1. This is a petition filed by the petitioner in public interest. He claimed in the writ petition that he is an agent of the Life Insurance Corporation of India. However, it was pointed out by the learned Counsel for the respondent that the copy of the affidavit served on him shows that the petitioner has claimed to be a Policy holder of Life Insurance Corporation of India.
2. The main contention of the writ petitioner is that the Life Insurance Corporation has been established not only to secure the Life Insurance business but to secure it to the best advantage of the community. It is stated that the respondent Corporation is bound to secure for insured persons the rights guaranteed under the Constitution of India and the privileges promised under the Directive Principles. It is further stated that the Corporation is conducting the Life Insurance business with a view to secure maximum benefits for the Corporation and it is blind to the interest of the Policy holders. He submits that, at present if the insured commits default within the first three years in paying the premium the policy is liable to be forfeited and money deposited by way of premium is forfeited in favour of the Corporation. He further submits that by another clause in all the policies, whether Endowment or Life, the forfeiture is waived of by the Corporation and instead a paid up value representing the proportionate amount payable to the insured is paid at the end of the entire term without any bonus provided the default has not occurred within five years from the date when the policy was taken. He submits that a concept of surrender value has been incorporated by the Corporation by virtue of certain administrative orders which is not even equivalent to premium paid plus bonus. He submits that the position is worse if the default occurs between three years and five years of taking up a policy. However, if there is default after five years, a different procedure is followed depending upon the year in which the default occurred. Paid up value is reduced by a mechanism adopted by the Corporation. Even this amount is not being paid to the Policy holder when the policy gets forfeited, but is being paid at the time when the policy would have in ordinary circumstances matured. It lias further been stated that the Supreme Court observed in Reserve Bank of India- v. Peerless Company, : [1987]2SCR1 that policies which lapse or are forfeited bear roughly a proportion of 1/3rd of the number of new policies.
3. The petitioner is particularly aggrieved of the loan policy of the Corporation, the loans which are advanced against the premium paid by the policy holders. The petitioner submits that before 30-6-1988 the policy regarding fixation of surrender value was better but it was changed after 1-7-1988. Surrender value factor has been reduced by the new policy to a far lower proportion and it has been stipulated that 90% of the surrender value can only be given by way of loan. The petitioner states by way of an example that in an endowment policy of 20 years on which premia had been paid for 10 years and the policy holder wants a loan mid way through, the surrender value factor is 46.94 which is the percentage of the paid up value which will form the basis for grant of loan. However only 90% of such surrender value- shall in effect be given as loan and as a matter of fact it only comes to about 42% net of the premia paid. In other words the petitioner submits that the provisions of the new policy arc harsh and that if a policy holder wants loan against his policy, at best he wilt get 42% as loan of the premia paid. Therefore, he wants this Court to strike down the policy enunciated from 1-7-1988.
4. The respondents have filed their counter and the petition is being resisted mainly on the following grounds :
(1) That, the petitioner has no locus standi
(2) That the issues involved relate, to policy of the Government of India and the Corporation and it involves fiscal matters, therefore it may not be appropriate for this Court to venture into the exercise as to whether the policy adopted by the respondent Corporation in advancing loans was fair or not.
(3) That, in terms of Insurance Act and the Life Insurance Corporation Act the powers of making policy are essentially with the Government of India and Union of India is not a party to this writ petition therefore no directions can be given by this Court to the Corporation.
(4) That, what ever is being done by the Corporation it is under the parliamentary supervision and reports arc placed before Parliament and lastly it has been urged that, even on merits, if it is examined it will be clear that being a commercial Corporation the respondent Corporation has to see to the interest of its policy holders vis-a-vis the viability of the Corporation. The financial health of the Corporation should not deteriorate to the extent that it cannot fulfil its commitments.
