IN THE HIGH P.K. SINGH VETSUS LIFE INSURANCE CORPORATION OF INDIA ..... Respondent Through Mr. Ravinder Sethi, Senior Advocate with Mr. Kamal Mehta and IW. Puneet Sharma. Advocates WITH w.P. (c) r0442t2006 NANDINI SUNDRIYAL ..... Petitioner Through: Mr. R.K. Saini, Advocate VETSUS LIFE INSURANCE CORPORATION OF INDIA ..... Respondent Through Mr. Ravinder Sethi, Senior Advocate with Mr. Kamal Mehta and Mr. Puneet Sharma. Advocates WITH w.P. (c) 1044312006 ..... Petitioner MR. MAN SINGH KUSHWAHA Through: Xdr. R.K. Saini, Advocate versus LIFE INSURANCE CORPORATION OF INDIA ..... Respondent Through Mr. Ravinder Sethi, Senior Advocate with Mr. Kamal Mehta and IW. Puneet Sharma. Advocates a(c) 327712007 R.K. MAFIAJAN ..... Petitioner Through VIr. J.P. Sengh, Senior Advocate with Xdr. N.K. Katyal and Mr. Sumeet Batra, A" COURT OF DELHI AT NEW DELHI w.P. (c) r0426t2006 ' Reserved on: 1lth March 2010 Decision on: 21't April 2010 ..... Petitioner Through: N4r. R.K. Saini, Advocate ANI) lvP (C) Nos. 10426,10442,10443 of2006& 3277 of2007 Page 1 of4l Digitally Signed By:AMULYA Certify that the digital file and physical file have been compared and the digital data is as per the physical file and no page is missing. Signature Not Verified 5t' Advocates VETSUS LIFE INSURANCE CORPORATION OF INDIA ..... Respondent Through Mr. Ravinder Sethi, Senior Advocate with Mr. Kamal Mehta and Mr. Puneet Sharma. Advocates CORAM: JUSTICE S. MT]RALIDHAR 1. Whether Reporters of local papers may be allowed to see the order? To be referred to the Reporter or not? Whether the order should be reported in Digest? JT]DGMENT 21.04,2010 1. The facts in these four writ petitions are more or less similar and are accordingly disposed of by this common judgment. 2. Each of these Petitioners was an agent with the Life Insuraice Corporation of India (LIC), the Respondent herein. By separate orders dated 24th November 2005, the agency of each of the Petitioners was terminated and forfeiture of renewal commission was also ordered in terms of the Life Insurance Corporation of India (Agents) Rules, 1972 fhereinafter the "Agents Rules"]. 3. Each of the Petitioners preferred an appeal to the Zonal Manager against the terminations and each of the appeals was rejected by separate orders dated 30th May 2006. The orders dated 24th November 2005, terminating the agency and the orders dated 30th May 2006dismissing the appeal have been challenged by each of them by way of the present writ petitions. they 2. .t J. WP (C) Nos. 10426,10442,10443 of2006& 3277 of2007 Page 2 of 4I iJl" were agents attached to Branch Unit 11-C. 4. The Petitioner in W.P. (C) No. 10426 of 2006, \4r. P.K. Singh, was appointed as an LIC agent in 1990. Since then, he has been conferred with several awards for his work in generating business for the LIC for several years. A long list of such achievements is set out in para 3(B) of the writ petition. He was awarded membership of the Chairman's Club for 2000-01 and 2001-02. Ms. Nandini Sundriyal the Petitioner in W.P(C) No. 10442 of' 2006 became an LIC agent in the year 1990 and has had an unblemished record. Mr. Man Singh Kushwaha the Petitioner in W.P. (C) No.10443 of 2006 became an agent way back in the 1970s and has also been awarded merit certificates and honours. Similarly, IVIr. R.K. Mahajan, the Petitioner in W.P. (C) No. 3277 of 2007 became an LIC agent on22"d October 1990. He achieved top rankings in agent's listings and was awarded membership of the Chairman's Club for 1997-98. On 19th September 2003 N4r. R.K. Mahajan made certain complaints to the Senior Divisional Manager, LIC regarding malfunctioning of the SSS. 5. It is stated that on 15th July 2004, a notice was issued by the LIC to each of the petitioners stating that irregularities had been obs.erved in various policies under the Salary Savings Scheme (hereinafter the "SSS") under the Petitioners' agencies at Branch Unit-ll-C and that the said inegularities "were resorted to with a view to defraud the corporation". It was stated that the "entire matter is under investigation and disciplinary action was contemplated" pending investigation and action in accordance Poge 3 of41 WP (C) Nos. 10426,10442,10443 of2006&3277 of2007 3P with the Agents Rules. The Petitioners were directed "not to procure or solicit any new LIC insurance business unless permitted to do so". By a separate order dated 15th July 2004, the Senior Divisional Manager directed each of them "not to enter any office under the jurisdiction of the LIC without taking his prior permission". 