Ramnath Bairagi vs Life Insurance Corporation of India and Others

Rajendra Menon, J.—As common questions of law and facts are involved in both these petitions, they are heard together and are being disposed of by this common order. For the sake of convenience, the documents and pleadings available in W.P. No. 3314/2011 is being referred to in this order.

Petitioner Ramnath Bairagi in W.P. No. 3304/2011 and petitioner Hari Narayan Singh Chouhan in W.P. No. 3314/2011 were appointed as Agents by the Life Insurance Corporation of India with the Divisional Office at Bhopal. They were appointed in accordance with the Recruitment of the Life Insurance Corporation (Agents) Regulations, 1972 (hereinafter referred to as ''the Regulation of 1972'') and were posted at Bhopal and were working in Bhopal, when the impugned action for terminating their Agency was initiated by the Senior Divisional Manager, Life Insurance Corporation of India, Divisional Office, Bhopal.

In both the cases the impugned order was passed on the same day i.e. on 21.2.2009 vide Annexure P-4, the appeal was dismissed by the Appellate Authority on 31.3.2010, vide Annexure P-6, and the memorial submitted to the Chairman of the Corporation has also been rejected on 18.11.2010, vide Annexure P-8. Challenging all these orders the writ petitions have been filed.

It was found in both the cases that while discharging their duties as Agents of the Corporation during the period 2006 to 2007 various cheques were issued by both the petitioners from their personal account for the purpose of submitting proposal deposits, first premium and renewal premium for various clients.

In the case of petitioner Hari Narayan Singh Chouhan it was found that he issued 48 Third Party cheques for the purposes indicated hereinabove. None of the persons for whom the cheques were issued were related to him. Out of the 48 cheques issued by the petitioner from his personal account 47 cheques were dishonoured. It is said that even though he knew that in 47 cases the cheques have been dishonoured but inspite of this he accepted the commission offered by the Corporation and misused his position by acting in a manner detrimental to the interest of the respondent Corporation.

In the case of petitioner Ramnath Bairagi also similar allegations were made with regard to issuance of 11 Third Party cheques in the year 2007-2008 and out of these 11 cheques, 10 cheques issued from his personal account were found to have been dishonoured. In his case also it was found that he has obtained the commission and took advantage of the situation.

Accordingly, in both the cases a show cause notice dated 17.4.2008, Annexure P-1, was issued to both of them and it was indicated in the show cause notice that the act as indicated hereinabove amounts to violation of Rules 8(4) read with Rule 16(1)(a)(b) and (c) of the Regulations of 1972 and they were asked to show cause as to why they be not punished. Both the petitioners submitted their reply to the show cause notice and when the impugned action was taken they have challenged the same before this Court.

Shri Shroti, learned Senior Counsel for the petitioners, argued that in reply to the show cause notice issued both the petitioners pointed out that in the Corporation during the period 30th March to 5th April the system of depositing cash for the premium of new proposals and renewal are not permitted and, therefore, agents are encouraged to receive cash from the clients and deposit cheque from their personal account. It was stated that they have only followed the same system that has been approved and they explained the position in the reply. Shri Shroti, the learned Senior Counsel, submitted that this explanation of the petitioners was treated to be admission by them by holding that the petitioners had accepted cash from the clients and deliberately deposited the cheques from their personal account which got bounced, and the impugned action has been taken.

Taking me through the averments made in the explanation submitted by the petitioners Shri Shroti, the learned Senior Counsel emphasized that the petitioners never accepted cash from the clients and did not admit this. They had clearly stated that the clients had promised them to pay cash on a future date but when the cash was never paid and thereafter they did not deposit the amount the cheques were made to bounce. It was stated that the explanation was misconstrued and it was treated as an admission. That apart, the learned counsel emphasized that the entire defence and the contention of the petitioners was not appreciated by the Disciplinary Authority and the appeal and the memorial has been rejected without application of mind, in a casual manner, without adverting to consider the various grounds raised in their defence.

It was further contended by the learned counsel for the petitioners that the Disciplinary Authority, the Appellate Authority and the Chairman of the Corporation relied upon certain enquiries conducted by the Vigilance Department and the report submitted by them. It was emphasized that the evidence was recorded by the Vigilance Department and the action has been taken against the petitioners based on the report of the Vigilance Department but neither any hearing was given to the petitioners by the Vigilance Department nor where they supplied with the report or the evidence collected in the Vigilance Enquiry. It was contended that the material was collected by the Vigilance Department behind the back of the petitioners and has been used to punish them.

