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Judgment
K.S. Jhaveri, J.—The petitioners herein have prayed to declare the decision of the respondent Insurance Company to cancel all long term Janata Personal Accident (JPA) Insurance Policies with a sum insured over Rs. 1 lac, whether individual or group issued prior to May 1999, as illegal, null and void.
The Respondent Insurance Company floated a scheme known as group Janata Personal Accident Insurance (JPA Scheme). The Insurance Company had given a proposal highlighting the features of the said Scheme. According to the petitioner the said proposal does not contain any Clause permitting the Insurance Company to prematurely terminate the insurance policy and Clause 7 of the said proposal provides that the risk would commence on payment of the premium and would continue to be covered till the agreed period. The said proposal was executed in September 1998 and the proposal was accepted by the petitioners.
2.1 According to the petitioners, the petitioner No. 1 company paid from time to time a total sum of Rs. 43,75,497/- towards premia for different groups comprising totally 28516 persons and approximately 20 policies came to be issued covering the said persons. The Insurance Company issued individual certificate of insurance to each of the said 28516 persons. As per the policy the risk commenced on payment of premium by petitioner No. 1, which is from 1st September 1998. Therefore from 1st September 1998 upto 4th April 2002 various claims were lodged by the individuals insured with the Insurance Company and the same were honoured by the Insurance Company.
2.2 The Insurance Company by its communication dated 4.4.2002 cancelled all long term JPA policies with sum insured over Rs. 1 lac whether individual or group, issued prior to May 1999. The said decision was communicated to the petitioners vide communication dated 4th April 2002. The petitioners have challenged the said decision in the present petition. It is the said decision which is challenged in the present petition.
Mr. A.S. Vakil, learned Advocate appearing for the petitioners submitted that the respondent being a nationalized Insurance Company, falling within the purview of Article 12 of the Constitution of India, is duty bound to act reasonably and fairly. According to him, the impugned decision prematurely terminating the insurance policies covering 28516 persons insured solely on the ground that the said policies have become economically not viable is in contravention of the provisions of Article 14 of the Constitution of India especially when the policies were not obtained either by fraud or misrepresentation.
3.1 He submitted that though the proposal/agreement contains an arbitration clause, the Insurance Company has not pleaded that the petitioners be relegated to the remedy of arbitration. Therefore the respondents have waived their right for referring the matter for arbitration.
3.2 He submitted that the cancellation of the policies is without authority. According to him the proposal did not provide any Clause for terminating the policy prematurely. Clause 7 of the said proposal specifically provides that on receipt of premium from the petitioners the risk shall commence and shall continue upto the period of policy. The Insurance Company has received the premium from the petitioner company and issued the relevant certificates of insurances. The certificates do not contain any condition enabling the Insurance Company to cancel the policy prematurely. He submitted that the "condition to cancel" does not form part of the proposal/agreement or certificates of insurance between the petitioner company and the insured on the one hand and the Insurance Company on the other hand.
3.3 Learned Counsel submitted that assuming that the policy was issued and the policy had a condition enabling the Insurance Company to cancel the policy, the same was not communicated to petitioner No. 1 company at any point of time. The insured have been supplied only the certificate of insurance and not the policy itself. It is the said certificate of insurance which makes a reference to the policy which is stated to have been issued to the petitioner No. 1 company. The certificate of insurance itself does not contain any provision for premature termination of the policy.
3.4 He submitted that there has been non-communication regarding condition to petitioner No. 1 company. Petitioner No. 1 company was only given the proposal which admittedly did not contain the provision to cancel the policy prematurely and it is the said very proposal which culminated into an agreement/contract. According to him petitioner No. 1 company on payment of the premium has never received the original policies nor was petitioner No. 1 company aware of the condition to cancel either orally or through any other mode. Therefore there has been a complete misrepresentation and fraudulent representation by the Insurance Company.
3.5 He submitted that assuming that the policies have condition No. 5 enabling the Insurance Company to prematurely cancel the said policies and as the said policies were communicated to the petitioners, the said condition No. 5 is expected to be reasonably interpreted and implemented and the Insurance Company cannot be permitted to enmasse cancel all the policies solely on one common ground viz. that the said policies have the potential of generating heavy losses during the currency of the policies and that the same has ceased to be economically viable.
