BIMAN KRISHNA BOSEversusUNITED INDIA INSURANCE CO. LTD. AND ANR.

                          BIMAN KRISHNA BOSE                                        A
                                        v.
           UNITED INDIA INSURANCE CO. LTD. AND ANR.

                              AUGUST 2, 2001

               (V.N. KHARE AND SHJVARAJ V. PATIL, JJ.]                              B


     General Insurance Business (Nationalisation) Act, 1972 : Sections 3(a),
9 and 24.

     Acquiring company-Exclusive privilege of carrying on insurance                 C
business-Acquiring companies have trappings of 'The State '-Held, Covered
by expression 'other authorities' under Article 12 of Constitution.

      Constitution of India, 1950 Article 12.

     State-Insurance Company having the trappings of State-Such . D
authorities must act reasonably even in area of contractual relations.

      Insurance-Medic/aim policy-Claim for reimbursement-Not honoured
by Insurance Company-Resort to court by insured-Held, is not a valid
ground for refasal to renew insurance policy-Insurance policy-Retrospective         E
renewal-Arbitrary refasal to renew the policy-In such a case policy is
required to be renewed with effect from the date when it fell due for its
renewal.

       The appellant took out a Mediclaim Insurance Policy from the
respondent insurance-company. An amount of Rs. 8243 was spent for hospital          F
treatment of appellant's wife. In legal proceedings initiated by appellant the
claim for said amount though ultimately upheld by the court, yet payment
was not made to the appellant. For recovery, further proceedings were
initiated and during these proceedings the insurance policy fell due for
renewal. Appellant's request for renewal of policy was rejected on the ground
of his past conduct viz. that he had gone in litigation for payment of his claim.   G
On a writ filed by appellant, Single Judge of the High Court directed the
insurance company to renew the Mediclaim Policy. On appeal by insurance
company the Division Bench directed the appellant to take fresh policy on
the ground that renewal of Mediclaim Policy cannot be granted with
retrospective effect. Hence this appeal.                                            H
                                      255
     256                     SUPREME COURT REPORTS (2001] SUPP. I S.C.R.

A          Allowing the appeal, the Court

           HELD : I. The High Court committed error in directing the appellant
     to take fresh mediclaim policy even after setting aside the order of refusal to
     renew the mediclaim policy by the insurance company. The order passed by
     the High Court to that extent is not sustainable in law. (261-E)
B
           2. Under the provisions of the General Insurance Business                   •
    (Nationalisation) Act, 1972 it is only the acquiring companies which have
    exclusive privilege of carrying on the general insurance business in India,
    under the supervision and control of General Insurance Corporation of India.
    The respondent insurance company is one of such acquiring company.
C   Excepting the acquiring companies no other company in private sector has a
    right and privilege to carry on general insurance business in India and to that
    extent the acquiring companies have a monopoly over such business. In such
    a situation, acquiring companies have the trappings of"the State" being other
    authorities under Article 12 of the Constitution of India. The acquiring
D   companies thus being "the State" under Article 12 of the Constitution are
    expected to act fairly and reasonably. (259-C, D, El

          3. Even, in an area of contractual relations, the State and its
    instrumentalities are enjoined with the obligations to act with fairness and in
    doing so, can take into consideration only the relevant materials. They must
E   not take any irrelevant and extraneous consideration while arriving at a
    decision. Arbitrariness should not appear in their actions or decisions.
                                                                         (260-A, BJ

          4. Ifan insured lodges a claim with the company and the company does
    not honour the claim, the insured is left with no alternative but to knock the
F   doors of court of law. Merely because the appellant had approached the
    Consumer Forum and this Court for redressal of his grievance, such an act
    cannot be attributed as bad record as to dis-entitle the appellant to get his
    policy renewed. In the present case arbitrariness is writ large in the actions
    of the respondent company when it refused to renew the mediclaim policy of
    the insured on the ground of his past conduct i.e. having gone into litigation
G   for payment of his claim against the respondent company. Therefore, the view
    taken by the High Court that the order of the respondent company refusing
    to renew the mediclaim policy of the appellant was unfair and arbitrary is
    correct (259-G; 260-B, C]

