LIC of India and Others Vs Ashwani Kumar Kalta and Others

2025:HHC:31638

IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA.

LPA Nos. 45 to 48 of 2019 with CWP No. 2776 of 2022 & CWPOA No. 6554 of 2020

Reserved on 11.09	.2025
Date of decision: 1	5.09.2025
LPA No. 45 of 2019 Life Insurance Corporation of India & Anr.	…Appellants
Versus
Rajesh Kumar Thakur & Ors.	…Respondents
LPA No. 46 of 2019 Life Insurance Corporation of India & Anr. Versus	…Appellants
Himachal Pradesh Urban Development Autho	rity. ...Respondent
LPA No. 47 of 2019 Life Insurance Corporation of India & Anr. Versus	…Appellants
Devender Kumar Tandon & Ors.	...Respondents
LPA No. 48 of 2019 Life Insurance Corporation of India & Anr. Versus	…Appellants
Ashwani Kumar Kalta & Ors.	...Respondents.
CWP No. 2776 of 2022 Smt. Neena Thakur Versus	…Petitioner
H.P. Housing & Urban Development Authorit	y & Anr.

...Respondents

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CWPOA No. 6554 of 2020

Smt. Satya Devi

...Petitioner

Versus

Himachal Pradesh Housing and Urban Development Authority & Anr. ...Respondents

¶13

Co ram

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The Hon’ble Mr. Justice Vivek Singh Thakur, Judge. The Hon’ble Mr. Justice Sushil Kukreja, Judge.

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Whether approved for reporting? Yes.

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For the Appellants/: Mr. Ajay Sharma, Sr. Advocate with Mr. Narender Sharma, Advocate, for the appellants in LPA Nos. 45 to 48 of 2019.

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Petitioner(s) Mr. N. D. Sharma, Advocate for the petitioner in CWP No. 2776 of 2022.

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Mr. Shashi Shirshoo, Advocate, for the petitioner in CWPOA No. 6554 of 2020.

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LPA No. 45 of 2019

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For the Respondents: Mr. Shrawan Dogra, Sr. Advocate with Mr. Tejasvi Dogra and Ms. Bhanvi Negi, Advocates for respondents No.1 to 120.

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Mr. Anup Rattan A.G. with Mr. Manoj Chauhan, Addl. A.G. for respondent No.121.

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Mr. Chander Narayan Singh, Advocate and Mr. Anshul Gandhi, Advocate, for respondents No.122 and 123.

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LPA No. 46 of 2019

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Mr. Bhupender Gupta, Sr. Advocate with Mr. Janesh Gupta, Advocate for respondent.

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LPA No. 47 of 2019

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Mr. Sunil Mohan Goel, Sr. Advocate with Mr.Raman Jamalta, Advocate, for respondents No.1 to 8.

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Mr. Bhupinder Gupta, Sr. Advocate with Mr. Janesh Gupta, Advocate for respondent No.9.

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Mr. Anup Rattan, A.G. with Mr. Manoj Chauhan, Addl. A.G. for respondent No.10.

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LPA No. 48 of 2019

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Mr. Sunil Mohan Goel, Sr. Advocate with Mr. Raman Jamalta, Advocate for respondents No.1 to 37, 39 and 40.

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Respondent No.38 is stated to have died.

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Mr. Chander Narayan Singh, Advocate with Mr. Anshul Attri, Advocate for respondent No.41.

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Mr. Anup Rattan, A.G. with Mr. Manoj Chauhan, Addl. A.G., for respondent No.42.

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CWP No. 2776 of 2022

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None for respondent No.1.

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Mr. Ajay Sharma, Sr. Advocate with Mr. Narender Sharma, Advocate for respondent No.2.

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CWPOA No. 6554 of 2020

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Mr. Amit Singh Chandel, Advocate for respondent No. 1.

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Mr. Ajay Sharma, Sr. Advocate with Mr. Narender Sharma, Advocate, for respondent No. 2.

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Vivek Singh Thakur, Judge

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These matters, for involvement of common question of law and facts, to be decided on the basis of common documents, are being decided together.

