# • LIC OF INDIA AND ANR v. CONSUMER EDUCATION AND RESEARCH CENTRE AND ORS. ETC

- **Citation:** [1995] Supp. 1 S.C.R. 349
- **Court:** Supreme Court of India
- **Decided:** 1995-05-10
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/lic-of-india-and-anr-v-consumer-education-and-research-centre-and-ors-etc-13416
- **Pages:** 34

## Headnote

~.
·.
r
•
LIC OF INDIA AND ANR.
v.
CONSUMER EDUCATION AND RESEARCH
CENTRE AND ORS. ETC.
MAY 10, 1995
[K. RAMASWAMY AND N. VENKATACHALA, JJ.] ·
A
B
' Constitution of India Article 14-Clause in term insurance policy
restricting it to persons employed in govemmen4 semi-government and reputed
commercial fimis-Held, clause unconstitutional--/ndian Contract Act, 1872 · C
S.23.
Constitution of India Article 14-LIC floating term insurance policy
with low premia but restricting availability to select class of persons-Held,
unreasonable arbitrary and violative of Article 14.
Constitution of India Article ii-Life Insurance policy-Held, appropriate policy within the paying capadty of the insured is a social security
measure to make right to life meaningful; .Held further, while insurer free to
evolve policy based on brisiness principles, policy should be consistent with
constitutional animation.
Constitution on India Article 226-f'ublic law-Writ petition challenging clause in term insurance policy of LIC-Held, action of LIC bears public
character with an imprint of public interest element; writ maintainabl..-l'rac~
lice and procedure.
D
E
F
Life Insurance Corporation of India (LIC) introduced a term iusurance policy under Table 58 for terms of 5, 6 and 7 years, with substan-
\ tially low rates of premium intended to cater to a larger section of the
population in the urban and rural areas. At the end of the term, in the
event of survival the assured would not get anything. In the event of death, G
the nominee or the dependents would get the assured amount. However,
LIC restricted this term policy only to "persons in government or quasi· .· ·
government or in the service of reputed commercial firms". When LIC
turned down proposals for term insurance cover from the executive trustee
of the first respondent and certain others, they challenged, by way of writ
petitions in the Gujarat High Court the conditions imposed under Table H
349
'
/
350
SUPREME COURT REPORTS, (1995) SUPP.1 S.C.R ..
A 58 as being arbitrary discriminatory and violative of Articles 14, 19 (1) (g)
and 21 of the Constitution. While upholding the eligibility and other
criteria laid down under Table 58, the High Court declared unconstitution·
al and struck down that part of the conditions which restricted the term
policy to a select class of persons. LIC as well as the writ petitioners
B appealed to this Court.
·
LIC contended that its policies were framed on actuarial considera·
lions and that the High Court was not justified in interfering "ith matters
based ou economic criteria. The writ petitions seeking to enforce contrac·
tual obligations were not maintainable. The respondents contended that
C LIC had no power to impose any unconstitutional conditions in the con·
tract; no classification much less a valid classification could be made of
employees in government semi-government, organised sectors or reputed.
commercial organisations on the one hand and those self· ·employed or in
unorganised sectors on the other.
D
Dismissing the appeals, th~s Court
. HELD : 1: The offending clause extending the benefit only to the
salaried class in Government, semi-government and reputed firms is
unconstitutional. The declaration given, therefore, is perfectly valid. The ·
E offending part is severable from the rest of the conditions. The rest of the
conditions are valid and do not call interference. Subject to compliance
with other terms and conditions, the appellant is free to enforce Table 58
policy "ith all eligible lives. (382-C]
"
Gillespie Brother~ & Co. Ltd. v. Roy Bowles Transport Ltd., (1973]
F ·Q.B •. 4oo; Central Inland Water Transport Corporation Ltd. v. Brojo Nath
Ganguly, (1986] 2 SCR 278; D.T.C. v. D.T.C. Mazdoor Congress, (1990] 1
Supp. SCR 142; V. Raghunadha Rao v. State of A.P. and Others, (1988) 1
Andhra Law Times; National Textiles Workers' Union E.tc. v. P.R. Ramak·
rishnan, (1983] 1 SCR 922; Workmen of Meenakshi Mills Ltd. v. Meenakashi
Mills Ltd., (1992] 3 SCC 336;

## Text

_Characters 0–39,995 of 83,849. This is a partial read: ask again with offset=39995 for what follows._

~.
·.
r
•
LIC OF INDIA AND ANR.
v.
CONSUMER EDUCATION AND RESEARCH
CENTRE AND ORS. ETC.
MAY 10, 1995
[K. RAMASWAMY AND N. VENKATACHALA, JJ.] ·
A
B
' Constitution of India Article 14-Clause in term insurance policy
restricting it to persons employed in govemmen4 semi-government and reputed
commercial fimis-Held, clause unconstitutional--/ndian Contract Act, 1872 · C
S.23.
Constitution of India Article 14-LIC floating term insurance policy
with low premia but restricting availability to select class of persons-Held,
unreasonable arbitrary and violative of Article 14.
