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2008 (5) TMI 686 - SUPREME COURTRenewal of a Mediclaim Policy - entitled to automatic renewal - Cheque towards payment of the premium for the purpose of renewal of the policy, refused on the purported ground of `high claim ratio' - `State' within the meaning of Article 12 of the Constitution - contract of insurance is no longer in the realm of contract?. HELD THAT:- If it is a `State' its action must be fair and reasonable. It has been so held in a catena of decisions of the Court as for example Life Insurance Corporation of India v. Consumer Education and Research Centre [1995 (5) TMI 247 - SUPREME COURT]. There cannot be any doubt that Directive Principles of State policy by themselves per se are not enforceable in a court of law. [See Kesavananda Bharati v. State of Kerala[1973 (4) TMI 114 - SUPREME COURT]. The action on the part of the authorities of the appellant was highly arbitrary. Respondents though were not entitled to automatic renewal, but indisputably, they were entitled to be treated fairly. We have noticed hereinbefore some of the clauses contained in the prospectus as also the insurance policy. When a policy is cancelled, the conditions precedents therefor must be fulfilled. Some reasons therefor must be assigned. When an exclusion clause is resorted to, the terms thereof must be given effect to. What was necessary is a pre-existing disease when the cover was inspected for the first time. Only because the insured had started suffering from a disease, the same would not mean that the said disease shall be excluded. If the insured had made some claim in each year, the insurance company should not refuse to renew insurance policies only for that reason. The words `incepts for the first time' as contained in clause 4.1 as also the words `continuous and without break' if the renewal premium is paid in time, must be kept in mind as also the reasons for cancellation as contained in clause 7(1)(n) thereof. Renewal of a mediclaim policy subject to just exceptions should ordinarily be made. But the same does not mean that the renewal is automatic. Keeping in view the terms and conditions of the prospectus and the insurance policy, the parties are not required to go into all the formalities. The very fact that the policy contemplates terms for renewal, subject of course to payment of requisite premium, the same cannot be placed at par with a case of first contract. It is essential that the Regulatory Authority must lay down clear guidelines by way of regulations or otherwise. No doubt, the regulations would be applicable to all the players in the field. The duties and functions of the Regulatory Authority, however, are to see that the service provider must render their services keeping in view the nature thereof. It will be appropriate if the Central Government or the General Insurance Companies also issue requisite circulars. Appellants before us being subsidiaries to General Insurance Corporation cannot ignore the statutory provisions. They are bound by the directions issued by the Central Government. We would request the IRDA to consider the matter in depth and undertake a scrutiny of such claims so that in the event it is found that the insurance companies are taking recourse to arbitrary methodologies in the matter of entering into contracts of insurance or renewal thereof, appropriate steps in that behalf may be taken. These appeals are dismissed with costs.
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