Madras High Court
Erode District Bus Owners Association vs Insurance Regulatory And Development ... on 14 June, 2011
Author: K.Chandru
Bench: K.Chandru
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 14.06.2011
CORAM
THE HONOURABLE MR.JUSTICE K.CHANDRU
W.P.Nos.10908, 11844, 12262, 12267, 12332, 12388,12626, 12632, 12633, 12634, 12656, 12657, 12658, 12703, 12704, 12746, 12747, 12759, 12937, 12938, 12939, 13031 and 13144 of 2011
and
M.P.NOs.2,3,2,3,2,3,2,2,3,2,2,2,2,2,2,2,2,2,2,2,2,2,1,1,1,2,2,2,
1,2,3 and 2 of 2011
Erode District Bus Owners Association
Rep. By its Secretary,
8, Bus Mahal, Erode -1. ...Petitioner in W.P.No.10908/2011
Federation of Bus Operators
Association of Tamil Nadu
Rep. By its Secretary,
No.19 Bishop Wallers Avenue (East)
Mylapore, Chennai 600 004. ...Petitioner in W.P.No.11844/2011
Association of Management of Coimbatore,
Anna University Affiliated Colleges,
(Registration No.140/2008)
Represented by its President,
119 Bhavani Road,
Erode 638 004. ...Petitioner in W.P.No.12262/2011
Federation of Associations of Private Schools in Tamil Nadu
Represented by its Secretary D.C.Elangovan,
Having registered office at
Old Door No.6A, New Door No.11,
20th Avenue, Ashok Nagar,
Chennai 600 083. ...Petitioner in W.P.No.12267/2011
Federation of Associations of
Matriculation Higher Secondary Schools,
Represented by its General Secretary,
S.K.Venkatasala Pandian,
No.274/1, M.T.H.Road,
Chennai 49 ...Petitioner in W.P.No.12332/2011
Coimbatore District Auto Workers Union
(Affiliated with CITU)
Rep. By General Secretary,
Mr.P.K.Sugumaran,
940-A, Mettupalayam Road,
Coimbatore 641 002. ...Petitioner in W.P.No.12388/2011
State Lorry Owners Federation Tamil Nadu
Represented by its President,
K.Nallathambi,
87, Salem Road, Namakkal 637 001. ...Petitioner in W.P.No.12626/2011
Anand Institute of Higher Technology
Rep. By its Chairman,
T.Kalasalingam, ...Petitioner in W.P.No.12632/2011
Kalasalingam and Anandam Ammal Charities,
Rep. By its Chairman,
T.Kalasalingam ...Petitioner in W.P.No.12633/2011
A.R.College of Engineering and Technology,
Rep. By its Chairman A.R.Anub ...Petitioner in W.P.No.12634/2011
Villupuram District Matriculation Schools Association,
Represented by its Secretary,
R.Vasudevan ...Petitioner in W.P.No.12656/2011
Tiruchirapalli District Matric and
Matric Higher Secondary Schools Federation,
represented by its Secretary,
Sri Vaijayanthi Vidyalaya Matric School. ....Petitioner in W.P.No.12657/2011
Nagai District Matric, Nursery &
Primary Schools Federation,
Represented by its President,
KV.Radhakrishnan
Sri Vivekananda Matric Higher
Secondary School. ...Petitioner in W.P.No.12658/2011
Erode District Mini Bus Owners
Safety Association
Represented by its President ...Petitioner in W.P.No.12703/2011
Erode District Mini Bus Owners Association
Represented by its President ..Petitioner in W.P.No.12704/2011
Kalaimagal Matriculation Higher
Secondary School
Rep. By its Correspondent
P.Duraimurugan ...Petitioner in W.P.No.12746/2011
R.V.S.Educational Trust,
Rep. By its Chairman
K.V.Kuppusamy ....Petitioner in W.P.No.12747/2011
Confederation of Surface Transport Tamilnadu
Rep. By its Secretary,
M.Vasudevan ....Petitioner in W.P.No.12759/2011
PRM Roadways Pvt. Ltd.,
Represented by its Managing Director. ... Petitioner in W.P.No.12937/2011
M.Ranjitham ... Petitioner in W.P.No.12938/2011
K. Manickam ... Petitioner in W.P.No.12939/2011
Sri Venkateswara Polytechnic College,
Rep. By Sri Vijayalakshmi Educational Trust
By Chairman and Trustee
Sri Venkateswara College and Education,
By Chairman and Trustee
Annamalaiyar College of Engineering,
Represented by Srivenkateswara Educational Trust
By Chairman and Trustee
Dusi Polytechnic College Represented by
Annai Indira Technical Educational Trust
by Chairman and Trustee ... Petitioners in W.P.No.13031/2011
Kalasalingam University
Rep. By its Chairman
T.Kalasalingam ... Petitioner in W.P.No.13144/2011
Vs.
1.Insurance Regulatory and Development Authority,
Rep. By its Chairman,
Parishrama Bhavanam,
6-9-58 B, 3rd Floor,
Basheer Bagh, Hyderabad 500 004.
2.The Tariff Advisory Committee,
Rep. By its Secretary,
Ador House, 1st Floor,
6A, Dubash Marg,
Mumbai 400 023. ...Respondents 1 and 2 in
W.P.Nos.12632, 12633,12746, 12747, 13144/2011
3.The New India Assurance Co. Ltd.,
Rep. By its Chairman and Managing Director,
190, Anna Salai, Chennai 600 006. ...3rd Respondent in
W.P.Nos.12633,12634,13144/2011
4.The National Insurance Co., Ltd.,
Rep. By its Chairman and Managing Director,
779 A, Anna Salai,
Chennai 600 002. ...3rd Respondent in
W.P.No.12632/2011
5.The Oriental Insurance Co. Ltd.,
Rep.by its Chairman and Managing Director,
Oriental House, A25/27 Asaf Ali Road,
New Delhi 110 007.
6.The United India Insurance Co. Ltd.,
Rep. By its Chairman and Managing Director,
24 Whites Road, Chennai 600 014. ...Respondents 1 to 6 in
W.P.Nos.W.P.No.10908, 11844, 12262, 12267,
12332, 12388,12626, 12656, 12657, 12658, 12703, 12704, 12759, 12937, 12938, 12939, 13031/2011,.
