The Madras High Court in case of Jasmine Ebenezer Arthur v. HDFC ERGO General Insurance Company Limited and Others (decided on June 6, 2019) held that a writ petition is maintainable against a private body, if it has a public duty imposed on it. Consequently, an insurance company is amenable to the writ jurisdiction of a court, as it performs public functions and have a public duty imposed on it.

FACTS
Jasmine Ebenezer Arthur (“Petitioner”) and her husband had availed a home loan from HDFC Bank Ltd. (“HDFC”) for a property located in Chennai, for an amount of INR 35,00,000, to be repaid in 120 equal monthly installments. A home loan agreement was also executed between the parties. The Petitioner’s husband also availed an insurance coverage along with the home loan, via a policy called Home Suraksha Plus (“Policy”) by paying a premium of INR 1,45,812, which covered ‘Critical Illness Diagnosis’. Section 3(c) of the Policy specifically provided coverage for “Myocardial Infarction”.

The Petitioner’s husband suffered massive cardiac arrest while driving to his office in Abu Dhabi, and was admitted to a hospital where it was diagnosed that he suffered from cardiac arrest and ventricular fibrillation. He died in Abu Dhabi, and no post mortem could be conducted. The Petitioner filed the claim with the HDFC ERGO General Insurance Company Limited (“Insurance Company”), but no action was taken to process the claim. Due to this inaction, the Petitioner was constrained to lodge a complaint with the grievance cell. Upon request of the Insurance Company, the required document with respect to the “cause of Ventricular Fibrillation and Cardiac Arrest” from the treating doctor was submitted by the Petitioner. As per the report, the cause of the death of her husband was “acute coronary artery syndrome”. The claim of the Petitioner was repudiated on the ground that the cause of her husband’s death was not covered under “Major Medical Illness”. The aggrieved Petitioner filed a complaint with the grievance cell which did not yield any positive response.

Thereafter, the Petitioner filed a complaint with the Insurance Ombudsman, Chennai and the same was dismissed. Aggrieved by the order of the Insurance Ombudsman, the Petitioner instituted a writ petition under Article 226 of the Constitution of India (“Constitution”) before the Madras High Court, praying for a writ of mandamus directing the Insurance Company to honor the claim made by the Petitioner in respect of insurance policy availed by Petitioner’s husband without insisting for any further documentations or particulars.

ISSUES
1. Whether the petition to enforce a contractual relationship is maintainable under Article 226 of the Constitution before the Madras High Court?
2. Whether the private bodies performing public duties can be brought within the purview of judicial review?

ARGUMENTS
The Insurance Company questioned the appropriateness of the forum approached, as there exists only a contractual relationship between the Insurance Company and the Petitioner. The Insurance Company also contends that the cardiac arrest suffered by the Petitioner’s husband is not “Myocardial Infarction” and thus, not covered under the Policy. HDFC filed a counter affidavit for dismissal of the writ petition on same grounds, and contended that they being the secured creditor, must be entitled to take recourse to legal remedies for recovery of dues with respect to the home loan. In light of the second issue raised, the Insurance Company argued that they are not performing any statutory function or obligations. The Insurance Company argued that it is not “State” under Article 12 of the Constitution, and hence the petition is not maintainable.

The Petitioner contended that the Insurance Company is a registered insurance entity with Insurance Regulatory and Development Authority of India (which is a regulatory authority) and hence, the writ petition is maintainable in law. The Petitioner cited the judgment of the Hon’ble Supreme Court in case of Life Insurance Corporation of India and Others v. Asha Goel and Another [(2001) 2 SCC 160], to support its argument that a writ petition to enforce a contractual right is maintainable.

OBSERVATIONS OF THE MADRAS HIGH COURT

Issue 1:
The basic object of the Insurance Act, 1938 is to prevent the abuse of power concentrated in the hands of insurance companies. The Madras High Court observed that since certain public functions such as insurance are allowed to be performed by private bodies, it has to extend its powers under the writ jurisdiction, to keep in check the public functions performed by such private bodies. The Madras High Court further perused Article 226 of the Constitution and held that a writ can be directed towards any person, not only for infringement of fundamental rights, but also for any other purpose.

Issue 2:
The Madras High Court observed that when the public monopoly power is replaced by private monopoly power, it becomes imperative that the private bodies should be made accountable to the judiciary within its scope of judicial review. If any private body has a public duty imposed on it, the court has jurisdiction to entertain the writ petition. Madras High Court also referred to the case of LIC v. Escorts Ltd. [AIR 1986 SC 1370], where it was held that the court will examine actions of the State, if they pertain to the public law domain, and refrain from examining them, if they pertain to the private law field.

