Delhi High Court
Life Insurance Corporation Of India & ... vs Shri Rajiv Khosla & Anr. on 4 July, 2011
Equivalent citations: AIR 2012 DELHI 9, (2012) 186 DLT 266
Author: Dipak Misra
Bench: Chief Justice, Sanjiv Khanna
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Judgment Reserved on: 5th April, 2011
% Judgment Pronounced on: July 04, 2011
+ LPA No. 431/2010
Life Insurance Corporation of India & Anr. ..... Appellants
Through: Mr.Sandeep Sethi along with Mr.B.B.
Sawhney, Sr. Advocates with
Ms.Indira Sawhney, Mr.Lakshay
Sawhney & Mr.Sunil Kumar, Advs.
Versus
Shri Rajiv Khosla & Anr. ..... Respondents
Through: Mr.Rakesh Tiku, Sr.Advocate with
Mr.Vivek Ojha, Adv.
CORAM:
HON'BLE THE CHIEF JUSTICE
HON'BLE MR. JUSTICE SANJIV KHANNA
1 Whether reporters of the local papers be allowed to see the judgment? Yes
2 To be referred to the Reporter or not? Yes
3 Whether the judgment should be reported in the Digest? Yes
DIPAK MISRA, CJ
The present intra-Court appeal is directed against the order dated 7th
April, 2010 passed by the learned Single Judge in WP (C) No. 5702/1999.
LPA No. 431/2010 page 1 of 42
2. The facts leading to the filing of the writ petition are that the
appellant-petitioner (hereinafter referred to as „the appellant‟) took "Jeevan
Kishor Policy" for his daughter, Aprajita, for a sum of Rs.1 lakh by Policy
No. 120312578 dated 14th October, 1994. The yearly premium of Rs.5,533/-
was payable for the policy. The appellant paid the premium for two
consequent years, that is, 1994-95 and 1995-96. The daughter of the
appellant expired on 11th September, 1996 in unfortunate circumstances
and thereafter no further premium was paid. After the death of the
daughter, the appellant sent a letter on 20th December, 1996 to the Life
Insurance Corporation of India (LIC) informing them about the death of
his daughter and asking for the claim under the policy to be settled. When
no response was received, he was compelled to knock at the doors of this
Court under Article 226 of the Constitution of India.
3. It was contended in the writ petition that no payment was made in
view of the stipulation in the policy to the effect that the policy shall stand
cancelled in case the life assured dies before the deferred date. Be it noted,
the said clause of the policy was assailed on the foundation that LIC is
obliged to make the payment and cannot take shelter under the said policy
on the ground that it is not obliged to make any payment if the assured
LPA No. 431/2010 page 2 of 42
dies prior to the deferred date. It was urged that such a clause was
arbitrary, unilateral and unfair.
4. The LIC combated the averments made in writ petition on the
ground that the petitioner could have filed a civil suit as he was seeking
enforcement of a contractual obligation; that the claim put forth by the
petitioner has been repudiated in terms of the conditions of the insurance
policy, which is basically a contract; that the stipulation in the policy is
neither arbitrary nor unreasonable; and that the deferred payment clause
is unassailable as the parties to the policy are bound by the terms of the
policy.
5. A rejoinder affidavit was filed stating, inter alia, that as long as the
premium was paid, it is not open to the LIC to repudiate the claim and
deny payment. That apart, the deferred date in the instant case was 14th
October, 1996 and the assured died on 11th September, 1996. It is also put
forth that the classification of life insurance policies into those payable
only after the deferred date and those without such limitation was
arbitrary and discriminatory.
LPA No. 431/2010 page 3 of 42
6. An additional affidavit was filed by the LIC contending, inter alia,
that "Jeevan Kishor Policy" was made only for the middle income/higher
income class. It was a flexible policy where the minimum and maximum
amount that could be insured was Rs.20,000/- and Rs.5 lakhs respectively.
The premium is a multiple of the tabular rate paid depending upon the
desired sum assured and the age of the assured. It was also explained that
in the case of children, it is not practically possible to obtain any medical
report for a child which would indicate the future expected mortality in
respect of life and any medical examination is unlikely to reveal an
authentic and reliable insight into the health status of a child. LIC, in order
to safeguard its own interest, has imposed restrictions under the Jeevan
Kishor plan before the risk on the children commences and that is why, the
imposition of the „deferred date‟ or „waiting period‟.
7. The learned Single Judge expressed the view that the stand of the
LIC that the petitioner should have filed a suit was untenable in view of
the decision in ABL International Ltd. v. Export Credit Guarantee
Corporation of India Ltd., (2004) 3 SCC 553. Being of this opinion, the
learned Single Judge proceeded to state as follows: -
LPA No. 431/2010 page 4 of 42
"8. The stand of the LIC as extracted in the above
paragraphs does not sufficiently explain the need for
deferring the payment under policy for children for two years.
It appears to this Court that once the LIC accepts the contract
by offering to insure even the life of a child, then it obviously
does do so irrespective of the age of the child. While
insurance business is largely dependent on the analysis of
risk, it is not possible to accept the submission of the LIC that
the "deferred date" clause became necessary only on the basis
of the risk that may be faced by the LIC. If the LIC chooses to
insure children and collects premia, there is no justification for
negativing a claim on the basis that payments thereunder
should stand postponed to a "deferred date". There is no
justification for imposition of a deferred date on the
apprehension that such waiting period is necessary to prevent
"moral hazards" involving the life of children.
9. xxx xxx xxx
10. In a further additional affidavit filed by the LIC on 28th
April 2003, the information relating to number of Jeevan
Kishor Policies issued from 1990-1991 to 2001-2002 including
the ages of the victims have been given. Given the large
number of Jeevan Kishor Policies issued [which stood at
471000 as of 2001-02], the actual claims in respect of children
in the age group of eleven years for the years 1999-2000, 2000-
2001 and 2001-2002 are 39, 55 and 53 respectively. The figures
are comparable for other age groups upto 15 years. By no
means can it be argued that there will be far too many claims
against the LIC if the "deferred date" clause is not
incorporated. Given the number of claims being made on a
yearly basis on account of the deaths of children under the
Jeevan Kishor Policy, this Court holds that the LIC is not
acting fairly or reasonably in insisting that no claim will be
entertained for two years after the commencement of the
policy."
