Holding

Renewal of a mediclaim policy is ordinarily required but not automatic, and a public‑sector insurer must act fairly, reasonably, and in accordance with statutory and constitutional mandates, precluding arbitrary refusal of renewal.

Summary

The petitioners held mediclaim policies with United India Insurance Co. Ltd., a subsidiary of the General Insurance Corporation of India, and paid premiums annually. After several claims, the insurer refused to renew the policies, citing high claim ratios and pre‑existing diseases. The Gujarat High Court ordered renewal, holding that the insurer, as a ‘State’ under Article 12, must act fairly and reasonably. On appeal, the Supreme Court examined whether renewal of a mediclaim policy is automatic upon premium payment and whether the insurer could arbitrarily refuse renewal. It held that renewal is ordinarily required but not automatic; the insurer, being a public‑sector entity, must comply with statutory provisions, constitutional fairness, and the regulations of the IRDA, and cannot deny renewal arbitrarily. The Court affirmed the High Court’s decision and dismissed the appeals with costs.

Issues considered

The renewal of a mediclaim policy is automatic upon payment of premium or subject to conditions.
Whether a public‑sector insurance company, deemed a ‘State’ under Art. 12, must act fairly and reasonably in refusing renewal.
Whether the contract of insurance can be interpreted solely as a private contract or must be read in light of statutory and constitutional provisions.
The scope of judicial review under Art. 226 in matters involving insurance contracts.

Legislation cited

Constitution of Indias. Art.12, s. Art.14, s. Art.47
General Insurance Business (Nationalisation) Act, 1972s. 10-A, s. 19(2), s. 19(3), s. 24A
Indian Contract Act, 1872s. Sec.23
Insurance Act, 1938
Insurance Regulatory and Development Authority Act, 1999

Subjects

mediclaiminsurance renewalpublic sector insuranceautomatic renewalfairnessconstitutional lawArticle 12Article 14statutory interpretationjudicial reviewIRDApolicyholder rights

Judgment

[2008) 9 S.C.R. 778

A UNITED INDIA INSURANCE COMPANY LTD.
~-
V.
MANUBHAI DHARMASINHABHAI GAJERA & ORS.
(Civil Appeal Nos.4113-4115 of 2008)

MAY 16, 2008
B
[S.B. SINHA AND V.S. SIRPURKAR, JJ]
A
Insurance:
i
Public sector insurance company - Medic/aim policy -
c Renewal of - If automatic, on payment of premium - Held:
Renewal of medic/air'I policy, subject to just exceptions, should
ordinarily be made - But that does not mean that renewal is
automatic - On facts, the insured, though not entitled to auto-
matic renewal, was entitled to be treated fairly- Only because
the insured had started suffering from a disease, the same
D
did not mean that the said disease could be excluded - If the
insured had made some claim in each year, the insurance
company could not refuse to renew insurance policy only for
that reason - Action of the insurance company was highly ar-
bitrary - Certain directions given to Insurance Regulatory and
E
Development Authority (/RDA) - Insurance Act, 1938 - Gen-
era/ Insurance Business (Nationalisation) Act, 1972 - ss.10A,
19(2), 19(3) and 24A - Insurance Regulatory and Develop-
ment Authority (Protection of Policyholders' Interest) Regula-
tions, 2002 - Regns. 2(1)(e}, 6, 7(1)(n}, 11(4) - Insurance
F Regulatory and Development Authority Act, 1999 - Constitu- A
.
tion of India, 1950 - Art. 12.
Constitution of India, 1950 -Art. 226 - Judicial Review -
Scope of - Held: While determining a tis having public law
domain, Courts entitled to take a broader view - Even cases
G
involving contracts may be determined by High Court in exer-
cise of its jurisdiction under Art. 226 - On facts, Appellant in-
surance company had declined to renew the medic/aim policy ~ -
- Basic facts were admitted - The High Court was concerned

H 778
UNITED INDIA INSURANCE CO. LTD. v. MANUBHAI 779
DHARMASINHABHAI GAJERA & ORS.

, ... with the interpretation of statute and interpretation of the con-
tract of insurance - Judicial Review of the impugned action
A

on part of Appellant was, therefore, permissible.

The business activities of insurance compani.es are
governed by the Insurance Act, 1938. In terms of the said
Act, the Insurance Regulatory and Development Author- B
ity (the Authority) was constituted by the Central Govern-
.A.
.. ment. The Authority made the Insurance Regulatory and
Development Authority (Protection of Policyholders' In-
terest) Regulations, 2002.
c
Appellants are subsidiary insurance companies of
General Insurance Corporation of India, carrying on in-
surance business in terms of the General Insurance Busi-
ness (Nationalisation) Act, 1972. By the Insurance Regu-
latory and Development Authority Act, 1999, s.24A was in-
D
serted in the 1972 Act directing cessation of the exclu-
sive privilege of the Corporation and the acquiring com-
panies in relation thereto.
Respondents had taken medi-claim policies. Appel-
lant insurance companies declined to renew the same. E
Respondents filed writ petitions before the High Court
which were allowed.
In appeals to this Court, the Appellants contended
that 1) the High Court erred in holding that the contract of
.. ;.. insurance is no longer ~n the realm of contract; 2) that the F
insurance companies must function having regard to
'commercial expedience' consideration in view of s.24A
of the 1972 Act and 3) that even assuming that Appellant
is a 'State' within meaning of Art. 12 of the Constitution,
the same by itself would not mean that it cannot enter into G
a contract with the policy holder on its own terms, par-
""11r
ticularly when such terms have been approved by the Au-
thority.
Respondents, on the other hand, contended that the
H
780 SUPREME COURT REPORTS [2008] 9 S.C.R.

A insurance companies having regard to their obligations
not only in terms of the constitutional provisions but also
the provisions of the 1938 Act, the 1972 Act and the 1999
Act and the Regulations framed thereunder and the guide-
lines issued, are bound to renew mediclaim policies from
s time to time on the same terms and conditions; that Ap-
pellants, are bound to act fairly and reasonably in the
matter of renewal of its policies and wrongful refusal on
their part must be remedied; that assuming that the in-
surance companies must address their business concern
c vis-a-vis the competition which they face from the other
companies, the same does not mean that, despite being
the 'State' within the meaning of Art. 12 of the Constitu-
tion, they would refuse to carry out their constitutional
and statutory obligations, particularly in view of the fact
that the insurance business was acquired by the 1972 Act
0
to subserve the public purpose; that renewal of insurance
policy, for all intent and purport, should be held to be au-
tomatic, subject of course to tender of the amount of pre-
mium of insurance in time inasmuch as in terms of the
guidelines issued by the Authority, the policy is to be a
E continuous one; that the right to cancel the policy and
refusal to renew the same must be held to be confined
only to the exclusionary clauses contained in the policy;
that the functions of Appellants being regulated by statu-
tory guidelines and circulars issued from time to time, any
F departure therefrom must be held to be wholly unfair and
mala fide; that the insurance companies being 'State' are
not only bound to comply with the constitutional scheme
contained in the preamble of the Constitution but also the
provisions of s.1 OA of the 1972 Act and other provisions
G of the Act and that in any event the policies must be con-
strued in favour of the insured in view of the maxim - con-
tra proferentum and uberrimae fidei.
Whether renewal of a mediclaim policy on payment
of the amount of premium would be automatic, is thus
H
UNITED INDIA INSURANCE CO. LTD. v. MANUBHAI 781
DHARMASINHABHAI GAJERA & ORS.

-.4. the question involved in the present appeals. A
Dismissing the appeals, the Court
HELD:1.1. Appellant is a 'State' within the meaning
of Art.12 of the Constitution. It has been created under
the General Insurance Business (Nationalisation) Act, B
1972. If it is a 'State' its action must be fair and reason-

.... A able. Appellants being subsidiaries to General Insurance
Corporation cannot ignore the statutory provisions. They
are bound by the directions issued by the Central Gov-
ernment. [Paras 23, 24, 67] [798-C,E, 820-8,C] c
1.2. The functions of the insurance companies are
governed by statute. A contract of insurance, therefore,
must subserve the statutory provisions. It must be con-
strued having regard to the larger public policy and pub-
lie interest guiding nationalization of the insurance com- D
panies. [Para 28] [799-F]
-Y
1.3. When the terms and conditions of contract of in-
s_urance are fixed, the protective umbrella over the inter-
est of the policy holders becomes fully open. The insur-
ance companies cannot either in their prospectus or in E
the terms of policy lay down any condition which would
be derogatory to the terms and conditions approved by
the Regulatory Authority. If the contract of insurance it-
self provides for renewal of an insurance policy the same
...
~ may not mean that the assured has a legal right of auto- F
matic renewal, but the Courts are required to strike a bal-
ance. [Para 34] [801-G, 802-A]
1.4. A distinction in the approach of the Court in this
behalf must also be borne in mind, namely that a Court
G
may exercise its power of judicial review at the threshold
of formation of a· contract and the cases where the terms
.'" and conditions of contract are to be enforced. Whereas
in the former case, the Courts' jurisdiction is wider, in the
latter, it is not. However, it does not mean that the Court
~
H

