IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) WEDNESDAY, THE TWENTY THIRD DAY OF JULY TWO THOUSAND AND EIGHT PRESENT THE HON'BLE MR JUSTICE NOOTY RAMAMOHANA RAO WRIT PETITION NO : 14141 of 2007 Between: Excellent Insurance Broking services Limited, (Licenced by Insurance Regulatory Development Authority), 3rd floor, State Bank of India Building, 8-3-96/B, Srinagar Colony, Hyderabad 500 073. rep. by its Managing Director & Principal Officer Dr.K.Muralidhara Reddy. ..... PETITIONER AND 1. The Government of Andhra Pradesh, rep. by Principal Secretary to Home, Secretariat, Hyderabad. 2. Director General & Inspector General of Police, Government of A.P., saifabad, Hyderabad. 3. Insurance REgulatory Development authority, Hyderabad, rep. by its Chairman. .....RESPONDENTS Petition under Article 226 of the constitution of India praying that in the circumstances stated in the Affidavit filed herein the High Court will be pleased to issue an order, direction or writ particularly one in the nature of writ of Mandamus or any other appropriate writ (i) declaring the proceedings Rc.No.10/VI/2007 dated 26.6.2007 issued by 2nd respondent as illegal, arbitrary and in violation of principles of natural justice and consequently set aside the same as such; (ii) declare the action of 2nd respondent in inviting tenders from Insurance Companies for "Group Personal Accident Insurance Policy" while Insurance Broker is on record is illegal and contrary to guidelines of 3rd respondent; (iii) and pass such other order or orders. Counsel for the Petitioner:MR.G.VIDYASAGAR Counsel for the Respondent No.: GP FOR HOME The Court made the following : THE HON’BLE SRI JUSTICE NOOTY RAMAMOHANA RAO W.P.No. 14141 of 2007 O R D E R: This writ petition has been instituted calling in question the validity of proceedings Rc.No. 10/VI/2007, dated 26th June 2007 issued by the Director General and Inspector General of Police, Government of Andhra Pradesh, Hyderabad as bad and illegal. The writ petitioner is an incorporated company, which has been rendering insurance broking services. The writ petitioner company has been granted the necessary licence for carrying on insurance brokerage by the Insurance Regulatory Development Authority, in terms of the regulations framed by it in that regard. The State Government had a huge police force. Some of the duties and functions performed by the policemen are intrinsically risky. Consequently, loss of life or limb is often an associated risk. Since life is more precious, the State Government keeps on evolving various steps and measures for ensuring that the risk elements are greatly minimized and in spite of all that, should causalities occur, they ensure that the victims are appropriately rehabilitated in quick time. The welfare and rehabilitation measures, which the State Government puts in place for the purpose of keeping up the morale of the force, constantly undergo changes. It has been conceived by the State to put in place a Group Personal Accident Policy for the police personnel. This measure perhaps was considered as an appropriate measure to instill the necessary sense of confidence and boost the morale of the force to fearlessly undertake and perform their duties and responsibilities as the relief measures are certainly available in case of any eventuality. Consequently, the Home Department appears to have appointed the writ petitioner company as an insurance broker for a period of one year, commencing from 1st July 2005 up to 30th June 2006. This has enabled the writ petitioner to provide the necessary services for securing the cover of Group Personal Accident Insurance policy to the police personnel in the State. The petitioner has been entrusted with the task of evaluating the bids that would be submitted by various insurance companies which offer the policy cover and then tender advice to the State for securing the best policy cover. Important amongst the services to be rendered, by the broker is relating to the settlement of claims of the bereaved families. According to the petitioner, it had rendered excellent services by securing the lowest premium offer of Rs. 72 lacs and also ensured renewal of the insurance policies for the period from 7th August 2006 to 6th August 2007. Thus, according to the petitioner, due to it’s efforts 98,721 police personnel have been brought under the cover of the Group Personal Accident Insurance policy and also the Group Health Insurance Scheme which covers the Home Guards numbering about 23, 658 of them. According to the petitioner, it had rendered its expert advise to the Home Department which enabled the latter to secure the best competitive premium to be paid for the insurance cover. It will be relevant to point out at this stage that when the Home Department made an attempt to invite bids from the insurance companies, it is the petitioner, which has advised the department to desist from entering upon such a charter as the same is opposed to the policy decision put in place by the Insurance Regulatory Development Agency. While having taken advantage of the services rendered by the petitioner, the Home Department has abruptly terminated the services of the petitioner by passing the impugned order on 26th June 2007 cancelling its appointment as the broker for Group Personal Accident Insurance policy of the Police Department of Andrha Pradesh. It is this decision dated 26th June 2007, which is called in question in this writ petition. It is contended by Sri G.Vidya Sagar, learned counsel for the petitioner that there is nothing against the performance of the writ petitioner, which warrants the cancellation of its services as an insurance broker. Apart from that, the services of the petitioner have been appreciated, inasmuch as it had ensured that the policy of insurance cover for a large police force has been secured at a most competitive price and that it had also rendered the necessary assistance for securing settlement of large number of claims made in that regard. It is also further asserted that the petitioner, because