Case: Western Coalfields Limited &amp; Others Vs. New India Assurance Limited

3.The facts in brief giving rise to the filing of the present petition, are as under :The petitioner No.1 is the Government of India Undertaking wherein more than 61,000 workers and about 2,500 officers are employed. The petitioner Nos.2 to 7 are the various Unions of the workers and officers working with the Petitioner No.1. The respondent herein is a Government of India Undertaking and engaged in the business of general insurance.4.It is the case of the petitioners herein that one lady employee of the petitioner No.1 met with an accident in or about January, 1999. It is the submission of the petitioners that after the said accident, the representative of the respondent approached the petitioner No.1 and submitted a proposal for insuring the employees of the petitioner No.1 under Group Janata Personal Accident Insurance Policy (hereinafter referred to as the JPA Policy). It is further the contention of the petitioners that it was represented that the JPA Policy can cover the risk for the period ranging from 1 year to 15 years. It is further the case of the petitioners that after prolonged negotiations of the petitioners with the respondent and taking into consideration the social security measures and the interest of the employees, the petitioner No.1 agreed to insure initially 2,500 officers of the petitioner No.1. In the negotiations, it was agreed that the Policy would cover the risk for a period of 10 years. The petitioner No.1, accordingly, paid the premium to the respondent @ Rs.818/per executive onThe petitioner thereafter deducted the said amount of premium from the salaries of the said executives.5.It is the contention of the petitioners that the representatives of the respondent thereafter time and again met the officers of the petitioner No.1 so as to persuade them to coveremployees also under the JPA Policy. It is further the contention of the petitioners that for that purpose, the representatives of the respondent visited various Area Officers within the jurisdiction of the petitioner No.1 and also met the representatives of various Unions so as to persuade them to come under the purview of the said JPA Policy. It is further the contention of the petitioners that the respondent submitted a comparative statement to the petitioner No.1 pointing out therein that the proposal given by the respondent is comparatively much better than the proposal given by the other Insurance Companies.6.It is the case of the petitioners that after prolonged negotiations, it was agreed that the coverage of the said JPA Policy would also be extended to all the employees of the petitioner No.1. On 14th September, 1999, the terms and conditions agreed between the parties i.e. the petitioner Nos.1 to 6 and the respondent, were reduced into Memorandum of Understanding (hereinafter referred to as the MOU) which was signed by the petitioner Nos.1 to 6 and the respondent. It is the case of the petitioners that in the said MOU, it was specifically agreed that the coverage of the said JPA Policy will be for a period of ten years commencing fromand it was agreed that one time premium would be charged for the employees @ Rs.403/and for the spouse @ Rs.It was agreed in the said MOU that since the premium was fixed at Rs.403/and since initially, the premium recovered from the officer was @the balance of the premium received in excess was to be refunded to the said officers. Accordingly, onthe petitioner No.1 paid an amount of Rs.2,90,99,714/to the respondent towards the premium for 61,163employees of the petitioner No.1. It is, thus, the case of the petitioners that total amount of Rs.3,11,44,714/was paid to the respondent.7.The Branch Manager of the respondent sent communication dated 16th August, 2002 to the petitioner No.1, thereby proposing to cancel the said JPA Policy and to refund the premium of the amount subject to the condition as contained in the Policy. Vide communication dated 19th August, 2002, the petitioner No.1 pointed out to the respondent that the risk of the employees of the petitioner No.1 was covered as per the MOU datedIt was the contention of the petitioner No.1 that no Policy was issued by the respondent. It was, therefore, pointed out by the petitioner No.1, in the said communication, that since the coverage of the said JPA Policy was for a fixed period of 10 years, same could not be cancelled prior to expiry of the said period of 10 years. However, without taking into consideration the said communication, the respondent cancelled the JPA Policy with effect fromvide communication dated 29th August, 2002. Vide another communication dated 4th September, 2002, the respondent informed the petitioner No.1 that in terms of condition No.5 of the Terms and Conditions of the Policy, the respondent was entitled to cancel the JPA Policy and as such the said JPA Policy was rightly cancelled. Being aggrieved by the cancellation of the said policy vide communication dated 29th August, 2002, the petitioners have approached this Court by way of present petition.