\
782 SUPREME COURT REPORTS [2008] 9 S.C.R

A shall not interfere even in a case where the term of the J..-
contract is against the public policy or where in enforc-
ing the same the State acts arbitrarily, unfairly or unrea-
sonably or makes discrimination amongst the persons
similarly situated. [Para 35] [802-B,C,D]
B 1.5. Where a renewal is based on mutual consent,
there may be no automatic renewal but, a mediclaim policy ~

where a senior citizen is involved would stand somewhat
on a different footing. It will depend upon the contract
entered into between the parties and the statutes operat-
-
c ing in the field as also constitutional scheme. [Para 46]
1.5. There exists a distinction between a private player
in the field and a public sector insurance company. A pri-
vate player, as the law stands now, may not be bound to
comply with the constitutional requirements of the equal-
D
ity clause, but the appellants are. Whereas a private player
in the field is only bound by the statutory regulations aper- 1-
ating in the field, the public sector insurance companies
are also bound by the directions issued by the General In-
surance Corporation as also the Central Government. They
E cannot be ignored. [Paras 51, 52] [814-F-H, 815-A]

1.6. It is essential that while on the one hand, the in-
surance companies are not put to undue burden keeping
in view the changes in the statute as also the policy deci-
...
F sions of the Central Government, they cannot also be .I,
permitted to act wholly arbitrarily and unreasonably. They
cannot be permitted to create a social condition which
would negate all human rights. [Para 55] [816-B,C]
Peacock Plywood (P) Ltd. v Oriental Insurance Co. Ltd.
G [(2006) 12 SCC 673 and Life Insurance Corporation of India
v. Consumer Education and Research Centre [(1995) 5 SCC
482] - relied on. ,.~

Asstt. Excise Commissioner. v. Issac Peter [(1994 (4)
sec 104] - held inapplicable.
H '

{
UNITED INDIA INSURANCE CO. LTD. v. MANUBHAI 783
DHARMASINHABHAI GAJERA & ORS.
•...4 Biman K. Bose v. United India Insurance Co. Ltd. [(2001) A
6 SCC 477]; Kesavananda Bharati v. State of Kerala [(1974)
3 SCC 225} ; Virinder Gaur and others v. State of Haryana
and others [(1995) 2 SCC 577]; Kirloskar Brothers Ltd. v. Em-
ployees' Stte Insurance Corporation [(1996) 2 SCC 682]; State
of Kerala & Ors. v. Kurian Abraham (P) Ltd. & Anr. [(2008) 3 B
S.C.C. 582]; D. Nataraja Mudaliar v. The State Transport Au-

- -" thority of India, Madras [AIR 1979 SC 114]; Ramana Dayaram
Shetty v. The International Airport Authority and others [AIR
1979 SC 1628]; New Indian Assurance Co. Ltd. v.
Harshadbhai Amrutbhai Modhiya & Anr. [(2006) 5 SCC 192]; c
Mahabir Auto Stores & Ors. v. Indian Oil Corporation & Ors.
[(1990) 3 SCC 752]; Kumari Shrilekha Vidyarthi & Ors. v. State
of UP & Ors. [(1991) 1 SCC 212]; Pradeep Kumar Jain v.
Citi Bank [(1999) 6 SCC 361J; Depot Supdt., H.P Corpora-
tion Ltd. v. Kolhapur Agricultural Market Committee [(2007) 6
D
SCC 159]; Hardesh Ores (P) Ltd. v. Hede & Co. [(2007) 5
---:f' SCC 614 and Divisional Forest Officer v. Bistiwanath Tea Co.
Ltd. [(1981) 3 sec 246]- referred to.
Gama Foods Ltd. v. Eagle Star Insurance Company
[1997 (2) ILRM 193] and A (FC) & Ors. (FC) v. Secetary of E
State for the Home Department [2004 UKHL 56] - referred
to.
2. In each of the present cases, the action was
... )> brought by private individuals. The writ petitions, how-
ever, had wider ramification. They not only would affect F
the writ petitioners, but also others who would be simi-
larly situated. Such cases may not be dealt with as indi-
vidual cases. In appropriate case, such litigation may be
regarded as public ir:iterest litigation. Even if it is not so
regarded, the High Court· may consider the same to be G
'Public Law Litigation'. While determ·ining a lis having
• )- public law domain, the Courts would be entitled to take a
broader view. It would not consider it to be case involv-
ing contract-qua-contract question only. Even cases in-
volving contracts may be determined by the High Court H
784 SUPREME COURT REPORTS [2008] 9 S.C.R.

A in exercise of its jurisdiction under Article 226 of the Con- J...•
stitution. In the present cases, basic facts are admitted.
The High Court was concerned with the interpretation of
statute and interpretation of the contract. Judicial Review
of the impugned action on the part of the Appellants was,
B therefore, permissible. [Para 56] [816-E-H, 817-A-D]
UC of India & Anr. v. Consumer Education & Research ,,_
Centre & Ors. [(1995) 5 SCC 482]; Sanjana M. Wig (Ms) v.
Hindustan Petroleum Corpn. Ltd. [(2005) 8 SCC 242]; ABL
.....
International Ltd & Anr. v. Export Credit Guarantee Corpora-
c tion of India Ltd & Ors. [(2004) 3 SCC 553]; The D.FO, South
Kheri & ors. v. Ram Sanehi Singh [(1971) 3 SCC 864 and
Noble Resources Ltd. v. State of Orissa &Anr. [(2006) 10 SCC
236] - relied on.
3. Each of the cases in question clearly shows that
D
the action on the part of the authorities of the Appellants
was highly arbitrary. Respondents though were not en- ..,._
titled to automatic renewal, but indisputably, they were
entitled to be treated fairly. When an insurance policy is
cancelled, the conditions precedent therefor must be ful-
E filled. Some reasons therefor must be assigned. When an
exclusion clause is resorted to, the terms thereof must be
given effect to. What was necessary was a pre-existing dis-
ease when the cover was inspected for the first time. Only
because the insured had started suffering from a disease,
F the same would not mean that the said disease shall be ,!, •
excluded. If the insured had made some claim in each year,
the insurance company should not refuse to renew insur-
ance policies only for that reason. [Para 64] [819-A-D]
4. Renewal of a medi-claim policy subject to just ex-
G
ceptions should ordinarily be made. But the same does
not mean that the renewal is automatic. Keeping in view
the terms and conditions of the prospectus and the in- -< •
surance policy, the parties are not required to go into all
the formalities. The very fact that the pol ;v contemplate~
H
UNITED INDIA INSURANCE CO. LTD. v. MANUBHAI 785
DHARMASINHABHAI GAJERA & ORS.
•..4
terms for renewal, subject of course to payment of requi- A
site premium, the same cannot be placed at par with a
case of first contract. [Para 65] [819-E,F]
5.1. Having regard to the fact situation obtaining in
each case, this Court is not inclined to exercise discre-
tionary jurisdiction under Art. 136 of the Constitution. B
\
...._ " However, keeping in view the role played by the insur-
ance companies, it is essential that the Regulatory Au-
thority must lay down clear guidelines by way of regula-
tions or otherwise. No doubt, the regulations would be
applicable to all the players in the field. The duties and c
functions of the Regulatory Authority, however, are to see
that the service provider must render their services keep-
ing in view the nature thereof. It will be appropriate if the
Central Government or the General Insurance Companies
also issue requisite circulars. [Para 66] [819-G] D
-""T
5.2. The IRDA is requested to consider the matter in
depth and undertake a scrutiny of such claims so that in the
event it is found that the insurance companies are taking
recourse to arbitrary methodologies in the matter of enter-
ing into contracts of insurance or renewal thereof, appro- E
priate steps in that behalf may be taken. [Para 68] [820-C,D]
CIVIL APPELLATE JURISDICTION : Civil Appeal No .. .
.. ;..
41134115 of 2008
From the final Judgment and Order dated 5/12/2003 of F,
the High Court of Gujarat at Ahmedabad in LP.A. Nos. 1028,
1003 and 1004 of 2003
WITH
C.A .. Nos. 4116 and 3633 of 2008 G
~
) G. Vahanvati, S.G., B.B. Sawhney, Atul Nanda, Rameeza
Hakeem, Sandeep Bajaj, Rajesh Kumar (for Mis. Law Associ-
ates & Co.), Vishnu Mehra, Vikram Singh, Sakshi Miittal (for
S.N. Bhat), Sameer Parekh, Sumeet Lall, Rukhmini Bobde (for
H
786 SUPREME COURT REPORTS [2008] 9 S.C.R.

A Mis. Pare~h & Co.), Indra Sawhney, Sadhana Sandhu and ~·
Hemantika Wahi for the Appearing Parties.

The Judgment of the Court was delivered by

S.B. SINHA, J. 1. Leave granted in all the matters.
B
INTRODUCTION
2. Whether renewal of a mediclaim policy on payment of
the amount of premium would be automatic, is the question in-
volved herein.

C BACKGROUND FACTS
3. The Parliament enacted the General Insurance Busi-
ness (Nationalisation) Act 1972 (for short 1972 Act) to provide
for the acquisition and transfer of shares of Insurance Compa-
0 nies and undertakings of other insurers in order to serve better
the need of the economy by securing the development of gen-
eral insurance business in the best interest of the community r·
and to ensure that the operation of the economic system does
not result in the concentration of wealth to the common detri-
E ment, for the regulation and control of such business and for
other matters connected therewith or incidental thereto.

4. Appellants are the two subsidiary insurance companies
of General Insurance Corporation of India, carrying on the in-
surance business in terms of the 1972 Act. The General lnsur-
F ance Companies had a monopoly over the business of general
insurance whereas Life Insurance Corporation of India consti-
tuted under the Life Insurance Corporation Act, 1956 enjoyed
the monopoly in respect of the business of life insurance.
5. The business activities of the insurance companies are
G governed by the Insurance Act, 1938 (for short the 1938 Act). In
terms of the provisions of the said Act, an authority known as
Insurance Regulatory and Development Authority (the Author-
.. •.
ity) was constituted by the Central Government in exercise of its
power conferred upon it by clause 2( c) of Section 114 of the
H 1938 Act.
UNITED INDIA INSURANCE CO. LTD. v. MANUBHAI 787
DHARMASINHABHAI GAJERA & ORS. [S.B. SINHA, J.]

