Supreme Court Partially Allows Appeals Regarding Advocate Fee Dispute: Insurance Companies to Adhere to 2009 and 2014 GIPSA Fee Schedules

Date of the Judgment: 02 July 2018

Citation: 2018 INSC 601

Judges: A.K. Sikri, J., Ashok Bhushan, J.

Can a Public Interest Litigation (PIL) be used to resolve a dispute over advocate fees between insurance companies and their lawyers? The Supreme Court of India recently addressed this question in a set of appeals filed by four insurance companies. The core issue revolved around whether the High Court was correct in directing the insurance companies to adhere to a specific fee schedule for their empanelled advocates, particularly when the companies claimed to be following a later, revised schedule. The bench consisted of Justices A.K. Sikri and Ashok Bhushan, with the judgment authored by Justice Ashok Bhushan.

Case Background

The case originated from a motor accident claim (FAO No. 2604 of 2013) before the Punjab & Haryana High Court. During the hearing, the Single Judge noted the absence of the insurance company’s lawyer despite notice. The judge observed that the insurance companies’ officials were manipulating fee structures and not properly assisting their counsel, causing delays and losses. This led to the judge treating the issue as a matter of public importance, and a Public Interest Litigation (PIL) was registered.

The four insurance companies involved were United India Insurance Co. Ltd., Oriental Insurance Co. Ltd., New India Assurance Co. Ltd., and National Insurance Co. Ltd. The advocates claimed that the insurance companies were not paying them according to the fee schedules approved by the General Insurers’ (Public Sector) Association of India (GIPSA). The High Court directed the insurance companies to adhere to the GIPSA fee schedules of 2004, 2009, and 2014 and to pay all outstanding dues. The insurance companies appealed this decision to the Supreme Court.

Timeline

Legal Framework

The core of the dispute revolves around the fee schedules issued by the General Insurers’ (Public Sector) Association of India (GIPSA). GIPSA is an informal, non-statutory body formed by the four national insurance companies to facilitate consultations and bring uniformity in their actions. The insurance companies argued that GIPSA is merely a recommendatory body and its decisions are not binding.

The High Court had directed the insurance companies to adhere to three GIPSA fee schedules:
✓ Circular dated 21.02.2005, which approved a revised fee schedule effective from 01.11.2004.
✓ Circular dated 09.01.2009, which approved a revised fee schedule effective from 01.01.2009.
✓ Circular dated 18.03.2014, which approved a revised fee schedule effective from 01.04.2014.

The primary point of contention was the 2004 fee schedule. While GIPSA had initially fixed a fee of Rs. 7,500/-, the insurance companies, through an Inter Company Coordination Committee (ICC) meeting on 16.03.2005, revised this to Rs. 5,000/- for appeals filed by claimants and Rs. 6,000/- for appeals filed by the companies, effective from 01.04.2005. The advocates argued that they were entitled to Rs. 7,500/- per case, irrespective of who filed the appeal.

Arguments

Arguments by the Insurance Companies (Appellants):

• The High Court erred in using Public Interest Litigation (PIL) to settle a contractual dispute between a client and their advocate.
• Payment of professional fees is a private matter and should not be the subject of a PIL.
• GIPSA is a non-statutory, recommendatory body, and its decisions are not binding on member insurance companies.
• The insurance companies were already following the 2009 and 2014 GIPSA fee schedules, and there was no need for the High Court to intervene.
• The fee schedule of 2004 was revised by the Inter Company Coordination Committee (ICC) meeting on 16.03.2005, and the revised schedule was being followed.
• Advocates had accepted the revised fees without protest.

Arguments by the Advocates (Respondents):

• The High Court was justified in taking suo moto cognizance of the matter as it involved issues of public interest.
• The dispute was not purely contractual, as the administrative decisions of the insurance companies affected their relationship with empanelled advocates.
• GIPSA’s decisions are binding on member insurance companies, as they voluntarily agree to follow them.
• The insurance companies could not modify the 2004 GIPSA fee schedule through the ICC meeting.
• The advocates were entitled to Rs. 7,500 per case as per the original 2004 GIPSA schedule.
• Fees should also be paid for appearances in Lok Adalats/Mediation Centers and in cases where notices are accepted on the Court’s asking.

Submissions Table

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame issues in a separate section. However, the primary issue before the court was:

✓ Whether the High Court was correct in directing the insurance companies to adhere to the 2004 GIPSA fee schedule in a Public Interest Litigation, especially when the companies claimed to be following later schedules?

Treatment of the Issue by the Court

Authorities

The Supreme Court did not explicitly cite any case laws or legal provisions in its judgment. The court primarily focused on the factual matrix of the case and the submissions of the parties. The Court considered the following:

✓ GIPSA Circular dated 21.02.2005: Regarding revised fees schedule of advocates/investigators w.e.f. 01.11.2004.

