1. Heard Mr. A.S. Rao, learned counsel for the petitioner and Mr. Rahul Tanwani, learned counsel for respondent Nos. 1 to 3.
2. By filing this petition under Article 226 of the Constitution of India, petitioner seeks quashing of communication dated 12.06.2020 issued on behalf of respondent No. 1 seeking to terminate the group medi-claim policies issued to the petitioner and further seeks a direction to the respondents to follow the due process including principles of natural justice before taking any decision in the matter.
3. Petitioner is a private limited company having its corporate office at Naupada, Thane in the State of Maharashtra. It is engaged in consultancy business including providing concessional holiday package service/holiday destinations to the group members.
4. According to the petitioner, Insurance Regulatory Development Authority has issued regulations called 'Insurance Regulatory and Development Authority of India (Health Insurance) Regulations, 2016 (briefly '2016 Regulations') in exercise of the powers conferred under section 114-A of the Insurance Act, 1938 and section 14 read with section 26 of the Insurance Regulatory and Development Authority Act, 1999 after due consultation with the insurance advisory committee. It is stated that by the said regulations, Insurance Regulatory Development Authority (IRDA) has contemplated health insurance products to be offered by its entities with valid registration under the Insurance Regulatory and Development Authority (Registration of Indian Insurance Companies) Regulations, 2000. The scope of health insurance business is mentioned in regulation 3 of the 2016 Regulations. Relevant portion of the 2016 Regulations dealing with registration and scope of health insurance business is extracted hereunder:-
"3. Registration and Scope of Health Insurance Business
a. Health Insurance products may be offered only by entities with a valid registration granted to carry on Life Insurance or General Insurance or Health Insurance Business under the Insurance Regulatory and Development Authority (Registration of Indian Insurance Companies) Regulations 2000 as amended from time to time.
b. Life Insurers may offer long term Individual Health Insurance products i.e., for term of 5 years or more, but the premium for such products shall remain unchanged for at least a period of every block of three years, thereafter the premium may be reviewed and modified as necessary.
Provided that a life insurer may not offer indemnity based products either Individual or Group. All existing indemnity based products offered by life insurers shall be withdrawn as specified under these Regulations.
Provided also that no single premium health insurance product shall be offered under Unit Linked platform.
c. General Insurers and Health Insurers may offer individual health products with a minimum tenure of one year and a maximum tenure of three years, provided that the premium remains unchanged for the tenure.
d. Group Health Policies may be offered by any insurer for a term of one year except credit linked products where the term can be extended up to the loan period not exceeding five years.
Provided General Insurers and Health Insurers may also offer Credit Linked Group Personal Accident policies for a term extended upto the loan period not exceeding five years.
Provided further, notwithstanding the provisions of Regulation 4 (b) of these Regulations, Life Insurers may offer Group Health Insurance Policies as specified in Regulation (3)(d).
e. Group Personal Accident Policies may be offered by General Insurers and Health insurers with term less than one year also to provide coverage to specific events. Other Insurance Products offering Travel Cover and Individual Personal Accident Cover may also be offered for a period less than one year.
f. Overseas or Domestic Travel Insurance policies may only be offered by General Insurers and Health Insurers, either as a standalone product or as an add-on cover to be a health or personal accident policy."
5. Petitioner being engaged in the business of holiday packages, it already had existing groups for such purpose. Some of the groups had approached the petitioner for group insurance purposes as an add on benefit. Accordingly, petitioner applied for medi-claim policies of the groups. On 29.01.2019, petitioner approached respondent No. 1 in the Bangalore office by submitting policies of 13 groups for approval. According to the petitioner, the 13 group medi-claim policies covered 2236 families and 9374 individuals. Group details were clarified to the respondents vide email dated 02.02.2019. It is stated that on being satisfied following scrutiny of the documents furnished by the petitioner, respondent No. 1 granted approval to the policies vide email dated 08.02.2019.
6. Notwithstanding grant of approval to the policies, Regional Manager (Health Insurance), Bangalore of respondent No. 1 by communication dated 25.02.2019 enquired about the relationship between the group insurance policy holders and the groups. Petitioner submitted reply on the same day clarifying that group medi-claim policies need not be for employer-employee relation but also for group membership as per guidelines of IRDA.
