Karnataka High Court
Sri Sutram Suresh vs The Senior Divisional Manager on 2 March, 2023
Author: M. Nagaprasanna
Bench: M. Nagaprasanna
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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 02ND DAY OF MARCH, 2023 R
BEFORE
THE HON'BLE MR. JUSTICE M. NAGAPRASANNA
WRIT PETITION No.29459 OF 2019 (GM - RES)
BETWEEN:
SRI SUTRAM SURESH
S/O SHRI S R SHANKARA RAMAIAH
AGED ABOUT 52 YEARS
RESIDING AT
GALAXY MANSION,
44, 17TH CROSS, 11TH MAIN
MALLESHWARAM
BENGALURU - 560 066.
... PETITIONER
(BY SRI PRASHANTH P.N., ADVOCATE)
AND:
1. THE SENIOR DIVISIONAL MANAGER
LIFE INSURANCE CORPORATION OF INDIA
MARKETING DEPARTMENT
"JEEVAN PRAKASH"
DIVISIONAL OFFICE-1
J.C.ROAD
BENGALURU - 560 002.
2. THE ENQUIRY OFFICER
MARKETING DEPARTMENT
"JEEVAN PRAKASH"
DIVISIONAL OFFICE-1
2
J.C.ROAD
BENGALURU - 560 002.
3. THE ZONAL MANAGER
(APPELLATE AUTHORITY)
SOUTH CENTRAL ZONAL OFFICE
JEEVAN BHAGYA
SAIFABAD, HYDERABAD.
... RESPONDENTS
(BY SRI RAJESH SHETTY, ADVOCATE)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND
227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE
IMPUGNED FINAL ORDER, DTD.14.05.2019 PASSED BY THE R-1 AS
PER ANNX-'K'.
THIS WRIT PETITION HAVING BEEN HEARD AND RESERVED
FOR ORDERS ON 23.01.2023, COMING ON FOR PRONOUNCEMENT
THIS DAY, THE COURT MADE THE FOLLOWING:-
ORDER
The petitioner is before this Court calling in question termination of the petitioner as an agent of Life Insurance Corporation of India by order passed by the Disciplinary Authority dated 14-05-2019 and has further called in question order passed during the pendency of the subject petition by the Appellate Authority dated 02-05-2020 which confirms the order of the Disciplinary Authority.
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2. Brief facts that lead the petitioner to this Court in the subject petition, as borne out from the pleadings are, as follows:-
The petitioner enrolls himself to be an agent of the 1st respondent/Life Insurance Corporation of India (hereinafter referred to as 'the Corporation' for short) at its City Branch in the month of March 1999. It is the claim of the petitioner that he has received several encomiums during his tenure of being an agent and had been recognized with the grant of Corporation Club Membership which is the Corporation's highest recognition to an agent and a million dollar roundtable life membership, both of which, according to the petitioner, are conferred upon only to agents who have served their best to the Corporation.
3. Things standing thus, a crime comes to be registered in Crime No.73 of 2018 against one M/s Vikram Investments for offences punishable under Sections 403, 406, 420 r/w 34 of the IPC. The allegation was with regard to a transaction of one A.R.Balaji and his Agarbathi Company who had invested and lost to an extent of `11.74 crores through accused No.2 Narasimha 4 Murthy. The petitioner claims that he also had invested in M/s Vikram Investments and had nothing to do with the loss.
4. The petitioner receives a communication from the Senior Divisional Manager of the Corporation on 12-03-2018 seeking an explanation from the hands of the petitioner with regard to his involvement in Crime No.73 of 2018 for the aforesaid offences. The communication indicated that the petitioner has induced his clients to invest their money in the unauthorized investment schemes and had promised his clients that future premiums under LIC plans can be financed through those unauthorized schemes. The petitioner receives another letter of the same date directing that the petitioner should not solicit or procure new Life Insurance business until further instructions from the Competent Authority.
5. On 14-09-2018 the petitioner receives a notice from an Inquiry Officer appointed, directing him to appear before the Divisional Office for a personal hearing to be held on 24-09-2018 indicating that it was an opportunity provided to the petitioner to be heard and submission of his views. The petitioner appears before 5 the Inquiry Officer on 24-09-2018 and claims that he was asked to reply to a questionnaire. The petitioner submitted his reply and nothing came about. After about 6 months of the said personal hearing, a show cause notice dated 18-03-2019 comes to be issued by the Disciplinary Authority - Senior Divisional Manager seeking to show cause as to why action should not be taken against him under Regulations 15 and 16 of the Life Insurance Corporation of India (Agents) Regulations, 2017 ('the Regulations' for short) to terminate the petitioner as an agent of the Corporation.