4th respondent in W.P.No.12633,13144/2011
3rd respondent in W.P.No.12746/2011
7.Royal Sundaram Insurance Company Ltd.,
Rep. By its Managing Director,
Sundaram Towers,
45 & 46, Whites Road,
Chennai 600 014. ...5th respondent in
W.P.No.12633,13144/2011
8.Bajaj Alliance General Insurance Co. Ltd.,
Rep. By its Managing Director,
25/26, Prince Towers, College Road,
Chennai 600 006. ...Respondents 7 & 8 in
W.P.No.12262/2011
9. Cholamandalam MS General Insurance
Company Limited,
Rep. By its Managing Director,
"Dare House" 2nd Floor,
NSC Bose Road,
Chennai 600 001. ...4th respondent in
W.P.No.12632/2011
10.Shriram General Insurance Company Limited,
Rep . By its Chairman,
No.E-8, EPIP, RIICO Industrial Area,
Sitapura, Jaipur, Rajasthan 302 022. ...4th respondent in
W.P.No.12634/2011
11.The Oriental Insurance Co. Ltd.,
Divisional Office III
India Life Building, Trichy Road,
Coimbatore 641 078. ...3rd respondent in
W.P.No.12747/2011
12.BALAJI ALLIANZ GENERAL INSURANCE CO.LTD.
REP BY ITS CHAIRMAN, GE PLAZA
AIRPORT ROAD, YERAWADA PUNE 411 006
13.ICICI LOMBARD GENERAL
INSURANCE CO.LTD
REP BY ITS CHAIRMAN ,
ZENITH HOUSE, KESHAVRAO KHADE MARG ,
MAHALAXMI, MUMBAI 400 034
14.IFFO TOKIO GENERAL INSURANCE CO.LTD. ,
REP BY ITS CHAIRMAN
4 AND 5TH FLOORS
IFFCO TOWER PLOT NO.3 SECTOR 29
GURGAON 122001 (HARYANA)
15. NATIONAL INSURANCE CO.LTD.
REP BY ITS CHAIRMAN
3 MIDDLETON ST P.B.NO. 9229, KOLKATA 700 071.
16.THE NEW INDIA ASSURANCE CO.LTD.
REP BY ITS CHAIRMAN,
NEW INDIA ASSURANCE BLDG
87 M.G. ROAD, FORT,
MUMBAI 400 001
17.THE ORIENTAL INSURANCE CO. LTD.
REP BY ITS CHAIRMAN
A 25/27 ASSAF ALI ROAD
NEW DELHI 110 002
18.RELIANCE GENERAL INSURANCE CO.LTD.
REP BY ITS CHAIRMAN
570 NAIGAUM CROSS ROAD
NEXT TO ROYAL INDUSTRIAL ESTATE
WADALA (WEST) MUMBAI 400 031
19.ROYAL SUNDARAM ALLIANCE INSURANCE CO.LTD.
REP BY ITS CHAIRMAN
SUNDARAM TOWERS, 45-46 WHITES ROAD
ROYAPURAM, CHENNAI 14.
20 TATA AIG GENERAL INSURANCE CO.LTD.
REP BY ITS CHAIRMAN
PENINSULA CORPORATE PARK ,
NICHOLAS PIRAMAL TOWER , 9TH FLOOR
GANPATRAO KADAM MARG, LOWER PAREL
21 UNITED INDIA INSURANCE CO. LTD
REP BY ITS CHAIRMAN 24 WHITES ROAD
CHENNAI 14
22 CHOLAMANDALAM MS GENERAL INSURANCE CO.LTD.
REP BY ITS CHAIRMAN
DAR HOUSE, 2ND FLOOR , NEW NO.2
OLD NO.234 , NSC BOSE ROAD, CHENNAI 1
23 HDFC ERGO GENERAL INSURANCE CO.LTD.
REP BY ITS CHAIRMAN, 6TH FLOOR
LEELA BUSINESS PARK, KURIA ROAD, ANDHERI
(EAST) MUMBAI 400 059
24 EXPORT CREDIT GUARANTEE CORPORATION OF INDIA LTD
REP BY ITS CHAIRMAN
10TH FLOOR , EXPRESS TOWERS
NARIMAN POINT , MUMBAI 400 021
25 AGRICULTURE INSURANCE CO. OF INDIA LTD
REP BY ITS CHAIRMAN, 13TH FLOOR
14 K.G. MARG. CONNAUGHT PLACE
NEW DELHI 110 001
26 STAR HEALTH AND ALLIED INSURANCE CO.LTD.
REP BY ITS CHAIRMAN,
NO.1 NEW TANK, ST VALLUVARKOTTAM HIGH ROAD
NUNGAMBAKKAM, CHENNAI 34
27 APOLLO MUNICH HEALTH INSURANCE CO.LTD.
REP BY ITS CHAIRMAN,
BUILDING NO.108, 10TH FLOOR, DLF CYBERCITY
GURGAON 122 001, HARYANA, INDIA.
28 FUTURE GENERAL INDIA INSURANCE CO.LTD.
REP BY ITS CHAIRMAN
001 TRADE PLAZA,
GROUND FLOOR , 414 VEER SARVARKAR MARG
PRABHADEVI MUMBAI 400 025
29. UNIVERSAL SOMPO GENERAL INSURANCE CO.LTD.
REP BY ITS CHAIRMAN
310- 311 TRADE CENTRE
OPP MTNL BUILDING, BANDRA
KURLA COMPLEX , BANDRA (E) MUMBAI 400 051
30 .SHRIRAM GENERAL INSURANCE CO.LTD.
REP BY ITS CHAIRMAN
E-8 EPIP RIICO INDUSTRIAL AREA
SITAPURA JAIPUR302, 022 (RAJASTHAN)
31. BHARTI AXA GENERAL INSURANCE
CO.LTD. REP BY ITS CHAIRMAN FIRST FLOOR
THE FEMSICON SURVEY NO.28 NEXT TO AKME
BALLET DODDANEKUNDI OFF OUTER RING ROAD
BANGALORE 560 037
32. REHEJA QBE GENERAL INSURANCE CO.LTD.
REP BY ITS CHAIRMAN
COMMERZ 10TH FLOOR
INTERNATIONAL BUSINESS PARK
WESTERN EXPRESS HIGHWAY
GEREGAON (EAST) MUMBAI 400 063
33.SBI GENERAL INSURANCE COMPANY LTD.
REP BY ITS CHAIRMAN
THE IL & FS FINANCIAL CENTRE
7TH FLOOR PLOT C 22 G BLOCK
BANDRA KURLA COMPLEX, BANDRA EAST
MUMBAI 400 051
34.MAX BUPA HEALTH INSURANCE CO.
LTD REP BY ITS CHAIRMAN
CORPORATE ADDRESS
2ND FLOOR , SALCON RASVILAS D-1
DISTRICT CENTRE, SAKET, NEW DELHI 110 017.
35. L & T GENERAL INSURANCE CO. LTD.
REP BYITS CHAIRMAN
601-602 TRADE CENTRE
BANDRA KURLA COMPLEX, BANDRA (EAST)
MUMBAI 400 051 ....Respondents 7 to 30 in
W.P.No.12759/2011
Writ petitions preferred under Article 226 of the Constitution of India praying for the issue of a writ of Certiorari, calling for the records of the 1st respondent made in Ref.IRDA / NL / NTFN / MOTP / 066 / 04 / 2011 dated 15.04.2011 in which passenger premium is enhanced and quash the same.
