Calcutta High Court (Appellete Side)
Kc National Insurance Company Limited vs The State Of West Bengal & Ors on 2 February, 2018
Author: Debangsu Basak
Bench: Debangsu Basak
1
05
02.02.2018
W.P. No. 2147(W) of 2018
KC National Insurance Company Limited
Vs.
The State of West Bengal & Ors.
Mr. Jayanta Mitra
Mr. Ranjan Bachawat
Mr. Vipul Kundalia
Ms. Sonal Shah
Mr. Kushagra Shah.
... for the petitioner.
Mr. Kishore Dutta, Learned Advocate General
Mr. Sirsanya Bandyopadhyay
Mr. Subhendu Sengupta.
... for the State.
The petitioner assails a notice inviting tender dated January
15, 2018 issued by the respondent no. 3 for selection of Group Health
Insurance provider for "Swasthya Sathi" Scheme (in short Scheme).
Learned senior advocate for the petitioner submits that, the petitioner had entered into an agreement with the State of West Bengal on December 26, 2016 in respect of the Scheme. He draws the attention of the Court to page 207 of the writ petition, which is the contract. He submits that, the terms of the contract provide that, the contract would be for a period of three years to be renewed yearly. The manner of renewal is prescribed. The performance of the petitioner is to be assessed in terms of Appendix 8 of the contract. The petitioner fulfils all the relevant conditions of Appendix 8. The petitioner has scored impressively on all parameters of Appendix 8 excepting with regard to 2 claims. He submits that, lodgment of claim is fortuitous. The petitioner being given a contract for nine districts, the situation in such districts for the year did not give rise to large number of claims. The petitioner has nothing to do with the number of claims that may be filed. There is no contemporaneous complain from respondent authorities as to any deficiency of service of the petitioner. The petitioner had expended large amounts in adhering to the terms and conditions of the contract. The terms and conditions of the contract require the petitioner to discharge various obligations. The petitioner had discharged such obligations to the satisfaction of the respondents. Having expended such large amounts, the petitioner has a legitimate expectation that, the contract would not be terminated abruptly as sought to be done by the writing dated January 25, 2018. By such writing, the petitioner was called upon to renew the contract for a period of two months. The same was not accepted by the petitioner on the ground as enumerated in the reply letter of the petitioner. He submits that, the petitioner was granted contract for nine districts and that in respect of two of the districts, the policies are valid till February 28, 2018. The respondents have proceeded on a pre- conceived and pre-determined mind to issue a notice inviting tender on January 15, 2018 without the period of the validity of the contract expiring. He submits that, this action of the respondents is arbitrary, unreasonable and should be quashed.
In support of the contention that, the writ petition is 3 maintainable in respect of a contract, learned senior advocate for the petitioner relies upon AIR 1979 SC 1628 (Ramana Dayaram Shetty Vs. The International Airport Authority of India & Ors.), (1999) 1 SCC 492 (Raunaq International Ltd. Vs. I.V.R. Construction Ltd. & Ors.), (2004) 3 SCC 553 (ABL International Ltd. & Anr. Vs. Export Credit Guarantee Corporation of India Ltd. & Ors.) and (2006) 10 SCC 236 (Noble Resources Ltd. Vs. State of Orissa & Anr.). He submits that when the State cats arbitrarily or unreasonably, even in contractual field, a writ is maintainable.
Learned Advocate General appearing for the State opposes the writ petition. He submits that, the Writ Court should not enter into disputed questions of facts. He draws the attention of the Court to the effect that, the disputes raised are referable to arbitration in terms of the arbitration clause contained in the subject contract. He submits that, the contract is a non-statutory one. No public law element is involved in the contract. The State is discharging its duty to provide best health care to its citizens by utilising the limited resources available to it in the best possible way. The State had decided to extend medical health facilities to its citizens and had promulgated the Scheme. The petitioner had obtained contract for nine districts. He refers to the various provisions of the contract and submits that, the contract is on yearly basis and that, the extension of the contract period would be on yearly basis on the satisfaction of the parameters noted in the contract. The petitioner did 4 not obtain the requisite mark in all the parameters required under the contract. It is a disputed question of fact as to whether the petitioner fulfills all the parameters of Appendix 8 to the contract requiring an automatic renewal of the contract for the next year. The State has decided to undertake a fresh tender. The petitioner is at liberty to participate in the fresh tender. All participants in the fresh tender including the petitioner, if he chooses to participate, will have a level playing field. He questions the maintainability of the writ petition. He refers to AIR 1977 SC 1496 (M/s. Radhakrishna Agarwal & Ors. Vs. The State of Bihar & Ors.), AIR 1989 SC 1076 (Bareilly Development Authority & Anr. Vs. Ajay Pal Singh & Ors.) and AIR 1997 Calcutta 168 (Santosh Kumar Roy & Ors. Vs. State of West Bengal & Ors.) in support of his contentions. He submits that, the principle of legitimate expectation is not available in contractual field. So far as interim order is concerned, he submits that, neither the prima facie case nor the balance of convenience is in favour of the petitioner. The petitioner has alternative remedy and can be compensated by money in the event of breach of any contractual obligation by the State. Therefore, according to him, non-grant of an interim order, as prayed for by the petitioner, will not cause irreparable loss to the petitioner.
I have considered the rival contentions of the parties and the materials made available on record.
The petitioner and the State have entered into an 5 agreement dated December 26, 2016 for providing health insurance services to the beneficiaries covered under the Scheme on the terms and conditions of the policy. The petitioner had obtained contract for nine several districts. It is averred in paragraph 10 of the writ petition that, the policies were valid upto January 31, 2018 for seven districts and till February 28, 2018 for two districts.
