailment,   namely,   diabetes   mellitus­II   and   the
same   were   taken   into   consideration   favourably   by   the   insurer   as   the
said   reports   showed   normal   results.   It   was   contended   by   learned
Senior Counsel for the appellant that the appellant had no knowledge
of  any  heart  ailment which  could   require  medical  attention  whilst  on
tour abroad. 
63.  It   was   further   submitted   that   the   appellant   was   on   statins   and
the   same   was   prescribed   to   him   as   diabetes   mellitus­II   which   was
disclosed   by   the   appellant   in   the   proposal   form   is   one   of   the   risk
factors   for   cardiac   disease.   Thus,   in   order   to   reduce   the   risk   of   a
cardiac   ailment   in   future,   statins   were   prescribed.   The   same   is   also
prescribed   for   controlling   hyperlipidaemia   but   the   appellant   did   not
suffer from any heart ailment or hyperlipidaemia.
64.  We   find   considerable   force   in   the   argument   made   on   behalf   of
the appellant. This is because while diabetes mellitus­II is a risk factor
for   a   cardiac   ailment   in   a   person,   it   is   not   a   hard   and   fast   rule   that
every person having diabetes mellitus­II would necessarily suffer from
a   cardiac   disease.   Conversely,   a   person   who   does   not   suffer   from

52
diabetes mellitus­II can also suffer from a cardiac ailment. Thus, what
the appellant had knowledge of was the existence of diabetes mellitus­
II, for which he was under treatment. In order to disclose the status of
the   said   disease   he   had   submitted   his   ECG   report,   blood   and   urine
test   reports   which   showed   normal   results.   The   fact   that   ECG   report
showed   normal   parameters   would   indicate   that   the   appellant   had   no
cardiac  disease.  The  prescription   of  statins  to   the  appellant  was  only
as a precaution to prevent a possible cardiac ailment from developing
in   the   future   as   diabetes   mellitus­II   is   a   risk   factor   for   such   a
disease.   But   by   that,   it   cannot   be   deduced   or   inferred   that   because
the   appellant   had   a   cardiac   ailment   or   hyperlipidaemia,   he   was
prescribed statins.
65.  Further, what was required to be disclosed in query no. 8 under
the caption medical history was 
“Knowledge of any positive existence of any ailment, sickness or
injury which may require medical attention whist on tour abroad”
 
This   means   that   any   ailment,   sickness   or   injury   of   which   the
proposer had positive knowledge of, and which may require imminent
medical   attention   whilst   on   tour   abroad   and   during   the   term   of   the
policy   had   to   be   disclosed.   If   the   proposer   had   no   knowledge   of   any
ailment he had, obviously there could be no disclosure of any ailment
or   sickness   which   would   require   medical   attention   whilst   on   tour

53
abroad.   In   fact,   the   aforesaid   query   has   also   to   be   considered   in   the
context of the further declaration sought by the insurance company to
the effect that the proposer was:
(a)  not travelling against the advice of a physician,
(b)  not on the waiting list of any medical treatment, 
(c)  not   travelling   for   the   purpose   of   receiving   medical
treatment,
(d)  not   received   a   terminal   prognosis   for   a   medical
condition   before   the   date   of   submitting   the   proposal
form. 
66.  Viewed   in   the   aforesaid   perspective,   it   is   held   that   the
respondent   insurance   company   could   not   have   repudiated   the   policy
on   the   ground   that   acute   myocardial   infraction   suffered   by   the
appellant   on   landing   at   San   Francisco,   USA   was   a   “pre­existing   and
related   complication”   which   was   excluded   under   the   policy.   The
insurer   was   informed   about   the   pre­existing   condition   of   the
appellant, namely, diabetes mallitus­II and it was for insurer to gauge
a related complication under the policy as a prudent insurer and then
issue   the   policy   when   satisfied.   In   the   absence   of   the   same,   the
treatment   availed   by   the   appellant   for   acute   myocardial   infraction   in
USA   could   not   have   been   termed   as   a   direct   offshoot   of
hyperlipidaemia   and   diabetes   mellitus   so   as   to   be   labelled   as   a   pre­
existing  disease or illness which the appellant  suffered from  and had