¶46

LPA Nos. 45 to 48 of 2019 have been preferred by Life Insurance Corporation of India (for short the ‘ LIC ’) against the common judgment dated 25.04.2019, passed by learned Single Judge in CWP No. 1147 of 2016, titled as Raj Kumar Thakur & Ors. vs State of Himachal Pradesh & Or s.; CWP No. 1439 of 2016, titled as Devender Kumar Tandon & Ors. vs. Himachal Pradesh Urban Development Authority & Ors.; CWP No. 3134 of 2016, titled as H.P. Housing and Urban Development Authority VS. LIC of India & Anr.; and CWP No. 2007 of 2017, titled as Ashwani Kumar Kalta & Ors. vs. Himachal Pradesh Housing & Urban Development Authority & Ors., whereby decision taken in pursuance to order dated 06.10.2015, passed by this High Court in CWP No. 8821 of 2014 and 14 other connected writ petitions, in the meeting dated 23.11.2015, issued on 18.12.2015 (Annexure P-13 of CWP No. 1147 of 2016) by LIC of India, Divisional Office Kasumpti, has been quashed and set aside and LIC has been directed to pay pension and DA to the retirees of Himachal Pradesh Urban Development Authority (for short the ‘ HIMUDA ’), as per the Scheme with further direction not to withhold any amount of pension and DA

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in future payable to the present and prospective retirees, and LIC has also been restrained from raising any illegal demand for paying any additional amount other than which was mutually agreed in accordance with Scheme (Annexure P-8 of CWP No. 1147 of 2016), with observation that agreed amount, admittedly, already stands paid to the LIC.

¶50

CWP No. 2776 of 2022 has been preferred by wife of deceased employee of the HIMUDA, to whom family pension has not been disbursed despite submitting all requisite documents, seeking directions to pay the same as per Pension Scheme.

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CWPOA No. 6554 of 2020 has also been filed by wife of deceased employee of HIMUDA, seeking directions to release family pension alongwith consequential benefits as per Pension Scheme.

¶52

Serving as well as retired employees of HIMUDA had approached the Court by filing CWP Nos. 1147 of 2016, 1439 of 2016 and 2007 of 2017, challenging the act of LIC whereby LIC had refused to pay pension/family pension to the petitioners or families of the deceased employees of HIMUDA, who had retired or died after April, 2015, by laying challenge to the consideration order passed by LIC in its proceedings dated 23.11.2025 (Annexure P-13 referred supra) in pursuant to orders passed by this High Court in earlier writ petitions filed by some

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of employees of HIMUDA bearing CWP No. 8821 of 2014 alongwith connected writ petitions.

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CWP No. 3134 of 2016 was filed by HIMUDA being employer, seeking directions to the LIC, (a) to pay pension and upto date DA to the retirees of HIMUDA as per Scheme without any delay and, (b) not to withhold any amount of pension and DA in future payable to the retirees and prospective retirees, (c) to pay amount of pension and upto date DA from the date of wrong and illegal stoppage with interest @ 18% per annum till the date of payment, (d) to restrain the LIC from raising illegal demand for additional amount not payable under the scheme and (e) not to insist the application of terms and conditions of Master Policy but to strictly follow pension scheme mutually agreed (Annexure P-5 of CWP No. 1147 of 2016).

¶57

After repeal by State of Himachal Pradesh, of its earlier pension scheme, namely, “H.P. Corporate Sector Employees Pension, Family Pension and Commutation of Pension, Gratuity Scheme, 1999” vide notification dated 02.12.2004, and communicating inability to raise the fund of pension liabilities, HIMUDA considered the matter for creating a pension fund on its own by constituting a Committee vide letters dated 31.10.2025 and 16.11.2025. During this exercise, for having two sets of employees, i.e. one set covered under CPF scheme and another contributing to EPF, it was found that on

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account of length of service, CPF employee would not qualify for EPF pension scheme whereupon matter was sent to the government for approval vide letter dated 05.10.2006, but Finance Department of the Government of Himachal Pradesh expressed its inability to concur the proposal. Thereafter, pension scheme was examined by HIMUDA with EPF organisation but for having length of service less than 10 years, most of the employees were not eligible to receive pension under EPF pension scheme. Case of daily wage employees covered under CPF scheme was also declined by the EPF organization, therefore, HIMUDA took up the matter with LIC for exploring the possibility for implementing any pension scheme.

¶61

After having correspondence and meetings with LIC, Scheme known as “LIC Group Superannuation Cash Cumulative (Defined Beneficiary) Scheme” was revised as “Scheme of Group Superannuation (DA Linked)” (Annexure P-5 of CWP No. 1147 of 2016.

