Sumant Sud vs The Insurance Regulatory and Development Authority

K. Kannan, J.

This Writ petition has been filed for quashing the categorization of licensed surveyors and loss assessors differently depending on the principal character of survey work, as a purported measure of rationalization for entrustment of work and to secure optimal performance from the surveyors by the Insurance Regulatory and Development Authority (IRDA). The petitioner is himself a licensed surveyor and an approved valuer and through this writ petition, the petitioner seeks for the relief of declaration that the process of categorization is wholly arbitrary, illegal and against the principles of natural justice.

The petitioner is empanelled as a surveyor and loss assessor by the then four subsidiaries of General Insurance Corporation: (i) National Insurance Company Limited (ii) the New India Assurance Company Limited (iii) the Oriental Insurance Company Limited and (iv) United India Insurance Company Limited, to work in respect of transactions of Insurance underwritten by them. He claims to be a surveyor with certain other private insurance companies as well. The petitioner''s contention is that earlier, the Controller of Insurance, New Delhi had been granting licenses to the Surveyors and Loss Assessors in accordance with the provisions of the section 64UM of the Insurance Act, 1938 and then by the IRDA, with effect from 19.04.2000, when it was established.

It would appear that on 20.11.2000, IRDA had caused the issue of a notification titled ''Insurance Surveyors and Loss Assessors (Licensing, Professional Requirements and Code of Conduct) Regulations, 2000'', as this was in exercise of IRDA''s powers conferred by sections 42D, 64UM, and 114A of the Insurance Act, 1938 (4 of 1938) and section 26 of the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999). Chapter V of the said notification provided for the categorization of the surveyors and loss assessors as falling within 5 areas of activity.

The criteria for the categorization were: (i) Professional Qualification (ii) Training undergone, (iii) Experience as a surveyor and loss assessor and any other relevant experience and (iv) any other criteria as may be specified by the authority from time to time. Section 14(1) of this chapter also provided that the categorization shall be done and reviewed from time to time on the basis of a point system and that the categorization shall be spilt as A, B and C. The petitioner also states that there was a categorical mention that the surveyors and loss assessors shall be eligible to carry on the work as per the categorization specified in the license.

The respondent issued a public notice to all surveyors and loss assessors seeking mandatory furnishing of information by way of a ''surveyor''s information form'' to which the petitioner complied by filling up the form and sending the same to the respondent specifying the nature of works done, quantum of loss assessed and number of surveys done. Upon the receipt of his application and several other applications from all other surveyors, a surveyor and loss assessor committee for existing surveyors was appointed by the IRDA under the chairmanship of a retired Chief Judge. The committee, after going through the details of the categorization process, recommended a point based system for categorization taking in to consideration the academic qualifications approved by Insurance Institute of India and Institute of surveyors and loss assessors, training, highest assessment in professional career, number of surveys done in the last three years and the quantum of loss assessed.

The petitioner''s contention is that a peculiar feature of this public notice was that the petitioner who up till now was doing work in all the department / classes of insurance was informed that he would be permitted to carry out survey and loss assessment work only in three departments after the notification of categorization by IRDA. The challenge now is that the petitioner who has been carrying out work in all the departments of insurance for which he is technically qualified and is having a sufficiently long experience in the related fields has been arbitrarily fettered in his expanse of work in all departments and is forced to opt only for 3 areas of insurance work.

The counsel of the petitioner submits that there is a hierarchy prevailing in the insurance set-up which is concerned with the allocation of work to the surveyors and loss assessors depending upon the nature of work and quantum of loss. On the account of the location of offices of the insurance companies, an automatic favored hierarchy exists and percolated in the allotment of survey work. The counsel would attempt to exemplify the point by submitting that the entire state of Himachal Pradesh does not have a single ''A'' category surveyor in Fire, Marine, Miscellaneous and Engineering general insurance business and only one ''A'' category surveyor in Motor Insurance (as per the list provided on the website of IRDA dated 30.03.2002). This lack of ''A'' class surveyor in Himachal Pradesh cannot in any way be construed to mean that no surveyor of such high caliber and capability exists in the entire state of Himachal Pradesh and surveyors have always been deputed from outside. The counsel would argue that such a method of fixation would further accentuate the anomaly in the allotment of survey work and would prove to be prejudicial to the progress of the surveyors and loss assessors stationed in small town and cities. The counsel thus submits that this act of categorization is apparently against the principles of fair play, equity, and natural justice and would also act against the interest of general public. According to the petitioner that though these categories largely fall into 5 major departments, they do not stand in isolation, the works overlap. The act of the IRDA in limiting the work for a surveyor or loss assessor to three departments of insurance would in fact only limit the quality of service and would affect the right of the surveyors and loss assessors to work freely in their profession and infringe on the guaranteed right to life and personal liberty. IRDA did not take the complete data / work profile of the surveyors working for a long time into full consideration. The stress was put on the basis of the ''quantum of losses assessed in the last three financial years''. As a result, surveyors who had done more work in the previous years but could not maintain the level owing to personal / or medical reasons, got classified in lower classes.

