1. Heard Mr. Mukul Sinha, learned Senior Counsel for petitioners and Mr. Dakshesh Mehta, learned advocate for respondent Nos.1 and 2.
2. The petitioners have prayed for below mentioned relief/s:-
"8 (A) The Hon'ble Court may be pleased to admit and allow this petition.
(B) The Hon'ble Court may be pleased to issue a writ of mandamus or any other appropriate writ or order or direction, declaring that the impugned decision / term reducing / altering the acquisition cost / rate of commission under Clause (viii) Sub-clause (ii)(e) of the impugned circular dated 20.7.2012 illegal, arbitrary and violative of Article 14 and 21 of the Constitution of India and this Hon'ble Court further be pleased to quash and set aside the said sub-clause.
(C) The Hon'ble Court may be pleased to issue a writ of mandamus or any other appropriate writ or order or direction, to permanently restrain respondents from reducing or altering the present rate of commission i.e. 15% in the case of standard medi-claim of individuals and further be pleased to direct the respondents to pay and continue to pay the present rate of commission i.e 15% in the case of standard medi-claim of individuals;
(D) The Hon'ble Court may be pleased to direct the respondents to restore the rate of commission to 15% as was existing prior to giving effect to the circular dated 20.7.2012 in question, in case the circular has been given effect to and pay arrears, if any, to each individual agent, in case the rate of commission is paid at any rate below 15% along with appropriate interest thereon;
(E)......
(F)........."
2.1 The petitioners are "Insurance Agents" whose services are engaged by respondent Nos. 1 and 2 in connection with its primary and principal activity of providing insurance / insurance cover (other than life insurance) to various category of consumers including group insurance and new insurance.
2.2 The petitioners have brought under challenge the circular dated 20.7.2012 whereby the respondent Nos. 1 and 2 have issued instructions which will have effect of reduction in rate of commission and consequently on their total income which, according to the petitioners is their only source of income and livelihood.
3. After hearing the petitioners, instead of granting any ex-parte relief, office was directed, under order dated 31.7.2012 to issue notice to the respondents making it returnable on 13.8.2012.
4. On 13.8.2012 adjournment was requested for by learned advocate for respondent Nos. 1 and 2.
4.1 On the said date also, Court refrained from granting any ad-interim relief, though it was insisted upon by learned advocate for the petitioners stating, inter alia that the respondent authorities would implement the impugned circular dated 20.7.2012 which may affect the payment to the petitioners. However, considering the request of learned advocate for the respondents further time was granted and the petition came to be adjourned to 16.8.2012.
4.2 On 16.8.2012 the respondents tendered reply affidavit and that therefore so as to enable the petitioners to examine details mentioned in the reply affidavit time was granted at the request of learned advocate for the petitioners and the hearing came to be adjourned to 27.8.2012 and thereafter on 29.8.2012.
4.3 Yesterday the petition was heard to certain extent. It was also noticed that respondent Nos. 3 and 4 have not been served and that therefore they have not entered appearance.
5. The reply affidavit filed by the respondents on 16.8.2010 is, for some reason not on record of present petition. Therefore learned advocate for the respondents with consent of learned advocate for the petitioners supplied office copy of the reply affidavit said to have been filed by the respondents.
5.1 Mr. Sinha, learned Senior Counsel for the petitioners have assailed the impugned circular dated 20.7.2012 on various grounds including the contention that after Insurance Regulatory and Development Authority Act 1999 (hereinafter referred to as the "IRDA") came into force the respondent Nos. 1 and 2 do not have any authority to prescribe or change the rate of commission and that therefore the impugned circular is without authority inasmuch as it aims at and has effect of adversely effecting i.e. reducing the rate of commission which is being paid to the petitioners since many years before the impugned circular came to be issued. He submitted that the authority to effect any change in the rate of commission is only with the IRDA. He further submitted that the circular has been issued in violation of principles of natural justice. He submitted that the impugned circular has civil consequences and that therefore at least notice about the respondents' intention and proposal should have been issued to the petitioners.
5.2 On the other hand Mr. Mehta, learned advocate for respondent Nos. 1 and 2 has submitted that the petition is not maintainable since the dispute raised by the petitioners is in realm of contract between the respondent Nos. 1 and 2 and the petitioners. He submitted that the replying respondent have issued circular in view of the instruction and guidelines received from respondent No.4 and the replying respondent have merely acted on such instructions. He also submitted that the petitioners are not right in contending that the respondent No. 4 has no authority to issue such instruction to the respondent Nos. 1 and 2. He also submitted that the respondent Nos. 1 and 2 are bound to comply the instruction issued by respondent No. 4 and that is why the impugned circular is issued.
5.3 As mentioned earlier, the respondent Nos. 3 and 4 have yet not entered appearance probably because the process has not been served to the said respondents. As of now only respondent Nos. 1 and 2 have entered appearance and filed affidavit opposing the petition.