LPA No. 431/2010 page 5 of 42
8. After so holding, the learned Single Judge directed that the claims
made hereafter under the "Jeevan Kishor Policy" would not be repudiated
by the LIC on the ground that they have been made before the deferred
date, subject, of course, to other conditions being satisfied. It is worth
noting, such a direction was issued as the counsel for the appellant had
made a statement that he was not interested in obtaining any amount from
LIC but getting the legal position clarified.
9. We have heard Mr.Sandeep Sethi and Mr.B.B. Sawhney, learned
senior counsel along with Ms.Indira Sawhney, Mr.Lakshay Sawhney and
Mr.Sunil Kumar, learned counsel for the petitioners and Mr.Rakesh Tiku,
learned senior counsel along with Mr.Vivek Ojha, learned counsel for the
respondents.
10. It is not in dispute that the deferred date, as per the policy, was 14th
October, 1996 but the daughter of the respondent died before the deferred
date. The Special Provision No.2 of the policy bond reads as follows: -
"The policy shall stand cancelled in case the life assured shall
die before the Deferred Date and in such event provided the
policy is then in full force, a sum of money equal to all the
premiums paid without any deduction whatsoever shall
become payable to the person entitled to the policy moneys."
LPA No. 431/2010 page 6 of 42
11. The question that emerges for consideration is whether the
conclusions arrived at by the learned Single Judge to the effect that the
condition is unfair and unreasonable on the foundation that insurance
business is largely dependent on the analysis of the risk; that once the LIC
accepts the contract by offering to the insurer, even that of a child, it does
so irrespective of the age of the child; and that if LIC chooses to insure the
child and collect the premium, there is no justification to negative the
claim on the basis that the payments thereunder should stand postponed
to a deferred date. In quintessence, the issue is whether the condition
incorporated by way of a special provision in the policy invites the frown
of Articles 14 and 21 of the Constitution of India.
12. The learned counsel for the appellants would contend that insurance
is basically a contract and the parties are governed by the stipulations in
the contract and when they have signed the contract of insurance knowing
the postulates engrafted therein, they cannot raise the plea of unfairness.
That apart, if the anatomy of the policy is scrutinized in proper
perspective, it is not remotely suggestive of any kind of unfairness and
does not smack of arbitrariness inasmuch as there is a proper classification
with regard to the payment of the sum assured in case of other categories
LPA No. 431/2010 page 7 of 42
of policy holder and the beneficiaries under "Jeevan Kishor Policy". The
learned counsel have commended us to certain literatures, citations and
circumstances which we shall dwell upon at a later stage of the order.
13. Per contra, the learned counsel for the respondents would support
the order passed by the learned Single Judge contending, inter alia, that
the life insurance policy stands in contradistinction to other categories of
policy and once the premium is paid, it is obligatory and incumbent on the
part of the Corporation to make good the assured sum and it cannot
impede the payability on the ground that there is a stipulation of deferred
date. It is propounded by them that the prescription of the deferred date
ushers in such a classification which is impermissible and unacceptable as
it causes discomfort to Article 14 of the Constitution. Quite apart from the
above, it is their submission that life has to be understood in the backdrop
of Article 21 of the Constitution of India and on a keener understanding,
this kind of condition is absolutely onerous and does not stand the test of
the summum bonum principle of life inherent under Article 21 of the
Constitution of India.
LPA No. 431/2010 page 8 of 42
14. To appreciate the rivalised submissions raised at the Bar, we may
refer with profit to the decision in L.I.C. of India & Anr. v. Consumer
Education and Research Centre & Ors., AIR 1995 SC 1811 wherein the Life
Insurance Corporation had confined the benefit of availing the policy to
salaried class from government, semi-government or reputed commercial
firms and not to other categories of people. The conditions imposed and
denial to accept the policies were assailed before the High Court as
arbitrary and discriminatory violating Articles 14, 19(1)(g) and right to life
in Article 21 of the Constitution. The High Court declared part of the
conditions as valid and the other part, namely, that the proposals for
assurance under the plan would be entertained only from persons in
government or quasi government organization or a reputed commercial
firm which can furnish details of leave taken during the preceding year
under Table 58 as subversive of the equality clause and, therefore,
constitutionally invalid. The Corporation challenged the said decision and
the affected persons also filed cross-appeals. It was contended before the
Apex Court that on acceptance of the proposals by themselves in life
insurance business, the policy holder gets rights in the policy and as the
policy of the respondents was rejected, they have no right whatsoever and
LPA No. 431/2010 page 9 of 42
no legal right remained to be enforced under Article 226 of the
Constitution. It was further contended that they cannot use judicial
process to create rights in their favour unless a binding contract emerged
by acceptance of the proposal of the insurance and acted upon. It was also
highlighted that the life insurance policies are framed on actuarial
consideration and worked out as per the needs of the policy to suit the
interests of all those interested in obtaining a particular policy and their
viability and hence, the High Court was not justified in interfering with
matters based on economic criteria and commercial contracts. The said
contention was resisted on the foundation that they were contrary to
Article 25 of the Declaration of Human Rights, Article 7 of the
International Covenant on Economic and Social Rights and the provision
of Part III and also the Directive Principles of State policy. It was also
contended that as the corporation is doing life insurance business, its
policy must be in conformity with the rights in Part III of the Constitution
and the policies engrafted under Part IV and it has no power to impose
any unconstitutional conditions in the contract and no classification much
less valid classification has been made between salaried persons,
LPA No. 431/2010 page 10 of 42
government, semi-government, organized sectors or reputed commercial
organizations on the one hand and others on the other hand.
15. The Apex Court addressed itself keeping in view the larger public
interest and the life insurance policy based on actuarial tables and the
policy holder‟s needs and after referring to the various Tables, reports of
the Committee and the decisions in D.S. Nakara v. Union of India, AIR
1983 SC 130, AIR 1986 SC 180, C.E.S.C. Ltd. v. Subhash Chandra Bose,
(1992) 1 SCC 441, Consumer Education & Research Centre v. Union of
India, (1995) 1 JT (SC) 637 and Regional Director, ESI Corporation v.
Francis De Costa, 1993 Supp (4) SCC 100, expressed thus:-
"18. It would thus be well settled law that the Preamble
Chapter of Fundamental Rights and Directive Principles
accord right to livelihood as a meaningful life, social security
and disablement benefits are integral schemes of socio-
economic justice to the people in particular to the middle class
and lower middle class and all offendable people. Life
insurance coverage is against disablement or in the event of
death of the insured economic support for the dependents,
social security to livelihood to the insured or the dependants.
