Smt. B. Chenchamma V. New India Assurance Company Ltd. and Citi Bank

WP/7402/2007

AI Insights

The case revolves around the cancellation of a health insurance policy by the New India Assurance Company Ltd., at the behest of Citi Bank, which was contested by the petitioner, Smt. B. Chenchamma. The petitioner argued that the cancellation was arbitrary and without proper notice or opportunity to be heard, violating principles of natural justice and various insurance regulations. The respondents contended that the cancellation was in accordance with the terms of the policy and was requested by the petitioner herself. The court found that the cancellation did not comply with the mandatory provisions of the Insurance Act, 1938, and the IRDA Act, 1999, particularly noting the lack of a proper request for cancellation from the petitioner and the absence of a notice as required by the policy terms.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 799535 (HC-ANDHRA_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 05-06-2014
• Assessment Year: misc
• Other Referred Cases: SHUJAUDDIN AHMED JEDDY v. STATE BANK OF INDIA LIFE INSURANCE CO. LTD., HYDERABAD, M/s NEW INDIA ASSURANCE COMPANY LTD. V. SABHARATHANAM ALIAS SABHA RATHINAM AND OTHERS ETC., SMT.ASHA GOEL v. LIFE INSURANCE CORPORATION OF INDIA AND OTHERS, L.I.C. OF INDIA AND ANOTHER v. CONSUMER EDUCATION AND RESEARCH CENTRE AND OTHERS, M/S RAJ RESTAURANT AND ANOTHER v. MUNICIPAL CORPORATION OF DELHI, THE CENTRAL BANK OF INDIA LTD. v. THE HARTFORD FIRE INSURANCE LTD., THE GENERAL ASSURANCE SOCIETY LTD. v. CHANDMULL JAIN AND ANOTHER, KULCHHINDER SINGH AND OTHERS v. HARDAYAL SINGH BRAR AND OTHERS, STATE OF ORISSA v. UNITED INDIA INSURANCE CO. LTD., LIFE INSURANCE CORPORATION OF INDIA AND OTHERS v. KIRAN SINHA, NATIONAL THERMAL POWER CORPORATION LTD. v. M/S BHANU CONSTRUCTION CO. P. LTD., HYDERABAD AND OTHERS, N.VENKATESWARLU ALIAS VENKANNA v. REGIONAL MANAGER, UNITED INDIA INSURANCE CO. LTD., HYDERABAD AND OTHERS, ORIENTAL INSURANCE CO. LTD. v. SONY CHERIYAN, CH.NARASIMHULU v. UNITED INDIA INSURANCE CO., CUDDAPAH AND OTHERS, NATIONAL INSURANCE CO. LTD. v. SEEMA MALHOTRA AND OTHERS, DEOKAR EXPORTS PVT. LTD. v. NEW INDIA ASSURANCE CO. LTD., UNREPORTED JUDGMENT OF KARNATAKA HIGH COURT IN W.P.No.3429 OF 2001 (B.KRISHNA BHAT v. UNION OF INDIA AND OTHERS), FEDERAL BANK LTD. v. SAGAR THOMAS AND OTHERS
• Laws Referred To: Insurance Act, 1938, Insurance Regulatory and Development Authority Act, 1999, IRDA (Insurance Advertisement and Disclosure) Regulation 2000, Insurance Brokers Regulation, Insurance Corporate Agents Regulation, IRDA (Protection of Policyholders' Interests) Regulations, 2002, IRDA (Licensing of Banks as Insurance Brokers) Regulations 2013
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: KOTA RAO; T KUMAR
• Assessee Lawyers: MV PRASAD
• Keywords: Contractual Obligation; Public Utility Service; Writ petition; Good Health Policy; Insurance Cancellation
• Section: 111; 226; 80-D; 300-A

Judgement Text

"THE HON’BLE SRI JUSTICE A.V.SESHA SAI W.P.No.7402 of 2007 ORDER: This Writ Petition filed under Article 226 of the Constitution of India challenges the cancellation of petitioner’s renewed Good Health Policy from 1.10.2006 as illegal, void, arbitrary, unauthorised and bad. 2. The pleaded case of the petitioner is as follows. 3. The 2nd respondent bank has a tie up with the 1st respondent-New India Assurance Company Ltd., and the representatives of the 1st respondent approached the petitioner’s husband and requested to take the credit card facility supported by Health Insurance for him and the petitioner. Accepting the same, option was given for taking health insurance from 1st respondent on 29.9.2004 and 1st respondent issued Good Health Medi Claim Policy bearing Card No.CHE-NI-GHO5-10- 00005A for the petitioner after debiting a sum of Rs.8,347/- in the petitioner’s husband credit card and the statement dated 15.12.2004 shows the same in Plan-10. Since the petitioner’s husband already crossed more than 70 years, he was not given the health policy. The policy card issued in favour of the petitioner is valid from 1.10.2005 and it does not prescribe any last date. The premium amount for renewal was debited from the petitioner’s husband’s account on 16.9.2006 and the renewed insurance policy certificate was also sent to the petitioner’s husband stating that the policy was renewed from 1.10.2005 to 30.9.2006. When the 2nd respondent did not send the billing card statements, petitioner’s husband contacted them and they told that there was a technical fault and the statement would be sent in due course. In view of the failure of the 2nd respondent Bank in sending the statements, petitioner’s husband contacted TTK Health Services who were providing health services and they informed that the policy was cancelled at the instance of 2nd respondent and asked him to contact 2nd respondent. The correspondence made with the respondents did not yield any result. 4. Pleading in the manner indicted supra and challenging the cancellation, the present Writ Petition has been filed. 5. In response to the Rule Nisi ordered by this court, a counter affidavit is filed on behalf of the 1st respondent Company stating that the renewal of policy is not automatic and is subject to the terms of the policy and also as per the MOU with the 2nd respondent and the good health policy can cancelled at the request of the 2nd respondent Bank and that the banker confirmation about the request for such cancellation will be binding upon the proposer/insured person as per terms. It is further stated that the policy was renewed from 1.10.2005 and was cancelled on the basis of the advice from the 2nd respondent Bank, who confirmed that the instructions for cancellation had been received from the petitioner herein. It is further stated that the writ jurisdiction cannot be invoked to enforce the contractual obligation and the 1st respondent cannot be compelled to issue a policy and renewals thereon. It is further averred in the counter that the 2nd respondent Bank requested for cancellation of the policy of the petitioner under letter dated 13.4.2005. Counter affidavit is also filed in W.P.M.P.No.33783 of 2013 by the 1st respondent stating that subsequent events with regard to joining in hospital and payment of bills etc., cannot give any right to the petitioner to claim relief. 6. A counter affidavit is also filed on behalf of 2nd respondent-Citi Bank stating that the Writ Petition is not maintainable and the 2nd respondent is not an authority falling under the definition of “State” under Article 12 of the Constitution of India. It is averred in the said counter affidavit that the policy was cancelled and the amount debited was reversed back and the husband of the petitioner requested for reversal of his policy and at that point of time, the 1st respondent was informed of the request of the husband of the petitioner and in this process, the policy of the petitioner’s husband got cancelled and reversed in 2005 itself. It is further averred in the said counter affidavit that there was an erroneous cancellation of the policy earlier and neither the petitioner nor the husband of the petitioner approached the 2nd respondent for reversal within due time and subsequently, due to passage of time, the policy could not be renewed. It is further stated that the cancellation was done by inadvertence and the same could not be rectified due to delay in approaching the 2nd respondent Bank by the petitioner’s husband. It is further stated that in order to help the petitioner, the 2nd respondent is ready to take up the matter with the 1st respondent for renewal of insurance policy in case the 1st respondent agrees to revive the policy and subject to the petitioner paying premium for the years lapsed in between. 