WP/15409/2004 of K.Venkareswarlu (died) per LRs Vs Liefe Insurance Corporation of India, on 31 December 2014

COMMON ORDER:

Since the causes of action, though independent, whichcompelled the petitioners to invoke the jurisdiction of this Court underArticle 226 of the Constitution of India, are similar and in view of thefactual similarities, this Court deems it apt and appropriate to disposeof these writ petitions by way of this common order.

2. Filtering the unnecessary details, the facts which are relevant forthe disposal of the present writ petitions, are as under:

3. The 3[rd] respondent herein issued show cause notices dated13.6.2003, calling upon the petitioner in W.P.No.15408 of 2004 and 1[st]petitioner in W.P.Nos.15409 & 15875 of 2004 to show cause as to whytheir Agencies should not be terminated on the ground that theyobstructed the functioning of the office. In response to the said showcause notices, petitioners submitted their explanations on 25.6.2003and 26.6.2003 and thereafter, the 3[rd] respondent herein passed ordersdated 27.10.2003 terminating the Agencies of the petitioners, statingthat their explanations were not satisfactory and that they acted in amanner prejudicial to the interest of the Respondent-Corporation. Thepetitioners herein submitted appeals before the appellate authority-2[nd]respondent herein. The 3[rd] respondent passed orders dated29.12.2003, as per the consent of the 2[nd] respondent, reinstating thepetitioners as Agents without Club Membership. Assailing the saidorders passed by the authorities to the extent of denying ClubMembership, the present writ petitions came to be filed.

4. Responding to the rule nisi issued by this Court, a counter affidavit filed by the respondents herein denying the averments madein the writ affidavits and in the direction of justifying the impugnedaction.

5. Heard Sri R.Sudheer, learned counsel for the petitioners and SriB.P.Mohan, learned Standing Counsel for Respondent-Corporation,apart from perusing the material available on record.

6. It is contended by the learned counsel for the petitioners that theorder of the appellate authority, declining restoration of petitioners’club membership without giving opportunity is contrary to Rule 23(1) ofLIC (India) Agents Rules, 1972 and as per Rule 17(ii) of the ClubRules, in case of reinstatement of agency, restoration of ClubMembership is normal and non-restoration is an exception owing tothe peculiarity of the factual situation. It is further contended that suchdenial of restoring the club membership has civil consequences anddeprives the agent of various financial and other benefits, as such, thesame cannot be effected without affording the person affectedopportunity of showing cause against such denial. It is furthercontended that the principles of natural justice have to be read inconjunction with the provisions of the Rules and the impugned actionis also discriminatory since several other agents who also participatedin the dharna have been let-off.

7. Per contra, it is strenuously contended by the learned StandingCounsel for the Respondent Corporation that the appellate authority isperfectly justified in declining to restore the Club Membership in favourof the petitioners, while restoring the agencies by taking a lenient andsympathetic view. It is further contended that the petitioners admittedtheir guilt also and the issue is serious and would not deserve anysympathy. The appellate authority by taking a lenient view restoredthe agencies and refused correctly the club membership of thepetitioners. It is further contended that restoration of club membership is not automatic one and it is the discretion of the authorities. It isfurther contended that in view of Rule 24 of the Rules, there is aneffective alternative remedy to the Chairman by way of memorialagainst the impugned order.

8. In view of the above, now the point that emerges forconsideration of this court is whether the petitioners are entitled for therelief as prayed in the writ petition?

9. The Life Insurance Corporation of India, an Indian State ownedInsurance Group and Investment Company with its Headquarters atMumbai, came into being on 1.9.1956. With the prior approval of theCentral Government, the LIC of India framed LIC of India (Agents)Regulations, 1972 (hereinafter called ‘the Regulations’), touching themethod of recruitment of agents and the terms and conditions of theirappointment and work. The Regulations, which are germane andrelevant for the purpose of the present writ petitions, are 16, 17, 20 and24 and the same are reproduced hereunder:

“16. Termination of agency for certain lapses:

(1) The competent authority may, by order, determine theappointment of an agent,appointment of an agent, (a) if he has failed to discharge his function, as set out inregulation 8, to the satisfaction of the competentauthority;regulation 8, to the satisfaction of the competentauthority; (b) if he acts in a manner prejudicial to the interests of the Corporation or to the interests of its policy holders;Corporation or to the interests of its policy holders;

(c) If evidence comes to its knowledge to show that he hasbeen allowing or offering to allow rebate of the whole orany part of the commission payable to him;been allowing or offering to allow rebate of the whole orany part of the commission payable to him; (d) if it is found that any averment contained in his agencyapplication or in any report furnished by him as an agentin respect of any proposal is not true;application or in any report furnished by him as an agentin respect of any proposal is not true; (e) if he becomes physically or mentally incapacitated forcarrying out his functions as an agent;carrying out his functions as an agent; (f) if he being an absorbed agent, on being called upon todos, fails to undergo the specified training or to pass thespecified tests, within three years from the date onwhich he is so called upon;dos, fails to undergo the specified training or to pass thespecified tests, within three years from the date onwhich he is so called upon; Provided that the agent shall be given a reasonable opportunity toshow cause against such termination.

(2) Every order of termination made under sub-regulation (1)shall be in writing and communicated to the agent concerned.

(3) Where the competent authority proposes to take actionunder sub-regulation (1), it may direct the agent not to solicit orprocure new life insurance business until he is permitted by thecompetent authority to do so.

