Arbitrary limitation in insurance scheme struck down as unreasonable, with claim period extended to better serve beneficiaries.
A socio-beneficial insurance scheme for marginal farmers and bereaved families was held to be governed by a reasonable claim period. The Court found the rejection of a claim as time-barred unsustainable because it was filed within the condonable period reckoned from the date of death and policy expiry. It also held the scheme's short limitation period, with only limited condonation, to be arbitrary and unreasonable as it defeated the scheme's object and was inconsistent with the governing law on insurance contracts. The impugned rejection was quashed, and the limitation clause was replaced with a three-year period from the date of death or rejection of the claim.
Issues: (i) whether the rejection of the claim as time-barred was sustainable under the Scheme, and (ii) whether the limitation prescribed in the Scheme was arbitrary, unreasonable and liable to be struck down.
Issue (i): whether the rejection of the claim as time-barred was sustainable under the Scheme.
Analysis: The claim was lodged within the condonable period contemplated by the Scheme when reckoned from the date of death and the expiry of the policy period. The rejection was based on an erroneous understanding of the limitation clause and failed to account for the period available for condonation under the Scheme.
Conclusion: The rejection on limitation was unsustainable and was set aside.
Issue (ii): whether the limitation prescribed in the Scheme was arbitrary, unreasonable and liable to be struck down.
Analysis: The Scheme was a socio-beneficial insurance arrangement intended to protect marginal farmers and bereaved families. The Court held that a very short claim period, coupled with only a limited condonation power, defeated the object of the Scheme and was inconsistent with the governing law applicable to insurance contracts. Applying constitutional review of policy measures, the Court found the limitation clause to be contrary to reasonableness and fairness.
Conclusion: The limitation clause in the Scheme was held to be arbitrary and unreasonable and was substituted by a three-year period for filing claims from the date of death or rejection of the claim.
Final Conclusion: The writ petition succeeded, the impugned rejection order was quashed, and claims under the Scheme are to be processed on merits if filed within the substituted three-year period.
Ratio Decidendi: A limitation clause in a socio-beneficial insurance scheme can be struck down if it is arbitrary or unreasonable and defeats the object of the scheme, especially where it is inconsistent with the governing law applicable to insurance contracts.
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