1. The petitioners, in above mentioned group of petitions, who claim to be insurance agents for respondent No.1 insurance companies, have preferred the petitions. The reliefs prayed for in the petitions are almost similar. Therefore, the relief prayed for in one of the petitions is quoted hereinbelow:
"17A. Your Lordships may be pleased to issue a writ of certiorari or any other writ, order or direction declaring that the commission rate prescribed under the Head of Individual Mediclaim Policies issued by the respondent no.1 Company reducing/altering the acquisition cost/rates of commission in respect of the Individual Health segment as beyond its power, unreasonable and arbitrary and thus violative of Articles 14 and 21 of the Constitution and quashing and setting aside the same.
17B. Your Lordships may be pleased to issue a writ of mandamus commanding the respondent authorities to pay and continue to pay licensed agents commission at the prevailing rate prior to the issue of circular dated 23.07.2012, as has been paid hitherto without exercising any cut in the rate of commission."
2. The respondent No.1 insurance companies have issued circular making change in the rate of commission paid to the insurance agents, i.e. the petitioners. Aggrieved by such change, the petitioners have preferred present petitions.
3. During pendency of the petitions, the respondent insurance companies issued another circular dated 29.10.2012 whereby the previous circular dated 23.7.2012 came to be superseded/modified. Therefore, the petitioners tendered draft amendment with a request that the petitioners may be permitted to amend the petition so as to challenge the subsequent circular dated 29.10.2012. The petitioner have been permitted to amend the petitions. The petitioner has accordingly carried out the amendment and challenged the subsequent circular dated 29.10.2012.
3.1 Learned counsel for the respondent insurance companies have submitted that except one insurance company viz. United India Insurance Company Ltd., other insurance companies have already implemented the original impugned circular dated 23.7.2012 and the concerned petitioners are being paid commission at the rates as per the said circular dated 23.7.2012.
4. The petitioners are aggrieved by the decision taken and office orders / circulars issued by the respondent insurance company whereby the rate of commission paid to the petitioners is reduced in pursuance of the directions issued by the respondent Union of India.
5. The respondent insurance companies have claimed that for the reasons mentioned in the communications issued, in May 2012 and october 2012, by the respondent Central Government, certain directives have been passed instructing all public sector insurance companies to revamp and rationalize the cost structure ratio, which include the rate of commission paid to the insurance agencies.
6. It is common case of the petitioners that prior to July 2012, since many years, the petitioners were being paid commission at the rate of 15%. It is also claimed that after enactment of the Insurance Regulatory and Development Authority Act, 1999 ('IRDA Act' for short), the powers and functions to decide the matters related to insurance policies are conferred on the authority constituted under the Act. It is claimed that in exercise of powers conferred by the said Act, IRDA has fixed the rate applicable to commission to be paid to the insurance agents. Therefore, the respondent insurance companies cannot unilaterally, and even without issuing notice to the affected persons, reduce the rate of commission to be paid to the insurance agents. It is also contended that the respondent insurance companies have, in the impugned circulars, stated that the reduction in rate of commission is sought to be effected in view of the directives by the Union of India. However, after enactment of IRDA Act, the Central Government does not have any power to issue such directions to the respondent insurance companies. It is claimed that entire activity directed to insurance policies is now modified and it is governed by the provisions contained under the Insurance Act, 1938 and IRDA Act and that, therefore, any action including the action of reducing rates of commission to be paid to insurance agents cannot be taken except in accordance with the provisions under the said Acts.
7. The respondents have opposed the petitions on diverse grounds. The respondent insurance companies have contended, inter-alia, that the relation between the respondent insurance companies and the petitioner insurance agents is contractual and are governed by the terms and conditions of the agreement between the parties. It is also claimed by the respondent insurance companies that they are obliged to comply the directions by the Central Government and therefore, they have acted in consonance with the instructions issued by the Union of India vide its instructions dated 24.5.2012 and 24.9.2012. The respondent IRDA has filed affidavit and stated, inter-alia, that:
"4. I beg to submit the Xerox copy of Circular Ref. No.011/IRDA/Brok-Com/AUG. 25, 2008 issued by IRDA in exercise of its powers under Sec. 14 of the IRDA Act, 1999 and in terms of the provisions of Sec. 40(1), 40A(3) and 40E of Insurance Act, 1938 with respect to limits on payment of commission or brokerage on General Insurance business with effect from 1st October, 2008 whereby IRDA has permitted the Insurance Companies to pay maximum percentage of commission to the agents. It is respectfully submitted that if any of the Insurance Companies modifies or changes their existing structure of commission but subject to the maximum limit in the aforesaid Circular, then they are not required to take any permission or prior approval for modifying their existing structure. A Xerox copy of the Circular dtd. 25.8.2008 is annexed hereto and marked Annex. "I"
to this affidavit.
