IN THE HIGH COURT OF KERALA AT ERNAKULAM
WP(C).No. 26791 of 2008(M)
1. MR.BABY JOHN,THURUTHUMMEL HOUSE
... Petitioner
Vs
1. THE LIFE INSURANCE CORPORATION OF INDIA
... Respondent
2. THE SENIOR DIVISIONAL MANAGER
3. THE BRANCH MANAGER
For Petitioner :SRI.C.G.SUNIL
For Respondent :SRI.LAL GEORGE
The Hon'ble MR. Justice S.SIRI JAGAN
Dated :17/08/2009
O R D E R
S. Siri Jagan, J.
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W. P (C) No. 26791 of 2008
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Dated this, the 17th August, 2009.
J U D G M E N T
The petitioner was an agent appointed by the Life Insurance
Corporation of India under the Life Insurance Corporation of India
(Agents) Regulations, 1972. He has more than 20 years of service
as an agent of the LIC. The said Regulations have been declared as
Rules made under the Life Insurance Corporation Act as per Section
48(2A) of the said Act, 1956. The petitioner contends that he was
entitled to exemption from doing minimum business under Regulation
9(4) for which the petitioner filed Ext. P5 application, which was not
favourably considered by the respondents. The petitioner thereafter
resigned as an agent of the LIC by Ext. P10. The insurance renewal
commission payable to the petitioner from March, 2009 to August
2008 was withheld despite the petitioner issuing Exts.P5, P7, P8 P10
and P11 requests for payment of the same. The respondents issued
Ext. P9 TDS certificate stating that for the total commission of Rs.
1,90,832.67 for the month of March, 2008, a sum of Rs. 19,655/- has
been deducted as income tax. But, no payment was made nor was any
proper reply given to the petitioner. It is under the above
circumstances the petitioner has filed this writ petition seeking the
following reliefs:
“(a) Issue a writ of mandamus or any other appropriate writ,
order or direction directing the respondents 1 to 3 to release the
insurance commission payable to the petitioner for the month of
March, 2008 to August, 2008 forthwith.
b) Issue a writ of mandamus or any other appropriate writ,
order or direction declaring that the petitioner is entitled to get
insurance renewal commission for the business secured by him
payable for the succeeding period and to direct the respondents to
make such payments as and when falls due without any delay.”
2. A counter affidavit has been filed by the Life Insurance
W.P.C. No. 26791/08 -: 2 :-
Corporation of India, wherein they have contended that in view of
Section 44(c) of the Insurance Act, 1938, which is applicable to the
agents of LIC also, the petitioner is not entitled to any renewal
commission, since he has canvassed insurance work for another
Company.
3. Regarding that contention, the petitioner would submit that
Section 44 of the Insurance Act is not applicable to the petitioner. He
raises two contentions in this regard. The first contention is that for
Section 44 to be applicable, the Central Government should have
issued a notification making the same applicable to the LIC as
provided in Section 43 of the LIC Act, 1956, which has not been done.
According to the petitioner, Section 48 (2C) of the LIC Act stipulates
that Rules made under clause (cc) of sub-section (2) of Section 48
would be applicable notwithstanding anything contained in the
Industrial Disputes Act , 1947 or any other law or any agreement,
settlement, award or other instrument for the time being in force.
Therefore, Section 44 is inapplicable for the purpose of payment of
renewal commission on discontinuance of agency, insofar as by
virtue of Section 48(2A) of the LIC Act, the Agents Regulations, 1972
would be deemed to be rules framed under Section 48 and payment of
commission after cessation of agency would be governed only by
those rules. According to the petitioner, Rule 19 of the Agents
Regulations provides for payment of commission even after
discontinuance of agency, which does not contain any restrictive
clause as in Section 44.
3. Counsel for the LIC has produced before me GSR 262(E)
issued by the Government of India, whereby the earlier notification
GSR 734 dated 23-8-1958 has been made subject to the modifications
mentioned in the new notification. That notification was published on
27-4-1972. According to counsel for the petitioner, these notifications
W.P.C. No. 26791/08 -: 3 :-
would show that a notification as enjoined by Section 43 of the LIC
Act making Section 44 of the Insurance Act applicable to the LIC
subject to the modification therein, has been issued. The contention
is that under Section 44(c) of the Insurance Act, an agent who has
served the insurer continually and exclusively for at least ten years
would not be entitled to payment of commission on cessation of
agency, if the agent directly or indirectly solicit or procure insurance
business for any other person. According to the LIC of India, the
petitioner has been doing insurance business for the Reliance Life
Insurance Company Ltd., and therefore by virtue of clause (c) of
Section 44 of the LIC Act, made applicable to the LIC by notification
issued under Section 43 of the LIC Act, 1956, the petitioner has
become disentitled for payment of renewal commission after
cessation of agency. They point out that by Ext. P6 letter dated 4-4-
2008, the petitioner has been specifically directed to inform the LIC
as to whether the petitioner is working for Reliance Life Insurance
Company or any other Insurance Company in any capacity. Although
he filed Ext. P7 reply, he did not reply either way. They point out
that while giving evidence as PW2 in O.S.No. 299/2007 of the Sub
Court, Perumbavoor, the petitioner had on 5-8-09 specifically deposed
that he was formerly an LIC agent and now he is working as Reliance
CD. According to the LIC, the petitioner was working as a Channel
Development Associate of Reliance Insurance Company, which
amounts to soliciting or procuring insurance business for that
Company.