¶62

After approval of the Scheme from Board of Directors, approval for implementation of the Scheme was granted by the State Government vide communication dated 10.11.2008 (Annexure P-4 in CWP No. 1147 of 2016) and accordingly agreement was duly agreed and signed by the LIC with HIMUDA. HIMUDA had constituted a Trust with LIC for administration and implementation of the aforesaid Scheme

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vide Trust Deed dated 31.03.2008 (Annexure P-6 of CWP No. 1147 of 2016). In furtherance to the aforesaid Scheme, Rs. 8 crore was released to and received by LIC on 29.03.2008, Rs. 12 crore on 11.11.2008 and Rs. 1.62 crore on 31.01.2009. LIC had also disbursed pension to retirees already retired employees of HIMUDA.

¶66

Thereafter, LIC sent a sample of Master Policy to the HIMUDA, which was never accepted and approved by the HIMUDA, rather request was made to LIC to re-frame the policy as per agreed terms and conditions, but the request was neither replied nor policy was revised as per agreed terms and conditions.

¶67

Case of the HIMUDA and its employees is that parties had accepted the proposal given by the LIC vide letter dated 13.03.2008, and accordingly Trust was created by executing Trust Deed on 31.03.2008 and it culminated into a Scheme on 10.11.2008 and, therefore, LIC, on its own, was not entitled or competent to alter or change terms and conditions agreed upon between the LIC and HIMUDA and HIMUDA or its employees were not bound by proposed Master Policy, which was issued during February, 2010 i.e. after about 2 years of implementation of Pension Scheme agreed and accepted and acted upon between and by the parties, in furtherance whereto and LIC had also been disbursing the pension to the members of

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the Pension Scheme, who retired from 2004 onward but it had stopped disbursing the pension to the employees retired on March, 2014 onward and DA was also not paid w.e.f. July, 2013 on the ground of insufficiency of funds.

¶71

As per LIC, the terms and conditions of Pension Scheme as well as Trust Deed were subject to the terms and conditions to be notified by issuing ‘Master Policy’ as has already been mentioned in various clauses of the Scheme and Trust Deed.

¶72

Learned Single Judge after taking into consideration the respective stands of the parties and pronouncements of the Apex Court has allowed the prayer prayer of HIMUDA and employees of HIMUDA and rejected the plea of LIC.

¶73

Learned counsel for LIC has submitted that writ petitions deserved to be dismissed on the ground of (a) maintainability for want of locus of the petitioners to prefer the appeal, (b) involvement of disputed question of the fact, (c) for claiming benefits of pension on the basis of un-concluded contract and (d) on account of promissory estoppel.

¶74

It has been argued on behalf of LIC that policy was purchased by the Trust and, therefore, there is no contractual relationship between the LIC and the employees of HIMUDA or even between LIC and HIMUDA and, therefore, neither employees of HIMUDA nor HIMUDA was and is competent to file

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petition(s) assailing the policy related to the Pension Scheme, Trust Deed or Master Policy because the Scheme was and is being executed, through Trust created by executing Trust Deed but not through HIMUDA or its employees directly.

¶78

It has been further submitted that there are disputed questions of facts related to applicability of terms and conditions contained in Master Policy, acceptance thereof in the Scheme as well as Trust Deed, and also regarding the amount payable to the LIC as parties on both sides are interpreting the same terms and conditions of the Scheme according to their suitability. Therefore, it has been contended that such question cannot be decided in writ petition(s) filed by invoking Article 226 of the Constitution of India.

¶79

It has been submitted on behalf of LIC that as it was clearly mentioned in the Scheme as well as Trust Deed that terms and conditions contained in ‘Master Policy’ will be applicable for continuing the arrangements for pension, the claim of the HIMUDA as well as its employees based on Scheme of Group Superannuation (Annexure P-5 of CWP No. 1147 of 2016) or Trust Deed is misconceived because contract was not concluded till issuance of ‘Master Policy’ and preliminary discussion between the parties for finalising the terms and conditions of the Pension Scheme and creation of Trust cannot be made basis for claim by HIMUDA or its employees being

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preliminary steps and exercise towards concluding the contract which has been concluded on issuance of ‘Master Policy’ and, therefore, claim of the HIMUDA and its employees deserves to be rejected.

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Learned counsel for LIC has also submitted that by accepting the terms and conditions of the Scheme providing issuance of ‘Master Policy’ later on, in terms whereof LIC had agreed to run account in favour of Trust Deed and also for similar provisions contained in Clauses of Trust Deed, HIMUDA as well as its employees are estopped from relying upon initial Pension Scheme and Clauses incorporated in Trust Deed which were subject to issuance of ‘Master Policy’ and thus, it is argued that even if it is considered that HIMUDA and its employees have locus to file and maintain writ petitions in the subject matter, for their act, conduct and deed, through HIMUDA and Trust, direction issued by learned Single Judge deserves to be interferred.