5. In the aforesaid facts and circumstances of the case and more particularly the right claimed by the petitioner being contractual in nature, is governed by the terms and conditions entered into between the Principal and agent at the time of appointment of the agent, wherein it is categorically mentioned that -
"It is further agreed to by the agent that in respect of any business whereby, the Company deems it necessary, the Company may reduce or increase the commission payable to the agent and the Company has liberty to amend, vary or revoke the schedule of commission payable at any time...." "
8. It is also claimed by the respondent insurance companies that in view of the agreement with the petitioners, i.e. insurance agents, they have right to pay/fix the rate of communication payable to their respective agents and that, therefore, they also have right to revise the rate of commission. It also appears from the submissions and from affidavit filed by IRDA and one of the insurance companies that IRDA has prescribed maximum limit / cap so far as the rate for paying commission to insurance agents is concerned and that, therefore, the insurance companies have discretion and liberty to fix the rate within the limit of the cap prescribed by IRDA and that, therefore, there is no prohibition in law to revise, so as to reduce, the rate of commission or in any case to increase the rate of commission provided the cap prescribed by IRDA is maintained.
9. The petitioners opposed the said contention and they would claim that except with express permission of IRDA, any change in rate of commission cannot be made by insurance companies and in any case, such change cannot be made merely on account of instruction from Central Government and such change also cannot be made without issuing notice about proposed change.
10. As mentioned earlier, circular dated 29.10.2012, the previous circular dated 23.7.2012 is superseded / modified and now, by virtue of the said circular dated 29.10.2012, the rate of commission to be paid to insurance agent is fixed as per below mentioned slabs:
Age Group Commission/Brokerage % Insured below the age of 35 years 15% Between 35 and 45 years 12% Above 45 years 10%
11. So far as Union of India is concerned, Mr.Chhaya, learned advocate, has appeared and submitted that the respondent needs time to file reply.
12. He submitted that the said respondent has yet not received copies of writ petitions except in case of SCA No.12984/2012. Learned advocate for the respondent Union of India has, however, submitted, without prejudice to the said respondent's right to file reply affidavit and make further and appropriate submissions after reply affidavit is filed, that the petitioners have not challenged the said circulars dated 23.7.2012 and 29.10.2012 issued by the Union of India and any relief has not been prayed for against Union of India.
13. Mr.Chhaya, learned advocate for respondent Union of India, while requesting for time to file reply affidavit, submitted that if the interim relief as prayed for by the petitioner is granted, then it would amount to granting interim relief against the circulars issued by the Union of India in May 2012 and October 2012 though the said circular has not been challenged and any relief in connection with the said directions has not been prayed for in the petition. He submitted that in view of the provisions contained under the Insurance Act and IRDA Act, the respondent Union of India is competent to issue instructions/directions and therefore, the circular issued by the respondent Union of India cannot be said to be unauthorised.
14. The respondent insurance companies viz. Oriental Insurance Company Ltd., New India Assurance Company Ltd., United India Insurance Company Ltd., National Insurance Company Ltd., have not filed any affidavit opposing the petitions, however, on their behalf also, request for time to file to prepare and file their respective affidavits, is made.
15. So as to appreciate the controversy involved in and raised in the petitions, it is appropriate to take into account below mentioned aspects:
(a) The dispute raised by the petitioners is in connection with the individual medical/mediclaim policies;
(b) The dispute raised by the petitioners is in connection with the rate of commission at which insurance agents are paid commission for securing and submitting business/policies for the concerned insurance company;
(c) The petitioner insurance agents claim that the relation with the insurance company is governed by the provisions under the Insurance Act and IRDA Act.
16. However, the respondent insurance companies would contend that actually relationship between the insurance companies and insurance agents is purely contractual and is governed by the terms of the agreement between the parties.
17. The respondent insurance companies would also contend that the dispute raised by the petitioners is in realm of contract and that, therefore, the petitions are not maintainable.