6. The petitioner replies to the notice on 28-03-2019 contending that there was no inquiry worth the name held under the Regulations. The petitioner after submitting his reply knocks at the doors of this Court in Writ Petition No.14709 of 2019 calling in question the show cause notice so issued on 18-03-2019. This Court in terms of its order dated 11-04-2019 disposed of the petition directing the Disciplinary Authority to take a decision in the matter after considering the reply submitted by the petitioner in accordance with law. Pursuant to the order passed by this Court, the impugned order comes to be passed on 14-05-2019 invoking 6 the power under Regulation 16 of the Regulations by terminating the petitioner as agent of the Corporation and consequent renewal commission that the petitioner was entitled had been forfeited.
7. The petitioner again knocked at the doors of this Court in the subject petition calling in question the order passed by the Disciplinary Authority and this Court permitted the petitioner to file an appeal before the Appellate Authority during the pendency of the petition and the Appellate Authority rejects the appeal in terms of his order dated 02-05-2020 which forms the second impugned order in the petition. The Appellate Authority confirms the order passed by the Disciplinary Authority - Senior Divisional Manager and terminated the agency of the petitioner.
8. Heard Sri P.N. Prashanth, learned counsel appearing for the petitioner and Sri Rajesh Shetty, learned counsel appearing for the respondents.
9. The learned counsel for the petitioner, Sri Prashanth. P.N. would vehemently contend that the petitioner has nothing to do with the crime so registered against Vikram Investments. The 7 petitioner is only an investor in the said Company and against all other accused, this Court has already granted an interim order of stay. No proceedings are going on now. The Police even after five years have not filed any charge sheet against the petitioner. He would contend that Regulation 16 of the Regulations is blatantly violated in the case at hand, as the petitioner is shown to have been placed under suspension. The order of suspension was never served on him. The impugned order cites that charges have been framed. The charge sheet was never served on him. He would contend that since it is in blatant violation of principles of natural justice and denial of reasonable opportunity to defend himself (the petitioner) the orders passed by both the Disciplinary Authority and the Appellate Authority are contrary to law. He would seek quashment of the said orders and restoration of status quo ante.
10. On the other hand, the learned counsel appearing for the respondents would vehemently refute the submissions to contend that all the opportunities had been granted to the petitioner and every document that he had sought for was furnished to him. The contention of the petitioner that he has no role to play in Vikram 8 Investments is contrary to records, as the matter is still under investigation. Since he has failed to perform the duties as an agent of the Corporation, the Disciplinary Authority has rightly taken action in terms of Regulation 16 and has rightly terminated the agency as the complaint against the petitioner is that he has induced about 800 people to invest in the Company and the Company had not returned their money and the petitioner had admitted that he made investment in the said Company and had introduced his family members also to the said Company, all of which form a misconduct under the Regulations. He would support the impugned orders.
11. I have given my anxious consideration to the submissions made by the respective learned counsel and have perused the material on record.
12. The afore-narrated facts, link in the chain of events and their dates are not in dispute. The petitioner gets enrolled as an agent of the Corporation on 18-03-1999. Once a person gets enrolled as an agent of the Corporation, his term as an agent in the 9 Corporation is regulated and governed by the Regulations. The Regulations are framed in exercise of powers conferred under Section 49 of the Life Insurance Corporation Act, 1956 with the previous approval of the Union Government and are therefore statutes. The Regulations in so far as they are germane to the lis read as follows:
"3. Definitions.--(1) In these regulations, unless the context otherwise requires,--
... ... ... ...
(c) "agent" means a person who has been appointed
under Regulation 4 of these regulations and includes an absorbed agent;
... ... ... ...
4. Appointment of Agents.--(1) Agents may be appointed in any place within India for the purpose of soliciting or procuring life insurance business including business relating to the continuance, renewal or revival of policies of insurance for the Corporation.
(2) All appointments referred to in the sub-regulation (1), shall be made by the competent authority after conducting interview of the candidates and satisfying itself about their suitability.
(3) In making such appointments the competent authority shall be guided by such rules of procedure as are laid down in the Insurance Regulatory and Development Authority of India (Appointment of Insurance Agents) Regulations, 2016 made under the IRDA Act, as amended from time to time.
(4) On and from the commencement of these regulations, every agent appointed under the provisions of the Life Insurance Corporation of India (Agents) Rules, 1972 and who was immediately before that day acting on behalf of the 10 Corporation as such agent, shall be deemed to be an agent appointed and confirmed under these regulations from such day:
Provided that for the purpose of computing the period of his work as an agent and any benefit under these regulations, the period during which he was continually acting on behalf of the Corporation as an agent immediately before the commencement of these regulations (excluding any period prior to the 1st September, 1956) shall be taken into account and for the purpose of ascertaining his business in force or the renewal premium income in respect of such business on any date, the business completed by him in the period during which he was continually acting as an agent immediately before such commencement shall be taken into account.