Constitution of India Article ii-Life Insurance policy-Held, appropriate policy within the paying capadty of the insured is a social security
measure to make right to life meaningful; .Held further, while insurer free to
evolve policy based on brisiness principles, policy should be consistent with
constitutional animation.
Constitution on India Article 226-f'ublic law-Writ petition challenging clause in term insurance policy of LIC-Held, action of LIC bears public
character with an imprint of public interest element; writ maintainabl..-l'rac~
lice and procedure.
D
E
F
Life Insurance Corporation of India (LIC) introduced a term iusurance policy under Table 58 for terms of 5, 6 and 7 years, with substan-
\ tially low rates of premium intended to cater to a larger section of the
population in the urban and rural areas. At the end of the term, in the
event of survival the assured would not get anything. In the event of death, G
the nominee or the dependents would get the assured amount. However,
LIC restricted this term policy only to "persons in government or quasi· .· ·
government or in the service of reputed commercial firms". When LIC
turned down proposals for term insurance cover from the executive trustee
of the first respondent and certain others, they challenged, by way of writ
petitions in the Gujarat High Court the conditions imposed under Table H
349
'
/
350
SUPREME COURT REPORTS, (1995) SUPP.1 S.C.R ..
A 58 as being arbitrary discriminatory and violative of Articles 14, 19 (1) (g)
and 21 of the Constitution. While upholding the eligibility and other
criteria laid down under Table 58, the High Court declared unconstitution·
al and struck down that part of the conditions which restricted the term
policy to a select class of persons. LIC as well as the writ petitioners
B appealed to this Court.
·
LIC contended that its policies were framed on actuarial considera·
lions and that the High Court was not justified in interfering "ith matters
based ou economic criteria. The writ petitions seeking to enforce contrac·
tual obligations were not maintainable. The respondents contended that
C LIC had no power to impose any unconstitutional conditions in the con·
tract; no classification much less a valid classification could be made of
employees in government semi-government, organised sectors or reputed.
commercial organisations on the one hand and those self· ·employed or in
unorganised sectors on the other.
D
Dismissing the appeals, th~s Court
. HELD : 1: The offending clause extending the benefit only to the
salaried class in Government, semi-government and reputed firms is
unconstitutional. The declaration given, therefore, is perfectly valid. The ·
E offending part is severable from the rest of the conditions. The rest of the
conditions are valid and do not call interference. Subject to compliance
with other terms and conditions, the appellant is free to enforce Table 58
policy "ith all eligible lives. (382-C]
"
Gillespie Brother~ & Co. Ltd. v. Roy Bowles Transport Ltd., (1973]
F ·Q.B •. 4oo; Central Inland Water Transport Corporation Ltd. v. Brojo Nath
Ganguly, (1986] 2 SCR 278; D.T.C. v. D.T.C. Mazdoor Congress, (1990] 1
Supp. SCR 142; V. Raghunadha Rao v. State of A.P. and Others, (1988) 1
Andhra Law Times; National Textiles Workers' Union E.tc. v. P.R. Ramak·
rishnan, (1983] 1 SCR 922; Workmen of Meenakshi Mills Ltd. v. Meenakashi
Mills Ltd., (1992] 3 SCC 336; Consumer Education & Research Centre v;
G Union of India, JT (1995); Dwarkanath v. Income Tax Officer, Kanpur,
[1965] 3 SCR 536; Andi Mukta Trust v. V.R. Rudani, (1989] 2 SCC 691;
Unni Krishnan v. State of A.P., (1993] 1 SCC 645; Hochitief Gammon v.
State of Orrissa, [1975] 2 SCC 649; MJ. Sivanf and Ors. v. State of Karnataka, SLP No. 11012/1991 etC. dated April 17, 199S; Pr~ga Tools Corpn.
H v. CA. !manual, [1969] 1 SCC 585 and Comptroller & Auditor General of
• j
•
Ll.C. v. CONSUMER EDN. AND RES. CENIRE
351
India v. K.S. Jagannathan, [1986] 2 SCR 17 at 36-40, referred to. ·
A
Chitti on Contract, 25th Edn., Vol. I; Anson's Law of Contract, P.6-7;
Todd D. Rakoff, 'Contracts of Adhesion' 1982-83, 95 Harvard Law Review
P.1174; M.A. Eisenberg, "The Bargain Principle and its Limits' (1982) 95
Har. L.R. page 441; Arthur leff, "Unconscionability of the Code" (1967) 115 ·
U. Pen. Law Review 485 at 494; M.P. Elinghaus, 'In defence of UnconB
scionability' (1968-69) 78 Yale Law Joumal Page 757 at 766, 767, referred
to.
2. Confining the policy under Table 58 to already covered salaried
sections would be unreasonable and arbitrary and would deprive large C
segme.nts in the rural areas or unorganised or self-employed and wo.uld be
unjust and irrational and unfair. (p.39) The classification based on
employment in. government, semi-goVernment and re:Puted commercial
· firms has the insidious and inevitable effect of excluding lives in vast.nrban ,
and rural sectors to have life insurance offending Article 14 of the Con-
.. stitotion and socio-economic ju~tice. [372-C, 371-D]
D
Maneka Gandhi v. Union of India, [1978] 2 SCR 621, followed..
