Gujarat High Court
Chairman vs Urmilaben on 18 March, 2011
Author: S.J.Mukhopadhaya
Bench: S.J. Mukhopadhaya
Gujarat High Court Case Information System
Print
LPA/1622/2010 23/ 23 JUDGMENT
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
LETTERS
PATENT APPEAL No. 1622 of 2010
In
SPECIAL
CIVIL APPLICATION No. 11776 of 2002
For
Approval and Signature:
HONOURABLE
THE CHIEF JUSTICE MR. S.J. MUKHOPADHAYA
HONOURABLE
MR.JUSTICE J.B.PARDIWALA
======================================
1
Whether
Reporters of Local Papers may be allowed to see the judgment ?
2
To
be referred to the Reporter or not ?
3
Whether
their Lordships wish to see the fair copy of the judgment ?
4
Whether
this case involves a substantial question of law as to the
interpretation of the constitution of India, 1950 or any order
made thereunder ?
5
Whether
it is to be circulated to the civil judge ?
======================================
CHAIRMAN,
LIFE INSURANCE CORPORATION OF INDIA & ORS
Versus
URMILABEN
N PRAJAPATI
======================================
Appearance :
MR
AK CLERK for the Appellants
MR PINAKIN N PATEL for the Respondent
======================================
CORAM
:
HONOURABLE
THE CHIEF JUSTICE MR. S.J. MUKHOPADHAYA
and
HONOURABLE
MR.JUSTICE J.B.PARDIWALA
Date
: 18/03/2011
CAV
JUDGMENT
(Per : HONOURABLE MR.JUSTICE J.B.PARDIWALA) The present appeal is directed against judgment and order dated 1st February 2010 passed by the learned Single Judge in Special Civil Application No.11776 of 2002 preferred by the respondent herein challenging the action of the appellant-corporation in terminating his agency as an agent and forfeiting all commissions due and payable to the respondent for all times to come. The learned Single Judge partly allowed the petition to the extent that the order of termination of agency was confirmed and the order with regard to forfeiture of commissions was quashed and set aside. The Corporation being aggrieved by the part of the order passed by the learned Single Judge to the extent of forfeiture of commission, has preferred the present commission.
The brief facts relevant for the purpose of deciding this appeal cam be summarized as under:
The appellant is a corporation duly constituted under the provisions of the Life Insurance Corporation Act, 1956. The respondent was working as an Agent of the appellant-Corporation at Kalol Branch under Gandhinagar divisions since 21st March 1993. The respondent introduced a proposal on the life of one Ashokkumar Ramjibhai Parmar for a sum assured at Rs.25,000 under the endowment plan on 20th September 1994. The policy holder i.e. Ashokkumar Ramjibhai Parmar passed away on 28th February 1996 as he was suffering from pulmonary tuberculosis. It is the case of the appellant-corporation that the respondent knowing fully well that the insured - late Ashokkumar Parmar was suffering from pulmonary tuberculosis suppressed this material fact and submitted Agent's confidential report dated 30th April 1994 stating therein that the proposer was not suffering from any ailment and was having sound health and recommended the acceptance of the life, which ultimately resulted into Policy bearing No.850364841. The appellant corporation thought it fit to issue charge-sheet cum show-cause notice to the respondent dated 3rd February 2000 calling upon the respondent to show cause as to why penalty of termination of agency and forfeiture of renewal commissions in terms of Rule 16 1(a) & (b) of the L.I.C. Of India (Agents) Regulations, 1972 (hereinafter referred to as 'the Regulations' for short) be imposed.
The case of the respondent before the authorities of the Corporation was that it was not within her knowledge that the insured was suffering from tuberculosis and as a matter of fact, this ailment was concealed by the insured.
The explanation of the respondent was not accepted by the competent authority and ultimately vide order dated 31st March 2000 passed by the Divisional Manager, the agency of the respondent being Agency Code No.3281832 was terminated in terms of Rule 16(a) and (b) of the Regulations with forfeiture of renewal commission.
This order of the Senior Divisional Manager was challenged before the Zonal Manger, LIC, Mumbai by the respondent by filing appeal vide letter dated 28.07.2000. The appeal came to be dismissed vide order date 23rd August 2001. The order of the appellate authority was once again made a subject matter of challenge before the Chairman of the Appellant Corporation in the form of a Memorial before the Chairman under Regulation No.24 of the Regulations. Chairman, LIC vide order dated 05.09.2002 rejected the said Memorial and confirmed both the orders i.e. Divisional Manager, Gandhinagar and the appellate authority.