7. After due verification and on being satisfied that the applications submitted by the petitioner were as per guidelines of IRDA, respondents granted final approval to the policies of the petitioner on 28.02.2019. Pursuant to such final approval, first policy was issued for 119 families consisting of 382 individuals for a total premium of Rs. 15,16,356.00 including GST. Thereafter subsequent policies were issued on various dates upto 22.11.2019 covering a total of 2236 families and 9374 individuals for total premium of Rs. 1,68,56,294.00 including GST.
8. According to the petitioner even after final approval, it appears that there were some misconceptions amongst the officials of the respondents regarding constituents of the groups in respect of whom the medi-claim policies were issued. It is stated that though petitioner was unaware of the contents of internal correspondence, nonetheless it could gather that a series of correspondences had taken place between the officials of the respondents. Though no communication was received, representative of the petitioner during one of his visits to the office of the respondents could sense that some doubts pertaining to the membership group continued to linger on. Therefore, as a means of abundant caution, petitioner submitted a clarification on 13.12.2019 clarifying the expression 'membership group' by quoting the necessary IRDA regulations.
9. To the utter surprise of the petitioner, it received email dated 12.06.2020 from the Senior Divisional Manager of respondent No. 1 stating that respondents cannot renew the policies which would fall due for renewal on 14.06.2020. On the same day in the evening, petitioner learnt from one of the group members that third party administrator had received a mail from respondent No. 1 stating that the insurance policies stood terminated forthwith and not to process claims from 12.06.2020. It is stated that though the mail was shown as addressed to the petitioner, it was actually not sent to the petitioner but sent to the third party administrators M/s. Ericson TPA and M/s. Health India TPA.
10. Contending that such abrupt decision to not renew the insurance policies as well as in terminating the said policies came as a big blow to the petitioner and to the group members of the petitioner as the individual members were denied cashless treatment by the covered hospitals when they faced medical emergency.
11. Aggrieved, present writ petition has been filed seeking the reliefs as indicated above.
12. Contention of the petitioner is that there are specific cancellation clauses in the policy. Policies can be cancelled by giving 30 days notice in which event the company shall refund to the insurer pro-rata premium for unexpired period of insurance though the company shall remain liable for any claim made prior to the date of cancellation.
13. A common affidavit in reply has been filed by Mr. Arvind Kumar Longani, General Manager, New India Assurance Company Limited, on behalf of respondent Nos. 1, 2 and 3. Preliminary objection has been raised as to the maintainability of the writ petition. It is contended that relationship between the petitioner and the respondents is based on contract. A contractual obligation cannot be enforced by way of a writ petition. It is further stated that respondent No. 4 i.e., Insurance Regulatory Development Authority of India is the supreme regulatory body in the country, which has been constituted for the sole purpose of development and regulation of the business of life and non-life insurance. Respondent No. 1 as an insurer is governed by the regulations made by IRDA. Being the regulator of insurance business in India, IRDA is the competent authority for redressal of the grievance of the petitioner. Since the petitioner has an efficacious alternative remedy, it cannot invoke the writ jurisdiction of the High Court.
13.1. Regarding the insurance policies, it is contended that while registering the company i.e., petitioner, business activity was mentioned as legal, accounting, book-keeping, auditing, tax consultant, etc. whereas in the business pamphlet business activities have been mentioned as health care, hospitality and tour and travel assistance.