7. A reply is also filed by the writ petitioner herein stating that the Writ Petition is maintainable in view of the judgments of the Hon'ble Apex Court and this Court and as the respondents are discharging their obligations under the Insurance Act, 1938 and the Insurance Regulatory and Development Authority Act, 1999 and the Regulations made thereunder . It is further stated in the reply affidavit that the respondents are playing the game of hide and seek and absolutely there are no bonafides on their part. 8. Heard Sri M.V.Durga Prasad, learned counsel for petitioner and Sri Kota Subba Rao, learned counsel for 1st respondent and Sri T.Vinod Kumar, learned counsel for 2nd respondent and perused the material available on record. 9. It is contended by the learned counsel for petitioner that the impugned action of the respondents is contrary to Insurance Act, 1938 and the Insurance Regulatory and Development Authority Act, 1999, the IRDA (Insurance Advertisement and Disclosure) Regulation 2000, Insurance Brokers Regulation, Insurance Corporate Agents Regulation and IRDA (Protection of Policyholders’ Interests) Regulations, 2002, IRDA (Licensing of Banks as Insurance Brokers) Regulations 2013. It is further contended that the life insurance is a public utility service and the respondents are discharing public duty with regard to insurance, as such, they are amenable to the jurisdiction of this Court under Article 226 of the Constitution of India. It is further contended that the health insurance policy is a ‘property’ within the meaning of Article 300-A of the Constitution of India. The impugned action of the respondents is arbitrary, illegal and violative of Articles 14, 19, 21 and 300-A of the Constitution of India and in utter disregard to the principles of natural justice. Before resorting to impugned action, the respondents did not choose to issue any notice to the petitioner herein and no opportunity of being heard was also afforded to the petitioner herein. It is contended by the learned counsel for petitioner that the petitioner did not make any request for cancellation of renewed policy. In support of his case, the learned counsel for petitioner relied upon the following decisions. (1) SHUJAUDDIN AHMED JEDDY v. STATE BANK OF INDIA LIFE INSURANCE CO. LTD., HYDERABAD[1] (2) M/s NEW INDIA ASSURANCE COMPANY LTD. V. SABHARATHANAM ALIAS SABHA RATHINAM AND OTHERS ETC.[2] (3) SMT.ASHA GOEL v. LIFE INSURANCE CORPORATION OF INDIA AND OTHERS[3]. (4) L.I.C. OF INDIA AND ANOTHER v. CONSUMER EDUCATION AND RESEARCH CENTRE AND OTHERSE[4]. (5) M/S RAJ RESTAURANT AND ANOTHER v. MUNICIPAL CORPORATION OF DELHI[5]. 10. Per contra, it is contended by Sri Kota Subba Rao, learned counsel for 1st respondent that the Writ Petition is not maintainable as the petitioner herein is seeking to enforce the contractual obligations. It is further contended that the question whether the petitioner made any request for cancellation of renewed policy to the 2nd respondent is a pure question of fact which cannot be permitted to agitate before this Court under Article 226 of the Constitution of India. It is further contended that on the instructions given by the 2nd respondent, the 1st respondent cancelled the policy. In support of his contentions, learned counsel for 1st respondent placed reliance on the following judgments. (1) THE CENTRAL BANK OF INDIA LTD. v. THE HARTFORD FIRE INSURANCE LTD.[6]. (2) THE GENERAL ASSURANCE SOCIETY LTD. v. CHANDMULL JAIN AND ANOTHER[7]. (3) KULCHHINDER SINGH AND OTHERS v. HARDAYAL SINGH BRAR AND OTHERS[8] (4) STATE OF ORISSA v. UNITED INDIA INSURANCE CO. LTD.[9] (5) LIFE INSURANCE CORPORATION OF INDIA AND OTHERS v. KIRAN SINHA[10]. (6) NATIONAL THERMAL POWER CORPORATION LTD. v. M/S BHANU CONSTRUCTION CO. P. LTD., HYDERABAD AND OTHERS[11]. (7) N.VENKATESWARLU ALIAS VENKANNA v. REGIONAL MANAGER, UNITED INDIA INSURANCE CO. LTD., HYDERABAD AND OTHERS[12]. (8) ORIENTAL INSURANCE CO. LTD. v. SONY CHERIYAN[13]. (9) CH.NARASIMHULU v. UNITED INDIA INSURANCE CO., CUDDAPAH AND OTHERS[14]. (10) NATIONAL INSURANCE CO. LTD. v. SEEMA MALHOTRA AND OTHERS[15]. (11) DEOKAR EXPORTS PVT. LTD. v. NEW INDIA ASSURANCE CO. LTD.,[16]. (12) UNREPORTED JUDGMENT OF KARNATAKA HIGH COURT IN W.P.No.3429 OF 2001 (B.KRISHNA BHAT v. UNION OF INDIA AND OTHERS) 11. Reiterating the contents of the counter affidavit filed on behalf of the 2nd respondent, it is contended by the learned counsel for 2nd respondent that the Writ Petition is not maintainable and the 2nd respondent is neither a State nor instrumentality of the State and the 2nd respondent is a private bank and in view of availability of alternative remedy, the Writ Petition is liable to be dismissed. In support of his contention, the learned counsel for 2nd respondent has placed reliance on the judgment of the Apex Court in FEDERAL BANK LTD. v. SAGAR THOMAS AND OTHERS[17]. 12. In the light of the above pleadings, submissions and contentions, now the issues which this Court is called upon to answer in the present Writ Petition under Article 226 of the Constitution of India are; (1) Whether the cancellation of renewed insurance policy of the petitioner is in accordance with law and whether the same is sustainable and tenable. (2) Whether the Writ Petition, questioning such cancellation, is maintainable under Article 226 of the Constitution of India. 13. The material available on record clearly shows that there is absolutely no dispute with regard to the age, eligibility and entitlement of the petitioner to get the policy from the 1st respondent during the year 2004. In the considered opinion of this Court, the 1st respondent is discharging public duty and is guided by legislations, namely Insurance Act, 1938 and the Insurance Regulatory and Development Authority Act, 1999 and the Regulations made thereunder. The said policy issued by the 1st respondent in the instant case is good health personal accident policy and clause 3 of the terms and conditions attached forms part of the said policy and to the extent the same is relevant to the present case reads as under. “GENERAL CONDITIONS APPLICABLE TO PERSONAL ACCIDENT AND MEDICLAIM SECTIONS 1. RENEWAL OF POLICY If the Proposer opts for non-renewal of this policy or for changes in renewal policy, he/she shall inform Citibank by filling in the application form indicating his/her preference and ensuring that it reaches at least 10 days prior to the date of commencement of the policy. Once the policy is renewed no request for alteration of policy choice will be