The plaintiff sought details of insurance policies from the defendant Life Insurance Corporation. After obtaining details, the plaintiff proposed framework outlines for the policies, but the defendant rejected them for not meeting statutory requirements and laid down its own guidelines. The plaintiff filed a writ petition alleging the defendant's actions were arbitrary and opposed to public policy. The High Court partially struck down the guidelines. On appeal, the Supreme Court held that when the state interacts with the public, its actions must satisfy the test of reasonableness under the Constitution. As the defendant's policy terms were unconscionable and opposed to public policy, they were constitutionally void and liable to be set aside.

1. 0
LIC VS CERC
1995 AIR 1811; 1995 SCC 5 482
Submitted to:
Ms. Debdatta Das
Faculty-in-charge
Amity Law School
Amity University, Noida
Uttar Pradesh 201 303
Submitted by:
Kunal (A3256113116)
Deepa (A3256113117)

2. 1
LIC VS CERC
1995 AIR 1811; 1995 SCC 5 482
PLAINTIFF: Consumer Education Research Centre
COUNSEL: AK Dhawan
RESPONDENT: Life Insurance Corporation Limited
COUNSEL: Harish Salve

3. 2
LIST OF CASES
D.S. Nakara & Others vs Union Of India, 1983 AIR 130, 1983 SCR (2) 165
CESC vs. Subhash Chandra Bose, 1992 1 SCC 441
Murlidhar Dayandeo Kesekar vs Vishwanath Pandu Barde & Anr, 1995 SCC, Supl. (2)
549 JT 1995 (3) 563
Erusian Equipment vs. St. of WB, 1975 (1) SCC 70
Sagir Ahmed vs. St. of Uttar Pradesh (1955 1 SCR 707)
Sanjeevani Naidu vs. St. of Madras, AIR 1970 SC 1102
Kasturi Lal Lakshmi Reddy vs. St. of J&K, 1980 3 SCR 1338
M.C. Mehta vs Union Of India & Others, 1988 AIR 1115, 1988 SCR (2) 530
LIC vs. Escorts Ltd., (1985) Suppl 3 SCR 909
Dwarkadas Marfatia vs Trustees of the Port of Bombay, 1989 AIR 1642, 1989 SCR (2)
751
Mahabir Auto Stores vs. Indian Oil Corporation, 1990 SC 1031
Kumari Shrilekha Vidyarthi Etc. ... vs State Of U.P. And Ors. 1991 AIR 537, 1990 SCR
Supl. (1) 625
Sterling Computers Limited Etc. vs M & N Publications Limited and Ors., 1996 AIR 51,
1993 SCR (1) 81
General Assurance Society Ltd. v. Chandmull Jain and Anr. - AIR 1966 SC 1644
CIWTC vs. Brojo Nath Ganguly, (1986) 3 SCC 156
Delhi Transport Corporation vs D.T.C. Mazdoor Congress, 1991 AIR 101, 1990 SCR
Supl. (1) 142
MJ Sivani vs. State of Karnataka, (1995) 6 SCC 289

4. 3
Facts
The plaintiffs had sought certain details of insurance policies from the respondents.
After obtaining such details, plaintiffs made a framework outline of these policies and
submitted to the respondents. These proposals were subsequently rejected by the
respondents on the grounds that they did not meet the minimum statutory requisites.
They instead laid down their own guidelines for acceptance of these policies.
The plaintiffs filed a writ petition before the concerned High Court, alleging that the
administrative actions undertaken by such defendants were unconstitutional under the
test of reasonableness (as laid down under Article 14, 19 and 21 of the Constitution) in
addition to being totally arbitrary and opposed to public policy standards. In doing so,
they filed a writ petition under Article 226 of the Constitution before the State High
Court seeking judicial relief. The High Court, after careful perusal of the conditions
mentioned in the proposal, utilized the principles of the doctrine of severability and
declared only the portion that spoke of acceptance of such policies qua
Government/semi-Governmental agencies as being repugnant in law.
The Defense
The counsel for the defendant held that under principles of life insurance business, it
is only the holder of insurance policies that gets the benefits and not anyone else. Hence,
the petitioners were not entitled to receive the profits of the insurance policy. However,
the counsel for petitioners held that the life insurance policies issued by the parent
company must be of such a nature that they are in total conformity with principles of
equality, fairness and the test of reasonableness as has been laid down in the Constitution
of India.
Prayers of the Defense
On appeal before the Supreme Court under Article 32 of the Constitution, the
following reliefs were prayed by the petitioners:
1. A decree that would set aside the High Court’s order as being repugnant-in-law
2. Absolute repugnancy of the conditions set out in the insurance policy plan
proposals which appeared to be absolutely arbitrary and opposed to public policy