18. The respondent insurance companies, except United India Insurance Company Ltd., have also asserted that the circular dated 23.7.2012 is already implemented. It is also claimed that the insurance agents are being paid commission at the rate prescribed by the said circular dated 23.7.2012 and now, after the circular issued in october 2012, necessary process for implementing the said circular is also completed.
19. It is also claimed that actually by the circular issued in october 2012, the rate of commission is increased/enhanced and upward revision has been made which is to the benefit of the petitioners.
20. It is also claimed that only handful of insurance agents have preferred present petitions whereas all others have accepted the revision in rate of commission and payment of commission at such revised rates.
21. In this background, it is to be considered as to whether the three well-recognised ingredients required to be established by the persons seeking interim relief, are established in present case or not.
22. It has prima facie emerged that the petitions involved and raised debatable and arguable case. However, so far as balance of convenience is concerned, the petitioners would contend that having regard to the fact that since last many years, the petitioners are paid commission at the rate of 15% and the power to fix the rate of commission is conferred on IRDA, the reduction could not have been made by the respondent insurance companies and that, therefore, balance of convenience is in favour of the petitioners. So far as the aspect of irreversible injury is concerned, it is also claimed by the petitioners that if the interim relief as prayed for is not granted, then irreversible injury will be caused to the petitioners.
23. However, the respondent insurance companies and IRDA have opposed the said contentions and claimed that irreversible injury will not be caused to the petitioners inasmuch as if at all the petitioners succeed in the petitions, then they can be compensated in terms of money and the Court can pass appropriate orders, including the direction to pay the difference between the amount paid upon implementation of the impugned circulars and which may become payable in view of the orders passed by the Court.
24. As mentioned above, the insurance companies and the respondent Central Government have made request for adjournment as they want to file reply affidavits dealing with the allegations made and contentions raised by the petitioners.
25. Besides this, during the pendency of the petitions, the petitioners have also come out with civil applications praying, inter-alia, that the petitions may be treated as representative petitions on behalf of all insurance agents.
26. Learned advocates for the Union of India and the insurance companies as well as IRDA have jointly submitted that they want to oppose the said applications and for the purpose of filing reply affidavit, time is required. Learned advocate for the respondent Union of India and learned advocate for IRDA have, however, jointly submitted that in view of the provisions contained under the High Court Rules, the application is not maintainable and the petitioners have not taken out application prescribed under the Rules and that, therefore, the application cannot be entertained and the relief as prayed cannot be granted.
27. It, prima facie, emerges from the relevant provisions, i.e. sections 2(8), 2(1), 2B, 40, 40A and 42 of Insurance Act and sections 14 and 18 under IRDA Act that insurance companies are not permitted to enter into a contract to pay commission to insurance agents at the rate exceeding 15%. IRDA has also issued instructions/directives in consonance with the said provision and as per the directives issued by IRDA, insurance companies are not permitted to pay commission at the rate more than 15%. However, prima facie there does not appear to be any provision prohibiting the insurance companies to revise the rate of commission while observing and maintaining the cap prescribed by IRDA.
28. The said provisions, prima facie, provide reply to the petitioners' contentions that there is no power to reduce the rate of commission inasmuch as the said provisions contemplate (a) contract to pay commission and (b) maximum rate of commission which can be paid to insurance agents.
29. Meaning thereby, so far as the issue related to payment of commission to insurance agent is concerned, would be given by the terms of agreement / contract by the insurance company. When a provision confers to fix the rate of commission, such power would include power to change/modify the rate of commission.
30. The other aspect which emerges from the said provision is that the matters related to engaging insurance agents and the matter related to fixing the rate for payment of commission are governed by the provisions under Insurance Act and IRDA Act and that, therefore, it appears, prima facie, that the the relationship between the insurance companies and the insurance agents cannot be put at par with relationship arising from any other ordinary contract of agency or any other ordinary contract between private parties. The relationships between the insurance companies and the insurance agents are between instrumentality of State viz. insurance companies whose operations are governed by provisions of the Act and insurance agents whose appointments and conditions of their engagement by the insurance companies including the rate of commission to be paid to them are also governed by provisions of the Act. Therefore, prima facie, the determination or revision in the terms and conditions at will of one of the parties to the relationship may not be permissible.
31. So far as the respondents' contention that the matter is purely in realm of private contract and the relations are governed by the terms and conditions of private contract between the insurance company and its agents, is concerned, it prima facie appears that the said contention does not hold merits in view of the provisions contained under sections 40, 40A and section 42 of the Insurance Act read with provisions under the IRDA Act. It prima facie appears that the contracts are statutory in nature and the relationship between the insurance companies and the insurance agents are governed by the provisions under the said Act.