.......... The Parliament also enacted the Insurance Regulatory and A
Development Authority Act, 1999. By the 1999 Act the Parlia-
ment inserted Section 24A in the 1972 Act directing cessation
of the exclusive privilege of the Corporation and the acquiring
companies in relation thereto. In exercise of the powers con-
ferred by clause 2(c) of sub-section (2) of Section 114A of the B
1938 Act read with sections 14 and 26 of the 1999 Act, the
~ Authority made Regulations known as Insurance Regulatory and
, Development Authority (Protection of Policyholders' Interest)
Regulations, 2002 (for short the 2002 Regulations).

FACTUAL MATRIX c
6. We may at the outset, briefly notice the facts involved in
one of the matters

Facts of Civil Appeal @ SLP (C) 153412006
D
7. Respondents No.1 obtained the mediclaim policy from
... ,., the appellant in April, 1995 and renewed annually upon pay-
ment of the requisite amount of premium. After over three years
namely, in July, 1998, Respondent No.1 suffered a coronary dis-
ease and was admitted in the Escorts Heart Institute and Re-
E
search Centre where he underwent 'Angioplasty'. A claim made
by him was paid by the appellant. In January, 2001 he was once
again admitted to the Escorts Heart Institute and Research
Centre and once again underwent 'Angioplasty'. The amount
claimed was duly reimbursed by the appellant to the respon-
"' > dent. In May, 2002 he was hospitalized in Holy Family Hospital F
for a minor operation and the medical expenses claimed to that
effect were reimbursed by the appellant. In April, 2002 he un-
derwent a bye-pass surgery. Respondent No.1 submitted his
claim which, however, was not paid.
G
8. On 3rc1 April, 2003, the respondent approached the ap-
pellant for renewal of the policy and issued a cheque towards
>
> payment of the premium for the purpose of renewal of the policy
w.e.f. 6th April, 2003, which was refused on the purported ground
of 'high claim ratio'. After serving notice, the said respondents
H
788 SUPREME COURT REPORTS [2008] 9 S.C.R.

A filed a writ petition which was allowed by the learned Single ......
Judge of the Delhi High Court by his order dated 7th January,
2005 directing the appellant to renew his mediclaim insurance
policy.
9. An intra court appeal filed by the appellant was dis-
B missed by reason of the impugned judgment and order dated
151hJuly, 2005. ~

We would notice the factual matrix involved in other mat- '
ters at a later stage.
c PROCEEDINGS
10. Respondents in each of these matters entered into
their respective contracts of insurance with the appellant com-
pany. They were not renewed. Contending that the appellant
and other subsidiaries. of the Corporation being 'State' within
D
the meaning of Article 12 of the Constitution of India, they must
be fair and reasonable and keeping in view the principles enun-
.....
ciated in the Directive Principle of State policy as contained in
Chapter IV of the Constitution of India, writ petitions were filed
before the Gujarat High Court.
E
11. We need not notice the other details of the said pro-
ceedings save and except that the conclusions recorded by the
Division Bench of the said Gujarat High Court were as under :-
"39. For the foregoing reasons, we conclude as under : .... ..
F
[1] The insured has an option under the existing
mediclaim insurance policy to continue the
cover by payment of renewal premium in time
in respect of the sum insured.
G [2] In case of renewal without break in the period,
the mediclaim insurance policy will be renewed
without excluding any disease already covered <( "'
under the existing policy which may have been
contracted during the period of the expiring
H policy. Renewal of mediclaim insurance policy
UNITED INDIA INSURANCE CO. LTD. v. MANUBHAI 789
DHARMASINHABHAI GAJERA & ORS. [S.B. SINHA, J.]

cannot be refused on the ground that the insured A
had contracted disease during the period of
the expiring policy so far as the basic sum
insured under the existing policy is concerned.

(3] In cases where the insured seeks an
enhancement of the amount of sum insured at 8
the time of renewal, the option to renew will not
extend to the amount of such enhancement and
renewal in respect thereof will depend upon the
mutual conse.nt of the contracting parties.
c
[4] Renewal of a medical claim insurance policy
cannot be refused, despite timely payment of
the renewal premium, on the ground that
continuance of the cover would become more
onerous or burdensome for the insurer due to D
the insured contracting a covered disease
during the period of the existing policy.
[5] The insurer may refuse renewal, even in
cases where the insured has an option to renew
· the policy on payment of the renewal premium E
in time, on the grounds, such as,
misrepresentation, fraud or non-disclosure of
material facts that existed at the inception of
the contract and would have vitiated the
insurance of the cover at its inception or non- F
fulfillment of obligations on the part of the insured
or any other ground on which the performance
of the promise under the contract is dispensed
with or excused under the provisions of the
Indian Contract Act or any other law or when the G
insurer has stopped doing business.
[6] The government insurance companies
continue to be "State" within the meaning of
Article 12 of the Constitution notwithstanding
the entry of private companies in the field of H
790 SUPREME COURT REPORTS [2008] 9 S.C.R.

A general insurance, ending their monopoly by .......
virtue of insertion of Section 24A in the Act of
1972, and they cannot arbitrarily cancel or refuse
to renew an existing mediclaim policy."
It was directed :
B
"40. For the foregoing reasons, we find
ourselves in agreement with the reasoning and
conclusions of the learned Single Judge in the
impugned order from which the Letters Patent
Appeals No.1028 of 2003, No.1003 of 2003
• ..-
-
c
and 1004 of 2003 arise, and there being no
warrant for interference with the same, all the
three appeals are, therefore, dismissed with
costs.
D 40.1 For the foregoing reasons, since the
grounds given for refusing to renew the 10' 4
mediclairr1 insurance policies of petitioners Nos.
2 and 3 are arbitrary and also agains~ the
contractual terms, the Special Civil Applicati ·'·
E No.9425 of 2002 is partly allowed, by holding
that the refusal of renewal of the medicfaim
insurance policy of the petitioners No.2 and 3
was arbitrary and illegal, and it is directed that
the respondents insurance companies will
F renew their respective policies from the date ... .
on which they expired, on payment of the
renewal premium payable by them under the
Scheme, without excluding the diseases that
may have been contracted by them during the
period of their existing policies for the
G
concerned year. Rule is made absolute
accordingly with costs."
~
..
CONTENTIONS
12. Mr. G.E. Vahanvati, learned Solicitor General of India,
H
UNITED INDIA INSURANCE CO. LTD. v. MANUBHAI 791
DHARMASINHABHAI GAJERA & ORS. [S.B. SINHA, J.]
~..>
appearing on behalf of the appellant, submits :- A

1) The High Court committed a serious error in holding
that the contract of insurance is no longer in the realm
of contract.

2) The insurance companies must function having regard B
to 'commercial expedience' consideration in view of
Section 24A of the Act.

3) Assuming that the appellant is a 'State' within the
meaning of Article 12 of the Constitution of India, the
same by itself would not mean that it cannot enter c
into a contract with the policy holder on its own terms,
particularly when such terms have been approved by
the Authority.

13. Mr. Sameer Parekh, and Mr. Sawhney, learned coun-
D
.... -,,. sel, appearing on behalf of the respondents, on the other hand,
contends:-
1) The insurance companies having regard to their
·n-· obligations .not only in terms of the constitutional·
provisions but also the provisions of the 1938 Act, E
1972 Act and 1999 Act; the Regulations framed
thereunder and the guidelines issued, are bound to
renew mediclaim policies from time to time on the
same terms and conditions .
... ~
2) Appellants, in view of the decision of this Court, in F
Biman K. Bose v. United India Insurance Co. Ltd.
[(2001) 6 sec 477] are bound to act fairly and
reasonably in the matter of renewal of its policies
and wrongful refusal on their part must be to be an
act of mischief resorted to cause harm to the insured G
....
which must be remedied .
~
3) Assuming that the insurance companies must
address their business concern vis-a-vis the
competition which they face from the other
H
792 SUPREME COURT REPORTS [2008] 9 S.C.R.

....... ~
A companies, the same does not mean that, despite
being the 'State' within the meaning of Article 12 of
the Constitution of India, they would refuse to carry
out their constitutional and statutory obligations,
particularly in view of the fact that the insurance
B business was acquired by the 1972 Act to subserve
the public purpose.
4) Renewal of insurance policy, for all intent and purport,
should be held to be automatic, subject of course to
tender of the amount of premium of insurance in time
c inasmuch as in terms of the guidelines issued by the
Authority, the policy is to be a continuous one.
5) The right to cancel the policy and refusal to renew
the same must be held to be confined only to the
exclusionary clauses contained in the policy.
D
..,. ..
6) The functions of the appellant being regulated by
statutory guidelines and circulars issued from time
to time, any departure therefrom must be held to be
wholly unfair and mala fide.
E 7) The insurance companies being 'State' are not only
bound to comply with the constitutional scheme
contained in the preamble of the Constitution of India
but also the provisions of Section 1OA and other
provisions of the Act. ... •
F
8) In any event the policies must be construed in favour
of the insured in view of the maxim - contra
proferentum and uberrimae fidei.
STATUTORY PROVISIONS, GUIDELINES ETC.
G
14. Sections 10-A, 19(2) and 19(3) of 1972 Act, which are
A.
relevant for our purpose, read as under:- 1

"10-A. Transfer to Central Government of shares vested in
Corporation.-All the shares in the capital of the acquiring
H companies, being-
UNITED INDIA INSURANCE CO. LTD. v. MANUBHAI 793
DHARMASINHABHAI GAJERA & ORS. [S.B. SINHA, J.]

