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Judgment
Lakshmanan, J.—The prayer in the above writ petition is as follows:
.....to issue a writ of certiorarified mandamus or any other appropriate writ, Order or direction, calling for the records of the respondent in
Proceedings No. MD/Sect1/ SDM dated 24-3-1992, quash the same and direct the respondent to pay the renewal and other commissions to the
petitioner and pass such further or other orders.....
The petitioner took up an Agency with the Life Insurance Corporation of India in May, 1983. The payment and termination of the services of
LIC Agents are governed by statutory Rules which have been framed u/s 49 of the Life Insurance Corporation of India Act, 1956 and these Rules
are known as the Life Insurance Corporation of India (Agents) Regulations, 1972. According to the petitioner ever since he was appointed as an
Agent of the Life Insurance Corporation, he has done exceedingly well. He had also the unique distinction of being the only Agent to get the IMM
-- Campa Cola -- Marketing Award for being the best Salesman in the country. The petitioner has also received Outstanding Young Person
Award from Jaycees. The petitioner has been interviewed by National Magazines like Business India and India To-day and also figured in the
Insurance Sales Magazine of the U.S.A.
By an order dated 27-5-1991, in exercise of the powers conferred by Rule 16(3) of the Rules, the respondent directed the petitioner not to
solicit or procure new life insurance business since certain material facts had been brought to his notice causing reasonable grounds on which
termination of the Agency was contemplated. On 28-5-1991, a show cause notice was issued to the petitioner under Rule 16 (1) (a) & (b) of the
Rules read with Rule 19(1) of the Rules proposing to terminate the Agency of the petitioner with forfeiture of renewal commission. The gravamen
of the charge was that in the case of three persons who wanted to avail of a Housing Loan from the Life Insurance Housing Finance Limited, a
totally independent entity which is a subsidiary of the Life Insurance Corporation of India, a false employer Certificate had been produced for the
purpose of the loan. It was further alleged that the said three persons had stated that the petitioner herein had given a forged employer certificate
and prompted them to mention that they were employed in the concern. Apart from the three instances mentioned above, the show cause notice
further alleged that in the case of one Smt. Prema Balasubramanian, certain payments had been made to the credit of a loan taken from the LIC
Housing Finance Limited and that the said Smt. Prema Balasubramanian had requested for refund out of the amount paid towards initial deposit,
etc., and that on investigation it had been found that the amount meant to be paid to the credit of the account was not actually remitted into the
Office. On the basis of the said allegations, it was stated that the petitioner had misappropriated the amount from Smt. Prema Balasubramanian.
The petitioner submitted a reply to the show cause notice on 12-6-1991 in which the petitioner stated that even without an enquiry the respondent
had come to the conclusion that the acts of the petitioner are deliberate, intentional, fraudulent and prejudicial and detrimental to the interests of the
Life Insurance Corporation of India, the insurance public and the public at large and that the proposal to terminate the agency with forfeiture of
renewal commission was in gross violation of the principles of natural justice. The petitioner submitted that there was a violation of the principles of
natural justice and also submitted that the conclusions reached by the respondent were not based on any valid evidence and that the respondent
had failed to make a clear distinction between the Life Insurance Corporation of India and the Life Insurance Corporation Housing Finance
Limited.
On 6-9-1991, another show cause notice was issued in which it was alleged that it has further been established by documentary evidence that
the petitioner is not a registered Member of the Institute of Chartered Accountants of India and the Institute of Cost and Works Accountants of
India and, therefore, did not possess the said qualifications as averred by the petitioner in his application dated 26-4-1983 for the grant of agency
and that there were certain other incorrect answers in the said application. It was averred that there were lapsations of policy under the petitioner''s
agency for various years and, therefore, the respondent proposed to terminate the agency with the forfeiture of renewal commission. The petitioner
replied to the show cause notice also by letter dated 18-9-1991 in which the petitioner stated that he was not in a position to reply to the points
raised in the show cause notice unless he was allowed to inspect other agency application form and a copy of the same has been furnished to him.