entertained. The Company shall not be responsible or liable for non-renewal of the policy for any reason whatsoever arising out of any decision of Citibank in this regard or due to any omission or rejection of any such application either wholly or in part, due to any decision, action or omission of Citibank or due to non-receipt or delayed receipt (i.e. after the due date) of the application form or of the medical practitioner’s report, wherever required, or due to the application received being incomplete in any respect or due to any other reason whatsoever. Notwithstanding this, however, the decision to accept or reject for coverage any person upon renewal of this mediclaim insurance shall rest solely with the Company. The company may at its discretion revise the premium rates and / or the Terms & conditions of the Policy every year upon renewal thereof. Renewal of this Policy is Automatic, only if the premium due is paid by Citibank to the Company before the due date on behalf of the Card member or the accountholder, as per his/her Application form. 2. CANCELLATION OF POLICY The Company may at any time cancel this policy certificate by sending the insured 30 days notice by registered letter at the insured's last known address and in such event the Company shall refund to the insured a pro-rata premium for unexpired period of insurance. The Company shall however remain liable for any claim which arose prior to the date of cancellation. In case renewal of policy was effected against the insured's option for non-renewal, the said policy may be cancelled from its inception in respect of the insured person for whom the cover is sought to be cancelled, at the request of the insured to either Citibank/the Company, within 45 days from the policy commencement date and full refund of premium will be refunded to Citibank on behalf of the insured by the Company provided no claim has occurred upto the date of cancellation. Citibank’s confirmation of receipt of request for such cancellation will be binding upon the proposer/insured person. In all other cases the proposer may at any time cancel this policy and in such event the Company shall allow refund of premium at Company's short period rates only as indicated below, provided no claim has occurred upto the date of cancellation. Period on Risk Rate of premium to be retained by Co. Upto 1 month 1/4th of the Annual Rate Upto 3 months 1/2 of the Annual Rate Upto 6 months 3/4 of the Annual Rate Exceeding 6 months Full Annual Rate In the event of the proposer requesting for cancellation of this policy and seeks refund of premium, any certificate issued to the insured for the purpose of claiming deduction under Section 80-D of the Income Tax Act, 1961 shall also be deemed to be cancelled and the insured cannot claim any deduction for Income Tax purposes, against such policy or certificate.” 14. Clause 11.4 reads as under: “AUTOMATIC RENEWAL - The Card member agrees and acknowledges that if he/she opts for non-renewal of Good Health Policy or changes in members for subsequent Policies, he/she shall inform the Bank by filling in the application form indicating his/her preference and ensuring that it reaches at least 10 days prior to the date of commencement of the policy. Otherwise it shall be construed by the Bank that he/she has opted for automatic renewal/auto debit to his Card Account towards renewal of the existing policy”. 15. A reading of the above conditions of the insurance policy in the present case makes it manifest that request and notice are mandatory before resorting to cancellation of policy and the renewal. In the instant case, there is absolutely no material on record to show that the petitioner herein made such a request to the 2nd respondent. It is significant to note at this juncture that the policy of the petitioner herein was cancelled erroneously and having done so, the responsibility is sought to be thrown on the petitioner’s husband saying that he did not approach them within time. As per the conditions, renewal is affected followed by debit of the amount from the account of the petitioner’s husband. Obviously, in the instant case, mistakenly reversal of the amount was affected. There is no written request made by the petitioner herein, which is mandatory as per the terms and conditions of the policy. Except stating that the husband of the petitioner made a request for cancellation, no evidence is placed on record either by 1st respondent or the 2nd respondent to substantiate such contention. Being an agent of the 1st respondent, the 2nd respondent is also liable as it is a transaction under legislation. Obviously, in the present case, in the process of debiting the amount pertaining to the husband of the petitioner as no policy was given to him, the 2nd respondent wrongly reversed the amount pertaining to the petitioner also and in order to cover up the said latches, the 2nd respondent is making every attempt which is impermissible. In fact, this discrepancy was pointed out by the petitioner’s husband vide email dated 30.1.2007. The good health policy issued by the 1st respondent clearly shows that policy was renewed from 1.10.2005 to 30.9.2006. In view of clear clauses in the terms and conditions of the policy, the plea of oral request for cancellation being sought to be raised by the respondents herein is neither sustainable nor tenable in the eye of law. The impugned action is also contrary to condition No.11(4) and 6 of the terms and conditions of the policy. Section 111 of the Insurance Act, 1938 imposes an obligation to serve notice and in the instant case, the same is lacking. It is also to be noted at this juncture that the provisions of Insurance Act, 1938 and the IRDA Act, 1999 and the Regulations made thereunder obligate the Insurance Companies to discharge their functions in accordance with the provisions of the said legislations. 16. Insurance is undoubtedly a regulatory business within the parameters of the Regulations framed under the above legislations. At this juncture, it is appropriate to refer to the judgments relied on by the learned counsel for petitioner. (1) In SHUJAUDDIN AHMED JEDDY v. STATE BANK OF INDIA LIFE INSURANCE CO. LTD., HYDERABAD (1 supra), this Court at paragraph 7 held as under: “7. So far as the first contention is concerned, it is too late in the day to undertake verification as to the nature of an entity vis-à-vis definition of State under Article 12 of the Constitution of India. With each passing year, the definition got expanded and the number of entities answering the description “instrumentalities of the State”, increased. Through the process of interpretation by the constitutional Courts, the tests laid therefor, namely deep and pervasive control of the agency by the State, the public finances being handled by the agency, its having been created under a statute, are all manifestly present in case of the respondent. Admittedly, it is a creation under an Act of Parliament and it is not only a Nationalised Bank, but also is completely owned by the Government of India. Therefore, the first facet of the objection can be rejected without much of further discussion”. (2) I