Against the concurrent findings of three authorities of the appellant-corporation, the respondent preferred Special Civil Application No.11776 of 2002 and the petition was ordered to be partly allowed by the learned Single Judge. The learned Single Judge confirmed the order of all authorities so far as termination of the agency is concerned, but quashed and set aside the order of authorities so far as forfeiture of commission is concerned.
The appellant-corporation aggrieved by this order passed by the learned Single Judge is in appeal before us.
We have heard Mr AK Clerk, learned counsel appearing for the appellant-corporation and Mr Pinakin Patel appearing for the respondent.
The main bone of contention on behalf of the learned counsel for the appellant-corporation is that the learned Single Judge has committed a serious error in holding that the Corporation could not have forfeited the commission of the policies for which there was no dispute or there was no complaint and the work of such policies was satisfactorily performed.
Learned counsel for the appellant would contend that the learned Single Judge has committed an error in coming to the conclusion that the Corporation could forfeit the commission in question i.e. the one which was procured by playing fraud.
Learned counsel would further contend that the learned Single Judge has not considered regulation 19(1) in its true perspective. He would further contend that the Corporation is justified in forfeiting the agency commission payable to the respondent and forfeited the commission on all policies payable to the respondent. Learned counsel for the appellant would further contend that the learned Single Judge erred in ignoring that the forfeiture of commission for committing fraud provided in regulation 19 of agents commission can only mean and refer to renewal commission being received by the agents in respect of policies canvassed by the agent in the past as the agent.
Learned counsel for the appellant has relied on a decision of Division Bench of this Court rendered in Letters Patent Appeal No.213 of 2007 in Special Civil Application No.957 of 1997 and submitted that once it is established that the respondent has played fraud with the Corporation, the Corporation would be well within its powers to forfeit the commission on the premium received in respect of the business secured by the agent.
Learned counsel for the appellant has also relied upon another judgment rendered by the Division Bench of this Court in Letters Patent Appeal No.257 of 2010. In this particular judgment the Division Bench did not deem fit to interfere with the order passed by the authority for termination of the agency and forfeiture of commission in respect of the policy for which alleged fraud was found. However, the Division Bench thought it fit to quash and set aside the decision for forfeiture of the commission in respect of policy for which no fraud was found or no allegation of fraud was levelled and directed the concerned authority of the Corporation to reconsider the matter afresh on the principle of proportionality of the punishment keeping in mind the observations made in the judgment.
Per contra, learned counsel for the respondent submitted that the order passed by the learned Single Judge is just and proper and the appellant Corporation could not have passed an order of forfeiture of commission in respect of other policies where no fraud has been played upon or no illegality or irregularity has been committed by the respondent prejudicial to the interest of the Corporation. He would submit that at the most, the commission in respect of the policy for which alleged fraud is said to have been established and proved can be forfeited.
Having regard to the facts and circumstances of the case and the rival contentions put forward by the learned counsel for the respective parties we would like to examine the matter in detail as there appears to be some conflict of opinion expressed by two other Division Benches of this Court.
In the present case, the appellant Corporation initiated the proceedings against the respondent on the premise that the respondent knowingly perpetuated fraud by pushing a life on the books of the Corporation by withholding and suppressing the fact that the insured - late Ashokkumar R Parmar was suffering from pulmonary tuberculosis. The defence of the respondent all throughout remained that it was not within her knowledge and this fact was suppressed by deceased - Ashokkumar R Parmar.
It would be expedient for better adjudication of the controversy to make a mention of the fact that the action against the respondent was initiated in the form of a charge-sheet cum show-cause notice dated 3rd February 2000.
In the charge-sheet cum show-cause notice there is a reference that the Corporation proposed to impose upon the respondent penalty of termination of agency with forfeiture of renewal commissions in terms of Regulation 16(1)(a) and (b) of the Regulations of 1972.
The first order passed by the competent authority namely the Divisional Manager also says that the authority is inclined to impose a penalty under Regulation 16(1)(a) and (b) of the Regulations and ultimately passed an order that the agency stands terminated in terms of Regulation 16(1)(a) and (b) of the Regulations with forfeiture of renewal commissions.