•> (a) the National Insurance Company Limited; A
(b) the New India Assurance Company Limited;

(c) the Oriental Insurance Company Limited;

(d) the United India Insurance Company Limited,
B
and vested in the Corporation before the commencement
of the General Insurance Business (Nationalisation)
Amendment Act, 2002 shall, on such commencement,
stand transferred to the Central Government.

Section 19 - Functions of acquiring companies c
(1) ....

(2) Each acquiring company shall so function under this
Act as to secure that general insurance business is
developed to the best advantage of the community. D

·-ii: (3) In the discharge of any of its functions, each acquiring
company shall act so far as may be on business principles
and where any directions have been issued by the Central
Government or the Insurance Regulatory and Development
E
Authority established under sub-section (1) of section 3 of
the Insurance Regulatory and Development Authority Act,
1999 (41 of 1999) shall be guided by such directions.
(4) ....
,.
> 15. 'Prospects' has been defined in the Regulation 2(1 )(e) F
of the 2002 Regulations to mean a document issued by the in-
surer or in its behalf to the prospective buyers of insurance, and
should contain such particulars as are mentioned in Rule 11 of
Insurance Rules, 1939 and includes a brochure or leaflet serv-
ing the purpose. Such a document should also specify the type G
and character of riders on the main product indicating the na-
>). ture of benefits flowing therefrom.

16. Regulation 6 provides for the matters to be stated in
the insurance policy.
H
794 SUPREME COURT REPORTS [2008] 9 S.C.R.

A Regulation 7(1 )(n) of 2002 Regulations read thus :- ..... 1

"7. Matters to be stated In general insurance policy.- (1)
A general insurance policy shall clearly state:

(n) provision for cancellation of the policy on grounds of
B misrepresentation, fraud, non-disclosure of material facts
or non-cooperation of the insured;"

Regulation 11(4) reads as under:-

11. General.-
c (4) Any breaches of the ~(>ligations cast on an insurer or
insurance agent or insurance intermediary in terms of these
regulations may enable the Authority to initiate action
against each or all of them, jointly or severally, under the
Act and/or the insurance Regulatory and Development
D Authority Act, 1999."
.._. ...
17. Indisputably the Authority also issued guidelines on "File
and Use" requirements for general insurance products; clause
3 whereof relate to IRDA requirements for consideration and
review of products meaning thereby the insurance policies. The
E
requirements specified by the Authority are:-
"(i) Design and rating of products must always be on
sound and prudent underwriting basis. The
contingencies insured under the product should be
F clear and provide transparent cover which is of value _.... .
to the insured.
(ii) All literature relating to the product should be in simple
language and easily understandable to the public at
large. As far as possible, a similar sequence of
G presentation may be followed. All technical terms
should be clarified in simple language for the benefit
of the insured. ... ....
(iii) The product should be a genuine insurance product
of an insurable risk with a real risk transfer. "Alternate
H
UNITED INDIA INSURANCE CO. LTD. v. MANUBHAI 795
DHARMASINHABHAI GAJERA & ORS. [S.B. SINHA, J.]

........ risk transfer" or "financial guarantee" business in any A
form will not be accepted.
(iv) The insurance product should comply with all the
requirements of the Protection of Policyholders'
Interests Regulations 2002.
B
(v) Insurers should use as far as possible, similar
wordings for describing the same cover or the same
requirement across all their products. For example
clauses on renewal of insurance, basis of insurance,
due diligence, cancellation, arbitration etc., should c
have similar wordings across all products.

(vi) The pricing of products should be based on
appropriate data and with technical justification.
'
(vii) The terms and conditions of cover shall be fair
D
between the insurer and the insured .
... "' (viii) Margins built into rates shall be consistent with the
experience of the insurer in respect of commission,
management expenses, contingencies and profit.
E
(ix) Insurer should take necessary steps in ensuring that
competition will not lead to unprincipled rate cutting
and other improper underwriting practices."
18. Guidelines 7 and 25 of the Guidelines issued by the
!'
>- IRDA on "File and Use:" requirements for general insurance F
products read as under:-
"7. Till the tariffs are in force, it will not be necessary for
any insurer to file information on any product that complies
with tariff rates, terms and conditions. In respect of products
that package insurance covers that are governed by tariffs, G
with those that are not, the insurer should file such products
>- ~ and confirm that the section governed by tariffs complies
with tariff rates, terms and conditions for the portion that
is governed by tariffs, as long as tariffs remain in force.
H
796 SUPREME COURT REPORTS [2008] 9 S.C.R.

A 25. The documents to be filed in respect of every new ~_..

product or revision of an existing product in respect of
products classified under categories (i) and (ii) of para 19
above shall be as follows:
i) Statement filing particulars of the product in Form A;
B
ii) Certificate by the Chief Executive Officer in Form B;
iii) Certificate by Appointed Actuary in Form C;
iv) Certificate by the company's lawyer in Form D;
c v) Copies of Prospectus and other sales literature
relating to the product;
vi) Copy of Proposal Form;
n
vii) Copy of Policy Form and copies of the standard
~
D endorsements to be used with the policy; and
viii) Copy of the Underwriter's Manual in respect of the 'I ...
product along with the list of declined risks, if any.
Important: While issuing the certificates under paras (ii),
E (iii) and (iv) above, persons responsible for issuing such
certificates should carefully go through all the required
aspects and apply due diligence. Serious view may be
taken in case of any deficiencies."
19. Clauses 16 to 18 provide for the responsibility for com-
F pliance. ~
..
20. For the purpose of obtaining approval of the terms and
conditions of the policy, the insurance companies are required
to file the following documents before the authority in respect of
G a new product or any revision of an existing product, which in-
eludes a certificate by the company's lawyer as specified in
Form D appended _thereto. ...
~
21. The National Insurance Company being one of the sub-
sidiary companies of the General Insurance Company issued a
H letter dated 181h December, 1998, inter alia, in the following
UNITED INDIA INSURANCE CO. LTD. v. MANUBHAI 797
DHARMASINHABHAI GAJERA & ORS. [S.B. SINHA, J.]
"~ terms:- A
"Different situations which may arise-during the renewal of
insurance and how to deal with them are summarized
below:-
(1) In case of renewal without a break in the period B
....
the policy will be renewed including the disease

- contracted during the expiring policy period.

(2) If there is a break, the fresh policy must specifically
exclude the disease contracted during the expiring
policy period and during the break period and it c
should be mentioned·in the schedule of the Policy
specifically
(3) If an insured is already covered under an
insurance policy, say, a group mediclaim, and wants
D
to take an individual policy the same may be issued
·~
upto.the identical sum insured on the same terms
and conditions if there is no break.
(4) If a person is insured with another subsidiary and
wishes to renew with us, the same should be E
considered only after ascertaining the claim status
and exclusion under the previous policy.
In case the claim status revealed is adverse or there is a
,,. continuing illness or an impending illness, such cases
)-
should be advised to continue with the same subsidiary F
and should not be accepted."
ANALYSIS OF THE HIGH COURT JUDGMENT :
22. The High Court has considered the matter under the
following broad headings :- G

'.>- .. a) The insurer have a public duty having regard to Article
47 of the Constitution of India.
b) In view of the regulatory framework operating in the

-
•
field it has a limited power to contract. H
798 SUPREME COURT REPORTS (2008) 9 S.C.R.

A c) The terms and conditions of the insurance policies -l ..

provide for an automatic renewal, .the pre-condition
whereof is only timely payment of premium.
d) The construction of a contract of insurance must be
made having regard to the nature and principles
B underpinning a contract of health insurance.
.
e) For the purpose of effective implementation of a
contract of insurance as regards mediclaim policy,
business considerations are wholly immaterial.
-
c ~ Different kinds of policies would attract different
.principles.
23. There is no escape from the fact that the appellant is a
'State' within the meaning of Article 12 of the Constitution. It has
been created under the 1972 Act. The said Act, as the preamble
D
shows, was enacted for achieving certain purposes, economic
T ~
benefit of the people and/or group of people, being one of it. At
the point of time when the 1972 Act was enacted the insurance
companies enjoyed a monopoly status. But would it mean that
only because it ceases to enjoy the same by itself is sufficient
E to hold that it is not required to follow the constitutional or statu-
tory norms?
24. If it is a 'State' its action must be fair and reasonabl~. It
has been so held in a catena of decisions of the Court as for
F example Peacock Plywood Plywood (P) Ltd. v. Oriental Insur- ~
..
ance Co. Ltd. [(2006) 12 sec 673 paragraphs 57 at page 691) ~
and Life Insurance Corporation of India v. Consumer Educa-
tion and Research Centre [(1995) 5 SCC 482).
25. There cannot be any doubt that Directive Principles of
G State policy by themselves per se are not enforceable in a court
of law. [See Kesavananda Bharati v. State of Kera/a [(1974) 3
sec 225J. ~
... )

26. We would assume that it is one thing to say that the
State is to make all endeavours to improve the puolic health but
H

...
UNITED INDIA INSURANCE CO. LTD. v. MANUBHAI 799
DHARMASINHABHAI GAJERA & ORS. [S.8. SINHA, J.]
"~ the same by itself would not mean that a contract of insurance A
governed by statute must receive construction in terms of the
said provision or otherwise, the endeavour of the State should
have been to direct compulsory insurance for all its citizens.
Improvement of public health has been held to mean an obliga-
tion on the part of the State to put forth its policy to ecological 8
~
balance and hygienic environment, the later being an indirect
-~
facet of the right to healthy life. {Virinder Gaur and others v.
State of Haryana and others [(1995) 2 SCC 577]}. {[See also
Kirloskar Brothers Ltds. v. Employees' Stte Insurance Corpo-
ration [(1996) 2 sec 682]}.
c
27. Even otherwise the term "health" may be given a wider
meaning in the context of insurance. It may mean sound health.
Collins English Dictionary defines "health" as :-

