Madras High Court
D.Jerald Innocent Babu vs The Executive Director (Marketing) on 23 September, 2015
Author: R.Subbiah
Bench: R.Subbiah
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
DATED : 23.09.2015
CORAM
THE HONOURABLE Mr.JUSTICE R.SUBBIAH
W.P.(MD).No.7337 of 2014
and
M.P.(MD).No.1 of 2014
D.Jerald Innocent Babu .... Petitioner
Vs.
1.The Executive Director (Marketing)
Life Insurance Corporation of India,
Central Office, Yogakshema, Jeevan Bima Marg,
P.B.No.19953, Mumbai-400 021.
2.The Zonal Manager,
LIC of India,
Zonal Office, Southern Region,
No.153, Anna Salai,
P.B.No.2450, Chennai-600 002.
3.The Senior Divisional Manager,
LIC of India, Divisional Office,
Gandhi Road, Thanjavur.
4.The Marketing Manager,
LIC of India, Divisional Office,
Gandhi Road, Thanjavur.
5.The Chief Manager,
LIC of India, Branch Office,
Vaigai Nallur Agraharam,
Kulithalai, Karur District. .... Respondents
Prayer:- Petition filed under Article 226 of the Constitution of India
praying for issuance of a writ of Certiorarified Mandamus to call for the
records relating to the impugned order of the 3rd respondent dated 12.02.2014
and to quash the same and consequently, to direct the respondents to pay the
commission on renewal of premium to the petitioner till 28.02.2007 together
with interest at 6% p.a., within a reasonable time.
!For Petitioner : Mr.J.Padmaavathi Devi
^For Respondents : Mr.G.Prabhu Rajadurai
:ORDER
The Writ Petition has been filed by the petitioner praying to quash the impugned order dated 12.02.2014 passed by the 3rd respondent rejecting the request of the petitioner/agent of LIC for consideration of paying commission on policies and renewal commission, in respect of the policies which were already procured by him, after his resignation from LIC.
2.The case of the petitioner, in brief, is as follows:-
2-1.The petitioner has completed B.Sc. Degree in Computer Science in the year 1994 and thereafter, he joined as LIC Agent with the Life Insurance Corporation of India (in short LIC) on 23.07.1997 and his Agent Code Number is 799 75B. He was attached with Kulithalai Branch in Thanjavur Division. His appointment as LIC Agent was confirmed with effect from 20.06.1998 by the letter dated 11.07.1998 issued by the Senior Branch Manager, LIC of India, Kulithalai.
2-2.It is the further case of the petitioner that owing to his strenuous and unstinted effort, he canvassed and procured 700 policy holders to the respondent-Corporation and the respondent-Corporation collected more than Rs.5 crores through him as its agent, through his service between 23.07.1997 to 27.02.2007 ie., 9 years 7 months. The approximate annual premium received by the respondent-Corporation from his customers/policy holders was Rs.30 lakhs. During the period of 9 years and 7 months, the petitioner had contributed sincere and dedicated service to the respondent- Corporation. During the said period, there was no complaint or remarks against the petitioner in discharge of his duties as LIC Agent.
2-3.The nature of employment of the petitioner as an Agent is to ascertain the persons, motivate them to be customers and policy holders of respondent-Corporation and to see that premium for the policy is paid regularly without any default or arrears to safeguard the interest of respondent-Corporation and effective running of the business of the respondent. The respondent-Corporation is liable to pay the commission for the insurance premium received from the customers procured or introduced by the LIC Agent and the LIC Agent is entitled to receive the commission for introducing a new customer as policy holder and on every payment of renewal of policy by the customers to the respondents. The respondent-Corporation is not liable to pay salary to the LIC Agent and the LIC Agent is not paid any salary or amount, except the commission to the extent of policy amount. The LIC Agent continues to discharge his work of procuring customers to the respondent-Corporation until his service is terminated by the respondent- Corporation and he ceases to work after the termination.
