Insurance Company Can't File Writ To Challenge Compensation Granted To Beneficiary Under Govt Welfare Scheme: Allahabad High Court

The Allahabad High Court has held that an insurance company cannot invoke the writ jurisdiction under Article 226 of the Constitution to challenge compensation awarded to a beneficiary under a government welfare scheme by relying on alleged violations of the Memorandum of Understanding (MoU) executed between the insurer and the State Government.It held that such a dispute is essentially contractual in nature and must be pursued before an appropriate civil, commercial or arbitral forum. The Court observed that beneficiaries under the scheme are not parties to the MoU and cannot be compelled to defend disputes arising out of contractual obligations between the insurer and the State.The bench of Justice Saral Srivastava and Justice Garima Prashad held,“The extraordinary jurisdiction under Article 226 cannot be permitted to become a routine remedy available to Insurance Companies for challenging compensation determinations under welfare schemes merely by alleging breach of the Memorandum of Understanding with the State Government. Entertaining such petitions would convert the writ jurisdiction into a parallel appellate forum for adjudicating inter se contractual disputes between the insurer and the State Government, thereby defeating the object of the Scheme.”The case arose after the husband of Respondent no. 1 died in a road accident on November 29, 2018. She sought compensation under the Mukhyamantri Kisan Evam Sarvhit Bima Yojna, but the Insurance company rejected the claim as time-barred under the Scheme. Pursuant to directions issued by the High Court in earlier proceedings, the District Magistrate, Kanpur Nagar reconsidered the matter and, by order dated November 29, 2025, directed payment of ₹5 lakh to the widow.Insurance company challenged this order in the present writ petition, on grounds that the Scheme is governed by the terms of MoU it had signed with the State Government, and the District Magistrate could not award compensation in a manner that went outside those terms. It also urged that the question of delayed claims and limitation under the Scheme, decided by a Division Bench of the High Court in Gautam Yadav v. State of U.P., is pending before the Supreme Court, where the operation of that judgment has been stayed.On maintainability of the writ petition, the Court observed that the Mukhyamantri Kisan Evam Sarvhit Bima Yojna is not ordinary commercial insurance between private parties but a welfare measure framed by the State to give quick financial support to poor farmers and persons in allied occupations when the sole earning member of the family dies or is disabled in an accident. “The beneficiaries under the Scheme are neither parties to the Memorandum of Understanding nor to the contractual arrangement between the petitioner and the State Government. Their entitlement arises from the welfare Scheme framed by the State and not from the contractual rights and obligations existing inter se between the petitioner and the State Government.”Drawing a distinction between a claim to enforce a welfare entitlement under a government scheme and a dispute over contractual liability between the insurer and the State, the Court held that a beneficiary may seek mandamus under Article 226 but the insurer stands differently placed, asserting no statutory or constitutional right and seeking only to enforce the terms of the Memorandum of Understanding on limitation, claim procedure and allocation of liability.The Court relied on State of Bihar v. Jain Plastics and Chemicals Ltd., Kerala State Electricity Board v. Kurien E. Kalathil and Joshi Technologies International Inc. v. Union of India, in which the Supreme Court has held that disputes over the interpretation, enforcement and breach of contracts lie in private law and belong before civil, commercial or arbitral forums.The pendency of the proceedings arising from Gautam Yadav did not assist the insurer either. The Court noted that the Division Bench there had found the limitation prescribed under the Scheme arbitrary and unreasonable and directed that claims made within three years of the death or of the rejection be treated as within time, a ruling that altered a general term of the Scheme and bore directly on the insurer's obligations. It was held that no such questions were involved in the present case. Setting out what would follow if such petitions were entertained, the Court observed,“Poor farmers, widows and dependent family members, already devastated by the accidental death of the sole breadwinner of the family, would be compelled to run from court to court defending constitutional proceedings initiated by the Insurance Company merely because the insurer disputes its contractual liabilities towards the State Government. Welfare compensation intended for immediate financial relief cannot be permitted to be indefinitely obstructed until the Insurance Company is fully satisfied regarding every contractual or procedural aspect of its arrangement...

Insurance Company Can't File Writ To Challenge Compensation Granted To Beneficiary Under Govt Welfare Scheme: Allahabad High Court

Upasna Agrawal

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Insurance Company Can't File Writ To Challenge Compensation Granted To Beneficiary Under Govt Welfare Scheme: Allahabad High Court

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