n M/s NEW INDIA ASSURANCE COMPANY LTD. V. SABHARATHANAM ALIAS SABHA RATHINAM AND OTHERS ETC. (2 supra), the Kerala High Court at paragraph 8 held as under: “8. In effect therefore where the parties fail to arrive at a settlement, Permanent Lok Adalath is not rendered helpless but is given the power to proceed to adjudicate the dispute as such, subject to the condition that the dispute is not related to any offence. A Lok Adalath constituted under Chapter VI derives its jurisdiction to proceed to settle certain disputes only when the parties agree for such settlement. In other words, power of adjudication, dehors any submission made in this behalf by the parties to the jurisdiction of the Lok Adalath, is not contemplated in so far as the Lok Adalaths constituted under Chapter VI of the Act are concerned. But a permanent Lok Adalath is competent to decide contentious issues as well. I also refer to the fact that Section 22E of the Act provides that an award passed by the Permanent Lok Adalath either on merit or in terms of a settlement agreement shall be final and binding on all the parties thereto and on persons claiming under them. The award is deemed to be a decree of a civil court and therefore can be executed in that behalf. (see Section 22E (3) and 5). I have referred to the above features to understand the powers of adjudication therefore available to a Permanent Lok Adalath. Obviously this cannot be inferred. But a Lok Adalath and a permanent Lok Adalath would only be vouchsafed with powers strictly in consonance with the statutory powers providing for their establishment and laid down in that behalf. It cannot be gainsaid that Permanent Lok Adalaths are entitled to only deal with such disputes which touch upon \"public utility services\". The term is defined under Section 22A(b) of the Act. What is really considered in the present case is the scope of the provision \"public utility services\" in so far as it mentions the term \"insurance service\". It would have been ideal if the legislature had defined insurance service for the purpose of ascertaining the limits of jurisdiction of the Permanent Lok Adalath in that regard. But it has not been done and therefore it would be necessary to refer to similar terms as they are defined in statutes covering the same field. The Insurance Act 1938 does not define an insurance service but significantly it defines Life Insurance business, Marine Insurance business, General insurance business and Fire insurance business. Life Insurance business is defined under Section 2(11) of the Insurance Act. The same reads as follows: 2(11). Life Insurance business means the business of effecting contracts of insurance upon human life, including any contract whereby the payment of money is assured on death (except death by accident only) or the happening of any contingency dependent on human life, and any contract which is subject to payment of premiums for a term dependent on human life and shall be deemed to include: (a) the granting of disability and double or triple indemnity accident benefits, if so provided in the contract of insurance. (b) the granting of annuities upon human life and the granting of superannuation allowances and annuities payable out of any fund applicable solely to the relief and maintenance of persons engaged or who have been engaged in any particular profession, trade or employment or of the dependents of such persons.” (3) I n SMT.ASHA GOEL v. LIFE INSURANCE CORPORATION OF INDIA (3 supra), the Bombay High Court at paragraph 9 held as under: “9. Assuming, for the sake of argument, that the liability of L.I.C. under a policy of life insurance is not a statutory liability and is a contractual liability even then, in my judgment, a writ under Art. 226 of the Constitution can lie against L.I.C. for enforcement of such a liability. Mr. Paranjape urged that in view of five decisions of the Supreme Court and one of a Division Bench of our High Court, contractual liability cannot be enforced by a writ of mandamus under Art. 226. Thus in the case of Har Shankar v. Dy. Excise and Taxation Commr., [(1975)3SCR254] , it was held that a writ petition under Art. 226 is not an appropriate remedy for impeaching validity of contractual obligations. Then in the case of State of Punjab v. Balbir Singh, [(1976)IILLJ4SC[ it was held by the Supreme Court that the High Court was wrong in allowing the writ petition by quashing the demand, as the demand was made in enforcement of liabilities arising out of mutually agreed conditions of auction, as writ petition was not an appropriate remedy for enforcing contractual obligations. And Mr. Paranjape thereafter pointed out that in case of the Divisional Forest Officer v. Bishwanath Tea Co. Ltd., [1981]3SCR662 it was held by the Supreme Court that when breach of statutory provision was not proved contractual right flowing from a contract of lease cannot be enforced in writ petition under Art. 226 of the Constitution. Mrs. Singhvi, while dealing with these three judgments, rightly contended that facts disclosed in these three judgments, show that contractual obligation were arising purely out of commercial activities of business conducted by the parties which facts and circumstances can be well distinguished from the facts and circumstances can be well distinguished from the facts and circumstances of our cases where the business activities of L.I.C. were not of a commercial nature but were for the welfare and benefits of the society as it was a primary goal of L.I.C. to promote the welfare of the people. I find lot of substance in the submission of Mrs. Singhvi for the simple reason that in the case of Har Shankar, the Supreme Court clearly pointed out that there was no fundamental right to do trade or business in intoxicants as dispute between the parties there was regarding the conduct of liquor business and the auction sale and licenses etc. The Supreme Court further observed that the State, under its regulatory powers, has the right to prohibit absolutely every form of activity in relation to intoxicants - its manufacture, storage, export, import, sale and possession. In all their manifestations, these rights are vested in the State, and since rights in regard to intoxicants belong to the State, it is open to the Government to part with those rights for a consideration, further observed the Supreme Court. Now, when the business disputes between the parties were with regard to the liquor shops and auction sales and licenses and when the State had so wide powers and pointed out by the Supreme Court, as above, the contractual obligations from such dealings naturally cannot be enforced in the writ jurisdiction of the High Court under Art. 226. In the case of Balbir Singh again the facts were regarding an auction sale for country liquor. So far as the case of the Divisional Forest Officer is concerned, the Company there tried to enforce through writ petition the right to remove timber without the liability to pay royalty where it was held that the Company was not enforcing its right under Rule 37 of the Assam Land and Revenue and Local Rates Regulation, but was seeking to enforce a