With regard to the lapsations of policy, the petitioner stated that most of the policies had been transferred from the Branch to other Divisions or to
the Life Insurance Corporation Housing Finance Limited and, therefore, requested confirmation of the fact that the figures given in the show cause
notice related only to policies which had actually lapsed from the LIC point of view and not in respect of policies which had been transferred to
other Branches/Divisions and to LIC Housing Finance Limited. The petitioner stated that on receipt of the particulars, the petitioner would be
sending a final reply. After the two show cause notices and the reply referred to aforesaid, no further correspondence was received in this matter
from the respondent herein. No enquiry was conducted. The petitioner was not given any opportunity to state anything in his defence. The
petitioner was not allowed to cross-examine witnesses or to bring his own witnesses and make any evidence. Eventually, by an order dated 24-3-
1992, an order was passed under Rules 8(2), 8(3)(b), (c) and Rule 16(1)(a), (b) and (d) read with Rule 19(1) of the Rules. The order did not give
any reason except to state as follows:--
Whereas the undersigned had gone through the reply given by Shri Prasanna and find the same not tenable and/or not to the point, and whereas
the agent, Shri S. Prasanna, has, been given reasonable and adequate opportunity to defend himself by way of details contained in the show cause
notice and the earlier letters issued to him in this regard. And whereas the Officer is satisfied that the charges mentioned in the show cause notice
mentioned above have been conclusively established and ends of justice will be met appropriately by the penalties proposed in the show cause
notices.
According to the petitioner, the action of the respondent is mala fide and smacks of merits not only in facts but also malice in law. Thus, the
petitioner contended that the action of the respondent in terminating the agency with forfeiture of renewal commission is contrary to law, illegal and
violative of Articles 14 and 19(1)(g) and 300A of the Constitution of India and hence the petitioner was compelled to approach this Court for the
relief mentioned above by filing the above Writ Petition.
The main grounds which have been urged by the writ petitioner through his counsel Mr. Vijay Narayan at the time of argument are as under:
(1) The action of the respondent in terminating the agency with forfeiture of renewal commission is arbitrary, illegal and violative of Articles 14 ,
19(1)(g) and 300A of the Constitution of India.
(2) The termination of agency is governed by Role 16 of the Regulations and that the Agent should be given an opportunity to show cause against
the termination. In the instant case, the order passed by the respondent is in gross violation of the principles of natural justice. The respondent had
come to the final conclusion that the petitioner was guilty of the offences for which the charge had been issued, the petitioner was asked to show
cause as to why his agency should not be terminated.
In doing so, the respondent has relied upon statements of persons which were admittedly taken behind the back of the petitioner. The petitioner
was not put on notice of the contents of these statements and was never given a chance to cross-examine the author of these statements. Hence, it
was submitted that those statements do not constitute legal evidence which can be relied upon by the respondent for the purpose of coming to any
conclusion regarding the guilt of the petitioner. Moreover, all other documentary material which was relied upon by the respondent was not brought
to the notice of the petitioner and the petitioner was not given any opportunity to bring in any evidence in support of his case. It was for this reason
that in the show cause notices dated 12-6-1991 and 18-9-1991, the petitioner only requested that the principles of natural justice should be
complied with before any order was passed. Inasmuch as there was absolutely non-compliance of the principles of natural justice, it is submitted
that f he order is illegal and that the same is liable to be set aside, which is in violation of Rule 16 itself which provides that the Agent should be
given a reasonable opportunity.
The writ petition was resisted by the respondents. The Secretary (Legal) of the Life Insurance Corporation of India at its Southern Zonal Office,
LIC Building, No. 102, Anna Road, Madras-2 has filed a counter-affidavit dated 22-9-1992. The main contentions raised in the counter-affidavit
are as under:
(1) Rule 16 provides for termination of agency for certain lapses and provides that the agent shall be given a reasonable opportunity to show cause
against such termination.