For Petitioners :
Mr.M.Palani : W.P.No.10908, 11844, 12703, 12704,
12937, 12938 and 12939/2011
Mr.J.Srinivasa Mohan : W.P.12332, 12267, 12656, 12657,
12658/2011
Mr.Kandan Doraisamy in W.P.No.12262/2011
Mr.S.R.Sundaram in W.P.No.12388/2011
Mr.R.Karthikeyan in W.P.No.12626/2011
Mr.K.Selvaraj in W.P.Nos.12632 to 12634,
12746, 12747 and 13144/2011
Mr.A.Muthuraman in W.P.No.12759/2011
M/s.Siva Associates in W.P.No.13031/2011
For Respondents : Mr.M.B.Raghavan for R1 and R2
Mr.N.Vijayaraghavan for R3 to R6
- - - -
COMMON ORDER
All these matters came to be posted before this Court vide an order dated 7.6.2011 by the Hon'ble the Chief Justice. While W.P.No.13144 of 2011 was heard on 09.06.2011, all the other writ petitions were heard on 08.06.2011.
2.In all these writ petitions, the subject matter of the challenge is to the order, dated 15.4.2011 issued by the first respondent, i.e., Insurance Regulatory and Development Authority (for short IRDA) constituted under the Insurance Regulatory and Development Authority Act, 1999. By the impugned order, the IRDA had fixed the Motor Insurance Premium Rates for third party liability only cover. The petitioners in all these writ petitions were either associations of bus operators, lorry operators, trade union of Auto rickshaw drivers and associations of matriculation schools, self finance colleges and deemed universities.
3.The short question that arise for consideration in this batch of cases was whether the fixation of premium rates for third party liability by the IRDA was without jurisdiction and whether it is arbitrary and violative of Article 14 of the Constitution as well as ultravires of the provisions of the Insurance Act, 1938?
4.Before going into the contentions, it is necessary to refer to the impugned order in extenso for better appreciation of the facts involved in all these cases. The order reads as follows:
"The Authority refers to the Exposure Draft on Review of Motor Insurance Premium rates for Third Party Liability Cover dated 4th January 2011, which was published in its website. Subsequently on receiving responses on the exposure draft, the Authority held series of discussions with the Transporters' Associations and Insurers.
By virtue of the power vested in the Authority under Section 14(2)(i) of the IRDA Act, 1999, it is hereby notified that with effect from 25.04.2011, the rates of premium applicable to Motor Third Party Liability Insurance business shall be as set out in Annexure-I to this notification. The Authority has noted that Motor Third Party premiums were revised in the past at 4/5 year intervals. Such long intervals between rate revisions cast an avoidable strain on policyholders as well as on the insurance companies. Premiums need to be reviewed regularly depending upon the average claims which have been awarded by the various courts, frequency of claims for each class of vehicle and inflation amongst other factors. During the consultation process, certain stakeholders had also suggested that an annual review would ease the burden of adjusting to changes in premia consequent to changes in these financial parameters.
Having regard to the above, after extensive statistical analysis of data for all classes of vehicles, the Authority has arrived at a formula for the revision of rates based on settled parameters as set out in Annexure-II. The parameters built into the formula are (i)average claims cost for each class of vehicle (ii)frequency of claims for each class of vehicle and (iii)Cost Inflation Index for the year of review.
Based upon the formula as set out in the Annexure II, the premiums would be reviewed and adjusted annually.
Insurers are advised to be mindful of the concerned expressed by vehicle owners about both the rates and availability of insurance. Considering the mandatory nature of Motor Third Party Insurance, insurers are advised to ensure that Motor Third Party Insurance is made available at their underwriting offices and that requests for insurance are processed expeditiously and policies are issued promptly. The Authority will treat any complaint of non-availability of insurance or use of methods to deny/delay the client seeking insurance cover, seriously.
Insurers are not permitted to cancel the current insurance policies and issue fresh policies to effect new premium rates.
This Notification as well as the enclosed schedule of premium rates shall be prominently displayed on the Notice Board of every underwriting office of the Insurers where it can be viewed by the public.
This Notification is issued in supersession of the Authority's earlier Notification Ref:043/IRDA/De-Tariff/Jan-07 dated 23rd January 2007."
(Annexures I and II omitted)
5.Mr.M.Palani, learned counsel appearing for some of the writ petitioners contended that the IRDA cannot disregard the provisions of the Insurance Act, 1938 in the matter of fixation of motor insurance premium. The power is conferred upon the Tariff Advisory Committee which alone has authority to fix the premium. The present IRDA is a committee packed with officers nominated by the Chairman. The Chairman of the IRDA cannot revise the tariff as if he is the Tariff Advisory Committee and also ratify his own action as a regulatory authority. He also submitted that in respect of the goods vehicles, liability towards third party is satisfied from the basic coverage of premium. But in respect of the passenger vehicle, such third party liability is fastened upon passenger risk. Therefore, it was grossly unfair and unjust to have different methods of premium. The method of fixation of tariff should be based upon earning capacity of insured and not with reference to the cost inflation index or claim amount or frequency and expenses involved in servicing the motor transport business. He also further submitted that the passenger premium for third party risk had been increased by several folds, whereas the passenger fare in respect of the passenger vehicle was not revised in the State of Tamil Nadu since December, 2001. By enhancing the premium per passenger from Rs.235/- to Rs.380/- as per the impugned notification, there is 60% increase in the current premium which affects the livelihood of the motor vehicle operators.
6.Supporting the stand of the learned counsel, Mr.Kandan Doraisamy, the learned counsel for the association of School managements submitted that the schools are not to be treated like other regular passenger vehicles. The school buses are used only for fetching students in mornings and evenings and that many of the schools were run as charitable organisations without any profit motive. Some members of the association also do not even charge separately for the transport from the parents.
7.Mr.S.R.Sundaram, learned counsel for the trade union for Auto Rickshaw drivers contended that no proper hearing was given to their associations and therefore, the impugned fixation of tariff was illegal and opposed to principles of natural justice.
8.Mr.J.Srinivasa Mohan, learned counsel for some of the petitioners submitted that the policy in respect of motor vehicles is covered by Section 146 of the motor Vehicles Act, 1988. The policy can only be with respect of third party and there can be only one component of premium. Therefore, there can not be third party as well as passenger premium. Directing the motor vehicle owners to pay passenger premium was not contemplated and there is no jurisdiction to demand passenger premium. Once basic premium is levied by the insurer, the question of further levying passenger premium does not arise which would amount to double premium for the same vehicle. The revision that has been made was without reference to any class of passengers and no scientific data has been provided for.