13.2. It is stated that there appears to be two different entities by the same name as that of the petitioner. However, it is admitted that believing on the representations made by the petitioner, the said respondents had issued 13 different tailor made group insurance policies to the petitioner. After issuance of the policies, answering respondents started receiving multiple claims from the petitioner towards hospitalization of members which was quite unusual. On enquiry, it was found that members covered under the group were not employees of the petitioner and that the groups of insured were not satisfying the definition of 'group' as per IRDA regulations. Approval to the policies in question was given for non-selective employer-employee relation between petitioner and its members. In other words, approval was only meant for employees of the petitioner and not for any other member. Referring to the definition of 'group' as per IRDA guidelines, it is stated that a group should consist of persons who assemble together with a commonality of purpose or engaging in a common activity like employees of a company. No group should be formed with the sole purpose of availing insurance. While a homogeneous group of persons may decide to buy a group insurance policy to achieve savings in cost, a person negotiating group rates then going around finding members to insure will not be considered as a legitimate group. In so far petitioner is concerned, the members are mainly senior citizens who would otherwise not get insurance cover there being also no legitimate commonality of purpose. The group has been primarily formed with the sole purpose of availing insurance. Examination of the policies and claims revealed that while the proposer's office is at Thane, members are from Ahmedabad, Surat, Mumbai, Navi Mumbai, Thane, Pune, Vasai, etc. and maximum number of claims pertained to parents; date of admission in hospital is within one week of policy inception. Under the 13 insurance policies, maximum members are from Maharashtra and Gujarat whereas policies were obtained from the Bangalore regional office. Claims were lodged within seven days of issuance of policies. Many such similar anomalies were detected.
13.3. It is stated that competent authority of respondent No. 1 had ordered investigation in December, 2019 and appointed one Mr. Satish Thanekar to investigate the same. He had submitted investigation report dated 20.01.2020 stating that the primary business activity of the petitioner was to provide holiday packages, diagnostic discount benefits, discounted ayurvedic medicines, etc. to the members.
13.4. From June onwards, petitioner renewed membership of the members and was charging around Rs. 3,000.00 to Rs. 5,000.00 having a strength of around 20,000 members.
13.5. In such circumstances, answering respondents seek dismissal of the writ petition.
14. Petitioner has filed rejoinder affidavit to the reply affidavit of respondent Nos. 1, 2 and 3. In so far preliminary objection of the respondents is concerned, it is submitted that petitioner is not seeking to enforce any contractual obligation. Petitioner is only challenging cancellation of medi-claim group insurance policies without notice and without providing any opportunity. There is no disputed question of fact here. By picking up one document here and another document there, respondents are trying to make out a case that the main object of the petitioner is book keeping etc. which is incorrect. Petitioner is primarily engaged in providing holiday packages to its group members and as an additional or add-on benefit along with the main holiday packages, group medical insurance is being facilitated. The groups are already in existence as holiday package groups and after the add-on insurance policies, the members are availing the additional benefits. Allegation of the respondents that petitioner has created the groups only for insurance purpose has been denied. Further contention is that once policy is issued, it would be deemed that respondents were satisfied about the compliance of the eligibility conditions.
14.1. Referring to the investigation report dated 20.01.2020, it is submitted that the report cannot be construed to be adverse to the petitioner. Even if construed to be adverse, the same was carried out behind the back of the petitioner. In so far objection of respondents that while the policies were obtained from the Bangalore office, the beneficiary members were mostly from Gujarat and Maharashtra, it is contended that there is no such regulation or restriction that people from Maharashtra and Gujarat should obtain policies only from Maharashtra and Gujarat. On frivolous and flimsy grounds, impugned decision has been taken, it is submitted.
15. Learned counsel for the petitioner submits that the impugned decision dated 12.06.2020 to the effect that respondents were not in a position to renew the policies and instructing the policy holders not to deposit any premium amount to the account of the respondents was taken without giving opportunity to the petitioner. Impugned decision is in blatant violation of the principles of natural justice. It is devoid of reasons. In their reply affidavit, respondents have not addressed this issue. All that the petitioner seeks is that it should be given an opportunity to explain the nature of the groups and the group insurance policies covering the groups before any adverse decision is taken.
16. On the other hand, learned counsel for the respondents has strenuously argued that the writ petition should not be entertained. He submits that petitioner and respondents were in a contractual relationship and provisions of a contract cannot be allowed to be enforced by filing writ petition. Law is well settled on this point. Besides, there are several disputed questions of fact which may not be gone into in a writ proceeding. That apart, IRDA being the supreme regulatory body is the competent authority to redress the grievance of the petitioner. Since petitioner has adequate and efficacious alternative remedy, the writ petition filed may not be entertained.