6. On tZ;n l,rty 2004,VIr. P.K.Singh and Ms. Nandini Sundriyal wrote to the Senior Divisional Manager expressing surprise at the aforementioned letters denying having committed any irregularity. Mr. Man Singh Kushwaha wrote letters to the Senior Divisional Manager, LIC to the same effect on 22nd lrly, 21't August and 6th September 2004. I\4r. R. K. Mahajan wrote a similar letter on 20th July 2004 7.By a common order dated 30th September 2004, the Branch Manager of Branch Unit No. 11-C stated that consequent upon the conclusion of investigation, the order dated 15th July 2004 prohibiting the agents from entering any office under the jurisdiction of the LIC of India, Delhi, stood withdrawn. The order dated 30th September 2Q04 was applicable to the three Petitioners other than Mr. R.K.Mahajan. 8. VIr. P.K. Singh, wrote a letter dated 6ft Decembet 2004 requesting LIC to take a decision in the matter and permit him to resume business as an LIC agent in view of conclusion of the investigation by LIC and the consequent order of 30th Septembet 2004. This was followed by a common letter by three of them (other than Mr. R. K. Mahajan) delivered to the lyP (C) Nos. 10426,10442,10443 of2006& 3277 of2007 Page 4 of 4I gs, Respondent LIC on 13ft December 2004 to the same effect. By a letter dated 20th January 2005, the Branch Manager informed the said three. Petitioners that the competent authority had decided to revoke the order dated 15th July 2004, and lifted the ban on procuring new life insurance business. As the two withdrawal orders dated 30ft September 2004 and 20s January 2005 excluded nnr. n. K. Mahajan, he sent representations to the LIC regarding the same on 15th February 2005, 10th Marc h 2005 and 8h April 2005. 9. After receiving the two orders of the Senior Divisional Manager, LIC dated 15th July 2004 Mr. R. K. Mahajan filed a writ petition, CWP No: 12754 of 2005 in this Court when no show cause notice was issued to him while he was prohibited from procuring any new business as well as entering premises under the jurisdiction of the LIC. This Court disposed of the said writ petition on 20th October 2005 directing the LIC to issue him a show cause notice. Thereafter, on 27th September 2005 a show cause notice was issued to each of the Petitioners by the Senior Divisional Manager under Rules 16 and 19 of the Agents Rules. 10. In the case of Mr. P.K. Singh the details of seven policies which were processed on the basis of Mr. P.K.Singh's Agents Confidential Reports (ACRs) were set out. It was stated that the premia for the said policy proposals were deposited through the Branch Office Collections (BOCs) including those created in the name of the Paying Authority (employer)' [hereinafter the "PA"] namely, Delhi Jal Board (DJB)/Naunicipal I'yP (C) Nos 10426,10442,10443 of2006& 3277 of2007 Poge 5 of 41 J\, Corporation of Delhi (MCD) in gross violation of the Agents Rules. Thus" the remittances of the PA, i.e., the employer remitting SSS renewal premia were deposited as proposal deposits against the above proposals. The precise allegation was that VIr. P.K.Singh had "misled the Corporation to adjust the above amount towards first premium under fresh proposals under ordinary mode", and therefore he was "a direct beneficiary in the above said fraudulent act", since he had given the Agent's Confidential Report (ACR) for the completion of the above proposal "leading to payment of enhanced commission to you by way of the above referred misappropriation to defraud the policyholders as well as the Corporation". The show cause notice further stated that the above adjustments have led to misappropriation of the renewal of premia "and creation of gaps in policies causing monetary loss to the Corporation and the Policy holders". \4r. P. K. Singh was accused of having defrauded the LIC and its policyholders resulting in the tamishing of its image. In para 2 of the show cause notice it was specifically alleged that "you collected cheques towards PAs remittances and submitted the same along with the lists containing details of premium deduction and misled the Corporation to adjust thsremittances towards first/renewal premium under the proposal/policies other than those in respect of which the deductions were made by the PAs, thereby putting policyholders and the Corporation to financial loss". It was stated that by the aforesaid acts, lVIr. P. K. Singh had "acted in a manner prejudicial to the interests of the Corporation as also that of policyholders & failed to , maintain absolute integrity in discharging the functions as an'agent and committed breach of Rule 16(1)(a)&(b) of the LIC of India(Agents) Rules, IYP (C) Nos. 10426,10442,10443 of2006& 3277 of2007 Page 6 of 41 (? d' J" 1972." In the penultimate paragraph of the show cause notice, the Senior Divisional Manager (Disciplinary Authority) stated that the LIC "......provisionally propose to impose the penalty of termination under Rule 16(1) of LIC of India (Agents) Rules, 1972 with forfeiture of renewal commission in terms of Rule 19(1) read with Rule 10(6) of LIC of India (Agents) Rules, 1972." Mr. P. K. Singh was asked to show cause within 15 days why he should not be held guilty of the aforesaid charges and why the penalty of termination of agency under Rule 16(1) with "forfeiture of renewal commission" under Rule 19(1) to be read with Rule 10(6) of the Agents Rules, should not be imposed. 