5. 4
Inclusiveness Determines Constitutionality of State Policy
In D.S. Nakara vs. Union of India (1983)1 it was held that the primary objective of
the Constitution is to provide relief to all sections of society. There can be no favoritism
in awardance of any form of relief by the Executive Government in merely granting
certain benefits to some strata of society while rejecting others. So, when any State rolls
out any proposals/legislative policies, it must cover all the members of the Indian society
latissime and not merely a select few individuals alone. Again, in CESC vs. Subhash
Chandra Bose2 it was held by the Apex Court that right to social justice is an integral
portion of the ‘right-to-life’ concept. Again in Murlidhar vs. Vishwanath (1995)3 it was
held by the Apex Court that right to economic empowerment is a basic sine qua non for
any fundamental democracy to exist.
In Erusian Equipment vs. St. of WB (1975)4 it was held by the Apex Court that
whenever there is any proposal made for the acceptance of any contract of services
rendered by any business organization, the terms of the contract must be reasonable and
not opposed to public policy principles. So, if any public member is excluded by the
terms of the contract and precluded from entering such contract, then it is repugnant to
public policy principles, in addition to being violative of the constitutional principles of
equality that mandates fair treatment for every person, irrespective of his or her class.
The same was held in case of Sagir Ahmed vs. St. of Uttar Pradesh5.
In Sanjeevani Naidu vs. St. of Madras (1970)6 it was held by the High Court of
Madras that the any acts carried out by public officers in course of their functions is an
act of the Indian State itself. Hence if there is found to be any material breach of
fundamental rights of an individual, it is the State that will be held vicariously liable for
the actions of its servants alone. The same was held in Kasturi Lal Lakshmi Reddy vs. St.
of J&K7 and M.C. Mehta vs. Union of India (1987)8 cases as well.
1 1983 AIR 130, 1983 SCR (2) 165
2 1992 1 SCC 441
3 1995 SCC, Supl. (2) 549 JT 1995 (3) 563
4 1975 (1) SCC 70
5 (1955 1 SCR 707).
6 AIR 1970 SC 1102
7 1980 3 SCR 1338
8 1988 AIR 1115, 1988 SCR (2) 530

6. 5
In LIC vs. Escorts Ltd (1985)9 it was held by the Apex Court that whenever the
administrative actions of the Indian State involve an element where the State has to
interact with the public at large, the constitutional validity of its administrative acts will
be scrutiunized by the Indian judiciary to check if it is ultra vires of the “Reasonableness
Test” as laid down in our constitution. The same principle was applied in Dwarkadas vs
Trustees of the Port of Bombay (1989)10 and Mahabir Auto Stores vs. Indian Oil
Corporation11, Kumari Srilekha Vidyarthi vs. St. of UP (1991)12 cases as well.
In Sterling Computers vs. M&N Publications13 it was held that in commercial
contracts it is mandatory for the State to lay out the terms of the contract in such a way
that it is non-repugnant to public policy standards. The same principle was laid down in
General Assurance Society vs. Chandramull Jain (1966)14 cases as well.
In CIWTC vs. Brojo Nath Ganguly (1986)15 it was held that any instrumentality of
the State cannot impose any conditions that are violative of constitutional principles of
equality, fairness or which are discriminatory-in-law. The same was held in DTC vs.
DTC Mazdoor Sabha (1990)16 case as well.
In V. Raghunathan Rao vs. St. of AP (1988) case it was held that if a contract or any
part of it is found to be unsonscienable or opposed to public policy it will be deemed
void in law and consequently set aside. The same was held in M.J. Sivani vs. St. of
Karnataka (1991)17 case as well. In this case too, the Apex Court ruled that whenever
any insurance policy is to be created, careful consideration must be given to its terms and
conditions. Such terms must be in direct conformity with the constitutional principles of
equality and reasonableness as has been laid down under Articles 14 and 19 of the Indian
Constitution.
9 (1985) Suppl 3 SCR 909
10 1989 AIR 1642, 1989 SCR (2) 751
11 1990 SC 1031
12 1991 AIR 537, 1990 SCR Supl. (1) 625
13 1996 AIR 51, 1993 SCR (1) 81
14 AIR 1966 SC 1644
15 (1986) 3 SCC 156
16 1991 AIR 101, 1990 SCR Supl. (1) 142
17 (1995) 6 SCC 289

7. 6
The Apex Court’s Verdict
Therefore, in a contract of insurance the rates of insurance must be totally reasonable,
as should be the premium amount. If both are arbitrary and opposed to public policy then
the whole contract is liable to be set aside. Thus, as the defendant’s policy terms were
unconscionable and opposed to public policy altogether, it was constitutionally void-in-
law and thus liable to be set aside by the High Court.