- 1 - IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO.1273 OF 1989 1-A. Sheriar Nariman Irani, ) ) 2-A. Jamshyd Naoroji Godrej, ) ) 3-A. Phiroze Dinshaw Lam, ) ) 4-A. Percy Eruch Fouzdar, ) ) 5-A. Anil Gyan Verma, ) 6. Kuamas Ardeshir Palia, ) all of Bombay Indian ) Inhabitant being Trustees ) of the Godrej & Boyce Mfg. ) Co.Ltd. Gratuity Trust Fund ) and having their office at ) Pirojshanagar, Vikhroli, ) Bombay - 400 079. ).. Petitioners. Versus Life Insurance Corporation of India) a Statutory Corporation, ) constituted under the provisions ) of the Life Insurance Corporation ) of India Act, 1956, having its ) office at Yogakshema, ) Jeevan Bima Marg, ) Bombay - 400 021. ).. Respondents. -- S/Shri D.J.Khambata with K.D.Mehta and A.J.Dhopaskar i/b M/s.Payne & Co. for the petitioners. Ms Snehal Paranjape with Mayura Maru i/b Little & Co. for the respondents. -- CORAM : R.M.S.KHANDEPARKAR & V.M.KANADE, JJ. DATED : 29TH AUGUST, 2005. - 2 - ORAL JUDGMENT : ( Per V.M.Kanade, J ) ORAL JUDGMENT : ( Per V.M.Kanade, J ) ORAL JUDGMENT : ( Per V.M.Kanade, J ) 1. By this petition, the petitioners are seeking a writ of certiorari or a writ in the nature of certiorari and a direction for quashing of communications dated 10th September, 1986, 27th September, 1986, and 10th October, 1987 sent by the respondent - Life Insurance Corporation of India whereby it communicated to the petitioners that the petitioners would be entitled to an amount at the rate of 92.5% only of the cash accumulation policy taken out by the petitioners. FACTS: FACTS: FACTS: 2. Facts of the present case in brief are as under:- . The petitioners are the trustees of the Godrej & Boyce Manufacturing Company Limited Employees’ Gratuity Trust Fund. The respondent is the Life Insurance Corporation of India constituted under the provisions of Life Insurance Corporation Act, 1956. Some-time in the year 1960, the petitioners effected the policy of the Life Insurance Corporation, - 3 - hereinafter referred to as the "LIC", which was in the nature of Pure Endowment Assurance by way of a Group Gratuity Policy for the benefit of the employees of the Godrej & Boyce Manufacturing Company Limited, hereinafter referred to as the "Godrej Company". The salient feature of the said policy was that the plan of assurance envisaged a Pure Endowment with return of premiums in the event of death of an employee. The amount which was summed and assured on the date on which the said amount was payable was also assured, and the surrender and paid-up value was fixed at 92.5% of the premiums paid, if the premiums for two years succeeding for payment under the agreement was not paid. Under a schedule, which was appended to the policy, it was expressly agreed that if the pure endowment assurance was discontinued, then in that event the assurance will automatically remain in force as paid-up assurance for a reduced sum assured payable under the same terms and conditions as the original sum assured. Further, in the event of discontinuance of the policy within three years from the effective date, it was agreed that the surrender value in that case would be reduced by 1% of the sum assured under the Assurance. 3. Sometime in the year 1980, according to the - 4 - petitioners, they intended to withdraw from the said Group Gratuity Scheme as they were not happy with the yield therefrom and considered that the same was inadequate. After the said fact was made known to the LIC, according to the petitioners, the LIC proposed that the insurance scheme would be converted to a new and more beneficial contribution scheme called as the "Cash Accumulation System." A representation was made that the transfer value which would be available to the employees after the conversion would be more than the surrender value under the Assurance. Further it was represented that the cash accumulation scheme was not an insurance scheme and the beneficiary was entitled to a return on the accumulated sum. This fact however has been denied by the LIC in its affidavit-in-reply. 4. In order to complete the modalities of conversion of the policy from pure endowment policy to a cash accumulation system, there was correspondence between the petitioners and the LIC. In this correspondence, certain clauses in the new scheme were deleted after the negotiations between the parties which are reflected from the correspondence annexed to the petition. Finally, it was agreed between the parties that the pure endowment scheme converted into - 5 - a cash accumulation scheme would be brought into effect from 1st December, 1981. It was further agreed that the petitioners would be entitled to continue the scheme for a period of five years and if the petitioners wished to discontinue the same after the said period, the full amount including interest minus actual disbursement against the claim standing to the credit of running account would be refunded. This also is seriously disputed by the LIC. 5. By letter dated 13th February, 1984, the petitioners intimated to the LIC the computation whereby a sum of Rs.481 lacs, as transfer value, would be credited to the running account of the petitioners under the cash accumulation scheme. This fact was confirmed by the LIC by its letter dated 14th March, 1984. From the correspondence and the averments in the petition under reply, it is revealed that there was no dispute regarding the actual amount which was standing to the credit of running account of the petitioners with the LIC. 6. On 29th August, 1986, the petitioners gave a notice to the LIC about their intention to discontinue the cash accumulation scheme as per clause (6) of Part II of the Schedule with effect from 1st December, 1986 - 6 - and the LIC was called upon to refund to the petitioners the full amount standing to the credit of a running account in the manner specified under the said clause since the scheme was being discontinued after a period of five years from 1st December, 1981, after its conversion from the pure endowment scheme to a cash accumulation scheme. 