The appropriate life insurance policy within the paying
capacity and means of the insured to pay premia is one of the
social security measures envisaged under the Constitution to
make right to life meaningful, worth living and right to
livelihood a means for sustenance."
LPA No. 431/2010 page 11 of 42
Thereafter, their Lordships dealt with the contention whether the
policy can be restricted to a particular class and whether the issue could be
addressed before there was a concluding contract between the parties and
in that regard opined thus -
"20. It is true that life insurance business as defined under S.
2(11) of the Insurance Act, 1938, is business of effecting
contracts of insurance upon human life, including any
contract whereby the payment of money is assured on death
(except death by accident only) or the happening of any
contingency dependent on human life, and any contract which
subject to payment of premiums for a term dependent on
human life including those enumerated in clauses (a) to (c)
thereof. Thereby, the contract of insurance is hedged with
bilateral agreement on human life upon payment of premia
subject to the covenants contained thereunder. But as stated
earlier, is the insurer entitled to impose unconstitutional
conditions including that which denied the right of entering
into the contract, limiting only to a class of persons under a
particular policy? We make it clear at this juncture that the
insurer is free to evolve a policy based on business principles
and conditions before floating the policy to the general public
offering on insurance of the life of the insured but as seen
earlier, the insurance being a social security measure, it should
be consistent with the constitutional animation and conscience
of socio-economic justice adumbrated in the Constitution as
elucidated hereinbefore."
xxx xxx xxx xxx xxx
23. Every action of the public authority or the person acting
in public interest or its acts give rise to public element, should
be guided by public interest. It is the exercise of the public
power or action hedged with public element becomes open to
challenge. If it is shown that the exercise of the power is
LPA No. 431/2010 page 12 of 42
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. The Administrative Law by Wade, 5th Ed. at p.513
in Chapter 16, Part IV dealing with remedies and liabilities,
stated thus:
"Until a short time ago anomalies used to be caused by
the fact that the remedies employed in Administrative
Law belong to two different families. There is the family
of ordinary private law remedies such as damages,
injunction and declaration and there is a special family
of public law remedies particularly Certiorari,
Prohibition and Mandamus, collectively known as
prerogative remedies. Within each family, the various
remedies can be sought separately or together or in the
alternative. But each family had its own distinct
procedure."
At page 514 it was elaborated that "this difficulty was
removed in 1977 by the provision of a comprehensive,
"application for judicial review", under which remedies in
both facilities became interchangeable." At page 573 with the
heading „Application for Judicial Review‟ in Chapter 17, it is
stated thus:
"All the remedies mentioned are then made
interchangeable by being made available „as an
alternative or in addition‟ to any of them. In addition
the Court may award damages, if they are claimed at
the outset and if they could have been awarded in an
ordinary action."
LPA No. 431/2010 page 13 of 42
The distinction between private law and public law remedy is
now settled by this Court in LIC v. Escorts Ltd., 1985 Supp. (3)
SCR 909: (AIR 1986 SC 1370 at p. 1424 para 102), by a
Constitution Bench thus.
"If the action of the State is related to contractual
obligation or obligations arising out of the Court
(contract sic) the Court may not ordinarily examine
unless the action has some public law character
attached to it. The Court will examine actions of State if
they pertain to the public law domain and refrain from
examining them if they pertain to the private law field.
The difficulty will lie in demarcating the frontier
between the public law domain and the private law
field. This is impossible to draw the line with procession
and we do not want to attempt it. The question must be
decided in each case with reference to the particular
action, the activity in which the State or the
instrumentality of the State is engaged when
performing the action, the public law or private law
character of the action and a host of other relevant
circumstances."
[Underlining is ours]
Thereafter, their Lordships proceeded to deal with the concept of
classification and noted the submissions of the learned counsel for the
corporation in paragraph 29 and came to hold thus -
"29. ....The classification based on employment in
government, semi-government and reputed commercial firms
has the insidious and inevitable effect of excluding lives in
vast rural and urban areas engaged in unorganised or self-
employed sectors to have life insurance offending Article 14 of
the Constitution and socio-economic justice."
LPA No. 431/2010 page 14 of 42
[Emphasis added]
After so stating, the Apex Court proceeded to state as follows: -
"31. An unfair and untenable or irrational clause in a
contract is also unjust amenable to judicial review. In common
law a party was relieved from such contract. In Gillespie
Brothers & Co. Ltd. v. Roy Bowles Transport Ltd., (1973) 1
Q.B. 400, Lord Denning for the first time construing the
indemnity clause in a contract stated that the court to permit
party to enforce his unreasonable clause, even when it is so
unreasonable, or applied so unreasonably, would be
unconscionable, it was stated:
"When it gets to this point, I would say, as I said many
years ago. There is the vigilance of the common law
which while allowing freedom of contract, watches to
see that it is not abused. It will not allow a party to
exempt himself from his liability at common law when
it would be quite unconscionable for him to do so." In
Lloyds Bank Ltd. v. Bundy, (1974) 3 All ER 757,
inequality of the bargaining power was enunciated by
Lord Denning M.R., and held that one who enters into a
contract on terms which are very unfair or transfers
property for a consideration which is grossly
inadequate when his bargaining power is grievously
impaired by reason of his own needs or desires, or by
his own ignorance or infirmity... the one who stipulates
for an unfair advantage may be moved solely by his
own self-interest, unconscious of the distress he is
bringing to the other.... One who is in extreme need
may knowingly consent to a most improvident bargain,
solely to relieve the strains in which he finds himself. It
would not be meant to suggest that every transaction is
saved by independent advice. But the absence of it may
be fatal. In A. Schroeder Music Publishing Co. Ltd. v.
LPA No. 431/2010 page 15 of 42
Macaulay (Formerly Instone), (1974) 1 W.L.R. 1308,
House of Lords considered and held that a party to a
contract would be relieved from the terms of the
contract. In the course of his speech learned Lord
Deplock outlined the theory of unreasonableness or
unfairness of the bargain to relieve a party from the
contract when the relative bargaining power of the
parities was not equal. In that case the song writer had
contracted with the publisher the terms more onerous
to him and favourable to the publisher. The song writer
was relieved from the bargain of the contract on the
theory of restraint trade opposed to public policy. The
distinction was made even in respect of standard forms
of contract emphasising that when the parties in a
commercial transaction having equal bargaining power
have adopted the standard form of contract, it was
intended to be binding on the parties. The court would
not relieve the party from such a contract but the
contracts are between the parties to it, or approved by
any organisation representing the interests of the
weaker party, they have been directed by that party
whose bargaining power, either exercised alone or in
conjunction with others providing similar goods or
services, enables him to say: "If you want these goods
or services at all, these are the only terms on which they
are obtainable. Take it or leave it." In Levision v. Steam
Carpet Co. Ltd., (1978) 1 Q.B. 69, Lord Denning M.R.
reiterated the unreasonable clause in the contract would
be applied to the standard form of contract where there
was inequality of bargaining power. In Photo
Production Ltd. v. Securicor Transport Ltd., 1980 A.C.