¶84

Learned counsel for LIC has submitted that cover note issued by the Insurance Company is not an Insurance Policy and the Scheme being referred and relied upon by the HIMUDA and its employees was like a cover note and actual Insurance Policy/Pension Scheme is the ‘Master Policy’. It is submitted that construction of policy must be construed like any other contract on its own terms and, therefore, re-writing of

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contract or substituting the terms which were not intended by the parties is not permissible to the Court and terms of the contract have to be strictly read and natural meaning be given to it. No outside aid should be sought unless the meaning is ambiguous.

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It has been further submitted that in absence of concluded contract, Scheme of pension cannot be made basis as the contract was concluded after issuance of Master Policy. It is contended that acceptance of Scheme and terms and conditions of the Trust Deed was offered and acceptance whereof was never communicated to constitute a binding contract rather it was agreed that contract shall be governed by terms and conditions of the ‘Master Policy’. Further that an internal noting of process undertaken to arrive at an agreed contract does not constitute a communication of consent for acceptance of offer. 21. To substantiate this plea learned counsel placed reliance on Dawsons Bank Ltd. vs. Nippon Menkwa Kabushihi Kaish, AIR 1935 Privy Council 79; Bennet Coleman & Co. vs. Punya Priya Das Gupta, AIR 1970 SC 426; Associated Cement Companies Ltd. vs. The State of Rajasthan, AIR 1981 Rajasthan 133; Vasant Kumar Radhakishan Vora vs. The Board of Trustees of the Port of Bombay, AIR 1991 SC 14; B. L. Sreedhar & Ors vs. K. M. Munireddy (Dead) and Ors., AIR 2003 SC 578; Life Insurance Corporation of India vs. Raja Vasireddy Komalavalli

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Kamba & Ors., (1984) 2 SCC 719; Sasadhar Chakravarty & Anr. Vs. Union of India & Ors., (1996) 11 SCC 1; United India Insurance Co. Ltd. vs. Harchand Rai Chandan Lal, (2004) 8 SCC 644; Vikram Greentech India Ltd. & Anr. vs. New India Assurance Co. Ltd., (2009) 5 SCC 599; National Textile Corporation (M.P.) Ltd. vs. M. R. Jadhav, (2008) 7 SCC 29 and PSA Mumbai Investments Pte. Ltd. vs. Board of Trustees of the Jawaharlal Nehru Port Trust & Anr., (2018) 10 SCC 525 .

¶92

Learned counsel for the respondents referring United India Insurance Co. Ltd. vs. M.K.J. Corporation, (1996) 6 SCC 428; Modern Insulators Ltd. vs. Oriental Insurance Co. Ltd., (2000) 2 SCC 734; Beed District Central Coop. Bank Ltd. vs. State of Maharashtra & Ors., (2006) 8 SCC 514; Bharat Watch Co. vs. National Insurance Co. Ltd., (2019) 6 SCC 212; Union of India & Ors vs. N. Murugesan & Ors., (2022) 2 SCC 25; Shivram Chandra Jagarnath Cold Storage vs. New India Assurance Co. Ltd., (2022) 4 SCC 539; Manmohan Nanda vs. United India Assurance Co. Ltd. & Anr., (2022) 4 SCC 582 and Texco Marketing Private Ltd vs. Tata AIG General Insurance Co. Ltd. & Ors., (2023) 1 SCC 428 , has submitted that the principle governing disclosure, good faith and notice, founded on common law, principle of fairness are applicable in present case with more rigor as the LIC is extending its services in standard form contract, such as issuance contract, pension Scheme

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Contract, Master Policy and, therefore, it was duty of the Insurance Company to act in good faith, to disclose exclusion clauses etc. and give notice of the terms and conditions which were in addition to or in conflict with the Pension Scheme already discussed, approved and agreed between the parties as well as terms and conditions contained in the Trust Deed. He has further submitted that by applying doctrine of “blue pencil” in present case, the terms and conditions contained in ‘Master Policy’ in conflict with the Pension Scheme already agreed, deserve to be invalidated and have rightly been invalidated by the learned Single Judge and such terms are to be considered to have been deleted. Further that non-disclosure, misrepresentation amounts to fraud entitling to declare such hidden terms as a void, and incorporation of such terms in Master Policy, which were never disclosed, amounts to unfair trade practice and unfair contract. In this regard, specific reliance has been placed on following paras of judgment of Apex Court in Texco Marketing Private Ltd. vs. Tata AIR General Insurance Company Ltd. & Ors. (2023) 1 SCC 428:-

¶96

“2. The appellant secured a Standard Fire & Special Perils policy from the respondent on 28.07.2012. The policy was effective from 28.07.2012 to 27.07.2013. It was meant to cover a shop situated in the basement of the building. However, the exclusion clause of the contract specifies that it does not cover the basement. Due inspection of the shop was made which was actually

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situated on the other side of the road from the office of respondent No. 1. Not only this shop of the appellant, but yet another shop similarly situated, was also insured by respondent No. 1. The appellant continued to pay the premium promptly.