5.4 In reply affidavit the respondent has placed reliance on the office communication of May 2010 said to have been issued by the Government of India, Ministry of Finance and it is claimed that impugned circular dated 20.7.2012 has been passed in view of the said instruction issued by the Government of India Ministry of Finance.
5.5 Mr. Mehta, learned advocate for respondent Nos. 1 and 2 has heavily relied on the said instructions and guidelines from the Ministry of Finance and submitted that for the reasons mentioned in the said circular and instructions and guidelines issued by the Ministry of Finance, respondent nos. 1 and 2 have issued circular dated 20.7.2012. He also tried to justify the steps taken by the respondent company including the revision / reduction in the rate of commission to be paid to the agents.
5.6 Mr. Mehta, leaned advocate further submitted that the relation between the petitioners and the respondents is that of principal and agent and the relation is governed by direction issued by respondent nos. 1 and 2 in appointing petitioners as its agent. He also submitted that the rate of commission is subject matter of contract between the petitioners and the respondent Nos. 1 and 2 and that therefore the Court may not entertain writ petition in respect of the matter which is subject of contract between the parties.
6. The respondents claimed that the petitioners are engaged by and under contract and the relationship between the petitioners and the respondent Nos. 1 and 2 is that of principal and agent. Though, the respondent companies have claimed that the appointment of petitioners as agent is done by virtue of contract of specified period any copy of such contact is not placed on record. Therefor, the Court had requested the parties to place a copy of such agreement on record.
6.1 On behalf of the petitioners blank formate of Agency Agreement is placed on record.
6.2 However learned Senior Court for petitioners has clarified that it could or could not be the exact contract agency agreement entered into between the petitioners and the respondents or there may be certain changes in actual agreement entered into between the parties inasmuch as the copy which has been made available is blank formate received from one of the persons and is not the agreement between the petitioners and the respondents and that therefore there is likelihood of changes or differences between the document placed on record and the actual agency agreement entered into between the parties.
6.3 It is clarified that for the present purpose the Court has taken into account the proforma of the agency agreement which is placed on record.
7. The petitioners on the other hand would contend that the agreement being statutory in nature, during the pendency of the contract such changes cannot be made by the respondents.
8. As mentioned earlier the respondents have heavily relied on instructions issued by respondent No.4. A copy of the said instructions which seem to have been issued somewhere in May 2012 is annexed to the reply affidavit of respondent Nos. 1 and 2. On perusal of the instructions / guidelines based on which impugned circular is issued by the respondent companies it prima facie appears that the said guidelines / instructions concentrate on group health insurance policy rather individual insurance policy which is described as "Retail Health Insurance Policy" in the instruction / circular.
8.1 It also prima facie appears that the respondent No. 4 appears to have instructed the Public Sector Insurance Companies to control or bring down the cost and to control or curtain if necessary, administrative expenses. It prima facie appears that in light of such instruction the respondent Nos. 1 and 2 have concentrated on reducing the rate of commission of the insurance agents, however any details of the other steps taken for controlling or reducing cost and / or controlling and curtailing administrative expenses by other means and methods are not placed on record despite sufficient time having been granted to the replying respondents.
8.2 Besides this, it also prima facie appears that the said instructions of May 2012 said to have been issued by respondent No.4 do not command the replying respondents to reduce the rate of commission.
8.3 Though it may be assumed in favour of respondents that the instructions issued by the said circular of May 2012 would include instruction to reduce rate of commission having regard to the economy and viability, then also it appears that the said circular of May 2012 issued by respondent No.4 has led emphasized on the group insurance and the agents concerned with group insurance and the emphasize is not on personal / individual insurance as much as it is on group insurance and the instructions with regard to group insurance are not made applicable to or are not aim at individual / retail health insurance.
8.4 These are the aspects which can be effectively explained and clarified by respondent No.4.
8.5 Learned advocate for respondent Nos. 1 and 2 has submitted that the replying respondents have merely acted in consonance with the instruction issued under circular of May 2012 and that therefore at this stage any effective explanation has not come forth and any assistance has not been provided by the replying respondents.
8.6 The petitioners would therefore, contend that even if such instructions / guidelines are to be taken into account then also respondent nos. 1 and 2 could not have applied said instructions in respect of Individual Health Policy or person undertaking the work of Individual Health Policy.
9. From rival submissions made by learned Counsel for petitioners and respondents it appears that presence of respondent nos. 3 and 4 is necessary who can explain the exact effect of the said instructions / guidelines by the Ministry of Finance and also clarify as to whether the instructions / guidelines apply to the rate of commission or not and whether it would apply with the same effect to the Individual Health Policy as well or not.
9.1 However, unfortunately the said two respondents have not been served until now and learned Senior Counsel for the petitioners has made request for fresh Notice qua said respondents.
9.2 It emerges from the said document that
(a) the relation between the parties are governed by the said agency agreement and condition mentioned therein and
(b) the period of such agency agreement is of specified period as per clause "period of agreement" which may be entered into between respondent Nos. 1 and 2 and the concerned persons / agent.