(2) In terms of the Rule 16, a detailed show cause notice dated 28-5-1991 was issued to the petitioner. The petitioner in his reply to the said show
cause notice did not refute any of the charges and he did not come out with any single specific point which can effectively rebut the charges framed
in the show cause notice.
(3) Even though formal charge sheets were issued only on 28-5-1991 and 6-9-1991 the various acts of the petitioner were brought to his notice
even earlier by several letters by the respondent and was given ample opportunities to explain his conduct.
The competent authority of the respondent Corporation considered the replies to the show cause notices submitted by the petitioner, fully and
carefully and then came to the conclusion that the petitioner''s explanation were unsatisfactory and did not contain any denial of the charges. The
petitioner was in fact given reasonable and adequate opportunities to explain his conduct and the decision to terminate his agency was taken only
after careful consideration of his replies. The contention of the petitioner that the termination of the agency is in violation of the principles of natural
justice is not correct. Life Insurance Corporation of India (Agents) Rules, 1972, does not envisage a formal enquiry, more so in case on hand,
wherein the agent has committed irregularities of a serious type. It is evident from the records form of evidence that the petitioner has committed
irregularities in this case. The petitioner has stated that the competent authority had failed to distinguish between LIC and LIC Housing Finance
Limited. The respondent further submits that the LIC Housing Finance Ltd. was promoted by LIC to provide housing loans to LIC''s Policy
holders and the majority of the shares of the company are held by the LIC and that the decision in this matter was taken only after considering the
replies to the show cause notice. According to the respondent, the writ petitioner deliberately suppressed the fact that his wife is working in a
Bank, which is a Central Government/Public Sector Undertaking. The very appointment of the petitioner as an Agent itself is not legally valid, since
the same was done on the false particulars furnished by the petitioner. Under the Policy of the respondent, LIC Agency is not given to any
applicant whose spouse is in employment in a Central or State Government or in any Public Sector Undertaking. The petitioner while filling up the
application form had deliberately suppressed the said fact. If the said particulars were given by him at the time of filling up of the application, he
would not have been selected as an agent at all. The petitioner has also not disclosed his service particulars correctly in his application for Agency.
Under the Rules and the guidelines, any Agent whose services have been terminated for any reason whatsoever should not be reappointed. If the
petitioner had not suppressed the said fact, he would not have been selected al all. The very appointment is liable to be cancelled. All these facts
are within the knowledge of the writ petitioner and if the very basis for the appointment as it goes, his application itself is not legally valid. Further,
suppression of material particulars and deliberate misstatement of facts, which, if disclosed, would have led to the rejection of his application itself.
Thus, the petitioner is liable to be straightway terminated, since the very appointment itself is not in order, since the appointment was made on the
basis of the particulars furnished by the writ petitioner. The very fact that the petitioner has suppressed the material, which if disclosed would have
disentitled him to be appointed as an agent, would show that the respondent as a Principal cannot allow him to continue or retain him. Lastly it was
contended by Mr. P. Jayaraman that under Regulation 20 of the Agent''s Regulations 1972 the petitioner has not availed himself of the remedy of
Appeal to the Zonal Manager, that even if the Zonal Manager rejects his appeal, he has a further remedy available under Regulation 24 of
submitting a Memorial to the Chairman and that as the petitioner has not exhausted the remedies available to him within the respondent
Corporation, his writ petition is liable to be dismissed in limine.
I have heard the elaborate arguments of Mr. Vijay Narayanan, learned counsel appearing for the petitioner and Mr. P. Jayaraman, learned
counsel appearing for the respondent Corporation. Both the learned counsel have reiterated the points and contentions raised in their respective
affidavit and the counter-affidavit. Mr. Jayaraman, learned counsel appearing for the Respondent Corporation has also cited an unreported
decision of this Court rendered by Mohan, J. (as he then was) in Sankar v. The Divisional Manager, LIC Madupai, (W.P. No. 2709 of 1979,
dated 22-3-1983) in support of his contentions.