The appellate authority also observed stating that the penalty of termination of agency is confirmed under Regulation 16(1)(a) and (b) of the Regulations. In the same manner, Chairman of the Corporation, in exercise of the powers under Regulation 24 of the Regulations confirmed the three orders referred to above making reference of Regulation 16(1)(a) and (b) of the Regulations.
This is suggestive of the fact that all throughout all the authorities have proceeded under Regulation 16 only. Regulation 16 of the Regulations reads as under:-
"Regulation 16: Termination of agency for certain lapses:
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 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 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 the date on which he is so called upon;
provided that the agent shall be given a reasonable opportunity to show cause against such termination.
Every order of termination made under sub-regulation (1) shall be in writing and communicated to the agent concerned.
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."
On fair analysis of Regulation 16 it is very clear that the competent authority is empowered to determine the appointment of an agent if the agent has failed to discharge his functions, as set out in regulation 8, to the satisfaction of the competent authority or if the agent acts in a manner prejudicial to the interests of the Corporation or to the interests of its policyholders. We take note of a very important fact that Regulation 16 nowhere refers the word 'fraud'. Clause (1) of Regulation 19 makes a reference of 'fraud'. Regulation 19 provides for appointment of commission of discontinuance of agency. Any order passed under Regulation 19(1) is not appealable. Regulation No.19(1) reads as under:-
"Regulation 19 Payment of commission on discontinuance of agency:
In the event of termination of the appointment of an agent, except for fraud, the commission on the premiums received in respect of the business secured by him shall be paid to him if such 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 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.
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.
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 is subsisting, to his heirs, so long 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.
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, notwithstanding anything contained in the said sub-regulation, commute all commission payable in subsequent financial year 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 lump 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 year subsequent to the said financial year."
To our mind, the position is very clear. In the event of the termination of an agent 'except for fraud' (emphasis supplied) the Commission on the premium received in respect of the business secured by the agent shall be paid to the said agent as prescribed under Regulation 19. Regulation prescribes that, 'except in case of fraud' after discontinuance of the agency, the agent is required to be paid the commission on the premiums received in respect of the business secured by him in the past.
Now, we shall deal with an important Regulation i.e. Regulation 15, which refers and talks about fraud. Regulation 15 reads as under:-
"15.
Termination of agency on account of certain disqualifications:
If an agent:
(a) is found to be of unsound mind by a court of competent jurisdiction;
(b) is found to be guilty of criminal misappropriation or criminal breach of trust or cheating or forgery or an abetment of or attempt to commit any such offence by a court of competent jurisdiction;
(c) in any judicial proceedings, has been found to have knowingly participated in or connived at any fraud, dishonesty or misrepresentation against the Corporation or any of its subsidiaries or against any person having official dealings with the Corporation or any of its subsidiaries, his appointment shall be liable to be terminated without notice and the competent authority shall forthwith terminate his appointment."
Regulation 15 talks about termination of agent on account of certain disqualifications and very importantly we take note of the fact that in Regulation 15 the word used is 'shall' meaning to say that if an agent incurs disqualification on account of being found to be of unsound mind by a court of competent jurisdiction or is found to be guilty of criminal misappropriation or criminal breach of trust or cheating or forgery or an abetment of or attempt to commit any such offence by a court of competent jurisdiction or in any judicial proceedings, has been found to have knowingly participated in or connived at any fraud, dishonesty or misrepresentation against the Corporation or any of its subsidiaries or against any person having official dealings with the Corporation or any of its subsidiaries his appointment as agent stands terminated. On plain reading of the language of Regulation 15 it is very clear that once the agent is disqualified in the event of any order passed by the competent court of law in judicial proceedings and once there is a finding recorded by the competent court of law in any judicial proceedings as regards fraud, the appointment stands automatically terminated without notice and the competent authority is left with no other option, but forthwith terminate his appointment. There is no discretion because of the word 'shall'. As against that, Regulation 16 talks about termination of agent on account of certain lapses. The lapses have been enumerated in clauses (a) to (f) of Regulation 16. Again, the language of Regulation 16 is important. It says that the competent authority 'may' by order determine the appointment of an agent. This is suggestive of the fact that in the event of certain lapses on the part of the agent, the competent authority may or may not determine appointment of an agent. That means, there is a discretion with the authority. In a given case the authority may find lapse of such a nature which may not warrant termination of the appointment of an agent. Therefore, unlike Regulation 15 where there is no discretion there appears to be some discretion in Regulation 16, which talks only about lapses.