The counsel for the petitioner also submits that IRDA had advertised that regional committees would be set up for the categorization exercise, but IRDA had set up only one single committee and took into consideration the data as filed by the surveyors in their respective ''information forms'' without any verification. The counsel would argue that to accept data without any verification and then await complaints would lead to total chaos and would severely jeopardize the rights of meritorious surveyors and loss assessors. Subsequently, on 11.09.2001, IRDA unilaterally fixed the limits to various classes of insurance business and posted the same on the website. There was no direct correlation between the data furnished in the surveyor''s information forms and the financial limits fixed by IRDA. There were no open discussions with the surveyors and loss assessors in adopting of this categorization nor were there any exchange or feedback, indicating that IRDA was acting unilaterally and arbitrarily. This categorization has far reaching consequences not only on surveyors and loss assessors but also on the general public at large. According to the petitioner, if the system of categorization is made transparent and open, involving discussions and interactions with representatives of the Insurers, surveyors and loss assessors from each state and members of IRDA a more comprehensive and objective picture can emerge leading to the regulated and orderly growth of the insurance surveyors and loss assessors of high caliber and integrity.

The objection of the petitioner is also against the assessment made on financial values of the subject of survey and take the same to be relevant to the ranking assigned without involving a candidate in any form of interview. The decision now arrived at, the petitioner apprehends, is only on mere surmises and based on the unauthentic information received from the particular surveyors and loss assessors. The respondents could not be allowed to conclude the rights of the petitioner and other similarly situated persons on such a non-objective consideration. The petitioner would argue that despite numerous representations being submitted to the respondents to address the highlighted shortcomings in the new policy sought to be introduced by faulty appraisal procedures, the respondents have still gone ahead to implement this scheme of categorization in unduly hasty, arbitrary and irrational manner and prays the same to be quashed.

In response to the averments made by the petitioner, the IRDA has the following contentions in its written statement:

"1. That Parliament has enacted the IRDA act and the IRDA has been established under this act as a statutory regulatory body for ensuring orderly growth of the insurance industry. The IRDA is the statutory expert body endowed with the duties, powers and functions for the overall regulation of the insurers and insurance intermediaries, like the insurance agents, surveyors and loss assessors etcetera.

Under the section 26(e) of the IRDA act, the IRDA has been empowered to make relevant regulations. Under section 114A of the Insurance Act 1938, IRDA may make regulations to carry out the purposes of this act. Under the section 114A(2)(x) of the Insurance Act 1938, IRDA may frame regulations with regard to ''matters relating to the licensing of surveyors and loss assessors, their duties, responsibilities and other professional requirements under section 64UM.''

Under the section 42D and 64UM of the Insurance Act, 1938, the IRDA is also the licensing authority for persons who intend to act as surveyors or loss assessors and these sections also provide for various parameters of licensing. That is, IRDA is specifically empowered by the parliament to prescribe these professional requirements, by way of regulations.

With a view to promote the healthy growth of insurance industry, protecting the interests of the policy holder and with a view to bringing about professionalism in the field of surveyors and loss assessors, it was felt necessary to have categorization of surveyors and loss assessors. The same was discussed with the all the General Insurance Companies and the representatives of the Institute of Surveyors and Loss Assessors.

That, to bring about uniformity and professionalism in the field, the IRDA in the bonafide discharge of its functions and duties and exercise of powers vested in it, has framed the ''Insurance surveyors and loss assessors (Licensing, Professional Requirements and Code of Conduct) Regulations, 2000'' under section 25 of the IRDA Act.

That, a licensee cannot be said to be vested with any right to be classified as per his preference and that the licensee shall not be allowed to sit in judgment of his own cause.

That, the system of categorization is based on parameters that are based on various intelligible criteria, like the academic qualifications, Insurance Institute of India and Institute of surveyors and loss assessors qualifications, training, highest assessment, working experience including experience other than as surveyor, number of surveys in the last three years and the quantum of loss assessed. Based on these, the respondents in consultation with the surveyors and loss assessors committee have evolved the point system.

That the surveyors and loss assessors have been categorized based on the point system so evolved and as such the surveyors and loss assessors are free to work in the categories allotted, subject to the limits applicable.