9.Per contra, Mr.M.B.Raghavan, learned counsel appearing for IRDA as well as Tariff Advisory Committee submitted that the IRDA has taken pains to collect scientific data on the liability to be incurred by the insurers and also the quantum of expenditure that had gone up considerably for the insurer to meet the third party liability both due to increased volume of accidents as well as elaborate interpretations of Courts regarding accident policy. Extensive consultation was also done with the association of stake holders. The present fixation of premium is based on scientific data. It must also be noted that there cannot be any judicial review in this matter and the issue involved is purely contractual. He further submitted that Section 147 of the Motor Vehicles Act contemplates two types of liability. Therefore, the premium had taken into account the entire liability arising out of Sections 146 and 147 of the Motor Vehicles Act. With reference to fixation of premium for goods vehicle, it was based upon the weight of the vehicle, because in goods vehicle, there are no passengers allowed and it wanted to provide different rates of premium depending upon the size of the vehicle. The same was the case in respect of the three wheelers. He also submitted that neither the Insurance Act nor the IRDA Act contemplates hearing of every individual and the very hearing itself is contemplated by the judicial order. A cross section of the stake holders were heard. To prove the fact, they also produced the minutes of meetings that the IRDA had with the Transporters associations. Therefore, he prayed for the dismissal of the writ petitions.
10.Mr.N.Vijayaraghavan, learned counsel for various insurance companies adopted the arguments of Mr.M.B.Raghavan and also submitted that unlike before there is no Government monopoly in the insurance sector and it is an opened up sector facing stiff competitions from foreign companies in this area. Instead of allowing the individual companies to deal with the insured, the IRDA being the regulatory authority as well as the development authority in the insurance sector was created so that there will be uniformity in the rate. This is very much essential because of compulsory insurance. The present premium fixed hardly taken into account the liability of the insurance company and most of the public sector companies are bound to subsidize the motor insurance with the income derived from the other insurances. If it is left to the market fluctuation while fixing the premium, then the premium rates will go up much higher. It is only because of the controlling authority in the form of IRDA, the insurance premiums are fixed at reasonable rates.
11.Mr.Vijayaraghavan also submitted that thanks to the interim orders granted by this court, some members of the petitioner associations were paying only the rate fixed before the impugned order, though number of transport operators have started paying new rates notwithstanding the interim order. But in case this court should hold against the transport operators, then they must be directed to pay the balance of insurance premiums. He further submitted that the interim order is only pending result of the writ petitions and it cannot have any effect beyond the outcome of the main writ petition.
12.In the light of the rival contentions, it has to be seen whether the petitioners have made out any case to interfere with the impugned order?
13.Before proceeding to deal with the rival contentions, various stages of development with reference to the motor insurance has to be mentioned. Before the Insurance Act, 1938 was introduced, the law relating to the insurance in the colonial India was covered by the Provident Insurance Societies Act which regulated the Life Insurance Companies. The said Act was amended by Act 20 of 1928 primarily to provide collection of statistical information in respect of insurance business other than life insurance business carried on in India by external companies. Subsequently, Mr.S.C.Sen was appointed to go into the working of insurance companies to make recommendations. It is on the basis of the recommendations, the Insurance Act, 1938 was enacted. The Act provided for minimum initial working capital and principle of deposits were applied. All schemes of insurance operated by a society were subjected to actuarial examination so that unsound schemes can be eliminated. Periodical actuarial investigation was also made into financial conditions of the society. The increased powers of inspection and enquiry was also made. Even after the enactment was made, there were many insurance sales and service companies themselves operating certain insurance companies and banking companies got interlocked with the insurance companies to use the monies for speculative business. Therefore, the Central Act, 47 of 1950 was brought in to plug the loopholes so as to make it difficult for designing financiers to get control of insurance companies or to use insurance funds for speculative purposes and that provisions were also made to prevent interlocking of interests between the insurance companies and banks.
14.It is only in the year 1968, the idea of Tariff Advisory Committee was evolved and an amendment was made by the Central Act 62 of 1968. Part II-B provides for establishment of Tariff Advisory Committee, composition of the Advisory committee and the power to make rules in respect of matters regarding the said Part. Under Section 64-UC, the power of the Advisory committee to regulate rates and advantages were also made. The Advisory committee was to comprise of the Controller of Insurance and a Senior Officer of the office of the Controller nominated by him as a Vice Chairman and not more than 10 representatives of Indian insurers elected in their individual capacity and not more than four representatives of the insurers incorporated or domiciled elsewhere India. The secretary of the Committee was an officer of the office of the Controller nominated by the him. This committee was entitled to discharge functions entrusted to it including if it deemed expedient, control and regulate the rates, advantages,terms and conditions that may be offered by the insurer in respect of any risk of any class or category of risk.
15.After these amendments were made, the Tariff Advisory Committee started fixing premium for the insurers of various types of insurance business. But, however after the amendment was made by the Central Act 62 of 1968 with effect from 1.6.1969, the entire general insurance business was nationalised by the Parliament by enacting the General Insurance Business (Nationalisation) Act, 1972 (Central Act 57 of 1972). A public sector company, i.e., General Insurance Corporation and four of its subsidiaries were established. Under Section 35 of the General Insurance Business (Nationalisation) Act subject to such exceptions, restrictions and limitations if any as the Central Government may by notification specify in that behalf, the Insurance Act 1938 was made to apply to or in relation to the Corporation and every acquiring company as if the Corporation or the acquiring company as the case may be were an insurer carrying on general insurance business within the meaning of the Act. Therefore, the Tariff Advisory Committee continued to fix tariff in respect of the nationalised business of general insurance and there were no private operators.
16.When in the year 1990, premium was fixed by the Committee, the matter was challenged in various High Courts by the transport operators. It was contended that escalation of premium rates had affected the business so as to offend Article 19(g) of the Constitution and that while fixing rates, the operators who were stake holders were not heard. The Supreme Court vide its judgment in Jt. Council of Bus Syndicate v. Union of India reported in 1992 Supp (2) SCC 125, in paragraph 8 had observed as follows:
8.After hearing counsel for the different parties we have, however, come to the conclusion that whether directly required by statute or not, it is appropriate that the parties who are affected by the escalation of the tariff rate should be given a hearing. We agree that such a hearing cannot be personal in regard to everyone in the field. That would be a physical impossibility. Therefore, on zonal basis representations should be received and existing representations also could be taken into consideration and groupwise hearing should be afforded at all States or Union territory headquarters. The Tariff Advisory Committee may have sittings at these places and where the headquarters of a State or Union Territory or two States are either at the same place or nearabout, they could be joined up for one set of hearing. We, however, do not disturb the escalation already adopted. In case after such a hearing is granted, the Committee is satisfied that alterations are warranted, appropriate reduction of the tariff should be undertaken. We make it clear that the tariff as a result of this exercise would not be permitted to be enhanced. The exact procedure of hearing in terms of our direction we do not intend to prescribe but we leave it open to the Committee to adopt a fair way of hearing the parties and we hope and trust that a fair and reasonable hearing would be extended to the parties or such of them who appear on such occasion or occasions. The Committee may break itself into groups for convenience of movement and quick disposal of the matter. After the hearing is over at the different centres, the entire Committee should meet and take its decision after appropriate deliberations.