Reasoning:
21.In the facts of the present case, as we have already observed hereinabove that the respondent is an instrumentality of the State, that there are no disputed questions of facts involved which require adducing of evidence, that petition pertains to the rights of more than 63,000 employees employed in the various areas of the petitioner No.1 and further that for the reasons to follow, we find that the action of the respondent is not reasonable and as such violative of mandate of Article 14 of the Constitution of India, we are not inclined to accept the preliminary objection raised by the learned counsel for the respondent regarding tenability of thethe aforesaid documents, it can clearly be seen that the respondent canvassed and persuaded the petitioner No.1 so also the representatives of the Unions of the workers working with the petitioner No.1 and the officers of the petitioner No.1, to accept the JPA Policy of the respondent. The representation was made by the respondent to the petitioner No.1 and its workers that the JPA Policy offered by the respondent is the best so as to protect the interest of the employees of the petitioner No.1 from the accident risk. It is pertinent to note that the respondent had initiated the proposal to cover the employees of the petitioner No.1 under the JPA Policy after one of the employees of the petitioner No.1 met with an accident. This is evident from the communication sent by the respondent dated 10th February, 1999. It is also clear from the communication addressed by the respondent to the petitioner No.1 that the JPA Policy was to be operative for a period of 10 years. Not only this, but the respondent has gone to the extent of making representation that the JPA Policy would be continued for the period of 10 years even after retirement of the employees. From the comparative chart given by the respondent, it is clear that at more than one place, they have made a representation that the JPA Policy would be operative for a period of 10 years with payment of premium at only one time. From the document singed by the Divisional Manager as well as the Branch Manager of the respondent, stating good reasons for taking their JPA Policy, it is clear that respondent company vigorously canvassed, toured the entire area and participated in the meetings so as to convince the officers and the employees of the petitioner No.1 to accept the said JPAis also clear from the said document that the General Manager, the Regional Manager of the respondent, so also the top executives of the G.I.C. had meetings with the Manager of the petitioner No.1 and Steering Committee members for giving correct picture of the JPA Policy. It is further clear that all the negotiations culminated in MOU. In the said MOU, it was clearly stated that the coverage of the JPA Policy would be for a period of 10 years form the date of commencement, irrespective of the fact whether the employees are on the roll, retired, dismissed, declared medically unfit or separated for any reason whatsoever. It is also clear from clause 13 of the MOU that though a periodical review of the Scheme was permissible, there was specific stipulation that there will be no change/review of the period and the amount assured. This MOU is duly signed by Regional Manager, Divisional Manager and the Branch Manager of the respondent and the Director (Personnel), General Manager (IR), General Manger (RR andand Finance Manager (Estb) of the petitioner No.1 and the representatives of the Unions. It is also clear that under the said MOU, it was also agreed that the employees of mines situated in district of Chandrapur and other employees who may be covered subsequently, would be covered under the Scheme from the date of payment received, but the termination of the Scheme would be onis, thus, clear that the respondents, representing the petitioners that the employees of the petitioner No.1 would be covered under the said JPA Policy upto 14th September, 2009, induced the petitioner No.1 and its employees to accept the JPA Policy of the respondent. It is further clear that the petitioner No.1, taking into consideration the requirements of protecting the interest of its employees and the requirement of social security measure, accepted the proposal of the respondent. So also the employees of the petitioner No.1, numbering more than 63,000, agreed to accept the JPA Policy issued by the respondent by paying premium. We, therefore, find that there was clear, unambiguous and unequivocal promise on behalf of the respondent that the said JPA policy would continue for a period of 10 years i.e. upto 14th September,is not in dispute that the JPA Policy was initially made applicable only to the executives of the petitioner No.1 on 14th March, 1999. Thereafter there was a series of communications addressed by the respondent. The respondent through its senior officers, held rounds of discussions with the officers of the petitioner No.1, representatives of the Unions of the employees working with the petitioner No.1 and thereafter, after prolonged negotiations, the terms and conditions were reduced into writing vide MOU dated 14th September, 1999. Not only this, but reference to the said MOU also find place in the endorsement to the Policy dated 14th September, 1999. We, therefore, find that the said Condition No.5, which gives unilateral power to the respondent to cancel the policy, stands