Public insurance scheme eligibility must be fair and non-arbitrary; restrictive salaried-only criteria were struck as unconstitutional.

A public authority's life insurance scheme, though contractual in form, remained subject to Article 14 standards of fairness, reasonableness, and non-arbitrariness because it had a public character and served a social security purpose. A writ challenge was maintainable against the scheme's eligibility conditions even without a concluded contract. Restricting term insurance to salaried persons in Government, quasi-Government, or reputed commercial firms was held to lack a rational nexus with the scheme's object of extending low-cost protection more broadly, including to unorganised and self-employed persons. The impugned eligibility clause was therefore unconstitutional and severable, while the remaining scheme could operate independently.

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Issues: (i) Whether the writ petition was maintainable to challenge the conditions of a life insurance scheme framed by a public authority. (ii) Whether restricting the term insurance scheme to salaried persons in Government, quasi-Government, or reputed commercial firms was a valid classification or an unconstitutional and severable condition.

Issue (i): Whether the writ petition was maintainable to challenge the conditions of a life insurance scheme framed by a public authority.

Analysis: The scheme had a public character because it was offered by an instrumentality of the State in the field of life insurance, which is a social security measure and not a purely private commercial arrangement. Even in contractual matters, State action and the action of its instrumentalities remain subject to the requirements of fairness, reasonableness, and non-arbitrariness under Article 14. The absence of a concluded contract did not bar judicial review where the challenge was to the constitutional validity of the conditions governing access to the scheme.

Conclusion: The writ petition was maintainable.

Issue (ii): Whether restricting the term insurance scheme to salaried persons in Government, quasi-Government, or reputed commercial firms was a valid classification or an unconstitutional and severable condition.

Analysis: The insurance policy was intended to provide low-cost protection to a wide segment of society, including persons in the unorganised and self-employed sectors. Restricting eligibility to salaried persons in specified establishments excluded large sections of the population without a sufficient rational nexus to the object of the scheme. The Court held that over-emphasis on classification could defeat equality, and that the impugned clause was arbitrary, unfair, and inconsistent with the constitutional mandate of socio-economic justice. The offending condition was severable, while the remaining eligibility terms could stand.

Conclusion: The restrictive clause was unconstitutional and the rest of the scheme was valid.

Final Conclusion: The constitutional challenge succeeded in respect of the impugned eligibility restriction, and the appeals failed because the remaining terms of the scheme were capable of operating independently.

Ratio Decidendi: A public authority offering a contractual scheme with a public element must ensure that its eligibility conditions are fair, reasonable, and non-arbitrary under Article 14, and a condition that unjustifiably excludes a large section of intended beneficiaries is liable to be struck down if severable.

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