2-4.So far as the present case is concerned, as stated above the petitioner joined as LIC Agent on 23.07.1997. He wanted to resign from LIC and therefore, he submitted his resignation letter to the 5th respondent on 28.02.2007, who is the officer-in-charge of Kulithalai Branch, requesting to disburse his entire arrears of commission payable to him till 28.02.2007. Immediately, after receipt of his resignation letter, the respondents also stopped the payment of commission due and payable to the petitioner without notice and intimation. According to the petitioner, he is entitled to be relieved or discontinued after giving one month's notice which is automatic. But, in the instant case, the 5th respondent or any other respondents neither accepted nor rejected his resignation letter dated 28.02.2007, which in law amounts to acceptance of resignation under Rule 17(2) of the Life Insurance Corporation of India (Agents) Rules 1972. Since there was no response or reply from any of the respondents for more than 12 months, the petitioner made a request under Right to Information Act on 15.03.2008; but, the respondent-Corporation refused to pay the commission on policies and renewal commission in respect of the policy premium received from his customers and rejected his request on 25.04.2008 stating that under Section 44(1)(c) of the Insurance Act, he is not eligible for the commission on policies and renewal commission. Thereafter, the petitioner gave a representation to the 3rd respondent seeking to grant commission to him. Since the said representation was not considered, the petitioner had filed a writ petition in W.P.(MD).No.3622 of 2009. This Court by order dated 20.12.2013 directed the 3rd respondent to consider the representation of the petitioner dated 02.05.2008 and to pass orders. Thereafter, the 3rd respondent has passed the impugned order dated 12.02.2014 rejecting the request of the petitioner. Aggrieved over the same, the petitioner has filed the present writ petition.
3.During the course of argument, it is represented by the learned counsel appearing for the respondents that respondent-Corporation is prepared to pay the commission on policies and also the renewal commission to the petitioner till the date of his submission of the resignation letter ie., 28.02.2007.
4.But, the petitioner has filed a detailed affidavit stating that he is eligible to receive commission on customer policies and also renewal commission till the expiry of the said policies. Further, the commission which amounts to Rs.30 lakhs has to be paid for the policies of his customers, which were procured during his work rendered as LIC Agent.
5.The case of the petitioner was resisted by the respondent-Corporation by filing a detailed counter, inter alia, stating that the petitioner had become an agent of the respondent-Corporation on 23.07.1997 and he submitted his resignation on 28.02.2007. The petitioner suppressed the reason for his resignation that he got appointment with M/s.Bajaj Allianz Life Insurance. The text of the letter of resignation of the petitioner does not indicate such reason. In his letter of resignation, the petitioner has not mentioned the name of the company in which he has joined. The respondent- Corporation has come to know that M/s.Bajaj Alliance Life Insurance Corporation has issued letter of appointment to the petitioner on 20.02.2007, for the post of Junior Sales Manager. It is pertinent to note here that the petitioner had applied for the said post and attended for the interview with M/s.Bajaj Allianz Life Insurance Corporation Ltd., prior to 20.02.2007 and none of the said facts was disclosed by the petitioner to the respondent- Corporation and the petitioner had chosen to suppress the same deliberately and intentionally. The petitioner had admitted in his earlier writ petition that he was working as a Junior Sales Manager in M/s.Bajaj Alliance Life Insurance Corporation Ltd., from 01.03.2007 to 31.05.2008 at Trichy and he had failed to adhere to the minimum notice period of one month for termination of agency as envisaged under Rule 17(2) of the Life Insurance Corporation of India (Agents) Rules 1972. The petitioner has joined the duty as Junior Sales Manager in M/s.Bajaj Allianz Life Insurance Corporation Ltd., immediately on the next date of his resignation, without giving one month notice to the respondent-Corporation, which is contrary to the above said Rules. The 5th respondent is not the competent authority to accept the resignation letter of an Agent. On receipt of the letter of resignation of the petitioner, the 5th respondent had forwarded the same to the competent authority, the Marketing Manager, LIC of India, Divisional Office at Tanjore and the said competent authority had caused a detailed enquiry about the events which happened subsequent to the resignation of the petitioner. After ascertaining the facts of further employment of the petitioner, the competent authority accepted the resignation of the petitioner on 01.10.2007. The decision with regard to the ineligibility of the petitioner to receive renewal commission was taken by the competent authority as per the provisions of Section 44(1)(c) of the Insurance Act 1938 with the application of facts and mind. Since the petitioner has joined the competing Insurance company, the petitioner is not eligible for commission on policies and renewal commission. Hence, the representation made by the petitioner for payment of commission on policies and renewal commission was rejected by the 3rd respondent on 12.06.2014. Thus, the respondents sought for dismissal of the writ petition.
