IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 18th DAY OF MARCH 2019 BEFORE THE HON’BLE MR. JUSTICE ALOK ARADHE WRIT PETITION NOs.50144-146 OF 2015 (GM-RES) BETWEEN:
SMT. B.V. SUJATHA W/O B. JAYARAMA REDDY R/AT. No.532, 11TH CROSS 29TH MAIN, HSR 1ST SECTOR BENGALURU-560102. … PETITIONER (By DR. P. RAVI SHANKAR, ADV.) AND:
1. THE LIFE INSURANCE CORPORATION OF INDIA REPRESENTED BY THE CHAIRMAN “YOGAKSHEMA” JEEVAN BHIMA MARG CENTRAL OFFICE, PB No.19953 MUMBAI-400021.
2. THE SENIOR DIVISIONAL MANAGER LIC OF INDIA, DIVISIONAL OFFICE-I J.C. ROAD, BENGALURU-560 002.
3. THE SENIOR DIVISIONAL MANAGER LIC OF INDIA, DIVISIONAL OFFICE-II INDIRA NAGAR, BENGALURU-560038.
4. THE ZONAL MANAGER LIFE INSURANCE CORPORATION OF INDIA SOUTH CENTRAL ZONAL OFFICE JEEVAN BHAGYA, SAIFABAD HYDERABAD-500063.
5. THE CHIEF BRANCH MANAGER LIC OF INDIA BRANCH OFFICE NR SQUARE BRANCH BENGALURU-560002 … RESPONDENTS (By MR. SHIVAYOGI B. HALLUR, ADV., FOR R1 TO R5) - - -
These Writ Petitions are filed under Articles 226 & 227 of the Constitution of India, praying to direct the R-2 to revoke the termination of agency and order of forfeiture of renewal commission and direct release forfeited renewal commission along with interest of 12% P.A. from the date of due and etc.
These Writ Petitions coming on for preliminary hearing in ‘B’ group this day, the Court made the following:-
ORDER Dr.P.Ravi Shankar, learned counsel for the petitioner.
Sri.Shivyogi B.Hallur, learned counsel for the respondent Nos.1 to 5.
2. The petitions are admitted for hearing. With consent of the learned counsel for the parties, the same are heard finally.
3. In these petitions under Article 226 and 227 of the Constitution of India, the petitioner inter alia seeks a writ of mandamus directing the respondent No.2 to revoke the termination of agency and order of forfeiture of renewal commission and to direct release of the amount of renewal commission along with interest at the rate of 12%. The petitioner also seeks writ of certiorari for quashment of orders dated 08.06.2013, 13.12.2014 and 29.08.2015 passed by respondent Nos.2, 4 and 1, respectively. In order to appreciate the petitioner’s grievance, few facts need mention which are stated infra.
4. The petitioner was appointed as an insurance agent in the year 2001. The petitioner was performing her duties as an agent under a Development Officer who is an employee of respondent No.5 – Corporation. The petitioner received a communication dated 03.02.2012 informing her that her life insurance agency has been suspended. On the same day, by a notice, the petitioner was asked to submit an explanation within a period of one week. The aforesaid notice inter alia contained an allegation that the petitioner had collected premium from some policy holders and did not deposit the same with the Corporation. Another allegation contained in the show cause notice against the petitioner was that the receipts of which the details have been given by the petitioner are not genuine and were not issued by the said Senior Business Associate Collection Centre. The petitioner submitted an explanation on 10.02.2012 and made a request to evoke the suspension and to permit her to commence her insurance business. However, the aforesaid reply failed to evoke any response from the respondents.
5. The petitioner thereupon filed a writ petition before this Court which was disposed of with a direction to the respondents to complete the enquiry process and to pass necessary orders by the end of April 2013. Despite order passed by this Court, no action was taken by the respondents. Thereupon, the petitioner again filed a contempt petition. During the pendency of the contempt petition, the respondent - Corporation issued a show cause notice dated 16.04.2013 by which the petitioner was asked to show cause as to why the agency be not terminated with forfeiture of renewal commission from 03.02.2012. The petitioner submitted her reply. However, it is the case of the petitioner that respondent No.2, without considering the contents of the reply, passed an order dated 08.06.2013 by which penalty of termination of agency along with forfeiture of renewal commission with effect from the date of order was imposed on the petitioner. It was further directed that a sum of `2,59,575/- shall be recovered and the balance commission will be forfeited. In the above said factual background, the petitioner has approached this Court seeking the relief supra.