7. On 10th September, 1986, the LIC requested the petitioners to have discussion with it before the LIC took final decision in the matter. LIC by the said letter informed the petitioners that if the petitioners had finally decided to discontinue the scheme, then the surrender value would be calculated on the scale of surrender value applicable for cash accumulation plan. Thereafter, correspondence started between the parties. The petitioners objected to LIC’s letter in which it offered the refund of 92.5% which was contrary to the Endorsement dated 15th September, 1985. Since the LIC disagreed with the contention raised by the petitioners on 18th February, 1988, the petitioners sent a legal notice calling upon the LIC to pay the full amount, as reflected from the running account as on 1st December, 1986. On 12th April, 1988, LIC however alleged that the discontinuance of a scheme and surrender of a scheme - 7 - are the two distinct situations, and therefore, the petitioners would be entitled only to 92.5% of the amount. Thereafter, the present petition was filed and the Rule was granted on 21st July, 1989. By way of interim relief, the Court directed the LIC to refund to the petitioners 95% of the amount on production of the relevant documents within a period of four weeks from the date of the order i.e. 21st July, 1989, as there was no dispute regarding the refund of this particular amount. SUBMISSIONS: SUBMISSIONS: SUBMISSIONS: 8. Learned counsel appearing on behalf of the petitioners invited our attention to the correspondence between the parties and he submitted that there was no dispute regarding the amount which was credited to the account of an employee in the cash accumulation scheme and only the dispute was in respect of interpretation of the various clauses under the Pure Endowment Scheme which was subsequently converted to a Cash Accumulation Scheme. He submitted that, therefore, the writ petition was maintainable for the purpose of challenging the action of the LIC in not returning the entire amount which was due and payable. He submitted that ordinarily the obligations - 8 - which arise out of breach of contract are not amenable to the writ jurisdiction of this Court. He submitted that however the Supreme Court has time and again held that if the dispute raised is bonafide and on the basis of interpretation of the relevant clauses under the agreement, and it could be pointed out that the LIC had acted arbitrarily, then a claim under insurance policy could very well be enforced under Article 226 of the Constitution of India. He relied upon the judgment of the Supreme Court in the case of ABL International Ltd. & Anr. v. Export Credit ABL International Ltd. & Anr. v. Export Credit ABL International Ltd. & Anr. v. Export Credit Guarantee Corporation of India Ltd. & Ors., Guarantee Corporation of India Ltd. & Ors., Guarantee Corporation of India Ltd. & Ors., reported in (2004)3 SCC 553. He also relied upon the judgments of the Supreme Court in the cases of Jamshed Hormusji Jamshed Hormusji Jamshed Hormusji Wadia v. Board of Trustees, Port of Mumbai & Anr., Wadia v. Board of Trustees, Port of Mumbai & Anr., Wadia v. Board of Trustees, Port of Mumbai & Anr., reported in (2004)3 SCC 214, Life Insurance Life Insurance Life Insurance Corporation of India & Ors. v. Asha Goel (Smt) & Corporation of India & Ors. v. Asha Goel (Smt) & Corporation of India & Ors. v. Asha Goel (Smt) & Anr., Anr., Anr., reported in (2001)2 SCC 160, and of Life Life Life Insurance Corporation of India & Anr. v. Consumer Insurance Corporation of India & Anr. v. Consumer Insurance Corporation of India & Anr. v. Consumer Education and Research Centre & Ors., Education and Research Centre & Ors., Education and Research Centre & Ors., reported in AIR 1995 SC 1811. 9. He submitted that in view of the ratio laid down by the Supreme Court in the aforesaid judgments, the present writ petition for enforcement of an endowment policy was maintainable and accordingly - 9 - direction be given by this Court for quashing the impugned notifications issued by the respondent- LIC to the petitioners and for a further direction directing the LIC to act as per clause (6) of the Schedule of the said Scheme. Learned counsel invited our attention to the Endorsement issued by the respondent by virtue of which the earlier Pure Endowment Life Insurance Scheme had been converted to a cash accumulation scheme for the benefit of the employees of the Godrej Company. He submitted that by virtue of the said Endorsement, substantial amendments and modifications were made. Firstly, the Endorsement deleted the part II, III and IV from the Master Policy which contained detailed provisions of pure Endowment Scheme, and this was substituted by the new Cash Accumulation Scheme which was based on a running account balance. He further invited our attention to the definition of the term "sum assured" which was endorsed in the new scheme and pointed out that the term "sum assured" shall in relation to the accumulated part, be the principal amount assured if the policy is in respect of all members, which shall be equal to the premium paid at any point of time including interest on the said amount so accumulated. He pointed out that in the original endowment policy, however, the term "sum assured" was clearly defined as - 10 - a sum assured under the assurance on the entry date