ORDER
S. Sankarasubban, J.
1. Both these Original Petitions are concerned with the same matter. Hence, I heard and am disposing them together. The facts are referred with respect to O.P. 15479/1992.
2. The petitioner in O.P. 15479/1992 is the Kerala State Road Transport Corporation represented by its Managing Director, hereinafter referred to as 'the Corporation'. The Corporation is a State Transport undertaking of the Government of Kerala, constituted as per the provisions of the Road Transport Corporations Act, 1950. It caters the need of the travelling public. Many important routes were nationalised and through the nationalised routes, only the Corporation is entitled to ply the buses.
3. With the increase in number of vehicles, it is a well-known fact that there has been an increase in the road accidents. The Motor Vehicles Act creates a separate Tribunal for the rederssal of the grievances of the persons who are injured in such accidents and the legal representatives of the person who succumbed to the injuries. In the State of Kerala itself there are nearly twenty exclusive Motor Accidents Claims Tribunals dealing with the accident cases. The Motor Vehicles Act also has made it compulsory for the vehicles which ply on the roads to insure against third-party risk with the Insurance companies. But for the discharge of the claims by the Insurance companies, many awards passed by the Motor Accidents Claims Tribunals could not have been satisfied. But, the Motor Vehicles Act exempted certain persons from taking the Insurance policies if it constitute a fund with a minimum amount. The Corporation was enjoying the benefit of this exemption.
4. During the course of time, the Corporation found that the reserve amount in the fund was not enough for the discharge of the claims. Hence it decided to insure its vehicles with the Insurance Company.
5. The General Insurance Business in India has been nationalised by the General Insurance Business (Nationalisation) Act, 1972. Section 2 of the Act says that the Act was promulgated for giving effect to the policy of the State towards securing the principles specified in Clause (c) of Article 39 of the Constitution of India. Under Section 4 of the Act, on the appointed day, all the shares in the capital of every Indian insurance company shall stand transferred to and vested in the Central Government free of all trusts, liabilities and encumbrances affecting them. By Section 5, the undertaking of every existing insurer who is not an Indian insurance company shall stand transferred to and vested in the Central Government. By virtue of the power under Section 9, the Central Government formed a company, called 'General Insurance Corporation of India' for the purpose of superintending, controlling and carrying on the business of general insurance. After the nationalisation, there are only four Insurance companies, viz., The Oriental Insurance Company Ltd., the New India Assurance Company Ltd., United India Insurance Company Ltd., and the National Insurance Company Ltd. Thus, the vehicle owners have to insure the vehicles, and against third-party risks, only with these four companies. The premium, etc. is decided as per the provisions of the Insurance Act.
6. As stated supra, the Corporation felt the need of insuring the vehicles under the Motor Vehicles Act. From the Original Petition it is seen that the National Insurance Company Ltd. by their letter dated 5-4-1988 informed the Corporation that all the buses owned by the Corporation are to be insured. It has also intimated the premium with regard to limited liability and with regard to unlimited liability. The Oriental Insurance Company Ltd. by its letter dated 23-8-1988 informed the Corporation as follows :
'Since yours is a State Government organisation, of the premium so computed you are eligible for a special discount of 5% of the net premium in each case'.
The letter ended with an assurance that:
'................in case the entire fleet is proposed to us, oh acquiring sufficient claim statistics we shall take up the matter with the Tariff Advisory Committee to fix up a suitable consolidated premium for such risk in future'.
The National Insurance Company Ltd. also sent a draft of the Master Policy Agreement for third party risk of all the vehicles owned by the . Corporation. This is produced as Exhibit P4. In Ext. P4, it is stated that premium will be calculated on the basis of the registered carrying capacity of each bus. For 500 spare/reserve vehicles the rate of premium for each bus to be paid by the Corporation will be 75% of the tariff rate. 50% of the premium will be paid on the commencement of the date of the Master Policy Agreement and the balance 50% will be paid on the basis of bank guarantee. The Director Board of the Corporation met and took Ext. P5 decision. It is as follows :--
'After evaluating the comparative merits of each proposal, it was decided to enter into an agreement with National Insurance Company Limited for 3rd party insurance coverage for all vehicles owned by the Corporation as per the agreement placed before the Board and also decided to write to Government for concurrence'.