The same point system for categorization is made applicable to all surveyors and loss assessors for arriving at the bench mark for the purpose of categorization, the same is neither discriminatory nor malafide. It indeed is a bona fide exercise of power by the statutory authority by prescribing the professional requirements.

That, if it is found that the surveyors and loss assessor has given false information, his license may be suspended or cancelled by the respondent.

That, an absence of categorization earlier should not be read to mean that there could be no categorization ever.

That, the revision of the financial limit has the effect of rationalization and is an improvement over the previous limits.

That, due public notice was issued to all surveyors and loss assessors in public newspapers and official websites. Information was also communicated through the General Insurance companies and the Indian Institute of surveyors and assessors, calling upon surveyors and loss assessors to submit their respective details. And that there was a due adherence to the principles of natural justice. A second opportunity was also given to surveyors and loss assessors who could not submit their details in the prescribed time. That, the petitioner was duly informed of the grades obtained in the departments and was also advised to furnish his option as to which of the three departments he would like to choose.

The petitioner being a mere licensee does not have any vested right to be granted all departments of his choice in isolation of the well evolved and structured point system. And as such all surveyors and loss assessors are licensees and have limited rights.

That, the basis of the categorization has a reasonable nexus with the object sought to be achieved, which is to protect the interests of the policy holders since the money of claims is paid off the public money and to regulate the process of survey on the basis of identified parameters, with a view to bringing professionalism in the field.

The object of fixing a financial limit is to ensure that the claims involving large amounts of money are surveyed and assessed properly by professionally experienced and more qualified surveyors and not handled flippantly.

That the interlinking of the departments as submitted by the petitioner is based on his own assumptions and has no relevance to the categorization process. The fact remains that any such assumed inter-linkage would have no effect on the categorization, which is done as per the regulations.

To ensure complete transparency, the IRDA displayed the point system on its website for the surveyors and loss assessors to see for themselves as to how they have been scored and categorized.

That, it is for the expert statutory body to evolve the system of categorization based on its own norms and criteria and that the same should not be questioned simply because these are not to the liking of the petitioner.

That the petitioner being only a licensee is not vested with any right to have opportunity for the minimum categorization. Based on the interest of the surveyor community; the respondents are allowed to have higher qualifications. Such an administrative matter, regarding fixation of norms cannot be interfered by this court. And the present writ petition is not the appropriate remedy.

That the categorization is neither unreasonable nor is it unjustified. And it does not lay any arbitrary restrictions on the petitioner''s profession and is not violative of the Articles 14, 19 and 21 of the Constitution of India."

Having carefully perused the submitted contentions and arguments on behalf of the petitioner, it becomes evident that surveying, as an activity is an extremely critical interface between policy holders and insurers in the event of a loss. As an activity ''surveying'' goes much beyond valuing a property or damage and involves dealing with aspects such as identification of cause of loss, nature of coverage under policy, the perils insured, admissibility of loss, compliance with conditions and warranties, adequacy of sum insured etcetera, each of which varies under different policies. With such a dynamically varying ambit of work, different surveyors licensed under the same blanket regime of license cannot be considered to be on a common pedestal of knowledge, experience and academic prowess. Licensing thus, may not be extrapolated to construe equal standards of competence. Also, It may not be a worthy proposition to assume that granting of such a license by the IRDA may entitle the license holder to be engaged for assessment of any loss.

That, the granting of a license to a surveyor or a loss assessor by the IRDA is a matter of privilege and not a matter of right. When one talks about licensing surveyors and obtains allotment of works, it is to be understood as a state largesse; it is granting of a special privilege or an opportunity and such a grant can not be by any means understood to being a matter of right which may be held in perpetuity, that too without being subjected to any restriction/modifications/alterations upon terms thereof. The parameter, which could be primarily checked for, is whether the norms fixed for the said grant are violative of the Article 14 of the Constitution of India.

The numerous considerations imbibed to formulate the matrix of assessment before releasing of the said grant is a matter well within the ambit of policies that could be issued by the authorities under the relevant context. I am of the view that if assessment is applied uniformly and consistently across the wide population of surveyors and loss assessors, it cannot per se, abrogate Articles 14, 19 or 21 of the Constitution of India. Consequently, I find no merit in the contentions of the petitioner with regard to these criteria as being arbitrary and unreasonable or illegal. Indeed, there is a presumption that statutory regulation and directions are not ''ultra vires'' if the power resides by express stipulations in the statute. The elaborate justification in the written statement exemplify the reasonableness of the new policy. I will find no reason to interfere in the execution and implementation of the said categorization rules as provided for in the ''Insurance Surveyors and Loss Assessors (Licensing, Professional Requirements and Code of Conduct) Regulations, 2000''.

The writ petition is dismissed. The parties are left to bear their own cost.