What can be deduced on plain interpretation of Regulations 15, 16 and 19 is that for coming to the conclusion that the agent has played fraud with the Corporation in connivance with any person may be the person he has insured there must be a fullfledged trial in the court of a competent court. In the trial evidence would be led by both the sides and after considering the evidence if in any judicial proceeding there is a finding that the agent is guilty of fraud, the appointment stands automatically terminated. We do not propose to say, that fraud would stand established only if there is criminal prosecution and pursuant to that a full-fledged trial resulting in findings regarding fraud. It may not be possible or would not be feasible at times to initiate criminal prosecution in all cases. In such eventuality, it is expected from the Corporation, which is a 'State' within the meaning of Article 12 of the Constitution to adopt a fair and reasonable procedure. When we say fair and reasonable procedure we mean a regular departmental enquiry. In a regular departmental enquiry also the person concerned will get an opportunity of leading oral evidence as well as documentary evidence which includes cross-examination of witnesses, if any. That would at least give a reasonable opportunity to the agent to meet with the charge of fraud. We are saying this because, the lapses enumerated under Regulation 16 nowhere refers in explicit terms 'fraud' though it does refer to some lapses on the part of the agent which might be equated with incorrect statement made by the agent or false information given by the agent. We also take notice of the fact that appeal is provided under Regulations 16, 17, 18 and 19, but no appeal is provided against order passed under Regulation 19. It would be profitable to quote the wordings of Honourable Supreme Court in the matter of Union of India v. M/s Chaturbhai M Patel & Co. reported in AIR 1976 SC 712. In paragraph 7 it has been held as under:-
"It is well settled that fraud like any other charge of a criminal offence whether made in civil or criminal proceedings, must be established beyond reasonabe doubt: per Lord Atkin in A. L. N. Narayanan Chettyar v. Official Assignee, High Court Rangoon, AIR 1941 PC 93. However suspicious may be the circumstances, however strange the coincidences, and however grave the doubts, suspicion alone can never take the place of proof. In our normal life we are sometimes faced with unexplainable phenomenon and strange coincidences, for, as it is said, truth is stranger than fiction."
In the present case all throughout when the authorities have proceeded under Regulation 16 they have read fraud or rather, we should say presumed and assumed fraud only because, according to the corporation, the respondent acted in a manner prejudicial to the interests of the Corporation. Again, going back to Regulation 16(b) it is very clear that if an agent acts in a manner prejudicial to the interests of the Corporation it does not necessarily mean that he has played fraud. All acts prejudicial to the interests of the Corporation are not necessarily or can be said to be falling within the ambit of fraud. When allegations of fraud are levelled they cannot be easily presumed and that is why, perhaps, the Regulations have referred to the word 'fraud' in Regulation 15 saying that if there is a finding of fraud in any judicial proceedings, the appointment shall be liable to be terminated without notice.
We take notice of the fact that if fraud is to be read in all cases falling within the ambit of Regulation 16(b) then, it will be a dangerous proposition. If the Corporation wants to forfeit the commissions due and payable to the agent with regard to policies where there is no complaint, they would easily read or would say that fraud has been played upon by the agent by acting in a manner prejudicial to the interest of the Corporation. There is a scope of mischief. The Division Bench of this Court in the matter of State v. Prathmesh Farms Private Limited, reported in 2011 (1) GLR 159 in paragraph 12.1 has observed as under:-
"12.1 When material words are capable of bearing two or more constructions, the most firmly established rule for construction is the rule laid down in Heydon's case, which is also known as "purposive construction" or "mischief rule". Court is required to make such construction as shall suppress the mischief and advance the remedy, and suppress certain inventions and evasions for continuance of the mischief, and pro privato commodo, and to add force and life to the cure and remedy, according to the true intent of the makers of the Act, pro bono publico, as discussed in several judgments of the Apex Court, including Bengal Immunity Co. v. State of Bihar [AIR 1955 SC 661] and Ameer Trading Corporation Ltd. v. Shapoorji Data Processing Ltd. [AIR 2004 SC 355].