I have carefully considered the rival submissions made by the learned counsel appearing for both sides. I am of the view that the writ petitioner
should succeed on the short ground that there was violation of the principles of natural justice and that the final order was passed by the
respondent without affording any reasonable opportunity to the writ petitioner. I also see much force in the contention of Mr. Vijay Narayanan in
regard to his argument with reference to Rule 16 of the Regulations. It is useful to extract Rule 16 of the Regulations in connection with the
termination of Agency which is governed by the said Rule.:
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;
(c) if evidence comes to its knowledge to show that he has been allowing or offering to allow rebate of the whole or any part of the commission
payable to him;
(d) if it is found that any averment contained in his agency application or in any report furnished by him as an agent in respect of any proposal is not
true;
(e) if he becomes physically or mentally incapacitated for carrying out his functions as an agent;
(f) if he being an absorbed agent, on being called upon to do so, fails to undergo the specified training or to pass the specified tests, within three
years from the date on which he is so called upon;
Provided that the agent shall be given a reasonable opportunity to show cause against such termination.
(2) Every order of termination made under sub-regulation (1) shall be in writing and communicated to the agent concerned.
(3) Where the competent authority proposes to take action under sub-regulation (1), it may direct the agent not to solicit or procure new life
Insurance until he is permitted by the competent authority to do so.
It is thus seen that the agent should be given a reasonable opportunity to show cause against the termination of his Agency. In the instant case, the
order passed by the respondent, in my opinion is in gross violation of the principles of natural justice. The respondent had come to the final
conclusion that the petitioner was guilty of the offences for which the charge had been issued, the petitioner was asked to show cause as to why his
agency should not be terminated and in doing so, the respondent has relied upon the statements of persons which were admittedly taken behind the
back of the petitioner. The petitioner was not put on notice of the contents of these statements and was never given a chance to cross-examine the
author of these statements. It was for this reason that in the show cause notices dated 12-6-1991 and 18-9-1991, the petitioner only requested
that the principles of natural justice should be complied with before any order was passed. Inasmuch as there was absolutely non-compliance of
the principles of natural justice, the impugned order is illegal and the same is liable to be set aside, which in my opinion, has been passed in violation
of Rule 16 itself which provides that the agent should be given a reasonable opportunity.
I have gone through the impugned order. The impugned order would show that there has been no application of mind whatsoever to the facts
and circumstances of the case. The order does not show any application of mind except to show that the charges mentioned in the show cause
notice has been conclusively established and hence the order is also liable to be set aside on the ground of non-application of mind. It is further
seen that Rule 16 can be invoked only in the circumstances mentioned therein. In the instant case, Rule 16 has been invoked for certain particulars
said to have occurred in making application for loans from the LIC Housing Finance Limited, which is a separate legal entity. There can be a
violation of Rule 8(2) only if the circumstances mentioned therein take place from the Agent who procures new life insurance business. Hence, it is
obvious that if there is any violation in respect of a loan application from the LIC Housing Finance Limited, by no stretch of imagination, it can be
stated to be a new life insurance business, the respondent does not have the right to invoke Rule 8(2) of the Act. The respondent has not made any
distinction between the LIC Housing Finance Limited and the Life Insurance Corporation of India and inasmuch as the Rules are made under the
Life Insurance Corporation Act, it can only relate to any violation in procuring any new life insurance business and it cannot in my opinion relate to
loans procured from the LIC Housing Finance Limited. It is therefore argued by Mr. Vijay Narayanan learned counsel appearing for the petitioner
that neither Rule 8 nor Rule 16 nor Rule 19 would apply to the facts and circumstances of the case and that therefore the impugned order has been
passed in utter disregard to the relevant provisions of the Rules. It is also seen that the petitioner had merely requested for certain documents and
particulars but without furnishing these particulars, the respondent has thought it fit to pass final orders. Besides being in violation of the principles
of natural justice, and the provisions of the Rules, the action of the respondent suffers from malice in law and hence in my view, the same is liable to
be set aside.