(Emphasis added)
17.It was by judicial dicta, such personal hearing was contemplated and there was hardly any challenge to the revision of premium for insurance business in general and motor insurance in particular. But, however, due to liberalisation in the area of insurance sector and due to policy decision taken by the Central Government, the insurance business was also opened up for foreign companies' participation. The Central Government thought fit to bring registration for the establishment of an authority to protect the interest of the holders of the insurance policy, to regulate, promote and to ensure orderly growth of insurance industry and also to amend the existing Insurance Act, 1938 brought the Insurance Regulatory and Development Authority Act, 1999. The Act apart from creating the IRDA, defining duties, powers and functions of the IRDA and also made extensive amendment to the existing Insurance Act by incorporating First Schedule prescribed under Section 30 of the IRDA Act.
18.Section 14 provides for duties, powers and functions of the Authority which reads as follows:
14.Duties, powers and functions of Authority. (1) Subject to the provisions of this Act and any other law for the time being in force, the Authority shall have the duty to regulate, promote and ensure orderly growth of the insurance business and re-insurance business.
(2) Without prejudice to the generality of the provisions contained in sub-section (1), the powers and functions of the Authority shall include,
(a)issue to the applicant a certificate of registration, renew, modify, withdraw, suspend or cancel such registration;
(b)protection of the interests of the policyholders in matters concerning assigning of policy, nomination by policyholders, insurable interest, settlement of insurance claim, surrender value of policy and other terms and conditions of contracts of insurance;
(c)specifying requisite qualifications, code of conduct and practical training for intermediary or insurance intermediaries and agents;
(d)specifying the code of conduct for surveyors and loss assessors;
(e)promoting efficiency in the conduct of insurance business;
(f)promoting and regulating professional organisations connected with the insurance and re-insurance business;
(g)levying fees and other charges for carrying out the purposes of this Act;
(h)calling for information from, undertaking inspection of, conducting enquiries and investigations including audit of the insurers, intermediaries, insurance intermediaries and other organisations connected with the insurance business;
(i)control and regulation of the rates, advantages, terms and conditions that may be offered by insurers in respect of general insurance business not so controlled and regulated by the Tariff Advisory Committee under Section 64-U of the Insurance Act, 1938 (4 of 1938);
(j)specifying the form and manner in which books of account shall be maintained and statement of accounts shall be rendered by insurers and other insurance intermediaries;
(k)regulating investment of funds by insurance companies;
(l)regulating maintenance of margin of solvency;
(m)adjudication of disputes between insurers and intermediaries or insurance intermediaries;
(n)supervising the functioning of the Tariff Advisory Committee;
(o)specifying the percentage of premium income of the insurer to finance schemes for promoting and regulating professional organisations referred to in clause (f);
(p)specifying the percentage of life insurance business and general insurance business to be undertaken by the insurer in the rural or social sector; and
(q)exercising such other powers as may be prescribed.
19.The composition of the IRDA is set out in Section 4 of the Act, which reads as follows:
4.Composition of Authority.The Authority shall consist of the following members, namely :
(a)a Chairperson;
(b)not more than five whole-time members;
(c)not more than four part-time members;
to be appointed by the Central Government from amongst persons of ability, integrity and standing who have knowledge or experience in life insurance, general insurance, actuarial science, finance, economics, law, accountancy, administration or any other discipline which would, in the opinion of the Central Government, be useful to the Authority:
Provided that the Central Government shall, while appointing the Chairperson and the whole-time members, ensure that at least one person each is a person having knowledge or experience in life insurance, general insurance or actuarial science, respectively.
20.Section 11 took care in granting immunity to the proceedings taken by the authority on account of any defect or error including vacancies. Section 11 reads as follows:
11.Vacancies, etc. not to invalidate proceedings of Authority.No act or proceeding of the Authority shall be invalid merely by reason of
(a)any vacancy in, or any defect in the constitution of, the Authority; or
(b)any defect in the appointment of a person acting as a member of the Authority; or
(c)any irregularity in the procedure of the Authority not affecting the merits of the case.
21.Schedule I read with Section 30 amended various provisions of the Insurance Act, 1938. Insofar as Section 64-UA is concerned, the term of Controller of Insurance was substituted by Chairperson of the authority. In respect of Section 64-UC which provided for regulating the rates, the previous approval of the Central Government was dispensed with and it was left to the authority to decide the issue by itself. Therefore, in this background of development of insurance business and the legislative changes brought about, the claim of the petitioners will have to be considered by this Court.
22.The Supreme Court while dealing with the functions of the Insurance company and the enforcement of terms and conditions of contract including the power of the regulatory authority to fix the tariff, vide decision in United India Insurance Co. Ltd. v. Manubhai Dharmasinhbhai Gajera reported in (2008) 10 SCC 404 in paragraphs 30,31,32 and 37 had observed as follows:
30.The functions of the insurance companies are governed by statute. A contract of insurance, therefore, must subserve the statutory provisions. It must indisputably be construed having regard to the larger public policy and public interest guiding nationalisation of the insurance companies.
31.Insurance sector is regulated. The provisions of the Insurance Act are applicable to all insurance companies irrespective of the fact as to whether they are in public sector or private sector. When a business is regulated, all concerned would be governed thereby.
32.It is one thing to say that the terms and conditions of a contract are statutory in nature but it is another thing to say that the statute governs or controls the business itself. It is the latter which is applicable to the fact of the case.
37.It has a tariff policy. It is completely under the control of the Regulatory Authority. The tariff has to be fixed by the Authority. What should be the reasonable tariff would again be the subject-matter of exercise of jurisdiction by the Authority. So far as non-tariff policies are concerned, the insurance companies may charge tariff but the terms and conditions thereof are regulated by the Authority......
23.With reference to the power of judicial review over such action of insurers, in the very same judgment in paragraphs 39,52,59 and 72, it was observed as follows:
39.Another distinction in the approach of the Court in this behalf must also be borne in mind, namely, that a court may exercise its power of judicial review at the threshold of formation of a contract as was the case in Ramana Dayaram Shetty v. International Airport Authority of India9 and the cases where the terms and conditions of contract are to be enforced. Whereas in the former case, the courts jurisdiction is wider, in the latter, it is not. We may, however, hasten to add that it does not mean that the court shall not interfere even in a case where the term of the contract is against the public policy or where in enforcing the same the State acts arbitrarily, unfairly or unreasonably or makes discrimination amongst the persons similarly situated.