In the words of Lord Griffith: "The courts now adopt a purposive approach which seeks to give effect to the true purpose of legislation and are prepared to look at much extraneous material that bears on the background against which the legislation was enacted".
[Pepper v. Hart (1993) 1 All ER 42]."
Lapses enumerated under Regulation 16 which have been relied upon by the authorities of the Corporation all throughout nowhere refers in explicit terms 'fraud'. At this stage we would also like to quote and rely upon the observations made by the Division Bench of this Court in Letters Patent Appeal No.257 of 2002 in which one Honourable Judge of the Bench while giving supplementary reasons in support of the conclusion has observed as under:-
"A bare perusal of Regulation-15 shows that the termination of agency is to be brought about in case of certain disqualifications and those disqualifications are enumerated in sub clause (a), (b) and (c) of Regulation 15. Sub clause (c) of Regulation-15 clearly points out that "in any judicial proceeding, the agent has been found to have knowingly participated in or connived at any fraud, dishonesty or misrepresentation against the Corporation or any of its subsidiaries or against any person having official dealings with the corporation or any of its subsidiaries" then, in such a situation his appointment is made liable to be terminated as an agent without notice. As against this, and reading in juxtaposition with this position of Regulation 15 with provision of Regulation 16 it would be seen that Regulation
16 emphasize the competent authority of LIC to bring about termination of agency for certain lapses. The lapses enumerated under Regulation 16 nowhere refers in explicit term "fraud". Though it does refer to some lapses on the part of the agent which might be equated with incorrect statement made by an agent or false information given by the agent. It is required to be noted at this stage that for bringing about termination of agency on account of lapses enumerated in Regulation 16 on the part of the agent, then a reasonable opportunity is required to be given to the agent, much less to holding appropriate inquiry in an appropriate manner. It is required to be noted at this stage that, appeal is provided from order made under Regulations 15,16, 17 and 18, but no appeal is provided for any order or against any order passed under Regulation
19. Meaning thereby Regulation 19 cannot be construed to clothe the LIC with any substantive power. It is more of a mechanical objection resulting in exercise of the determination of agency brought about either under Regulation 15 or under 16. Regulation 15 in terms refer to 'fraud' on the part of the agent. I reiterate at the cost of repetition that Regulation 15 refers to disqualifications on the part of the agent and on agent's suffering from any one of those disqualifications; namely from Regulation 15 (a), (b) and (c). The termination of agency cannot be qualified to be termination on account of invocation of Regulation 15."
In paragraph 3 of the said judgment it is further observed as under:-
"3. In the instant case, as could be seen from the impugned show cause notice which came to be issued on 19/12/1997 as well as the order of terminating agency dated 24/9/1999, it can well be said that the authority has proceeded under Regulation 16 only. Regulation-15 which is disqualifications have neither been invoked nor been attributed or alleged against the petitioner herein above. Thus when the authorities have made out a case only based upon the lapses enumerated under Regulation 16, then, question arises as to whether 19(1) could be invoked, where under the commission is forfeited on account of fraud or disqualification involving fraud is attracted by the agent. In other words in case if any action is taken under Regulation 15 against the agent then Regulation 19 (1) cannot be invoked when only action against agent is invoked on account of lapses enumerated under Regulation 16, i.e. from Regulation 16 (1) (a) to (f), (2) and (3). The Legislature and Rule Framing Authority could not have clothed the one contracting party to forfeit the commission for the work already done by the agent and procuring clients and on their payment of premium, as one contracting party could not have legitimately decided about other party's fraud taking up on its own task of terming him to be fraudulent so as to deprive the agent of all the benefits of his past work. In fact, therefore, as could be seen from the language employed in Regulation 15, it is a disqualification which the agent incurs on account of he being found to be unsound mind by a court of competent jurisdiction being adequate guilty of criminal misappropriation by court of competent jurisdiction or being found fraudulent in any judicial proceedings. Therefore, in my view, for visiting the agent with dire consequences of forfeiture of his entitlement to receive commission on the past contracts or policies which he procured the requirement of Regulation 15 are to be fully satisfied. In the instant case, as could be seen from the record, the authorities have not invoked Regulation 15 at all against the present petitioner, and therefore, in my view there is no question of visiting him with forfeiture in his entitlement of receiving commission in future."