16.1. On merit, it is contended that there is no error or infirmity in the impugned decision. The groups formed by the petitioner to avail the medi-claim insurance policies do not meet the definition of 'group' under the IRDA regulations. Besides, there is an attempt to avail benefit of insurance coverage by the petitioner for its group members which does not appear to be bonafide.
16.2. Submissions made by learned counsel for the parties have been considered. Also perused the materials on record.
17. Let us first deal with the preliminary objections raised by learned counsel for the respondents. He has raised the preliminary objection as to maintainability of the writ petition primarily on three grounds. Firstly, petitioner and respondents are in a contractual relationship; a contractual obligation cannot be enforced by way of a writ petition. Secondly, his contention is that the writ petition raises disputed questions of fact and therefore, the same may not be gone into in a proceeding under Article 226 of the Constitution of India. Thirdly, IRDA is the competent authority for redressal of the grievance of the petitioner; when the petitioner has got an alternative remedy which is efficacious, the writ petition would not be maintainable.
17.1. In so far the first two preliminary objections of learned counsel for the respondents are concerned, i.e., no writ would lie when the claim is to enforce contractual obligation and there being disputed questions of fact, these aspects were elaborately gone into by the Supreme Court in ABL International Limited Vs. Export Credit Guarantee Corporation of India Limited : (2004) 3 SCC 553. That was also a case where claim of the appellant was based on contractual obligation but which was repudiated by the respondent. At the initial stage, learned Single Judge of the High Court had allowed the writ petition which finding was reversed by the Appellate Bench of the High Court. It was thereafter that the matter came before the Supreme Court. One of the questions which fell for consideration was whether a writ petition under Article 226 of the Constitution of India is maintainable to enforce a contractual obligation of the state or its instrumentality by an aggrieved party? Supreme Court referred to a series of its earlier decisions and held that the said question is no more res integra and is settled by a large number of judicial pronouncements. If a state acts in an arbitrary manner even in a matter of contract, an aggrieved party can approach the court by way of a writ under Article 226 of the Constitution and the court depending on the facts of the case would grant the relief. Even in a matter arising out of a contract on the existence of the required factual matrix, a remedy under Article 226 of the Constitution would be available.
17.2. On the contention that the writ court would not entertain a writ petition involving disputed questions of fact, Supreme Court relying upon the law laid down in Gunwant Kaur Vs. Municipal Committee, Bhatinda : (1969) 3 SCC 769 reiterated the proposition that there is no absolute rule that in all cases involving disputed questions of fact, the parties should be relegated to a civil suit. In Gunwant Kaur (supra), Supreme Court had held that the High Court is not deprived of its jurisdiction to entertain a petition under Article 226 merely because in considering the petitioner's right to relief questions of fact may fall for determination. In a petition under Article 226, the High Court has jurisdiction to try issues both of fact and law. While exercise of the jurisdiction is discretionary, such discretion must be exercised on sound judicial principles. Thus, merely because one of the parties to the litigation raises a dispute in regard to the facts of the case, the court entertaining such petition under Article 226 of the Constitution is not always bound to relegate the parties to a suit. In a writ petition, if the facts require, even oral evidence can be taken. Thus, in an appropriate case, the writ court has the jurisdiction to entertain a writ petition involving disputed questions of fact and there is no absolute bar for entertaining a writ petition even if the same arises out of a contractual obligation and/or involves some disputed questions of fact. Summing up the legal principles, Supreme Court held as under:-
"27. From the above discussion of ours, following legal principles emerge as to the maintainability of a writ petition:-
(a) In an appropriate case, a writ petition as against a State or an instrumentality of a State arising out of a contractual obligation is maintainable.
(b) Merely because some disputed questions of facts arise for consideration, same cannot be a ground to refuse to entertain a writ petition in all cases as a matter of rule.
(c) A writ petition involving a consequential relief of monetary claim is also maintainable."