3.1. While the insurer is free to evolve a policy based on business
principles and conditions before floating the policy to the general public,·
insurance· being a social security measure should be consistent with the . E .
constitutional animation and conscience of socio-economic Justice
adumbrated in the Constitution. [364-E]
3.2. The appropriate life insurance policy within the paying capacity
and means or the insured. to pay premia is one of the social security
measures envisaged under the Constitution to make right to life meaningF
fut, worth living and right to livelihood a means for sustenance. [363-E] ,
D.S. Nakara v. Union of India, [1983] 2 SCR 165; Olga Tellis v.
Bombay Municipal Coporation, [1985] . Supp. 2 SCR 51; CE.S.C Ltd. v •.
Subhash Chandra Bose, [1992] l SCC 441; Consumer Education & Research G :
Centre. v. Union of India, JT (1995) · 1 SC 637; Regi.onal Director, ES/
Coporation v. Francis De Costa, [1993] Supp; 4 SC 100 and Murlidhar .
1 Dayandeo Kesekar v. Vishwanath Pandu Brade, (C.A. No. 952{17) decide by
Snpreme Court on February 22, 1995, referred to.
4.1. LIC or any person or anthority in the field of insurance owe a H
'
352
.. SUPREMECOURTREPORTS [1995JSUPP.1S.C.R.
A public duty to evolve their policies subject to such reasonable, and fair
terms and conditions accessible to all the segments of th~ society for
insuring the lives of eligible persons. [382-D]
4.2 •. The actions of the appellants bears public character with an
imprint of public interest element in their regarding terms and conditions
B mentioned in the appropriate table inviting the public to enter into contract
of life insurance. It is not pure and simple private law dispute without any
insignia of public element. Therefore, the writ petition was maintainable to
test the validity of the conditions laid in Table S8 term policy. (370-E-F]
' C
M/s. Erusian Equipment & Chemicals Ltd. v. State of West Bengal,.
[197S] 1 SCC 70; Saghir Ahmad v. State of U.P., [199S] 1 SCR 707; A
Sanjeevi Naidu v. State of Madras, (1970] 3 SCR SOS; Ramana Dayaram .
Shetty v. International Airport Authority of India, [1979] 3 SCR 1014; Kasturi
· Lal Lakshmi Reddy v. State of l & K, (1980] 3 SCR 1338; M.C. Mehta v.
D Union of India, (1987] 1SCC395; UC v.Escort Ltd., [198SJ Supp. 3 SCR
909; Dwarkadas Marfatia & Sons ".·Board of Trustee of the Port of Bombay,
(1989] 2 SCR 7Sl; Mahabir Auto Stores v. India Oil Corporation, AIR .
(1990) SC 1031; Kumari Shrilekha Vidyarthi v. State of U.P., [1991] 1 SCC
212; Food ·corporation of India v. Mis Kaindhenu Cattle Feed Industries,
(1993] 1SCC71; Sterling Computers Ltd. v.M. & N Publications Ltd., (1993]
E 1SCC445 and Union of India v.M/s. Graphic Industries Co.,(1994] 5 SCC
398, referred to.
F
Genera/Assurance Society Ltd. v. Chandumall lain, (1966] 3 SCR SOO,
distinguished.
·
·
·
Benjamin Cardozo, 'Judicial Process'; Wade, Administrative Law, 5th ·
Ed. P. 513, referred to.
CIVIL APPELLATE JURISDICTION : Civil Appeal No. mt of.
G 1994 Etc.
From the Judgment and Order dated 31.1.94 of the Gujarat High
Court in S.CA. No. 2614 of 1980.
Harish Salve, Rajiv Mehia, Kailash Vasdev ·and-Ms. Meenakshi
H Grover for the Appellants.
LI.C.v.CONSUMEREDN.ANDRES.CENIRE[K.RAMASWAMY,J.)
353
'
Rajiv Dhawan, Arvind Kr. Sharma and P.H. Parekh for the ResponA
dents.
_The Judgment of the Court was delivered by
K.RAMASWAMY, J. Leave granted. Delay condoned.
B
The appeal and cross appeal arise from the Division Bench judgment
of Gujarat High Conrt dated January 31, 1994 in Sp!. Civil Application No.
2614 of 1980. On August 25, 1980 one Prof. Manubhai Shah Executive
Trustees of Respondent No. 1 and Mr. D.N. Dalal sought policies under
Table 58. Similarly in December, 1978 Respondent Nos~ 2 to 4 sought . C
similar policies for convertible terms insurance plans for different amounts.