modified by the promise given by the respondents to the petitioners subsequently and the terms and conditions reduced into writing vide said MOU dated 14th September, 1999 which MOU also finds place in the endorsement to the policy dated 14th September,is, thus, clear that mere change in the policy will not be sufficient to exonerate the Government from the liability. It is for the authority to show what precisely is the changed policy and the reason and justification for the same. It is also necessary that the authority claiming to resile from the promise must place proper and adequate material on record so as to show that the overriding public interest requires that the Government should not be held bound by the promise and should be free to act unfettered by it.40.However, in the facts of the present case, except merely saying that there is change in policy, the respondent has not placed anything on record to show as to what is the changed policy, as to what is the reason for change in the policy and as to what is the justification for change in the policy. The respondent has also not placed any material, leave aside proper and adequate material, for the perusal of this Court so as to consider as to whether the change in the policy was on reasonable ground and was justified and as to whether the overriding public interest requires that the respondent should not be held bound by the promise. We are, therefore, unable to accept the contention raised by the respondent in thisis, thus, clear that the contract of insurance differs from any ordinary contract, inasmuch as it requires that utmost good faith is to be observed on the part of both the Insured and Insurer. It is further clear that all the representations made by the parties during the negotiations leading up to the contract are to be honestly made. From the facts of the present case, it can be seen that the present respondent has throughout represented to the petitioners during the negotiations and up to the stage of MOU and subsequent endorsement on the JPA Policy, that the period of risk covered will be fixed for 10 years. From the documents on record which are subsequent to the JPA Policy dated 14th March, 1999, it is clear that the respondent had, time and again, represented that the period of contract will be for 10 years and in the MOU, a clear representation is given that the said period would not bethe facts of the present case also, we find that the respondent had induced the petitioner No.1 to act as a model employer and discharge its social obligationits employees. Not only that, it had induced by canvassing in various area offices of W.C.L. in Maharashtra and Madhya Pradesh and also represented the benefits of the Scheme to the representatives of the Union by making representation that the risk of accidental death/ disability of the employees of the petitioner No.1 would be covered for a period of 10 years.46.In the aforesaid case, though there was a default on the part of the employer in not paying the premium, still the Apex Court held that the Life Insurance Corporation, being State within the meaning of Article 12 of the Constitution of India, could not be discharged from its contractual obligation and was bound to honour the policy and to pay the assured amount.47.Insofar as the reliance placed by the learned counsel appearing on behalf of respondent on the provisions of section64VB(3) of the said Act,is concerned, we do not find that there is much merit in the contention in this regard. No doubt that it is a settled law that rule of promissory estoppel would not apply against a statute and that no promise would be enforced which is contrary to the statutory provisions. However, from the perusal of section64VB(3) of the said Act,it is clear that it only provides for a manner in which the premium is to be refunded on abasis for the remainder of the term, after cancellation of the policy. However, the learned counsel for the respondent has not been in a position to point out to us any provision in the statute which permits the respondent to unilaterally cancel the said JPA Policy without assigning any reason. In that view of the matter, the contention in this regard will have to be rejected.48.Insofar as the contention of the learned counsel for the respondent regarding the conduct of the petitioners in getting the benefits to its employees under the terms and conditions of the said Policy and not raising the issue regarding the applicability of the terms and conditions of the MOU, is concerned, the same is also without substance. It is contended by the learned counsel for the respondent that the employees of the petitioner No.1 have taken the benefits under the JPA Policy at earlier point of time and at that point of time, did not raise the issue regarding applicability of said MOU.49.It can be seen from the perusal of the MOU that though most of the terms and conditions regarding risk coverage were as per the terms and conditions of the JPA Policy, only certain conditions were modified by the said MOU. The most important condition was that the term of the JPA Policy and the amount of premium shall not be varied in any eventuality. We, therefore, find that only when the respondent made an attempt to unilaterally cancel the JPA Policy much prior to the expiry of ten years period, there was a cause for the petitioners to raise an issue regarding the applicability of the