✓ GIPSA Circular dated 09.01.2009: Regarding approved and revised fees schedule by GIPSA w.e.f. 01.01.2009.

✓ GIPSA Circular dated 18.03.2014: Regarding approving the advocates/investigators fee w.e.f. 01.04.2014.

✓ Inter Company Coordination Committee’s Meeting dated 16.03.2005: The meeting of the Chandigarh Regional Officers of all four insurance companies, which revised the 2004 fee schedule.

Treatment of Authorities by the Court

Judgment

The Supreme Court partly allowed the appeals filed by the insurance companies. The Court held that the High Court should not have entertained the issue regarding the 2004 GIPSA fee schedule in a Public Interest Litigation (PIL), especially since the insurance companies were already following the 2009 and 2014 schedules. The court modified the High Court’s judgment as follows:

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• GIPSA Circular dated 21.02.2005: The direction of High Court directing insurance companies to adhere to fees schedule issued by GIPSA dated 21.02.2005 w.e.f. 01.11.2004 is set aside. The Court clarified that any payment made as per this circular shall be treated as final and not to be re-opened.
• GIPSA Circular dated 09.01.2009 and 18.03.2014: The insurance companies shall adhere to the schedule framed by GIPSA, i.e. 01.01.2009 and 01.04.2014, and fee wherever payable shall be paid and balance wherever payable shall be paid as admitted by insurance companies themselves before the High Court.

The Court also set aside the High Court’s direction regarding the payment of interest.

The Court observed, “The issue relating to non-payment of fee of empanelled advocates as per Circular dated 01.11.2004 could not have been undertaken in the Public Interest Litigation, more so, when the same was replaced by subsequent circulars of 2009 and 2014, which circulars were adhered to by the insurance companies.”

The Court further stated, “We, thus, are of the view that entertainment of the issue regarding payment of fee as per circular dated 21.02.2005 by GIPSA or subsequently modified by proceeding dated 16.03.2005 w.e.f. 01.04.2005 ought not to have been gone in the writ petition and directions by the learned Single Judge in the above regard deserves to be set aside.”

The Court clarified, “We have decided these appeals on its own facts, which may not be referred to and relied as a precedent since, we have expressly left questions open.”

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the following factors:

✓ The Court emphasized that the core issue was the fee structure of empanelled advocates, which is essentially a contractual matter between the insurance companies and their advocates.

✓ The Court noted that the High Court’s intervention was not warranted, especially since the insurance companies were already following the 2009 and 2014 GIPSA fee schedules.

✓ The Court highlighted that the 2004 fee schedule was modified by the insurance companies through an internal committee meeting, and the revised schedule was being followed.

✓ The Court found that the PIL was not the appropriate forum to resolve a dispute that was essentially a contractual matter and did not directly impact “poor litigants,” which was the basis for the PIL’s registration.

The sentiment analysis of the reasons given by the Supreme Court is as follows:

Fact:Law Ratio

The court’s reasoning was more influenced by the factual aspects of the case, such as the existence of the 2009 and 2014 schedules and the modification of the 2004 schedule, than by pure legal considerations.

Logical Reasoning

Key Takeaways

• Public Interest Litigation (PIL) is not the appropriate forum to resolve contractual disputes between clients and their advocates.
• Insurance companies are bound to follow the GIPSA fee schedules that they have adopted, but they can modify the same through internal committee meetings.
• Courts should be cautious in intervening in matters that are essentially contractual in nature, especially when there is no direct impact on public interest.
• The Supreme Court has clarified that its decision is based on the specific facts of this case and should not be treated as a precedent for other cases.

Directions

The Supreme Court gave the following directions:

✓ The direction of the High Court directing insurance companies to adhere to the fee schedule issued by GIPSA dated 21.02.2005 w.e.f. 01.11.2004 is set aside. Any payments made as per this circular will be treated as final and not to be re-opened.

✓ The insurance companies shall adhere to the fee schedules framed by GIPSA, i.e., 01.01.2009 and 01.04.2014. Any outstanding fees as per these schedules shall be paid.

✓ The direction issued by the High Court regarding the payment of interest is set aside.

Specific Amendments Analysis

There were no specific amendments discussed in this judgment.

Development of Law

The ratio decidendi of this case is that a Public Interest Litigation (PIL) is not the appropriate forum to resolve contractual disputes between clients and their advocates, especially when the dispute is about fee payment and the client is already adhering to a revised fee schedule. The Supreme Court has reinforced the principle that PILs should be used to address issues of public interest and not to settle private disputes.

Conclusion

The Supreme Court’s judgment provides clarity on the scope of Public Interest Litigation and its applicability to contractual disputes. The Court emphasized that PILs should address issues of public concern and not be used to settle private matters. The insurance companies were directed to adhere to the 2009 and 2014 GIPSA fee schedules, while the direction to adhere to the 2004 schedule was set aside. This decision underscores the importance of maintaining a clear distinction between public interest matters and private contractual disputes.