11. Similar allegations were communicated to the other Petitioners in the show cause notices issued to them. In case of Ms. Nandini Sundriyal, sixty-two proposals were mentioned in which the premia had been scl adjusted. In case of Mr. Man Singh Kushwaha the allegation of adjustment of premia was with regard to two proposals. VIr. R.K. Mahajan's notice mentioned some fourteen proposals in which, the allegation was that, a total amount of Rs. 18,254/- was adjusted against PA's money for renewal premia and diverted towards new proposals. Another charge against Mr. R.K. Mahajan was that six proposals given by him, which were converted into policies by the LIC, later had to be repudiated when the said six policy holders all died within three years of subscribing to their respective policies. This according to the show cause notice was in violation of Rule 8(2) (b) of the Agents Rules. Pnge 7 of41 WP (C) Nos. 10426, 10442, 10443 of2006& 3277 of 2007 J6, 12. On various dates in October 2005. the four Petitioners submitted their replies to the show cause notices. Apart from denying the allegations, it was stated that they were being blamed for "what is basically a system failure and for which even very remotely the applicant cannot be held responsible" and that "only those responsible for the management and administration of LIC should be put into task." It was maintained that it was practically not possible for the Petitioners to change or alter the system of LIC since the agents had "no control over the system and administration of LIC". The Petitioners also pointed out to the inherent defects in the manner in which the SSS was being administered where the first premium as well as the renewal premium were remiffed to LIC in a single cheque from the employer which then used to be bifurcated into two parts, for one of which a Block Branch Office Collection (BOC) would be issued and for the other an SSS MR. Mr. P.K. Singh gave an example where. the actual cheque amount was Rs. 10,000/- which was split into two parts of Rs. 5,000/- each and a block BOC as well as an SSS MR were issued giving the same cheque number for both. This resulted in multiple BOCs being issued against a single cheque. While adjusting the amount, if the premium was short, it was adjusted from another Block BOC and the case used to get passed. It was pointed out that all these discrepancies were not on account of the Petitioners but on account of the LIC officials themselves. The above practice was followed not only for the MCD but for DJB, DDA etc. as well. It is stated that such practice was prevalent from earlier times when the Petitioners first became LIC agents. It was pointed out that when Xdr. P. K. Singh had given a life insurance business of over 6000 policies, WP (C) Nos. 10426,10442,10443 of2006& 3277 of2007 Page I of4l s7, it was not possible for him to compromise on the deposit of any amount. The other three Petitioners had also provided more or less a similar quantum of business. It was stated in the reply as under: "For the list of premium, as indicted in the show cause notice, it is further clarified that such list were prepared in consultation with the employer and used to be duly signed by their authorized DDO. As such, no direct and independent role was ever played.which could be prejudicious (sic'prejudicial') to the interest of LIC." 13. On 24th November 2005 separate orders were passed by the Disciplinary Authority in respect of all four petitioners terminating the agency under Rule 16(1) (a), (b) and the renewal commission.in terms of Rule 19(1) read with Rule 10(6) of the Agents Rules. In the case of \4r. P. K. Singh, the order set in five paragraphs the contents of the show cause notice and thereafter stated: "after consideration of investigation reports, reply of Mr. P.K. Singh and the documentary evidence available, I conclude that Mr. P.K. Singh, Agency Code 49721-111 is guilty of the charges enumerated against him vide Show Cause Notice........." Similar orders were passed in respect of the other Petitioners. Mr. R.K. Mahajan was, in addition, found to have violated Rule 8(2) (b). His agency was terminated under Rule 16(1) (d) in addition to Rule 16(1) (a) and (b) of the Agents Rules 14. VIr. R.K. Mahajan, on 2nd December 2005 and 21't December 2005t WP (C) Nos. 10426,10442,10443 of2006& 3277 of2007 Page 9 of41 J$' sought permission for inspection of certain records. The LIC on 7th January 2006 denied this request. 