National Insurance Co. Ltd vs General Insurance Dev. Officers Asson. ...

4. The present scheme purports to amend the earlier scheme framed under Section 17A of the General Insurance (Business Nationalization) Act, 1972 (in short the 'Act'). The principal scheme was framed in 1976 in exercise of powers under Section 16(1)(g) of the Act. The scheme was amended earlier in the years 1987, 1990 and 1996 and 2000. The principal scheme of 1976 was challenged but the challenge was turned down and legality of the scheme was upheld by this Court. Several writ petitions have been filed by Development Officers questioning legality of the scheme on the ground that there was unilateral change of service conditions of the Development Officers in Class II category. The declaration sought for in the writ petitions was that administrative guidelines dated 5.2.2003 were without power, jurisdiction and legal sanctity. It was pointed out that while changing service conditions of the Development Officers in Class II category the service conditions of other employees in Class I, III and IV were not touched. According to the Development Officers the following stipulations affected them:

8. The above illustration shows how a development officer put on constrain to maintain his cost in revised norms he has to procure an additional premium of Rs.12,27,000/- in this competitive market scenario or other wise he will directly loose the monetary benefits proportionate to his premium income.

10. The Non-Core benefits such as Conveyance, Entertainment, Telephone allowance, Travelling Expenses incurred to procure premium, are exempted from Income Tax as per CBDT Rules. But through the 2003 Amendment the respondents have added the entire non core benefits to the cost ratio. Thereby as per the above illustration the development officer who was procuring a business of Rs.32,00,000/- premium has to now procure a business of Rs.43,36,000/- to maintain the cost ratio and to make himself eligible for an increment.

12. Change in incentive Scheme Through paras 14, 14A and 15 a Development Officer would get Cost based Growth Incentive and Profit Incentive. The growth incentive and cost saving profit incentive is based on the performance of the development officer. The margin in cost ratio as provided in the amended scheme 1987 are withdrawn and replaced by one single incentive scheme which is totally based on the profitability as per the 2003 amendment. This incentive is directly related to the claims arising due to accidents, and natural calamities which are beyond the control of a development officer. This is arbitrary as in any industry it is universally accepted that the incentives to the marketing staff shall be linked to their sales performance.

16. It is the stand of the respondents that as a matter of fact the report was foundation for introduction of the Insurance Regulatory and Development Authority Act, 1999 (in short 'IRDA Act'). On the basis of the recommendations amendments were made to the Act, Life Insurance (Business Nationalization) Act, 1956 and the Insurance Act, 1938 (in short the 'Insurance Act'). The Malhotra Committee examined the state of the insurance industry and gave specific suggestions regarding the working of Development Officers and other reforms inter-alia necessary for the growth of the insurance industry.

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20. It was further clarified that if the scheme is prima facie discriminated it is open to challenge.

22. The appeals are allowed. The transfer petitions stand disposed of.