17.3. In so far maintainability of the writ petition vis-a-vis availability of an adequate and efficacious alternative remedy is concerned, the law is well settled that the plenary jurisdiction of the High Court under Article 226 of the Constitution of India cannot be restricted or limited merely on account of availability of an alternative remedy. It is another matter that the High Court exercises self-imposed restriction when the litigant before it has alternative remedy which it finds to be adequate and efficacious. But in a case where there is violation of principles of natural justice, gross procedural infraction, where the order passed is so absurd that no reasonable person instructed in law could have passed such an order, the order or proceeding is based on non-existent statute or where the statute has been declared ultra vires by the court, where there is error apparent on the face of the record, etc., the writ court would not relegate the party before it to the forum of alternative remedy. It is not necessary to burden this judgment with the long line of judicial precedents on this point. However, to buttress the point we may mention that Supreme Court in Calcutta Discount Limited Vs. ITO : 41 ITR 191 held that even a notice can be successfully challenged in a writ proceeding under Article 226 of the Constitution of India if the said notice is without jurisdiction. In such a case, existence of an alternative remedy would not be a sufficient reason for refusing relief to the aggrieved party. This position has been reiterated by the Supreme Court in various subsequent decisions including in Whirlpool Corporation Limited Vs. Registrar of Trade Marks: (1998) 8 SCC 1, which has been summed up succinctly in ABL International Limited (supra) as under:-
"28. However, while entertaining an objection as to the maintainability of a writ petition under Article 226 of the Constitution of India, the court should bear in mind the fact that the power to issue prerogative writs under Article 226 of the Constitution is plenary in nature and is not limited by any other provisions of the Constitution. The High Court having regard to the facts of the case, has a discretion to entertain or not to entertain a writ petition. The Court has imposed upon itself certain restrictions in the exercise of this power [See: Whirlpool Corporation vs. Registrar of Trade Marks]. And this plenary right of the High Court to issue a prerogative writ will not normally be exercised by the Court to the exclusion of other available remedies unless such action of the State or its instrumentality is arbitrary and unreasonable so as to violate the constitutional mandate of Article 14 or for other valid and legitimate reasons, for which the court thinks it necessary to exercise the said jurisdiction."
18. Having clarified ourselves on the preliminary objections raised on behalf of the respondents, we may revert back to the facts of the present case. Admittedly, the first respondent is a creature of a statute and is certainly an authority within the meaning of Article 226 of the Constitution of India read with Article 12 thereof.
19. It is seen that by e-mail dated 25.02.2019, petitioner had clarified to the respondents about the relationship between the group and the group members. It was pointed out that petitioner already has a group enjoying holiday packages and thyrocare discount packages as benefits. Petitioner wanted to provide members of the group health insurance as add-on benefit which it was contended is within the group policy guidelines of IRDA. Documents on record shows that respondents had approved the policies of the petitioner besides approving family floater premium rates. Petitioner had furnished a statement at page 90 of the writ petition giving details of the 13 insurance policies covering 2236 families having total number of 9374 members. Total premium paid was Rs. 1,68,56,294.00, including GST. However, by the impugned communication dated 12.06.2020, petitioner was informed that respondents were being approached by the group members directly for renewal of the policies; further stating that respondents were not in a position to renew the policies. Instruction was issued that no premium should be deposited with the respondents. It is this communication which is under challenge in the present writ petition primarily on the ground that no notice or hearing was given to the petitioner before such communication and thus, it was violative of the principles of natural justice. No reasons have been assigned for non-renewal. Therefore, the impugned decision reflects an arbitrary exercise of power which infringes Article 14 of the Constitution of India.