15. The orders passed by the Appellate Authority on 30th May 2006 dismissing the petitioners' appeals were identical. After setting out the contents of the show cause notice, \4r. P.K. Singh's order stated that "the remittance of Paying Authority (Employer) remitting SSS renewal premiums were deposited as proposal deposit against the seven mentioned proposals and Ex-Agent misled the Corporation to adjust the above amount towards l't Premium under fresh proposals under Ordinary as well as SSS Mode." The orders stated that the Petitioners did not raise any new fact foi consideration. 16. There after,on 13'h July 2006, VIr. R.K. Mahajan filed a memorial as provided for in terms of Rule 24 Agents Rule to the Chairman of LIC and sent a reminder of the same on 12th October 2006. Between September 2006 and December 2006, he also filed a number of applications under the Right to Information Act 2005 (RTI Act) seeking information regarding utilization of the sum of Rs. 37.0001- credited to the LIC's account. However, the LIC refused access on the ground that the information sought related to a matter under investigation by the Central Bureau of Investigation (CBI). An appeal was preferred to the Central Information Commission (CIC), which, in its order dated 12th February 2007, directed LIC to furnish the information sought inasmuch as it did not relate to the IYP (C) Nos. 10426,10442,10443 of2006& 3277 of2007 Page I0 of41 s1 , CBI investigations. LIC did not furnish any information on the ground that the details with regard to the said cheque were under investigation. Writ Petitions and Replies 17. The principal ground in each of the writ petitions is that the impugned orders terminating the agency of the petitioners are in violation of the principles of natural justice. It is stated that even the Appellate Authority did not follow Rule 23(I) of the Agents Rules which contemplates giving the appellant "a reasonable opportunity of representing his case". A reference is made to the judgment of the Madras High Court in K. Chellathungam v. The Chairman, Life Insurance Corporation of India AIR 2004 Madras 288. 18. The Petitioners submit that the case had already been investigated in 2004 and nothing had been found against any of the Petitioners to justiff the subsequent orders dated 30th September 2004 and 20th January 2005. The impugned orders had been passed without any further enquiry. It wai further pointed out that the Petitioners have been made a scapegoat for the fault of the LIC officials and that in terms of LIC's circulars and orders, the Petitioners had been depositing amounts to cover the shortfall in the premium. In some of the cases, this shortfall was only to the extent of Rs. 201- to Rs. 200/- which could have been due to a bonafide calculation mistake. It is also pointed out that the CBI had raided the Petitioners' premises and found nothing incriminating. The Petitioners had been working with the LIC for a long time and had a legitimate expectation that WP (C) Nos. 10426,10442,10443 of2006& 3277 of2007 Pnge I1 of41 Y", their agency would continue. In any event, there was absolutely no justification for forfeiting the entire renewal commission for all the policies which had been brought to the LIC by the Petitioners. 19. In the counter affidavit, it is contended by the LIC that the principles of natural justice were fully complied with "both in its letter and spirit". It was stated that the charges stood proved against the Petitioners. They were of quite a grave nature amounting to fraud and misappropriation and that the "said misconduct is totally and completely prejudicial to the interest of the corporation". It is stated in the counter affidavit that "the only punishment which could have been awarded to the Petitioneis is the termination of their services which is what was precisely done." Further the fraudulent nafure and the element of misappropriation "was of such a grave nature having criminal culpability that the matter had to be entrusted to the Central Bureau of Investigation". The circular/instruction dated 10th March 2006 relating to closing of books and acceptance of cash deposits was limited to the period between 23'd March and 3l't March 2006.In no event, could the said amounts be utilized towards introduction of fresh proposals. LIC's response to the Petitioners' RTI applications 20. During the pendency of this writ petition, Mr. P.K. Singh filed an application under the RTI Act on 5th Septembet Z6Oe. Ms. Nandini Sundriyal also filed a similar application. The reply given by the LIC to the questions raised by the Petitioners on the working of the SSS were WP (C) Nos. 10426, 10442, 10443 of 2006& 3277 of 2007 Poge 12 of 41 \f^ summarized by them as under: "1. Monthly premium in Salary Saving Scheme (SSS) are deposited/dispatched by the employer directly to LIC servicing branch. 