"Health: the state of being bodily and mentally vigorous
D
~ -. and free from disease, the general condition of body and
mind: in poor health, the condition of any unit, society, etc.:
the economic health of a nation, a toast to a person, wishing
him or her good health, happiness, etc., (modifier) ofor
relating to food or other goods reputed to be beneficial to
the health: health food; a health store., (modifier) of or E
relating to health, esp. to the administration of health: a
health committee; health resort; health service., an
exclamation wishing someone good health as part of a
fl>. ),. toast (in the phrases your health, good health, etc.)."
F
28. The functions of the insurance companies are governed
by statute. A contract of insurance, therefore, must subserve the ·
statutory provisions. It must indisputably be construed having
regard to the larger public policy and public interest guiding na-
tionalization of the insurance companies.
G
29. Insurance Sector is regulated. The provisions of the
~;. ~
Insurance Act are applicable to all insurance companies irre-
spective of the fact as to whether they are in public sector or
private· sector. When a business is regulated, all concerned
would be governed thereby. · H
800 SUPREME COURT REPORTS [2008] 9 S.C.R.

A 30. It is one thing to say that the terms and conditions of a
contract are statutory in nature but is another thing to say that
the statute governs or controls the business itself. It is the latter
which is applicable to the fact of the case.
Two things are apparent. One, the Central Government has
8 come out with a new economic policy. The monopoly status has
been taken away from the General Insurance Corporation of
India and its subsidiaries. The insurance companies are re-
quired to compete with others in the field, but the same may not
necessarily mean that despite the statutory interdicts the public
C sectors insurance companies must have a level playing field
with the private insurance companies.
31. We have, despite the new economic policy of the Cen-
tral, no option but to proceed on the assumption that the public
sector insurance companies being a State have a different role
0
to play. It is not to say that as a matter of policy statutory or
T •
otherwise the insurance companies are bound to regulate all
contracts of insurance having the statement of Directive Prin-
ciples in mind but there cannot be any doubt whatsoever that
fairness or reasonableness on the part of the insurance com-
E panies must appear in all of its dealings.
The Authority wants the insurance companies to offer a
fair deal and all the terms and conditions of their offer must be
transparent. There should not be any hidden agenda. Even they
F should not take recourse to 'ticketing contract'.
When, however, the terms of the new product or revised
product require the approval of the Authority, prima facie the
same would mean th~t they are fair and reasonable. The action
on the part of the Authority is not in question. Regulations, guide-
G lines and circulars are binding on the insurance companies. {See
State of Kera/a & Ors. v Kurian Abraham (P) Ltd. &Anr. [(2008)
3 S.C.C. 582]}
Different principles, however, have been laid down for
H dealing with different kinds of policies. Broadly we may divide
UNITED INDIA INSURANCE CO. LTD. v. MANUBHAI 801
DHARMASINHABHAI GAJERA & ORS. [S.B. SINHA, J.]

.. > them into two categories - life insurance which is based on an A
annuity scheme does not require any renewal clause . Policies
not involving the life of an insured would, however, stand on a
different footing.
32. It has a tariff policy. It is completely under the control of
the Regulatory Authority. The tariff has to be fixed by the Author- B
ity. What should be the reasonable tariff would again be the sub-
ject matter of exercise of jurisdiction by the Authority. So far as
non tariff policies are concerned, the insurance companies may
charge tariff but the terms and conditions thereof are regulated
by the Authority. Indisputably, the Authority intends to grant statu- c.
tory protection to the policy holders. It is with that end in view the
Protection Regulations were framed. It speaks of 'prospectl.js'.
It speaks of the mode and manner in which the insurance com-
panies should function. Not only that even the guidelines have
been framed on 'file and use' requirements. Before the Author- D
ity each insurance company has undertaken that they will be
... ""' fair in their dealing. It is one thing to say that if they breach their
terms which would attract the penal clause as contained in sub-
clause (4) of Clause 11 of the Regulations, the Authority may
take action against the Insurance Company but it is another thing E
to say that the Authority would also be entitled to redress the
individual grievances. Matter may be different if it is to be held
that the policies are automatically renewable or for that matter
all insured had a legal right of renewal as was the case in D.
~ ; Nataraja Mudaliar v. The State Transport Authority of India, F
Madras [AIR 1979 SC 114], but it is another thing to say that no
such legal right exists at all.
33. We will deal with that aspect of the mater a little later.
34. We may, however, at this stage notice that when the
G
terms and conditions of contract of insurance are fixed, the pro-
tective umbrella over the interest of the policy holders became
• i- ,._ fully open. The insurance companies cannot either in their pro-
spectus or in the terms of policy lay down any condition which
would be derogatory to the terms and conditions approved by
H
802 SUPREME COURT REPORTS [2008) 9 S. C.R.

A the Regulatory Authority. If the contract of insurance itself pro-
vides for renewal of an insurance policy the same may not mean
that the assured has a legal right of automatic renewal, but the
courts are required to strike a balance.
35. Another distinction in the approach of the Court in this
B behalf must also be borne in mind, namely that a court may ex-
ercise its power of judicial review at the threshold of formation
of a contract as was the case in Ramana Dayaram Shetty v.
The International Airport Authority and others [AIR 1979 SC
1628) and the cases where the terms and conditions of con-
e tract are to be enforced. Whereas in the former case, the courts'
jurisdiction is wider, in the latter, it is not. We may, however,
hasten to add that it does not mean that the court shall not inter-
fere even in a case where the term of the contract is against the
public policy or where in enforcing the same the State acts arbi-
0 trarily, unfairly or unreasonably or makes discrimination amongst
the persons similarly situated.
36. Keeping in view the aforementioned principles we may
have to construe the provisions of the prospectus, the jurisdic-
tion of the Third Party Administrator, cover incepts etc.
E
PROSPECTUS - MED/CLAIM INSURANCE POLI-
. GIES

37. The prospectus issued provide for salient features of
c:-
the policy, some of them are :- ..
"1. SALIENT FEATURES OF THE POLICY:
1.1 The policy covers reimbursement of Hospitalisation/
Domiciliary Hospitalisation expenses for illness/diseases
or injury sustained.
G
1.2 In the event of any claim becoming admissible under
this scheme, the company/TPA will pay to the Hospital/
Nursing Home or the Insured person the amount of such
expenses as would fall under different heads mentioned
below, and as are reasonable and necessarily incurred
H
UNITED INDIA INSURANCE CO. LTD. v. MANUBHAI 803
DHARMASINHABHAI GAJERA & ORS. [S.B. SINHA, J.]

• _... thereof by or on behalf of such Insured Person, but not A
exceeding the Sum Insured aggregate in the schedule
hereto.
A) Room, Boarding Expenses as provided by the
hospital/Nursing home.
B
B) Nursing Expenses,

C) Surgeon, Anaesthetist, Medical Practitioner,
Consultants, Specialists Fees.

D) Anaesthesia, Blood, Oxygen, Operation Theatre c
Charges, Surgical Appliances, Medicines & Drugs,
Diagnostic Materials and X-Ray, Dialysis,
Chemotherapy, Radiotherapy, Cost of Pacemaker,
Artificial Limbs & Cost of Organs and similar
expenses.
D
(N.B. 1. Company's Liability in respect of all claims
- T'
admitted during the period of insurance shall not exceed
the Sum Insured per person mentioned in the schedule.)
38. What would be covered under the policy and what
would not are matters governed by the Acts, Regulations and E
Guidelines. The limited liability of the insurance provides for a
third party administrator, who is engaged for the purpose of
health services and may not only oversee the claim but may
also disburse it.
F
In order to appreciate the rival contentions the question as
regards whether the policy is continuous or otherwise statuto-
rily renewable we may notice the following clauses.
"4.1 Any diseases/injuries which are pre-existing when
the cover incepts for the first time. For the purpose of G
applying this condition, the date of inception of the initial
mediclaim policy taken from any of the Indian Insurance
Companies shall be taken, provided the rene.wars.ti~ve
been continuous and without any break.
'H
804 SUPREME COURT REPORTS [2008] 9 S.C.R.

A 4.3 During the first year of the operation of he policy, the
expenses on treatment of diseases such as Cataract,
~ .
Benign Prostatic Hypertrophy, Hysterectomy for
Menorrhagia or Fibromyoma, Hernia, Hydrocele,
Congenital Internal diseases. Fistula in anus, piles,
B Sinusitis and related disorders are not payable.

11. This insurance policy is issued for a period of one ...
year and subject to review. Continuation of insurance cover .
'
will be available in the renewal premium is paid in time.
On continuation of insurance cover and timely remittance
c of premium insured becomes eligible to following benefits
from first day after renewal.

a) Cumulative bonus if accrued (Ref. Item 9)

b) Cost of health check-up if due (Ref. Item 10)
D
c) Payment for hospitalization cost for disseases/
illness/injury sustained even during first 30 days of T ~

renewal (Ref. Deletion of 4.2 and 4.3)

13-. Cancellation Clause : The policy may be renewed by
E mutual consent. The Company shall not however be bound
to give notice that it is due for renewal and the Company
may at any time cancel this policy by sending the Insured
30 days notice by registered letter at the insureds' last
known address and in such event the Company shall refund
to the Insured a pro-rata premium for unexpired Period of ~~
F
Insurance. The Company shall, however, remain liable for
any claim, which arose prior to the date of cancellation.
The Insured may at any time cancel this Policy and in such
event the Company shall allow refund of premium at
Company's short period rate only (Table given here below)
G
provided no claim has occurred up to the date of
cancellation. .... '
-f

H
UNITED INDIA INSURANCE CO. LTD. v. MANUBHAI 805
DHARMASINHABHAI GAJERA & ORS. [S.B. SINHA, J.]

