LexUNITED INDIA INSURANCE COMPANY LTD. versus MANUBHAI DHARMASINHABHAI GAJERA & ORS.
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[2008) 9 S.C.R. 778 A UNITED INDIA INSURANCE COMPANY LTD. ~- V. MANUBHAI DHARMASINHABHAI GAJERA & ORS. (Civil Appeal Nos.4113-4115 of 2008) B MAY 16, 2008 [S.B. SINHA AND V.S. SIRPURKAR, JJ] Insurance: A 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 D the insured had started suffering from a disease, the same 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- E bitrary - Certain directions given to Insurance Regulatory and 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- F tions, 2002 - Regns. 2(1)(e}, 6, 7(1)(n}, 11(4) - Insurance 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 G domain, Courts entitled to take a broader view - Even cases 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- A tract of insurance - Judicial Review of the impugned action 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 B Act, the Insurance Regulatory and Development Author- .A. ity (the Authority) was constituted by the Central Govern- 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
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