2. Employees of the respective branch scrutinize the list of the policy Nos. submitted by the Employees along with the Premium Cheques. 3. Officials of the particular servicing branch create the miscellaneous Receipt (MR) of the Renewal Premium cheques. 4. Officials at the servicing branch make the adjustment of MRs/BOCs created in the name of Paying Authonty (Employer). 5. There is no role of the Agent in said adjustments of BOCsAvIRs. 6. Renewal Premium received from the Employer by crossed cheque in the name of LIC of India cannot be adjusted in fresh proposals. 7. Officials/employees of the branch office are responsible for underwriting/scrutiny of the fresh insurance proposal forms. They fill the proposal No. BOC No. Date of BOC and amount of BOC on the proposal forms and after scrutiny of the proposal form." 2l.In addition to the Petitioners' forfeiture of agency commission, LIC issued show cause notices on 14th November 2006 to 18 officers of the Khan Market branch office to seek their explanation. Instructions were issued on 1lft March 2000 itself by the Divisional Office pointing out that the deduction of new insurance premium amount from the salary of the proposer was contrary to the instructions whereby the recovery of the salary commenced only from the 3'd month of the entry. The said circular stated that the branches themselves would be responsible if the said wp (c) Nos. 10426,10442,10443 of2006& 3277 of2007 Poge 13 of41 \r^ 'tt instructions were violated. 22. An additional affidavit was filed by IVIr. P.K. Singh on 20th February 2O0g stating that against the order dated 30fr May 2006 of the Appellate Authority, he had filed a memorial under Rule 24 of Agents Rules to the Chairman, LIC which had been rejected by an ordei dated 22nd November 2007. A copy of the said order has also been placed on record. Orders of this Court 23. When these cases were heard together by this Court, it was found that none of the relevant documents had been produced by LIC. On I|th January 20I0,the following order was passed by this Court: "1. In each of these cases the allegation is that money deposited by the paying authority ('PA') pursuant to the Salary Saving Scheme, for renewal of premia of LIC policies in the names of the employees of the PA, have been, at the instance of the Petitioners, misappropriated towards payment of premium for new/fresh policies of private individuals unconnected with the PA. 2. Learned counsel for the LIC states that he will, on the next date of hearing, produce before this Court the complete details of each of the policies mentioned including the premia paid against these policies and the manner of payment of such premia. 3. At his request, list on 28th January 2010." 24. Thereafter, on the adjourned date'a further time was sought by the LIC and the case was listed for 8'h February 2010. Mr. Ravinder Sethi, the learned Senior Counsel for LIC again sought further time to produce the WP (C) Nos. 10426,10442,10443 of2006& 3277 of2007 Page 14 of 41 \e records which were ultimately produced on 17th February 20L0. 25. During the hearing on 17h February 20I0,LIC informed this Court that the voluminous documents submitted before the Court on that date were not furnished earlier to any of the Petitioners, much less enclosed with the show cause notices seeking their explanation. The court enquired of the learned Senior counsel appearing for the LIC whether the LIC would be willing to consider giving a fresh opportunity of hearing to each of the Petitioners by furnishing them with the complete material which was used by the LIC to form an opinion about their alleged misconduct resulting in the termination of their agency. Learned Senior counsel for LIC sought time to obtain instructions. On 17th February 2010 the following order was passed: "I. The Respondent has produced the documents which included the charts giving the particulars that are available in the records of the LIC vis-d-vis each of the Petitioners. After going through the materials and making submissions Mr. Sethi, learned Senior counsel for the Respondent states that these cases may be adjourned by ten days to enable him to seek instructions in light of what has transpired before this Court. 2. It is made clear that if the LIC is not able to take a decision by the next date, the case will be heard further on merits. 3. Adjoumed to 4ft March 2010.' 26. At the subsequent hearing on 4th March 2010, the learned Senior counsel for the LIC stated on instructions that the LIC was