Bombay High Court
Mahesh Narayandas Kothari vs Ig Life Insurance Corporation Of India on 28 February, 2012
Author: S.A.Bobde
Bench: S.A.Bobde, P.B.Varale
W.P.No.5137.11 1
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
NAGPUR BENCH, NAGPUR
WRIT PETITION NO. 5137 OF 2011.
PETITIONER: Mahesh Narayandas Kothari,
Aged 54 years, r/o Kothari Vima Seva
Kendra Civil Lines, Risod, Distt.Washim.
: VERSUS :
RESPONDENTS: 1. ig Life Insurance Corporation of India, thr. the
Managing Director, Life Insurance Corporation
of India, Central Office, : "Yogakshema" Jeevan
Bima Marg, Mumbai - 400 021.
2. The Chairman, Life Insurance Corporation of
India, Western Zone, "Yogakshema", Jeevan
Bima Marg, Mumbai - 400 021.
3. The Zonal Manager, (Appellate Authority under
Clause 20 of the Life Insurance Corporation of
India (Agents) Rules, 1972, Life Insurance
Corporation of India, Western Zone,
"Yogakshema" Jeevan Bima Marg, Mumbai-21
4. The Senior Divisional Manager, (Competent
Authority under Clause 16 and 19 of the Life
Insurance Corporation of India (Agent)
Regulations, 1972 Jeevan Prakash Building,
Shrikrishna Peth Near Daffrin Hospital,
Amravati - 444 601.
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Mr. Z.A.Haq with Mr.R.A.Haque Advocates for the petitioner.
Mr. P.N.Kothari, Advocate for respondent nos.1 to 3.
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W.P.No.5137.11 2
CORAM: S.A.BOBDE & P.B.VARALE,JJ.
DATED: 28th FEBRUARY, 2012.
ORAL JUDGMENT (Per S.A.Bobde, J.)
1. Rule, returnable forthwith. Heard finally by consent of learned counsel for the parties.
2. By this petition, the petitioner has challenged the order terminating his agency passed by respondent no.1 - Life Insurance Corporation of India. The petitioner was appointed as an Agent in the year 1988. It appears that the respondent - Life Insurance Corporation noticed some irregularities and defects in his functioning; for instance the money of the customers was found in his account. The Insurance Corporation issued a show cause notice to the petitioner under Regulation 16(1)(a) of the Life Insurance Corporation of India (Agents) Regulations, 1972 on 26/11/2007.
After a reply was submitted by the petitioner, the competent authority i.e. respondent no.4, without hearing the petitioner issued an order dated 15/3/2010 terminating the petitioner's agency with forfeiture of renewal commission payable to the petitioner under ::: Downloaded on - 09/06/2013 18:13:50 ::: W.P.No.5137.11 3 Regulation 16(1)(a),(b) and 19(1) of the LIC of India (Agents) Regulations, 1972.
3. The petitioner preferred an appeal against the said order before the Zonal Manager i.e. respondent no.3 under Section 20 of Life Insurance Corporation of India (Agents) Regulations, 1972. The Zonal Manager passed an order dated 26/10/2010 without hearing the petitioner and dismissed his appeal. Thereafter, the petitioner filed a memorial before the Chairman on 29/12/2010. This memorial was also rejected. Therefore, the petitioner has approached this court against the termination of his agency.
4. Mr.Haq, the learned counsel for the petitioner, submitted that the order of termination is completely unsustainable since it has been passed without compliance of rules of natural justice. The learned counsel further submitted that the order rejecting his appeal against such an illegal order is also illegal as same is having been passed in violation of the rules of natural justice. Admittedly the petitioner was not heard before the orders were passed.
::: Downloaded on - 09/06/2013 18:13:50 ::: W.P.No.5137.11 45. Clause 16 of the Agents Regulations, 1972 framed by the L.I.C. in exercise of the power conferred on it under Section 49 of the Life Insurance Corporation Act, 1956, under which the order terminating the agency was passed, reads as follows -
"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 interest of the Corporation or to the interest of its policyholders;
(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 averement 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 ::: Downloaded on - 09/06/2013 18:13:50 ::: W.P.No.5137.11 5 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.
(emphasis supplied)"
6. We are of the view that term "reasonable opportunity to show cause against such termination of agency" clearly contemplates the grant of hearing to the agent. It is not disputed that the termination of agency involves civil consequences, which in a given case could also be stigmatic. It is settled law that an action which involves such consequences should be taken after a person has been given an opportunity to show cause and heard. Though the clause does not mention hearing, the reasonable opportunity to show cause must include a hearing having regard to the nature of the action.