          5. Where an insurance company which has exclusive privilege to carry
H   on insurance business has refused to renew the mediclaim policy of an insured
         B.K. BOSE v. UNITED INDIA INSURANCE CO. LTD. [V.N. KHARE, J.). 257

on extraneous and irrelevant consideration, any disease which an insured had       A
contacted during the period when the policy was not renewed, such disease
cannot be covered under a fresh insurance policy in view of the exclusion
clause. The exclusion clause provides that the pre-existin_g diseases would not
be covered under the fresh insurance policy. If a view is taken that the
mediclaim policy cannot be renewed with retrospective effect, it would give        B
handle to the insurance company to refuse th_e renewal of the policy on
extraneous consideration and thereby deprive the claim of insured for
treatment of diseases which have appeared during the relevant time and
further deprive the insured for all time to come to cover those diseases under
an insurance policy by virtue of the exclusion clause. This being the disastrous
effect of wrongful refusal of renewal of the insurance policy, the mischief and    C
harm done to the insured must be remedied. Therefore, once it is found that
the act of an insurance company was arbitrary in refusing to renew the policy,
the policy is required to be renewed with effect front the date when it fell due
for its renewal. (260-G, H; 261-A, BJ

        CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2296 of                    D
2000.

     From the Judgment and Order dated 22.7.98 of the Calcutta High Court
in A.P.0. No. 383 of 1997.

                                                                                   E
        In-person for the Appellant.

        K.L. Nandwani and Kamal Baid for Debasis Misra for the Respondents.

        The Judgment of the Court was delivered by

      V.N. KHARE, J. The appellant herein and his wife Smt. Atka Bose,             F
took out a mediclaim insurance policy from the respondent United India
Insurance Company (hereinafter referred to as 'insurance company') on
December 14, 1990. In July 1991, Smt. Alka Bose fell ill and as per advice
of the doctor she was admitted to a hospital on August 14, 1991. She paid
Rs. 8,243 towards the charges for her treatment to the hospital. On August         G
30, 1991 the appellant lodged a claim for Rs. 8,243 with the insurance company
along with necessary papers. Despite repeated requests the claim was not
honoured, with the result the appellant approached the District Consumer
Grievance Redressal Forum (District Forum Calcutta) but the said complaint
was rejected. On appeal before the State Commission, the order of the District
Forum was set aside and direction was issued to the respondent insurance           H
     258                     SUPREME COURT REPORTS (2001) SUPP. I S.C.R.

A     company to pay to the appellant a sum of Rs. 8,243. The insurance company
      thereafter went in revision before the National Consumer Redressal
      Commission which allowed the revision and set aside the order of the State
      Commission. Aggrieved, the appellant filed an appeal before this Court. On
      May 10, 1995 this Court allowed the appeal with costs which was quantified
      at Rs. 20,000. Despite the order of this Court, the payment was not made
B    with the result the appellant had to take further proce~dings. While the said
      litigation was going on, appellant's policy fell due, for renewal. Under such
     circumstances, the appellant on 24.1.1996, sent a letter along with a cheque
     of Rs. 1, 796 to the respondent insurance company requesting for renewal of
     his existing mediclaim policy. On 7.3.1996, the insurance company declined
C    to renew the mediclaim policy as per the advice of the competent authority
     of the company. Under the aforesaid ci~cumstances, the appellant filed a writ
     petition under Article 226 of the Constitution before the Calcutta High Court
     challenging the order passed by the respondent insurance company refusing
     to renew the mediclaim policy. The said writ petition was allowed and the
     order refusing to renew the policy was set aside and a direction was issued
iD   to the insurance company to renew the mediclaim policy earlier taken out by
     the appellant. Aggrieved, the respondent insurance company filed    an  appeal
     against the judgment of learned Single Judge. The Division Bench of the
     Calcutta High Court while agreeing with the view taken by the learned Single
     Judge substantially dismissed the appeal. Yet, the High Court directed the
E    appellant to take fresh mediclaim policy, as the renewal of mediclaim policy
     cannot be granted with retrospective effect, as the period for which renewal
     was required· has already expired. It is against the said part of the order the
     appellant has preferred this appeal.