54
not disclosed the same. At any rate, the appellant had in the proposal
form disclosed that he was suffering from diabetes mellitus­II and for
which the medical test reports were submitted along with the proposal
form   which   were   considered   by   the   insurance   company   before   the
policy was issued to the appellant. In fact, the appellant stated in his
representation dated 16 th
  November, 2009, against the repudiation of
the policy that he was taking lipid­lowering medicines not because he
was   suffering   from   hyperlipidaemia   but   as   it   was   customary   to   take
such   medication   for   prevention   of   cardio­vascular   complications   in
diabetics.   He   also   stated   that   he   had   informed   the   physician,   Dr.
Jitendra Jain, who examined him prior to obtaining the policy, of the
medicines he had been taking. Therefore, the insurance company was
well aware of the fact that the insured was a diabetic and was taking
all   necessary   medication   for   preventing   further   complications   and
controlling  the  disease.  Hence  in   our  view,  there  was  no  suppression
of any material fact by the appellant to the insurer. 
67.  Further on the disclosures made by the appellant with regard to
his   existing   disease,   namely   diabetes   mellitus­II,   the   insurance
company considered the same and issued the policy in question to the
appellant.   The   respondent   insurance   company   as   a   prudent   insurer
considered the details given by the appellant in the proposal form and
issued   the   policy.   The   insurance   company   did   not   think   that   the

55
medical and health condition of the appellant was such which did not
warrant   issuance   of   a   mediclaim   policy.   The   insurance   company
therefore   did   not   decline   the   proposal   of   the   assured   as   a   prudent
insurer. 
68.  Therefore, the respondents were not right in stating  that as per
the terms and conditions of the policy “ all the complications arising out
of   pre­existing   condition   is   not   payable .”   As   already   noted,   acute
myocardial   infraction   can   occur   in   a   person   who   has   no   history   of
diabetes   mellitus­II.   One   of   the   risk   factors   for   the   aforesaid   cardiac
episode   is   diabetes   mellitus­II.   The   fact   that   the   appellant   had
diabetes   mellitus­II   was   made   known   to   the   insurance   company.
Therefore, it is observed that any complication which would arise from
diabetes   mellitus­II   was   also   within   the   consideration   of   the   insurer.
Despite   the   aforesaid   facts   regarding   the   medical   record   of   the
insured,   the   insurance   company   decided   to   issue   the   policy   to   the
appellant.  The aforesaid clause has to be read against the respondent
insurer by applying the   contra proferentem   rule against it. Otherwise,
the   very   contract   of   insurance   would   become   meaningless   in   the
instant case. Hence, in our considered view, the respondent­insurance
company was not right in repudiating the policy in question. 

56
69.  The   object   of   seeking   a   mediclaim   policy   is   to   seek
indemnification in respect of a sudden illness or sickness which is not
expected   or   imminent   and   which   may   occur   overseas.   If   the   insured
suffers a sudden sickness or ailment which is not expressly excluded
under   the   policy,   a   duty   is   cast   on   the   insurer   to   indemnify   the
appellant for the expenses incurred thereunder.  
70.  Hence   in   the   instant   case,   the   repudiation   of   the   policy   by   the
respondent insurance company was illegal and not in accordance with
law.   Consequently,   the   appellant   is   entitled   to   be   indemnified   under
the   policy.   In   view   of   the   aforesaid   discussion,   we   hold   that   the
Commission   was   not   right   in   dismissing   the   complaint   filed   by   the
appellant herein.    
71.  The appeal is allowed in the following terms: 
(i)  The   respondents   are   directed   to   indemnify   the   appellant
regarding   the   expenses   incurred   by   him   towards   his   medical
treatment within a period of one month from the date of receipt
of   a   copy   of   this   judgment   with   interest   at   the   rate   of   6%   per
annum   from   the   date   of   filing   the   claim   petition   before   the
Commission till realisation. 
(ii)  Since the expenses incurred by the appellant was in terms
of   US   Dollars   and   the   claim   would   be   paid   in   terms   of   Indian

57
Rupees,   the   exchange   rate   as   it   existed   on   the   date   the   claim
petition was filed by the appellant herein before the Commission
or   at   Rs.45   INR,   whichever   is   lesser,   shall   be   reckoned   for   the
purpose   of   determining   the   conversion   rate   of   US   Dollars   into
Indian   Rupees   vide   Meenakshi   Saxena   &   Anr.   Vs.   ECGC
Limited   (formerly   known   as   Export   Credit   Guarantee
Corporation of India Limited)  & Anr.  – (2018) 7 SCC 479.  
(iii)   The   appellant   is   also   entitled   to   Rs.   1,00,000/­   payable   by
the respondents towards the cost of litigation.  
..……………………………………………….J
[DR DHANANJAYA Y CHANDRACHUD]
………………………………………...J
[B.V. NAGARATHNA]
NEW DELHI;
6 th
 DECEMBER, 2021.