::: Downloaded on - 09/06/2013 18:13:50 ::: W.P.No.5137.11 67. Clause 23 of the Regulations reads as follows -
"23. Consideration of appeals:
(1) Where an appeal is received under these regulations, the appellate authority shall consider all the circumstances of the case and pass such orders as it deems fit:
Provided that the appellant shall be given a reasonable opportunity of representing his case.
(2) All appeals shall be disposed of as expeditiously as possible but not later than six months from the date of the receipt of the appeal by the appellate authority."
This provision also contemplates affording of a reasonable opportunity which, in our view, requires that the agent should be heard in support of his appeal.
8. Mr.Haq, learned counsel for the petitioner, relied on a recent judgment of the Supreme Court in the case of Prakash Ratan Sinha ..vs.. State of Bihar and ors, reported in (2009)14 SCC 690 where the Supreme Court observed as follows :
"11. The decision complained against in the instant case is an administrative decision. The decision is likely to have far reaching civil consequences for the appellant, as it has adversely affected his right to continue in the promotional post. Therefore, in our view, the decision concerning the ::: Downloaded on - 09/06/2013 18:13:50 ::: W.P.No.5137.11 7 promotion makes itself available for scrutiny by the courts on the touchstone of well-established principles of natural justice. The decision that was questioned before the Court was an administrative decision having civil consequences and is alleged to have been taken without affording an opportunity of hearing to the appellant."
Further, the court observed that the nature of the statutory duty imposed on the decision maker itself implies an obligation to hear before deciding the case unless the hearing is expressly prohibited. The court observed as follows -
"14. Corollary principles emanating from these cases are as to what particular rule of natural justice should apply to a given case must depend to an extent on the facts and circumstances of that case and that it is only where there is nothing in the statute to actually prohibit the giving of an opportunity of being heard and on the other hand, the nature of the statutory duty imposed on the decision maker itself implies an obligation to hear before deciding. These cases have also observed, whenever an action of public body results in civil consequences for the person against whom the action is directed, the duty to act fairly can be presumed and in such a case, the administrative authority must give a proper opportunity of hearing to the affected person.::: Downloaded on - 09/06/2013 18:13:50 ::: W.P.No.5137.11 8
15. This Court in Canara Bank case has stated that: (SCC P.570, para 15) "15. The adherence to principles of natural justice as recognised by all civilized States is of supreme importance when a quasi-judicial body embarks on determining disputes between the parties, or any administrative action involving civil consequences is in issue."
Even an administrative order, which involves civil consequence must be consistent with the rules of natural justice."
In the result, we find that it was necessary for the authorities to hear the petitioner before terminating his agency and also before rejecting his appeal against his termination.
9. Mr.Haq, learned counsel for the petitioner, further submitted that the Chairman was bound to hear the petitioner before he rejected a memorial. According to the learned counsel, there is no difference between the consideration of a memorial by the Chairman of the L.I.C. and the Competent Authority or by the Appellate authority as to whether the petitioner's agency should be terminated.
::: Downloaded on - 09/06/2013 18:13:50 ::: W.P.No.5137.11 9Clause 24 of the said Regulations, which provides for the consideration of the memorial reads as follows :
"24. Memorial :
An agent whose appeal under these regulations, not being an appeal against an order under sub-regulation (1) of regulation 17, has been rejected by the appellate authority may address a memorial to the Chairman of the Corporation in respect of that matter within a period of three months from the date of receipt by the agent of a copy of the order of the appellate authority and the Chairman shall, after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify."
10. We find that there is a marked difference between clauses 16 and 23 of the Regulations which clearly contemplate the hearing of the agent at the first instance and also in an appeal and clause 24 which deals with a memorial. A proviso that he shall be given an opportunity to show cause against such termination as in clause 16, or that he shall be given a reasonable opportunity for representing his case as in clause 23 is significantly absent in clause 24 of the Act which provides for the decision of a memorial. Though it is true that ::: Downloaded on - 09/06/2013 18:13:50 ::: W.P.No.5137.11 10 there is nothing in the Regulations which provides the giving of an opportunity of being heard, the nature of the statutory duty imposed on the decision maker itself implies an obligation to hear before deciding the case. It cannot be said that the said obligation is imposed at every stage. All that depends on the nature of the obligation. We find that the provision of presenting a memorial and deciding the same is significantly different in its nature and impact, and empowers the Chairman to decide the same by passing such an order as the circumstances of the case justify after making such enquiry as he deems necessary. It seems to be in the nature of last resort. We do not consider it necessary to impose an obligation of hearing as the regulations themselves do not provide for such a hearing and, in fact, contemplate that there need not be such a hearing. The duty to hear a person as to the action proposed to be taken is an essential requirement of rules of natural justice because it is settled law that no man can be condemned unheard. Therefore, in the regulations, there are provisions for hearing the person against whom an order is proposed to be passed by the competent authority in the first instance and also by the appellate authority. There is no requirement of hearing the memorial by Chairman, who may make ::: Downloaded on - 09/06/2013 18:13:50 ::: W.P.No.5137.11 11 the order after making certain inquiries as he deems fit. Thus, the said proceeding is more in the nature of last resort or a plea for mercy.