32. At this stage, it is necessary and relevant to note that neither the petitioners nor the insurance companies have placed on record notice of agreements/contracts, except in one place, i.e. in SCA No.10466/2012, the respondent insurance company has placed on record copy of one agreement/contract between petitioner No.1 of said SCA No.10466/2012 and the concerned insurance company, i.e. National Insurance Company Ltd.
33. With reference to the request made by learned counsel for Central Government and the insurance companies to grant time to file reply affidavits, the petitioners have submitted that in the interregnum, the interest of the petitioners may be protected, so that they are not adversely affected until the matters are further considered after reply affidavits filed by the insurance companies and Union of India are filed.
34. The rival submissions give rise to diverse questions e.g. whether insurance companies can reduce the rate without advance notice and merely on instruction/directives by Central Government. The other question which also arises is that when the relations between the insurance companies and insurance agents are governed by the provisions of the Act, whether the right to modify or change rate of commission at any time at discretion of the insurance company can be permitted to operate and hold good in view of the position as regards contracts which are statutory in nature. The aforesaid and such other issues arise in present matter which require consideration.
35. With reference to the request for interim relief, it is necessary to keep in focus the fact that the circular issued in July 2012, has been undisputedly implemented by the respondent companies. True, it is said that the said circular is superseded and replaced by the subsequent circular issued in October 2012 and it is claimed that the process to implement the said subsequent circular has also been completed. Besides this, it is also relevant to keep in focus that by the said subsequent circulars, the rate of commission is slightly increased as compared to the rate prescribed by circular issued in July 2012.
36. In such circumstances, if the Court were to direct the insurance companies to make payment of commission to the insurance agents at rate which was prevailing prior to July 2012, then it would amount to granting status quo ante which existed prior to July 2012, which would not be proper or permissible for the Court to do at interim stage.
37. Moreover, such relief if granted at this stage would amount to granting final relief.
38. Besides this, though the petitioners can claim that they have made out a prima facie and arguable case in their favour, however, so far as other two ingredients necessary to be taken into account to decide interim relief viz. balance of convenience and irreversible injury are concerned, it cannot be said, at this stage, that the said aspects are in favour of the petitioners because if the petitioners ultimately succeed in the petition, then the insurance companies can be directed to immediately pay differential amount and appropriate relief can be moulded after adjudicating the issues involved in the matter. However, if the interim reliefs as prayed for by the petitioners are granted and if they ultimately fail, it may not be possible for the insurance companies to recover, in all cases, the amount already paid to the insurance agents inasmuch as in certain cases, the insurance agents may sever their relationship with the insurance company whereas in certain cases, the period of licence may expire during the pendency of the petitions and either the insurance company or the insurance agent may not extend / renew the tenure.
39. Therefore, on overall consideration, it does not appear appropriate or permissible to grant interim relief as prayed for, more particularly because it would amount to granting status quo ante and restoring status which was existing prior to July 2012 and it would also amount to granting final relief at interim stage.
40. In such circumstances, it appears appropriate that instead of passing any direction for interim relief at this stage, the petitions may be taken up for final decision on earliest occasion and the matters may be decided finally on the next date but before the date on which the next payment of commission becomes due.
41. Therefore, with clarification that in SCA No.10466/2012 where certain interim arrangements have been made, the same will continue until the next date of hearing, however, in other cases, the interim relief which may bring about the position which prevailed prior to July 2012, is not granted and instead, the petitions are directed to be listed for final hearing on 27.11.2012.
42. In the meanwhile, the Union of India and the insurance companies will file their reply affidavit with complete pleadings.
43. It is submitted that the petitioners that so far as New India Assurance Company Ltd., i.e. SCA No.12984/2012 is concerned, it has continued to pay the commission at the same rate that it was paid prior to July 2012. If that be so, then the same position may continue until next date of hearing.
44. So far as Application Nos.12673/2012, 12853/2012, 12855/2012 and 12677/2012 are concerned whereby the petitioners have requested that the petitions may be treated as representative petitions, the said applications also will be heard along with the petitions and if the respondents want to oppose the same by filing reply affidavit, the pleadings in the said applications may also be completed on or before next date of hearing.
(K.M.
Thaker, J.) Bharat*