9.3 It also however appears from the agreement proforma that the rate of commission is mentioned in the schedule to such agreement.
9.4 Of course agreement policy contains stipulation which confers right on the respondent companies to alter the rate of commission. The respondents would rely on the said clause and contend that it has right to alter rate of interest.
9.5 It is noticed that instructions said to have been issued by respondent No.4 came to be issued in May 2012 and replying respondents issued impugned circular on 20.7.2012. In this context the learned Counsel for the petitioners submitted that until now the impugned circular has not been given effect to and the petitioners have been paid commission at the old rate. He also submitted that until respondent Nos. 3 and 4 enter appearance and the relevant issues are clarified the payment at the old rate may be continued since it has continued until now i.e. even after the circular dated 20.7.2012.
9.6 Under the circumstances, it was inquired from the learned advocate for the respondent Nos. 1 and 2 as to whether the insurance company has already made payment of commission to the petitioners on the revised rate as per the impugned circular or payment until now have been made on the basis of erstwhile rate. The said querry was put to the learned advocate for the respondents so as to determine as to whether the impugned circular has been given actually effect by the respondent companies or not.
9.7 In reply to the question learned advocate for the respondents submitted that the respondent companies have given the said work to another agency however, until now such agency could not be implemented the said work because of requirement to alter the software programme and that therefore ad-hoc payment has been made at old rate subject to the respondents right of making necessary adjustment after after software program is appropriately altered.
10. It, therefore, appears that after the impugned circular dated 20.7.2012 until now the payments have been made on old rate, though on ad-hoc basis and actual effect to the impugned circular does not appear to have been given by the respondent companies.
10.1 From the rival submissions it appears that before reaching to the conclusion that the petition is not required to be or does not deserve to be entertained as the dispute falls within the realm of contract and the nature of contract between the parties is that of principal and agent, it would be appropriate to examine, particularly in light of the provisions contained under IRDA read with the Insurance Act, as to whether the contract between the replying respondents and the petitioners is purely a contract between principal and agent or it also has flavour and colour of statutory contract or not. It also appears that before reaching to conclusion that the petition does not deserve to be entertained or any interim relief does not deserve to be granted because as per the contract the respondents have power to reduce the rate of commission, which would be appropriate to consider as to whether the instruction issued by respondent No.4 also equally applied to the individual / retail insurance or not and whether the provision which allows reduction in rate of contract would be available to the respondents for reducing the rate of interest during period of operation of the contract or not.
10.2 The aforesaid and such other aspects can be clarified only after the respondent Nos. 3 and 4 enter appearance and clarify the aforesaid aspect and the respondent Nos. 1 and 2 also file further affidavit and place on record the copy of the contract executed with the petitioners. The issues related to interim relief and as to whether factors governing the decision about interim relief i.e. balance of convenience, irreparable injury exists in present case in favour of petitioners are also required to be considered but this aspect also can be effectively considered after relevant details are available on record. In the meanwhile it appears that it would be appropriate and necessary to make interim arrangement until next date of hearing so that balance can be maintained. Therefore, by way of an interim arrangement subject to all rights and contentions of respondent companies and in light of the statement made by the learned advocate for the respondents companies it is clarified that if any payment of commission to the petitioners is not made until now on the basis of the impugned circular i.e. at new rate and until now respondents have made payment on old rate on ad-hoc basis then until next date of hearing if any payment is to be made then it may be made on the similar basis i.e. ad-hoc basis as has been done by the respondent companies until now.
10.3 This arrangement is required to be made for the reason that the exact term and condition of the appointment of the petitioners are required to be examined and it is also necessary to examine as to whether the contract between the petitioners and the respondent Nos. 1 and 2 are purely in realm of contract between principal and agent or it is statutory in nature.
10.4 Unless and until the said and such other issues become clear, it is not possible to grant any relief, including interim relief and Court would resist from making any order of such nature.
10.5 However, having regard to the fact and the submission / clarification made by the learned advocate for the respondents that until now payments have been made by the respondent companies (as stated by the learned advocate for the respondent Nos. 1 and 2) on ad-hoc basis the above mentioned ad-interim arrangement is made which will enure until next date.
11. At the request of the learned Senior Counsel for the petitioners office is directed to issue fresh Notice qua respondent Nos. 3 and 4 making it returnable on 07.09.2012.
11.1 Direct service tomorrow is permitted.
11.2 Direct service may be effected by registered speed post as well.
12. The respondent Nos. 1 and 2 will also communicate respondent Nos. 3 and 4 about the pendency of present petition and copy of the petition with this order may also be served to the learned Assistant Solicitor General of India with a request to receive necessary instruction so that appropriate and effective orders including any order for interim relief can be passed on the next date.
The above arrangement will continue until then and further orders will be passed on the said date i.e. 07.09.2012.
(K.M.THAKER,J.) Suresh*