In September, 1980 Respondent Nos. 6 and 7 agents of the app.ellants when
presented proposals to the LIC under Table 58 on behalf of individual
i respondents and promised to cover under Table 58 other 9 crores unin~ . •
i sured household, the LIC turned them down. Consequently, after issuance
! of a nitice through counsel on September 14, 1980, the respondents filed , D
! the above writ -petition. The conditions imposed and . denial to accept
·i. ·policies sought under Table 58 were assailed as arbitrary, discriminatory
i violating Articles 14, 19(1)(g) and right to life in Article 21 of the Constitution. The High Court while upholding that prescription conditions for Isl
/
· class lives as eligibility and other criteria laid down in the policy under
Table 58 are neither unjust nor arbitrary, declared a part of the conditions, < E
namely, 'Further, proposals for assurance under the piain will be entertained only from persons in Government or Quasi-Government organiSation or a reputed commercial fir;,{ which call furnish details of leave taken
during the preceding year under Table 58' as subversive of eqiiality and,
. therefore, constitutional invalid. Accordingly, . it was strllck . down. The ._
Corporation filed the appeal against the portion that was struck down and · · F
the respondentS filed the cro~s appeal against the findings that went against
them.
·
· ·
·
·
._
Sri Harish Salve, learned Senior counsel for LIC contended that the
acceptance of the proposals by the insurer in Life In5urance business, the -G
policy holders gets rights in the policy. As the proposals of respondents 2
to 5 were rejected as not being in conformity with the conditions prescribed
in Table 58, they cannot enforce any right flowing from Table 58 under
Article 226. They cannot use Judicial process to create rights in their favour
unless a binding contract emerged by acceptance of the proposal of insurance and acted upon. No rights would flow to any pa'rty to the 'proposal · H
354
SUPREME COURT REPORTS (1995] SUPP. 1 S.C.R.
A to challenge the policy, its terms and plain of insurance. The writ petition
under Article 226 of the Constitution is not maintainable to enforce constitutional obligations. It is next contended that Life Insurance policies are
framed on Actuarial considerations and worked out as per the needs of
the policy to suit the interests of all these interested in obtaining a parB
ticular policy and their viability. The High Court was not justified in
interfering with matters based on economic criteria and commercial contracts, in particular, after having recorded findings referred to hereinbefore
in favour of the Corporation, the High Court committed error of law in
declaring the offending portion of the policy as arbitrary and violative of
Articles 14, 19 and 21 of the Constitution.
c
The actuarial principles are the calculations made by actuaries taking
into consideration :
(a) present condition of health and physical build of the life to be
D insured;
(b) personal and family history, occupation, likelihood of any change
in the occupation etc. The premium to be charged in a particular policy is
calculated by actuarial method. These conditions have been imposed taking
. into consideration risk to be covered to see that the plan is successfully
E operated. The afore-stated conditions are necessary to forecast mortality
among insured lives within a relatively narrow margin of error, depending
upon general population statistics based on insured lives. The Tables were
framed to cover the risk of all classes of people to suit all the classes. There
are several policies like endowment policy, annuity policy and whole life
F policy. These are again sub-divided into various plans of insurance. All
policy holders under Table 58 have been treated as a class. Several conditions in the policy do disclose that they have been formulated to effectuate
the policy under Table 58. Taking into consideration the minimum and
maximum age enumerated therein, all the policy holders under Table 58
are treated as a class. Restrictions imposed or the terms and conditions
G contained therein are reasonable. There is no invidious discrimination
meted out to the respondents. It is open to the policy holders to have term
policy converted into endowment or whole life policy., The policy of
denying convertible risk, policy to female lives before the expiry of two
years of the term policy, all eligible persons are entitled to convert them
H into whole life policy or endowment policy before expiry of two years. The
/
L.l.C. v. CONSUMER EDN. AND RES. CENTRE [K. RAMASWAMY, J.)
355
premium payable on the term policy is very marginal to benefit such of A
those persons at the threshold of their career. In the event of the said
conversion, there is no need for fresh medical report. Since. the policy is
commercial contract, the High Court has no power or jurisdiction to
interfere with contractual relations declaring them as invalid and unconstitutional.
B
Shri Dhawan, learned Senior counsel for the respondents resisted
these contentions on the anvil of Article 25 of the Declaration of Human
Rights, Article 7 of the International Covenant on Economic and Social
Rights and, in particular, on the provisions of part Ill and the Directive
Principles of the Constitution which assure livelihood. This Court interC
preted the· word "life" under Article 21 broadly so as to render them
socio-economic justice. Policy under Table 58 is Cheaper. Having issued
the policy, the appellant has to formulate its scheme in such a way that it
is not inconsistent with the egalitarian social order which the Constitution
seeks to achieve and the court must be give effect to them. The interpreta- D
lion sought to put up by the LIC depletes practical content of human rights
in Part IV. Initially females were. excluded to have insurance policy. By
sustained public pressure, females were made eligible to have policy including term policy. Age was extended from 45 to 50 years. Similarly the
respondent, though is doing life insurance business, its policies must be in
confirmity with the rights in Parts III and IV of the Constitution. It has no E
power to impose any unconstitutional conditions in the contract, no classification much less valid classification has been made between salaried
employees in Government, Semi-government, organised sectors or reputed
commercial organisations, self- employed or unorganised sectors. The term
insurance policy being cheaper premium helps large segments of poor and F
lower middle class persons. Sezhivan Committee on improvement of Insurance, the LIC recommended popularisation in urban and rural areas
policies under Table 58. The whole life or endowment policies are not
easily accessible to the poorer segments of the society. Only term insurance
under Table 58 policy is more attractive and easily accessible to those
segments of the society. Imposition of conditions including the one struck G
down by the High Court are therefore, unconstitutional and impermissible.