It was also observed by the Madras High Court that there is no equality between the parties in an insurance agreement, as the insurer is a rich corporation and the insured is usually an ordinary individual. In most of the cases, the individual has no legal knowledge about the ambiguous language used in the insurer’s policy. The need to have more transparent, accurate and unambiguous facts and provisions in an insurance policy was noted. With reference to the merits of the case, the Madras High Court observed that from the reports of the expert cardiologist, it was further observed that as per Section 3 of the Policy, the medical event of “Myocardial Infarction” was covered under the Policy, which was denied by the Respondents. It was established that the cause of death of the insured was well within the defined medical events prescribed in the Policy.

DECISION OF THE MADRAS HIGH COURT
The Madras High Court held that the petition is maintainable against the Insurance Company, and the Insurance Company was directed to honor the claim made by the Petitioner, without seeking any further documents or particulars, within a period of 8 weeks from the receipt of the order.

Vaish Associates Advocates View
The evolving jurisprudence of a company, corporation, trust or society being amenable to the writ jurisdiction comes from a catena of judgments over the years. The Supreme Court and various High Courts normally evaluate the extent of the public function being performed by the company, and balance it against the possible harm that can be caused if the writ jurisdiction is not exercised. Initially, the factors for testing the applicability of the writ jurisdiction rested on a few key factors such as incorporation via a statute, financial assistance, controlling authorities, composition of the board and shareholding, deep and pervasive control of the State, and functions holding importance for the public. Essentially, the test involved financial, administrative and functional control over the company.

Over a period of time, the courts have increased the ambit of applicability of writ jurisdictions from educational institutions, government corporations, airport authorities, to private entities like the Board of Control for Cricket in India. The fulcrum of the court’s rationale for extending this jurisdiction hinges mostly upon the nature of the function performed by the entity, and whether the function spills into the public function sphere, affecting masses at large, in a domain where arbitrariness would create an absolutely unfair result. Courts have often curbed misuse of power by intelligent interpretation, of not including the entity under “State” under Article 12 of the Constitution, but nonetheless holding them amenable to the writ jurisdiction only by virtue of the nature of powers it exercises. This liberal approach in extending the writ jurisdiction and binding private entities to constitutional standards has mostly had a positive impact, until the judgment in question.

In the present judgment, the Madras High Court has tried to do the morally correct thing, but has overstepped in its interpretation of public functions/duties, which may lead to the opening of floodgates, and burdening the court with vexatious writ petitions. The Madras High Court’s justification for extending the writ jurisdiction to private companies is threefold: first, writ jurisdiction can be extended to persons for “any other purpose”; second, insurance companies have a public duty imposed on it; and third, it is a rampant practice nowadays that insurance companies enter into agreements with laymen who are incapable of understanding the nitty-gritties of the agreement, and often end up being cheated.

In response to the first justification, the Madras High Court has erred in considering the Hon’ble Supreme Court’s judgment in G. Bassi Reddy v. International Crops Research Institute and Another [(2003) 4 SCC 225], wherein the Supreme Court while considering the ambit of the writ jurisdiction and its extension to “a person” and for “any other purpose” has circumscribed the powers and held that “It is true that a writ under Article 226 also lies against a “person” for “any other purpose”. The power of the High Court to issue such a writ to “any person” can only mean the power to issue such a writ to any person to whom, according to the well-established principles, a writ lay. That a writ may issue to an appropriate person for the enforcement of any of the rights conferred by Part III is clear enough from the language used. But the words “and for any other purpose” must mean “for any other purpose for which any of the writs mentioned would, according to well-established principles issue”.

Therefore, the Madras High Court failed to consider the well settled principles of functional, administrative and financial control enunciated in a number of landmark judgments, and has relied solely on the letter of the law to extend its writ jurisdiction.

With respect to the second justification, the background and history of insurance as a concept and its advent in India makes it abundantly clear that it is a purely commercial transaction, with no public duty imposed on the same, and the only form of regulation that can be put in place is legislative in nature. This legislative control is already in place by virtue of the Insurance Act, 1938 and Insurance Regulatory and Development Authority, with the Insurance Ombudsman available as a forum for resolving disputes. It is true that over a period of time insurance has become an essential part of a person’s life, and a majority of citizens purchase insurance in some form or the other, but this is only a commercial product gaining significant momentum and market cap, and does not tantamount to any form of public duty being imposed on the insurance companies.

With respect to the third justification, the incapacity of the Insurance Ombudsman, along with the fact that insurance contracts are worded in such a manner as to confuse the layman, are policy and enforcement issues which cannot be overcome by extending jurisdictions way beyond the prescribed domain.

In conclusion, although the Madras High Court had a bonafide intention of helping a litigant who was facing immense trouble due to the arbitrariness of the insurance company, the means of achieving the remedy comes at a much higher cost of altering well settled principles of law, and tweaking the jurisprudence of writs and State under the Constitution.

For more information please write to Mr. Bomi Daruwala at [email protected]

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