(5) An applicant seeking appointment as a composite insurance agent shall provide details of the Insurer with whom his Agency exists in the Application Form for Composite Agents.
(6) Notwithstanding anything in sub-regulations (1) to (5), the competent authority may, by notice in writing to an agent, direct that his agency year shall be every successive period of twelve months from the date mentioned in the notice:
Provided that the date so mentioned in the notice shall be the first date of a calendar month.
(7) Notwithstanding anything contained in this regulation, the designated officer may refuse or reject, for reasons to be recorded in writing, an application if he feels that the grant of appointment may be against public interest.
... ... ...
10. Payment of commission to agents.--(1) An agent shall be paid as compensation and remuneration for the discharge of all his functions under these regulations, commission at the rates fixed for each product of assurance as approved by the competent authority on the first year premiums and renewal premiums received during the continuance of his agency in respect of the completed business under his agency.
(2) An agent shall, in addition to the commission payable under sub-regulation (1), be entitled to bonus commission on 11 the first year eligible commission as provided in the Third Schedule.
(3) The commission or remuneration payable to an agent in any form is subject to regulations made by the Authority under the IRDAI Act, in force.
(4) Save as provided by Regulation 19, no commission shall be payable to an agent after he ceases to be an agent.
... ... ...
16. Termination or suspension of agent for certain lapses.--(1) The competent authority may, by order, in writing, terminate the appointment of an agent, after due notice and after giving him a reasonable opportunity of being heard in accordance with the procedure laid down in the Fifth Schedule, if he--
(a) has violated the provisions of the Insurance Act, 1938 (4 of 1938), Insurance Regulatory and Development Authority of India Act, 1999 (41 of 1999) or rules or regulations, made thereunder as amended from time to time;
(b) acts in a manner prejudicial to the interests of the Corporation or to the interests of its policyholders;
(c) has failed to discharge his functions and failed to comply with the code of conduct as set out in Regulation 8 and Regulation 14, and directions issued by the Authority from time to time, to the satisfaction of the competent authority;
(d) fails to furnish any information relating to his activities as an agent as required by the Corporation or the Authority;
(e) furnishes wrong or false information or conceals or fails to disclose material facts in the application submitted for appointment of Agent or during the period of its validity;
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(f) does not co-operate with any inspection or enquiry conducted by the Authority;
(g) fails to resolve the complaints of the policyholders or fails to give a satisfactory reply to the Corporation or the Authority;
(h) if the competent authority is satisfied that either directly or indirectly the agent is involved in embezzlement of premiums or cash collected from policyholders or prospects or on behalf of Insurer, and he has been knowingly involved in or connived at any fraud, dishonesty, misrepresentation, misappropria-tion, cheating and forgery against the Corporation or its policyholders or any of its subsidiaries or against any person having official dealings with the Corporation or any of its subsidiaries;
(i) violates the terms of appointment;
(j) does not submit periodical returns as required by the Corporation or the Authority;
(k) 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;
(l) 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;
(m) becomes physically or mentally incapacitated for carrying out his functions as an agent;
(n) if he being an absorbed agent, on being called upon to do so, fails to undergo the required training or to pass the tests, within the time fixed by the Board;
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(o) if it is found that he is misusing any facility provided to him by the Corporation.
(2) Where the competent authority proposes to take action under sub-regulation (1), it may direct the agent not to solicit or procure new insurance business until he is permitted by the Competent Authority to do so and the order of suspension so issued may be published as provided for in the Fifth Schedule.
17. Termination or suspension of agency by notice.--(1) The appointment of an agent may be terminated by the competent authority at any time giving him one month's notice thereof in writing.
(2) Nothing contained in this regulation shall effect the right of the competent authority to take action against the agent in terms of Regulations 16 and 19.
... ... ...
19. Payment of commission on discontinuance of agency.--(1) In the event of termination of the appointment of an agent, the commission on the premiums received in respect of the business secured by him shall be paid to him, if such agent--
(a) has fulfilled the minimum business required under Regulation 9 for at least five years since his appointment and twenty five policies on different lives effected through him were in full force on a date one year before his ceasing to act as such agent; or
(b) has fulfilled the minimum business required under Regulation 9 for at least ten years since his appointment; or
(c) being an agent whose appointment has been terminated under clause (m) of sub-regulation (1) of Regulation 16 has fulfilled the minimum business required under Regulation 9 for at least two years since his appointment and policies on twelve different lives effected through him were in full 14 force on a date immediately prior to such termination:
Provided that after his ceasing to act as such agent he does not directly or indirectly solicit or procure or promote life insurance business in any capacity for any other person or company or organisation, which includes broker or intermediary or a life insurance company or a health insurance company for two years thereafter.
