Rajni Damri vs Life Insurance Corporation of India and Others

Rajiv Narain Raina, J.—The challenge in this petition are to the orders passed by the Life Insurance Corporation of India terminating the agency of the petitioner for her role as an agent of LIC in selling an insurance policy under Table-Term 150-21 scheme to Surinder Kumar Girdhar, the assured who failed to disclose that he was terminally ill. The panel doctor of LIC Dr. Vidya Bhushan Madaan did not detect anything abnormal in Girdhar during the medical check up and gave his report and on recommendations of the petitioner and after enquiries made by the Local Officer, Girdhar was insured under Policy No. 471167408 on 28.02.2004. Surinder Kumar Girdhar died on Chronic Renal Failure on 27.07.2004 after 4 months and 23 days of submitting proposal for insurance. During investigation of the death claim, it was found that the Life Assured was suffering from Chronic Renal Failure and was on regular dialysis at the PGI Chandigarh and Ashtha Hospital Ganganagar prior to submitting proposal for insurance and, therefore, the petitioner failed to disclose these material facts in Agent''s Confidential Report and thus acted in a manner prejudicial to the interest of the Corporation and committed breach of Rule 8(2)(b) read with Rule 16(1)(a)(b) and (d) of the Life Insurance Corporation of India (Agents) Rules, 1972. The explanation of the petitioner was called for by the disciplinary authority for submitting false Agent''s Confidential Report. The petitioner made no answer. The disciplinary authority then issued show cause notice dated 07.12.2006 calling upon the petitioner to show cause as to why her agency be not terminated with forfeiture of renewal commission. The petitioner again failed to submit reply. The agency was terminated. The petitioner filed statutory appeal against the termination order before the Appellate Authority who re-examined the matter but found no merit in the appeal and dismissed the same by order dated 01.04.2008. The petitioner filed Memorial under Rule 24 of 1972 Rules. The Memorial was reexamined at the level of the Chairman of the Corporation but again no merit was found therein and was rejected by order dated 03.01.2009. The statutory remedies stood exhausted.

The petitioner approached this Court by filing the present writ petition praying for quashing the orders impugned. It was the case of the petitioner in appeal and in the Memorial presented for ventilating her grievance, that at the time of selling insurance policy as an agent of LIC she was not aware of the medical condition of Surinder Kumar Girdhar who by his own hand had filled the declaration form affirming that he was not suffering from any ailment. The prospective assured had been examined by a medical doctor on the panel of the Life Insurance Corporation of India. She had moved an application under the Right to Information Act, 2005 requesting information from the Branch Manager, LIC, Fazilka regarding the opinion tendered by Dr. Vidya Bhushan Madaan, the panel doctor and whether he had been removed from the panel after considering the policy of Girdhar or whether after removing him from the panel he had been rein-ducted. She also sought a copy of the investigation report penned by the Branch Manager, LIC, Fazilka in respect of the disputed policy. She received a reply on 05.10.2009. She was informed that Dr. Vidya Bhushan Madaan was not removed from the panel of doctors and, therefore, the question of reappointment did not arise. On receiving such information, she represented to the authorities of the Corporation. She submitted reminder representation dated 13.08.2009. She received no information with respect to her request. It is her case that when she met up with Girdhar he appeared to be hale and hearty and was attending to his business without any sign of ill health. She made enquiries which did not reveal anything adverse in issuance of a policy. It was in these circumstances that she had initiated the process. The insurance policy was issued after Girdhar was examined by Dr. Vidya Bhushan Madaan. The doctor being the expert in his field had failed to discern signs of the disease Girdhar suffered from. The petitioner was innocent lay person and had no knowledge of the true medical condition of the person interested in insurance policy. She pleaded that the sum assured was not released to the heirs/nominees of the assured and, therefore, no financial loss had been caused to the Corporation due to any lapse on her part in not detecting the disease since the insurance claim was not processed till disbursement.

I have heard the learned counsel for the parties at considerable length.

The short question which arises in this matter is whether the petitioner concealed material facts in her Agent''s Confidential Report and thus defrauded the Corporation in selling the said insurance policy. This alleged fraud practiced is said to have come to light during investigation of the claim policy. There is no doubt that Girdhar was suffering from Chronic Renal Failure and was on regular dialysis. It is also part of record that on 28.11.2006 the Corporation issued strict warning to Dr. Vidhya Bhushan Madan to exercise more caution in future while examining the life to be assured for insurance cover. The warning letter has been placed on record by the Corporation at Annexure R-3.

I have perused the orders impugned in this petition and the material placed on record before me with the assistance of the learned counsel. I have also been through the Medical Examiner''s Confidential Report (P-1) filled and signed by the panel doctor. No suspicion is forthcoming from the medical report. It is not the case of the Corporation that the petitioner in connivance with the medical doctor sold insurance policy to a person afflicted by a disease which could have resulted in death during the currency of the policy. The charge is not that the petitioner had personal knowledge of the medical condition of Girdhar and yet proceeded to sell insurance. The entire blame cannot be put on the petitioner and it may not be correct for the Corporation to say that the petitioner cannot pass on her own blame on the panel medical practitioner. The orders passed cancelling the agency of the petitioner and forfeiting her renewal commission arc plainly stigmatic. With these orders, the petitioner can never think of applying for an insurance agency in the public or private insurance sector. The action taken appears to be rather excessive and hit by the doctrine of proportionality and borders on Wednesbury arbitrariness as no reasonable man in the place of the decision maker would take. If the doctor was let off with a simple warning, I see no reason why the same punitive measuring scale could not have been applied to the petitioner to inflict any lesser dose than the extreme step of cancellation of agency. There is also nothing in her past record to justify the extreme step taken. It is not for this Court to enter into the arena of the part played by the petitioner and it would suffice to limit the attention of this Court to an examination on the issue of quantum of punishment inflicted. After all, agents bring business to the Corporation and without them, it would be difficult to sell insurance policy or to enlarge business. The Life Insurance Corporation of India is a statutory Corporation which qualifies as an instrumentality of the State. Its actions must be manifestly fair, transparent and equitable. Though this Court is not concerned with the decision but with the decision making process yet fairness in action, nondiscrimination is expected from LIC. What the petitioner did if weighed with what the medical doctor did, the role of the medical doctor critically outweighs what the petitioner did or did not do. The action taken appears to be harsh, perverse, unreasonable and discriminatory and such that disturbs the conscience of the Court. The stigma attached with the orders is required to be removed in the attending circumstances. No loss has been caused to the Corporation, though that alone may not be sufficient reason to interfere if there was present an intention to defraud. Girdhar hoodwinked the system and secured an insurance policy on the strength of his declarations which unfortunately went unnoticed by the panel doctor who failed to call for minimum tests to determine state of health of the prospective assured. I have no doubt if the doctor had been removed from the panel then the matter may have panned out differently.

I have, therefore, no hesitation in allowing this writ petition and quashing the impugned orders dated 22.03.2007.01.04.2008 and 03.01.2009 (P-2, P-3 and P-9). Resultantly, the respondent-Corporation would remain at liberty to pass fresh orders in the light of the observations made in this judgment.