On these grounds, challenge is made to the impugned action and in support thereof reliance is placed on a judgment of this Court in the case of S.C. Seth vs. United Commercial Bank and others, (W.P. No. 5732/2008) decided on 16.2.2012 and reported in 2012 (5) MPHT 62. Finally, it was argued by Shri Shroti, the learned Senior Counsel that the entire action is taken against the petitioners on the basis of a show cause notice and without any proper enquiry or opportunity of hearing was granted to the petitioners and, therefore, the entire action stands vitiated.

Smt. Amrit Ruprah, the learned counsel appearing for the respondents, refuted the aforesaid and submitted that the petitioners having accepted the question of issuing the cheques which were ultimately dishonoured and having accepted the commission for the same without the premium/ proposal being accepted, has committed misconduct and, therefore, as their agency is terminated in accordance with the requirement of the Regulation of 1972, there is no illegality in the matter. Referring to the provisions of Section 16 & 17 of the Regulations of 1972, Smt. Ruprah, the learned counsel contended that there is no provision for conducting a full fledged enquiry and the only requirement under the statute is to issue a show cause notice and take a decision.

In the present case, the decision is taken after issuing a show cause notice and, therefore, the impugned action does not call for any interference. Accordingly, she prays for dismissal of both the writ petitions.

I have heard the learned counsel for the parties and perused the record. From the record it is clear that after the show cause notice were issued to the petitioners vide Annexure P-2, they submitted a detailed reply and in the reply they pointed out that the Corporation through its Branch Manager encouraged acceptance of money from the clients and payment to the Corporation through personal cheques of the agents due to certain administrative and accounting difficulties. The statement made by the petitioners in this regard is a general statement and they have stated that it is a practice in the Corporation and many agents who have done so have been left out and no action is taken against them. However, while considering this defence the Disciplinary Authority namely the Sr. Divisional Manager has held that the petitioners have accepted the allegation of accepting premium from the clients and, thereafter issuing of cheques from their personal account which bounced. It is also stated that even though such a system is permitted at some point of time in the month of March and April, the petitioners have done so on various other occasions and, therefore, action is taken against them. It is also indicated in the order of the Disciplinary Authority and the Appellate Authority that the Vigilance Department has also conducted an enquiry, collected evidence and submitted its report which also shows that the petitioners are guilty.

This act of the respondents namely; the Disciplinary Authority and the Appellate Authority in recording these two findings prima facie seems to be unsustainable. In the reply submitted by the petitioners they nowhere accept that money was given to them by the clients and after receipt of money from the clients they have issued the cheques from their personal account. In fact both the petitioners have specifically come out with a case that the clients had promised them to pay the money and hoping that the clients will fulfill their promise, they have issued the cheques. The question with regard to the procedure followed by various agents and approved by the Management which was indicated by the petitioners without acceptance of premium is misconstrued and by treating it to be an admission the entire action has been taken and on that count alone the action stands vitiated. That apart, the appellate order goes to show that some vigilance case was registered against the petitioners in which prima facie evidence was found against them and based on the report of the Vigilance Department and after approval of the Central Officer of the Vigilance Department, on thorough examining the evidence on record, the impugned action is taken.

If any Vigilance Enquiry was done and the material that was collected in the Vigilance Enquiry formed the basis for taking action against the petitioners and for dismissing their appeal, the principle of natural justice requires supplying of the aforesaid material to the petitioners, giving them an opportunity to give their say on the same and thereafter take a decision. It is a case where the material collected by the Vigilance Department is used against the petitioners and as this material is collected behind the back of the petitioners without their knowledge, the entire action stands vitiated.

Having found the action to be vitiated on the aforesaid two counts, it is not necessary for this Court to go further in the matter. Instead the orders passed by the authorities are quashed and the matter is remitted back to the initiating authority namely; the competent authority to proceed afresh in accordance with law.

Accordingly, both the petitions are allowed. The orders impugned, passed by the competent Authority (Senior Divisional Manager) dated 21.2.2009 Annexure P-4, the Appellate Authority dated 31.3.2010, Annexure P-6, and the memorial submitted to the Chairman dated 18.11.2010, Annexure P-8 are quashed and it is directed that the petitioners shall furnish certified copy of this order to the Senior Divisional Manager and the competent authority shall supply to the petitioners all the material collected by the Vigilance Department, giving them an opportunity to submit a detailed explanation and thereafter, after considering the explanation, shall proceed in accordance with law.

The respondents are granted two months time to conclude the proceedings with effect from the date the certified copy of the order is received. Till the matter is so decided, the suspension of the petitioners agency shall continue to remain in operation. With the aforesaid directions, both the petitions stand allowed and disposed of. In the facts and circumstances, there shall be no order as to costs.