contractual right under the specific terms of contract of lease agreed to between the Company and the Government and such contractual right could not be enforced in a writ petition. Therefore, the facts and circumstances obtaining in these three cases where the activities of business were purely of commercial nature, they had nothing to do with the welfare of the people. Mr. Paranjape, did submit that after all the activities where the Government contracts were concerned, were meant for the welfare of the people and there is no reason to distinguish such activities from the activities carried out by LIC which are also purely business activities. I am afraid, I cannot agree with Mr. Paranjape as there is certainly lot of difference between the liquor and the timber business involving contracts based solely on profit making motive on the one hand and the LIC business on the other where there is no profit making motive but only service to the community and the nation. The benevolent activities of LIC which are beneficial to the members of the public cannot be compared by any stretch of imagination with the liquor and the timber business. Mr. Paranjape then took me through a judgment of the Division Bench of this Court in case of Rewant v. Divisional Manager, Life Insurance Corporation of India, Nagpur: AIR1985Bom75 in which it was held that there was no statutory obligation on the part of the Life Insurance Corporation apart from contractual obligation on their party to pay surrender value of a certain policy to the petitioners and as such a writ of mandamus cannot be issued under Article 226 of the Constitution. This decision is also of no help to Mr. Paranjape because the facts and circumstances obtaining in the said case could also be well distinguished from the facts and circumstances appearing in our case. In the case before the Division Bench, a writ petition was filed seeking declaration that Life Insurance Corporation was under a legal obligation to pay the surrender value of the policies even to a Hindu Minor absolute assignee of the policies , through his natural guardian and further to issue a writ of mandamus as a consequential relief for payment of the said surrender value. It was held by the Division Bench that the writ petition was not maintainable as what the petitioner in effect purported to do was to oblige the Corporation to pay the surrender value to the guardian, and the question of payment of the surrender value either to the assignee or to his guardian might arise in a given case under the contract of insurance, which was not the same thing as discharge of statutory duty imposed upon the party to do certain thing. The Division Bench further held that there being no provision either under the Insurance Act or in the enactment under which the Corporation had been incorporated casting upon it any duty or obligation to pay the surrender value to the guardian or the assignee without asking it for any certificate or proof and that it was not possible to spell out from S. 38(5) of the said Act any duty or obligation on the part of the Corporation to pay the surrender value or the sum assured to the transferee or assignee in particular circumstances and that could at the most be subject matter of a suit if there was no other remedy available under the Insurance Act. Therefore, in the said matter there were many questions raised under the Insurance Act and the Guardian and Wards Act and the point involved was regarding the obligation of the Corporation to pay surrender value of the policies to a Hindu minor through his natural guardian and naturally, therefore, under those facts and circumstances a writ under Art.226 may not lie but in the matter of satisfying claim, pure and simple, on a life insurance policy, the matter for consideration would be altogether different which could be agitated under Art.226. Mr. Paranjape also dealt with two Supreme Court rulings referred to and relied upon by the Division Bench viz. the case of the Bihar Eastern Gangetic Fishermen Co- operative Socy. Ltd. v. Sipahi Singh : [1978]1SCR375 and the case of Kulchhinder Singh v. Hardayal Singh Brar : (1976)IILLJ204SC and submitted that in these two cases also it was held by the Supreme Court that contractual obligations cannot be enforced under the writ jurisdiction by the High Court under Art. 226 of the Constitution. I may once again point out that the facts and circumstances obtaining in both the cases are also different and distinguishable from those obtaining in our case and therefore the observations of the Supreme Court made in those cases will not help Mr. Paranjape. Thus in the case of Kulchhinder Singh the Supreme Court held: The remedy of Art. 226 is unavailable to enforce a contract qua contract. A mere contract agreeing to a quota of promotions cannot be exalted into a service rule or statutory duty. Private law may involve a State, a statutory body, or a public body in contractual or tortious actions. But they cannot be siphoned off into the writ jurisdiction. Although Art. 226 is of wide amplitude to correct manifest injustice, but contractual obligations in the ordinary course, without even statutory complexion cannot be enforced by this sort, though, wrong cut. Hence, a writ petition merely to enforce an agreement entered into between the employees and the co- operative Bank about giving certain percentage of promotions to existing employees is not maintainable.\" Can these observations of the Supreme Court in a service matter, by any stretch of imagination, be useful to Mr. Paranjape in a matter like the one on hand? The answer is obvious, no. Then in the case of the Bihar Eastern Gangetic Fisherman Co-operative Society Ltd. the facts and circumstances discloses that the disputes between the parties there were regarding money matters and settlements arrived at and the installments asked for and some fishery rights sought to be enforced and all that wherein the Supreme Court ruled that the writ of mandamus cannot be granted to enforce obligations flowing from contract. Is it possible to say that the facts and circumstances in the case before the Supreme Court were same or similar as in our case?” (4) In L.I.C. OF INDIA AND ANOTHER v. CONSUMER EDUCATION AND RESEARCH CENTRE (4 supra), the Hon'ble Apex Court at paragraph 18 held as under: “18. It would thus be well settled law that the Preamble Chapter of Fundamental Rights and Directive Principles accord right to livelihood as a meaningful life, social security and disablement benefits are integral schemes of socio-economic justice to the people in particular to the middle class and lower middle class and all offendable people. Life insurance coverage is against disablement or in the event of death of the insured economic support for the dependents, social security to livelihood to the insured or the dependents. The appropriate life insurance policy within the paying capacity and means of the insured to pay premia is one of the social security measures envisaged under the Constitution to make right to life meaningful, worth living and right to livelihood a means for sustenance.” (5) I n M/S RAJ RESTAURANT AND ANOTHER