5. I have heard the learned Counsel for the parties in detail. My attention has been drawn by the learned Counsel for the petitioner to 'Programmed Manual for Calculating Surrender and Loan Values' which has been issued by the Life Insurance Corporation of India in 1987. To understand the arguments of the learned Counsel for the parties some extracts from this manual need be reproduced.
6. In the column of 'Introduction' in para-III paid-up value has been defined as :-
'III. What is paid-up value ?
Paid-up value is that part of the insured amount which is due to the policy holder by virtue of the premiums already paid, In other words, paid-up value is granted free of any obligations to pay future premiums. In most cases (including Endowment Assurances) the Paid up value can be determined by the simple proportionate rule. That is, paid-up value is the amount which bears the same proportion to the sum assured as the number of premiums actually paid bears to the number of premiums stipulated for in the policy.''
In para-IV of the some chapter 'Surrender, Value' has been defined as :
'IV. What is Surrender Valuel
The Surrender value is the Cash Value of the policy which is payable to the policy holder if he decides to terminate the contract. This surrender value is usually obtained from the paid up value by applying a percentage factor. This percentage factor (which will give the surrender value per Rs.100 of the Paid-up value) will vary according to the plan of Assurance, the original term of the policy and the duration elapsed since the commencement of the policy.'
In para-VI it has been stated that a policy acquires Surrender value after two full years premium had been paid if the term of the policy is 20 years or more. It further lays down that, where the term is 11 to 19 years, 1/10th of the total premiums should have been paid before the policy acquires surrender value. In case of a term of 5 to 10 years, the Surrender value is acquired after more than one year's premium is paid. It further states that for policies completed on or after 1st April, 1973 the policy acquire the surrender value after payment of three full years' premiums.
7. In para-X of the Manual the method of calculation of Surrender value is given. Under para-XI the method for calculating Loan value has been given. Certain examples have also been given in the Manual. Some of the examples need be reproduced.
8. For instance, if the sum assured was Rs.2,000/- and the policy was for a term of 14-20 years and mode of payment was half-yearly and the policy had commenced on 10th August, 1962 and if the paid-up value and surrender value is calculated on 10th August, 1970 the following would be the position:
If the total number of years premiums paid is 81/2 years, paid up value would be: Number of years premiums paid-------------------------------- X sum assuredNumber of years premiums payable
That would amount to:
17x1----- x 2000 = Rs.850/-2x20 So, paid up value would be Rs.850/-.
Bonus according to the rates prevalent would beRs.113.20.
The vested Bonus would be calculated by the following formula:
Multiply the bonus by actual sum assured and divide by 1,000; that would be :
113.20x2,000------------- =Rs. 226.401,000 Rs.226.40 would be vested bonus.
Rs.850.00 would be paid-up value.
Thus, the total paid-up value would be Rs.850.00 + Rs.226.40 = Rs. 1076.40.
After calculating the paid-up value the surrender value would be calculated by the following formula:
Surrender value =Paid up value x surrendervalue factor------------100 Surrender value in this case is 50.8, therefore the net surrender value would be
1076.40 x 50.8------------- =546.81 100 Therefore, surrender value would be Rs.546.90.
90% of the surrender value can at best be given by way of loan which would mean that the net loan amount which can be granted under this policy would be Rs.490/-.
9. The learned Counsel for the petitioner submits that although the policy holder in such a situation had paid an amount of Rs.850/- by way of premiums he had further gained a Bonus of Rs.226.40 which would make him entitled to Rs. 1,076.40. But, if he requires money by way of loan, he would only get Rs.490/- which is much less than even 50% of the money which has already become due to the policy holder. Many more examples have been given in the Memorandum and for instance in a policy where the Surrender value is calculated at Rs.3,222/- and where the amount paid by way of premium was Rs.4,670/-the net loan available would be only Rs.2,500/-. In policies which are for longer period of time and for which the premia has been paid for lesser number of years, the surrender value comes even less than the premia paid. In this example in the manual the premia paid was Rs.3,750/- but surrender value calculated was only Rs.3,222/-. This example can be found on the Manual from pages 18 to 19. By giving these examples the learned Counsel for the petitioner submits that this is not a lair method of calculation particularly in view of Section 6 of Life Insurance Corporation Act, 1956. Section 6 is part of Chapter III which deals with the functions of the Corporation and Section 6 lays down:
'6. Functions of the Corporation :--(1) Subject to the rules, if any, made by the Central Government in this behalf, it shall be the general duty of the Corporation to carry on life insurance business, whether in or outside India, and the Corporation shall so exercise its powers under this Act as to secure that life insurance business is developed to the best advantage of the community.'