of its expertise, could negotiate the best terms and conditions in the insurance cover, while keeping in mind the specific requirements of Andhra Pradesh police force. The learned counsel would also further urge that the services of the insurance broker are secured without any additional financial commitment being thrust on the department. In fact, the writ petitioner does not charge for its services rendered to the Police Department either in the matter of securing the cover of insurance policy or even at the time the claims arising there from are settled. The learned counsel would further urge that the Insurance Regulatory Development Agency grants licences only in favour of such brokers, who comply with the stringent conditions prescribed by it in that regard. The very fact that the writ petitioner company had satisfied all such norms, which also included huge capital outlay, would suggest that it is the insurance broker, who alone will be able to secure the best insurance terms by entering into negotiations for the benefit of the policy holders. Therefore, learned counsel would urge that the State shall not deny itself the benefits of the services of an expert not only in tendering advices but also securing the best terms and quick settlement of claims without any hassles for the department. The learned counsel would add that securing advice without anything more for the State is the added advantage and that the premium that is being paid by the State for securing the insurance cover in turn fetches the best returns for such an investment that is being made on an annual basis by the department. Above all, the decision to terminate the services of the writ petitioner, reflected in the impugned order, is the result of some misapprehensions on the part of the State or at any rate some of it’s high ranking officials. It has been contended that while the insurance companies on one hand are specifically prohibited from soliciting business, the State is now literally indulging in an act, which is, in effect, encouraging such a breach. By entering into a straight and direct relationship with the insurance companies, the State, in turn, is permitting the insurance companies to solicit the business. The learned Government Pleader for Home contends that by securing the services of the writ petitioner, the State has merely enabled it to improve its business and that by directly resorting to securing insurance cover by the provider of such insurance cover itself, the State Government has not breached any legal provision. On the contrary, the services of the petitioner are merely utilized for the purpose of tendering advice in the matter of evaluation and when the department itself has realized that it is capable of negotiating the best terms with the service provider, it has considered it appropriate not to allow an intermediary agency like that of the writ petitioner to come in the way. Therefore, contends, the learned Government Pleader that by contacting or negotiating directly with the Insurance Companies the Department is absolutely certain of the terms and conditions that suit them best and any further ambiguity is only avoided. Learned Government Pleader has also disputed the correctness of the assertion of the writ petitioner that its services have been well- appreciated for securing settlement of the claims made in terms of the insurance cover provided by the insurance companies. The learned Government Pleader would contend that since the services of the writ petitioner are not on the same footing as that of a public servant, there is no further necessity of either conducting an enquiry or providing for an opportunity of hearing before eventually deciding to dispense with its services. In effect, learned Government Pleader for Home would urge that the State is under no legal obligation to compulsorily utilize the services of the writ petitioner for the purpose of putting in place the insurance policies for securing cover to their police force. If the State is able to directly negotiate with the insurance companies concerned and secure the best possible terms for itself, there is no further necessity of permitting an intermediary agency to play the said role and hence, it has decided to dispense with the services of the writ petitioner. Sri Rajendra Babu, learned counsel appearing for the Insurance Regulatory and Development Authority (henceforth referred to as “IRDA”) would point out that by granting a licence in favour of the writ petitioner for rendering insurance brokerage services, it is only intended to ensure that the business is carried out by men who are familiar with the job required to be performed by them and at the same time, no policy holder would have to face any inconvenience in securing either the best terms available or settlement of the claims arising from out of such an insurance coverage. While the regulatory authority has only prohibited the insurance companies from soliciting, it has not prohibited a direct access by the policyholder with the insurance company. He, therefore, contends that if the State Government’s Police Department directly enters into negotiations with any insurance company for the purpose of securing the best possible terms for its insurance cover, the same cannot be faulted at all. The Insurance Regulatory and Development Authority Act, 1999 has been ushered in for establishing the authority to protect the interests of holders of the insurance policies, to regulate, promote and ensure orderly growth of insurance industry. The functions and responsibilities entrusted for the IRDA have been spelt out in detail in Section 14 of the said Act. As a part of this exercise of overall regulation, promotion and ensuring orderly growth of insurance business, the regulatory authority has been entrusted with the power to grant the necessary certificate of registration. Beyond that, the agency does not exercise any power of superintendence over the functions of either the insurance broker or the insurance service provider itself. A statute has