827, considering the Unfair Contract Terms Act, 1977,
Lord Wilberforce during the course of his speech
emphasised the unequal bargaining power as an
invalidating factor upheld the contract in that case since
it was commercial bargain between two competent
party to enter into a contract on equal bargaining
power. Lord Deplock also reiterated his earlier view.
LPA No. 431/2010 page 16 of 42
Lord Scarman agreeing with Lord Wilberforce
described that a commercial dispute between the parties
well able to look after themselves, in such a situation
what the parties have agreed expressly or impliedly is
what matters, and the duty of the courts is to construe
their contract according to their tenor. It was held that
in that case that parties have equal bargaining power
and intervention of the court to relieve the party from
the contract was not called for. The Civil Code of
Germany in S. 138(2), thereof release a person from the
contract when the party has no equal bargaining
power."
xxx xxx xxx xxx xxx
40. It is, therefore, the settled law that if a contract or a
clause in a contract is found unreasonable or unfair or
irrational one must look to the relative bargaining power of
the contracting parties. In dotted line contracts there would be
no occasion for a weaker party to bargain or to assume to have
equal bargaining power. He has either to accept or leave the
services or goods in terms of the dotted line contract. His
option would be either to accept the unreasonable or unfair
terms or forego the service forever. With a view to have the
services of the goods, the party enters into a contract with
unreasonable or unfair terms contained therein and he would
be left with no option but to sign the contract.
xxx xxx xxx xxx xxx
46. 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
LPA No. 431/2010 page 17 of 42
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. Both
the appeals are accordingly dismissed but in the
circumstances parties are directed to bear their own costs."
[Emphasis supplied]
16. In The United India Insurance Company Ltd. v. M.K.J. Corporation,
(1996) 6 SCC 428, it has been held by the Apex Court that it is a
fundamental principle of insurance law that utmost faith must be observed
by the contracting parties and further good faith forbids either party from
non-disclosure of the facts which the party privately knows, to draw the
other into a bargain, from his ignorance of fact and his believing the
contrary. It has been so held because insurance is a contract of speculation.
17. In Pradeep Kumar Jain v. Citi Bank, (1999) 6 SCC 361, the Apex
Court distinguished a case of general insurance from that of life insurance.
In that context, their Lordships have stated that in case of life insurance
policy, certain sum is agreed to be paid by the insurance company in the
LPA No. 431/2010 page 18 of 42
event of the death of the insured or a contingency arising as indicated in
the policy. The obligation is then on the insured to pay the premium
periodically and there is no other obligation cast upon him. The same is
not the situation in case of insurance relating to motor vehicle.
18. In LIC of India v. Asha Goel, (2001) 2 SCC 160, it has been held thus:
"....The contracts of insurance including the contract of
life assurance are contracts uberrima fides and every
fact of material (sic material fact) must be disclosed,
otherwise, there is good ground for rescission of the
contract. The duty to disclose material facts continues
right up to the conclusion of the contract and also
implies any material alteration in the character of the
risk which may take place between the proposal and its
acceptance. If there are any misstatements or
suppression of material facts, the policy can be called
into question. For determination of the question
whether there has been suppression of any material
facts it may be necessary to also examine whether the
suppression relates to a fact which is in the exclusive
knowledge of the person intending to take the policy
and it could not be ascertained by reasonable enquiry
by a prudent person."
19. In New India Assurance Co. Ltd. v. Harshadbhai Amrutbhai
Modhiya & Anr., (2006) 5 SCC 192, the Apex Court was dealing with the
issue whether the interest is payable by an insurer while indemnifying the
LPA No. 431/2010 page 19 of 42
insured amount of compensation awarded against him under the
Workmen‟s Compensation Act, 1923. S.B. Sinha, J. referred to Section 12 of
the Act which provides for the mode and manner of payment of
compensation by a principal employer and/or his contractor. Thereafter,
his Lordship referred to Section 17 of the Act which nullifies contracting
out. In that context, his Lordship stated that an employer is not statutorily
liable to enter into a contract of insurance. Where, however, a contract of
insurance is entered into by and between the employer and the insurer, the
insurer shall be liable to indemnify the employer. The insurer, however,
unlike under the provisions of the Motor Vehicles Act, does not have a
statutory liability. Section 17 of the Act does not provide for any
restriction in the matter of contracting out by the employer vis-à-vis the
insurer. Further, the terms of a contract of insurance would depend upon
the volition of the parties. A contract of insurance is governed by the
provisions of the Insurance Act. In terms of the provisions of the
Insurance Act, an insured is bound to pay premium which is to be
calculated in the manner provided for therein. With a view to minimise
his liability, an employer can contract out so as to make the insurer not
liable as regards indemnifying him in relation to certain matters which do
LPA No. 431/2010 page 20 of 42
not strictly arise out of the mandatory provisions of any statute.
Contracting out, as regards payment of interest by an employer, therefore,
is not prohibited in law. In the said decision, it has been further held that a
contract of insurance is governed by the provisions of the Insurance Act.
Unless the said contract is governed by the provisions of a statute, the
parties are free to enter into a contract as per their own volition. Where a
statute does not provide for a compulsory insurance or the extent thereof,
it will bear repetition to state that the parties are free to choose their own
terms of contract and, therefore, contracting out so far as reimbursement of
the amount of interest is concerned is permissible not being prohibited by
the statute.
