1. SHAFIUR RAHMAN, J.-Leave to appeal was granted to State Life Insuran Corporation of Pakistan to examine the true scope and effect of paragraph 9 of the Insurance Policy in spite of which the claim of Rs, 3-3,000 was decreed by the first appellate Court and maintained by the Lahore High Court in second appeal by its decision dated 2nd of June, 1982.
2. ' Allah Yar, the husband of Mst. Begum. Jan, plaintiff/respondent, got himself insured with the appellant for a sum of Rs, 30,000 on 28-5-1975. He died on 10-9-1976. His widow as nominee filed a claim for the sum due under the Insurance Policy and the bonus accruing on it. It was denied by the appellant on 7-7-1977 on the ground that Allah Yar deceased had obtained the policy by fraud and concealment of material facts with regard to his age and the contract had been rendered void under Condition No, 9 of the contract of insurance. The concealment or the fraud alleged was that he had at the time of obtaining the Insurance Policy shown his age to be 49 years when, in fact, he was 55 years of age, and bad forwarded a forged national identity-card to support the age disclosed by him. The following issues were framed on the pleadings of the parties :- "(1) Whether the policy in question has been obtained by fraud and misrepresentation ? 0. P. P
(2) Whether the plaintiff is entitled to recover the disputed amount 7 0, P. P.
(3) Relief."
3. ' The trial Court considered the two issues together and held as follows :- "The fact remained that Allahyar deceased was definitely 55 years of age at the time of insurance as per identity-card Exh. P. 1 and voters' list Exh. P.
6. From above, therefore, it is clear that the plaintiff has equally become a party to the fraud and misrepresentation as such her claim had been rightly refused by the defendant's Corporation nor such a decree can be granted by this Court because the plaintiff has not come with clean hands.
4. Issue No. 1 is; therefore, found for the defendant while Issue No, 2 is answered in negative."
5. ' The suit of the plaintiff-respondent was dismissed leaving the parties to bear their own costs.
6. ' On plaintiff's first appeal the District Judge re-examined the evidence and concluded as follows :- "It is an admitted fact that Sales Officer of the Insurance Corporation gets more commission on an insurance policy under 05 scheme than under 03 scheme. I have, therefore, no doubt in my mind that the mischief was done by the representative of the respondents and not by Allahyar deceased. On my asking the learned counsel for the respondents told that for Allahyar deceased life insurance policy under either scheme was equal as he had to get the same amount of bonus on the policy under both the schemes. Hence, it is abundantly clear that Allahyar did not obtain the policy in question by fraud and misrepresentation rather fraud was played upon him by the agent of respondent. Thus the appellant a nominee of Allahyar deceased is entitled to recover the disputed amount from the respondents."
7. ' The finding on both the issues was reversed by the District. Judge and a decree for Rs, 33,000 was granted with costs throughout.
8. The second appeal filed by the appellant was dismissed in limine and the High Court held as follows "The learned lower appellate Court on the basis of evidence has recorded a finding of fact that it was the agent of the appellant who has committed the fraud. The learned lower appellate Court - has appraised the evidence and recorded findings of facts. These are not inter farmable in second appeal."
9. ' The learned counsel for the appellant contended that the first appellate Court committed an error in recording the finding that the agent of the Appellant committed the fraud by concealment and misrepresentation with regard to age of the assured, and the assured himself was not in any manner involved in it. Such a mistaken finding which was conjectural in nature could not be considered by the High Court to be sacrosanct in second appeal. Even if this finding of fact were left undisturbed the knowledge of the agent which was fraudulently concealed by him from the principal could not be imputed to the principal so as to create financial liability against it or save the policy from being treated as void. Finally the learned counsel for the appellant invoked paragraph 9 of the contract of insurance policy under which appellant could call for proof of age and 'if the age of the life insured at the commencement date is proved to be higher than the maximum entry age that was permissible by State Life under the plan and scheme of insurance mentioned in the proposal of this Policy" it could treat the policy as void.
10. ' The learned counsel for the respondent, on the other hand, contended that the finding of fact recorded was correct, that the appellant could not avoid the responsibility for the act of the agent and Condition No, 9 of the contract of Insurance Policy was in violation of section 45 of Insurance Act and hence of no avail to the appellant.
11. ' We do not propose to question or review the finding of fact for it may not be very necessary for the disposal of this appeal. All the same we must take full note of the dad nature of fraud and the finding of fact relating thereto. The District Judge, held that "it is abundantly clear that Allahyar did not obtain the policy in question by fraud and misrepresentation rather fraud was played on him by the agent of respondent". This finding was considered good enough and not liable to interference by the High Court in second appeal. The proposal form was, in fact, offered by one Mr. M. A. Beg, Sales Officer of the appellant who has since died, probably prior to the death of the assured. The proposal form at its end contained a declaration about the truthfulness and accuracy of the information disclosed. At the end there was a further certificate recorded in the matter as follows :- "If the life proposed has not been signed in English, the following declaration should be made by an English knowing witness- ' I declare that before the life proposed signed this form I read over, translated and explained to him/her the contents of the above form which he/she fully understood."
12. ' This was also completed and certified. The declaration made before the doctor also contained a similar declaration and a certificate both of which were certified by the doctor. The thumb- impression of the assured was certified by the Sales Representative. The reverse side of the Identity Card which contained a different date of birth than the one recorded in the Identity Card itself had put in as supporting evidence. It is also established that if true age had been disclosed the assured would not have been entitled to a policy under plan/scheme 05 but he would have been entitled under a more onerous and reduced benefit plan 03 on altogether different terms. The finding of the Court amounts to this that the assured had disclosed true facts to the Sales Representative, that the Sales Representative in order to obtain enhanced commission which was available under 05 schemes fabricated the record and the age without the knowledge of the assured with a view to bring the case of the assured under 05 scheme.
