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Gujarat High Court
Appearance : vs Mr Pinakin N Patel For The on 18 March, 2011
Author: Mr.S.J.Mukhopadhaya,&Nbsp;Mr.Justice J.B.Pardiwala,&Nbsp;
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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

   

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