Report No. 190

Law Commission's views on the responses

4.3.1 The Law Commission has carefully considered the wide range of responses received to its proposal for an independent grievance redressal mechanism. While the Commission is conscious that there are bound to be different points of view to any proposal for change, the present proposal for an independent GRA must be viewed as having received more or less a positive response barring a few who would like the status quo to continue. The Commission is of the firm view that the existing system of Ombudsman, who is not necessarily a person with judicial background, is not satisfactory from the point of view of consumers and policyholders or even from the point of view of the insurers.

The said scheme in the Regulations which does not permit the insurer to question the decision of the Ombudsman but which permits the insured to reject the same, appears to be contrary to the principles of equality to access to justice. In order to instill a degree of confidence in the policyholders and insurers, particularly in the changed scenario where a number of private players are in the market, it is imperative to have an independent, transparent and accountable grievance redressal mechanism to address the concerns of the policyholders. The Commission, therefore, cannot agree with the suggestion that the existing system of Ombudsman should be continued.

4.3.2 The Commission accepts the suggestion that it should be statutorily mandatory for every insurer to put in place an in-house grievance redressal mechanism which should be fair and transparent and subject to supervision by the IRDA. It is only after exhausting the remedy of approaching the in-house mechanism, that a complaint should be entertained by the GRA. Of course, where a complaint remains un-attended to by the in-house mechanism for a maximum period to be spelt out in the statute itself, preferably sixty days, it will be open for such person/ complainant to approach the GRA. The internal mechanism, it is obvious, must be made to conform to the principles of natural justice and also to a right of personal hearing and a reasoned order must be made.

4.3.3 The Commission also accepts the suggestion that the IRDA should itself appoint Adjudicating/ Investigating Officers to adjudicate violations of the Act, Rules and Regulations by insurers, insurance intermediaries and insurance agents and these officers will also have the power to levy the penalties as provided for in the Act.

There will be an appeal from the decision of the Adjudicating/ Investigating Officer to the IAT.

4.3.4 The Commission also accepts the suggestion that the respective scope of powers of GRA and IAT should be clearly spelt out. There will be one further statutory appeal from the decision of the IAT to the Supreme Court. The GRA as the primary authority, as well as the IAT, which is the appellate authority, are dealing with civil rights of parties and are not adjudicating any public law issues or rights. If, on the other hand, the GRA or IAT are dealing with public law issues or rights, it would have become necessary to provide judicial review before the High Court as decided in L. Chandrakumar v. Union of India, (1997) 3 SCC 261.

Yet another aspect of the matter is that though technically the orders of the GRA or IAT can be questioned under Article 226/227 of the Constitution of India, in the High Court, the High Court will not ordinarily exercise its discretionary jurisdiction if an effective alternate remedy is provided and that is why we are recommending a statutory appeal from the GRA to the IAT and then from the IAT to the Supreme Court. The decision of the GRA will be enforceable as a decree of a civil court. The Commission also accepts the suggestion of the levy of an adjudication fee but this will only apply to such of those complainants who are in an economically sound position and not to small policyholders.

4.3.5 The Law Commission has also considered the question of the tenure of members of the GRA and IAT as well as the question of their removal. The nature and composition of the GRA now proposed is akin to that of the District Consumer Forum under the Consumer Protection Act, 1986. The other model of a similar tribunal is under the Administrative Tribunals Act, 1985. The Commission is aware that in both these fora, the tenure of a member or President is for a fixed term of five years and the age of retirement is 65 years.

The Law Commission would like to ensure that both the GRAs the IATs are independent and accordingly recommends that the appointments to these two bodies should not be for any fixed tenure but with the age of retirement fixed at 65 years. Since it is 35recommended that one of the qualifications for being appointed as member, whether judicial or technical, is at least 20 years' experience, it is only appropriate that such persons are not appointed for a tenure but permitted to hold office till the age of 65 years.

4.3.6 As regards, removal of the President and Members for proven misbehaviour or incapacity, the Commission recommends that insofar as the President and Members of GRA are concerned, they can be removed for proven misbehaviour or incapacity after an enquiry made by a Judge of the High Court and in which enquiry the President or the Member concerned will be informed the charges and given a reasonable opportunity of being heard in respect of those charges. As regards the President or Members of the IAT, the procedure for removal on grounds of proven misbehaviour or incapacity will be the same with one difference. The enquiry will be made by a Judge of the Supreme Court. It is hoped that this will ensure a sufficient degree of independence to the GRA as well as the IAT.

4.3.7 The salary and other terms and conditions applicable to the President and Members of these bodies should be left to be prescribed by the Central Government by way of rules. It is expected that these will correspond to the terms and conditions applicable to members of other statutory tribunals performing similar functions.

Back

Index

Next