or the annual renewal date which would be an amount equal to two-third of a month’s salary of the employee, and it was accordingly interpreted for 20 and 25 years of service, respectively. He further pointed out that in the new Scheme, clauses 2, 3 and 4 of Part II were quite significant. The clause (2) thereof provided that the balance of the premium will be held by the Corporation in a running account for the credit of the Grantees. Clause (3) provided that at the end of each accumulation year, the Corporation shall issue a statement showing the sum assured and interest credited and debited to the running account. Clause (4) provided that in case of death of a member, LIC would be liable to pay from the running account necessary amount in respect of the member which would make up the gratuity payable amount to the nominee. Clause (5) also provided that LIC’s liability would be limited with the accumulated balance standing to the credit of the Grantees in the running account. 10. Learned counsel for the petitioners drew our attention to the clause (6) of Part II of the original Master Policy and pointed out that under the said policy, it was clearly laid down that in the event of surrender of the said scheme, the employee would be - 11 - entitled to get surrender and paid up value immediately on payment of premiums and the surrender value would be 92.5% of the premiums paid. He submitted that, however, the said clause was deleted from the new scheme and it was placed by clause (6) of Part III which specifically stipulated that if the policy is surrendered within a period of 5 years from the date of switch over to cash accumulation system, i.e. 1st December, 1981, the total amount remaining in the running account on the date of surrender shall be subject to deduction of an amount which shall not exceed 1% of the accumulation would become payable by the Corporation to the petitioners, and after a period of 5 years the amount would not be deducted. He submitted that since the petitioners had accepted to switch over the claim from the pure Endowment Scheme to Cash Accumulation Scheme along with the specific modifications and alterations which were made by consent of both the parties and which were specifically incorporated in the new deal, it was not open for the LIC to take a different stance and refuse to honour its commitment as per the agreement which was in force after switching over of the said scheme. 11. He submitted that the LIC was not entitled to rely on the various circulars and the contention - 12 - raised by the LIC in its affidavit-in-reply was contrary to the law. Learned counsel appearing on behalf of the petitioners also relied upon the leaflet issued by the LIC in respect of the Group Gratuity ( Cash Accumulation) Scheme. He submitted that the stand taken by the LIC and the reliance placed on Section 113 of the Insurance Act, 1938 are clearly unwarranted as the said Section was not applicable to the terms of the Master Policy and the Endorsement. He therefore submitted that necessary directions be issued by this Court for quashing the impugned communications and paying the entire amount due and payable after deducting administration expenses, if any. 12. Learned counsel appearing on behalf of the respondent- LIC has submitted her written arguments. She submitted that the present petition under Article 226 of the Constitution of India is not maintainable, as the same is based on the disputed questions of fact, and purported to enforce an implied term arising out of an Endorsement based upon a contract of insurance. She submitted that it was well settled that the writ jurisdiction of this Court may not be exercised in the matters arising out of contracts and that the petitioners have efficacious and alternative - 13 - remedy to file a suit under the civil law. Learned counsel further submitted that there was inordinate and unexplained delay in filing the petition and the petitioners were informed by the LIC way back in the year 1986 that the surrender value of the petitioners’ policy would be computed at the rate of 92.5% of the amount standing in the credit of the running account of the petitioners. The petitioners, however, had approached this court in the month of April, 1989, and therefore, the petition is liable to be dismissed on the ground of delay and laches. She further submitted that the petition is based on the several disputed questions of fact which could not be decided unless the evidence is led. She submitted that certain concessions and admissions were made by the Managing Director of the respondent-LIC who was no longer in the service of the respondent. 13. She submitted that the Endorsement issued to the petitioners in terms stated that the policy carried a surrender value of 92.5% of the premium, if two years period of amount is paid. She further submitted that in fact the LIC had given a fair offer of switch over to the petitioners and further a sum of Rs.16 lakhs was credited in the account of the petitioners on transfer by the petitioners to the cash - 14 - accumulation system and further switch over was permitted with retrospective effect from 1st December, 1981. She submitted that therefore the higher rate of interest was consequently extended with retrospective effect to the petitioners. She further submitted that the Endorsement clearly stipulated the surrender value being effected within a period of five years from 1st December, 1981 and therefore any surrender on completion of five years or thereafter was not a part of the Endorsement. She submitted that therefore a circular issued by the Corporation would be applicable in case of surrender of the Scheme after five years. She submitted