11. The rules of natural justice are a safe guard against action by which a person may be punished are adversely affected and they must be complied with. If the entire procedure for imposing punishment or passing adverse orders is completed in successive stages; such as the first order by an authority in the first stage and an appeal in the next stage, it is necessary to consider the entire process for seeing whether there is compliance with the rules of natural justice. In the present case, the process is completed in the passing of the order in the first stage and the appellate stage. The third stage complies the consideration of the memorial by the Chairman which comes after the action is taken and the appeal is dismissed. Since there is sufficient compliance with the rules of natural justice during the first two stages, we are of the view that there would be no failure of justice if no hearing is provided by the Chairman before deciding.
It is difficult to read into the rules, a mandatory requirement of hearing the person, who makes the memorial. Neither can the ::: Downloaded on - 09/06/2013 18:13:50 ::: W.P.No.5137.11 12 person is said to suffer prejudice if he is not heard on his memorial.
12. In somewhat similar circumstances, in Oriental Bank of Commerce and another ..vs.. R. K. Uppal, (2011) 8 Supreme Court Cases 695, the Supreme Court observed as follows:
"22. It is now fairly well settled that the requirements of natural justice must depend on the circumstances of the case, the nature of the inquiry, the rules under which the tribunal is acting, the subject-matter that is being dealt with and so forth. In the words of Ramaswami, J. (Union of India v. P.K. Roy) the extent and application of the doctrine of natural justice cannot be imprisoned within the straitjacket of a rigid formula. The application of the doctrine depends upon the nature of jurisdiction conferred on the administrative authority, upon the character of the rights of the persons affected, the scheme and policy of the statute and other relevant circumstances disclosed in the particular case."
As regards the personal hearing, in paras 24 and 26 of the judgment, the Supreme Court observed thus:
"24. The appeal provision in Regulation 17 of the 1982 Regulations does not expressly provide for personal hearing to the appellant. Is the right of personal hearing ::: Downloaded on - 09/06/2013 18:13:50 ::: W.P.No.5137.11 13 to the appellant implicit in the provision? We think not. In our considered view, in the absence of personal hearing to the appellant, it cannot be said that the very right of appeal is defeated. One situation is, however, different.
Where the appellate authority proposes to enhance the penalty, obviously, the appellate authority must issue notice to the delinquent asking him to show cause why penalty that has been awarded to him must not be enhanced and give him personal hearing. It is so because the appellate authority seeks to inflict such punishment for the first time which was not given by the disciplinary/punishing authority. Although there are no positive words in Regulation 17, requiring that the appellant shall be heard before the enhancement of the penalty, the fairness and natural justice require him to be heard.
25. .....
26. However, personal hearing may not be required where the appellate authority, on consideration of the entire material placed before it, confirms, reduces or sets aside the order appealed against. Regulation 17 of the 1982 Regulations does not require that in all situations personal hearing must be afforded to the delinquent by the appellant authority. The view taken by the Full Bench of Punjab and Haryana High Court in Ram Niwas Bansal is too expansive and wide and cannot be held to be laying ::: Downloaded on - 09/06/2013 18:13:50 ::: W.P.No.5137.11 14 down correct law particularly in the light of judgment of this Court in Mahendra Kumar Singhal. We answer this question accordingly."
13. Mr. Kothari, learned counsel for the respondents, submitted that the petitioner is an agent, appointed by the L.I.C., and not an employee of the L.I.C. We find that there is a difference between the relationships of the Corporation with its Agent and employee. Agency is purely a matter of contract and its termination involves the termination of contract, as distinct from a contractor and employer. In the circumstances, we find that there is sufficient compliance with the rules of natural justice and the agent's services are to be terminated after giving a reasonable opportunity by competent authority under clause 16 and appellate authority under clause 23 of the Life Insurance Corporation of India (Agents) Regulations, 1972. In the result, impugned orders are set aside and the matter is directed to be decided afresh by the competent authority i.e. respondent no.4, after hearing the petitioner. Rule is made absolute in above terms.
::: Downloaded on - 09/06/2013 18:13:51 ::: W.P.No.5137.11 1514. Mr.Haq, the learned counsel for the petitioner, prayed for grant of monetary compensation. We are not inclined to go into the question in this writ petition. The petitioner is at liberty to take appropriate proceedings for compensation, as may be advised.
ig JUDGE JUDGE
chute
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