            The appellant, Biman Krishna Bose, has appeared in person. He argued
F    that the High Court even after setting aside the order refusing to renew the
     policy, was not justified in directing the appellant to take fresh mediclaim
     policy. According to the appellant, by the said order of the High Court he has
     been placed at a great disadvantageous position. The appellant referred to the
     exclusion clause of the policy taken out by him. Relevant clauses 2. I and
G    2.1.J 4 of the mediclaim policy run as under:

            "2. I - The Company shall not be liable to make any payment under
            this policy in respect of any expenses whatsoever incurred by any
            Insured Person in connect with or in respect of:-

            2. I .14 - All diseases/injuries which are pre-existing when the cover
H           incepts for the first time."
       B.K. BOSE v. UNITED INDIA INSURANCE CO.LTD. [V .N. KHARE, J.]     259
 On the strength of the exclusion clause, the appellant urged that in case the   A
appellant is required to take fresh mediclaim policy, all the diseases which
have surfaced during the period the policy was not renewed shall be treated
as pre-existing diseases and the same would neither be covered by the fresh
policy nor he will be paid the money which he has incurred for treatment of
the said diseases during the relevant time and, therefore, the order of the
High Court be set aside. We find substance in the argument.                      B "·

        Under Section 9 of the General Insurance Business (Nationalisation)
Act, 1972 (hereinafter referred to as the 'Act'), General Insurance Corporation
of India (in short GIC) was set up as a government company for the purpose
 of superintendence, control and carrying out the business of general insurance C
 in the country. Under Section 24 of the Act, the acquiring companies were
given the exclusive privilege to carry on general insurance business in India.
Under Section 3 (a) of the Act, an acquiring company has been defined to
mean any Indian Insurance Company in which any other company.has been
merged in pursuance to the amalgamation scheme formulated under the Act..
The respondent insurance company is one of such acquiring company. A D
perusal of the provisions of the Act makes it evident that it is only the
acquiring companies which have exclusive privilege of carrying on the general
 insurance business in India, under the supervision and control of General'
 Insurance Corporation of India. Excepting the acquiring companies no other
company in private sector has a right and privilege to carry on general E
insurance business in India and to that extent the acquiring companies have
a monopoly over such business. In such .a situation, acquiring companies
have the trappings of 'the State' being other authorities under Article 12 of
the Constitution of India. The acquiring companies thus being 'the State'
under Article 12 of the Constitution are expected to act fairly and reasonably.
In the present case, what we find is that the respondent insurance company F
refused to renew the insurance policy of the appellant on the ground of his
past conduct. The past conduct attributed is that the appellant had gone in
litigation for payment of his claim lodged by him with the respondent insurance
company. If an insured lodges a claim with the company ?nd the company
does not honour the claim, the insured is left with no alternative but to knock G
the doors of court of law. Merely because the appellant had approached the
Consumer Forum and this Court for redressal of his grievance, can such an
act be attributed as bad record as to dis-entitle the appellant to get his policy
renewed. The answer is 'no'. Where an insurance company under the
provisions of the Act having assumed monopoly in the business of general
insurance in the country and thus acquired the trappings of the 'State' being H ..
    260                      SUPREME COURT REPORTS [2001] SUPP. I S.C.R.

