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3. Each of the Petitioners preferred an appeal to the Zonal Manager against the terminations and each of the appeals was rejected by separate orders dated 30th May 2006. The orders dated 24th November 2005, terminating the agency and the orders dated 30th May 2006 dismissing the appeal have been challenged by each of them by way of the present writ petitions. They were agents attached to Branch Unit 11-C.

4. The Petitioner in W.P. (C) No. 10426 of 2006, Mr. P.K. Singh, was appointed as an LIC agent in 1990. Since then, he has been conferred with several awards for his work in generating business for the LIC for several years. A long list of such achievements is set out in para 3(B) of the writ petition. He was awarded membership of the Chairman‟s Club for 2000-01 and 2001-02. Ms. Nandini Sundriyal the Petitioner in W.P(C) No. 10442 of 2006 became an LIC agent in the year 1990 and has had an unblemished record. Mr. Man Singh Kushwaha the Petitioner in W.P. (C) No.10443 of 2006 became an agent way back in the 1970s and has also been awarded merit certificates and honours. Similarly, Mr. R.K. Mahajan, the Petitioner in W.P. (C) No. 3277 of 2007 became an LIC agent on 22nd October 1990. He achieved top rankings in agent‟s listings and was awarded membership of the Chairman‟s Club for 1997-98. On 19th September 2003 Mr. R.K. Mahajan made certain complaints to the Senior Divisional Manager, LIC regarding malfunctioning of the SSS.

12. On various dates in October 2005, the four Petitioners submitted their replies to the show cause notices. Apart from denying the allegations, it was stated that they were being blamed for "what is basically a system failure and for which even very remotely the applicant cannot be held responsible" and that "only those responsible for the management and administration of LIC should be put into task." It was maintained that it was practically not possible for the Petitioners to change or alter the system of LIC since the agents had "no control over the system and administration of LIC". The Petitioners also pointed out to the inherent defects in the manner in which the SSS was being administered where the first premium as well as the renewal premium were remitted to LIC in a single cheque from the employer which then used to be bifurcated into two parts, for one of which a Block Branch Office Collection (BOC) would be issued and for the other an SSS MR. Mr. P.K. Singh gave an example where the actual cheque amount was Rs. 10,000/- which was split into two parts of Rs. 5,000/- each and a block BOC as well as an SSS MR were issued giving the same cheque number for both. This resulted in multiple BOCs being issued against a single cheque. While adjusting the amount, if the premium was short, it was adjusted from another Block BOC and the case used to get passed. It was pointed out that all these discrepancies were not on account of the Petitioners but on account of the LIC officials themselves. The above practice was followed not only for the MCD but for DJB, DDA etc. as well. It is stated that such practice was prevalent from earlier times when the Petitioners first became LIC agents. It was pointed out that when Mr. P. K. Singh had given a life insurance business of over 6000 policies, it was not possible for him to compromise on the deposit of any amount. The other three Petitioners had also provided more or less a similar quantum of business. It was stated in the reply as under:

50. It must be noticed that the above decision did not concern Rule 16 of the LIC Agents Rules which mandates a reasonable opportunity to be given to the agent. The agency here is therefore not purely contractual as was sought to be contended by the LIC. It is governed by the LIC Agents Rules. The above decision also, therefore, does not help the LIC.

51. In Chandra Prabha Dogra v. LIC of India, the show cause notice detailed the manner in which the misconduct had been committed by the LIC Agent under the LIC Agents Rules. It was noticed that the allegation was that "she used to receive moneys in advance from the prospective persons seeking insurance and then at her convenience issue her own cheques which in a number of cases got dishonoured". In reply to the show cause notice, she admitted her fault by stating: "While I once again, in an unqualified manner, make a submission that there was a mistake on my part in the use of discretion....." It was in the above circumstances that it was held that there was no violation of the principles of natural justice and that "a fraudulent act outside judicial proceedings would also be actionable under Section 16(b)".... After the above decision in Chandra Prabha Dogra v. LIC of India was upheld by the Division Bench on 17th May 2005, where it was noticed that the cheques issued by the agent had bounced and the policies were returned whereas the amount had been collected in cash from prospective policy holders, the facts of the present case do not bear any comparison with the facts of Chandra Prabha Dogra v. LIC of India. That case proceeded on an „admission‟ by the agent of her misconduct. This Court is, therefore, unable to agree with the submission of the learned Senior Counsel for the LIC that the above case justifies dispensation with the compliance of the minimum requirements of natural justice.

Adverse consequences for the Petitioners

63. The Court is also not satisfied that the procedure adopted in the present case was sufficient for the purposes of the proviso to Rule 16(1) of the Agents Rules which requires a reasonable opportunity to be given to an agent who is charged with misconduct. Being an LIC agent for 15 years means that such person has earned goodwill and a reputation. Although it might technically be correct that an agent is not an employee of the LIC, from the point of view of the public, an LIC agent is seen as representing LIC. The adverse consequence of an agent being held to have committed fraud is, therefore, even more severe than perhaps that suffered by its employee. The more grievous the charge, the more strictly must the words `reasonable opportunity‟ be interpreted. The materials that constituted the basis for forming an opinion that the agent committed an act prejudicial to the interests of the LIC, must be furnished to such an agent to elicit such agent‟s response. Further, if such material has been investigated and a conclusion arrived at then the report of such investigation must be furnished to the agent so that a response can be elicited before proceeding against such agent. Such a procedure, which comports with the mandatory requirement of providing a „reasonable opportunity‟ in terms of the proviso to Rule 16 (1) of the Agents Rules has not been adopted in the present case.