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Bombay High Court Dismisses Petition Directing Aggrieved Party To Approach IRDA; Observes Principles of Natural Justice Violated by Insurers

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A Writ Petition was filed seeking relief against an abrupt decision to cancel insurance policies by the Respondents. The Bombay HC redirected the Petitioners to the Insurance Regulatory Development Authority (IRDA) and disposed of the Petition.


The Petitioner is engaged in the business of providing consultancy holiday services to groups. As an add-on, the Petitioner decided to provide insurance policies to the group members. On 29th January 2019, the Petitioner approached Respondent No. 1 for medi-claim policies which were accepted vide email on 8th February 2019. Notwithstanding the acceptance by Respondent 1, the Regional Manager (Health Insurance) of Respondent 1 enquired about the relationship between the policyholders and the groups. After due verification and on being satisfied that the Petitioner’s application was as per the IRDA guidelines, Respondent 1 sent the final approval for the medi-claim policies on 28th February 2019.  

On 12th June 2020, the Petitioner received an email from the Sr. Divisional Manager of Respondent 1 stating the existing policies could not be renewed. Communication to the effect that the policies stood terminated forthwith and no claims would be processed from 12th June 2020 addressed to third-party administrators of the groups were sent by Respondent 1. Aggrieved by this abrupt decision to cancel the medi-claim policies without providing any notice, reason, or chance for hearing, the Petitioner approached the Bombay High Court by way of a Writ.

Respondent’s Submissions 

Respondents No. 1, 2, and 3 raised a preliminary objection against the maintainability of the Writ Petition. The Respondents contend that since the relationship between the Petitioner and the Respondents was based on a contract, it could not be enforced by way of a Writ. Also, since Respondent No. 4 – IRDA, was the supreme regulatory body for insurance matters, it was the competent authority to redress the grievance of the Petitioner. Since the Petitioner had an efficacious alternative remedy, it could not invoke the Writ Jurisdiction of the High Court. 

The Respondents contended that the members covered under the policy did not satisfy the definition of group as per IRDA guidelines. About the Petitioner, the members of the group were mainly senior citizens who would otherwise not get insurance cover as there was no legitimate commonality of purpose. The groups made by the Petitioner were for the sole purpose of availing insurance. Moreover, an examination of the policies revealed that while the office of the Petitioner was in Thane, the members of the policy were from other places in Maharashtra and Gujarat and the policy had been obtained from the Bangalore office.

The Respondents sought dismissal of the Writ Petition in light of the above-mentioned circumstances.

Petitioner’s Submissions

The Petitioner submitted that he was not seeking to enforce any contractual obligations but merely challenging the abrupt cancellation of the insurance policies without notice and an opportunity. The Petitioner clarified that he was in the business of providing holiday packages and wanted to facilitate medical insurance as an add-on benefit. These groups were already in existence as holiday package groups and therefore the allegation that the groups were only created for the insurance didn’t stand ground. The Petitioner also submitted that once the insurance policy has been issued, the Respondents were deemed to be satisfied with the eligibility conditions. Moreover, there was no rule that people from Maharashtra and Gujarat should only obtain policies from their respective States. 

The Petitioner submitted that the decision to cancel the policies without providing any reason or opportunity of hearing was a blatant violation of the principles of natural justice. The Petitioner merely sought an opportunity for clarification before adverse steps were taken.

Court’s Observations

The Court observed that the question of maintainability was raised on three grounds – that the matter was contractual, that the High Court could not deal with questions of fact in a Writ Petition, and that the Petitioner had not exhausted his alternative remedies. Firstly, the Court observed that if the State acts arbitrarily in a contractual matter, the aggrieved party can approach the Court by way of a Writ Petition. Secondly, regarding the issue related to the question of fact, the Court stated that there was no absolute rule barring the HCs from dealing with questions of fact in a Writ Petition as it is a matter of discretion of the Court. Lastly, on the question of alternative remedy, the Court held that jurisdiction under Article 226 cannot be restricted merely on account of the availability of alternative remedy especially in matters where the principles of natural justice had been violated.

The Court further observed that no notice or hearing was provided to the Petitioner before the cancellation of the policies. Further, no reasons were provided for the same. This was, therefore, a violation of the principles of natural justice and an arbitrary exercise of power that infringed Article 14 of the Constitution of India.

Court’s Decision

In light of the communication by the Respondents to the effect the impugned decision was taken only after considering the merits of the case, the Court decided that remanding the matter back to the Respondents would not subserve the cause of justice. Due to the prevailing circumstances, the Court was of the view that it would be more effective if the grievance was looked into by the IRDA. The Court thus directed the Petitioners to file a representation before the IRDA within 15 days from the date of the Order. IRDA would give a reasonable opportunity of hearing to both parties and then make a decision. The Court directed that the aforesaid exercise must be completed within six weeks from the date of receipt of representation by the Petitioner.

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