We have given our anxious and careful consideration to the respective contentions, since our answers to the questions involved are bound to
have far reaching effect on the business of life insurance, we have minutely H
356
SUPREME COURT REPORTS (1995] SUPP. 1 S.C.R.
A
examined all the questions bearing in mind the larger public interest. Life
insurance policies based on actuarial Tables and the Policy Holders' needs
suited to their requirements. Jt appears that LIC has) in assessing the risk,
taken into consideration the factors: (a) present condition of health and
physical build of the person whose life has to be insured; (b) his/her
B personal history i.e., record of illness suffered in the past by the person
whose life has to be insured, risks to be covered and the person's habits in
general; (c) family history, i.e., record of health and longevity of members
of the family of the person to be insured; ( d) occupation and environment
of the person whose life has to be insured; and ( e) the likelihood of any
change in the occupation of the person whose life has to be insured,
C calculated to increase the risk of his/her life. Based thereon, the amount
of premium would be charged depending upon whether a particular policy
is a term insurance or an endowment or whole life policy etc. based on
actuarial method. The terms and conditions subject to which the risk is to
be covered , undoubtedly, would play a vital role in deciding the amount
D of premium payable and the conditions on which the policy is to be issued.
In that behalf, it would be necessary to foresee mortality among insured
lives within a relatively narrow margin of error. The insurer, therefore
would be entitled to devise its plans, relative terms and conditions, its
advantages and other relevant factors. Therefore, the insurer would be
E entitled to specify eligibility criteria in various plans of life insurance. Each
policy differ in its contents and conditions, the degree of risk, the amount
of premium payable in that behalf and also mortality rate.
Sezhivan Committee Report after its elaborate study of the working
of the LI C on insurance recommended in the year 1980 for improvement
F on several factors of the working system. It had recommended to make
available policies to wider sections of the people. It analysed diverse life
insurance policies in para 13.l(i) and concluded that the cost of providing
life Insurance through individual life insurance policies is high and beyond
the means of a large section of the population both in urban and rural
G areas; (ii) in pursuance of one of its basic objectives, namely, mobilisation
of savings through life insurance, the LIC has been concentrating its efforts
mainly on upper strata and employed sections of the population which has
a regular income and saving potential. The obligatory linking of life insurance to savings inherent in the conventional individual assurance plans
and the LIC's concentration on this type of business together, had the
H effect of denying life insurance cover to the vast section of the people who
L.I.C. v. CONSUMER EDN. AND RES. CENTRE [K. RAMASWAMY, J.]
357
'··
· do not have regular income and whose savings potential is low; (iii) as a A
result of the above, only about 10% of the insurable male lives in the
country have been provided cover against death. That too on the salary
earning classes and persons in the higher income groups who take out LI C
mainly because of the tax relief available. The coverage of persons in rural
areas and of those employed in the unorganised sector in the urban areas
in meagre; (vi) Life insurance in India can still be a viable savings medium,
B
as it is in U.K., provided the LIC is enabled to improvement substantially
the yield on its investment and to control effectively its expenses of management. In para 13.18, the report further states that "there is one other which
·the Committee feels the LIC ought to introduce and that is a level premium
term insurance plan. The Committee has noted that the Committee of C
Actuaries had recommended introduction of such a plan ..................... .
Therefore, the term insurance policy introduced, though based on calculations of actuarial consideration, was intended to cover not only the elite
and employed in government, semi-government and reputed commercial
establishments but also need to cover wider public, self employed or those
working in unorganised sectors. The term insurance policy under table 58 D
is beneficial to all sections and restricted to lives in specified area alone.·
The original clause in Table 58 reads thus :
"The rates of premium herein apply to male lives who, on the basis
of the medical examiner's report, personal and family history etc.
E
are considered by the Corporation as first class lives. Persons over
45 years nearer birthday at entry and those following hazardous
occupation including persons in the Armed Forces will not be
eligible for insurances under this plan,.' Proposals for policies
under this scheme will be entertained only from persons in Government or quasi-government or the service of reputed commercial
firms
F
The medical examination of the proposer will be arranged only
after the proposal is first submitted to the Divisional Office of the
Corporation and its approval to proceedings with medical ex- G
amination is obtained. The cost of the medical examination will
have to be borne by the proposer.
Minimuni sum assured
The minimum amount for which policy will be issued under this H
A
B
358
SUPREME COURT REPORTS [1995] SUPP. 1 S.C.R.
plan is Rs. 5,000.
Tenn of Assurance.
Policy under this plan will be issued for a term of 5, 6 and 7 year
only.11
During the course of the litigation, as stated earlier, by public pressure, (i)
the appellant amended the clause and deleted "female" from disabled
persons; (ii) increased the age from 4.'l year to 50 years; (iii) incorporated
the term of five years to proposal in the age group of 46 to 50 years; and
C (iv) to furnish details of leave taken during the preceding three years.