20. In this context, we may refer to the decision in P.J. Narayan v.
Union of India & Ors., (2006) 5 SCC 200. A writ petition was filed under
Article 32 of the Constitution of India for issuance of a direction to the
insurance company to delete the clause in the insurance policy which
provides that in cases of compensation under the Workmen‟s
Compensation Act, 1923, the insurance company will not be liable to pay
interest. Their Lordships, dealing with the said issue, expressed the view
in the following terms -
LPA No. 431/2010 page 21 of 42
"We see no substance in the writ petition. There is no
statutory liability on the insurance company. The statutory
liability under the Workmen‟s Compensation Act is on the
employer. An insurance is a matter of contract between the
insurance company and the insured. It is always open to the
insurance company to refuse to insure. Similarly, they are
entitled to provide by contract that they will not take on
liability for interest. In the absence of any statute to that
effect, insurance companies cannot be forced by courts to take
on liabilities which they do not want to take on."
21. In Noble Resources Ltd. v. State of Orissa & Anr., AIR 2007 SC 119,
while dealing with the State action on the touchstone of Article 14 of the
Constitution of India, their Lordships have opined that if an action on the
part of the State is violative of the equality clause contained in Article 14 of
the Constitution of India, a writ petition would be maintainable even in
the contractual field. A distinction indisputably must be made between a
matter which is at the threshold of a contract by selecting a party and a
breach thereof; whereas in the former, the court‟s scrutiny would be more
intrusive, in the latter, the court may not ordinarily exercise its
discretionary jurisdiction of judicial review unless it is found to be
violative of Article 14 of the Constitution. While exercising contractual
powers also, the government bodies may be subjected to judicial review in
order to prevent arbitrariness or favouritism on their part. The State action
LPA No. 431/2010 page 22 of 42
has to be just, fair and reasonable in all their activities including those in
the field of contracts.
22. In P.C. Chacko & Anr. v. Chairman, LIC of India & Ors., (2008) 1
SCC 321, a two Judge Bench has opined thus:
"We are not unmindful of the fact that Life Insurance
Corporation being a State within the meaning of Article
12 of the Constitution of India, its action must be fair,
just and equitable but the same would not mean that it
shall be asked to make a charity of public money,
although the contract of insurance is found to be
vitiated by reason of an act of the insured. This is not a
case where the contract of insurance or a clause thereof
is unreasonable, unfair or irrational which could make
the court carry the bargaining powers of the contracting
parties. It is also not the case of the appellants that in
framing the aforesaid questionnaire in the
application/proposal form, the respondents had acted
unjustifiably or the conditions imposed are
unconstitutional."
23. In United India Insurance Company Ltd. v. Manubhai
Dharmasinhbhai Gajera & Ors., (2008) 10 SCC 404, the question arose
with regard to the role of the Court as regards treating a particular clause
in a contract as unconscionable or unfair. In that regard, it has been stated
thus-
LPA No. 431/2010 page 23 of 42
"34. We have, despite the new economic policy of the
Centre, no option but to proceed on the assumption that the
public sector insurance companies being State have a different
role to play. It is not to say that as a matter of policy, statutory
or otherwise, the insurance companies are bound to regulate
all contracts of insurance having the statement of directive
principles in mind but there cannot be any doubt whatsoever
that fairness or reasonableness on the part of the insurance
companies must appear in all of its dealings.
35. The Authority wants the insurance companies to offer a
fair deal and all the terms and conditions of their offer must
be transparent. There should not be any hidden agenda.
Even they should not take recourse to "ticketing contract".
When, however, the terms of the new product or revised
product require the approval of the Authority, prima facie, the
same would mean that they are fair and reasonable. The
action on the part of the Authority is not in question.
Regulations, guidelines and circulars are binding on the
insurance companies. [See State of Kerala v. Kurian Abraham (P)
Ltd., (2008) 3 SCC 582].
xxx xxx xxx xxx xxx
47. Existence of the jurisdiction of the superior courts of
India upon invoking Article 14 of the Constitution as also
Section 23 of the Contract Act to strike down a clause in the
contract which the court feels to be unconscionable having
regard to the equal (sic unequal) bargaining power of the
parties is not in question, but the said provisions would have
no application for the purpose of modifications, alterations or
additions of a term in the contract. There cannot furthermore
be any doubt whatsoever that each case must be considered
on its own facts which would obviously lead to the conclusion
that by reason thereof the court shall not read into the contract
an automatic renewal clause in a contract of insurance if there
does not exist any."
LPA No. 431/2010 page 24 of 42
24. From the aforesaid decisions, the principles that are culled out are
that every action of the State or public authority or the person whose
action involves public element should primarily be guided by public
interest; that though the insurer is free to evolve a policy based on business
principles, yet the insurance being a social security measure, it should be
consistent with the constitutional animation and conscience of socio-
economic justice enshrined in the Constitution of India; that there is a
distinction between the frontiers of the public law domain and the private
law field; that an unfair and untenable or irrational clause in a contract is
amenable to judicial review; that there are distinctive features between
general insurance and life insurance inasmuch as in case of life insurance
policy, certain sum is agreed to be paid by the insurance company in the
event of the death of the insured or a contingency arising as indicated in
the policy and the only obligation of the insured is to pay the premium;
that where a statute does not provide for a compulsory insurance, the
parties are free to choose their own terms of contract; that in the absence of
any statutory liability, the insurance company cannot be forced by courts
to take on liabilities which they do not want to take on; that if the action of
LPA No. 431/2010 page 25 of 42
the State is violative of the equality clause contained in Article 14 of the
Constitution of India, a writ petition would be maintainable in the
contractual field; that the State and its authorities including the
instrumentalities of the State have to show justness, fairness and
reasonableness in all their activities in the field of contract, otherwise they
invite discomfort to Article 14 of the Constitution of India; that the
jurisdiction of the superior court can be invoked under Article 14 of the
Constitution of India as also Section 23 of the Contract Act to strike down a
clause in the contract which the court feels to be unconscionable having
regard to the unequal bargaining powers of the parties; and that the
contract of insurance is fundamentally based on faith and are contracts of
uberrima fides.
25. Regard being had to the principles that have been spelt out, it is to
be scrutinized whether the condition stipulated in the policy, the contract
of insurance, is discriminatory inasmuch as the classification made by the
Corporation is invidious and defies the concept of classification. In this
context, we may refer with profit to a three-Judge Bench decision in Video
Electronics Pvt. Ltd. & Anr. v. State of Punjab & Ors., AIR 1990 SC 820,
wherein it has been held as follows:
LPA No. 431/2010 page 26 of 42
"24. Discrimination implies an unfair classification.
