IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE K.BALAKRISHNAN NAIR & THE HONOURABLE MR. JUSTICE C.T.RAVIKUMAR THURSDAY, THE 9TH JULY 2009 / 18TH ASHADHA 1931 WA.No. 1218 of 2007() --------------------- AGAINST THE JUDGEMENT/ORDER IN OP.30853/2000 Dated 01/03/2007 .................... APPELLANT/PETITIONER: -------------- K.SUBRAMANIA PILLAI, DEVELOPMENT OFFICER, LIFE INSURANCE CORPORATION OF INDIA, BRANCH NO.2, ERNAKULAM, ELIAS CHAMBERS, BANERJEE ROAD, KOCHI-18. BY ADV. SRI.O.V.RADHAKRISHNAN, SENIOR ADVOCATE SMT.K.RADHAMANI AMMA SRI.ANTONY MUKKATH SRI.K.V.JOY SRI.K.RAMACHANDRAN (THYKOODAM) RESPONDENTS/RESPONDENTS: --------------- 1. SENIOR DIVISIONAL MANAGER, LIFE INSURANCE CORPORATION OF INDIA, ERNAKULAM, DIVISIONAL OFFICE,"JEEVAN PRAKASH", PB NO.1133,M.G.ROAD, KOCHI-682 011. 2. P.SREEDHARA RAO (INQUIRIYING AUTHORITY), DEPUTY SECRETARY (INVESTMENT), LIFE INSURANCE CORPORATION OF INDIA, CENTRAL OFFICE, "YOGA KSHEMA", JEEVAN BINA MARG,MUMBAI-400 021. 3. ZONAL MANAGER (APPELLATE AUTHOIRITY), LIFE INSURANCE CORPORATION OF INDIA, SOUTHERN ZONAL OFFICE, ANNA ROAD, P.B NO.2450,CHENNAI- 600 002. 4. CHAIRMAN, LIFE INSURANCE CORPORATION OF INDIA,CENTRAL OFFICE, "YOGA KSHEMA", JEEVAN BINA MARG,MUMBAI - 400021. 5. LIFE INSURANCE CORPORATION OF INDIA, REPRESENTED BY ITS CHAIRMAN, LIFE INSURANCE CORPORATION OF INDIA, CENTRAL OFFICE, "YOGA KSHEMA",JEEVAN BINA MARG, MUMBAI- 400021. ADV. SRI.E.SUBRAMANI, SENIOR ADVOCATE SRI.S.EASWARAN, SC, LIC THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 09/07/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: K.BALAKRISHNAN NAIR & C.T.RAVIKUMAR, JJ. ------------------------------ W.A.No. 1218 OF 2007 ------------------------------ Dated, this the 9th day of July, 2009 J U D G M E N T ~~~~~~~~~~~~ Balakrishnan Nair, J. The appellant is the writ petitioner. The brief facts of the case are the following: The appellant was a Development Officer of the Life Insurance Corporation of India working at Ernakulam. While so, he has been served with Ext.P1 charge sheet dated 9.8.1994 accusing him of certain irregularities in reporting the proposal for insuring the life of one Sri.V.C.Devassy, who was working as an Assistant, at the relevant time, in Telecom Department. Sri.George Paul, the Agent, working under the appellant, came forward with a proposal for insuring the life of said Sri.V.C.Davassy for Rs.5,00,000/-. The appellant submitted a 'Confidential Report' concerning that proposal on 11.5.1988. In that report, he certified the monthly income of said Sri.Devassy as Rs.9,000/- from different sources. Without proper enquiry, it is alleged, he recommended the proposal for acceptance and induced the Corporation to accept that proposal. The said Devassy died on 12.6.1989 and the same W.A.No.1218/2007 2 resulted in a claim being made on the LIC for an amount of Rs.10,00,000/-. Yet another allegation raised in Ext.P1 was that he submitted a 'Confidential Report' dated 31.5.1989 in connection with another proposal for insuring the life of the aforementioned Devassy for a further amount of Rs.4,00,000/-. In that report, the appellant certified that the Devassy's monthly income was Rs.23,500/- from different sources. It was so certified without conducting a proper enquiry into his sources of income, it was alleged. But, before the said proposal matured into a policy, the said Devassy died. During the investigation of the death claim, it was found that the said Devassy had only a monthly salary of Rs.1,900/- and therefore, the 'Confidential Reports' submitted by the appellant on 11.5.1988 and 31.5.1989 contained false information. Therefore, the appellant committed breach of Regulations 21 and 24 read with Regulation 39(1) of Life Insurance Corporation of India (Staff) Regulations, 1960, it was alleged. 2. The appellant submitted Ext.P3 reply. He submitted that he was appointed as probationer in the post of Development Officer in July 1987. Sri.George Paul was one of the many Agents recruited by him. The said George Paul has W.A.No.1218/2007 3 substantial volume of business. In April 1988, the said Agent approached the appellant and told him that he has contacted Sri.V.C.Devassy and tried to persuade him to take a policy, but he failed to convince him. The appellant immediately informed Sri.B.K.Narayanan Nair, the Assistant Branch Manager (Sales) and sought his advice. The latter suggested that all of them together would call on Sri.V.C.Devassy at his residence. All the three went to his residence. The Assistant Branch Manager (Sales) Sri.B.K.Narayanan Nair was able to persuade the said client to take an insurance policy for Rs.5,00,000/-. The said Officer made a detailed enquiry with the said client regarding his income and its sources. He also met some of the neighbours and made enquiries regarding the sources of income mentioned by the client etc. Based on the information so collected, the appellant drafted a 