that therefore under the Scheme and as per the provisions of Section 113 of the Insurance Act, the petitioners are not entitled to get the entire amount which is accumulated to the credit of the running account. She further submitted that the petitioners also in any case were not liable to get interest at the rate of 18% per annum or any other rate claimed by the petitioners. Learned counsel thereafter invited our attention to the compilation of documents which included a circular issued by the LIC to all its zonal offices in respect of Group Gratuity (Cash Accumulation) Scheme. The clause (2) of the said circular stated that all cases of surrender of policy should be referred to Central office for - 15 - ascertaining the amount of surrender value. She relied upon the circular issued by the LIC to all its zonal offices for determination of life cover and OYRTA premium under the Group Gratuity Scheme in the year 1986. She also invited our attention to the extract from the book on Elements of Actuarial Science recommended for reading as part of the departmental examination on the inquiries of LIC. She lastly relied upon the P & Gs Training Manual issued by the LIC and while inviting our attention to Section 113 of the Insurance Act, and strenuously urged that in all the cases of policy of pure endowment scheme or cash accumulation scheme, in the event of surrender of any such policy prematurely, the surrender value would be calculated as per the provisions of Section 113 and the various circulars which were issued from time to time, and in the present case, since the petitioners had surrendered the scheme within five years, the said provision of section 113 of the Insurance Act was applicable. FINDINGS AND CONCLUSION : FINDINGS AND CONCLUSION : FINDINGS AND CONCLUSION : 14. We have heard learned counsel for the petitioners and the respondents at length. We have given our anxious consideration to the submissions - 16 - made by learned counsel for both the parties in the present case. The petitioners have invoked writ jurisdiction of this Court under Articles 226 and 227 of the Constitution of India, for the purpose of quashing the impugned notifications issued by the LIC and for an appropriate direction directing them to abide by the terms and conditions of the Endorsement between the parties. 15. The first question which falls for our consideration is whether a writ petition is maintainable for the purpose of issuance of direction to the LIC in respect of a scheme and contract entered into between the parties. The Supreme Court in catena of judgments has held that such a petition would be maintainable and the LIC would be amenable to the writ jurisdiction of this Court. In the case of L.I.C. of L.I.C. of L.I.C. of India & Anr. v. Consumer Education and Research India & Anr. v. Consumer Education and Research India & Anr. v. Consumer Education and Research Centre & Ors.(Supra) Centre & Ors.(Supra) Centre & Ors.(Supra), the Supreme Court in paragraph 28 of the judgment, after referring to the various judgments of the Supreme Court, has observed as under:- "The arms of the High Court is not shackled with technical rules or of Procedure. The actions of the State, its instrumentality, any - 17 - public authority or person whose actions bear insignia of public law element or public character are amenable to judicial review and the validity of such an action would be tested on the anvil of Article 14. While exercising the power under Article 226 the Court would be circumspect to adjudicate the disputes arising out of the contract depending on the facts and circumstances in a given case. The distinction between the public law remedy and private law field cannot be demarcated with precision. Each case has to be examined on its own facts and circumstances to find out the nature of the activity or scope and nature of the controversy. The distinction between public law and private law remedy is now narrowed down. The actions of the appellants bear public character with an imprint of public interest element in their offers with terms and conditions mentioned in the appropriate table inviting the public to enter into contract of life insurance. It is not a pure and simple private law dispute without any insignia of public element. Therefore, we have no hesitation to hold that the writ petition is maintainable to test the validity - 18 - of the conditions laid in Table 58 term policy and the party need not be relegated to a civil action." 16. The Supreme Court in the case of ABL ABL ABL International Ltd.’s case (supra) International Ltd.’s case (supra) International Ltd.’s case (supra) held that in an appropriate case, the writ court has jurisdiction to entertain a writ petition involving disputed questions of fact and that there is no absolute bar for entertaining a writ petition even if the same arises out of contractual obligation and/or involves some disputed questions of fact. The Supreme Court in paragraph 19 of the said judgment has observed as under:- "Therefore, it is clear from the above enunciation of law that 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 the above case of Gunwant Kaur this Court even went to the extent of holding that in a writ petition, if the facts require, even oral evidence can be taken. This clearly shows that in an - 19 - 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." 17. Similarly, in the case of Life Insurance Life Insurance Life Insurance Corporation of India & Ors. v. Asha Goel (Smt) & Corporation of India & Ors. v. Asha Goel (Smt) & Corporation of India & Ors. v. Asha Goel (Smt) & Anr. (supra), Anr. (supra), Anr. (supra), while considering the question of maintainability of the writ petition