Biman
Krishna Bose Vs. United India Insurance Co. Ltd. & Anr [2001]
Insc 358 (2 August 2001)
V.N.
Khare & Shivaraj V. Patil V.N. Khare, J.:
The
appellant herein and his wife Smt. Alka Bose, took out a mediclaim insurance
policy from the respondent United India Insurance Company (hereinafter referred
to as insurance company) on December 14, 1990.
In July 1991, Smt. Alka Bose fell ill and as per advice of the doctor she was
admitted to a hospital on August 14, 1991.
She paid Rs.8,243/- towards the charges for her treatment to the hospital. On August 30, 1991 the appellant lodged a claim for
Rs.8,243/- with the insurance company along with necessary papers. Despite
repeated requests the claim was not honored, with the result the appellant
approached the District Consumer Grievance Redressal Forum (District Forum
Calcutta) but the said complaint was rejected. On appeal before the State
Commission, the order of the District Forum was set aside and direction was
issued to the respondent insurance company to pay to the appellant a sum of
Rs.8,243/-. The insurance company thereafter went in revision before the
National Consumer Redressal Commission which allowed the revision and set aside
the order of the State Commission. Aggrieved, the appellant filed an appeal before
this Court. On May 10,
1995 this Court
allowed the appeal with costs which was quantified at Rs.20,000/-. Despite the
order of this Court, the payment was not made with the result the appellant had
to take further proceedings.
While
the said litigation was going on, appellants policy fell due for renewal. Under
such circumstances, the appellant on 24.1.1996, sent a letter along with a cheque
of Rs.1,796/- to the respondent insurance company requesting for renewal of his
existing mediclaim policy. On 7.3.1996, the insurance company declined to renew
the mediclaim policy as per the advice of the competent authority of the
company. Under the aforesaid circumstances, the appellant filed a writ petition
under Article 226 of the Constitution before the Calcutta High Court
challenging the order passed by the respondent insurance company refusing to
renew the mediclaim policy.
The
said writ petition was allowed and the order refusing to renew the policy was
set aside and a direction was issued to the insurance company to renew the mediclaim
policy earlier taken out by the appellant. Aggrieved, the respondent insurance
company filed an appeal against the judgment of learned Single Judge. The
Division Bench of the Calcutta High Court while agreeing with the view taken by
the learned Single Judge substantially dismissed the appeal. Yet, the High
Court directed the appellant to take fresh mediclaim policy, as the renewal of mediclaim
policy cannot be granted with retrospective effect, as the period for which
renewal was required has already expired. It is against the said part of the
order the appellant has preferred this appeal.
The
appellant, Biman Krishna Bose, has appeared in person. He argued that the High
Court even after setting aside the order refusing to renew the policy, was not
justified in directing the appellant to take fresh mediclaim policy. According
to the appellant, by the said order of the High Court he has been placed at a
great disadvantageous position. The appellant referred to the exclusion clause
of the policy taken out by him. Relevant clauses 2.1 and 2.1.14 of the mediclaim
policy run as under:
2.1
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 connect
with or in respect of: - 2.1.14 All diseases/injuries which are pre- existing
when the cover incepts for the first time.
On the
strength of the exclusion clause, the appellant urged that in case the
appellant is required to take fresh mediclaim policy, all the diseases which
have surfaced during the period the policy was not renewed shall be treated as
pre-existing diseases and the same would neither be covered by the fresh policy
nor he will be paid the money which he has incurred for treatment of the said
diseases during the relevant time and, therefore, the order of the High Court
be set aside. We find substance in the argument.
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 reasonableness 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.
Coming
to the next question whether the appellants 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 decease 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.
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.1,796/- towards premium but the same was returned to the appellant.
Thereafter, the 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/-.
J.
(V.N. Khare)
J.
(Shivaraj
V. Patil) New Delhi, August 2, 2001.
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