6. Learned counsel for the petitioner submitted that the agency has not been terminated on the ground of fraud but has been terminated on the ground enumerated under Rule 16(1)(a) of the Life Insurance Corporation of India (Agents) Regulation, 1972 (hereinafter referred to as ‘the Regulations’ for short). It is further submitted that the Authority is not vested with the power under Rule 19(1) of the Regulations to terminate the agency and to forfeit the renewal commission. Attention of this Court has also been invited to the report sent to the Zonal Vigilance Officer. It is also urged that until and unless an agent is found to have knowingly participated in or connived at any fraud, dishonesty or misrepresentation against the Corporation or any of its subsidiaries or against any person having official dealings with the Corporation or any of its subsidiaries in any judicial proceedings, renewal commission cannot be forfeited on the ground of fraud. In support of his submissions, learned counsel for the petitioner has placed reliance on the decisions of this Court in the cases of ‘SMT.G.VASANTHA Vs. THE CHAIRMAN, LIC OF INDIA AND OTHERS’ in W.P.No.5786/2010, ‘THE CHAIRMAN, LIC OF INDIA AND OTHERS Vs. SMT.G.VASANTHA in W.A.No.488/2011, ‘PRAKASHA B.N. Vs. THE CHAIRMAN, LIC OF INDIA AND OTHERS’ in W.P.No.56665/2014, THE CHAIRMAN, LIC AND OTHERS Vs. PRAKASHA B.N. in W.A.No.2460/2015, ‘THE CHAIRMAN, LIC OF INDIA AND OTHERS Vs. URMILABEN N PRAJAPATI’ in LETTERS PATENT APPEAL NO.1622/2010 of the Gujarat High Court, ‘DIVISIONAL MANAGER, LIC OF INDIA, MADURAI Vs. R.SIVASATHYAMURTHY’ in W.A.No.517/1978 of Madras High Court and ‘P.G.NATARAJAN Vs. LIC OF INDIA AND OTHERS’ in Civil Appeal No.1553/2016 of the Hon’ble Supreme Court.
7. On the other hand, learned counsel for the respondents has invited the attention of this Court to the show cause notice dated 16.04.2013 and has submitted that the petitioner had committed fraud by misappropriating a sum of `67,102/-, by not remitting the amount collected from the policy holders and had tarnished the image of the Corporation and also belied the trust of the policy holders. Therefore, the action against the petitioner was taken under Clause 15(c) of the Regulations on the ground of fraud and the agency was rightly terminated and the removal commission has been forfeited. It is further submitted that the action has been taken under Rule 16(1)(a) as well as 15(c) of the Regulations which does not call for interference in exercise of powers under Article 226 of the Constitution of India.
8. I have considered the submissions made by both the sides and have perused the record. Before proceeding further, it is appropriate to take note of the relevant extract of the Regulations:
“Rule 15. Termination of agency on account of certain disqualifications:
(c) in any judicial proceedings, has been found to have knowingly participated in or connived at any fraud, dishonesty or misrepresentation against the Corporation or any of its subsidiaries or against any person having official dealings with the Corporation or any of its subsidiaries, Rule 16. Termination of agency for certain lapses:
(1) The competent authority may, by order, determine the appointment of an agent, (a) if he has failed to discharge his functions, as set out in regulation 8, to the satisfaction of the competent authority;
(b) if he acts in a manner prejudicial to the interests of the Corporation or to the interests of its policy holders;
Rule 19(1) In the event of termination of the appointment of an agent, except for fraud, the commission on the premium received in respect of the business secured by him shall be paid to him if such an agent:
9. In the instant case, the show cause notice dated 16.04.2013 was issued to the petitioner by which petitioner was informed that she has committed fraud and has acted in a manner prejudicial to the interest of the Corporation which is in breach of Rule 16(1)(a) read with Rule 8(4) of the Regulations. Accordingly, the petitioner was asked to show cause as to why the agency be not terminated and the renewal commission be not forfeited. Admittedly, the petitioner has not been found to be involved in any fraud in any judicial proceeding. Therefore, if Rule 15(c) and Rule 19(1) are read in conjunction, it is evident that the renewal commission cannot be forfeited. A Division Bench of this Court in W.A.No.5786/2010 has held that only when the termination is based on the ground of fraud, renewal commission earned by an agent can be forfeited. In this connection, reference may also be made to the decision of the Division Bench of High Court of Gujarat mentioned supra.
10. In view of proceeding analysis, the impugned show cause notice dated 16.04.2013 as well as orders dated 08.06.2013, 13.12.2014, and 29.08.2015 insofar as it pertains to forfeiture of renewal commission are hereby quashed. However, the respondents are granted liberty to take action against the petitioner under Rule 15(c) of the Regulations.
Accordingly, the petitions are disposed of.
Sd/- JUDGE RV