'Moral Hazard Report' for the above proposal. Since the sum assured was above Rs.4,00,000/-, the aforementioned Assistant Branch Manager (Sales) wrote the 'Moral Hazard Report' and this resulted in the proposal being accepted and a policy being issued. Again the aforementioned Agent during 1989 persuaded the said Devassy to take a policy for a further sum of Rs.4,00,000/-. Before writing the 'Moral Hazard Report', W.A.No.1218/2007 4 the appellant called on Sri. Devassy at his residence and made enquiries about his income. He also made enquiries in the neighbourhood and based on the information received, he completed and submitted the 'Moral Hazard Report'. The appellant also pointed out in his reply that for the first policy late Devassy has paid the quarterly LIC premium regularly. It was also found that he was maintaining Postal Life Insurance, Accident Insurance and additional contribution to G.P.F. etc. Apart from that, his wife was working in the Gulf as a nurse. He was maintaining a decent standard of living also. The same proved beyond doubt that late Devassy had sufficient income to maintain these policies, it was submitted in Ext.P3. 3. In view of the above facts, the appellant pleaded in his reply that further proceedings may be dropped. But, the disciplinary authority was dissatisfied with the appellant's reply. So, an Enquiry Officer was appointed to enquire into the charges. The Inquiring Authority by Ext.P11 submitted the enquiry report finding the appellant guilty of the charges levelled against him in Ext.P1. He was served with a copy of that report calling upon him to submit his comments, if any. Thereupon, he submitted Ext.P13 objections to the report. W.A.No.1218/2007 5 The disciplinary authority overruled the objections of the appellant and by Ext.P14 order imposed the punishment of reduction of his basic pay to the minimum in the time scale of pay, applicable to Development Officers, in terms of Regulation 39 (1) (d) of the LIC of India (Staff) Regulations, 1960. The appellant, aggrieved by Ext.P14, filed Ext.P15 appeal. But, the appeal was dismissed by Ext.P16 order. He filed a memorial before the Chairman of the LIC of India, a copy of which was produced as Ext.P17. The said memorial was dismissed by the Chairman by Ext.P18 order on 18.6.1999. Challenging Ext.P1 charge sheet, Ext.P11 enquiry report, Ext.P14 Original Order, Ext.P16 Appellate Order and Ext.P18 Order on the memorial to the Chairman, the Original Petition was filed. Other consequential reliefs were also sought. The respondents filed a detailed counter affidavit resisting the prayers in the Original Petition. The learned Single Judge, after hearing both sides, dismissed the Original Petition. Hence, this appeal. 4. We heard Sri.O.V.Radhakrishnan, learned senior counsel for the appellant, and Sri.S.Easwaran, learned counsel for the respondent. Learned senior counsel submitted that W.A.No.1218/2007 6 Ext.P1 does not disclose any misconduct covered by Regulation 21 or 24. The 'Moral Hazard Report' for the first proposal concerned was written by the Assistant Branch Manager (Sales), Sri.B.K. Narayanan Nair. As mentioned in his reply to the charge sheet, the appellant along with the Assistant Branch Manager and the LIC Agent visited the house of the insured and based on the interaction with him and also his neighbours, arrived at a finding that he has sufficient income for taking a policy for Rs.5,00,000/-. Since it was a policy for an amount above Rs.4,00,000/-, the appellant's drafting of 'Moral Hazard Report' was irrelevant and the LIC accepted the proposal only on the basis of the 'Moral Hazard Report' of the Assistant Branch Manger (Sales). The said Officer has admitted this fact, while he was examined as DW6. The said Officer was allowed to retire without any punishment and the appellant alone was subjected to disciplinary action for issuing the policy of Rs.5,00,000/-. Mr.B.K.Narayanan Nair, mentioned above, alone was principally responsible for the issuance of the said policy. Since the second proposal did not fructify into a the policy, the decision to take action for the 'Moral Hazard Report' in relation to the 2nd policy was unsustainable. The learned senior counsel also submitted that W.A.No.1218/2007 7 the enquiry against him was held in violation of the principles of natural justice. In support of that submission, the learned senior counsel submitted Exts.P39, P42 and P45 were marked in the enquiry and their contents were relied on in the enquiry report without making available the authors of those documents for the cross-examination of the appellant. 