6.The learned counsel for the petitioner submitted that the petitioner had joined the respondent-Corporation as an Agent on 23.07.1997 and he submitted his resignation on 28.02.2007. During the course of his agency, he procured more than 600 policies to the respondent-Corporation and collected more than Rs.5 crores. Hence, he is eligible for commission on his customers' policies and also on renewal of policies, till the said policies get expired. But, the 3rd respondent, after receiving the resignation letter dated 28.02.2007, has stopped the payment of commission to the petitioner. The petitioner's request for payment of commission on the policies procured by him was rejected by the 3rd respondent stating that as per Section 44(1)(c) of the Insurance Act, 1938, the petitioner is not eligible for the commission. In this regard, the learned counsel for the petitioner submitted that in an identical case, when a similar plea was taken by the LIC, the Hon'ble Division Bench of the Calcutta High Court has rejected the same and directed the Insurance Company to pay the commission amount. In support of his contention, the learned counsel for the petitioner has produced a copy of the judgment of the Calcutta High Court in reported (2013) 2 CHN 117 (Rajeev Lohia Vs. Life Insurance Corporation of India Ltd.,).
7.Per contra, the learned counsel for the respondents would contend that as per Sub-Rule 1 to Rule 8 of the Life Insurance Corporation of India (Agents) Rules, 1972, every agent shall solicit and procure new life insurance business which shall not be less than the minimum prescribed in the said regulations and shall endeavour to conserve the business already secured. Further, as per Sub-Rule (3) to Rule 8 of the said Rules, 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. In the instant case, the petitioner's duty as LIC Agent is not only to conserve the policy alone, but his duty continues till the policy gets expired. Once the agent resigns and joins another competing company, his loyalty will be only with the competing company viz., new company. Therefore, there is no possibility for the agent to continue his obligation as stipulated under Rule 8(3) of the Insurance Act. Since the petitioner herein joined the competing insurance company, he is not entitled to get commission from the respondent-Corporation.
8.In this regard, the learned counsel for the respondents has also invited the attention of this Court to Section 44(1)(c) of the Insurance Act, 1983, which reads as follows:-
?44. Prohibition of cessation of payments of commission._ (1) Notwithstanding anything to the contrary contained in any contract between any person and an insurance agent providing for the forfeiture or stoppage of payment of renewal commission to such insurance agent, no such person shall, in respect of life insurance business transacted in India, refuse payment to an insurance agent of commission due to him on renewal premium under the agreement by reason only of the termination of his agreement, except for fraud: Provided that?
(a) & (b) ........
(c)such agent has served the insurer continually and exclusively for at least ten years and after his ceasing to act as such agent he does not directly or indirectly solicit or procure insurance business for any other person.
By referring the above said provision, the learned counsel for the respondents submitted that if an agent, who served continuously and exclusively for ten years, subsequently ceased to act as agent, he should not directly or indirectly solicit or procure insurance business for any other person. In the instant case, the petitioner joined the respondent- Corporation as agent on 23.07.1997 and he submitted his resignation letter on 28.02.2007 and his request for resignation came into effect only on 01.10.2007; by that time, he had continuously and exclusively rendered service as agent with the respondent-Corporation for more than 10 years. Since the petitioner has completed service as agent for more than 10 years and he joined another insurance company, he is not entitled to receive commission from the respondent-Corporation.
9.Keeping the submissions made on either side, I have carefully gone through the materials available on record.