D
E
F
G
H
During the course of the arguments the appellants furnished the
comparative evolution of convertible term insurance, endowment with
profits and endowment without profits, while life policy from which the
followir.g picture would emerge :
"PREMIUM PER THOUSAND PER YEAR FOR PROPONENT
AGED 20 YEARS
TABLE
PREMIUM PAYING TERM PER 1000 YEAR
5 YEARS
6 YEARS
7 YEARS
58 (Convertible
Term AssuRs. 4.80
Rs. 4.70
Rs. 4.65
ranee)
14 (Endowment
Rs. 217.15
Rs. 179.40
Rs. 152.65
with profit)
11 (Endowment
Rs. 188.90
Rs. 152.00
Rs. 126.00
without profit)"
The premium payable to the term insurance at the age of 20, 25, 30,
35, 40, 45 year is as disclosed in the Table given by the appellants thus :
SPECIFIED TERMS
Age nearer
5 Years
6 years
7 years
Birthday
(In rupees and paise)
20
4.80
I
4.70
4.65
I
•.
L.I.C. v. CONSUMER EDN. AND RES. CENTRE [K RAMASWAMY, J.]
359
25
4.95
4.90
4.90
30
5.50
5.50
5.50
35
6.50
6.55
6.65
40
8.70
8.90
9.10
45
12.45
-
-
50
18.45
-
-
The term insurance policy under Table 58, therefore, appears to be
the cheapest and most accessible policy which a large number of people in
A
B
the country both in rural and in urban sectors can afford to take for the C
reason that the premium is low and within affordable limit. The policy is
for a short term of 5 to 7 years. There is no return for the insured at the
end of the policy. In the event of death of the insured, it purely provides
insurance cover to the family as social security to support the dependents.
Pursuant to the recommendation made by Sczhiyan Committee, the terms
insurance policy was brought into vogue. In fact, this policy appears to be D
very popular even in the United States of America as per the material
furnished before us which would indicate that during the year 1985 to 1989
among all the policies, the term insurance policy was the most popular one,
which covered large number of lives.
It is true that convertible whole life insurance was intended to meet E
the needs of a young person who is on the threshold of his career to provide
maximum insurance with a minimum cost and at the same time intended
to offer a flexible contract which can be altered into an endowment
insurance without any need to pay premia after the age of 70 and without
further medical examination. Convertible term insurance is designed to F
meet the needs of those who are initially unable to pay premium required
for whole life or endowment insurance policy and hope to be able to pay
for such a policy in the near future. Fixed term convertible is permissible
except in the last two years without any further medical examination. As
stated earlier at the end of the term, the assured will not get anything, if G
he survives. On his death, the nominee or the dependents will get the
assured amount but it cold be seen that the capacity to pay the premium
would also be a relevant factor.
The premium for Rs. 1000 under the policy as per the Table furnished would indicate as under :
H
360
A
Age
B
15
20
25
35
SUPREME COURT REPORTS [1995] SUPP. 1 S.C.R.
TABLE : SHOWING DIFFERENCES IN PREMIA
( Premia per 1000)
Convertible Whole Life
Term Policy
Life
5 Years
6 years
Rs. 10.80
10.75
-
-
Rs. 11.65
11.65
4.80
4.70
Rs. 13.05
12.95
4.95
4.90
Rs. 18.25
17.95
6.50
6.55
7 years
-
4.65
4.90
6.65
C
It will thus be that the difference in premia is quite considerable. It
should be noted that the rate is per Rs.1000. Thus, where the policy
is Rs. 50,000 the difference will be as shown below :
D
E
Age
35
The Premia for Rs. 50,000 is as under :
Policy
Convertible
Whole
Term Policy
Life
5 yrs.
6 yrs.
7 yrs.
Rs. 50,000
Rs. 912.50
897.50
325
327.50
332.5
It will, thus, be clear that the term Policy is a demonstrably cheap
and efficacious short term policy and held those badly in need of
it.
From this material matrix, the question emerges whether the appellant is justified in law in restricting the term policy to the specified class,
F namely, salaried persons in Government, quasi-Government or reputed
commercial firms. The Preamble, the arch of the Constitution, assures
socio-economic justice to all the Indian citizen in matters of equality of
status and of opportunity with assurance to dignity of the individual. Article
14 provides equality before law and its equal protection. Article 19 assures
freedoms with right to residence and settlement in any part of country and
G Article 21 by receiving expansive interpretation of right to life extends to
right to livelihood. Article 38 in the Chapter of Directive Principles enjoins
the State to promote the welfare of the people by securing and protecting
effective social order in which socio-economic justice shall inform all the
institutions of the national life. It enjoins to eliminate inequality in status,
H to provide facilities and opportunities among the individuals and groups of
--
L.l.C. v. CONSUMER EDN. AND RES. CENTRE [K RAMASWAMY, J.]