Laying stress on this provision the learned Counsel for the petitioner submits that the Corporation is bound to develop the business of Insurance to the best advantage of the community. Therefore, all the schemes formulated by the Corporation must satisfy the test of being to the best advantage of the community and if it is shown that the impugned policy of the Corporation with regard to grant of loans is not to the best advantage of the community it must be struck down. He has further taken me through a chart pertaining to year 1987 which is a statement in Form-DDD. According to him, number of policies those were surrendered in the year ending 31st March, 1987 were 2,86,817 and the sum assured against these policies was Rs. 245,82,20,914. He submits tliat, this shows that more than 245 crores of rupees was the benefit to the Corporation in one year alone on account of surrender of about three lacs of policies. This money was forfeited and this money goes either to the Corporation or to the Government or to those of the policy holders who are affluent because only those policies will get elapsed where the policy holders are not in a position to pay the premium because they are poor. He submits that, it is at the cost of poor policy holders all benefits are derived either by the rich policy holders or by the Corporation or by the Government. He has also taken me through different notes in 'Modem Insurance Law' by John Birds, third edition to show that the policy of the insurers cannot be unfair. He submits that, it would be fair that atleast total paid up value is advanced as loan because that much of money has already been paid by the insured and if the loan is advanced the policy docs not lapse and the insured would continue to pay the premiums along with interest at 10.5% whereas the bonus earned by him will not in any case be more than 6% even at the present rates. He has heavily relied on the judgment of the Supreme Court in Reserve Bank of India v. Peerless Company, (supra). This was a matter pending before the Supreme Court in which the Life Insurance Corporation was not a party, but while examining the schemes of the Peerless Company and comparing them to the Life Insurance Corporation policies, the Court made the following observation :
'10. We cannot help but feel distressed that despite Articles 38, 39, 41 and 43 of the Constitution, the Life Insurance Corporation of India, an instrumentality of the State, which is given the monopoly of life insurance business in the country has taken no steps to offer proper security and protection to the needy, poor, rural folk. If the Life Insurance Corporation is really interested in treating the poorer policy-holders less harshly and more liberally the time has come for the Life Insurance Corporation to revise its terms and conditions and to think in the direction of deleting the forfeiture clause altogether as has now been done by the Peerless Company or to delete it at least from policies for small amounts. Perhaps the Life Insurance Corporation may think of short term, small amount policies with no forfeiture clause and with some incentive such as a reduced premium for continuing to pay premiums regularly. We are sure that with the management expertise at its command the Life Insurance Corporation of India can devise a myriad ways of serving the poorer sections of the people of our country, as also to tap the huge untapped savings resources, the existence of which has been brought home by companies like the Peerless however wrong-headed their business methods might be. It is a matter of common knowledge that the return to a policy-holder who survives the period of the policy is very poor. We are now told daily that the Life Insurance Corporation is paying higher bonus year after yeaf. But the learned Counsel for Peerless charges that the bonus comes out of amounts of the forfeited policies and that it is really the poorer class of defaulting policy-holders whose policies are forfeited that are paying bonus to the class of policy holders who are better off. One wonders if this is not so ! This is surely is not what is contemplated by Article 38(2) of the Constitution which talks of minimising the inequalities in income, not only amongst individuals but also amongst groups of people and Article 39(c) which requires the State to secure that the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment.'