(2) Notwithstanding anything contained in clause (a) or
(b) of sub-regulation (1), an agent terminated by an order passed under Regulation 15 or under clause (b) or (h) of sub-
regulation (1) of Regulation 16 shall entail forfeiture of his entire commission in respect of all the policies effected under his agency.
(3) Any commission payable under the sub-regulation (1) shall not be paid if the agent commits breach of the proviso thereunder.
(4) Subject to other provisions of this regulation, 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.
(5) 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 two years from the date of his appointment and policies on twelve different lives effected through him were in full force on a date immediately prior to his death.
(6) If the renewal commission payable under sub- regulation (1) or sub-regulation (4) or sub-regulation (5) is less than ten thousand rupees in any financial year (hereinafter referred to as the said financial year), the competent authority may, notwithstanding anything contained in the said sub- 15 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 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 years subsequent to the said financial year.
(7) Notwithstanding anything contained above, the payment of renewal commission or hereditary commission shall be as decided by the Board from time to time subject to any regulations made by the Authority in this regard.
20. Appeals.--(1) Every agent shall have a right of appeal to the Zonal Manager concerned of the Corporation against an order terminating the appointment and or forfeiture of renewal commission or suspending him from procurement of new business under Regulation 15 or Regulation 16 or Regulation 18 or sub-regulation (2) of Regulation 19.
(2) Every person submitting an appeal shall file the appeal in his own name.
(3) The appeal shall be addressed to the authority to whom the appeal lies and shall not contain any disrespectful or improper language and shall be complete in itself.
(4) The appeal shall be submitted through the authority which made the order appealed against.
(5) No appeal under this regulation shall be entertained unless it is submitted within a period of three months from the date on which the appellant receives a copy of the order appealed against:
Provided that the Zonal Manager may entertain the appeal after the expiry of the said period, within a further period of three months, if it is satisfied that the appellant had sufficient cause for not submitting the appeal in time.
... ... ...
23. Consideration of appeals.--(1) Where an appeal is received under these regulations, the Zonal Manager shall 16 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 three months from the date of the receipt of the appeal by the Zonal Manager."
(Emphasis supplied) Clause (c) of sub-regulation (1) of Regulation 3 defines who is an agent; an agent appointed in terms of Regulation 4. Regulation 4 deals with appointment of agents; agents may be appointed in any place for soliciting or procuring life insurance business including continuance, renewal or revival of policies of the Corporation; Regulation 10 deals with payment of commission to agents; an agent would be paid commission in discharge of his functions on the first year premiums and all such renewal premiums received during continuance of his agency. Regulation 16 deals with termination or suspension of agent for certain lapses. The lapses are those which are enumerated from sub-clause (a) to (o) thereof. Sub-regulation (1) of Regulation 16 mandates that the Competent Authority may pass an order in writing terminating the appointment of the agent after due notice and after giving him a reasonable opportunity of 17 being heard in accordance with the procedure stipulated in the Fifth schedule. Regulation 16(2) directs that the Competent Authority may direct the agent not to solicit or procure new insurance business until he is permitted by the Competent Authority and an order of suspension would be published as provided under the Fifth Schedule. Regulation 17 deals with termination or suspension of agency by notice. Regulation 20 permits the agent whose services have been terminated to file an appeal before the Appellate Authority. Regulation 23 deals with consideration of appeal. This is the broad statutory frame work under which the services of an agent in the Corporation are regulated. Since the termination of an agent can be only after giving the agent reasonable opportunity of being heard in terms of the procedure stipulated under the Fifth schedule, it becomes germane to notice the Fifth schedule which is the schedule appended to sub-regulation (1) of Regulation 16 dealing with disciplinary action. The Fifth Schedule reads as follows:
"THE FIFTH SCHEDULE [See Regulations 15(2) and (3), 16(1) and(2)] Disciplinary Action
1. Manner of holding enquiry before or after suspension of appointment of agent.--
(1) The appointment of an agent shall not be cancelled unless an enquiry has been conducted in 18 accordance with the procedure laid down in this Schedule.
(2) For the purpose of holding an enquiry or investigation, the competent authority may appoint an officer as an Enquiry Officer for the irregularities enumerated under Regulation 16 within fifteen days of issuance of suspension order, wherever issued, to conduct the enquiry or investigation.
(3) The Enquiry Officer may direct the agent concerned to furnish all information/data as deemed necessary to conduct the enquiry and grant the agent a time of twenty-one days from the receipt of letter or date of receipt of the suspension order, for submission of his reply and such information or data called for.
(4) The agent may, within twenty-one days from the date of receipt of such notice, furnish to the Enquiry Officer a reply together with copies of documentary or other evidence relied on by him or sought by the Enquiry Officer.
(5) The Enquiry Officer shall give a reasonable opportunity of hearing to the agent to enable him to make submissions in support of his reply.