52.We must, however, place on record that the United Kingdom and Ireland do not have a written constitution. Doctrine of fairness would not be radiant in a contract in those courts. Decisions rendered in other jurisdictions merely have a persuasive and not a binding nature. A foreign law should not be applied when the constitutionalism operating in the countries are different. We have to apply the law keeping in view the equality clause contained in Article 14 of the Constitution of India. It is the heart and soul of our Constitution.
59*..... Whereas on the one hand we cannot forget the new market economy and the foreign direct investment, we also cannot shut our eyes to the ground realities. There is a huge gap between the high-sounding wants of the Government and the realities on the ground. It is essential that while on the one hand, the insurance companies are not put to undue burden keeping in view the changes in the statute as also the policy decisions of the Central Government, they also cannot be permitted to act wholly arbitrarily and unreasonably.....
72...... however, we would like to observe that keeping in view the role played by the insurance companies, it is essential that the Regulatory Authority must lay down clear guidelines by way of the Regulations or otherwise. No doubt, regulations would be applicable to all the players in the field. The duties and functions of the Regulatory Authority, however, are to see that the service providers must render their services keeping in view the nature thereof.....
24.With reference to the first contention that the tariff was fixed by the IRDA and not by the Tariff Advisory Committee is concerned, the said argument fails to take into account the change in law and more particularly, Schedule I read with Section 30 of the IRDA Act, 1999. The composition of the Committee has now been changed and the IRDA has been given power to fix the rate if there is no rates fixed by the Tariff Advisory Committee. Section 14(2)(i) extracted above clearly shows that if it is not controlled or regulated by the Tariff Advisory Committee under Section 64-U of the Insurance Act, 1938, then the IRDA can control and regulate the rates. In this context, the Tariff Advisory Committee in its meeting held on 24.8.2006 had decided that the current tariff should be withdrawn effective from the date to be decided by the Chairman of the TAC. Accordingly, the tariff rates in respect of motor and other insurance stood withdrawn with effect from 1.1.2007. This fact was also communicated by a communication, dated 4.12.2006. It was thereafter, the IRDA exercising power under Section 14(2)(i) of the IRDA Act, started the process of consultation with various stake holders in the matter of fixation of new tariff. The minutes of various meetings held between the transport associations and the IRDA officials were set out in pages 3 to 18 of the typed set filed by respondents 1 and 2, dated 6.6.2011. It is unnecessary to set out the discussions between the parties. It is suffice that the process of consultation was held in terms of the judgment of the Supreme Court in Jt. Council of Bus Syndicate's case (cited supra).
25.But, subsequent to the said consultation process, the Exposure Draft was circulated by communication, dated 4.1.2011 by the IRDA. In that communication, the queries raised by the transporters and the response by the IRDA were set out. While the claim of the Transporters to fix the liability against various insurance claims though strictly do not come within the purview of the IRDA Act, the IRDA had recommended to the Central Government for amendment of the Motor Vehicles Act. With reference to the claims for passengers should be segregated from the claims for non passengers, the IRDA's response was as follows:
"The law treats passengers and other third parties on equal footing. However efforts are on to work out separate data for passenger and non-passengers for the future by the Insurance Information Bureau (IIB)."
26.With reference to the need for revision, the IRDA in the Exposure Draft in paragraphs 4 to 8 had responded as follows:
"4.Statistics compiled by the Insurance Information Bureau (IIB) of the Authority show that the motor third party insurance portfolio for commercial vehicles is consistently making losses. The summary of incurred claims ratio for preceding 2 years for motor third party insurance for (i) Good carrying vehicles (Public Carrier) and (ii)Passenger Carrying vehicle (4 wheelers), are given below:
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
TP Incurred Claims Ratio
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Class Description 2007-08 2008-09
Code
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
17 Goods Carrying Public (other
than 3 wheelers) 152.50 173.08
21 Passengers Carrying 4 wheeler 158.62 149.94
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
The data for third party insurance for all classes of vehicles for 2007-08 and 2008-09 years are placed in Annexure-II(a), II(b) respectively.
5.The Authority is of the view that the issue of review of motor third party premium deserves due importance and urgency. The data clearly shows that the portfolio is running at a considerable loss to the insurance companies. The development of claims for this portfolio also takes several years as illustrated in Annexure-III. The development is illustrated separately for all classes of vehicles in respect of (i) death (ii) third party property damage and (iii)other causes which can be accessed in the website of IRDA www.irda.gov.in ("what is New" / 09th Nov, 2010).
6.This class of insurance being mandatory, the motor pool whereby the insurers are sharing the loss, is also bursting at seems, with the long term liability threatening to run to 197%. It is also to be noted that as per IRDA estimates the insurance premium represent less than 1% of operating cost of transporters.
7.In view of the above factors placing severe strain on the underwriting of mandatory third party insurance business by the general insurers, it has become necessary to come out with this exposure draft reviewing the third party premium and replace the current tariff by rates as proposed in column-3 of Annexure-I.
8.The rates proposed are the premium that can be charged by insurers till further orders."
27.Finally, in the meeting held on 8.3.2011 with All India Motor Transport Congress, the queries raised by the transporters were answered by them point by point and that in the minutes, the Chairmen of the IRDA had informed the transporters which is as follows:
"Chairmen expressed concerns of IRDA based on actuarial working that the provisions of reserves made by the insurers for long term liability were in fact under estimated. Chairman allayed the doubts of the transporters regarding accuracy of the estimates by explaining that unlike the past decade when data of only one company was available, today the Insurance Information Bureau had transactional level data of all companies. The analysis is done by experts in the field of actuarial science. Hence the analysis done on such data has a sound basis."
28.It was thereafter, the impugned order came to be issued on 15.4.2011. The impugned notification had the following salient features. In Annexure-I, types of vehicles, goods carrying vehicles, passenger vehicles and three wheeler and four wheelers were subjected to different revision of tariff. The IDA had also informed that the last revision was done in 2007 and such a long gap between one revision and the other had an avoidable strain on policy holders as well as on the insurance companies. Therefore, there was a need to review the premium regularly depending upon the average claims which have been awarded by the courts, frequency of claims for each class of vehicle and inflation among other factors were to be considered.
29.By Annexure II to the impugned order, it was decided to have a review of premium on annual basis and a formula for future was set out, which reads as follows:
"The premium for the Motor TP polices shall be determined by using the formula:
P(t) = C1(t) * CII(t-1) + C2(t) where P(t) is the Motor TP premium applicable to the financial year 't'.
CII(t-1) is the Cost Inflation Index for the year 't-1' as notified by CBDT, and C1(t) and C2(t) are the parameters applicable to the financial year 't' whose values shall be as determined and notified by the Authority in each financial year based on the experience measured in terms of average claim amounts, frequency and expenses involved in serving the Motor TP business. The values of the parameters C1(t) and C2(t) may vary according to the class of vehicle."