Period of Risk Rate of Premium to be charged A
.. *
Up to one month % of the annual rate
Up to three months % of the annual rate
Up to six months 3/41h of the anRual rate
B
Exceeding six months Full annual rate"
.....
. 39. All mediclaim insurance policies, a proforma whereof
has been brought to our notice, contain almost identica! clauses,
some of which are:-
c
4.0 The Company shall not be liable to make any payment
under this policy in respect of any expenses
whatsoever incurred by any Insured Person in
connection with or in respect of :

4.1 All diseases/injuries which are pre-existing when the D
cover incepts for the first time.
~ ~'

4.2 Any disease other than those stated in clause 4.3,
contracted by the Insured person during the first 30
days from the commencement date of the policy.
E
This exclusion shall not, however, apply if in the
opinion of Panel of Medical Practioners constituted
by the Company for the purpose, the insured person
could not have known of the existence of the Disease
of any symptoms or complaints thereof at the time of
!>
+ making the proposal for insurance to the Company. F
This condition 4.2 shall not however apply in case, of
the insured person having been covered under this
scheme or group insurance scheme with any of the
Indian Insurance companies for a continuous period
of preceding 12 months without any break. G

).
4.3 During the first year of the operation of the policy, the

" expenses on treatment of diseases such as Cataract,
Benign Prostatic Hypertrophy, Hysterectomy for
Menorrhagia or, Fibromyoma, Fistula anus, Piles,
H
806 SUPREME COURT REPORTS [2008] 9 S.C.R.

A Sinusitis and related disorders are not payable. If ~ ..
th~se diseases are Pre-existing at the time of
proposal they will not be covered during subsequent
period of renewal too.
5.7 The Company shall not be liable to make any pay-
B
ment under the policy in respect of any claim if such
claim be in any manner fraudulent or supported by
+
any fraudulent means or device whether by the In- .
sured Person or by any other person acting on his
be.half.
c
5.9 The policy may be renewed by mutual consent. The
Company shall not however be bound to give notice
that its due for renewal and the Company may at any
time cancel this. Policy by sending the Insured 30
days notice by registered letter at the insured last
D
known address and in such event the Company shall
refund to the Insured a pro-rata premium - for unex- T •
pired Period of Insurance. The Company shall, how-
ever, remain liable for any claim which arose prior to
the date of cancellation. The Insured may at any time
E cancel this Policy and in such event the Cpmpany
shall allow refund of premium at Company's short
period rate only (table given here below) provided
no claim has occurred up to the date of cancellation.

F Period of Risk Rate of Premium to be charged ~
~

Up to one month Y.. of the annual rate
Up to three months 1h of the annual rate
Exceeding six months Full annual rate
G
7. CUMULATIVE BONUS "
....
Sum insured under the policy shall be progressively ~
increased by 5% in respect of each claim free year
of insurance subject to maximum accumulation of 10
H claim free years of insurance.
UNITED INDIA INSURANCE CO. LTD. v. MANUBHAI 807
DHARMASINHABHAI GAJERA & ORS. [S.B. SINHA, J.]
. .. 7.1 In case of a claim under the policy in respect of A
insured person who has earned the cumulative bonus
the increased percentage will be reduced by 10% of
sum insured at the next renewal. However basic sum
insured will be maintained and will not be reduced."

CONSTRUCTION OF THE CONTRACT OF INSUR- B
,,. ANGE:
40. We may, for this purpose, notice a few precedents
operating in the field. In New Indian Assurance Co. Ltd. v.
Harshadbhai Amrutbhai Modhiya & Anr [(2006) 5 SCC 192], c
this Court opined that even in respect of a contract of insur-
ance, contracting out may be permissible. In his separate Judg-
ment, P.K. Balasubramanian, J. opined:

"A contract of insurance is to be construed in the first
place from the terms used in it, which terms are themselves D
..... to be understood in their primary, natural, ordinary and
popular sense. (See Co/invaux's Law of Insurance, 1h
Edn., para 2-01). A policy of insurance has therefore, to
be construed like any other contract. On a construction of
the contract in question it is clear that the insurer had not E
undertaken the liability for interest and penalty, but had
undertaken to indemnify the employer only to reimburse
the compensation the employer was liable to pay among
other things under the Workmen's Compensation Act.
~
~ Unless one is in a position to void the exclusion clause F
concerning liability for interest and penalty imposed on
the insured on account of his failure to comply with the
requirements of the Workmen's Compensation Act of
1923, the insurer cannot be made liable to the insured for
those amounts."
G
41. One important facet of the matter which must also be
,,. ~ taken note of is duty on the part of a State to act fairly. Such a
fair dealing is expected at the hands of a State within the mean-
ing of Article 12 of the Constitution of India. Strong reliance has
been placed by Mr. Parekh on the decision of this Court in H
808 SUPREME COURT REPORTS [2008] 9 S.C.R.

A Mahabir Auto Stores & Ors. v. Indian Oil Corporation & Ors.
[(1990) 3 SCC 752] and Kumari Shrilekha Vidyar1hi & Ors. v
.... .
State ofU.P & Ors. [(1991) 1SCC212]. There cannot be any
doubt whatsoever that Article 14 of the Constitution of India which
encompasses within its fold, obligations on the part of the State
.
B to act fairly which operates also in the contractual field but the
said principle would be applicable more in a case where bar-
gaining power is unequal or where the contract is not a negoti- ~

ated one and/or is based on the standard form contracts be-
tween unequals. Some of these decisions, however, had been
c taken into consideration in Asstt. Excise Commissioner. v. Issac
Peter [(1994 (4) SCC 104] whereupon strong reliance has been
placed by the learned Solicitor General. Therein, inter alia, it
was held:
"26. Learned Counsel for Respondents then submitted
D that doctrine of fairness and reasonableness must be read
into contracts to which State is a party. It is submitted that
the State cannot act unreasonably or unfairly even while
... ~

acting under a contract involving State power. Now, let us
see, what is the purpose for which this argument is
E addressed and what is the implication? The purpose, as
we can see, is that though the contract says that supply of
additional quota is discretionary, it must be read as
obligatory - at least to the extent of previous year's supplies
- by applying the said doctrine. It is submitted that if this
is not done, the licencees would suffer monetarily. The
F
other purpose is to say that if the State is not able to so
~ "
supply, it would be unreasonable on its part to demand the
full amount due to it under the contract. In short, the duty to
act fairly is sought to be imported into the contract to modify
and alter its terms and to create an obligation upon the
G
State which is not there in the contract. We must confess,
we are not aware of any such doctrine of fairness or ....
reasonableness. Nor could the learned Counsel bring to ~

our notice any decision laying down such a proposition.
Doctrine of fairness of the duty to act fairly and reasonably
H
UNITED INDIA INSURANCE CO. LTD. v. MANUBHAI 809
DHARMASINHABHAI GAJERA & ORS. [S.B. SINHA, J.]
... ~
is a doctrine developed in the administrative law field to A
ensure the Rule of Law and to prevent failure of justice
where the action is administrative in nature. Just as
principles of natural justice ensure fair decision where the
function is quasi-judicial, the doctrine of fairness is evolved
to ensure fair action where the function is administrative. B
.._ But it can certainly not be invoked to amend, alter or vary
the express terms of the contract between the parties.
This is so, even if the contract is governed by statutory
provisions, i.e., where it is a statutory contract - or rather
more so. It is one thing to say that a contract - every contract c
- must be construed re~sonably having regard to its
language. But this is not wha! the licencees say. They
seek to create an obligation on the other party to the
contract, just because it happens to be the State. They are
not prepared to apply the very same rule in a converse
D
case, i.e., where the State has abundant supplies and
- -t
wants the licencees to lift all that stocks. The licencees will
undertake no obligation to lift all those stocks even if the
State suffers- loss. This one-sided obligation, in
modification of express terms of the contract, in the name
of duty to act fairly, is what we are unable to appreciate." E

42. A bare perusal of the said decision would show that
the same was rendered in the context of contracts entered into
between the State and its citizens pursuant to public auction of
•} tenders or by negotiation. Respondents therein sought to get F
new term incorporated in the Contract on the specious plea of
fairness. The said place was rightly rejected. The fact, however,
remains that the ratio in Issac is not applicable to the fact of the
present case not because the duty to act fairly on the part of a
State has no application in the field of a contract but the same
G
would not apply for the purpose of alterations or modifications
.A~ of a term of contract.
43. Existence of the jurisdiction of the Superior Court of
India upon invoking Article 14 of the Constitution as also Sec-
lion 23 of the Indian Contract Act to strike down a clause in the H
810 SUPREME COURT REPORTS (2008] 9, S.C.R.