(6) The agent may either appear in person or through any person duly authorized by him to present his case, provided however that the prior approval of the competent authority is obtained for the appearance of the authorised person.
(7) The Enquiry Officer may advise the competent authority to present its case through one of its officials.
(8) If it is considered necessary, the Enquiry Officer may call for feedback or information from any other related entity during the course of enquiry.19
(9) If it is considered necessary, the Enquiry Officer may call for additional papers from the agent.
(10) The Enquiry Officer shall make all necessary efforts to complete the enquiry or investigation within forty five days of the commencement of the enquiry.
(11) In case the enquiry cannot be completed within the period of forty-five days, the Enquiry Officer may seek additional time from the competent authority stating the reason thereof.
(12) The Enquiry Officer shall, after taking into account all relevant facts and submissions made by the agent, furnish a report making his/her recommendations to the competent authority.
(13) The competent authority shall issue a show cause notice directing the agent to submit his say within fifteen days from the date of receipt of the show cause notice proposing termination, and shall pass a final order in writing with such decision as he deems fit and communicate to the concerned agent.
(14) On issuance of the final order for termination of agency of the agent, he shall cease to act as an agent from the date of the final order.
2. Publication of order of suspension or termination.--(1) The order of suspension or termination of appointment of the insurance agent under Regulation 15 or Regulation 16 shall be displayed on website of the Corporation and updated in centralised list of agents maintained by the authority, so that registration of new business by the suspended or terminated agent is stopped forthwith by the Corporation.
(2) On and from the date of suspension or termination of agency appointment, the agent, shall cease to function as an agent of the Corporation.
3. Effect of suspension or termination of agency appointment.--(1) On and from the date of suspension or 20 termination of the agency, the agent shall cease to act as an agent.
(2) The competent authority shall recover the appointment letter and identity card from the agent whose appointment has been terminated within seven days of issuance of final order effecting termination of appointment.
(3) The competent authority shall black-list the agent and enter the details of the agent whose appointment is suspended or cancelled into the blacklisted agent's database maintained by the authority and the centralised list of agents' database maintained by the competent authority in online mode, immediately after issuance of the order effecting suspension or termination.
(4) In case a suspension is revoked in respect of any agent on conclusion of disciplinary action by way of issuance of a speaking order by the competent authority, the details of such agent shall be removed from list of blacklisted agents as soon as the speaking order revoking his suspension is issued.
(5) The competent authority, may inform other insurers, with whom he is acting as an agent, of the action taken against the agent for their records and necessary action."
(Emphasis supplied) The Fifth schedule appended to Regulation 16(1) mandates certain procedure. The procedure is as follows, the appointment of an agent can be cancelled only after conduct of an enquiry in accordance with the procedure in the schedule; for the purpose of enquiry the Competent Authority is to appoint an Enquiry Officer within 15 days of issuance of a suspension order for conduct of enquiry or investigation; the Enquiry Officer would direct the agent 21 to furnish all information and data necessary to conduct the enquiry and grant 21 days time to the agent; the agent may within 21 days furnish a reply to the Enquiry Officer; the Enquiry Officer is to give reasonable opportunity of being heard to make his submissions in support of his reply, therefore, an agent has to be heard apart from submission of his reply. Clause 10 to 14 of the Fifth schedule deals with the duties of the Enquiry Officer and the Disciplinary Authority up to the culmination of the proceedings. The afore-quoted schedule forms part of the Regulations.
13. The Regulations being statutory, observance of the tenor of the Regulations and the procedure stipulated under the Fifth schedule is imperative. It is under the parameters of the said Regulations the case and contention of the petitioner is required to be noticed. As observed hereinabove, the petitioner gets embroiled in Crime No.73 of 2018 which was registered against one Vikram Investments. The allegation against the petitioner is that he has lured the investors to invest in Vikram Investments and had promised certain premium returns. These are allegations which are pending investigation by the Investigating Officer in the aforesaid 22 crime. The Police have not filed charge sheet yet though the crime is registered five years ago. The issue in the lis does not concern the contents of the crime. The aftermath of registration of crime is what forms the fulcrum of the present lis. On the ground that the crime comes to be registered on 03-03-2018 the Disciplinary Authority issues a communication to the petitioner on 12-03-2018 seeking an explanation about the involvement of the petitioner in the alleged incident. The Communication reads as follows:
Sir, Re: Involvement in reported scam of Vikram Investments.
..
It has been brought to our notice that criminal case has been registered against you under Sections 34, 403, 406, 420 of IPC 1860 in Banashankari Police Station, Bangalore. Also it has been reported in News Papers that you were inducing your clients to invest their money in unauthorized investment schemes. Also it is reported that you promised your clients that future premiums under LIC plans can be financed through the returns generated by such unauthorised schemes.
Such alleged acts hae the potential to bring disrepute to LIC and harm its interests.