Parties have placed various clauses of the contract for consideration. The parties join issue as to the tenure of the contract. According to the petitioner, it is a three year period contract with the yearly renewal. According to the State, the contract is for one year and can be renewed yearly for the maximum period of three years.
The clauses of the contract which the parties claim are relevant for the purpose of consideration of such issue are as follows:
"1. The Insurer has agreed that it shall provide the health insurance services to the beneficiaries covered under Swasthya Sathi Scheme on the terms and conditions of the policy and more particularly described in this Agreement in the district of BURDWAN in the State of West Bengal.
2. The commencement of Swasthya Sathi Scheme through the Insurer under this agreement shall be effective from 01.02.2017 for BURDWAN (or any other day mutually agreed upon by the Government and the Insurance Co. after due completion of enrolment process) for three years, subject 6 to renewal of policy on yearly basis based on parameters fixed by the State Government/Nodal Agency for renewal. This policy shall remain in operation from 01.02.2017 to midnight of 31.01.2018 for BURDWAN (or period defined by State Nodal Agency and mutually agreed upon by the Government and the Insurance Co.) ................ .............. .......... ..........
9. Period of Contract and Insurance 9.1 Term of the Contract The Contract between the State Nodal Agency and the Insurer shall become effective on the date of signing and shall continue to be valid and in full force and effect until expiration of the Policy Cover Period of the last Policy issued by the insurer, including any renewal of such policy, under the Contract or until early termination, whichever is earlier. However, the cumulative term of the Contract(s) shall not exceed three (3) years, from the start date of the insurance policy in the first year. The decision regarding extending the contract of the Insurance Company on yearly basis will be taken by the State Nodal Agency as per the parameters provided in Appendix 8.
Even after the end of the contract period, the Insurance Company should ensure that all enrolment and claim settlement services are available until the fulfilment of its obligations with the State Nodal Agency and settlement of claims from all hospitals and Inter Insurance Company claims."
Clause 2 of the contract provides that the Scheme will 7 commence from February 1, 2017 and will continue for three years subject to renewal of policy on yearly basis based on the parameters fixed. Clause 9.1 of the contract provides that, the contract would be valid and continue to be in force and effect until expiration of the policy cover period of the last policy issued by the insurer including any renewal or early termination, whichever is earlier. It goes on to provide that the cumulative term of the contract shall not exceed three years from the start date of the insurance policy in the first year. The decision regarding extending the contract on yearly basis is to be taken by the State Nodal Agency on the parameters of Appendix 8 of the contract. According to the petitioner, it fulfils all the parameters of Appendix 8. According to the State, the petitioner does not. These are disputed questions of fact, which are required to be gone into.
The contract is for the purpose of providing health insurance service to the beneficiaries. Admittedly, the petitioner had contract for nine districts. Insurance policies for seven of the districts stands expired on January 31, 2018. There is a writing from the State requesting the petitioner to extend the period of such policies for two months on pro rata basis. There is a writing from the petitioner refusing to do so. As on date, the policies for seven districts have expired. There is a letter of the State dated January 31, 2018 to all the enlisted hospital and the health facilities stating that, the beneficiaries under the Scheme will continue to receive the benefits of such scheme notwithstanding the expiry of the 8 policies. The State has, therefore, stepped in to fill up the vacuum left by the non-renewal of the policies by the petitioner.
The writ petition is in respect of the alleged breach of contractual obligations by the State. The writ petitioner traces its right to seek a stay on the fresh tender process initiated or founded upon the contract entered with the State. An issue is raised as to whether a writ petition would be maintainable in such arena. According to the State, since the contract is a non-statutory one and does not involve any public law element in it, the Writ Court should not intervene. M/s. Radhakrishna Agarwal & Ors. (supra), Bareilly Development Authority & Anr. (supra) and Santosh Kumar Roy & Ors. (supra) are of the view that, a writ petition relating to a contract should not be entertained when such contract is non-statutory and where no public law or public interest element is involved.
The decisions cited by the State were considered in later Supreme Court decisions. Ramana Dayaram Shetty (supra), Raunaq International Ltd. (supra), ABL International 9 Ltd. (supra) and Noble Resources Ltd. (supra) are of the view that, a writ is maintainable in respect of a contract, if it can be established that, there is any violation of Article 14 of the Constitution of India. Activities of the State in the contractual field are amenable to judicial review once such activities violate Article 14 of the Constitution of India. What is understood to be public law element is explained in Raunaq International Ltd. (supra).
The issue of maintainability of the writ petition is required to be gone into. In the facts of the instant case, it would be best decided after affording the respondents an opportunity of filing affidavits.
The question of passing an interim order during the pendency of the writ petition requires consideration.
As noted above, the petitioner had contracts for nine districts. As per paragraph 10 of the writ petition, policies for seven districts have expired. The State has stepped in by the letter dated January 31, 2018 to extend the facilities to fill-up such vacuum. The petitioner cannot take 10 the benefit of the action of the State when the petitioner had refused to extend the policies after being requested to do so by the State. In such circumstances, it cannot be said that, the balance of convenience is in favour of the petitioner in granting the relief as prayed for. Moreover, the petitioner can be compensated in terms of money, in the event it is ultimately held that, the State has acted in violation of the terms of the contract.
In such circumstances, I am not minded to pass any interim order at this stage of the writ petition.
Let affidavit-in-opposition be filed within four weeks from date; reply thereto, if any, be filed two weeks thereafter. The writ petition will be treated as 'ready for hearing' immediately on completion of the time period prescribed for filing affidavits. Liberty to the parties to mention for early hearing.
Urgent certified website copies of this order, if applied for, be made available to the parties upon compliance of the requisite formalities.
(Debangsu Basak, J.)