20. Respondents in their affidavit have annexed the terms and conditions applicable to all the 13 policies namely, New India Flexi Floater Group Mediclaim Policy. Clause 3.36 deals with renewal of such policy. It says that renewal defines the terms on which the contract of insurance can be renewed on mutual consent with a provision of grace period for treating the renewal continuous for the purpose of all waiting periods. The cancellation clause is 5.7. It says that the policy may be renewed by mutual consent. However, the company may at any time cancel the policy by giving 30 days notice in which event the company shall refund to the insured the pro-rata premium for unexpired period of insurance though the company shall remain liable for any claim which arose prior to the date of cancellation. Similarly, the insured may also cancel the policy at any time in which event company shall allow refund of premium provided no claim was made upto the date of cancellation. As per clause 10.0, the company may send a renewal notice as a matter of courtesy. If the insured does not receive the renewal notice, it will not amount to any deficiency of service. However, for the reasons mentioned therein, the company would be entitled to decline renewal which includes fraud, moral hazard/misrepresentation or suppression. Clause 14 speaks about grievance redressal wherein it is stated that in the event of insured having any grievance relating to the insurance, the insured person may contact the jurisdictional ombudsman with list of ombudsman provided in annexure II appended to the terms and conditions. In the event of the company admitting liability for any claim but the difference or dispute is to the amount payable, the same shall be decided by reference to arbitration under clause 16.0.
21. The Insurance Ombudsman Rules, 2017 have been framed providing for establishment of insurance ombudsman. As per rule 7(1), there shall be established such number of insurance ombudsmen for such territorial jurisdiction as the executive council of insurers may specify for discharging the duties and functions prescribed under the Rules. Duties and functions of insurance ombudsman are provided in rule 13. The ombudsman shall receive and consider complaints or disputes relating to delay in settlement of claims, partial or total repudiation of claims, disputes over premium paid or payable, misrepresentation of policy terms and conditions, legal construction of insurance policies, etc. As per sub-rule (2), while dealing with the above matters, the ombudsman acts as a counsellor and a mediator provided there is written consent of the parties to the dispute. As per rule 16, whenever a complaint is settled through mediation, the insurance ombudsman shall make appropriate recommendation. The ombudsman can also pass award under rule 17 when complaint is not settled b
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y way of mediation. 22. The Insurance Regulatory and Development Authority Act, 1999 provides for establishment of an authority to protect the interest of holders of insurance companies, to regulate, promote and ensure orderly growth of the insurance industry and for matters connected therewith or incidental thereto. Section 2(1)(b) defines 'authority' to mean the Insurance Regulatory and Development Authority of India (IRDA) established under sub-section (1) of section 3. While IRDA is established under section 3, the duties, powers and functions of IRDA are provided in section 14, which includes protection of the interest of the policy holders in matters concerning assigning of policy, adjudication of disputes between insurers and intermediaries or insurance intermediaries. 23. From the pleadings and arguments what transpires is that though petitioner's grievance primarily centers around violation of the principles of natural justice while issuing the impugned communication, respondents in their affidavit have traversed much beyond that and have justified the impugned decision on merit. While petitioner certainly has a grievance, the question is if the impugned communication is interfered with and the matter is remanded back to the respondents for a fresh decision after hearing the petitioner, will it subserve the cause of justice? As we have already noted, respondents in their affidavit have justified on merit the impugned decision taken. Therefore, if the matter is remanded back to the respondents for a fresh decision after hearing the petitioner, it may turn out to be a futile exercise. In such circumstances, Court is of the view that it would be more effective if the grievance of the petitioner is looked into either by the insurance ombudsman or by the IRDA. 24. On a careful and minute comparison of the powers and functions of the two authorities, we feel that IRDA which has been arrayed as respondent No. 4 in the present proceeding would be the more appropriate authority to look into and take a decision on the grievance of the petitioner. As already noted above, sending the petitioner back to respondent No. 1 would be a mere formality as respondents have already expressed their view on merit. 25. Thus, having regard to the facts and circumstances of the case, we direct that petitioner may file a detailed representation before respondent No. 4 within a period of 15 days from today. If such representation is submitted, respondent No. 4 shall take an appropriate and considered decision thereon after giving reasonable opportunity of hearing to both the sides. Whatever decision is taken that shall be in the form of a speaking order and communicated to the parties. This exercise shall be completed within a period of six weeks from the date of receipt of the representation. 26. With the above directions, writ petition is disposed off. However, there shall be no order as to costs. 27. This order will be digitally signed by the Private Secretary of this Court. All concerned will act on production by fax or email of a digitally signed copy of this order.