Mr. P. Jayaraman, learned counsel appearing for the respondent Corporation in his arguments submits that the respondent Corporation
carefully considered the replies to the show cause notice submitted by the petitioner and came to the conclusion that the petitioner''s explanations
were not satisfactory and that the same did not contain any denial of the charges. He further submits that the petitioner was in fact given reasonable
and adequate opportunities to explain his conduct and the decision to terminate his Agency was taken only after careful consideration of his replies.
According to Mr. Jayaraman, Rule 16 of the Life Insurance Corporation of India (Agents) Rules, 1972 provides for termination subject to the
Agent having been given a reasonable opportunity to show cause against such termination and that the Life Insurance Corporation of India
(Agents) Rules do not envisage a formal enquiry, more so in case on hand, wherein the agent has committed irregularities of a serious type. It is
further argued that from the records and from the evidence, it will be seen that the petitioner has committed irregularities in this case and that the
respondent has taken the decision only after considering the replies to the show cause notice. In support of his contention that Rule 16 of the Rules
does not envisage a formal enquiry. Mr. Jayaraman placed strong reliance on the judgment of Mohan, J. (as he then was) in W.P. No. 2709 of
1979 dated 22-3-1983. The above case was by an Agent of the Life Insurance Corporation of India, who started addressing the gathering though
he was not scheduled to speak in the meeting. He started making comparison between the remuneration of the LIC employees and the commission
paid to the agents. He stated that the employees of the Corporation were going home with pocket full of money and lot of gifts to their wives and
children while the Agents have to wait for the paltry prizes for enormous work done by them. He criticised the Corporation and further expressed
his doubts about the correctness of calculation of the gratuity amount paid to one Sri. Ganapathy. Thus, the petitioner made disparaging remarks
affecting the reputation of the Corporation in which he was engaged as an agent for canvassing. The petitioner deliberately made this public
statement in a function organized by the Corporation to encourage Agents to work with enthusiasm and which was not the proper forum for airing
his grievances if any. On the basis of this speech, the petitioner was issued a show cause notice on 7-2-1976, whereunder he was directed to
show cause as to why his Agency should not be terminated under Regulation No. 16(1)(b) of the Agents Regulations. The petitioner to the said
show cause notice furnished an explanation on 8-2-1976, wherein he denied all the charges and justified his right to make the statement. After
going through the explanation of the petitioner, the agency was terminated by the impugned order, exercising powers under Regulations 16(1)(b) of
the Life Insurance Corporation of India (Agents) Regulations, 1972 The only point that was argued before the learned single Judge was that the
petitioner was not afforded a reasonable opportunity as has been held by this Court in W.P. No. 4622 of 1970. The learned counsel for the
Corporation submitted that the case cited on behalf of the petitioner was easily distinguishable because in that case certain materials, which were
collected behind the back of the petitioner, were relied on. Therefore the learned Judge held that unless those materials are made known to the
petitioner, there will be a violation of the principles of natural justice. Mr. Justice Mohan (as he then was) while distinguishing the Judgment of this
Court in W.P. No. 2709 of 1979 held that the situation in W.P. No. 2709 of 1979 filed by C. Shankar was entirely different. In that case the
petitioner has made an open speech which speech appeared in a Tamil daily. Therefore, there is no question of any material collected behind the
back of the petitioner being relied on. In any event, the learned single Judge held that the proviso to Regulation 16 merely requires a reasonable
opportunity which was afforded to the petitioner. In fact, the petitioner did not submit his explanation as well. Therefore no exception could be
taken to the impugned order of termination of Agency. The learned single Judge has specifically held that the judgment of this Court in W.P. No.