3.6 In order to support this contention learned Advocate has relied upon the decisions in the cases of Kumari Shrilekha Vidyarthi and Others Vs. State of U.P. and Others, , ABL International Ltd. and Another Vs. Export Credit Guarantee Corporation of India Ltd. and Others, United India Insurance Co. Ltd. v. Mohanlal Agarwal reported in 2004(1) GLR 637 and Union of India (UOI) and Another Vs. International Trading Co. and Another,
3.7 Mr. Vakil submitted that considering the fact that all the 20 policies have now matured, this Court may treat the interim order dated 19th December 2002 as the final order and dispose of the petition by leaving all the questions open to be decided in any other matter in future.
Mr. Shalin Mehta, learned Advocate for the respondent submitted that Clause 5 of the Group Janata Personal Accident Long Term Policy stipulates cancellation of the policy. This Clause was known to the insured. Clause 5 of the policy governs the contractual relationship between the insured and the insurer.
4.1 He submitted that the prayer Clause 7 of the petition does not seek a prayer to declare Clause 5 i.e. cancellation Clause of the insurance policy as illegal and null and void and in absence of any challenge to the cancellation clause, the said Clause is required to be given effect to.
4.2 Mr. Mehta submitted that it is necessary to incorporate a cancellation Clause in every insurance policy so as to enable the insurer to cancel the risk for a valid reason and cancellation Clause also acts as a necessary safeguard when the contract becomes incapable of performance or stands frustrated on account of a change in the conditions.
4.3 According to him in the present case the respondent has cancelled all Group Janta Personal accident Long Term Policies of individuals, companies, cooperative banks, etc and therefore there is no discrimination.
4.4 He submitted that the scope of judicial review in the realm of contract would not permit a writ Court to act as a Court of appeal while examining an administrative decision and to record a finding whether such decision could have been taken otherwise, in the facts and circumstances of the case. He submitted that in species of commercial transactions, the writ Court is concerned primarily as to whether there has been any infirmity in the decision-making process.
4.5 According to him in the present case, the petitioner cannot require the writ Court to examine the reasonableness of the decision taken by the respondent Company to cancel all the Group Janata Personal Accident Long Term Policies of sums insured above Rs. 1. In this connection he has relied upon decisions in the case of General Assurance Society Ltd. Vs. Chandumull Jain and Another, , in the case of G.B. Mahajan and others Vs. The Jalgaon Municipal Council and others, and in the case of Sterling Computers Limited and Others Vs. M and N Publications Limited and Others,
4.6 He submitted that in the present case the respondent was under an obligation to see what public interest required it to do in a given instant situation where the policy started making losses in its very first year. The losses multiplied every year after year and public interest would not have required the respondent to continue the Group Janata Personal Accident Long Term Policies and be condemned to perpetual loss making. He submitted that it is under these circumstances that the respondent thought it fit to invoke the cancellation Clause and refund the unearned premium to the insured. He therefore submitted that this way the insured have not suffered any loss or prejudice.
4.5 Mr. Mehta has lastly submitted that the petition raises several disputed questions of fact which cannot be adjudicated in a writ petition and therefore this petition deserves to be dismissed.
I have heard the matter at length and perused the entire record. The main contention of the petitioners is that the proposal does not contain any Clause permitting the Insurance Company to prematurely terminate the insurance policy. In this connection attention of this Court was drawn to Clause 5 of the Policy which reads as under:
[5] The Company may at any time by notice in writing cancel this Policy provided that the Company shall in that case return to the insured the then last paid premium less a pro-rata part thereof for the current Insurance period which shall have expired. Such notice shall be deemed sufficiently given if posted address to the insured at the address last registered in the Company books and shall be deemed to have been received by the insured at the time when the same would be delivered in the ordinary course of post.
5.1 Thus, there is in fact a Clause with regard to cancellation of the policy at any point of time. Therefore there cannot be any dispute with regard to the existence of such clause.
5.2 The petitioners have annexed the certificates of insurance issued to them. These certificates make a clear reference to the terms and conditions of the insurance policy. Therefore it is deemed to believe that Clause 5 of the policy was known to the insured. The said Clause 5 of the policy governs the contractual relationship between the insured and the insurer. When the petitioners have agreed upon the said condition, now it is not open to the petitioners not to accept the said clause. In the case of General Assurance Society (supra) it is held that "where the parties agree upon certain terms which are to regulate their relationship, it is not for the writ Court to make a new contract, however, reasonable, if the parties have not made it themselves." I am therefore of the view that having accepted the policy along with the conditions, the petitioners cannot now turn around and say that they are not aware about the said Clause pertaining to cancellation.