30.Therefore, it cannot be said that the procedure adopted by the IRDA was contrary to the spirit of the Act or opposed to the dictum laid down by the Supreme Court in this regard. The argument that fancy figures were arrived at including double levy of tax also cannot be accepted.
31.With reference to the power of the IRDA to revise the premium, Mr.M.B.Raghavan, learned counsel referred to a judgment of the Kerala High Court in All Kerala Bus Operators Organisation and etc. Vs. Insurance Regulatory and Development Authority reported in AIR 2007 Ker 208. In that case, the Kerala High Court had considered the earlier revision made by the Tariff Advisory Committee, dated 4.12.2006 and in paragraphs 5 to 7 had observed as follows:
"5.Coming to the provisions of the Insurance Regulatory and Development Authority Act, 1999, it can be seen that Section 14(2)(i) of that Act provides that without prejudice to the generality of the provisions contained in Sub-section (1) of Section 14, the powers and functions of the IRDA shall include control and regulation of the rates that may be offered by the insurers in respet of general insurance business not so controlled and regulated by the TAC under Section 64U of the Insurance Act. So much so, the TAC having withdrawn the rates fixed by it, it was well within the competence of the IRDA to control and regulate the rates that may be offered by the insurers in respect of general insurance business regarding the fields of insurance in question. Both the enactments under consideration are Central legislations, for the purpose of regulating and controlling the field of insurance and make reference to each other. So much so, the TAC was well within its authority to take its decision that it was not expedient to continue to have the tariff rates fixed by it and therefore, to withdraw the same. Once that was done, the field occupied by the rates fixed by the TAC under Section 64UC of the Insurance Act fell vacant and therefore, the IRDA was well within authority referable to Section 14(2)(i) to control and regulate the rates of those fields of insurance. Hence, there is neither any jurisdictional error nor lack of competence for the IRDA to have taken the decision to revise the insurance tariffs. Therefore, there is no legal infirmity or jurisdictional error in the decision-making process by which the IRDA has fixed the tariffs for areas not covered by any TAC decision.
6....I also find that there is no jurisdictional error or lack of authority for the IRDA to have rendered the policy decision which it has. Having regard to the well settled parameters of law relating to judicial review of policy decision, I do not find any ground to sustain the challenge, even on facts, particularly when it has been demonstrated that IRDA had adverted to and considered all relevant materials and had afforded an opportunity of hearing.
7.Having found as above and having repelled the contentions, also on facts, the contention that the field in question relates to compulsory insurance does not appeal. Section 143 of the Motor Vehicles Act, 1988 makes third party insurance cover obligatory for the use of a motor vehicle. Such obligation is part of the social obligations recognised and imposed on the users of motor vehicles by law, in terms of the Constitution. At the same time, institutions like IRDA, TAC etc. are created by law to ensure that checks and balances are maintained in the field of insurance business. The compulsion of a person by Section 143 of the Motor Vehicles Act to have a third party insurance cover for a motor vehicle does not give him any added advantage to stand against any decision of the IRDA on the question of tariff rates in relation to motor vehicle policies, unless the impugned imposition is per se arbitrary, irrational and made contrary to due procedure. Therefore, the socialistic goal sought to be achieved by Section 143 of the Motor Vehicles Act, is no plea against the rates, when they are not demonstrated to be arbitrary."
32.The learned counsel for IRDA also referred to the judgment of the Karnataka High Court in The Karnataka State Bus Owners Federation, Bangalore Vs. Union of India and others in W.P.No.2980 of 2007 (GM-RES), dated 12.10.2007 for the very same proposition. In that case, once again the High Court was dealing with the earlier tariff fixed on 4.12.2006. In dealing with the power of the IRDA, in paragraphs 11 and 12, it was observed as follows:
"11.It is to be noticed that the Tariff Advisory Committee is constituted under section 64UA of the Insurance Act, 1938. Part IIB of the Insurance Act consist of section 64U and 64UA which would relate to Tariff Advisory Committee and Section 64UC provides the power to the Advisory Committee to regulate the rate etc. Among other things the Tariff Advisory Committee may from time to time control and regulate the rates that may be offered by the insurers in respect of any risk or of any class or category of risks among other things. In fact, such rates as determined shall be binding on the insurers. Sub section (3) of section 64UC also provides that every decision of the Tariff Advisory Committee shall be valid only after and to the extent it is ratified by the Authority and every such decision shall take effect from the date on which it is so ratified by the Authority. In the instant case, it is to be noticed that the earlier tariff rates fixed which was the subject matter of the earlier writ petition was withdrawn.
12.Section 14(1) and (2) of the IRDA Act, 1999 provides duties, powers and functions of the Authority. Sub section (2)(i) of Section 14 provides control and regulation of the rates, advantages, terms and conditions that may be offered by insurers in respect of general insurance business not so controlled and regulated by the Tariff Advisory Committee under Section 64U of the Insurance Act, 1938."
Therefore, the contentions relating to the lack of jurisdiction and wrongful procedure in not granting personal hearing have to be necessarily rejected.
33.The other contention that the educational institutions stand on different footing is concerned, the same also does not stand to reason. In the present case, the issue is not the ownership of the vehicle or purpose for which the vehicle is used. Admittedly, the educational institutions are running the motor vehicles on public road and carrying students (passengers) subject to risk and also third party claims. Therefore, the Act being the beneficiary piece of legislation and also intended to protect the vehicle owners from the claim of third parties, necessarily the vehicles will have to be insured. Therefore, there cannot be distinction between the educational institutions putting the motor vehicles carrying on passengers on road and the private operators. In this context, the educational institutions do not enjoy different status.
34.The Supreme Court even in respect of minority educational institutions having protection under Article 30(1) of the Constitution has held that such institutions are subjected to all the municipal laws, taxing statutes and labour laws and in such circumstances, the character of the employer is irrelevant. The Supreme Court vide its judgment in Christian Medical College Hospital Employees' Union v. C.M.C. Vellore Assn., reported in (1987) 4 SCC 691 had categorically held that in the matter of application of laws relating to public health, taxation, municipal laws and labour legislation, the minority managements cannot claim any privilege and those laws must be uniformly applied to the workmen employed by those institutions irrespective of character of those institutions. The Supreme Court had forewarned that if not done in that fashion, it may result in maladministration of those institutions. It is necessary to extract the following passage found in paragraph 18 of the said judgment and it reads as follows:
"18.... If a creditor of a minority educational institution or a contractor who has built the building of such institution is permitted to file a suit for recovery of the money or damages as the case may be due to him against such institution and to bring the properties of such institution to sale to realise the decretal amount due under the decree passed in such suit is Article 30(1) violated? Certainly not. Similarly the right guaranteed under Article 30(1) of the Constitution is not violated, if a minority school is ordered to be closed when an epidemic breaks out in the neighbourhood, if a minority school building is ordered to be pulled down when it is constructed contrary to town planning law or if a decree for possession is passed in favour of the true owner of the land when a school is built on a land which is not owned by the management of a minority school. In the same way if a dispute is raised by an employee against the management of a minority educational institution such dispute will have necessarily to be resolved by providing appropriate machinery for that purpose. Laws are now passed by all the civilised countries providing for such a machinery....."