v. MUNICIPAL CORPORATION OF DELHI (5 supra), the Hon'ble Apex Court at paragraph 5 held as under: “5. Where, in order to carry on business a licence is required, obviously refusal to give licence or cancellation or revocation of licence would be visited with both civil and pecuniary consequences and as the business cannot be carried on without the licence it would also affect the livelihood of the person. In such a situation before either refusing to renew the licence or cancelling or revoking the same, the minimum principle of natural justice of notice and opportunity to represent one's case is a must. It is not disputed that no such opportunity was given before taking the decision not to renew the licence though it is admitted that for the reasons hereinbefore set out the licence was not renewed. Such a decision in violation of the minimum principle of natural justice would be void. Now, it is true that no specific order is made setting out the reasons for refusal to renew the licence. But the action of sealing the premises for carrying on the business without a licence clearly implies that there was refusal to renew the licence and the reasons are now disclosed. And the action disclosing the decision being in violation of the principle of natural justice, deserves to be quashed.” 17. Coming to the judgments relied on by the learned counsel for 1st respondent-Insurance company. (1) In THE CENTRAL BANK OF INDIA LTD. v. THE HARTFORD FIRE INSURANCE LTD. (6 supra), the Hon'ble Apex Court at paragraphs 5, 6 and 10 held as under: “5. The contention of the appellant is based on the interpretation of Clause 10. Now it is commonplace that it is the court's duty to give effect to the bargain of the parties according to their intention and when that bargain is in writing the intention is to be looked for in the words used unless they are such that one may suspect that they do not convey the intention correctly. If those words are clear, there is very little that the court has to do. The court must give effect to the plain meaning of the words, however it may dislike the result. We have earlier set out Clause 10 and we find no difficulty or doubt as to the meaning of the language there used. Indeed the language is the plainest. The clause says \" This insurance may be terminated at any time at the request of the insured \", and \" the insurance may also at any time be terminated at the instance of the company. \" These are all the words of the clause that matter for the present purpose. The words \" at any time \" can only mean \" at any time the party concerned likes. \" Shortly put, Clause 10 says \"either party may at its will terminate the policy. \" No other meaning of the words used is conceivable. 6. None the less learned counsel for the appellant referred us to various authorities .which, according to him, showed that it was a fit case for implying a term in the clause and to these we now turn. We were first referred to Halsbury's Laws of England, 3rd edition, volume II, paragraph 640, page 391, where it is said that \" In order to give effect to a contract according to what appears to have been the intention of the parties, the court may imply a term or condition or a qualification of a clause which is not inconsistent with the general tenor of the document.\" It was said that it was the intention of the parties that the policy would be liable to termination only for a reasonable cause and that this appeared when the contract, as it had to be, was, \" read in the light of the material circumstances of the parties in view of which the contract is made,\" The quotation is from the judgment of Lord Wright in Luxor v. Cooper, [1941] A.C. 108. and as to the correctness of the proposition contained in it there is no question. The learned counsel then said that here the insurance was effected and undertaken at a time when riot was raging and, therefore, the parties must have intended that the policy could be terminated only for a reasonable cause. We are unable to agree. The prevailing riots do not indicate what the intention of the parties, that is, of both of them, was. There is no question of reading the policy in the riotous conditions for they throw no certain light. Further, the riot risk cover agreement expressly provided that \" all the conditions of the policy shall apply \" to it and this agreement had been made in the light of the prevailing riot conditions. Obviously, the parties intended that Clause 10 of the conditions of the policy would be applicable to the riot risk cover also. We also think that plain and categorical language cannot be radically changed by relying upon the surrounding circumstances ; a right to terminate at will cannot, by reason of the circumstances, be read as a right to terminate for a reasonable cause. 10. We are besides of opinion that there is nothing capricious or unreasonable in Clause 10. The insurer was free at the beginning to decide whether he would agree to indemnify the assured against the risk or not, and if he decided to indemnify, for how long he would indemnify. If the assured cannot compel an insurer to take up a risk, he cannot complain of unreasonableness, caprice or even abuse of power if the insurer is prepared to take it up only on a condition that he would be free at any time to change his mind as to the future. Furthermore, Clause 10 gives the assured the same liberty to terminate the policy. Besides a term in the form contained in Clause 10 is a common term in policies and must, therefore, have been accepted as reasonable: see MacGillivray on Insurance Law, 5th edition, volume 2, page 963. The Privy Council in Sun Fire Office v. Hart, (1889) 14 App. Cas. 98. held of a clause similar to Clause 10 in the present case that it gave an insurer the right to terminate the contract at will and that there was nothing absurd in such a term. Learned counsel for the appellant sought to distinguish this case from the present on the ground that there previous fires had occurred and anonymous letters had been written threatening continuance of the incendiarism and this made it reasonable for the insurer to terminate the policy. This attempted distinction however is wholly beside the point. The question before the Judicial Committee was not whether a particular termination of a policy was reasonable but of the interpretation of a clause in it. For that question only we have referred to that decision and on it we find that the view taken by us receives full support from the decision of the Judicial Committee. In that respect the two cases are indistinguishable.” (2) In THE GENERAL ASSURANCE SOCIETY LTD. v. CHANDMULL JAIN (7 supra), the Hon'ble Apex Court at paragraph 23 held as under: “23. This condition gives mutual rights to the parties to cancel the policy at any time. To the assure it gives a right to cancel the policy at will. It was contended that such a condition was so unreasonable that it could not be allowed to stand. It was argued on the authority of See Hai Tong Bank Ltd. v. Rambler Cycle Co. Ltd. L.R. (1959) A.C. 576 that the extreme width of the condition must be cut down by an implied limitation which was that the