361
the people living in any part of the country and engaged in any avocation. A
Article 39 assures to secure and right to livelihood, health and strength of
workers, men and women and the children of tender age. The material
resources of the community are required to be so distributed as best to
subserve the common good. Social security has been assured under Article
41 and Article 47 imposes a positive duty on the State to raise the standard B
of living and to improve public health.
Article 25 of the Universal Declaration of Human Rights envisages
that everyone has the right to standard of living adequate for the health
and well-being of himself and of his family in duding food, clothing, housing
and medical care and necessary social services and the right to security in C
the event of unemployment sickness, disability, widowhood, old age or
other lack of livelihood in the circumstances beyond his control. Article 7
of the International Covenant on Economic and Social Rights equally
assures right to everyone to the enjoyment of just and favourable conditions
of work which ensures not only adequate remuneration and fair wages but D
also decent living to the workers for themselves and their families in
accordance with the provisions of the Covenant. Covenant on Right to
development enjoins the State to provide facilities and opportunities to
make rights a reality and truism, so as to make these rights meaningful.
A Constitution Bench of this Court in D.S. Nakara v. Union of India, E
[1983] 2 SCR 165 at p. 185, held that pension ensures freedom from
undeserved want. The basic framework of the Constitution is to provide a
decent standard of living to the working people and especially provides
security from cradle to grave. Every State action whenever taken must be
directed and be so interpreted as to take society one step towards the goal
F
of establishing a socialist welfare society. While examining the constitutional validity of legislative/administrative action, the touchstone of the Directive Principles of the State policy in the light of the Preamble provides
yardstick to hold one way or the other. In Olga Tellis v. Bombay Municipal
Corporation, [1985] Supp. 2 SCR 51, another Constitution Bench of this
Court held that the right to life includes right to livelihood because no G
person can live without the means of living i.e. means of livelihood. If the
right to livelihood is not treated as part of constitutional right to life, the
easiest way of depriving a person of his right to life would be to deprive
him of his means of livelihood to the point of abrogation. Such deprivatiqn
would not only denude the life of its effective content and meani'ngfulness H
362
SUPREME COURT REPORTS (1995J SUPP. l S.C.R.
A but it would make life impossible to live.
Interpreting Article 19(e) vis-a-vis Article 25(2) of the Universal
Declaration of the Human Right and Article 7 of the International
Covenant of Economic, Social and Cultural Rights, one of us (K. RamasB wamy, J.) in C.E.S.C. Ltd. v. Subhash Chandra Bose, [1992J 1 SCC 441 at
p. 462 in para 30, held that the right to social justice is a fundamental rigbt.
Rigbt to livelihood springs from the right to life guaranteed under Article
21. The health and strength of a worker is an integral facet of right to life.
Right to human dignity, development of personality, social protection, right
to rest and leisure are fundamental human rights to a common man. Right
C to life and dignity of person and status without means are cosmetic rights.
Socio-economic rights are, therefore, basic aspirations for meaningful right
to life. Right to social security and protection of the family are integral part
of the right to life. Right to social and econoinic justice is a fundamental
right". In paragraph 32, it was further held that the "right to medical care
D and health for protection against sickness are fundamental rights to the
workmen". On this aspect, there was no disagreement by the majority
members. In Consumer Education & Research Centre v. Union of India, JT
(1995) 1 SC 637, it was unanimously held by a bench of three Judges that
right to health to a worker is an integral facet of meaningful right to life
and have not only a meaningful existence but also robust health and vigour
E without which worker would lead life of misery. Lack of health denudes
his livelihood. Compelling economic necessity to work in an industry
exposed to health hazards due to indigence of bread winner to himself and
his dependents, should not be at the cost of the health and vigour of the
workman. Facilities and opportunities, as enjoined in Article 38, should be
F provided to protect the heath of the workman. Right to human dignity,
development of personality social protection are fundamental rights to the
workmen. Medical facilities to protect the health of the workers are
fundamental rights to workmen. It was, therefore, held that "the right to
health, medical aid and to protect the health and the vigour of a worker
while in service or post retirement is a fundamental right under Article 21
G read with Articles 39(e), 41, 43, 48-A of the Constitution of India and
fundamental human right to make the life of workmen meaningful and
purposeful with dignity of persons". In Regional Director, ES/ Corporation
v. Francis De Costa, [1993J Supp 4 SCC 100 at 105, the same view was
stated. Security against sickness and disablement is fundamental right
H under Article 25 of the Universal Declaration of Human Rights and Article
•
. '
,,
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L.l.C. v. CONSUMER EDN. AND RES. CENTRE [K. RAMASWAMY, J.]
363
7(b) of International Convention of Economic, Social and Cultural Rights A
and under Articles 39(e), 38 and 21 of the Constitution of India. Employees
State Insurance Act seeks to provide succour to maintain health of an
injured workman and the interpretation should be so given as to give effect
to right to medical benefit which is a fundamental right to the workman.