By Exhibit P6, the Corporation addressed the Government regarding the insurance. The Government passed Exhibit P7 order, by which it accorded approval to the proposal of the Corporation to introduce third-party insurance coverage for all vehicles owned by the Corporation and also to entrust the insurance coverage with the National Insurance Company Ltd. After receiving Exhibit P7 order, the Corporation communicated to the Divisional Manager, National Insurance Company Ltd. about the decision of the Government. The Divisional Manager was requested to come to the office of the Corporation to sign the Master Policy Agreement mutually consented and to receive the amount, so that the third-party insurance coverage will come into force with effect from 29-7-1989. But, from here onwards, there has been an unwillingness on the part of the Insurance Company to sign the agreement and to insure the vehicles for third-party risk. There were several correspondences. The Corporation was willing to pay premium at the existing rates. But, finally, by Exhibit P20, the General Insurance Corporation of India informed the Corporation that the matter has been referred to the Tariff Advisory Committee and that the insurance coverage cannot be granted at the existing tariff rates.
7. This Original petition has been filed for the following reliefs : For a direction to quash Exhibit P20 order; and for mandamus directing respondents 1 and 2 to insure the vehicles of the Corporation and to give third-party insurance coverage to all the vehicles of the petitioner, accepting the premium at the existing Motor Insurance Premium rates as per Exhibit P19; and further for a direction to withdraw the reference made to the Tariff Advisory Committee.
8. On behalf of the General Insurance Corporation of India, the General Manager has filed a counter-affidavit. On a reading of the counter-affidavit, the grounds taken therein are that entering into an insurance policy is a contractual matter between the parties and such contractual obligations cannot be enforced through a petition under Article 226 of the Constitution of India, It is further contended that so far as the fixation of premium is concerned, the respondent Corporation has got every jurisdiction to refer it to the Tariff Advisory Committee and the decision of the Tariff Advisory Committee is final under Section 64-U of the Insurance Act. According to the respondent, the fixation of tariff cannot be challenged in a petition under Article 226 of the Constitution of India. The respondent further contends that the price fixation is a legislative function and no principles of natural justice are involved in legislative action. There is no estoppel against a legislative action. The respondent has only referred the matter to the Tariff Advisory Committee and is prepared to enter into contractual obligations with the petitioner on the basis of the tariff prescribed by the Advisory Committee. It is further stated that after the coming into force of the Motor Vehicles Act, 1988, there has been steep increase in the amount of compensation and hence it has become necessary to increase the rate of premium. It is their further case that on account, of the non-maintenance of accurate data and non-furnishing of his data by the petitioner, the TAC is not able to fix the actual premium. They also rely on the fact that they are entitled to fix the premium on the basis of the risk or category of risk which is to be taken when dealing with such fleet operators, as the Corporation.
9. I heard the counsel for the petitioners and the counsel for the Insurance Corporation. On an anxious consideration of the entire facts and circumstances of this case, I am of the view that this is a case where the General Insurance Corporation of India and the other General Insurance companies have not acted in the way in which they were expected to act. The General Insurance Corporation of India was formed on the basis of the General Insurance Business (Nationalisation) Act, which declared that the policy of the Act is to promote the directive principles of the State policy under Section 39(c) of the Constitution of India. A perusal of the Exhibits produced by the petitioner show that there has been a sudden change of stand by the General Insurance Corporation of India as well as the National Insurance Company Ltd., with regard to extending the insurance coverage for the Corporation vehicles under the Motor Vehicle Act. There is no dispute that the premium can be fixed by the Tariff Advisory Committee, and so long as the premium fixed by the tariff Advisory Committee is not vitiated by any illegalities that fixation is to be adopted and accepted. But here that is not the question. The Insurance Corporation has insured the vehicles of the Haryana State Road Transport Corporation on the basis of the existing premium. Ext. P19 shows the premium rates for various vehicles insured by the National Insurance Company Ltd. What is the difference so far as the vehicles of the Kerala Road Transport Corporation is concerned? The respondents cannot cling on the technical plea that insuring of the vehicles is in the field of contractual obligations and this Court is powerless under Article 226 of the Constitution of India to force a party to enter into contractual obligations. A look at the provisions of the Motor Vehicles Act will show that it has been made compulsory for every owner of a vehicle to insure the vehicle against third-party risks under the Motor Vehicles Act. Non-insurance under the Motor Vehicles Act results in penalty to the owner and the vehicle tax will not be accepted if the vehicle is not insured land the premium paid. That is one side of the picture. The other side of the picture is when we go behind the motive of the statutory compulsion to insure the vehicles. This statutory compulsion :is made with a view to benefit for large number of persons who lose their lives in automobile accidents or who are injured and disabled as a result of such accidents. The owners of the vehicle will not be able to meet the claims of the victims of the accidents. It is with the above object that the compulsory insurance is made under the Motor Vehicles Act. These insurance companies are nationalised with a view to see that they toe the line of the directive principles of State policy under Article 39 of the Constitution of India and also fulfil the obligations under the Motor Vehicles Act. In the Motor Vehicles Act, no fault liability has been introduced, which burdens the owner and the insurer of the vehicle to compensate the death of a person or a permanently disabled person by a minimum amount of compensation. The Act has now introduced a schedule giving the various amounts of compensation. Will not these provisions be defeated if the Insurance companies are allowed to escape by the plea of Contractual obligations so as to wriggle out of the statutory obligations prescribed on them? I am not able to discern from the counter-affidavit as to why the vehicles of the Corporation cannot be insured on the basis of the existing premium. The General Insurance Corporation of India and its companies are 'States' under Article 12 of the Constitution of India. Their actions will be guided by the touch-stone under Article 14 of the Constitution. Any discrimination will not be tolerated.