Hence that contention must also fail.
35.The other contention is that in respect of the goods vehicles, the tariff was made on the basis of the weight of the vehicle and it is arbitrary. The said argument is also made without any basis. The authorities had adopted a reasonable classification to charge according to the weight of the vehicle and it cannot be said to be either irrational or unreasonable.
36.Finally, the learned counsel for the petitioners submitted that in the light of the interim order, they have paid the old rates and that should this court uphold the revision, then it will be an unreasonable burden on them to pay the balance amount. Therefore, they prayed that it should be made only for future and that for the past period, they should be left off with the payment already made. This court is unable to agree with the said submission. It is the petitioners who had obtained the interim order and such interim orders are always subject to the result in the main writ petition. If such reliefs are given only for the people who came to the court, it will look as if persons who have paid the new tariff as per law, were punished for abiding the law. In this context, it is necessary to refer to a judgment of the Supreme Court in Mahanadi Coalfields Ltd. v. Orient Paper & Industries Ltd., reported in 1995 Supp (2) SCC 717 and in paragraph 3, the Supreme Court had observed as follows:
"3.While the purpose of an interlocutory order is to preserve in status quo the rights of the parties during the pendency of the litigation, the Court is also required to put into the scales the need to protect the interest of the appellant if the writ petitions ultimately fail and the uncertainty as to their results is resolved in appellants favour. It would appear that if the dispensation ordered by the High Court prevails, the appellant, even in the event of its success, would be faced with a fait accompli and it would be well-nigh impossible for the appellant to gather the dues from the innumerable purchasers of coal.....
37.Further, the argument that it would amount to double recovery of premium, i.e., one on the passenger and the other on third party claims cannot be accepted. Merely because the insurance companies do not submit figures in respect of the claims from the passengers or from the third party or that the figures furnished in respect to the transporters showed that in respect of passenger risk claims, it was on the lower side will not give rise to any cause of action for the petitioners to challenge that they were saddled with unjust claims.
38.The other arguments based upon Section 147 of the Motor Vehicles Act to the effect that the third party claims are consisting with two sub parts, i.e. claim for passengers, who are also normally considered as third parties and also claim from actual third parties do not stand to reason. As per Section 147, it is only the claim against the passengers, they are bound to insure also cannot be accepted. It has to be seen whether premium has been fixed in a reasonable manner so as to meet all contingencies arising out of third party claims. As rightly contended by Mr.N.Vijayaraghavan, the third party claims even in respect of individuals have gone up considerably over the period and that thanks to the liberal grant of compensation by courts, liabilities of the Insurance companies have far-exceeded than the actual premium paid also cannot be rejected.
39.The scope of judicial review by courts in respect of premiums and coverage came to be considered by the Supreme Court in LIC of India v. Consumer Education & Research Centre reported in (1995) 5 SCC 482. In paragraphs 23,26,27 and 53 of the said judgment, the Supreme Court had observed as follows:
"23.Every action of the public authority or the person acting in public interest or any act that gives rise to public element, should be guided by public interest. It is the exercise of the public power or action hedged with public element (sic that) becomes open to challenge. If it is shown that the exercise of the power is arbitrary, unjust and unfair, it should be no answer for the State, its instrumentality, public authority or person whose acts have the insignia of public element to say that their actions are in the field of private law and they are free to prescribe any conditions or limitations in their actions as private citizens, simpliciter do in the field of private law. Its actions must be based on some rational and relevant principles. It must not be guided by irrational or irrelevant considerations. Every administrative decision must be hedged by reasons......
26.This Court has rejected the contention of an instrumentality or the State that its action is in the private law field and would be immuned from satisfying the tests laid under Article 14. The dichotomy between public law and private law rights and remedies, though may not be obliterated by any strait-jacket formula, it would depend upon the factual matrix. The adjudication of the dispute arising out of a contract would, therefore, depend upon facts and circumstances in a given case. The distinction between public law remedy and private law field cannot be demarcated with precision. Each case will be examined on its facts and circumstances to find out the nature of the activity, scope and nature of the controversy. The distinction between public law and private law remedy has now become too thin and practicably obliterated.
27.In the sphere of contractual relations the State, its instrumentality, public authorities or those whose acts bear insignia of public element, action to public duty or obligation are enjoined to act in a manner i.e. fair, just and equitable, after taking objectively all the relevant options into consideration and in a manner that is reasonable, relevant and germane to effectuate the purpose for public good and in general public interest and it must not take any irrelevant or irrational factors into consideration or appear arbitrary in its decision. Duty to act fairly is part of fair procedure envisaged under Articles 14 and 21. Every activity of the public authority or those under public duty or obligation must be informed by reason and guided by the public interest.
53.We have, therefore, no hesitation to hold that in issuing a general life insurance policy of any type, public element is inherent in prescription of terms and conditions therein. The appellants or any person or authority in the field of insurance owe a public duty to evolve their policies subject to such reasonable, just and fair terms and conditions accessible to all the segments of the society for insuring the lives of eligible persons. The eligibility conditions must be conformable to the Preamble, Fundamental Rights and the Directive Principles of the Constitution. The term policy under Table 58 is declared to be accessible and beneficial to the large segments of the Indian society. The rates of premium must also be reasonable and accessible. Accordingly, we hold that the declaration given by the High Court is not vitiated by any manifest error of law warranting interference. It may be made clear that with a view to make the policy viable and easily available to the general public, it may be open to the appellants to revise the premium in the light of the law declared in this judgment but it must not be arbitrary, unjust, excessive and oppressive...."
40.Even if the parameters shown by the Supreme Court are applied, the petitioners have not made out any case. The impugned order is based upon rational classification and subject to sound reasoning and evolved after public consultation with the stake holders. In view of the above, all the writ petitions will stand dismissed. The petitioners are given eight weeks time to pay the balance of the premium amounts to the respective insurers without fail. However, there will be no order as to costs. Consequently, connected miscellaneous petitions stand closed.
vvk To
1.The Chairman, Insurance Regulatory and Development Authority, Parishrama Bhavanam, 6-9-58 B, 3rd Floor, Basheer Bagh, Hyderabad 500 004.
2.The Secretary, The Tariff Advisory Committee, Ador House, 1st Floor, 6A, Dubash Marg, Mumbai 400 023