¶100

Adhesion contracts are otherwise called StandardForm Contracts. Contracts of Insurance are one such category of contracts. These contracts are prepared by the insurer having a standard format upon which a consumer is made to sign. He has very little option or choice to negotiate the terms of the contract, except to sign on the dotted lines. The insurer who, being the dominant party dictates its own terms, leaving it upon the consumer, either to take it or leave it. Such contracts are obviously one sided, grossly in favour of the insurer due to the weak bargaining power of the consumer.

¶101

11.The concept of freedom of contract loses some significance in a contract of insurance. Such contracts demand a very high degree of prudence, good faith, disclosure and notice on the part of the insurer, being different facets of the doctrine of fairness. Though, a contract of insurance is a voluntary act on the part of the consumer, the obvious intendment is to cover any contingency that might happen in future. A premium is paid obviously for that purpose, as there is a legitimate expectation of reimbursement when an act of God happens. Therefore, an insurer is expected to keep that objective in mind, and that too from the point of view of the consumer, to cover the risk, as against a plausible repudiation.

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Exclusion Clause

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12.An exclusion clause in a contract of insurance has to be interpreted differently. Not only the onus but also the burden lies with the insurer when reliance is made on such a clause. This is for the reason that insurance contracts are special contracts premised on the notion of good faith. It is not a leverage or a safeguard for the insurer, but is meant to be pressed into service on a contingency, being a contract of speculation. An insurance contract by its very nature mandates disclosure of all material facts by both parties.

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,,,,,,,,,,

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Duty of disclosure, good faith and notice

¶108

15.The principles governing disclosure, good faith and notice are founded on the common law principle of fairness. These principles are meant to be applied with more rigour in standard form contracts such as insurance contracts. Such an application is warranted much more when we deal with an exclusion clause. A very high standard of good faith, disclosure and due compliance of notice is required on the part of the insurer, keeping in view the unique nature of an insurance contract.

¶109

16.An act of good faith on the part of the insurer starts from the time of its intention to execute the contract. A disclosure should be a norm and what constitutes a material fact requires a liberal interpretation. It is only when an insurer is not intending to act on an exclusion clause, the aforesaid principles may not require a strict compliance. The three elements which we have discussed are interconnected and overlapping. It is the foremost duty of the insurer to give effect to a due disclosure and notice in its true letter and spirit. When an exclusion clause is introduced making the contract

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unenforceable on the date on which it is executed, much to the knowledge of the insurer, non-disclosure and a failure to furnish a copy of the said contract by following the procedure required by statute, would make the said clause redundant and non-existent.

¶113

Lord Denning succinctly describes the fallacy in making an inadequate disclosure in George Mitchell (Chesterhall) Ltd v Finney Lock Seeds Ltd. (1983) Law Reports Q.B. 284);

¶114

"None of you nowadays will remember the trouble we had - when I was called to the Bar - with exemption clauses. They were printed in small print on the back of tickets and order forms and invoices. They were contained in catalogues or timetables. They were held to be binding on any person who took them without objection. No one ever did object. He never read them or knew what was in them. No matter how unreasonable they were, he was bound. All this was done in the name of "freedom of contract." But the freedom was all on the side of the big concern which had the use of the printing press. No freedom for the little man who took the ticket or order form or invoice. The big concern said, "Take it or leave it." The little man had no option but to take it. The big concern could and did exempt itself from liability in its own interest without regard to the little man. It got away with it time after time. When the courts said to the big concern, "You must put it in clear words," the big concern had no hesitation in doing so. It knew well that the little man would never read the exemption clauses or understand them.

¶115

It was a bleak winter for our law of contract……"

¶116

18.In a recent judgment, this Court in Manmohan Nanda v. United Insurance (2022) 4 SCC 582, summarises the duty of an insurer and an insured to disclose any material facts:

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“ Uberrimae fidei

¶118

It is observed that insurance contracts are special contracts based on the general principles of

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full disclosure inasmuch as a person seeking insurance is bound to disclose all material facts relating to the risk involved. Law demands a higher standard of good faith in matters of insurance contracts which is expressed in the legal maxim uberrimae fidei.