main object and intent of the contract should not be allowed to be defeated and that object and intent was the insuring of the property against floods and cancellation of the policy when floods had started would defeat the main object and intent of the contract. This argument mixes up two situations. The first is a question of pure principle. There is nothing wrong in including such a mutual condition for the cancellation of the insurance An assured may like to invoke such a condition when the policy is found to differ from the policy he agreed to accept or it contained a term or condition to which he did not agree. He may not accept the same policy from another company to which he did not make a proposal. He may invoke this condition if the company transfers its assets and business to another. Just as the assured may like to terminate the policy without assigning any reasons and at his will, the assure may also do likewise.” (3) In KULCHHINDER SINGH AND OTHERS v. HARDAYAL SINGH BRAR (8 supra), the Hon'ble Supreme Court at paragraph 12 held as under: “12. The controversy before us in substance will turn on the construction and scope of the agreement when the claim to a quota as founded cannot be decided in writ jurisdiction without going back on well, settled guidelines and even subverting the normal processual law-except perhaps in extreme case which shock the conscience of the Court of or other extra-ordinary situation, an aspect we are not called upon to explore here. We are aware of the wide amplitude of Article 226and its potent use to correct manifest injustice but cannot agree that contractual obligations in the ordinary course, without even statutory complexion, can be enforced by this short, though, wrong cut.” (4) In STATE OF ORISSA v. UNITED INDIA INSURANCE CO. LTD. (9 supra), the Hon'ble Supreme Court at paragraph 12 held as under: “12. In view of the fact that the Branch Manager was not authorised to cover the risk of the loss on account of non-supply, the agent, namely, the Insurance Company is not liable for any damages. But in view of the fact that the contract had been duly terminated under the insurance itself, the declaration sought, viz., for that the contract was duly cancelled, is clearly within the power and legal competence. This controversy is covered by the judgment of a Constitution Bench of this Court in General Assurance Co. v. Chandumull Jain : [1966]3SCR500 . Therein, this Court had held thus: This condition gives mutual rights to the parties to cancel the policy at any time. To the assurer it gives a right to cancel the policy at will.” (5) In LIFE INSURANCE CORPORATION OF INDIA v. KIRAN SINHA (10 supra), the Hon'ble Supreme Court at paragraph 2 held as under: “We have heard the learned Attorney-General and Mr.A.K.Sen, learned counsel for the respondent. The High Court could not have in the circumstances of this case directed the payment of the money claimed under the insurance policies in question in a petition filed under Article 226 of the Constitution. The only remedy available to the respondent in this case was a suit before a civil court. The judgment of the High Court is, therefore, set aside”. (6) In NATIONAL THERMAL POWER CORPORATION LTD. v. M/S BHANU CONSTRUCTION CO. P. LTD., HYDERABAD (11 supra), this Court at paragraph 25 held as under: “25. From the above decisions, it is clear beyond any doubt that merely because the Government, or an officer of the Government, or an agency or instrumentality of the State enters into a contract for execution of certain works with another person, it cannot be said to be acting in the public law field. Its rights and obligations are the same as those of any other person entering into a contract. The only limitation is that before entering into the contract, it must act consistent with the guarantee contained in Article 14; (vide E.E. & C. Ltd. v. State of West Bengal : [1975] 2 SCR 674 , and Ramana v. International Airport Authority of India : (1979) IILLJ 217 SC ). But once a contract is entered into, it is the terms of the contract that govern, and no question of Article 14, or arbitrary action, arises. The very concept of one party to the contract acting arbitrarily and thereby violating Article 14, is misplaced. The action may be wrongful; but it is not such an action as is amenable to writ jurisdiction on the ground that it is arbitrary. If a contract is terminated wrongfully, it cannot be questioned in a writ petition saying that the termination is arbitrary, or unreasonable. The concept of arbitrary or unreasonable action amenable to writ jurisdiction is relevant only where the State acts under a statute, or in exercise of its executive/administrative power. Taking any other view would not only be contrary to well established authority, but would also cast an uncalled for burden upon this Court. Not only this Court would be exercising its writ jurisdiction for determining the private rights of the parties arising from, or relating to a contract, but would also be obliged to enquire into disputed questions of fact, which it would not ordinarily undertake.” (7) I n N.VENKATESWARLU ALIAS VENKANNA v. REGIONAL MANAGER, UNITED INDIA INSURANCE CO. LTD., HYDERABAD (12 supra), this Court at paragraph 9 held as under: “9. There is no dispute with regard to the jurisdiction of the civil Court to settle the claim. A reading of the above decision of the Supreme Court in LIC of India's case (supra) clearly indicates that the civil Court's jurisdiction is not excluded, even if there is a clause prohibiting a particular forum and Section 46 of the Insurance Act, in clear and categorical terms with non-obstante clause confers a right to issue any relief in respect of the policy in the Court of competent jurisdiction in India. In the facts and circumstances of the case, to resolve the controversy in question and following the dictum laid down by the Apex Court in LIC of India's case (supra), I am of the view that the writ petition is not the adequate and proper Forum and the only remedy available to the petitioner is to approach the civil Court, if he is so advised, for settling the claim.” (8) In ORIENTAL INSURANCE CO. LTD. v. SONY CHERIYAN (13 supra), the Hon'ble Apex Court at paragraph 15 held as under: “15. The insurance policy between the insurer and the insured represents a contract between the parties. Since the insurer undertakes to compensate the loss suffered by the insured on account of risks covered by the insurance policy, the terms of the agreement have to be strictly construed to determine the extent of liability of the insurer. The insured cannot claim anything more than what is covered by the insurance policy. That being so, the insured has also to act strictly in accordance with the statutory limitations or terms of the policy expressly set out therein.” (9) I n CH.NARASIMHULU v. UNITED INDIA INSURANCE CO., CUDDAPAH (14 supra), this Court at paragraph 6 held as under: “From the above, it is clear that to enforce the insurance contract i.e., policy, a writ petition would not lie. In view of this, this Court is not inclined to express any opinion as to whether the petitioner comes within