BIMAN KRISHNA BOSE versus UNITED INDIA INSURANCE CO. LTD. AND ANR.

Citation: [2001] SUPP. 1 S.C.R. 255 · Decided: 02-08-2001 · Supreme Court of India · Bench: V.N. KHARE · Disposal: Appeal(s) allowed

Judgment (excerpt)

BIMAN KRISHNA BOSE 
v. 
UNITED INDIA INSURANCE CO. LTD. AND ANR. 
AUGUST 2, 2001 
(V.N. KHARE AND SHJVARAJ V. PATIL, JJ.] 
General Insurance Business (Nationalisation) Act, 1972 : Sections 3(a), 
9 and 24. 
A 
B 
Acquiring company-Exclusive privilege of carrying on insurance C 
business-Acquiring companies have trappings of 'The State '-Held, Covered 
by expression 'other authorities' under Article 12 of Constitution. 
Constitution of India, 1950 Article 12. 
State-Insurance Company having the trappings of State-Such . D 
authorities must act reasonably even in area of contractual relations. 
Insurance-Medic/aim policy-Claim for reimbursement-Not honoured 
by Insurance Company-Resort to court by insured-Held, is not a valid 
ground for refasal to renew insurance policy-Insurance policy-Retrospective E 
renewal-Arbitrary refasal to renew the policy-In such a case policy is 
required to be renewed with effect from the date when it fell due for its 
renewal. 
The appellant took out a Mediclaim Insurance Policy from the 
respondent insurance-company. An amount of Rs. 8243 was spent for hospital F 
treatment of appellant's wife. In legal proceedings initiated by appellant the 
claim for said amount though ultimately upheld by the court, yet payment 
was not made to the appellant. For recovery, further proceedings were 
initiated and during these proceedings the insurance policy fell due for 
renewal. Appellant's request for renewal of policy was rejected on the ground 
of his past conduct viz. that he had gone in litigation for payment of his claim. G 
On a writ filed by appellant, Single Judge of the High Court directed the 
insurance company to renew the Mediclaim Policy. On appeal by insurance 
company the Division Bench directed the appellant to take fresh policy on 
the ground that renewal of Mediclaim Policy cannot be granted with 
retrospective effect. Hence this appeal. 
H 
255 
256 
SUPREME COURT REPORTS (2001] SUPP. I S.C.R. 
A 
Allowing the appeal, the Court 
B 
HELD : I. The High Court committed error in directing the appellant 
to take fresh mediclaim policy even after setting aside the order of refusal to 
renew the mediclaim policy by the insurance company. The order passed by 
the High Court to that extent is not sustainable in law. (261-E) 
2. Under the provisions of the General Insurance Business 
(Nationalisation) Act, 1972 it is only the acquiring companies which have 
exclusive privilege of carrying on the general insurance business in India, 
under the supervision and control of General Insurance Corporation of India. 
The respondent insurance company is one of such acquiring company. 
C Excepting the acquiring companies no other company in private sector has a 
right and privilege to carry on general insurance business in India and to that 
extent the acquiring companies have a monopoly over such business. In such 
a situation, acquiring companies have the trappings of"the State" being other 
authorities under Article 12 of the Constitution of India. The acquiring 
D companies thus being "the State" under Article 12 of the Constitution are 
expected to act fairly and reasonably. (259-C, D, El 
3. Even, in an area of contractual relations, the State and its 
instrumentalities are enjoined with the obligations to act with fairness and in 
doing so, can take into consideration only the relevant materials. They must 
E not take any irrelevant and extraneous consideration while arriving at a 
decision. Arbitrariness should not appear in their actions or decisions. 
(260-A, BJ 
4. Ifan insured lodges a claim with the company and the company does 
not honour the claim, the insured is left with no alternative but to knock the 
F doors of court of law. Merely because the appellant had approached the 
Consumer Forum and this Court for redressal of his grievance, such an act 
cannot be attributed as bad record as to dis-entitle the appellant to get his 
policy renewed. In the present case arbitrariness is writ large in the actions 
of the respondent company when it refused to renew the mediclaim policy of 
the insured on the ground of his past conduct i.e. having gone into litigation 
G for payment of his claim against the respondent company. Therefore, the view 
taken by the High Court that the order of the respondent company refusing 
to renew the mediclaim policy of the appellant was unfair and arbitrary is 
correct (259-G; 260-B, C] 
5. Where an insurance company which has exclusive privilege to carry 
H o

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