10. The learned counsel for the InsuranceCorporation mainly contended that by allowingthe writ petition this Court will be compelling therespondent to enter into contractual obligationswith the petitioner. The Honourable SupremeCourt in the decision reported in Mahabir AutoStores v. Indian Oil Corporation, AIR 1990 SC1031, held as follows (para 12) :--
'Every action of the State executive authority must be subject to rule of law and must be informed by reason. So, whatever be the activity of the public authority, in such monopoly or semi-monopoly dealings, it should meet the test of Article 14 of the Constitution. If a Governmental action even in the matters of entering or not entering into contracts, fails to satisfy the test of reasonableness, the same would be unreasonable. Rule of reason and rule against arbitrariness and discrimination, rules of fair play and natural justice are part of the rule of law applicable in situation or action by State instrumentality in dealing with citizens. Even though the rights of the citizens are in the nature of contractual rights, the manner, the method and motive of a decision of entering or not entering into a contract, are subject to judicial review on the touchstone of relevance and reasonableness, fair play, natural justice, equality and non-discrimination'.
In L.I.C. of India v. Consumer Education and Research Centre, AIR 1995 SC 1811, the Supreme Court was considering a question under the L.I.C. of India. The question at issue was the policy under Table 58, which was as follows :--
'Proposals for assurance under the plan will be entertained only from persons in Government or Quasi-Government organisation or a reputed commercial firm which can furnish details of leave taken during the preceding year under Table 58'.
The benefits of the policy were denied to those who were not salaried persons. The Supreme Court held that denial thereof to larger segments violates their constitutional rights. Regarding the jurisdiction of the Court under Article 226, the Supreme Court held as follows (at p. 1822 of AIR) :--
'The actions of the State, its instrumentality, any public authority or person whose actions bear insignia of public law element or public character are amenable to judicial review and the validity of such an action would be tested on the anvil of Article 14. While exercising the power under Article 226, the Court would be circumspect to adjudicate the disputes arising out of the contract depending on the facts and circumstances in a given case. The distinction between the public law remedy and private law field cannot be demarcated with precision. ............... The actions of the Corporation bears public character with an imprint of public interest element in their offers with terms and conditions mentioned in the appropriate table inviting the public to enter into contract of life insurance'.
Thus, it cannot be said that this Court has no power to direct the respondent Corporation to enter into contract with the petitioner Corporation when it find an arbitrariness on the part of the State instrumentality. As already said, the benefit of entering into contract is not a benefit accrued to the Corporation; but it is a benefit that will accrue to the poor victims of automobile accidents. By refusing to enter into contract, the State instrumentality has refused to follow the purpose for which it was created.
In the light of the above, I allow these Original Petitions. Exhibit P20 order is quashed. There will be a direction to the respondents 1 and 2 to insure the vehicles of the Corporation and give third party insurance coverage to all the vehicles accepting the premium at the existing Motor Insurance Premium rates as per Exhibit P19. Of course, if on the basis of the recommendation of the Tariff Advisory Committee the premium is going to be revised for all the vehicles, that will be binding upon the Corporation.