A contract which the court feels to be unconscionable having re- ~·
gard to the equal bargaining power of the parties is not in ques-
tion but the said provisions would have no application for the
purpose of modifications, alterations or additions of a term in
the contract. There cannot furthermore be any doubt whatso-
B ever that each case must be considered on its own facts which
would obviously lead to the conclusion that by reason thereof
the Court shall not read into the contract an automatic renewal
...
clause in a contract of insurance if there does not exist any.
44. This brings us to the question of reading the prospec-
c tus into the contract of insurance. We do not find that the pro-
spectus and contract c.f insurance speak on different terms. T_hey
seek to attain the same object. Clause 11 and 13 of the pro-
spectus and clauses 5, 9 and other clauses lead to one conclu-
sion that the policy is subject to renewal which is dependent
D upon the mutual consent of the parties. It is also evident that
both the parties have the rights to cancel the insurance policy. If ... -
it is to be held otherwise, logical corollary would be that even
the insured would not be at liberty not to discontinue the insur-
ance policy. But herein we are not concerned with such a ques-
E tion.
45. Let us, at this stage, consider some of the decisions
relating to contracts of insurance. In Pradeep Kumar Jain v.
Citi Bank [(1999) 6 SCC 361], this Court distinguished a case
of general insurance from that of lifejnsurance, stating :
~
•
F
"6. In the case of life insurance policy certain sum agreed
to be paid by the insurance company in the event of the
death of the insured or a contingency arising as indicated
in the policy. The obligation is then on the insured to pay
the premiums periodically. There is no other obligation
G
upon him. In the case of a motor vehicle, the risk to be
covered is not only in respect of a vehicle but also towards -1"'
the injury to others or damage caused to the property
arising out of an accident. In such an event, when the
policy is renewed or a fresh policy is applied for, an
H
UNITED lNDIA INSURANCE CO. LTD. v. MANUBHAI 811
DHARMASINHABHAI GAJERA & ORS. [S.B. SINHA, J]
' .. ~
application has to be given and it is to be indicated whether A
any claim had been made in the previous year or not and
to furnish appropriate material as regards the valuation of
the vehicle. It can also be made clear as to the nature and
extent of the risk covered whether it is only third party or
comprehensive or otherwise. The obligation under the Act B
is only at least to cover third party risk. Thus mere payment
of premium could not result in an automatic renewal of the
policy. In the circumstances, we find that the appellant
also had certain duties to discharge in the matter of
obtaining insurance policy and cannot merely put the blame c
on the first respondent."

46. As a proposition of law, where a renewal is based on
mutual consent, there may be no automatic renewal as has also
been held by this Court in Depot Supdt., H.P Corporation Ltd.
v. Kolhapur Agricultural Market Committee [(2007) 6 SCC 159] D
~-t but as would be discussed hereinafter, a mediclaim policy where
a senior citizen is involved would stand somewhat on a differ-
ent footing. It will depend upon the contract entered into between
the parties and the statutes operating in the field as also consti-
tutional scheme. We do not agree with the submission of the E
learned Solicitor General that wherever renewal is subject to
mutual consent to the parties, a State may at its whims and ca-
price refuse to renew.
;.. 47. We may, at this juncture, notice a decision of the Su-
; F
. preme Court of Ireland whereupon strong reliance has been
placed by learned Solicitor General in Gama Foods Ltd. v.
Eagle Star Insurance Company [1997 (2) ILRM 193] wherein
it was held:
'The plaintiffs say that one must imply a term into the
G
policies of insurance issued by the defendant to the
.... ,.. plaintiffs in this case to the effect that if a policy is cancelled
or its renewal is declined the defendant must give their
reasons for so doing. Apart from cases where the law
implies some terms into certain kinds of contract, whether
H
812 SUPREME COURT REPORTS [2008] 9 S.C.R.

A by statute or by common law (for example sale of goods,
hire purchase, landlord and tenant, sale of lands etc.) one
can imply a term into a contract only when the implied
term gives effect to the true intentions of all the parties to
the contract who might be affected by such implied term.
B The learned trial judge in his judgment in this case which
is now reported at [1995] 1 IR 526 at p.532 quoted from
the well known dictum of MacKinnon LJ. In Shirlaw v.
Southern Foundries (1926) Ltd. (1939] 2 K.B. 206 and I
also quote that dictum here:-

C "Prima facie that which in any contract is left to be implied
and need not be expressed is something so obvious that it goes
without saying; so that, if, while the parties were making their
bargain, an officious bystander were to suggest some express
provision for it in their agreement, they would testily suppress
D him with a common 'Oh of course!'."

Here the evidence before the learned trial judge is quite
clearly to the effect that if such a term were sought to be
included in the insurance policies at the time when the
plaintiffs were seeking insurance the defendant would not
E
have contracted with the plaintiffs at all. If the officious
bystander had interrupted in relation to condition 13 of the
policies and had asked the defendant "If you do cancel,
will you give your reasons for canceling". The defendant's
answer would have been an emphatic "No" whereas to
F imply such a term into the policies the answer would have
to be by both parties "Yes, of course" expressed rather
testily to discourage the officious bystander from further
interrupting.
It is also helpful to quote what Pearson LJ. Said in 1973
G
in Trollope and Coils Ltd. v. North West Metropolitan
Regional Hospital Board [1973] 1 OPP 601 at p.609 :

"An unexpressed term can be implied if and only if
the court finds that the parties must have intended
H that term to form part of their contract: it is not enough
UNITED INDIA INSURANCE CO. LTD. v. MANUBHAI 813
DHARMASINHABHAI GAJERA & ORS. [S.B. SINHA, J.]
,. ~
for the court to find that such a term would have been A
adopted by the parties as reasonable men if it had
been suggested to them" it must have been a term
that went without saying, a term necessary to give
business efficacy to the contract, a term which, though
tacit, formed part of the contract which the parties B
made for themselves."
....
These basic principles of law preclude the implication of
a term into the policies to the effect that in the event of a
declinature or cancellation the defendant must state its
reasons therefore." c
48. The said decision, therefore, does not rule out the ef-
feet of an implied contract. We must, however, place on record
that the United Kingdom and Ireland do not have a written con-
~titution. Doctrine of fairness would not be radiant in a contract
D
in those courts. Decisions rendered in other jurisdictions merely
~ -t have a persuasive and not a binding nature. A foreign law should
not be applied when the constitutionalism operating in the coun-
tries are different. We have to apply the law keeping in view the
equality clause contained in Article 14 of the Constitution of In-
dia. It is a heart and soul of our Constitution. E
-1
49. Even doctrine of equality had not ordinarily been ap-
plied in the field of administrative law in England. Keeping in
view the advent of human right regime doctrine of equality is
~:-.." now being applied even in administrative law in UK. It is a re- F
cent trend of the English courts as would appear from the judg-
ment of the House of Lords wherein the court refused to draw a
distinction in the matter of 'indefinite detention' of a British Citi-
zen and a Non-citizen. [See A (FC) & Ors. (FC) v. Secetary of
State for the Home Department [2004 UKHL 56]
G
50. It was furthermore contended that the writ court would
>. ~ ordinarily not grant specific performance of a contract even if it
is found that there exists a renewal clause or there has been a
breach of contract on the part of the appellant. Ordinarily, it is
so ..A writ of mandamus shall not issue in case of a breach of H
814 SUPREME COURT REPORTS [2008] 9 S.C.R.

A contract. The court shall also not ordinarily issue a writ of man-
damus directing a party to perform a specific performance of
the contract in exercise of its writ jurisdiction.

We. however. would notice that this is the ordinary law as
has been held in Hardesh Ores (P) Ltd. v Hede & Co. ((2007)
B 5 SCC 614 and Divisional Forest Officer v. Bishwanath Tea
Co. Ltd. [(1981) 3 SCC 246]. In Bishwanath Tea Co., this Court
had used the word ordinarily. Hardesh was a case arising out
of a civil suit. The question which arose therein was as to whether
exercise of option by company was for renewal itself sufficient
C where the execution of a fresh document is necessary.

Section 24A, introduced in 1972 Act, has invited a com-
ment by learned Solicitor General that the situation has com-
pletely changed. The High Court might have made broad state-
D ment that by reason thereof. a State within the meaning Article
12 of the Constitution of India, does not cease to be one but. in
our opinion. that is not the point. The point is what would be the
effect. Would it mean that two concepts. namely, Article 12 of
the Constitution and Section 24A of the 1972 Act are different?
If they are not. in a given case. it may be possible to hold that
E even while the State shall have more liberty to enter into a con-
tract or fix the terms and conditions thereof having regard to the
field of competition opened by reason of taking away of its the
monopoly status, but there exists a distinction between the acts
of a private player and the State.
F
51. We, however. do not mean to say that even in the field
of contract qua contract, the State is not free to negotiate its
terms; what we mean to say is that its action cannot be arbi-
trary. Role of both are different. A private player, as the law stands
G now, may not be bound to comply with the constitutional require-
ments of the equality clause, the appellants are.

52. There exists a distinction between a private player in -1- •
the field and a public sector insurance company. Whereas a
private player in the field is only bound by the statutory regula- ¥1
H lions operating in the field. the public sector insurance compa-
UNITED INDIA INSURANCE CO. LTD. v. MANUBHAI 815
DHARMASINHABHAI GAJERA & ORS. [S.S. SINHA, J.]
........
nies are also bound by the directions issued by the General A
Insurance Corporation as also the Central Government. They
cannot be ignored. The said directions are not said to be in
derogation of the statutory provisions. Their validity is not under
challenge.

53. We may also notice that the Universal Declaration of B
Human Rights states that :

"Everyone has right to a standard of living adequate for
the health and well-being of himself and his family, including
food, clothing, housing and medical care, and necessary c
social services, and the right to security in the vent of
unemployment, sickness, disability, widowhood, old age,
or other lack of livelihood in circumstances beyond his
control."