MOU. At earlier point of time, there was no occasion to raise the said issue and as such the contention in this respect is totally without substance.50.In the conclusion, therefore, we find that the respondent being an instrumentality of the State and as such "State" within the meaning of Article 12 of the Constitution of India, is bound to act reasonably and fairly even in contractual matters. We find that the respondent had given an unequivocal, unambiguous and clear representation to the petitioner that the said JPA Policy would be for a period of 10 years and that the said period of 10 years shall, in no case, be varied and that in any event the JPA Policy would continue to cover risk till 14th September, 2009. The reliance placed on Condition No.5 of the Terms and Conditions, in our view, is not of much assistance to the case of the respondent. The respondent, subsequent to the issuance of the said JPA Policy dated 14th March, 1999, had held detailed negotiations with the petitioners, had vigorously canvassed in the various areas of the W.C.L. in Maharashtra and Madhya Pradesh thereby representing that the risk of death/disability on account of accident of the employees of the petitioner No.1, would be covered for a period of 10 years on payment of one time premium and have thereby induced the petitioner No.1 and its employees to accept the JPA Policy by paying one time premium. Not only this, but the respondent has entered into a tripartite MOU i.e. between firstly the petitioner No.1, secondly the petitioner Nos.2 to 6 and thirdly the respondent, therein specifically mentioning that the period of JPA Policy would be for 10 years and though the other terms and conditions were subject to review, the period of JPA Policy was not subject to review and have also stated in the endorsement on the JPA Policy that the said obligation under the said JPA Policy was extended to the employees as per the MOU. We, therefore, find that there is an unequivocal representation made by the respondent that the period of JPA policy would not be changed prior to 14th September, 2009. We, therefore, find that the respondent was bound to honour the representation made to theonly ground on which the respondent is claiming to resile from the said promise is the change of policy. However, except mere whisper that there has been change in the policy, no material, leave aside proper or adequate material, has been placed for consideration before this Court so as to test the reasonableness and justification in the so called change in the policy. It is also not the case of the respondent that the overriding public interest demands that the respondent should not be held to be bound by the promise made by them. Even accepting the case of the respondent for a moment that the rights and obligations purely arise out of contractual matters, even in that eventuality, as held by the Apex Court in various pronouncements, since the respondent is a State within the meaning of Article 12 of the Constitution of India, even in contractual matters, it is expected to act reasonably and fairly. As held by the Apex Court in the case of Hanil Era Textiles Ltd. (cited supra), in a contract of Insurance utmost good faith has to be observed. The representations made by the parties during the negotiations leading up to the contract are required to be honestly made. In the present case, on more than one occasions, a representation has been made that the contract will be for a period of 10 years and in no case, it will come to an end prior to 14th September, 2009. From the facts, it is also clear that the respondent had induced the petitioner No.1 and its employees to accept the JPA Policy as a social security measure in the interest of welfare of the employees of the petitioner No.1, by representing that on payment of one time premium, the risk of death/disability on account of accident would be covered for a period up totherefore, find that even if the contention of the respondent is accepted for a moment that the rights and obligations of the parties arises out of contractual obligation, even in that eventuality, as held by the Apex Court in the case of Chairman, Life Insurance Corporation (cited supra) and Biman Krishna Bose (cited supra), the respondent being an instrumentality of the State, is required to act fairly and reasonably and not arbitrarily even in contractual matters. The said scheme being social security measure, the respondent cannot be permitted to terminate the contract at its whims and fancy without assigning any cogent and relevant reason for the same. In any case, we have held that the petitioners have made out a case of promissory estoppel. The respondent has made an unequivocal, unambiguous and clear representation to the petitioner that the said JPA Policy will be in operation for a period up to 14th September, 2009. Acting on the said promise, the petitioner No.1 and its employees had subscribed to the said JPA Policy by paying one time premium. We find that if the respondent is permitted to cancel the JPA Policy abruptly, it will cause injustice to more than 63,000 employees of the petitioner No.1 who were allured to accept the said JPA Policy by the respondent. We have already held that the respondent has not made out any case by placing any material on record, so as to point out its policy decision and as to how the said change in policy is reasonable or justifiable.