10.It is the contention of the learned counsel for the respondents that the petitioner herein has joined the respondent-Corporation as an agent on 23.07.1997 and he submitted his resignation letter on 28.02.2007. On 20.02.2007, even before he submitted his resignation on 28.02.2007, he joined another insurance company viz., M/s.Bajaj Alliance Life Insurance Corporation Ltd. The resignation of the petitioner was accepted by the respondent- Corporation only on 01.10.2007; by that time, the petitioner had continually and exclusively put in more than 10 years service. When his service had crossed more than 10 years continually and exclusively, as per the version of the respondent-Corporation, he should not directly or indirectly solicit or procure insurance business for any other person. But, in the instant case, the petitioner has joined the competing company viz., M/s.Bajaj Alliance Life Insurance Company and he would be soliciting and procuring customers for that company only; hence, he is not entitled to get renewal commission from the respondent-Corporation.
11.In the view of the contentions made on either side, the question that falls for consideration in this case is that if an agent worked continually and exclusively for more than 10 years in the the respondent corporation as agent and subsequently he ceased to act as an agent, and joined another insurance company, whether he is entitled to receive the commission from the Insurance company in respect of the policies which were already procured by him till the said policies mature.
12.The judgment relied upon by the learned counsel for the petitioner reported in (2013) 2 CHN 117 (Rajeev Lohia Vs. Life Insurance Corporation of India Ltd.,) gives a fitting answer to this issue. The relevant portions in the said judgment are as follows:-
?9.It appears from the records that appellant sent in his resignation on 7th March, 2002 under sub-regulation (2) of Regulation 17 of the said Regulation. The respondent however did not admit receipt of the same but it appears that it must have received subsequently as it would appear from a letter dated 22nd May, 2002 of the Branch Manager concerned conveying the return of pay order for a sum of Rs.250/- sent earlier for renewal of the license of the appellant as the appellant had resigned from the agency. This fact has been admitted in its letter copy whereof is annexed at page 104 of the paper book. We think that the resignation has been accepted, and this relates back to the date of 7th March, 2002. Nowhere it provided that acceptance of resignation is a must and in any view of the matter when this has been accepted subsequently by its act and conduct this Court is of the view that on 17th March, 2002 the relationship of Principal and the Agent has come to an end. As such by upholding the contention of the learned counsel for the appellant that the Corporation officials had no jurisdiction to issue show cause on 7th May, 2002. We think that the relationship has ceased not only on account of resignation but also on nonrenewal of the license. ......
12.But the dispute in this appeal does not end here as the appellant-
writ petitioner wants something more than payment of the renewal commission. Under the terms of the contract, which is governed by the regulation under Regulation 19 so far, the payment of commission on discontinuance is concerned. This has to be read with Section 44 of the Insurance Act which is reproduced hereunder:- ..............
?Section 44- prohibition of cessation of payments of commission-
(1)Notwithstanding anything to the contrary contained in any contract between any person and an insurance agent providing for the forfeiture or stoppage of payment of renewal commission to such insurance agent, no such person shall, in respect of Life Insurance business transacted in India, refuse payment to any insurance agent of commission due to him on renewal premium under the agreement by reason only of the termination of his agreement, except for fraud; provided that ?
(a) such agent ceased to act for the insurer concerned after the Central Government has notified in the Official Gazette that it is satisfied that the circumstances in which the said insurer is placed are such as to justify the agents ceasing to act for him; or ?
(b) such agent has served the insurer continually and exclusively in respect of Life Insurance business for at least five years and policies assuring a total sum of not less than Rupees fifty thousand effected through him for the insurer were in force on a date one year before his ceasing to act as such agent for the insurer and that the commission on renewal premium due to him does not exceed four per cent in any case or;
(c) such agent had served the insurer continually and exclusively for at least ten years and after his ceasing to act as such agent he does not directly or indirectly solicit or procure insurance business for any other person.