Reference may be made to the observations of this
Court in Kathi Raning Rawat v. State of Saurashtra,
1952 SCR 435 : (AIR 1952 SC 123) where Chief Justice
Shastri at p. 442 (of SCR) : (at pp. 443-44 of AIR) of the
report reiterated that all legislative differentiation is not
necessarily discriminatory. At p.448 (of SCR) : (at pp.
127-28 of AIR) of the report, Justice Fazal Ali noticed the
distinction between 'discrimination without reason' and
'discrimination with reason'. The whole doctrine of
classification is based on this and on the well-known
fact that the circumstances covering one set of
provisions or objects may not necessarily be the same as
these covering another set of provisions and objects so
that the question of unequal treatment does not arise as
between the provisions covered by different sets of
circumstances."
26. In this regard, it would not be out of place to refer to the concept of
classification as laid down in the locus classicus, i.e., Ram Krishna Dalmia
and Ors. v. Shri Justice S.R. Tendolkar and Ors., AIR 1958 SC 538. In
the said decision, the Apex Court laid down many a principle pertaining to
class legislation and also the presumption of constitutionality. Looking at
the role of a Court while dealing with the presumption of constitutionality,
the two principles which are relevant for the present purpose are reproduced
below:
"(e) that in order to sustain the presumption of
constitutionality the Court may take into consideration
matters of common knowledge, matters of common
LPA No. 431/2010 page 27 of 42
report, the history of times and may assume every state of
facts which can be conceived existing at the time of
legislation; and
(f) that while good faith and knowledge of the
existing conditions on the part of a Legislature are to be
resumed, if there is nothing on the face of the law or the
surrounding circumstances brought to the notice of the
Court on which the classification may reasonably be
regarded as based, the presumption of constitutionality
cannot be carried to the extent of always holding that
there must be some undisclosed and unknown reasons for
subjecting certain individuals or corporations to hostile or
discriminating legislation."
27. In Madhya Pradesh Ration Vikreta Sangh Society & Ors. v. State of
Madhya Pradesh, (1981) 4 SCC 535, the question that arose before the
Apex Court was whether the Madhya Pradesh Foodstuffs (Civil Supplies
Public Distribution) Scheme, 1981 formulated by the State Government
under sub-clause (d) of Clause (2) of the Madhya Pradesh Foodstuffs
(Distribution) Control Order, 1960 introducing a new scheme for running
of individual fair price shops by agents to be appointed under a
Government scheme giving preference to cooperative societies in
replacement of the earlier scheme of running such fair price shops through
retail dealers appointed under clause 3 of the Order of 1960 was violative
of Articles 14 and 19(1)(g) of the Constitution of India. In that context,
LPA No. 431/2010 page 28 of 42
their Lordships referred to the decision in R.D. Shetty v. International
Airport Authority of India & Ors., AIR 1979 SC 1628 which has laid down
the principle that if a governmental action disclosed arbitrariness, it would
be liable to be invalidated as offending Article 14 of the Constitution, but
taking into consideration the wider concept, their Lordships held as
follows:
"The wider concept of equality before the law and the
equal protection of laws is that there shall be equality
among equals. Even among equals there can be unequal
treatment based on an intelligible differentia having a
rational relation to the objects sought to be achieved.
Consumers' cooperative societies form a distinct class
by themselves. Benefits and concessions granted to
them ultimately benefit persons of small means and
promote social justice in accordance with the directive
principles. There is an intelligible differentia between
the retail dealers who are nothing but traders and
consumers' cooperative societies. The position would
have been different if there was a monopoly created in
favour of the later. The scheme only envisages a rule of
preference. The formulation of the scheme does not
exclude the retail traders from making an application
for appointment as agents."
28. In National Council for Teacher Education and Others v. Shri
Shyam Shiksha Prashikshan Sansthan and Ors., 2011 (2) SCALE 59, the
Apex Court has opined thus:
LPA No. 431/2010 page 29 of 42
"16. Article 14 forbids class legislation but permits
reasonable classification provided that it is founded on
an intelligible differentia which distinguishes persons
or things that are grouped together from those that are
left out of the group and the differentia has a rational
nexus to the object sought to be achieved by the
legislation in question."
29. It is worth noting that in the aforesaid case, reliance was placed
upon in Re the Special Courts Bill, (1979) 1 SCC 380 wherein
Chandrachud, C.J., speaking for majority of the Court, adverted to large
number of judicial precedents involving interpretation of Article 14 and
culled out several propositions. The relevant propositions which are
required to be stated for the present case are as follows:
"(3) The constitutional command to the State to afford
equal protection of its laws sets a goal not attainable by
the invention and application of a precise formula.
Therefore, classification need not be constituted by an
exact or scientific exclusion or inclusion of persons or
things. The courts should not insist on delusive
exactness or apply doctrinaire tests for determining the
validity of classification in any given case. Classification
is justified if it is not palpably arbitrary.
(4) The principle underlying the guarantee of Article 14
is not that the same rules of law should be applicable to
all persons within the Indian territory or that the same
remedies should be made available to them irrespective
of differences of circumstances. It only means that all
persons similarly circumstanced shall be treated alike
LPA No. 431/2010 page 30 of 42
both in privileges conferred and liabilities imposed.
Equal laws would have to be applied to all in the same
situation, and there should be no discrimination
between one person and another if as regards the
subject-matter of the legislation their position is
substantially the same.
(5) By the process of classification, the State has the
power of determining who should be regarded as a
class for purposes of legislation and in relation to a law
enacted on a particular subject. This power, no doubt, in
some degree is likely to produce some inequality; but if
a law deals with the liberties of a number of well
defined classes, it is not open to the charge of denial of
equal protection on the ground that it has no
application to other persons. Classification thus means
segregation in classes which have a systematic relation,
usually found in common properties and
characteristics. It postulates a rational basis and does
not mean herding together of certain persons and
classes arbitrarily.
(6) The law can make and set apart the classes according
to the needs and exigencies of the society and as
suggested by experience. It can recognize even degree
of evil, but the classification should never be arbitrary,
artificial or evasive.
(7) The classification must not be arbitrary but must be
rational, that is to say, it must not only be based on
some qualities or characteristics which are to be found
in all the persons grouped together and not in others
who are left out but those qualities or characteristics
must have a reasonable relation to the object of the
legislation. In order to pass the test, two conditions
must be fulfilled, namely, (1) that the classification must
be founded on an intelligible differentia which
distinguishes those that are grouped together from
LPA No. 431/2010 page 31 of 42
others and (2) that that differentia must have a rational
relation to the object sought to be achieved by the Act."