5. The learned senior counsel also pointed out that Exts.P49, P52 and P55 were the statements of certain persons before the CBI officer, who conducted the enquiry in the matter. But, the makers of those statements when examined retracted from their statements. But, the contents of those documents were relied on to find the appellant guilty of the charges. If those objectionable documents were removed from the evidence on record, there was no legal evidence to find the appellant guilty. In other words, the finding was entered against him based on no evidence. Therefore, the enquiry report was liable to be rejected and all proceedings initiated against the appellant based on the enquriy report were liable to be quashed. The learned senior counsel further submitted that an employee cannot be punished for committing an error in judgment or being inefficient. The satisfaction regarding W.A.No.1218/2007 8 income recorded in the 'Moral Hazard Report' concerning a policy is based on the subjective satisfaction of the Development Officer or the Assistant Branch Manager (Sales), as the case may be. There were no Rules prescribing objective norms for ascertaining the income of the insured. There is no stipulation that the Development Officer should get the certificate from the concerned Revenue Official regarding the income of the policy holder. Further, he is not supposed to verify the title deeds of the properties claimed to be owned by the insured. Normally, he interacts with the proposed client, collects information from the neighbourhood and if he is subjectively satisfied that the person has the income claimed by him, proposal is taken up and 'Moral Hazard Report' is filed. It was, what has, happened in this case. So, the objective findings made after a detailed enquiry held in 1990 on the details of actual income etc. cannot be made the basis for finding that the appellant has made a wrong report in 1988. So, the disciplinary proceeding was ill- conceived and liable to be quashed, it is submitted. W.A.No.1218/2007 9 6. The learned senior counsel relied on the decisions of the Apex Court in Zunjarrao Bhikaji Nagarkar v. Union of India [1999(7) SCC 409] and Nitinkumar Nathalal Joshi v. Oil and Natural Gas Corporation Ltd. [ 2002(3) SCC 443] in support of his submission that error of judgment or inefficiency cannot be the basis for disciplinary action. The learned counsel also submitted that the documents marked in the enquiry report should be proved and no amount of suspicion could take the place of legal proof. In support of that submission, reliance was placed on the decisions of the Apex Court in Roop Singh Negi v. Punjab National Bank [2009 (2) SCC 570]. 7. The learned counsel for the respondents Sri.Easwaran, on the other hand, submitted that the enquiry was held in accordance with the Regulations governing the same and also in conformity with the principles of natural justice. The documents marked in the enquiry came from the proper custody and the appellant has chosen not to raise any objection when those documents were marked. Therefore, the belated criticism of marking the documents without examining the authors of them is unsustainable. The same cannot be W.A.No.1218/2007 10 considered by this Court. The learned counsel also submitted that strict rules of evidence are not applicable to domestic enquiries. The findings in the enquiry were based on the evidence on record and unlike in other cases, if some evidence is available to support the charges, the same will be sufficient in a domestic enquiry. Going by the well settled principles governing judicial review, no ground has been made out warranting interference with the impugned orders. It is also submitted that without any supporting materials, the delinquent has reported about the income of the insured, which resulted in issuance of the policy. So, the action was rightly taken. In support of his submission, the learned counsel relied on the decision of the Division Bench of the Jammu and Kashmir High court in Zonal Manager, LIC of India v. Mohan Lal Saraf [1978(2) SLR 868] and also the decision of the Apex Court in K.L.Tripathi v. State Bank of India [1984(1) SCC 43]. The first decision was cited to support the contention that strict rules of evidence are not applicable in marking documents and the second decision of the Apex Court was cited in support of the submission that the delinquent cannot complain of marking documents unless objection to the same is taken at the appropriate time. W.A.No.1218/2007 11 8. We considered the rival submissions made at the Bar and went through the relevant materials and documents. It is common knowledge that the officers under the LIC, especially, in the marketing wing, are working under great pressure to increase the volume of business. We find everyone having some income being constantly pestered by the Agents and Development Officers for taking a policy. In this case, we notice that a person was identified by the Agent as a prospective client. In their enthusiasm, the appellant as well as the Assistant Branch Manager (Sales) together with the Agent visited his house and made on the spot assessment. Based on the statement of the client, an