Explanation:1. For the purpose of this Sub-section, service of an insurance agent under a Chief Agent of the insurer, whether before or after the commencement of the Insurance (Amendment) Act, 1950 (47 of 1950) shall be deemed to be service under the insurer;
(2) Any commission payable to an insurance agent under the provisions of Clauses (b) and (c) of the proviso to sub-section (1) shall, notwithstanding the death of the agent continue to be payable to his heirs, for so long as such commission would have been payable had such insurance agent being alive.?
13.If two provisions are read conjointly it will appear that even on termination of the agreement the renewal commission has to be paid except on the ground of fraud and, Section 44 sub-section (1) further provides that the agent is disentitled to get any renewal commission on cessation to act as such agent if he does directly or indirectly solicit or procure insurance business for any other person.
14.In this case admittedly the appellant joined as an Officer not an agent of a Company. Whether joining of this office rendered himself disentitled to get any renewal commission or not? According to us, on reading of clause (c) it will appear that after cessation of agency with the Corporation the same will apply to anyone who does any act which tantamount to direct or indirect soliciting or procuring insurance business for any other person. We think that this act and action must be an act as an agent of the another person which may be having juristic entity also. An officer of the Insurance Company cannot be said to be an agent nor can he be said to be involved in soliciting business directly or indirectly as business is procured by the agent either directly or indirectly not by an individual officer, unless it is proved that he is involved in soliciting or procuring business.
From a reading of the said judgment, it could be seen that once resignation is submitted to the respondent-Insurance company, the same will automatically come into effect on expiry of one month period from the date of submission of the resignation as per Rule 17(2) of the Life Insurance Corporation of India (Agents) Rules, 1972. It would be appropriate to extract Section 17(2) of the said Rules.
?An agent may, by giving one month's notice in writing to the competent authority, discontinue his agency and after the expiry of the period of one month, his agency shall stand terminated.?
From a reading of Rule 17(2), it is very clear that on submission of resignation, the tenure of the agent shall stand automatically terminated after expiry of the period of one month. Hence, as per the dictum laid down in the judgment rendered by the Division Bench of Delhi High Court, the question of accepting the resignation does not arise in this case. So far as the present case is concerned, the resignation letter was submitted by the petitioner on 28.02.2007 and it would come into effect by 27.03.2007 and as on 27.03.2007, the period of service of the petitioner is only 9 years and 7 months and as such, he has not completed 10 years service continually on that date. Therefore, the contention of the learned counsel for the respondents that the resignation of the petitioner would take effect only from 01.10.2007 on which date the resignation was accepted by the respondent-Corporation, cannot be accepted.
13.Further, in the instant case, the petitioner has joined as Junior Sales Manager in M/s.Bajaj Alliance Life Insurance Corporation Ltd. From the dictum laid down in the judgment of the Division Bench of the Calcutta High Court reported in (2013) 2 CHN 117 (Rajeev Lohia Vs. Life Insurance Corporation of India Ltd.,) it is clear that joining as an Officer in the competing Insurance Company can not disentitle the person from getting renewal commission for the policies procured by him. Unless it is established that he is involved in soliciting and procuring customers, the said person cannot be denied commission in respect of the policies that have already been procured by him and he is entitled to the commission till the said policies get expired.
For the foregoing reasons, the writ petition is liable to be allowed and accordingly, the same is allowed and the impugned order is set aside. The respondents are directed to pay the commission on policies and renewal commission in respect of the policies procured by the petitioners till such policies get expired. Consequently, connected Miscellaneous Petition is closed. No costs.
To
1.The Executive Director (Marketing) Life Insurance Corporation of India, Central Office, Yogakshema, Jeevan Bima Marg, P.B.No.19953, Mumbai-400 021.
2.The Zonal Manager, LIC of India, Zonal Office, Southern Region, No.153, Anna Salai, P.B.No.2450, Chennai-600 002.
3.The Senior Divisional Manager, LIC of India, Divisional Office, Gandhi Road, Thanjavur.
4.The Marketing Manager, LIC of India, Divisional Office, Gandhi Road, Thanjavur.
5.The Chief Manager, LIC of India, Branch Office, Vaigai Nallur Agraharam, Kulithalai, Karur District.
.