I hereby call upon you to submit your explanation within a week."
(Emphasis added) 23 On the same day another communication comes to be issued directing the petitioner not to solicit and procure any new Life Insurance business until further instructions. On 14-09-2018, the petitioner receives a communication from a person termed as Inquiry Officer asking the petitioner to appear for personal hearing on 24-09-2018. The communication reads as follows:
"Ref: DO I/Mktg. 14-09-2018 Sri Sutram Suresh, Flat No.101, Galaxy Mansions, No.44, 17th Cross, 11th Main, Malleshwaram, Bangalore-55.
Dear Sir, Re: Appear for personal hearing.
We are in receipt of your letter dated 28-06-2018, requesting for reinstatement of agency and release of renewal commission on your release on bail with regard to Vikram Investments scam.
You are placed under suspension on receipt of letter received from your Branch quoting FIR (No.0073/2018 dated 3-03-2018, accused under Offence - IPC 1860 under Sections 34, 403, 406, 420) and newspaper reports about your alleged involvement in Vikram Investment scam. You were directed not to solicit and procure new life insurance business until further instructions by the Competent Authority on 12-03-2018.
We hereby inform you that you are provided an opportunity to be heard and submit your views for which you are required to appear at Divisional Office for a personal hearing on 24-09-2018 between 11-30 to 12-30 a.m. Please ensure your presence. You 24 may furnish all information/data as deemed necessary for consideration of your case. You may either appear in person or any other person duly authorized by you to present your case, provided however prior approval of the Competent Authority is to be obtained for the appearance of the authorized person.
Your faithfully, Sd/- Enquiry Officer."
(Emphasis added) The communication depicts two factors - one appointment of an Enquiry Officer and the other is that the petitioner was placed under suspension on receipt of a letter received from the Branch.
14. The 1st respondent has filed its statement of objections and there is no document produced seeking to demonstrate that an order of suspension was served upon the petitioner at any point in time. Therefore, the petitioner was never served with any order of suspension which the communication reads and also was never made aware of the appointment of the Enquiry Officer to summon the petitioner for personal hearing. The petitioner appears before the Enquiry Officer and submits his reply on 24.09.2018. The reply is not produced as it was a questionnaire that was asked by the Enquiry Officer and answered by the petitioner. The same would stand to reason, as it is not produced by the respondent along with 25 the statement of objections. Therefore, this forms the first straw of violation of principles of natural justice. If the order would read that the petitioner was placed under suspension, the order of suspension ought to have been communicated to the petitioner. If disciplinary proceedings are initiated against an agent and if an Enquiry Officer was appointed for the said purpose, it ought to have been made known to the petitioner. Regulation 17 mandates that an agent can be placed under suspension after issuance of suspension notice to him, but not prior to notice he can be placed under suspension. Both of which have been violated in the case at hand.
15. After the petitioner appears for personal hearing six months passed by. Again on the same ground a show cause notice is issued to the petitioner seeking to show cause as to why his agency should not be terminated with forfeiture of renewal commission. The show cause notice reads as follows:
"ACTION UNDER LIC OF INDIA (AGENTS) RULES, 1972 AND IN THE MATTER OF SRI SUTRAM SURESH, LIC AGENT, CODE NO.5942611 OF CITY BRANCH (611) UNDER BANGALORE DIVISION-I. SHOW CAUSE NOTICE 26 WHEREAS, you Sri Sutram Suresh, Agent, Code No.5942611 attached to City Branch Office (611) are charged as under:
Whereas you are named in the FIR (No.0073/2018 dated 3.3.2018) and the news papers reporting your involvement in the scam of M/s Vikram Investments punishable under IPC 1860 (U/s 34, 403, 406, 420). You are accused of inducing clients to invest in unauthorized investment schemes. These acts amount to violation of code of conduct and other terms of agency envisaged under Regulations 15(c) and (d) read with Regulations 16(b), (c), (h), (i) of the Life Insurance Corporation of India (Agents) Regulations, 2017 notified vide Gazette Notification G.S.R. 86(E) dated 2-02-2017.
Whereas pursuant to your bail Order No.CRL.MISC No.2253 /2018 dated 4-04-2018,sufficient opportunity was given to you to be heard by our Enquiry Officer on 24-09-2018. However, your explanation dated 24-09-2018 to the Enquiry Officer has not been found satisfactory.
Whereas, you being a professional Agent, by your misdeeds, have tarnished the image of the Corporation. WHEREAS, you have acted in a manner prejudicial to the interest of the Corporation and violated Rule 8(3), Regulations 15(c) and (d) read with 16 (1) (b),(c), (h),
(i) of the Life Insurance Corporation of India (Agents) Regulations, 2017 notified vide Gazette Notification G.S.R. 86(E) dated 2-02-2017 and failed to perform your duties as an Agent.