In Murlidhar Dayandeo Kesekar v. Vishwanath Pandu Barde, C.A. No. B
952177 on February 22, 1995, this Court held that right to economic
empowerment to the poor, disadvantaged tribes and depressed and oppressed Dalits, is a fundamental right to make their right to life and dignity
of person meaningful and worth living. It was also held that socio-economic
democracy is sine qua non to make political democracy, a truly participatory democracy and a truism for unity and integrity of Bharat.
c
It would thus be well settled law that the Preamble Chapter of
Fundamental Rights and Directive Principles accord right to livelihood as
a meaningful life, social security and disablement benefits are integral
schemes of socio-economic justice to the people in particular to the middle D
....
class and lower middle class and all affordable people. Life insurance
coverage is against disablement or in the event of death of the insured
economic support for the dependents, social security to livelihood to the
insured or the dependents. The appropriate life insurance policy within the
paying capacity and means of the insured to pay premia is one of the social
security measures envisaged under the Constitution to make right to life E
meaningful, worth living and right to livelihood a means for sustenance.
The question, therefore, is whether the appellant is free to incorporate as a part of its business principles, any term of it choice. It is true
that the appellant is entitled to accept insurance policy from a person F
possessed of health with first class life and before acceptance of the policy
·~
the insured is required to undergo medical examination as per policy at his
expense to satisfy his condition of health. The question is whether the term
policy needs to be restricted only to the employees of Govt., quasi-government or reputed commercial firms and whether such condition is just, fair G
..,.
and reasonable or based on reasonable classification consistent with Artides 14 and 21 of the Constitution. The contention of the appellants is that
life insurance policy being a contract of insurance becomes a binding
contract on appellants' acceptance. Until a contract is entered into, the
proposed insured does not acquire any right in insurance policy. The terms
of the contract under Table 58 cannot be declared ultra vires before a H
364
SUPREME COURT REPORTS [1995] SUPP.1 S.C.R.
A concluded contract emerged. Contract of insurance operates in the arena
of contractual relations. Refusal to enter into contract does not infringe
any fundamental right or a legal right nor the respondents are entitled to
compel the appellants to enter into favourable relations when they did not
fulfill lhe essential terms of the proposal. Therefore, writ petition is not
B maintainable lo enforce such rights in embryo nor they be entitled to
declaration in their favour.
It is true that life insurance business as defined under s.2(11) of the?
Insurance Act, 1938, is business of effecting contracts of insurance upon
human life, including any contract whereby the payment of money is
C assured on death (except death by accident only) or the happening of any
contingency dependent on human life, and any contract which subject to
payment of premiums for a term dependent on human life including those
enumerated in clauses (a) to ( c) thereof. Thereby, the contract of insurance
is hedged with bilateral agreement on human life upon payment of premia
D subject to the covenants contained thereunder. But as stated earlier, is the
insurer entitled to impose unconstitutional conditions including that which
denied the right of entering into the contract, limiting only to a class of
persons under a particular policy? We make it clear at this juncture that
the insurer is free to evolve a policy based on business principles and
conditions before floating the policy to the general public offering on
E insurance of the life of the insured but as seen earlier, the insurance being
a social security measure, it should be consistent with the constitutional
animation and conscience of socio-economic justice adumbrate in the
Constitution as elucidated hereinbefore.
p
In M/s. Erusian Equipment & Chemicals Ltd. v. State of West Bengal,
[1975] 1 SCC 70 at 75 in para 17, this Court held that neither the petitioner
nor the respondent has any right to enter into a contract but they are
entitled to equal treatment with others who offer tender or quotations for
the purchase of the goods services etc .. This privilege arises because it is
G the Government which trading with the public and the democratic form of
Government demands equality and absence of arbitrariness and discrimination in such transaction. Privilege is a form of liberty as opposed to
a duty. When public element is involved in the activities of the Government,
then there should be fairness and equality. If the State does enter into a
contract, it must do so fairly without discrimination and without unfair
H
procedure. Exclusion of a member of the public from dealing, prevents him
-
-
....
L.I.C. v. CONSUMER EDN. AND RES. CENTRE [K. RAMASWAMY, J.]
365
from entering into lawful contractual reliitions and discriminates him in A
favour of other people. Though the state is entitled to imposed reasonable
conditions but arbitrary conditions prevents entering into contractual relations with the State. The individual is entitled to fair and equal treatment
with others. A duty to act fairly can be interpreted as meaning a duty to
observed certain aspects of rules of natural justice. The legitimate expecB
talion cannot be denied without fair procedure. In that case black listing,
without an opportunity was held to be an unfair procedure offending
Article 14.
In Saghir Ahmad v. State of U.P., [1955] 1 SCR 707, the Constitution
Bench the earliest buried fathoms deep that the State is free to carry on C
trade or business in the same position as a private trader. In A. Sanjeevi
Naidu v. State of Madras, [1970] 3 SCR 505, another Constitution Bench
held that the acts of the authorised officers are the acts of the State itself
and not as the delegates of the Government. In Ramana Dayal'am Shetty
v. Intemational Airport Authority of India, [1979] 3 SCR 1014, another D
Constitution Bench held that in a welfare State in regulating and dispensing
special services contracts, the citizen derives rights or privileges by entering
into favourable relations with the Government. The Government, therefore, cannot anchor its role as a private person.