We are of the view that the Corporation having invoked Regulation 16 all throughout would not be justified in forfeiting the right of the respondent in receiving the commission as it is admissible under Regulation 19(b) and (c) as applicable to this case.
The judgment which has been relied upon by the learned counsel for the appellant-corporation rendered in Letters Patent Appeal No.257 of 2002 is in two parts. Both the Honourable Judges of the Division Bench have expressed their opinion on the subject but the final conclusion remains the same. The Division Bench thought it fit to remit the matter to the concerned authority of the Corporation for the purpose of reconsideration of the matter afresh on the aspect of proportionality of the punishment. We are of the view that the principle of proportionality of the punishment would not be applicable in such type of cases when an agency is terminated and the commissions payable to the agent are ordered to be forfeited. Determining the agency and forfeiting the commissions is not by way of punishment. It is on the strength of terms of contract entered into between the Corporation and the agent. In this view of the matter, we are not inclined to accept the submissions of the learned counsel of the Corporation that we may also remit the matter to the concerned authority for fresh consideration so far as forfeiture of commissions of all policies is concerned.
Learned counsel for the Corporation has also relied upon a judgment of Division Bench of this Court in Letters Patent Appeal No.213 of 2007. In that case, the Division Bench of this Court took the view that the conduct of the agent in collecting the cheque from a policy holder for revival of his policy and utilising those cheques for fresh proposals on the lives of others clearly amounts to fraud and by such fraudulent act the agent obtained unlawful gain. The Court further observed that the conduct of agent would amount to misappropriation of amount which falls within the expression o f 'fraud'. In that case, the Court having regard to the peculiar facts came to the conclusion that it would amount to fraud, but as we have discussed in our judgment fraud cannot be presumed and that every lapse on the part of the agent or any act of the agent prejudicial to the interests of the Corporation need not necessarily be a fraud.
The Division Bench while deciding Letters Patent Appeal No.263 of 2007 has not considered the entire issue keeping in mind Regulation 15 of the Regulations, 1972. The Division Bench proceeded on the footing that since it is a case of misappropriation of amount the Corporation would be justified in terminating the agency as well as all commissions. It appears that the matter was not examined from the point of view as regards omission of the word 'fraud' in Regulation 16 and as to whether all acts prejudicial to the interest of the Corporation can be termed as acts of 'fraud'. We are in agreement with the ratio propounded by the Division Bench of this Court in Letters Patent Appeal No.257 of 2002 except to the extent of remitting the matter to the authorities of the Corporation for reconsidering the issue on the principle of proportionality of punishment.
Again, at the cost of repetition, we would like to mention that in the present case the allegations against the agent are to the effect that she knew that late Ashokkumar R Parmar was suffering from pulmonary tuberculosis and in spite of this knowledge, as an agent, she recommended the Corporation for the policy. We take notice of the fact that without any proper departmental enquiry or detailed investigation in this regard, the Corporation could not have jumped to the conclusion that the agent is guilty of fraud by suppressing the fact that the insured was suffering from pulmonary tuberculosis. We take notice of the fact having perused all the three orders passed by the Corporation i.e. first order of the Divisional Manager, second order passed by the appellate authority and the third order in the form of Memorial by the Chairman of the Corporation that all the three authorities have based their conclusions solely taking into consideration the reply filed by the respondent to the show-cause notice. There was no other enquiry of any nature worth the name at the end of the appellant-Corporation. It can be a case of carelessness or negligence. However, though we are not supposed to go into the questions of facts, but in the present case, having regard to the peculiar circumstances, we are constrained to observe that there is not an iota of material on record to suggest that there was any meeting of minds or any conspiracy hatched for the purpose of defrauding the Corporation.
For the reasons recorded above, we are of the view that the appellant - Corporation could not have forfeited the amount of renewal commissions. To that extent, the judgment and order passed by the learned Single Judge is just, proper and justified. We do not see any reason to interfere with the order passed by the learned Single Judge. In the result, the appeal fails and the same is hereby dismissed. No costs.
(S.J. Mukhopadhaya, CJ.) (J.B.Pardiwala, J.) *mohd Top