However, before proceeding further with the final order, you are hereby directed to show cause in writing as to why your agency should not be "Terminated with forfeiture of Renewal Commission" for your aforesaid misdeeds and for acting in a manner detrimental to the interest of the Corporation, under the provisions of Rule 8(3), Regulations 15(c) and (d) read with 16(1) (b), (c),
(h), (i) of the Life Insurance Corporation of India (Agents) Regulations, 2017 notified vide Gazette Notification G.S.R. 86(E) dated 2.02.2017. 27
Whereas, your reply should reach us within 15 days from the date of receipt of this notice failing which it will be presumed that you have nothing to say in the manner and further action will be taken without any reference to you. Dated at BANGALORE this 18th day of March 2019."
(Emphasis added) The petitioner submits a detailed reply to the show cause notice on 28-03-2019 and before an order could be passed, reaches this Court calling in question the said show cause notice in Writ Petition No.14709 of 2019. This Court disposed of the petition in term of its order dated 11-04-2019 directing order to be passed. Consequence of the said direction results in passing of the final order under the Regulations. The final order reads as follows:
"FINAL ORDER ACTION UNDER LIFE INSURANCE CORPORATION OF INDIA (AGENTS) REGULATIONS, 2017 NOTIFIED VIDE GAZETTE G.S.R. 86(E) DATED 2-02-2017 ON THE MATTER OF SRI SUTRAM SURESH, AGENT, CODE NO.5942611 OF CITY BRANCH OFFICE, UNDER BANGALORE DIVISION-1.
WHEREAS, you, Sri Sutram Suresh, Agent, Code No.5942611, attached to City Branch Office, under Divisional Office I, Bangalore, were issued with a Show Cause Notice dated 18-03- 2019, explaining the charges therein and calling for your explanation.28
FOR good and sufficient reasons, I as the Competent Authority provisionally proposed the penalty of termination of your Agency with forfeiture of Renewal Commission with effect from the date of Final Order under Regulation 15(c) and (d) read with Regulations 16(1) (b), (c), (h), (i) and Regulation 8(3) of the Life Insurance Corporation of India (Agents) Regulations, 2017 notified vide Gazette Notification G.S.R. 86(E) dated 2.02.2017 in the said Show Cause Notice dated 18-03- 2019.
WHEREAS, in your reply dated 28-03-2019 to the above Show Cause Notice dated 18-03-2019, you have not brought out any relevant facts to disprove the charges framed against you and your reply is not satisfactory.
WHEREAS, I as the Competent Authority after carefully going through the case, relevant records and your reply vide letter dated 28-03-2019 have satisfied myself that you have acted in a manner prejudicial to the interest of the Corporation, and failed to maintain absolute integrity in discharge of your duties thus infringing on Regulations 16(1) (b), (c), (h), (i) and Regulation 8(3) of the Life Insurance Corporation of India (Agents) Regulations, 2017 notified vide Gazette Notification G.S.R. 86(E) dated 2.02.2017. Consequently, Renewal Commission is forfeited under Sub-Regulation 2 of Regulation 19 of LIC of India (Agents) Regulations, 2017 notified vide Gazette Notification G.S.R. 86 (E) dated 2-02-2017.
NOW, therefore, for the reasons stated above, I, as the Competent Authority impose upon you the penalty of termination of your agency with forfeiture of Renewal Commission with effect from the date of Final Order and recovery of all outstanding dues, under the provisions of Regulations 16(1) (b), (c), (h), (i) and Regulation 8(3) of the Life Insurance Corporation of India (Agents) Regulations, 2017 notified vide Gazette Notification G.S.R. 86(E) dated 2.02.2017 with immediate effect. Consequently, Renewal Commission is forfeited under Sub-Regulation 2 of Regulation 19 of LIC of India (Agents) Regulations, 2017 notified vide Gazette Notification G.S.R. 86(E) dated 2-02-2017.29
Dated at Bangalore this 14th day of May, 2019."
(Emphasis added) The final order reads that the petitioner in reply dated 28-03-2019 to the show cause notice dated 18-03-2019 was unable to disprove the charges framed against him and the reply was not satisfactory. Charges were never framed against the petitioner. What was issued was a show cause notice seeking to show cause as to why the agency should not be terminated. Therefore, this is the next straw of violation of principles of natural justice and denial of reasonable opportunity to the petitioner to defend himself.