¶122

Mac Gillivray on insurance law 13th Ed. has summarised the duty of an insured to disclose as under:

¶123

“...the assured must disclose to the insurer all facts material to an insurer's appraisal of the risk which are known or deemed to be known by the assured but neither known nor deemed to be known by the insurer. Breach of this duty by the assured entitles the insurer to avoid the contract of insurance so long as he can show that the non-disclosure induced the making of the contract on the relevant terms. 33 . Lord Mansfield in Carter v. Boehm (1766) 3 Burr 1905 has summarised the principles necessitating disclosure by the assured in the following words:

¶124

“Insurance is a contract of speculation.

¶125

The special facts upon which the contingent chance is to be computed lie most commonly in the knowledge of the assured only; the underwriter trusts to his representation, and proceeds upon confidence that he does not keep back any circumstance in his knowledge to mislead the underwriter into a belief that the circumstance does not exist,….

¶126

The keeping back such circumstance is a fraud, and therefore the policy is void. Although the suppression should happen through mistake, without any fraudulent intention, yet still the underwriter is deceived and the policy is void; because the risk run is really different from the risk understood and intended to be run at the time of the agreement.

¶127

The policy would be equally void against the underwriter if he concealed;...

¶128

Good faith forbids either party, by concealing what he privately knows, to draw the other into a bargain from his ignorance of the fact, and his believing the contrary”.

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The aforesaid principles would apply having regard to the nature of policy under consideration, as what is necessary to be disclosed are "material facts" which phrase is not definable as such, as the same would depend upon the nature and extent of coverage of risk under a particular type of policy. In simple terms, it could be understood that any fact which has a bearing on the very foundation of the contract of insurance and the risk to be covered under the policy would be a "material fact”.

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xxx xxx xxx

¶133

Just as the insured has a duty to disclose all material facts, the insurer must also inform the insured about the terms and conditions of the policy that is going to be issued to him and must strictly conform to the statements in the proposal form or prospectus, or those made through his agents. Thus, the principle of utmost good faith imposes meaningful reciprocal duties owed by the insured to the insurer and vice versa. This inherent duty of disclosure was a common law duty of good faith originally founded in equity but has later been statutorily recognised as noted above. It is also open to the parties entering into a contract to extend the duty or restrict it by the terms of the contract.”

¶134

On the principle of acting in good faith, it is held by this Court in United India Insurance Co. Ltd. v. M.K.J. Corporation (1996) 6 SCC 428, that it is the primary duty of the parties to a contract to do so,

¶135

“(6) It is a fundamental principle of Insurance law that utmost good faith must be observed by the contracting parties. Good faith forbids either party from concealing (non-disclosure) what he privately knows, to draw the other into a bargain, from his ignorance of that fact and his believing the contrary. Just as the insured has a duty to disclose, “similarly, it is the duty of the insurers and their agents to disclose all material facts within their knowledge, since obligation of good faith applies to them equally with the assured.”

¶136

(7) The duty of good faith is of a continuing nature. After the completion of the contract, no material alteration can be made in its terms except by mutual consent. The materiality of a fact is judged

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by the circumstances existing at the time when the contract is concluded…..”

¶140

A similar view is taken in Modern Insulators Ltd. v. Oriental Insurance Co. Ltd. (2000) 2 SCC 734;

¶141

“(8) It is the fundamental principle of insurance law that utmost good faith must be observed by the contracting parties and good faith forbids either party from non-disclosure of the facts which the parties know. The insured has a duty to disclose and similarly it is the duty of the insurance company and its agents to disclose all material facts in their knowledge since the obligation of good faith applies to both equally.”

¶142

21.We have already quoted with profit the classical passage of Lord Denning in George Mitchell (supra) on the degree of notice. Such a degree of notice mandates a party relying upon the exclusion clause to bring it to the knowledge of the other side, any failure to do so would non-suit the said party from placing reliance upon it, as held in Bharat Watch Company v. National Insurance Co. Ltd. 2019 (6) SCC 212;

¶143

"7. The basic issue which has been canvassed on behalf of the appellant before this Court is that the conditions of exclusion under the policy document were not handed over to the appellant by the insurer and in the absence of the appellant being made aware of the terms of the exclusion, it is not open to the insurer to rely upon the exclusionary clauses. Hence, it was urged that the decision in United India Insurance Co. Ltd. v. Harchand Rai Chandan Lal, (2004) 8 SCC 644, will have no application since there was no dispute in that case that the policy document was issued to the insured.