A other authorities under Article 12 of the Constitution, it requires to satisfy the
    requirement of reasonableness and fairness while dealing with the customers.
    Even, in an area of contractual relations, the State and its instrumentalities
    are enjoined witl:i the obligations to act with fairness and in doing so, can
    take into consideration only the relevant materials. They must not take any
B   irrelevant and extraneous consideration while arriving to a decision.
    Arbitrariness should not appear in their actions or decisions. In the present
    case, what we find is that arbitrariness is writ large in the actions of the
    respondent company when it refused to renew the mediclaim policy of the
    insured on the ground of his past conduct i.e. having gone into litigation for
    payment of his claim against the respondent company. We are, therefore, in
C   agreement with the view taken by the High Court that the order of the
    respondent company refusing to renew the mediclaim policy of the appellant
    was unfair and arbitrary.

           Coming to the next question whether the appellant's policy was required
    to be renewed with effect from the date when it fell due for renewal. The
D   view taken by the High Court is that an insurance policy cannot be renewed
    for the period which has already expired. It is not disputed that original
    mediclaim policy taken out by the appellant provided for its renewal. It is
    also not disputed that the appellant applied for renewal of the insurance
    policy well in time and sent a cheque towards its premium. The respondent
E   company has not challenged the order of the High Court setting aside the
    order refusing to renew the mediclaim policy of the insured. Under such facts
    and circumstances of the case, whether the appellant can be directed to take
    a fresh mediclaim policy on the premise that no renewal of the policy can be
    ordered for the expired period.

F         A renewal of an insurance policy means repetition of the original policy.
    When renewed, the policy is extended and the renewed policy in the identical
    terms from a different date of its expiration comes into force. In common
    parlance, by renewal, the old policy is revived and it is sort of a substitution
    of obligations under the old policy unless such policy provides otherwise. It
G   may be that on renewal, a new contract comes into being, but the said contract
    is on the same terms and conditions as that of the original policy. Where an
    insurance company which has exclusive privilege to carry on insurance
    business has refused to renew the mediclaim policy of an insured on extraneous
    and irrelevant consideration, any disease which an insured had contacted
    during the period when the policy was not renewed, such disease cannot be
H   covered under a fresh insurance policy in view of the exclusion clause. The
         B.K. BOSE v. UNITEp INDIA INSURANCE CO. LTD. [V.N. KHARE, J.)       261
exclusion clause provides that the pre-existing diseases would not be covered        A
under .the fresh insurance policy. If we take the view that the mediclaim
policy cannot be renewed with retrospective effect, it would give handle to
the insurance company to refuse the renewal of the policy on extraneous
consideration thereby deprive the claim of insured for treatment of diseases
which have appeared during the relevant time and further deprive the insured         B
for all time to come to cover those diseases under an insurance policy by
virtue of the exclusion clause. This being the disastrous effect of wrongful
refusal of renewal of the insurance policy, the mischief and hann done to the
insured must be remedied. We are, therefore, of the view that once it is found
that the act of an insurance company was arbitrary in refusing to renew the
policy, the policy is required to be renewed with effect from the date when          C
it fell due for its renewal.

      Learned counsel appearing for the insurance company argued that since
the appellant has not deposited the premium for subsequent years, the policy
cannot be renewed with retrospective effect. It is not disputed that the appellant
sent a cheque for Rs. 1, 796 towards premium but the same was returned to            D
the appellant. Thereafter, the parties had been litigating and respondent
insurance company stopped having any correspondence with the appellant.
Therefore, there arose no occasion for the appellant to deposit the premium.
We accordingly reject the argument of the learned counsel for the respondent.

      For the aforesaid reasons, we are of the view that the High Court              E
committed error in directing the appellant to take fresh mediclaim policy
even after setting aside the order of refusal to renew the mediclaim policy by
the insurance company. The order passed by the High Court to that extent is
not sustainable in law. We, therefore, set aside the order of the High Court
to the extent it directed '"e appellant to take a fresh mediclaim policy. We,        F
further direct that if the appellant applies for renewal of his mediclaim policy
for the expired period and pays the premium, the respondent company shall
renew the said mediclaim policy forthwith.

      The appeal is allowed with costs, which we quantify at Rs. 5,000.
                                                                                     G
T.N.A.                                                          Appeal allowed.