13. ' Fraud of the agent of Sales Representative of an Insurance Company vitiates the contract of Insurance itself and this happens to be a proposition universally recognized. In Lakshmishankar Kanji Rawal v. Gresham Life Assurance Society, Ltd. , it was held that false statement in a proposal form whether at the instance of the assured or of the agent absolves the Company of the liability under the contract. The question involved in that case was answered in the alternative by holding as follows "Either the assured authorized these answers to be given or by his negligence he made it possible for the agent to deceive the Company In neither case can the plaintiff succeed."
14. ' In the case of Bawden v. The London, Edinburgh and Glasgow Assurance Co. , there was no element of fraud involved either of the assured or of the agent. Knowledge obtained by the agent from the assured but not communicated to the principal without any particular reason being there for the omission and the assured being an illiterate man almost unable to read or write, the knowledge Of the agent was imputed to the Company and the Company made liable under the contract. This decision came up for extensive discussion in Newsholme Brothers v. Road Transport and General Insurance Company Limited , and examination from all aspects including one where fraud was committed by the agent as against the principal and assured. The following law was laid down :- "It would, I think, be most unjust to hold that an insurance policy was valid because a servant of the Insurance Company knew a fact which was contrary to a statement in the proposal signed by the person seeking the insurance, although it was certain that the policy would never have been granted if the insured had seen to it that the questions put to him were answered truthfully for the information of those who alone could grant a valid policy."
15. ' Distinguishing Bowden's case the following observation was made :- "In my view the decision in Bawden's case is not applicable to a case where the agent himself, at the request of the proposer, fills up the answers in purported conformity with information supplied by the proposer. If the answers are untrue and he knows it, he is committing a fraud which prevents his knowledge being the knowledge of the Insurance Company. If the answers are untrue, but he does not know it, I do not understand how he has any knowledge which can be imputed to the Insurance Company. In any case, I have great difficulty in understanding how a man who has signed, without reading it, a document which he knows to be a proposal for insurance, and which contains statements in fact untrue, and a promise that they are true, and the basis of the contract, can escape from the consequences of his negligence by saying that the person he asked to fill it up for him is the ageist of the person to whom the proposal is addressed."1 2 3 ' The same question of law came up for consideration in the United States supreme Court in the case of New York Life Insurance Company v. 'Thomas' C. Fletcher, Exr. Of Chinonda S. Alford .
16. Statement of fact wa given in the following words :- "Both he and the Company were deceived by the fraudulent contract of the agent. The assured was placed in the position of making false representations in order to secure a valuable contract, which, upon a truthful report of his conditions, could not have been obtained. By then the Company was imposed upon and induced to enter into the contract. In such a case, assuming that both the parties acted in good faith, justice would require that the contract be cancelled and the premiums returned. As the present action is not for such a cancellation the only recovery which the plaintiff could properly have upon the facts he asserts, taken in connection with the limitation upon the powers of the agent, is for the amount of the premiums pad ' Referring to a decision in the case of Insurance Company v. Wilkinson the following basis for that decision was adopted "But it cannot be supposed that these defendants intended to clothe this agent with authority to perpetrate a fraud upon themselves. That he deliberately intended to defraud them is manifest. He well knew that if correct answers were given no policy would issue. Prompted by some motive he sought to obtain a policy by means of false answers. His duty required him not only to write the answers truly as given by the applicant, but also to communicate to his principal any other fact material to the risk which might come to his knowledge from any other source. His conduct in this case was a gross violation of duty, in fraud of his principal, and in the interest of the other party. To hold the principal responsible for this act, and assist in the consummation of the fraud, would he monstruous injustice. When an agent is apparently acting for his principal, but is really acting for himself or third persons and against his principal, there is no agency in respect to that transaction, at least as between the agent himself, or the person for whom he is really acting, and the principal."
17. It follows, therefore, that on the finding of fact recorded by the first appellate Court and maintained by the High Court irrespective of the vires of clause 9 of the Insurance Policy, the contract of insurance stood vitiated and the utmost benefit that could be extended to the assured or nominee provided he was, in no way, directly or indirectly responsible for it as held by the two Courts would be to return him the premium paid for the policy.
18. ' Clause (9) empowered the insurer to call for the proof of age. Section 45 of the Insurance Act placed a limited embargo with regard to the disputing facts contained in an insurance policy after two years. In this case the insurance policy was issued on 28-5-1976. The assured died on 10-9- 1976. The claim was filed on 28-9-1976 and the insurer called for proof of age and veracity of the declaration within period of two years. In terms, therefore, even if the limitations contained in section 45 were to apply they did not apply to this case because the dispute with regard to the veracity of the information contained in the proposal form, the declaration before the doctor and the certificates were raised and the proof called for within two years. Clause (9) of the Insurance Policy would, therefore, be attracted and in terms thereof as the age of the appellant has been proved to be materially different from what was disclosed, the contract would be rendered void.
19. This has been the effect also of the fraud perpetrated by the Sales Representatives' on the principal as well as on the assured. Hence we accept the appeal, set aside the judgment and decree of the High Court. We have been informed that a sum of Rs, 3,400 was the premium paid by the assured.
20. The plaint as nominee of the assured is entitled to the refund of the premium capital paid under a contract of insurance which has been rendered void on account of the fraud held to have been committed by the Sales Representatives of the appellant. We decree the claim to that extent only.
21. No order is made as to costs. AIR 1932 Boni. 582 1892 L R 2 Q II 5344 1 2