30. In Transport and Dock Workers Union and Others v. Mumbai Port
Trust and Anr., 2011 AIR SCW 220, it has been opined thus:
"21. It has been repeatedly held by this Court that
Article 14 does not prohibit reasonable classification for
the purpose of legislation or for the purposes of
adoption of a policy of the legislature or the executive,
provided the policy takes care to reasonably classify
persons for achieving the purpose of the policy and it
deals equally with all persons belonging to a well
defined class. It is not open to the charge of denial of
equal protection on the ground that the new policy does
not apply to other persons. In order, however, to pass
the test of permissible classification, as has been laid
down by the Supreme Court in the catena of its
decisions, two conditions must be fulfilled; (1) that the
classification must be founded on an intelligible
differentia which distinguishes persons or things that
are grouped together from others left out of the group
and (2) that the differentia must have a rational relation
to the object ought to be achieved by the statute in
question, vide Gopi Chand v. Delhi Administration,
AIR 1959 SC 609 (see also Basu‟s „Shorter Constitution
of India, fourteenth edition 2009 page 81).
22. Thus the classification would not violate the equality
provision contained in Article 14 of the Constitution if it
has a rational or reasonable basis."
LPA No. 431/2010 page 32 of 42
31. In Narmada Bachao Andolan v. State of Madhya Pradesh & Anr.,
2011 (5) Scale 624, it has been held as follows:
"66. Unequals cannot claim equality. In Madhu
Kishwar & Ors. v. State of Bihar & Ors., AIR 1996 SC
1864, it has been held by this Court that every instance
of discrimination does not necessarily fall within the
ambit of Article 14 of the Constitution.
67. Discrimination means an unjust, an unfair action
in favour of one and against another. It involves an
element of intentional and purposeful differentiation
and further an element of unfavourable bias; an unfair
classification. Discrimination under Article 14 of the
Constitution must be conscious and not accidental
discrimination that arises from oversight which the
State is ready to rectify...."
32. Keeping in view the aforesaid pronouncements, it is to be scanned
whether the stipulation of „deferred date‟ is unjust and unfair and by
providing such a date, an unreasonable classification has been made
between two categories of policy holders, namely, the policy holders after
a particular age and also period and the policy takers who breathe their
last prior to the said period.
33. The special provision no.2 which we have reproduced hereinbefore
stipulates that if the death of the insured occurs within a period of two
years of the commencement of policy, only the premium paid till that date
LPA No. 431/2010 page 33 of 42
would be payable and nothing more. The deferred date has been
mentioned in the policy as 14.10.1996. Thus, the submission of the learned
counsel for the appellant is that the stipulation of deferred date in the
policy is neither unfair nor unjust nor unreasonable. It cannot be regarded
as an unconscionable clause in the contract of insurance which plays foul
of Article 14 of the Constitution of India. It is urged that in the case of a
child, it is not possible to obtain any medical report or special report which
would indicate the expected mortality in respect of life. The medical
examination is unlikely to reveal an authentic and reliable insight into the
status of health of a child. It is urged by him that the Corporation has to
deal with the risk and uncertainty based on actuarial presumptions and
assumptions while undertaking the risks and carving out exceptions and
exclusions. It is canvassed by him that there is no legal compulsion on
anyone to effect an insurance policy, if the terms and conditions are not
acceptable to him.
34. At this juncture, we may note with profit that in the case of
Consumer Education and Research Centre & Ors (supra), the Life
Insurance Corporation had confined the benefit of availing the policy to
salaried class from government, semi-government or reputed commercial
LPA No. 431/2010 page 34 of 42
firms and it was not available to other categories of people. In that context,
the Apex Court held that though the insurer is free to evolve a policy
based on business principles and conditions, yet it has to be consistent
with the constitutional philosophy and the conscience of socio-economic
justice. Their Lordships further opined that the classification based on
employment is insidious and has the inevitable effect of excluding lives in
vast rural and urban areas engaged in unorganized or self-employed
sectors which offends Article 14 of the Constituion of India. It has also
been ruled in the said case that a duty is cast on the Corporation to lay
down stipulations in a policy which are reasonable, just and fair and the
terms and conditions should be accessible to all the segments of the society
for insuring the lives of eligible persons and the eligibility conditions must
be comfortable to the preamble, fundamental rights and directive
principles of the Constitution. In the case at hand, there is no stipulation
by which any particular category or categories of persons have been
excluded. It is contended that the Corporation has several Children‟s
Deferred Assurance policies intended to meet different needs,
requirements with different rates of premium and the policies varying
deferred dates for commencement of coverage of risk of death thereunder.
LPA No. 431/2010 page 35 of 42
Jeevan Kishor Policy (Plan 102) can be proposed by parents of children
between ages 1 to 12 years. The risk cover commences from the policy
anniversary after attaining the age of seven years or on expiry of a period
of two years from the commencement of the policy, whichever is later.
The deferred assurance policies have lower rates of premium as there is an
initial "claim free" period. At the commencement of the policy, the rate of
premium is lower and the said rate remains constant throughout the entire
term of the policy which may extend to 35 years. As is perceptible from
the analysis of the learned Single Judge, he has compared the figures of
actual claims under Jeevan Kishor Policies for the years 1999-2000, 2000-
2001 and 2001-2002 in respect of children in the age group of 11 years with
those of the other age groups upto 15 years and expressed the view that
the clause is unfair. We think it appropriate to reproduce the said
paragraph of the order of the learned Single Judge:
"10. In a further additional affidavit filed by the LIC on
28th April 2003, the information relating to number of
Jeevan Kishor Policies issued from 1990-1991 to 2001-
2002 including the ages of the victims have been given.
Given the large number of Jeevan Kishor Policies issued
[which stood at 471000 as of 2001-02], the actual claims
in respect of children in the age group of eleven years
for the years 1999-2000, 2000-2001 and 2001-2002 are 39,
55 and 53 respectively. The figures are comparable for
LPA No. 431/2010 page 36 of 42
other age groups upto 15 years. By no means can it be
argued that there will be far too many claims against
the LIC if the "deferred date" clause is not incorporated.
Given the number of claims being made on a yearly
basis on account of the deaths of children under the
Jeevan Kishor Policy, this Court holds that the LIC is
not acting fairly or reasonably in insisting that no claim
will be entertained for two years after the
commencement of the policy."