¶144

This submission is sought to be answered by the learned counsel appearing on behalf of the insurer by adverting to the fact that SCDRC construed the terms of the exclusion. SCDRC, however, did not notice the decision of this Court, and hence, NCDRC was (it was urged) justified in correcting the error having regard to the law laid down by this Court. The learned counsel urged that the appellant has

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been insuring its goods for nearly ten years and it is improbable that the appellant was not aware of the exclusion.

¶148

We find from the judgment of the District Forum that it was the specific contention of the appellant that the exclusionary conditions in the policy document had not been communicated by the insurer as a result of which the terms and conditions of the exclusion were never communicated. The fact that there was a contract of insurance is not in dispute and has never been in dispute. The only issue is whether the exclusionary conditions were communicated to the appellant. The District Forum came to a specific finding of fact that the insurer did not furnish the terms and conditions of the exclusion and special conditions to the appellant and hence, they were not binding. When the case travelled to SCDRC, there was a finding of fact again that the conditions of exclusion were not supplied to the complainant.

¶149

Having held this, SCDRC also came to the conclusion that the exclusion would in any event not be attracted. The finding of SCDRC in regard to the interpretation of such an exclusionary clause is evidently contrary to the law laid down by this Court in Harchand Rai (supra) However, the relevance of that interpretation would have arisen provided the conditions of exclusion were provided to the insured. NCDRC missed the concurrent findings of both the District Forum and SCDRC that the terms of exclusion were not made known to the insured. If those conditions were not made known to the insured, as is the concurrent finding, there was no occasion for NCDRC to render a decision on the effect of such an exclusion.”

¶150

On a discussion of the aforesaid principle, we would conclude that there is an onerous responsibility on the part of the insurer while dealing with an exclusion clause. We may only add that the insurer is statutorily mandated as per Clause 3(ii) of the Insurance Regulatory and Development Authority (Protection of Policy Holder’s Interests, Regulation 2002) Act dated 16.10.2002 (hereinafter referred to as IRDA Regulation, 2002) to the effect that the insurer and his agent are duty bound to

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¶153

provide all material information in respect of a policy to the insured to enable him to decide on the best cover that would be in his interest. Further, sub-clause (iv) of Clause 3 mandates that if proposal form is not filled by the insured, a certificate has to be incorporated at the end of the said form that all the contents of the form and documents have been fully explained to the insured and made him to understand. Similarly, Clause 4 enjoins a duty upon the insurer to furnish a copy of the proposal form within thirty days of the acceptance, free of charge. Any non-compliance, obviously would lead to the irresistible conclusion that the offending clause, be it an exclusion clause, cannot be pressed into service by the insurer against the insured as he may not be in know how of the same.

¶154

Doctrine of Blue Pencil

¶155

In such a situation, the doctrine of “blue pencil” which strikes off the offending clause being void ab initio, has to be pressed into service. The said clause being repugnant to the main contract, and thus destroying it without even a need for adjudication, certainly has to be eschewed by the Court. The very existence of such a clause having found to be totally illegal and detrimental to the execution of the main contract alongwith its objective, requires an effacement in the form of declaration of its non-existence, warranting a decision by the court accordingly.”

¶156

Direct beneficiaries of Pension Scheme are employees of HIMUDA. HIMUDA has taken initiative for formulating a Scheme to provide pension to its employees and Trust Deed has been executed between HIMUDA and LIC.

¶157

23

¶158

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¶159

Therefore, the responsibility of the HIMUDA to protect its employees’ interest as well as employees having right to protect their interest are definitely having locus to file and maintain the writ petition(s) against the LIC for the nature of the dispute between the parties.

¶160

Even otherwise plea of the LIC that it was dealing with the Trust but not with the HIMUDA is also falsified from the communications placed on record dated 15.09.2014 (Annexure P-8 of CWP No. 1147 of 2016) and 26.03.2015 (Annexure P-9 of CWP No.1147 of 2016), wherein communications by the LIC through its Manager (P&GS) have been addressed to CEO-cumSecretary, HIMUDA. From the other correspondence on record in various petitions, it is apparent that HIMUDA was involved in finalising the Scheme for pension, and to execute the said Scheme a Trust was created between the HIMUDA and the LIC. Thus, first ground assailing impugned judgment on ground of locus to file and maintain petition(s) is rejected.