been put in place, as large-scale insurance covers are needed to be taken up by any developed State. Therefore, Act 41 of 1999 has maintained adequate and safe distance from all the players by ensuring that the Regulatory and Development Agency acts as a referee in a game played by various players and ensures that “fair play” is the basic theme adhered to by one and all instead of “make profit at all costs” principle. Beyond that it does not have a greater regulatory role. Can an insurance broker be liable to be treated as a public servant? Can he be equated in the matter of performance of his duties and responsibilities with that of an Advocate whose services are used by the State? The duties and responsibilities to be performed by an insurance broker undoubtedly require him to make a value based assessment of the terms and conditions subject to which the insurance cover is sought to be made available by the service providers. It is the broker who will be analyzing or insisting upon certain client specific terms which are essentially suitable to form part of the contract of insurance cover so that the interests of the customers are well served by the insurance cover providers viz., the Insurance companies. He may not be charging the policyholder for purpose of rendering the services. But, he is certainly entitled to secure an appropriate commission from the insurance company, as his actions will result in promoting the business of the insurance company concerned. His assessment of the terms and conditions offered by the respective insurance companies and recommendations made by him are undoubtedly liable to be considered by the State, in this case. But, at the back of it weighs the consideration of his own right to collect commission from the Insurance Company. It is no doubt true that it is the State, which ultimately decides as to whether a particular policy should be put in place, or not. In the process, if it be put in use, the expertise available with the broker like the writ petitioner, which comes in handy. At the time when the writ petitioner has been chosen to act as an insurance broker, it is apt to remember that the department had not followed any procedure much less transparent or otherwise for the purpose of choosing the writ petitioner company. It could be that the Home Department may have been guided in the matter by the decent reputation of the writ petitioner in the field. Therefore, at the time when they have utilized his services initially for a period of one year, which has been subsequently renewed by a further one year period, the writ petitioner company has been allowed to negotiate and secure the appropriate terms and conditions which shall be more suitable to the specific needs and requirements of the police personnel for whose benefit the insurance policy cover is sought to be put in place by the State. It is, therefore, not necessary for one to adjudicate about the efficiency or the efficacy of the services of an insurance broker. If the State considered it appropriate now to directly negotiate with the insurance company itself, and in the process seek to derive some advantage whether it is real or otherwise, that is a matter between the State and the insurance company. The insurance broker, therefore, does not play any role in the ultimate decision other than by way of contributing important inputs which help in evaluation of the terms and conditions offered by the respective insurance companies. In that view of the matter, the status of an insurance broker cannot be equated to that of a public servant. Public servants, by the very nature of their occupation, hold themselves responsible and accountable for the decisions taken by them. They take decisions for themselves and also on behalf of the larger body corporates or at times on behalf of the State. They also, in the process, may make recommendations for evaluation by a superior as the administration runs on a structured level. Therefore, the ultimate decision would have been arrived at the very top of the hierarchy. But, each one of the public servants down below would also have supplied necessary inputs for enabling the ultimate decision to be arrived at. In that sense of the word, each one of those who have played his role becomes responsible and more importantly accountable. An insurance broker by the very nature of his avocation can hardly be accountable for his suggestions. I, therefore, do not consider it appropriate that an insurance broker should be equated to that of a public servant. Similarly, can the services of an insurance broker be equated to that of an Advocate engaged by the State for the purpose of defending its actions. By the very nature of the profession practised by Advocates, they acquire a sense of expertise and acumen in the field of law. They apply such expertise for the purpose of tendering the right advice to the department/government for whose benefit his services are sought to be engaged. He has no doubt a major role to play inside a court. He is not merely a mouthpiece of his client. He has the power vested in him in bringing out such fact situation, which is vital and most relevant and in his judgment, that suits the situation. In his capacity, he can gain access to information and data, which can perhaps be a classified one or even sensitive. He has therefore dual role viz., to protect the best interests of his client and while at the same time standing up to the principles, which require him to maintain complete detachment from the limited interests of his client. Therefore, conventionally, the role of Government Pleaders or Advocates engaged by the State for espousing their cause has come to be evaluated as akin to that of a public servant. By the very nature of their duties and responsibilities, advocates might be posted with very sensible and selective information as well. A sense of confidentiality is thus retained in the entire process. Therefore, when the State engages the services of an Advocate, there is something more than a mere ordinary client – counsel relationship. The right of the counsel to appropriately and selectively utilize the information that is fed and made available by the State in discharge of his duties and functions is an integral part of the relationship of the government advocates and the government. This is the reason why the conventional view is that the government advocates, though sometimes handpicked, essentially are the most trusted and well-qualified personnel in the profession. By their very nature of calling they are trained to maintain equanimity in the matter of discharge of their functions and duties. Therefore, the relationship of government and its advocates has got unique features and blends itself well with the overall functions of public servant. It will be difficult to view the role performed by an insurance broker rendering recommendations or advices to the State while evaluating in the process the terms and conditions of the insurance cover, to be the same as that of a public servant or that of a government advocate. On both counts, I am unable to concede to such a status to an insurance broker. In principle, I consider that there is only a business relationship between an insurance broker and the State. It is the same as between the insurance broker and any other private client or citizen to whom he renders similar services. Essentially it is a contract, the consideration of which flows from the commission paid by the respective insurance service providers in terms of Regulation 19. The learned counsel for the petitioner, therefore, is not right in contending that the services of the writ petitioner are liable to be treated as that of a public servant and hence the principles of fair play or natural justice have any application in the matter of termination of the contract of his services. Similarly, even if the state has not provided for any period of time while passing orders on 27-05-2006 extending/continuing the services of the petitioner, it does not clothe the petitioner with any further rights or correspondingly costs any obligations to be complied with compulsorily by the State prior to terminating his services. Further, the emphasis sought to be supplied by the learned counsel for the petitioner that the Insurance Regulatory and Development Authority (Insurance Brokers) Regulations, 2002, has required stringent financial and a host of other factors to be satisfied before a license is granted to a broker and hence compulsorily, their services are liable to be utilized before Insurance Covers are obtained, is inappropriate. To ensure that only persons/institutions with right credentials become the players in the field of insurance business, the Regulations have provided for stringent conditions to be accomplished. They are common to one and all. Obviously, they intend to discourage fly by night operators to enter upon the charter of insurance business. Beyond that no significance need be attached to them, in the present context. An attempt has been made across the bar to demonstrate that the contract in question can be characterized as a statutory contract in view of the license granted in favour of the writ petitioner by the IRDA. A contract does not become a statutory contract merely because an agency created by a Statute enters into a contract with any other person, until and unless the contract itself is the result of a statutory exercise. In the instant case, far from being any provision of the Statute coming to the aid of the writ petitioner, license has been granted by the IRDA in terms of Insurance Brokers Regulations framed by it. Those Regulations have been framed for regulating the very exercise of power available with the IRDA in granting the licenses to the Brokers. Therefore, the contract entered into by the writ petitioner - a licensed insurance broker, with the Home Department of the State Government does not have any statutory flavor and it cannot also become a statutory contract. It is profitable to notice what the Supreme Court has pointed in KARNATAKA STATE ELECTRICITY BOARD AND ANOTHER v. KURIEN E. KALATHIL AND OTHERS at Paragraph No.10: “xxxxxxxxxx. If a term of a contract is violated, ordinarily the remedy is not the writ petition under Article 226. We are also unable to agree with the observations of the High Court that the contractor was seeking enforcement of a statutory contract. A contract would not become statutory simply because it is for construction of a public utility and it has been awarded by a statutory body. We are also unable to agree with the observation of the High Court that since the obligations imposed by the contract on the contracting parties come within the purview of the Contract Act, that would not make the contract statutory. Clearly, the High Court fell into an error in coming to the conclusion that the contract in question was statutory in nature.” The learned counsel for the petitioner had placed reliance upon the judgments of the Supreme Court in GUJARAJ STATE FINANCIAL CORPORATION v. M/S. LOTUS HOTELS PRIVATE LIMITED, THE D.F.O., SOUTH KHERI AND OTHERS v. RAM SANEHI SINGH, M/S. DWARKADAS MARFATIA AND SONS v. BOARD OF TRUSTEES OF THE PORT OF BOMBAY , MAHABIR AUTO STORES AND OTHERS v. INDIAN OIL CORPORATION AND OTHERS, VERIGAMTO NAVEEN v. GOVERNMENT OF A.P. AND OTHERS a n d KUMARI SHRILEKHA VIDYARTHI v. STATE OF UTTAL PRADESH . The learned counsel for the petitioner placed strong reliance upon the following passages of Kumari Shrilekha Vidyarthi’s case cited (7) supra: “22. There is an obvious difference in the contracts between private parties and contracts to which the State is a party. Private parties are concerned only with their personal interest whereas the State while exercising its powers and discharging its functions, acts indubitably, as is expected of it, for public good and in public interest. The impact of every State action is also on public interest. This factor alone is sufficient to import at least the minimal requirements of public law obligations and impress with this character the contracts made by the