IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE S.SIRI JAGAN FRIDAY, THE 16TH DECEMBER 2011 / 25TH AGRAHAYANA 1933 WP(C).No. 2175 of 2006(H) ------------------------ PETITIONER : --------------------- P.G. NATARAJAN, ANANDA BHAVANAM, K.P.1/369, MUNDAIKONAM, MUTTADA P.O., TRIVANDRUM-25. BY ADVS. SRI.VAKKOM N. VIJAYAN SMT.VINITHA PRASANNAN SRI.P.ANIYAN SRI.A.S.SACHIN RESPONDENT(S): ------------------------- 1. LIFE INSURANCE CORPORATION OF INDIA, REPRESENTED BY THE CHAIRMAN, YOGAKSHEMA JEEVAN BIMA MARG, MUMBAI. 2. THE MANAGING DIRECTOR, LIFE INSURANCE CORPORATION OF INDIA, YOGAKSHEMA JEEVAN BIMA MARG, MUMBAI. 3. THE SENIOR DIVISIONAL MANAGER, L.I.C. DIVISION OFFICE, JEEVAN PRAKASH BUILDINGS, PATTOM, TRIVANDRUM. R1 TO R3 BY ADV. SRI.S.EASWARAN, SC THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 16/12/2011, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: Mn ...2/- WP(C).No. 2175 of 2006(H) APPENDIX PETITIONER'S EXHIBITS: EXT.P1 : COPY OF CERTIFICATE OF MEMBERSHIP OF DIVISIONAL MANGER'S CLUB FOR AGENTS OF L.I.C. FOR THE PERIOD 1999-2000. EXT.P2 : COPY OF CERTIFICATE OF MEMBERSHIP FOR THE PERIOD 2001-2002. EXT.P3 : COPY OF CERTIFICATE OF MEMBERSHIP FOR THE PERIOD 2002-2003. EXT.P4 : COPY OF CERTIFICATE OF MEMBERSHIP FOR THE PERIOD 2003-2004. EXT.P5 : COPY OF CERTIFICATE PARTICIPATED IN SALES TRAINING CENTRE (KERALA) DATED 24.9.1999. EXT.P6 : COPY OF CERTIFICATE PARTICIPATED IN SALES TRAINING CENTRE (KERALA) FROM 19.5.2003 TO 22.5.2003 DATED 22.5.2003. EXT.P7 : COPY OF AWARD OF EXCELLANCE DURING THE YEAR 2000-01. EXT.P8 : COPY OF PHOTOGRAPH TAKEN DURING THE DEVELOPMENT PROGRAMME NO. XIII/90-91 FROM 23RD OCT. TO 2ND NOVEMBER, 1990. EXT.P9 : COPY OF PROCEEDINGS OF SHOW CAUSE NOTICE DATED 20.3.2004. EXT.P10 COPY OF EXPLANATION DATED 19.04.2004 SUBMITTED BY THE PETITIONER. EXT.P11 COPY OF TERMINATION ORDER DATED 21.4.2004 OF THE 3RD RESPONDENT. EXT.P12 COPY OF APPEAL FILED BY THE PETITIONER BEFORE THE 2ND RESPONDENT AS PER THE RELEVANT PROVISIONS ON 5.7.2004. EXT.P13 COPY OF APPEAL DATED 25.4.2005. EXT.P14 COPY OF PROCEEDINGS DATED 31.12.2005 ALONG WITH COVERING LETTER DATED 3.1.2006. RESPONDENT'S EXHIBITS : NIL //TRUE COPY// P.A. TO JUDGE Mn S. SIRI JAGAN, J. ------------------------------------------- W.P.(C) No.2175 of 2006 ---------------------------------------------- Dated this the 16th day of December, 2011 JUDGMENT While working as a Career agent of the Life Insurance Corporation of India, proceedings were initiated by the respondents against the petitioner under Regulations 16 and 19 of the Life Insurance Corporation of India (Agents) Regulations, 1972, for termination of the agency of the petitioner and for denying him the commission on the premiums already received in respect of business secured by him on certain allegations of misconduct committed by the petitioner. Ultimately, the agency of the petitioner was terminated under Section 16(1) and also it was directed to forfeit the commission on the premiums already received in respect of the business secured by the petitioner. The petitioner's appeal also did not meet with success. Exts.P9, P11 and P14 are the orders passed in this regard. The petitioner challenges the same seeking the following reliefs: “i) to issue a writ of certiorari or other appropriate writ, direction or order calling for the records leading to Exts.P9, P11 and P14 and quashing the same; ii) to issue a writ of mandamus or other appropriate W.P.(C)No.2175/106 2 writ, direction or order directing the respondents to reinstate the petitioner as Career agent and to permit the petitioner to continue as Career agent with all usual benefits.” 2. The petitioner's contention is that the allegation against the petitioner is that he recommended proposals by two persons, who were already policy holders through the petitioner himself, suppressing the fact that the proposers had taken earlier policies. In one of the cases, the petitioner had also noted the date of birth incorrectly. According to the petitioner, the same was purely omissions and the petitioner had no intention to defraud the Life Insurance Corporation of India. It is further submitted that because of omissions on the part of the petitioner, the Life Insurance Corporation of India did not suffer any loss whatsoever and therefore, no fraud can be alleged against the petitioner in respect of his action. 3. A counter affidavit has been filed by the respondents, wherein the stand taken is that the conduct of the petitioner amounts to fraud and nothing else. The contention is that the earlier policy was taken by the proposer through the petitioner himself and as such, the petitioner was W.P.