assessment regarding income has been made and 'Moral Hazard Report' has been filed. As rightly pointed by the appellant, in this case, since the amount exceeded Rs.4,00,000/-, admittedly, in the light of the standing instructions, only the Assistant Branch Manager (Sales) could have submitted 'Moral Hazard Report' and the same has been submitted by the said Officer only. Of course, if there are prescribed Regulations having objective standards for the purpose of assessing income, the Assistant Branch Manager (Sales), Development Officer and the Agent could have been accused of dereliction of duty. The LIC has W.A.No.1218/2007 12 completely left the assessment of income to the subjective satisfaction of the Agent/ Development Officer or the Assistant Branch Manager, as the case may be, concerned. We feel that there is a reason for leaving it to their satisfaction. The considerations relevant while granting a loan by a bank to a customer are totally irrelevant in the matter of issuance of a policy. The bank has to assess whether the loanee will be able to re-pay the loan amount in time; whether he has sufficient income for the same and even if he defaults; whether he has assets from which the amount could be recovered. Since the bank is giving its money, it has to make such assessment. Otherwise, the bank's existence itself will be in danger. Every bank has detailed written instructions concerning the above aspects. In contrast, the LIC has no Rules providing for objective assessment of the income or the assets of the client. The reason for the same is obvious. In a transaction of insurance, the customer is paying money to the LIC. Therefore, the LIC is not very much concerned with the capacity of the policy holder to make it. If a person with meagre income takes a policy for a huge amount and defaults, the policy holder alone is affected. No substantial prejudice is caused to the LIC. Such adventures, we find will happen only W.A.No.1218/2007 13 occasionally. Normally, a person, in his senses, will take an LIC Policy, if only, the premium is affordable for him. In this case, the assured was living in style; he was a Class III employee of the Telecom Department; his wife, at the relevant time, was working in a Gulf country and she was also sending some money. He had business in fruits and vegetables. In the above background, if the delinquent Officer and his superior came to the conclusion that the client has sufficient income to remit the premium, the same cannot be said to be a wrong or illegal decision. The allegation against the appellant was that he violated Regulations 21 and 24 of the LIC of India (Staff) Regulations, 1960. Those regulations read as follows: “21. Every employee of the Corporation shall at all times maintain absolute integrity and devotion to duty, shall conform to and abide by these Regulations and shall observe, comply with and obey all orders and directions which may, from time to time, be given to him in the course of his official duties by any person or persons under whose jurisdiction, superintendence or control he may, for the time being, be placed. 24. Every employee shall serve the Corporation honestly and faithfully and shall use his utmost endeavours to promote the interest of Corporation and shall show courtesy and attention in all transactions.” W.A.No.1218/2007 14 The materials against appellant on record does not show any lack of integrity or devotion of duty from his part. It is not shown or even whispered that he has violated any written instruction regarding method of assessment of the income of the insured. There is no allegation of dishonesty or lack of good faith against him. 9. In this case, it is common ground that the person has remitted the premium for the policy regularly till his date of death. So, the assessment regarding capacity to pay also cannot be said to be faulty. The LIC has circulated instructions for deciding on the probable amount of policy with reference to the income of the policy holder, which were placed before us. As per the said document, if a person is within the age group of 18-35, he can be insured for an amount, which will be 15 times his annual income. In this case, the incumbent was aged 32 and the insurance amount was Rs.5,00,000/-, so, the annual income need be only 33,000/-.That means, a person having a monthly income of about Rs.3,000/- will be eligible to get that policy. So, even the objective assessment, which the officers of the LIC W.A.No.1218/2007 15 subsequently made after the death of the policy holder, revealed that the man was having a monthly salary of Rs.1,960/-. Out of which, Rs.1,500/- he was depositing in the Provident Fund. The fact that he was depositing Rs.1,500/- in the Provident Fund, which was disclosed by materials on record would show that he was having other substantial income. Other wise, he will not be able to pay the rent, telephone bill, his