10. On the other hand, the learned Counsel for the respondent has taken me through different provisions of the Insurance Act and he has also stressed that the petitioner lias no locus standi. He has relied on many judgments of Supreme Court and other Courts to show that the petitioner has no locus standi, but the petitioner being an agent or a policy holder or even a citizen cannot be ousted from this Court merely on the ground that he has no locus standi. Therefore, I am not impressed by the argument that the petitioner has no locus standi to file this writ petition. The law has undergone many changes during the years gone by and it is not necessary for this Court to deal with this objection in detail.
11. The learned Counsel for the respondent submits that in terms of Section 21 of the Life Insurance Corporation Act, 1956 the Corporation has to be guided by the directions of the Central Government. In terms of Section 26 the Corporation is bound once atleast in two years to cause an investigation to be made by actuaries into the financial condition of the Corporation and submit its report to the Central Government. Section 27 lays down that the Corporation after end of each financial year will prepare and submit to the Central Government a report of its activities during the previous financial year. In terms of Section 28 the method has been given by which surplus from Life Insurance business can be utilised. He states that, it is not true that the money accruing to the Corporation by way of surrender of policies goes to the Corporation. He submits that 95% of such surplus or higher percentage thereof as the Central Government may approve shall be allocated to or reserved for the life insurance policy holders of the Corporation and if any amount remains there, that shall be paid to the Central Government or shall be utilised in a method in which it is directed to be utilised by the Central Government. He submits that, in terms of Section 29 reports are to be laid before the Parliament by the Central Government. He has also taken me through the various provisions of the Insurance Act and in particular he has referred to Section 2(1), 2(11), 2B, Section 13, Section 14, Section 34, Section 34E, Sections 64A, 64F, 64J. He has also placed reliance on Sections 64S, 64U and 64UA of the Insurance Act, 1938. Relying on these provisions the learned Counsel for the respondents submits that each and every activity of the Corporation is being monitored by statutory bodies and the ultimate power of issuing directions and making policies cannot be exercised without the Government's approval. He states that since the Government of India is not a parry to this writ petition, therefore even if a direction is given by this Court it may not be possible for the Corporation to implement that direction. He farther states that, in any case the activities of the Corporation are subject to the ultimate control of the Parliament where the reports are tabled every year by the Central Government. Therefore, if at all there will be any arbitrariness or any unfair practices the Parliament is always mere to watch the interests of the insured. He further states that these are the matters which arc best left to the experts and this Court may not be in a position to direct as to what should be the Surrender Value of a particular policy and what should be the amount payable by way of Loan in case a policy holder seeks loan from the Corporation against his policy. He has referred to Tata Cellular v. Union of India, : AIR1996SC11 . This was a matter concerning grant of Tenders. After considering the whole catena of law on the subject principles were laid down by the Supreme Court which would be guiding factors when administrative actions are judicially scrutinised. These principles were summarised as follows :
(1) The modem trend points to judicial restraint in administrative action.
(2) The Court does not sit as a Court of appeal but merely reviews the manner in which the decision was made.
(3) The Courpt does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible.