(C)No.2175/106 3 quite aware of the fact that the same person had earlier taken another policy. They would submit that in respect of the first proposer, the maximum insurance allowable to that person, going by the person's avocation, was Rs.50,000/- at the relevant time. Therefore, when a second policy was proposed in respect of the same person, that person was already a policy holder for Rs.25,000/-. Therefore, if the Life Insurance Corporation of India had known that there was an earlier policy for Rs.25,000/- by the same person, the maximum insurance amount for the second policy sanctioned would have been only Rs.25,000/-. Consequently, the Corporation was misled into accepting risks higher than permissible under Rules prevailing at that time and it is knowing fully well this fact that the petitioner has intentionally suppressed the fact of earlier policy, which amounts to fraud, is the contention raised. In respect of the same proposer, it is stated that the petitioner has given the date of birth of the person wrongly with ulterior motive. According to the respondents, it cannot be taken that it was a mistake because the agent is expected to ascertain the correct date of birth through appropriate documents W.P.(C)No.2175/106 4 evidencing date of birth. As such, the fact that the petitioner gave a wrong date of birth would go to show that the same was also done intentionally. In respect of the second proposer, it is submitted that the earlier policy taken by the said person had lapsed and as per the rules if a policy taken has lapsed within the previous three years of the proposal for a second policy no second policy could have been issued. It is knowing this fact that the petitioner had suppressed the fact of the earlier policy, is the contention raised by the respondents. They particularly point out that in the Agent's Confidential report against question No.4 asking whether the agent had discussed with the proposer/life proposer the status of previous policies and whether he is satisfied that no policy has lapsed within the last three years, the petitioner answered 'yes', which would further show that the fraudulent nature of the action of the petitioner, is the contention raised. Therefore, according to the respondents, the action under rules 16(1) and 19 is perfectly valid and justifiable. 4. I have considered the rival contentions in detail. Regulations 16 and 19 of the Life Insurance Corporation of W.P.(C)No.2175/106 5 India (Agents) Regulations, 1972 framed under Section 49 of the Life Insurance Corporation Act, 1956 read thus: “16. 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 th 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 business until he is permitted by the competent authority to do so.” xxx xxx xxxx 19. Payment of commission on discontinuance of agency: (1) In the event of termination of the appointment of an agent, except for fraud, the W.P.(C)No.2175/106 6 commission on the premiums received in respect of the business secured by him shall be paid to him if such an agent: (a) has continually worked for at least 5 years since his appointment and policies assuring a total sum of not less than Rs.2 lakhs effected through him were in full force on a date one year before his ceasing to act as such an agent; or (b) has continually worked as an agent for at least 10 years since his appointment ; or (c) being an agent whose appointment has been terminated under clause (e) of sub- regulation (1) of regulation 16 has continually worked as an agent for at least two years from the date of his appointment and policies assuring a total sum of not less than Rs.1 lakh effected through him were in full force on the date immediately prior to such termination: Provided that in respect of an absorbed agent the provisions of clause (a) shall apply as if for the letters, figures and word “Rs.2 lakhs”, the letters and figures “Rs.50,000” had been substituted. (2) Any commission payable to an agent under sub-regulation (1) shall, notwithstanding his death, be payable to his nominee or nominees or, if no nomination is made or is subsisting to his heirs, so long as such commission would have been payable had the agent been alive. (3) In the event of the death of the agent while his agency subsists,any commission payable to him had he been alive, shall be paid to his nominee, or, if no nomination is made or if subsisting, to his heirs, so long as such commission would have been payable had the agent been alive, provided he had continually worked as an agent for not less than 2 years from the date of his appointment and policies assuring a total sum of not less than Rs.1 lakh effected through him were in full force on the date immediately prior to his death. (4) If the renewal commission payable under sub-regulation (1) or sub-regulation (2) or sub-regulation (3) falls below Rs.100/- in any financial year (hereinafter referred to as the said financial year), the competent authority may, W.P.(C)No.2175/106 7 notwithstanding anything contained in the said sub-regulation, commute all commission payable in subsequent financial years for a lump sum which shall be three times the amount of renewal commission paid in the said financial year and on the payment of such lumps sum to the agent or his nominees or heirs, as the case may be, no commission on the business effected through the agent shall be payable in the financial years subsequent to the said financial year.” Regulation 8 reads thus: “8. Functions of agents: (1) Every agent shall solicit and procure new life insurance business which shall not be less than the minimum prescribed in these regulations and shall endeavour to conserve the business already secured. (2) In procuring new life insurance business, an agent shall: (a) take into consideration the needs of the