17. Termination of agency by notice:

(1) The appointment of an agent may be terminated by thecompetent authority at any time by giving him one month’s noticethereof in writing.

(2) An agent may, by giving one month’s notice in writing tothe competent authority discontinue his agency and after theexpiry of the period of one month, his agency shall standterminated.

20. Appeals:

(1) Every agent shall have a right of appeal to the relevantappellate authority set out in Schedule-VII against an orderterminating the appointment which has been passed underregulation 15 or regulation 16 or sub-regulation (1) of regulation 17or regulation 18.

(2) Every person submitting an appeal shall do so separatelyand in his own name.

(3) The appeal shall be addressed to the authority to whomthe appeal lies, shall not contain any disrespectful or improperlanguage and shall be complete in itself.

(4) The appeal shall be submitted through the authority whichmade the order appealed against.

(5) No appeal under this regulation shall be entertainedunless it is submitted within a period of three months from thedate on which the applicant receives a copy of the order appealedagainst:

Provided that the appellate authority may entertain the appealafter the expiry of the said period, if it is satisfied that the appellanthad sufficient cause for not submitting the appeal in time.

24. Memorial:

An agent whose appeal under these regulations, notbeing an appeal against an order under sub-regulation (1) ofregulation 17, has been rejected by the appellate authority mayaddress a memorial to the Chairman of the Corporation inrespect of that matter within a period of three months from thedate of receipt by the agent of a copy of the order of the appellate authority and the Chairman shall, after making orcausing to be made such inquiry as he deems necessary, passsuch order thereon as the circumstances of these case justify”.

10. The controversy in the present writ petitions is required to beexamined in the light of the above mentioned Regulations. There isabsolutely no dispute with regard to the chronology of events as setout in the writ affidavits and the counters. In response to the showcause notices dated 13.6.2003 issued by the 3[rd] respondent-SeniorDivisional Manager under proviso to Regulation 16(1) of theRegulations, calling upon the petitioners to show cause as to why thepenalty of termination of agencies should not be imposed on them, thepetitioners herein submitted their explanations. The 3[rd] respondent-Senior Divisional Manager found the said explanation unsatisfactoryand while narrating the circumstances leading to the action, passedorders, terminating the agencies of the petitioners with eligibility toreceive commission. As against the said order of termination of theagency, the petitioners filed appeal before the 2[nd] respondent-appellate authority contending that the order of termination is contraryto Regulations and that the punishment of termination is excessive andis an extraneous act of the authority and that they are repenting for theevent of happening. The Senior Divisional manager while referring tothe letter of the 2[nd] respondent dated 24.12.2003, wherein the 2[nd]respondent consented for restoration of agency without clubmembership, vide proceedings dated 29.12.2003 orderedreinstatement of the petitioners as Agents without Club Membership.

11. In the instant case, the 3[rd] respondent after giving opportunity asprovided under the proviso to Regulation 16(1) passed the order oftermination of the agency dated 27.10.2003 by recording reasons andwhile narrating the circumstances leading to such action. As perRegulation 20 of the Regulations, the petitioner herein filed appeal

and as per the proviso to Regulation 23(1), it is obligatory on the part ofthe appellate authority to afford the appellants a reasonableopportunity of representing their case. While replying to the avermentin the affidavits filed in support of the writ petitions, in the counters filedon behalf of respondents, there is absolutely no reference as regardsaffording any such opportunity by the appellate authority, exceptstating that taking a lenient and sympathetic view, the 2[nd] respondentmodified the order of termination and restored the agency only. It istrue that as per Regulation 24 of the Regulations, there is a remedy tothe petitioners by way of filing memorial before the Chairman againstthe impugned orders and in the considered opinion of this Court, at thislength of time, this Court finds absolutely no justification to direct thepetitioners to avail the said remedy. Since the appellate authorityfailed to provide any opportunity to the petitioners herein, this Court isof the opinion that the petitioners are entitled for such opportunity byway of remanding the matter to the appellate authority. The mandatoryrequirements of law cannot be dealt with in a mechanical manner andthe same should be implemented in their true letter and spirit by theauthorities. In the instant case, there is absolutely no evidence toshow that such opportunity was given by the appellate authority at thetime of disposal of the appeals. Therefore, this Court deems itappropriate to provide such opportunity to the petitioners by remandingthe matters to the appellate authority.

12. For the aforesaid reasons, the writ petitions are allowed, settingaside the orders dated 29.12.2003 to the extent of refusing to restorethe Club Membership in favour of the petitioners and the matter isremanded back to the appellate authority for fresh consideration on theaspect of Club Membership alone after giving notice and opportunity ofhearing to the petitioners. As a sequel, the miscellaneous petitions, ifany, shall stand closed. There shall be no order as to costs.

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Date: 31.12.2014

DA

A.V.SESHA SAI, J

DA

IN THE HIGH COURT OF JUDICATURE OF ANDHRA PRADESHAT HYDERABAD

Date: 31.12.2014

Between:

K.Virupakshi Petitioner in W.P.No.15408 of 2004

K.Venkateshwarlu & others. Petitioners in W.P.No.15409 of 2004

G.Khader Saheb & others Petitioners in W.P.No.15875 of 2004

And

Life Insurance Corporation of India,represented by Chairman, LIC of India,Central Office, Mumbai & others.

Respondents in all the W.Ps.