The Supreme Court laid down further three principles for which we are not concerned for the present controversy. The learned Counsel for the respondent submits that the Corporation has taken a decision and made policy with regard to calculation of Surrender value and with regard to the amount which would be payable to a Policy holder against the policy in case he asks for the loan. Whether this amount is fair or not, whether the method adopted in calculating the Surrender 'Value is fair or not may not be scrutinised by this Court. He further states that Courts have always held that it is not the administrative decision which is being scrutinised by the Courts when a decision is complained of but it is the method by which the authorities have reached to a decision. If the methods adopted in reaching the decision are arbitrary, the end result would certainly be quashed, but in case the Court does not find fault with the methods adopted, it cannot quash the end result particularly when the matter concerns the business of an Insurance Company which needs a special expertise. He relies on the principles laid down by the Supreme Court and reproduced above to suggest that this Court is not a Court of appeal and this Court is also not having sufficient expertise, therefore, if it ventures and decides as to what would be the fair method of calculating the Surrender value and what would be the fair amount that could be advanced as loan to the Policy holder against his policy, it may have disasterous effect. I agree with the learned Counsel for the respondent that this Court is neither expert nor it can come to a conclusion as to what would be fair amount which could be advanced against the policies as loan. But the problem in this case is that the learned Counsel for respondent has not been able to show me the source of power under which the schemes have been prepared. 1 have repeatedly asked the learned Counsel for respondent to tell me as to who decided as to what should be the Surrender value factor and what should be the amount of Loan granted against a policy, the reply was not forthcoming. This is one aspect of the matter. Coming to the argument of the learned Counsel for the petitioner that in 1986 alone ' more than Rs.245 crores were earned by the Corporation on the basis of Surrender of policies, the learned Counsel for the respondents has submitted that the amount of Rs.245,82,20,914/- is not the amount by which the Corporation was benefited. In feet this was the amount for which the policies had been insured which got lapsed of which were surrendered. In fact there were only 2,86,817 policies and obviously none of them had paid premium for more than two years therefore they got lapsed. Had these policy holders paid if the whole premiums and had the policies matured, then the Corporation would be receiving the amount referred to above. Therefore this argument is felicitous that the Corporation was benefited by more than Rs.245 crores. He submits that, in fact by lapsing of policies the Corporation incurred losses because for first one or two years the premium goes towards administrative expenditure which needed for opening a policy. He states that 35% of the premium for first two years goes by way of commission to the agents and this has to be continued on a lesser percentage till the policy matures. He submits that, for the first two years whatever the premium is collected most of it is spent on administrative expenditure and when policy lapses only after two years the Corporation suffers loss. The argument of the learned Counsel for respondent is appealing and this Court agrees with the learned Counsel for respondent mat Rs.245 crores was not the benefit accruing to the Corporation in the year 1986.
12. Another aspect of the matter is that the Supreme Court has come to the conclusion as early as in the year 1987 that everything is not well in the Life Insurance Corporation. Therefore, it had issued guidelines to the Life Insurance Corporation. The learned Counsel for the respondents submits that the observations made by the Supreme Court were made in a judgment to which the Life Insurance Corporation was not a party. When the Corporation came to know about the observations made by the Supreme Court, they filed an application in the Supreme Court. In the counter affidavit the respondents have stated that an application was moved by the Corporation under Article 142 of the Constitution on 7th May, 1987 whereby it was prayed that since the Corporation had not been heard before the observations were made, therefore, the observations be deleted. The Supreme Court decided this application and disposed of on 11th September, 1987, according to the counter, and while disposing of the application the Supreme Court made the following remarks :
'Our remarks were intended to guide the Life Insurance Corporation in the conduct of their business and not to hurt their reputation in any manner. CMP stands disposed of.'