proposers for life insurance and their capacity to pay premiums; (b) make all reasonable inquiries in regard to the lives to be insured before recommending proposals for acceptance, and bring to the notice of the Corporation any circumstances which may adversely affect the risk to be underwritten; (c) take all reasonable steps to ensure that the age of the life assured is admitted at the commencement of the policy; and (d) not interfere with any proposal introduced by any other agent. (3) Every agent shall, with a view to conserving the business already secured, maintain contact with all persons who have become policy-holders of the Corporation through him and shall: (a) advice every policy-holder to effect nomination or assignment in respect of his policy and offer necessary assistance in this behalf; (b) endeavour to ensure that every instalment of premium is remitted by the policy- W.P.(C)No.2175/106 8 holder to the Corporation within the period of grace; (c) endeavour to prevent the lapsing of a policy or its conversion into a paid-up policy; and (d) render all reasonable assistance to the claimants in filling claim forms and generally in complying with the requirements laid down in relation to settlement of claims. (4) Nothing contained in these regulations shall be deemed to confer any authority on an agent to collect any moneys or to accept any risk for or on behalf of the Corporation or to bind the Corporation in any manner whatsoever; Provided that an agent may be authorised by the Corporation to collect and remit renewal premiums under policies on such conditions as may be specified.” Practically the petitioner did not advance any serious arguments regarding the termination of the policy. In any event, he could not have validly challenged the same since the facts are admitted. The two persons had taken policies earlier through the petitioner himself. He did not disclose the same to the respondents fully knowing about the previous policies. It was his duty to disclose, if it was with in his knowledge. When it was his duty and the earlier policy was taken through him only there cannot be any doubt that the petitioner has intentionally withheld vital information from the respondents. That being so, there cannot be anything wrong with the W.P.(C)No.2175/106 9 termination of the agency under Section 60. 5. The learned counsel for the petitioner would vehemently argue that there was absolutely no grounds to infer any fraudulent intention on the part of the petitioner to deny the petitioner commissions for the business already canvassed by him, especially when Life Insurance Corporation of India did not suffer any loss whatsoever on account of the grant of the second policy. I am of opinion that the question is not whether the Life Insurance Corporation of India had actually suffered any loss. Result of loss to the Corporation is not a condition precedent for denial of commission. In fact if certain contingencies had in fact arisen in respect of the policy holders there was real likelihood of the corporation suffering loss also. The question is whether the petitioner had any fraudulent intention in doing what he did. It is not disputed before me that going by the avocation of the first proposer, she was entitled to only a maximum insurance amount of Rs.50,000/-. Under the earlier policy, the sum assured was Rs.25,000/-. Therefore, if the factum of the earlier policy was disclosed to the Life Insurance Corporation of India, they W.P.(C)No.2175/106 10 would have issued a policy with a maximum sum assured of only Rs.25,000/- even if they were inclined to issue a policy knowing about the earlier policy. Therefore, obviously, the petitioner's intention was to see that the policy holder gets another policy without the limitation of the sum assured. It is not as if it is a mere mistake. I cannot assume that the agent, who is regularly getting commission for every premium paid by a policy holder, would easily forget that policy holder and the fact that, the same proposer was already a policy holder when he forwarded the second proposal of the same policy holder. By this action the petitioner has forced the Corporation to accept a risk higher than what was permissible under Rules. In respect of the second person, it is not disputed before me that question No.4 of the Agent's Confidential report has been answered by the petitioner in the affirmative. The question No.4 reads like this: “Did you discuss with the proposer/life proposer/life proposed the status of previous policies and are you satisfied that no policy has lapsed within the last three years? The petitioner has answered 'yes' to the said question. That W.P.(C)No.2175/106 11 shows the fraudulent intention of the petitioner. Therefore, I am of opinion that the conduct of the petitioner leads to an irresistible conclusion of fraud. Consequently, the Corporation was perfectly justified in denying future commission of the petitioner in respect of the work he had already canvassed in accordance with Regulation 19. In the above circumstances, I am not inclined to entertain this writ petition and accordingly, the writ petition is dismissed. S. SIRI JAGAN, JUDGE acd W.P.(C)No.2175/106 12 W.P.(C)No.2175/106 13