54. The declaration also demands that the member na- D
4 i' tions secure the recognition and observance of the said rights.
The authority would do well in issuing appropriate direction keep-
ing in view the aforementioned human rights and particularly in
view of the fact that the Government of India does not provide
for any social security by way of compulsory insurance. Unlike E
the provisions of the Motor Vehicles Act, 1988 such compul-
sory insurance does not find a place in any statute book.
We, in the aforementioned situation, have strived to strike
... ,.;,.. a balance between the tiuman rights as contained in the Uni-
versa! Declaration of Human. Rights as also the right of a State F
and others who perform public utility provisions like insurance
companies. It is also useful to note that although ordinarily a
contract of insurance services would not come within the pur-
view of the public utility services, the Legal Services Act, 1987,
as amended in 2002, says so in terms of Section 22(b) or 22(c) G
thereof.
"" )
55. We are referring to the aforementioned provisions only
with a view to show that whereas attempts are being made to
strengthen the control over the insurance sector by creating new
H

(
816 SUPREME COURT REPORTS [2008) 9 S.C.R.

.......
A forums which would easily be accessible to the service recipi-
ent, the insurance companies having regard to the new policy
of the Central Government, in general and under Section 24A
of the 1972 Act in particular should not be allowed to make all
attempts to frustrate the same. Whereas on the one hand we
B cannot forget the new market economy and the Foreign Direct
Investment, we also cannot shut our eyes to the ground reali-
+
ties. There is a huge gap between the high sounded wants of
the Government and the realities on the ground. It is essential ~
that while on the one hand, the insurance companies are not
c put to undue burden keeping in view the changes in the statute
as also the policy decisions of the Central Government, they
cannot also be permitted to act wholly arbitrarily and unreason-
ably. They cannot be permitted to create a social condition which
would negate all human rights. We although would not place
medicare and old age being the facets of human rights with
D
abject poverty, but then the gap between the object on the stat-
utes and the action on the part of the players on the field must "'" ...
be taken care of.
JUDICIAL REVIEW
E 56. The action was brought by private individuals.
The writ petition, however, had wider ramification. They
not only would affect the writ petitions, but also others who would
be similarly situated. ,.,
,\,
F Such cases may not be dealt with as individual cases.
In appropriate case, such litigation may be regarded as
public interest litigation.
Even if it not so regarded, the High Court may consider
G the same to be 'Public Law Litigation'
,..
While determining a lis having public law domain, the courts ~
would be entitled to take a broader view. It would not consider
to be case involving contract-qua-contract question only.
H Even cases involving contracts may be determined by the
,
UNITED INDIA INSURANCE CO. LTD. v. MANUBHAI 817
DHARMASINHABHAI GAJERA & ORS. [S.B. SINHA, J.]

·~ High Court in exercise of its jurisdiction under Article 226 of the A
Constitution of India. (see LIC of India & Anr v. Consumer Edu-
cation & Research Centre & Ors. [(1995) 5 SCC 482], Sanjana
M. Wig (Ms) v. Hindustan Petroleum Corpn. Ltd. [(2005) 8 SCC
242], ABL International Ltd & Anr v. Export Credit Guarantee
Corporation of India Ltd & Ors. [(2004) 3 SCC 553], The D.F 0, B
South Kheri & ors. v. Ram Sanehi Singh [(1971) 3 SCC 864,
Noble Resources Ltd. v. State of Orissa & Anr [(2006) 10 SCC
236]. We, however, do not think that facts involved in each case
and the law laid down therein need not be discussed as there
does not exist any basic principles therefor. These cases do c
not involve serious disputed question of fact.
Basic facts are admitted. The High Court was concerned
with the interpretation of statute and interpretation of the con-
tract.
D
Judicial Review of the impugned action on the part of the
i appellant was, therefore, permissible.
APPLICATION OF LAW
57. Keeping in view the aforementioned legal principles,
we may notice the fact of each case. E

58. The insurer in SLP (C) No.9877entered into a con-
tract of mediclaim insurance in 1990 for a sum of Rs.90,0001-
from 1992 to 2002. He had been making payments of the pre-
miums regularly. His policy had been renewed every year. It was F
also renewed for the period 4.10.2001 to 3.10.2002. The
insured's wife, son and daughter-in-law have also entered into
such policy since 1992. Their policies had also been renewed
from time to time without any change in terms.
59. On or about 9.9.2002, Respondent No.1 handed over G
a cheque for a sum of Rs.6,377/- by way of renewal of insur-
ance policy. As no action thereon was taken, a reminder was
sent. A legal notice was also issued. The legal notice was re-
fused to be accepted by the Divisional Manager. In response
thereto, only on 30.9.2002, the appellant stated that the policy H
818 SUPREME COURT REPORTS [2d08] 9 S.C.R.

A would be renewed by loading of 300% premium. A sum of
......
Rs.18,982 was deposited. A receipt ~cknowledging the sum of
Rs.6,377/- was also issued. Despite issuance of the said sum,
the policy was not renewed. Strangely enough, only on October
3, 2002, the appellant stated that the said policy could be re-
B newed subject to exclusion of the diseases specified therein. It
was in the aforementioned situation, the writ petition was filed. .....
60. In SLP (C) No.10205 of 2004, the second respondent,
who is a practicing consultant neurologist and physician since
1961, had taken mediclaim insurance for himself his v.'ife and
c his family members since 1992-1993. He was diagnosed with
Hypogamglobulinemias in August-September 1999. Despite the
same, the policy was renewed. By a letter dated 26.7.2002,
appellant informed him that his mediclaim policy which was to
expire on 13.8.2002 would be renewed subject to the exclusion
D of the disease Septicemia with Hypogamglobulinemias and
was advised that the next premium will be accepted after load- .... .,.
ing of 100% with 5% excess for each and every claim. It is at
that juncture, the writ petition was filed.
61. Respondent No.3 in SLP (C) No.10205 of 2004 had
E taken a mediclaim policy and accident insurance policy in 1988.
By a letter dated 15.1.2002, the mediclaim policy for the year
2002-2003 was refused to be renewed and he was asked to
renew his policy in another company. The policy was cancelled.
.-
F 62. We have noticed the judgment of the Gujarat High Court ......
in each of these cases.
63. First Respondent in SLP (C) No.1534 of 2006 ap-
preached the Delhi High Court when the joint mediclaim policy
was refused to be renewed. His claim of Rs. 2, 19,660/- which
G he had incurred for undergoing a bye-pass surgery in January
2003 was refused to be paid. He had obtained mediclaim policy ...
in April, 1995. The same had been renewed. He had unde1- ~

gone Angioplasty in July 1998 and again in June 2001. He had
undergone a bye-pass surgery in December 2002. Respon-
H dent No.1 tendered premium for renewal of the policy in April, .::__
UNITED INDIA INSURANCE CO. LTD. v. MANUBHAI 819
DHARMASINHABHAI GAJERA & ORS. [S.B. SINHA, J.]
... _,.
2003 which was declined on the ground of 'high claim ratio in A
the last three years'.

64. Each of the aforementioned cases clearly shows that
the action on the part of the authorities of the appellant was
highly arbitrary. Respondents though were not entitled to auto-
matic renewal, but indisputably, they were entitled to be treated B
fairly. We have noticed hereinbefore some of the clauses con-
tained in the prospectus as also the insurance policy. When a
policy is cancelled, the conditions precedents therefor must be
)
fulfilled. Some reasons therefor must be assigned. When an
exclusion clause is resorted to, the terms thereof must be given c
effect to. What was necessary is a pre-existing disease when
the cover was inspected for the first time. Only because the in-
sured had started suffering from a disease, the same would not
mean that the said disease shall be excluded. If the insured had
made some claim in each year, the insurance company should D
-#' ... not refuse to renew insurance policies only for that reason. The
words 'incepts for the first time' as contained in clause 4.1 as
also the words 'continuous and without break' if the renewal pre-
mium is paid in time, must be kept in mind as also the reasons
for cancellation as contained in clause 7(1 ){n) thereof. E
65. Renewal of a medi-claim policy subject to just excep-
lions should ordinarily be made. But the same does not mean
that the renewal is automatic. Keeping in view the terms and
conditions of the prospectus and the insurance policy, the par-
ties are not required to go into all the formalities. The very fact F
that the policy contemplates terms for renewal, subject of course
to payment of requisite premium, the same cannot be placed at
par with a case of first contract.
66. Having regard to the fact situation obtaining in each
G
,,. case, we are not inclined to exercise our discretionary jurisdic-
t tion under Article 136 of the Constitution of India. Before part-
ing with this case, however, we would like to observe that keep-
ing in view the role played by the insurance companies, it is
essential that the Regulatory Authority must lay down clear guide~·
H
820 SUPREME COURT REPORTS [2008] 9 S.C.R.

A lines by way of regulations or otherwise.-No doubt, the regula- ..._ ...
tions would be applicable to all the players in the field. The du-
ties and functions of the Regulatory Authority, however, are to
see that the service provider must render their services keep-
ing in view the nature thereof. It will be appropriate if the Central
B Government or the General Insurance Companies also issue
requisite circulars.
67. Appellants before us being subsidiaries to General
Insurance Corporation cannot ignore the statutory provisions.
They are bound by the directions issued by the Central Govern-
C ment.
68. We would request the IRDA to consider the matter in
depth and undertake a scrutiny of such claims so that in the
event it is found that the insurance companies are taking re-
D course to arbitrary methodologies in the matter of entering into
contracts of insurance or renewal thereof, appropriate steps in
that behalf may be taken.
68. These appeals are dismissed with costs. Counsel's
fee assessed at Rs.25,000/- (Rupees twenty five thousand only)
in each case.
B.B.B. Appeals dismissed