1995 (5) TMI 247 - SC - Indian Laws

Whether the appellant is justified in law in restricting the term policy only to the specified class, namely, salaried persons in Government, quasi-Government or reputed commercial firms? Held that - No hesitation to hold that in issuing a general life insurance policy of any type, public element is inherent in prescription of terms and conditions therein. The appellants or any person or authority in the field of insurance owe a public duty to evolve their policies subject to such reasonable, just and fair terms and conditions accessible to all the segments of the society for insuring the lives of eligible persons. The eligibility conditions must be conformable to the Preamble, fundamental rights and the directive principles of the Constitution. The term policy under Table 58 is declared to be accessible and beneficial to the large segments of the Indian society. The rates of premium must also be reasonable and accessible. Accordingly, we hold that the declaration given by the High Court is not vitiated by any manifest error of law warranting interference. It may be made clear that with a view to make the policy viable and easily available to the general public, it may be open to the appellants to revise the premium in the light of the law declared in this judgment but it must not be arbitrary, unjust, excessive and oppressive. Both the appeals are accordingly dismissed but in the circumstances parties are directed to bear their own costs.

Issues Involved:
1. Eligibility criteria for policies under Table 58.
2. Constitutionality of the conditions imposed by LIC.
3. Maintainability of the writ petition under Article 226.
4. Public law versus private law remedies.
5. Reasonableness and fairness of the contractual terms.
6. Judicial review of administrative and contractual actions.

Detailed Analysis:

1. Eligibility Criteria for Policies under Table 58:
The appeal and cross-appeal arose from the Division Bench judgment of the Gujarat High Court, which dealt with the eligibility criteria for policies under Table 58. The conditions imposed by LIC required proposals for assurance under the plan to be entertained only from persons in Government or Quasi-Government organizations or reputed commercial firms. This condition was challenged as arbitrary and discriminatory.

2. Constitutionality of the Conditions Imposed by LIC:
The High Court upheld the prescription of conditions for 1st class lives as eligibility and other criteria laid down in the policy under Table 58, finding them neither unjust nor arbitrary. However, it declared the condition requiring proposals for assurance under the plan to be entertained only from persons in Government or Quasi-Government organizations or reputed commercial firms as subversive of equality and constitutionally invalid, striking it down.

3. Maintainability of the Writ Petition under Article 226:
The appellants argued that the writ petition under Article 226 was not maintainable to enforce constitutional obligations in the absence of a binding contract. The court, however, held that the writ petition was maintainable to test the validity of the conditions laid in Table 58 term policy, emphasizing the public law character of the action and the need for fairness and equality in state actions.

4. Public Law versus Private Law Remedies:
The court discussed the distinction between public law and private law remedies, noting that actions of the State or its instrumentalities, even in contractual matters, must be informed by public interest and are subject to judicial review. The court emphasized that every administrative decision must be hedged by reasons and guided by public interest.

5. Reasonableness and Fairness of the Contractual Terms:
The court examined whether the condition restricting the term policy only to salaried persons in Government, quasi-Government, or reputed commercial firms was just, fair, and reasonable. It held that such a condition was arbitrary and discriminatory, depriving large segments of the population, particularly those in rural and unorganized sectors, of access to life insurance. The court emphasized that the eligibility conditions must conform to the Preamble, fundamental rights, and directive principles of the Constitution.

6. Judicial Review of Administrative and Contractual Actions:
The court reiterated that the actions of public authorities, including those in the field of insurance, are subject to judicial review to ensure they are not arbitrary, unjust, or unfair. The court held that the offending clause in the insurance policy was severable from the rest of the conditions and declared it unconstitutional, allowing the policy to be accessible to all eligible lives.

Conclusion:
The Supreme Court upheld the High Court's decision, declaring the condition restricting the term policy under Table 58 to salaried persons in Government, quasi-Government, or reputed commercial firms as unconstitutional. The court emphasized the need for fairness, equality, and public interest in state actions and policies, particularly in the context of life insurance as a social security measure. The court dismissed both appeals, directing parties to bear their own costs.

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