35. Thus, the learned Single Judge has been guided by the number of
claims. The basic concept, as is understood, pertains to a different area.
The fact of the matter is that the medical report of the children do not
provide reliable guide to future expected mortality and that is the reason
for no medical examination. The deferred payment for commencement of
the risk or waiting period of two years has been postulated. It may bear
repetition that the child is not medically examined. It is also seen that the
rates in the Tables for the policies with deferred dates are lower than those
which are without deferred dates. This is fundamentally an anticipated
policy for the children. It is not a case where a clause is incorporated in the
contract where the bargaining powers of the contracted parties are
different. It is a policy available for a child on a deferred date basis.
LPA No. 431/2010 page 37 of 42
36. The learned senior counsel for the appellant has brought to our
notice the Child Life Insurance Policy which we think it appropriate to
reproduce in entirety:
"As the name suggests, child insurance policy or
children plans means an insurance policy on the lives of
children, who are not majors. Since the age of child is
below 18 years, the proposal will have to be made by a
parent or a guardian.
One of the advantages of child insurance plans is that
the premium which will be considered at the
commencement of the policy is relatively lower because
of the young age. Usually, a child insurance plan can be
purchased when the child is 3 months old (or 91 days of
age). However, the risk cover on the life of the insured
child will commence only when the child attains a
specified age. This clause is according to the rules of
IRDA (Insurance Regulatory and Development
Authority). Such a time gap between the date of
commencement of the insurance policy and the
commencement of the risk is called the "Deferment
period". The date, on which the risk will commence, at
the end of the deferment period is called the "Deferred
Date".
Let us explain the basic concept of a child plan with
Ranjan‟s example. He is 27 years old, married with a 2-
year old daughter. He purchases a child plan for his
daughter Sameera. Ranjan has now covered his
daughter under the child insurance plan but her life
cover doesn‟t start till she is 7 years old. However, the
plan continues as usual and no mortality charge is
deducted till Sameera reaches 7 years of age; this is
because her life cover doesn‟t start till such time. The
day her life cover starts, i.e. the first policy anniversary
LPA No. 431/2010 page 38 of 42
after her 7th birthday, is called the Deferred Date. From
this day onwards the life cover of the child Sameera
starts, i.e. if she dies after the deferred date her family
would get the entire sum assured. But if she had died
before the deferred date, her family would only get
back the premiums paid and no sum assured would be
payable. When Sameera attains 18 years of age or any
later date as may be chosen, the title of the policy
automatically passes on to her name. This process is
called as Vesting. Therefore, the day on which the
policy contract is transferred from Ranjan to Sameera,
i.e. the first policy anniversary after her 18th birthday, is
called the Vesting Date. After vesting, the insurance
policy becomes a contract between the insurance
company and Sameera.
This life insurance policy covers the risk of the child‟s
life. This is a distinctive plan as the entire amount
payable gets transferred in the name of the child once
he/ she is 18 years old. Thus it becomes a big asset for
the child‟s future to take care of various financial
commitments and pursue higher education,
professional courses, develop skill sets, travel places,
plan other investments and many others."
37. At this juncture, we may note a submission of the learned senior
counsel for the appellant that there is a statutory regulatory mechanism,
namely, the Insurance Regulatory and Development Authority (IRDA)
under the Insurance Regulatory and Development Act, 1999. An
obligation is cast on the regulatory body to regulate, promote and ensure
orderly growth of the insurance business and reinsurance business.
LPA No. 431/2010 page 39 of 42
Section 14(2) of the Act enumerates the powers and the functions of the
authority. No insurance policy can be introduced in the market or be
modified without prior scrutiny and approval of IRDA. The deferred date
policies for children issued by the LIC have been approved by IRDA. The
same has been based on actuarial and economic policies. It is also worth
noting that there are deferred term policies in Canada and in advanced
countries like United Kingdom, life insurance is not available for those
below the age of 16 years. We have referred to these aspects only to
appreciate the nature of the policy, the bargaining power and the
international phenomenon. A policy of life insurance is a question of
bonafides and faith. The present policy, as is perceived, does not exclude
anyone to have such a policy for a child. In Consumer Education and
Research Centre & Ors (supra), their Lordships have held that the policy in
issue excluded certain categories of persons as a consequence of which it
defied the constitutional animation and conscience. In the case at hand, it
is not a case of exclusion.
38. It is urged by Mr.Tiku, learned senior counsel for the respondents
that in case of policies under the contract of life insurance and in other
policies where a premium is being paid, the sum assured becomes due and
LPA No. 431/2010 page 40 of 42
there is no question of deferred date. In essence, the submission is that
there is a classification between the policy holders who are not covered by
the deferred date and certain other policy holders who come within the
domain of the deferred date. The deferred date or the waiting period in a
policy and in "Jeevan Kishor Policy" have the following four main
features: (i) it is a policy which covers a child where the physical health
and the medical examination is not done and it is also not possible to find
out the predictability or anticipated certainty of life; (ii) the premium paid
is much lower than the premium which is paid in the normal or other
categories of life insurance policies; (iii) the policy is uniformly applicable
to all children belonging to all stratum of society and it is not that parents
belonging to more financially sound category can pay the premium and
cover the risk of the child for the assured sum without the waiting period
or avoid the deferred date; and (iv) the policy is fundamentally a
protection for the child as eventually there is a concept of vesting after
attaining the age of 18 years.
39. Judged on these parameters, we are unable to pursuade ourselves to
concur with the view expressed by the learned Single Judge that the action
of the Corporation is unfair inasmuch as the incorporation of the „deferred
LPA No. 431/2010 page 41 of 42
date‟ in the special conditions of the policy does not appear to us as unfair,
unreasonable or unconscionable. We may hasten to clarify that we have
referred to the acceptance of the policy by the regulatory body only to
appreciate the submission in proper perspective but we have adverted to
the issue as indicated hereinbefore on the anvil and touchstone of Article
14 of the Constitution of India.
40. In view of the aforesaid premised reasons, we arrive at the
irresistible conclusion that the conditions incorporated in the "Jeevan
Kishor Policy" withstand nuanced judicial scrutiny and do not cause
discomfort to Article 14 of the Constitution and consequently, the appeal is
allowed and the order passed by the learned Single Judge is set aside. In
the facts and circumstances of the case, there shall be no order as to costs.
CHIEF JUSTICE
JULY 04, 2011 SANJIV KHANNA, J.
kapil/dk LPA No. 431/2010 page 42 of 42