2001 Supreme(SC) 1024

2001(5) Supreme 449
SUPREME COURT OF INDIA
(From Calcutta High Court)
V.N. Khare and Shivaraj V. Patil, JJ.
Eiman Krishna Bose -Appellant
versus
United India Insurance Co. Ltd & Anr. -Respondents
Civil Appeal No. 2296 of 2000
Decided on 2-8-2001
Counsel for the Parties :
For the Appellant : In-person.
For the Respondents : K.L.Nandwani, Kamal Baid, Advocate for Debasis Misra, Advocate.

VERY IMPORTANT POINT
High Court committed error in directing the appellant to take a fresh mediclaim insurance policy even after setting aside the order of refusal to renew the mediclaim policy by insurance co. or an unfair and arbitrary ground of past litigation.
[Editiorial query:-Supreme Court has noticed in the facts of this case that it passed an order on mediclaim (after appellant had travelled in all the consumer fora) with costs but still Insurance Co. did not honour it. This points out a serious lacuna in the working of Consumer Protection Act in relation to enforcement of the orders passed which needs reformation by legislature, if judiciary due to lacuna cannot help].

Headnote:(i) General Insurance Business (Nationalisation) Act, 1972-Sections 9, 24 and 3(a)-Effect-Every acquiring Co. e.g. respondent is State under Article 12 of Constitution subject to writ jurisdiction if not acting fairly and reasonably-Refusal to renew policy of mediclaim on ground of part litigation-High Court holding it unfair and arbitrary-Whether correct? (Yes)-Constitution of India -Articles 12, 226 and 32).

       Held : Under Section 9 of the General Insurance Business (Nationalisation) Act, 1972 (hereinafter referred to as the Act ), General Insurance Corporation of India (in short GIC) was set up as a government company for the purpose of superintendence, control and carrying out the business of general insurance in the country. Under Section 24 of the Act, the acquiring companies were given the exclusive privilege to carry on general insurance business in India. Under Section 3(a) of the Act, an acquiring company has been defined to mean any Indian Insurance Company in which any other company has been merged in pursuance to the amalgamation scheme formulated under the Act. The respondent-insurance company is one of such acquiring company. A perusal of the provisions of the Act makes it evident that 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. 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 companies thus being "the State" under Article 12 of the Constitution are expected to act fairly and reasonably. In the present case, what we find is that the respondent insurance company refused to renew the insurance policy of the appellant on the ground of his past conduct. The past conduct attributed is that the appellant had gone in litigation for payment of his claim lodged by him with the respondent insurance company. If an insured lodges a claim with the company and the company does not honor the claim, the insured is left with no alternative but to knock the doors of court of law. Merely because the appellant had approached the Consumer Forum and this Court for redressal of his grievance, can such an act be attributed as bad record as to dis-entitle the appellant to get his policy renewed. The answer is no . Where an insurance company under the provisions of the Act having assumed monopoly in the business of general insurance in the country and thus acquired the trappings of the State being other authorities under Article 12 of the Constitution, it requires to satisfy the requirement of reasonable ness and fairness while dealing with the customers. 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 not take any irrelevant and extraneous consideration while arriving to a decision. Arbitrariness should not appear in their actions or decisions. In the present case, what we find is that 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 for payment of his claim against the respondent company. We are, therefore, in agreement with 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. (Para 3)

       (ii) Mediclaim Policy-Clauses 2.1 and 2.1.14-Exclusion clause-In case fresh insurance policy taken it will not cover pre-existing diseases -High Court holding non-renewal of policy unfair and arbitrary but directing to take fresh insurance policy-Whether correct? (No)-It should be renewed with effect from date when it fell due for renewal.

       Held : Coming to the next question whether the appellant s policy was required to be renewed with effect from the date when it fell due for renewal. The view taken by the High Court is that an insurance policy cannot be renewed for the period which has already expired. It is not disputed that original mediclaim policy taken out by the appellant provided for its renewal. It is also not disputed that the appellant applied for renewal of the insurance policy well in time and sent a cheque towards its premium. The respondent company has not challenged the order of the High Court setting aside the order refusing to renew the mediclaim policy of the insured. Under such facts and circumstances of the case, whether the appellant can be directed to take a fresh mediclaim policy on the premise that no renewal of the policy can be ordered for the expired period. A renewal of an insurance policy means repetition of the original policy. When renewed, the policy is extended and the renewed policy in the identical terms from a different date of its expiration comes into force. In common parlance, by renewal, the old policy is revived and it is sort of a substitution of obligations under the old policy unless such policy provides otherwise. It may be that on renewal, a new contract comes into being, but the said contract is on the same terms and conditions as that of the original policy. Where an insurance company which has exclusive privilege to carry on insurance business has refused to renew the mediclaim policy of an insured on extraneous and irrelevant consideration, any disease which an insured had contacted during the period when the policy was not renewed, such disease cannot be covered under a fresh insurance policy in view of the exclusion clause. The exclusion clause provides that the pre-existing diseases would not be covered under the fresh insurance policy. If we take the view that the mediclaim policy cannot be renewed with retrospective effect, it would give handle to the insurance company to refuse the renewal of the policy on extraneous consideration thereby deprive the claim of insured for treatment of diseases which have appeared during the relevant time and further deprive the insured for all time to come to cover those diseases under an insurance policy by virtue of the exclusion clause. This being the disastrous effect of wrongful refusal of renewal of the insurance policy, the mischief and harm done to the insured must be remedied. We are, therefore, of the view that once it is found that the act of an insurance company was arbitrary in refusing to renew the policy, the policy is required to be renewed with effect from the date when it fell due for its renewal. (Paras 4 & 5)

       (iii) Mediclaim Policy-Renewal applied with premium-Returned and renewal rejected -Litigation-Long period expiring-Premium for subsequent period not deposited-Can appellant be refused renewal on ground of non-deposit of premium? (No)-Appeal allowed with costs. (Para 5)

       Held : Learned counsel appearing for the insurance company argued that since the appellant has not deposited the premium for subsequent years, the policy cannot be renewed with retrospective effect. It is not disputed that the appellant sent a cheque for Rs.l,796/- towards premium but the same was returned to the appellant. Thereafter, tbe parties had been litigating and respondent insurance company stopped having any correspondence with the appellant. Therefore, there arose no occasion for the appellant to deposit the premium. We accordingly reject the argument of the learned counsel for the respondent. For the aforesaid reasons, we are of the view that the High Court committed error in directing the appellant to take fresh medicalim 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. We, therefore, set aside the order of the High Court to the extent it directed the appellant to take a fresh mediclaim policy. We, further direct that if the appellant applies for renewal of his mediclaim policy for the expired period and pays the premium, the respondent company shall renew the said mediclaim policy forthwith. The appeal is allowed with costs, which we quantify at Rs. 5,000/-.(Paras 6, 7 & 8)

       (iv) Consumer Protection Act, 1986-Sections 2(1)(o) r/w 2(1)(g)-Deficiency in insurance service-Mediclaim of Rs. 8243/- under insurance policy-Delay-is a deficiency in service-Supreme Court allowed the appeal with costs of 20,000/- when District Forum rejected-State Commission accepted but National Commission again rejected in revision-Taking further proceedings in this connection -Can Insurance Co. refuse renewal on this ground? (No)-(Impliedly so held in Para 1 r/w rest of the judgment).