food bills etc. So, in this case, the assessment of the apparent income of the policy holder made based on interaction with him and enquiries in the neighbourhood cannot be said to be an unreasonable figure. In this case, the accusation was made against the appellant based on objective assessment made in 1990 based on Exts.P42 and P45. Even those reports, especially Ext.P45 would show that he had other business like wholesale business in vegetables and fruits, private money lending and dealings in the stock market and thus had income from those sources. We are extracting relevant portions of those reports in the later part of the judgment. Going by those reports, if the appellant had acted on the claim of the insured on his income, it cannot be said to be illegal or irregular. W.A.No.1218/2007 16 10. We notice that LIC does not have a case that there is bad faith from the part of the appellant or the Assistant Manager (Sales) in issuing a policy. In fact, they have done everything in good faith and tried to increase the business of the LIC and their actions have not prejudiced it also. If an affluent man takes a policy for Rs.5,00,000/- and he dies, then also the LIC will have to pay the amount covered by the policy. So, whether a policy holder was affluent or not is totally an irrelevant consideration, as far as, the payment under the policy was concerned. The only reason for the LIC to launch the proceedings against the appellant was that the insured died after one year and it has to pay the amount under the policy to his wife. Later on hindsight after two years of the issuance of the policy, it was found that the insured did not have sufficient income. We feel that the conduct of the appellant Officer has to be viewed in the circumstances obtained at the time when the proposal was made in 1988, not based on the materials obtained in 1990. 11. In view of the aforementioned reasons, we feel that the action of the Assistant Branch Manager (Sales) or the appellant cannot be described as a misconduct. The W.A.No.1218/2007 17 allegations in the charge sheet against the appellant do not disclose any misconduct of violation of Regulations 21 or 24 warranting punishment under Regulation 39. 12. Further, we notice that this is the only case involving the appellant, in which the policy holder had a premature death and the LIC has to shell out Rs.10 lakhs towards the claim. Further, since the 'Moral Hazard Report' in this case was, in fact, written by the Assistant Branch Manager (Sales) and only based on that the policy was given, we feel that the appellant cannot be accused of having committed any misconduct in being part of the team, which investigated into the proposal for the policy. The same is the case of the second charge also. In that case, actually the policy was never issued and the LIC did not suffer any loss. It is common ground that the above incident, which is subject matter of the charge sheet, was the solitary incident in the career of the delinquent officer, the appellant herein. 13. Even assuming, the allegations in Ext.P1 disclose some misconduct warranting disciplinary action against the appellant, we feel that the enquiry was held in violation of the principles of natural justice. It is not in dispute that Exts.P39, W.A.No.1218/2007 18 P42 and P45 were marked without examining the authors. Ext.P39 is a claim enquiry report made by one Sri.Thomas, who was the Manager (Sales) at the relevant time. Ext.P42 is a report filed by the said Sri.Thomas, Manager (Sales), based on a discreet enquiry made by him. The relevant portion of Ext.P42 reads as follows: “He was heavily losing in share market. The contract notice which are exchanged for money in some of the cases are enclosed herewith which shows that he was losing heavily in share market. He do not have a house of his own/land/property which can give him extra income. On my discreet enquiry eventhough it was reported from some quarters that he is engaged in private money lending and arranging for wholesale sale of Fruits and Vegetables, there is no convincing evidence I could get that he was earning substantial money and had established in this business. (emphasis supplied) My conclusion on the result of the investigation is that the Agent, Development Officer and the Assistant Branch Manger (Sales) has not made proper enquiries before recommending for an insurance of 5 lakhs to an Assistant in the Telecom Office. Their W.A.No.1218/2007 19 report of his having extra income from Landed properties and fixed assets are not true. The Corporation had to take such huge risk by their reports and it is very clear that this policy is against indemnifying the loss tantamount to gambling. Since the claim amount is over 10 lakhs on the first policy- Number 770623158 and 4 lakhs in proposal No.155791 (contract not completed) it is worth referring to CBI.” 14. But, the learned counsel for the