¶161

Plea with respect to estoppel actually is applicable to LIC because in present case though in various clauses of Scheme and Trust Deed, there is reference of Master Policy but it is a fact that two years before issuance of Master Policy, LIC had accepted more than Rs. 21 Crores and had started disbursing pension and DA to the retired employees of the HIMUDA. Therefore, LIC was bound to act according to the terms

¶162

24

¶163

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¶164

and conditions of the Scheme of Group Superannuation as well as terms incorporated in the Trust Deed.

¶165

There is ample material on record as has also been considered by the learned Single Judge that contract was concluded in the year, 2008 when Trust Deed was executed and terms and conditions of Scheme of Group Superannuation was agreed and amount was received by the LIC and pension was started to be disbursed to the retired employees.

¶166

The ‘Master Policy’ had to supplement the terms already agreed but not to supplant such terms.

¶167

Even if plea of the learned counsel for LIC is accepted that Scheme Policy is merely a Cover Note and Master Policy is complete actual policy, then also no terms and condition can be permitted in Master Policy contrary to or in conflict with terms of the Scheme Policy (Cover Note). Terms of the Main Policy should be in extension or expansion of the terms projected agreed and incorporated in the Cover Note. New terms, in conflict with the terms and conditions of the Cover Note acted upon by parties, cannot be permitted to be imposed under the garb of clause providing issuance of Master Policy on subsequent date that too after two years as has been done in present case.

¶168

No doubt, there is reference of issuance of ‘Master Policy’ by the LIC in furtherance to the aforesaid contract, but

¶169

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¶170

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¶171

despite having such right, LIC was not competent and entitled to issue Master Policy having the terms of the contract in conflict with the provisions of already accepted and agreed terms and conditions and Pension Scheme, completely changing the nature of the Pension Scheme. The Master Policy, if any, was to be issued in consonance with the terms and conditions agreed upon between the contracting parties, particularly when contract stood concluded in the year, 2008 and was duly acted upon by the both parties. Therefore, reliance placed on by the LIC for its action and arriving at impugned decision is not sustainable and thus, rejected.

¶172

The issue involved in the present matter relates to public policy and the only issue to be decided was that as to whether contract stood concluded at the time of execution of Trust Deed and acceptance of Pension Scheme in the year, 2008 or not. Therefore, it cannot be said that issue involved in the present case is disputed question of fact which requires to be proved by leading oral or other evidence, rather this issue can be decided and has been decided on the basis of the documents placed on record alongwith petition(s) and reply(ies) filed thereto duly supported by the respective affidavit(s) of the party(ies) and, thus, this plea of the LIC is also not sustainable and is rejected.

¶173

26

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¶175

In Clause 1 (xi) of the Scheme (Annexure P-5 of CWP No. 1147 of 2016), it has been categorically stated that “Effective Date” in relation to the Scheme shall mean the 31^st of March, 2008, the date as from which the Scheme takes effect. This Scheme is complete document in itself having all terms and conditions of the Pension Scheme indicating the liabilities and responsibilities of the parties for which no further deliberation or explanation or clarification was required. Though in Clause 7 there is a reference of ‘Master Policy’ but as stated supra, the ‘Master Policy’ was a formality of issuing a Master Policy but in furtherance and in consonance with the Scheme already agreed between the parties. Any terms and conditions contained in the ‘Master Policy’ in conflict with the Pension Scheme, accepted and executed between the parties, has to be considered as unenforceable and non-existent in the Master Policy. The demands raised by the LIC contrary to the Pension Scheme is illegal and thus the learned Single Judge, has rightly set aside such demands.

¶176

In view of the above discussion and going through the entire material on record, we do not find any illegality, irregularity or perversity in the impugned judgment. Learned Single Judge has rightly appreciated the case law referred in the impugned judgment.

¶177

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¶179

Accordingly, appeals i.e. LPA Nos. 45 to 48 of 2019 are dismissed and CWP No. 2776 of 2022 and CWPOA No. 6554 of 2020 are allowed in terms of the prayer(s), with direction to the LIC to pay pension/family pension to the petitioner(s) therein strictly in terms of the Pension Scheme (Annexure P-5 of the CWP No. 1147 of 2016) already finalised between the parties and the Trust Deed (Annexure P-6 of CWP No. 1147 of 2016).

¶180

The appeals and petitions are disposed of in the aforesaid terms, so also the pending application(s), if any.

¶181

(Vivek Singh Thakur) Judge

¶182

(Sushil Kukreja) 15^th September 2025 Judge (sanjeev)

LIC of India and Others v. Ashwani Kumar Kalta and Others

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LIC of India and Others v. Ashwani Kumar Kalta and Others

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