Now, does this observation of the Supreme Court excuses the respondents from implementing the judgment of the Supreme Court referred to above. In my opinion this is not so. The Supreme Court has only cleared that the observations were made not to hurt the reputation of the Corporation but it has reiterated that the remarks were made to guide the Life Insurance Corporation. Therefore, it can safely be said that the Supreme Court has already given guidelines with regard to the matters raised in this Writ Petition. Needless to say that in terms of Article 144 of Constitution of India it is mandatory for all authorities in the Country to act in aid of Supreme Court. Although the Supreme Court had not given any directions, the Supreme Court had certainly made remarks which according to Supreme Court itself were intended to guide the Life Insurance Corporation. Therefore, it is expected that the respondents shall be guided by the remarks of the Supreme Court and in the light of observations of the Supreme Court reconsider the matters in the interest of Policy holders. The remarks which were intended to guide the Life Insurance Corporation and the words of the Supreme Court are not of lesser value when the question of implementation comes, than the positive directions of the Supreme Court. The case decided by the Supreme Court is a guiding factor for this Court. Whether the Apex Court issues positive directions or directions by way of guidelines they are meant to be implemented and every authority in this country, judicial or administrative is bound to assist and aid the Supreme Court in getting the orders of the Apex Court implemented. The Supreme Court is the Apex Court of the Country. It passes its orders in most courteous and sweet language. But, that does not mean that the orders passed by the Court are, not required to be implemented. This observation I am making on the strength of the judgment of the Apex Court in Spencer and Co. v. Vishwadarshan Distributors, : (1995)1SCC259 . The matter was pending before the Supreme Court and at the same time another matter was pending before a Division Bench of Madras High Court. While dealing with the matter before the Supreme Court on 14th January, 1994 the Supreme Court passed the following order :-
'Let the matter stand by three months. In the meantime, parties' Counsel shall approach the High Court for an early disposal of the OSA Nos.69-73 of 1993 pending before it and apprise to us on the next date of hearing the result of it. We have no doubt that the High Court when approached for the purpose would give the matter due attention as is expected by us.'
By this order, the Supreme Court as a matter of fact ordered the High Court to dispose of the matter before it within three months so that the Supreme Court would know the outcome of the matter which was pending before the High Court. After the order was passed by the Supreme Court an application was moved before the High Court for early hearing, but a Division Bench of the High Court passed the following order :-
'These applications are filed for fixing early hearing of the appeal. The order of the Supreme Court dated 14-1-1994 in Special Leave Appeal (Civil) No. 12597-600/93 12597-600/93 (AN) is produced before us to support the aforesaid prayer. We have considered the matter with the seriousness it deserves; but find nothing important so as to give precedence to the appeals over large numbers' of pending appeals in this Court. The appellant must take his chance strictly in order in which he approached this Court by filing these appeals.
The applications are rejected.'
When tliis order was brought to the notice of the Supreme Court, the Supreme Court even considered the possibility of proceeding in contempt against two learned Judges who had passed the order in the High Court. The Supreme Court set aside the order and while interpreting Articles 141, 142 and 144 of the Constitution of India, made certain important remarks. While interpreting their own order dated 14th January, 1994 the Supreme Court made the following observations :
'Ex facie courtesy is the blend of our order of 14-1-1994. Outwardly it is neither commanding in nature nor explicitly in terms of a direction. Such is not the sheen and tone of our order, meant as it was, for a high constitutional institution, being the High Courts. It comes from another high constitutional institution (this Court) hierarchically superior in the corrective ladder. When one superior speaks to another it is always in language sweet, soft and melodious; more suggestive than directive. Judicial language is always chaste.'
Then, the Supreme Court also quoted a dialogue in Bhagavad Gita between Lord Krishna and Arjuna. If the language of the order of the Supreme Court is chasty, melodious, soft and sweet that does not mean that the order is not to be enforced. If it is not commanding in nature but suggestive in nature, still under Articles 141, 142 and 144 the order becomes enforceable and as a matter of feet everybody is duty bound in this country to enforce the order of the Supreme Court. In the order passed by the Supreme Court which has been referred to above, (supra) the Supreme Court says; 'we are sure that with the management expertise at its command the Life Insurance Corporation of India can devise a myraid ways of serving the poorer sections of the people of our country, as also to tap the huge untapped savings resources ......'; This infact arc the directions of the Supreme Court though not in directive tone but in suggestive tone, hi view of the judgment of the Supreme Court given earlier, I do not think tliis Court has to say much in the matter.
13. Since the Supreme Court has already given directions, which according to this Court arc binding on the respondents, it will serve no purpose to examine what will the effect of Union of India not being a party to these proceedings.
14. With the above observations, the writ petition is disposed of. No order as to costs.