16. Regulation 16 (supra) which deals with termination of agency mandates that if the agency of any agent is to be terminated for any of the reasons enumerated in sub-regulation (1), mandates that the agent shall be provided reasonable opportunity to show cause against such termination. The reasonable opportunity to show cause against such termination would in the considered view of this Court would not mean that he should not be made known of what are the allegations against him or communication of any order either, be it suspension, 30 appointment of Enquiry Officer or an order framing the charge, all of which form part of a final order which terminates the agency of the petitioner. The Fifth schedule appended to Regulation 16 as quoted and noted (supra) mandates certain procedure to be followed prior to passage of an order that would terminate the agency of an agent. A perusal at the proceedings or the orders passed which are all noted hereinabove, would unmistakably indicate that the procedure as stipulated under the Fifth Schedule has been thrown to the winds and the order of termination is passed.
17. It is trite that if a particular procedure is mandated to be followed prior to passing any order of termination, such procedure cannot be given a go-bye by the Authorities, as procedure is the life blood of the Fifth Schedule. On this solitary ground of blatant violation or non-compliance with the procedure stipulated under the Fifth Schedule and Regulation 16, the orders impugned are rendered unsustainable.
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18. The petitioner then files an appeal. The Appellate Authority rejects the appeal during the pendency of the subject petition in terms of his order dated 02-05-2020. The consideration in the appeal is as follows:
"In the Appeal dated 09-08-2019, he submits that he is innocent of the offences alleged in the FIR and that he had been granted bail. He submits that he has not acted in a manner prejudicial to the interest of the Corporation or to its policy holders. He mentions that there is no directive from the Court or police to the Senior Divisional Manager to initiate action against him in the manner which is not concerned or connected with LIC of India and that the Senior Divisional Manager has initiated action based only on the newspaper reports. He submits that he has cleared all outstanding dues to the Corporation after the Final Order of termination of his agency was issued to him and he also states that the said order is not a speaking order. He prays to revoke the final order, restore his forfeited renewal commission and allow him to resume work as LIC agent.
The action of the Ex-Agent has affected the image of the Corporation. By his action directly or indirectly the image of the Corporation has been tarnished.
AND WHEREAS the Ex-Agent has not brought any cogent grounds in his appeal warranting interference with the Final Order dated 14-05-2019 of Senior Divisional Manager and as the appeal is devoid of merits, and after going through the entire papers, I am convinced that the penalty of termination of agency with forfeiture of Renewal Commission imposed on him is just and appropriate.
NOW THEREFORE, by virtue of powers in me under Rule 23(1) of LIC of India (Agents) Regulations, 1972, now amended as Rule 23(1) of Life Insurance Corporation of India (Agents) Regulations, 2017, I do hereby order that the penalty of "Termination of Agency with forfeiture of Renewal Commission"
in terms of Regulations 16(1)(b)(c) and (i) of Regulation 8(3) of 32 the LIC of India (Agents) Regulations, 2017 imposed by the Disciplinary Authority, be and is hereby confirmed and the appeal dated 9-08-2019 preferred by Sri Sutram Suresh, Ex- Agent, Code No.05942611, City Branch Code No.611 under Bangalore Division-1, be and is hereby rejected. Dated at Hyderabad this 2nd Day of May, 2020.
Sd/- ZONAL MANAGER, (APPELLATE AUTHORITY)."
In the light of the orders of both the Disciplinary Authority and the Appellate Authority apart from the afore-narrated facts of the entire proceedings being contrary to the principles of natural justice, are bereft of reasons. Regulation 20 of the Regulations mandates that the Appellate Authority shall consider all the grounds urged in the appeal and then pass orders. The order passed by the Appellate Authority, in the considered view of this Court, is not in consonance with what is mandated under Regulation 20 or the order passed by the Disciplinary Authority under Regulation 16.
19. In view of the preceding analysis, both the orders of the Disciplinary Authority and the Appellate Authority are rendered unsustainable and have to be quashed. The quashment of orders would not mean that the proceedings against the petitioner cannot be taken afresh at all. Since they are in violation of the principles of 33 natural justice, it is from that stage the proceedings are required to be redone by the Disciplinary Authority i.e., from the stage of issuance of show cause notice. The petitioner would thus become entitled to consequential benefits i.e., renewal commission, as the orders impugned are no longer in existence. Except this, all other consequential benefits would depend upon the outcome of the proceedings now remitted.
20. For the aforesaid reasons, the following:
ORDER
(i) Writ Petition is allowed and the Final Order dated 14-
05-2019 passed by the Disciplinary Authority and the Proceedings dated 02-05-2020 passed by the Appellate Authority stand quashed.
(ii) The matter is remitted back to the Disciplinary Authority to redo the entire exercise from the stage of issuance of show cause notice to the petitioner and the Disciplinary Authority shall comply with the regulations and adhere to the observations made in the course of this order.
(iii) The Petitioner shall be entitled to all consequential benefits that would follow from the quashment of the aforesaid orders i.e., renewal commission. 34
(iv) All other consequential benefits would depend upon the proceedings that are now to be redone and their outcome.
Pending applications, if any, also stand disposed as a consequence.
Sd/-
JUDGE bkp CT:MJ