4622 of 1970 cannot be equated to that of the case before him. The relationship between the Corporation and the petitioner is purely that of a
principal and agent and therefore where the principal does not repose confidence in the Agent, the Court cannot compel the Corporation to
continue the agency. The learned single Judge has further held that the proviso to Regulations 16 of the Life Insurance Corporation of India
(Agents) Regulations 1972 states provided that the agent shall be given a reasonable opportunity to show cause against such termination by issuing
the memorandum of charges and calling upon the petitioner to furnish explanation, which explanation as stated above was duly furnished, the
reasonable opportunity contemplated under the proviso has been afforded to the petitioner and that therefore there is no question of any material
collected behind the back of the petitioner being relied on, which was the position in W. P. No. 4622 of 1970. Accordingly, the learned single
Judge dismissed the Writ Petition No. 2079 of 1979 by distinguishing the judgment of this Court in W.P. No. 4622 of 1970.
In my opinion, the case in W.P. No. 2709 of 1979 is not applicable to the facts and circumstances of the case on hand and that the same is
easily distinguishable. In the instant case, the specific allegations made by the petitioner are as under:
It is thus seen that the agent should be given a reasonable opportunity to show cause against the termination. In the instant case, the order passed
by the respondent is in gross violation of the principles of natural justice. The respondent had come to the final conclusion that the petitioner was
guilty of the offences for which the charge had been issued, the petitioner was asked to show cause as to why his agency should not be terminated.
In doing so, the respondent has relied upon statements of persons which were admittedly taken behind the back of the petitioner. The petitioner
was not put on notice of the contents of these statements and was never given a chance to cross-examine the author of these statements. Hence, it
is submitted that those statements do not constitute legal evidence which can be relied upon by the respondent for the purpose of coming to any
conclusion regarding the guilt of the petitioner. Moreover, all other documentary material which was relied upon by the respondent was not brought
to the notice of the petitioner and the petitioner was not given any opportunity to bring in any evidence in support of his case. It was for this reason
that in the show cause notices dated 12-6-1991 and 18-9-1991, the petitioner only requested that the principles of natural justice should be
complied with before any order was passed. Inasmuch as there was absolutely non-compliance of the principles of natural justice, it is submitted
that the order is illegal and is liable to be set aside. It is in violation of Rule 16 itself which provides that the agent should be given a reasonable
opportunity. In the facts and circumstances of this case, it is obvious that no reasonable opportunity was given to the petitioner prior to the
termination of the agency.
Hence, in the instant case without affording a reasonable opportunity, the respondent has passed the impugned order of termination, Hence in my
opinion, the order of this Court relied upon by Mr. P. Jayaraman, learned counsel appearing for the respondent-Corporation in W.P. No. 2709 of
1979 is not applicable to the facts and circumstances of the case on hand and the principles laid down by this Court in W.P. No. 4622 of 1970
which were distinguished on facts by Mohan, J. (as he then was) in W.P. No. 2706 of 1979 alone are applicable to the facts and circumstances of
the present case. As already stated, the said W.P. No. 4622 of 1970 was allowed by this Court since certain materials which were collected
behind the back of the petitioner were relied on by the Department in that case. Similarly, in the instant case, the Department has relied on the
statements given by some persons, which were admittedly taken behind the back of the petitioner and the petitioner was also not put on notice of
the contents of those statements and he was not given a chance to cross-examine the author of these statements. That apart the documentary
material which was relied upon by the respondent Corporation was not brought to the notice of the petitioner and the petitioner was also not given
an opportunity to look into those documents, in spite of his specific requests made in the replies sent to the show cause notice issued by the
respondent Corporation.
Hence, this writ petition succeeds and the same is allowed.
(a) The order impugned in this writ petition, viz., proceedings No. MD/Sect1./SDM dated 24-3-1992 is set aside;
(b) The respondent Corporation is directed to give an opportunity to the writ petitioner to peruse the documents and all the other materials relied
upon by the respondent-Corporation and to give a further opportunity to the petitioner to appear before the respondent Corporation to prosecute
his case;
(c) The respondent-Corporation is also directed to pay the renewal and other commissions to the writ petitioner pending disposal of the
departmental enquiry pending before the respondent-Corporation;
(d) This writ petition is ordered accordingly;
(e) There will be no order as to costs.
Petition allowed.