5.3 Further, the scope of judicial review in the realm of contract would not permit a writ Court to act as a Court of appeal while examining an administrative decision and to record a finding whether such decision could have been taken otherwise in the facts and circumstances of the case. In species of commercial transactions, the writ Court is concerned primarily as to whether there has been any infirmity in the decision-making process. In the present case no infirmity is pointed out in the process of taking a decision to cancel all Group Janata Personal Accident Long Term Policies of sums insured above Rs. 1 lac. However, this Court cannot go into the facts and examine the reasonablness of the decision taken by the respondent company as settled in the cases of General Assurance Society, G.B. Mahajan and others and Sterling Computers Ltd. (Supra).
5.4 In any case it is pointed out that in the present case the respondent was under an obligation to see what public interest required it to do in the instant situation where the policy started making losses in its very first year. The losses multiplied year after year. Public interest would not have required the respondent to continue the Group Janata Personal accident Long Term Policies and be condemned to perpetual loss making which may even result into threat to the every survival of the company. Had it continued with loss, it may even affect the other policy holders also creating a chain of loss merely because retaining a policy which was not viable in the circumstances. I am therefore of the view that no infirmity is pointed out in invoking the cancellation Clause by the respondent Company on the particular facts of this case. In any case, no court would be justified in holding that the company should continue with the policy if it is a loss making policy which is against the interest of the company.
5.5 Another aspect is that when the respondent company decided to cancel the policy, the company did refund the unearned premium to the insured. Therefore the petitioners also cannot contend that they suffered loss or caused any prejudice to them. I am of the view that the petitioners have failed to show that the decision to cancel all Group Janata Personal Accident Long Term Policies was whimsical and so arbitrary that no prudent or reasonable man could have taken.
It is required to be noted that as stated hereinabove, there is in existence a Clause pertaining to cancellation Clause being Clause 5 of the Policy. It is still in existence. The petitioners have not challenged the validity of the said cancellation clause. In absence of any challenge to the said Clause as being arbitrary, the Court has to look into the Clause and interpret the same as such. Therefore when the said Clause 5 being cancellation clause, without challenging the same, the petitioners are not justified in seeking a direction to declare the action of canceling the policy as illegal and arbitrary.
6.1 It appears that the cancellation Clause was incorporated in the policy so as to enable the insurer to cancel the risk for a valid reason. Cancellation Clause acts as a necessary safeguard when the contract becomes incapable of performance or stands frustrated on account of a change in the conditions. In the present case the respondent has cancelled all Group Janata Personal Accident Long Term Policies of individuals, companies, cooperative banks, etc. Therefore the petitioners cannot even contend that there is discrimination against them.
Mr. Shalin Mehta, learned Advocate for the respondent has submitted that in the present case the insurance policies have been serviced by the respondent on account of operation of the interim order dated 19th December 2002 passed in this petition and if the petition is dismissed, the effect of the said interim order needs to be reversed and the respondent is entitled to recover all sums that have been paid by it to the petitioner so far under the said Long Term Policies. However, to order restitution in favour of the respondent Company, it would be necessary for the Insurance Company to place on record the details of all the claims lodged with the Insurance Company subsequent to the interim order dated 19th December 2002 and upto the expiry of the insurance policies. In the case of South Eastern Coalfields Ltd. Vs. State of M.P. and Others, it is held that the successful party can demand (a) the delivery of benefit earned by the opposite party under the interim order of the Court, or (b) to make restitution for what it has lost; and it is the duty of the court to do so unless it feels that in the facts and on the circumstances of the case, the restitution would be far from meeting the ends of justice. I am of the view that looking to the overall facts and circumstances of the case no irreparable injury would be caused to the respondent company if the restitution is not made. Therefore this contention cannot be accepted, especially since they have retained the amount of premium.
In view of the above, I do not find any merits in the petition. The same is therefore dismissed. Rule is discharged with no order as to costs. Interim relief stands vacated.
At this stage Mr. Vakil, learned Advocate for the petitioner requests to stay this order for a period of three weeks. This request is accepted. Accordingly this order shall come into operation after three weeks from today.