clause (c) or clause (d) of policy. If so advised, the petitioner may institute a suit subject to law of limitation and claim insurance amount. The writ petition is misconceived and the same is accordingly dismissed”. (10) In NATIONAL INSURANCE CO. LTD. v. SEEMA MALHOTRA (15 supra), the Hon'ble Apex Court at paragraph 19 held as under: “Under Section 25 of the Contract Act an agreement made without consideration is void. Section 65 of the Contract Act says that when a contract becomes void, any person who has received any advantage under such contract is bound to restore it to the person from whom he received it. So, even if the insurer has disbursed the amount covered by the policy to the insured before the cheque was returned dishonoured, insurer is entitled to get the money back”. (11) In DEOKAR EXPORTS PVT. LTD. v. NEW INDIA ASSURANCE CO. LTD. (16 supra), the Hon'ble Apex Court at paragraphs 11 and 12 held as under: “11. A policy of insurance is a contract based on an offer (proposal) and an acceptance. The appellant made a proposal. The respondent accepted the proposal with a modification. Therefore, it was a counter proposal. The appellant had three choices. The first was to refuse to accept the counter-proposal, in which event there would have been no contract. The second was to accept either expressly or impliedly, the counter-proposal of the respondent (that is respondent's acceptance with modification) which would result in a concluded contract in terms of the counter proposal. The third was to make a counter proposal to the counter-proposal of the respondent in which event\" there would have been no concluded contract unless the respondent agreed to such counter-counter- proposal. But the appellant definitely did not have the fourth choice of propounding a concluded contract with a modification neither proposed nor agreed to by either party. If the appellant did not agree to the policy covering the period 26.8.1988 to 25.8.1989 instead of the period 12.3.1988 to 12.9.1989, the result would never create an insurance contract effective from 30.6.1989 or any other date. 12. The contention of the learned Counsel for the appellant that an equitable view must be taken is untenable. In a contract of insurance, rights and obligations axe strictly governed by the policy of insurance. No exception or relaxation can be made on the ground of equity.” (12) In an unreported judgment in W.P.No.3429 OF 2001, the Karnataka High Court held as under: “An insurance is a contract between two parties. It is neither required nor is desirable for a court to direct the State or any other authority to enter into a contract against their interest unless by law they are required to do so. The terms of policy of insurance and its conditions are the contractual prerogatives of an insurance company and there is no legal provision which can compel or make it obligatory for an insurance company to make mediclaim insurance coverage to the persons suffering from a particular disease. It is the prerogative of the insurer to contract and undertake the risk fixing the terms and conditions of the policy and it is for the insurer to undertake particular risk according to the premium collected. They cannot be compelled to cover a risk …………………………………….” 18. Coming to the judgment relied on by the learned counsel for 2nd respondent-Bank in FEDERAL BANK LTD. v. SAGAR THOMAS (17 supra) and paragraphs 18 and 32 of the said judgment held as under: “18. Executive Committee of Vaish Degree College, Shamli and Ors. v. Lakshini Narain and Ors., (1976)IILLJ163S} was also referred to on the proposition that contract of personal service cannot ordinarily be enforced. 32. The other case which has been heavily relied upon is Andi Mukta (supra). It is no doubt held that a Mandamus can be issued to any person or authority performing public duty, owing positive obligation to the affected party. The writ petition was held to be maintainable since the teacher whose services were terminated by the institution was affiliated to the university and was governed by the Ordinances, casting certain obligations which it owed to that petitioner. But it is not the case here. Our attention has been drawn by the learned counsel for the appellant to paragraphs 12, 13 and 21 of the decision (Andi Mukta) to indicate that even according to this case no writ would lie against the private body except where it has some obligation to discharge which is statutory or of public character.” 19. In view of the mandatory provisions of the Insurance Act, 1938 and the Insurance Regulatory and Development Authority Act, 1999 and the Regulations made under the said legislation, the respondents herein are undoubtedly discharging the statutory functions under the said enactments, as such, it is absolutely not open for the respondents to contend that the present Writ Petition is not maintainable under Article 226 of the Constitution of India. In the guise of the plea that the petitioner is seeking enforcement of contractual obligation, the respondents cannot escape from their liability and cannot be permitted to get away from their statutory obligations under the legislations. For the fault committed by the respondents herein, in the considered opinion of this Court, the petitioner herein who is a senior citizen and who did not violate any conditions of insurance policy, cannot be penalized for no fault of her. Since the 2nd respondent is a corporate agent of the 1st respondent herein, the 1st respondent is equally responsible for their wrong, if any committed by the 2nd respondent in discharge of its function in the said capacity. The plea of alternative remedy, as pleaded by the respondents herein cannot be the basis for denying the claim of the petitioner herein. Therefore, this court is of the opinion that the petitioner herein is entitled for the relief claimed in the present Writ Petition. 20. For the aforesaid reasons and having regard to the principles laid down by the Hon'ble Apex Court and this Court in the above referred judgments, the Writ Petition is allowed and the impugned cancellation of renewed good health policy granted in favour of the petitioner herein is hereby set aside and the respondents herein are directed to extend the benefit to the petitioner herein as per the good health policy issued in 2004. As a sequel, the miscellaneous petitions, if any, shall stand closed. There shall be no order as to costs. ______________ A.V.SESHA SAI, J Date: 5.6.2014 DA THE HON’BLE SRI JUSTICE A.V.SESHA SAI W.P.No.7402 of 2007 5.6.2014 IN THE HIGH COURT OF JUDICATURE OF ANDHRA PRADESH AT HYDERABAD THE HON’BLE SRI JUSTICE A.V.SESHA SAI W.P.No.7402 of 2007 Date: 5.6.2014 Between Smt.B.Chenchamma Petitioner And The New India Assurance Company Ltd., Anna Salai, Chennai and another. Respondents [1] 2011(5) ALD 824 [2] AIR 2009 KERALA 71 [3] AIR 1986 BOMBAY 412(1) [4] AIR 1995 SC 1811 [5] (1982) 3 SCC 338 [6] AIR 1965 SC 1288 [7] 1966 ACJ 267 [8] AIR 1976 SC 2216 [9] AIR 1997 SC 2671 [10] 1985 ACJ 657 [11] AIR 1989 AP 140 [12] 2000(4) ALT 531 [13] 1999(6) J T 149 [14] 2008(6) ALD 350 [15] 2001 ACJ 638 [16] 2009(1) ALD 15 (SC) [17] 2003(10) SCC 733 "