4. The petitioner would try to counter the argument by
pointing out that while issuing G.S.R.262(E), the Government had
decided to make Section 44 of the Insurance Act applicable to the LIC
of India with certain modifications and in view of those modifications,
the petitioner would eligible for renewed premium as per the
W.P.C. No. 26791/08 -: 4 :-
modified Section 44 even after cessation of agency.
5. I have considered the rival contentions in detail.
6. Section 43 of the LIC Act, 1958 reads thus:
“43. Application of the Insurance Act:- (1) The
following sections of the Insurance Act shall, so far as may be,
apply to the Corporation as they apply to any other insurer,
namely:-
Sections 2, 2B, 3, 18, 26, 33, 38, 39, 41, 45, 46, 47A, 50, 51,
52, 110A, 110B, 110C, 119, 121, 122 and 123.
(2) The Central Government shall as soon as may be after
the commencement of this Act, by notification in the Official
Gazette, direct that the following sections of the Insurance Act
shall apply to the Corporation subject to such conditions and
modifications as may be specified in the notification, namely:-
Sections 2D, 10, 11, 13, 14, 15, 20, 21, 22, 23, 25, 27A,
28A, 35, 36, 37, 40, 40A, 40B, 43, 44, 102 to 106, 107 to 110, 111,
113, 114 and 116A.
(2A) Section 42 of the Insurance Act shall have effect in
relation to the issue to any individual of a licence to act as an
agent for the purpose of soliciting or procuring life insurance
business for the Corporation as if the reference to an officer
authorised by the Controller in this behalf in sub section (1)
thereof included a reference to an officer of the Corporation
authorised by the Controller in this behalf.
(3) The Central Government may, by notification in the
Official Gazette, direct that all or any of the provisions of the
Insurance Act other than those specified in sub section (1) or sub
section (2), shall apply to the Corporation subject to such
conditions and modifications as may be specified in the
notification.
(4) Every notification issued under sub section (2) or sub
section (3) shall be laid for not less than thirty days before both
Houses of Parliament as soon as possible after it is issued, and
shall be subject to such modifications as Parliament may make
during the session in which it is so laid or the session immediately
following.
(5) Save as provided in this section nothing contained in
the Insurance Act shall apply to the Corporation.”
W.P.C. No. 26791/08 -: 5 :-
Section 44 of the Insurance Act reads thus:
"44. Prohibition of cessation of payments of
commission:- (1) Notwithstanding anything to the contrary
contained in any contract between any person and an insurance
agent providing for the forfeiture or stoppage of payment of
renewal commission to such insurance agent, no such person
shall, in respect of life insurance business transacted in India,
refuse payment to an insurance agent of commission due to him
on renewal premium under the agreement by reason only of the
termination of his agreement, except for fraud:
Provided that–
(a) such agent ceases to act for the insurer concerned after the
Central Government has notified in the Official Gazette that it is
satisfied that the circumstances in which the said insurer is
placed are such as to justify the agent’s ceasing to act for him; or
(b) such agent has served the insurer continually and
exclusively in respect of life insurance business for at least five
years and policies assuring a total sum of not less than fifty
thousand rupees effected through him for the insurer were in force
on a date one year before his ceasing to act as such agent for the
insurer, and that the commission on renewal premiums due to him
does not exceed four per cent in any case; or
(c) such agent has served the insurer continually and
exclusively for at least ten years and after his ceasing to act as
such agent he does not directly or indirectly solicit or procure
insurance business for any other person.
Explanation:- For the purposes of this sub-section, service
of an insurance agent under a chief agent of the insurer, whether
before or after the commencement of the Insurance (Amendment)
Act, 1950, shall be deemed to be service under the insurer.
(2) Any commission payable to an insurance agent under
the provisions of clauses (b) and (c) of the proviso to sub section
(1) shall, notwithstanding the death of the agent, continue to be
payable to his heirs for so long as such commission would have
been payable had such insurance agent been alive.”
(underlining supplied)
That Section as such was originally applicable to the LIC of India by
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G.S.R. 734 dated 23-8-1958. By G.S.R.262(E) dated 27-4-1972, the
following modifications were made to the said Section as applicable to
the LIC:
“2. In section 44–
(a) for clause (b) of the proviso to sub section (1), the
following clauses a shall be substituted, namely:
(b) “such agent being an agent appointed before the 1st
May, 1972 has served the insurer continuously in respect of life
insurance business for at least five years and policies assuring a
total sum of not less than fifty thousand rupees effected through
him were in force on a date one year before his ceasing to act as
such agent for the insurer: or(bb) such agent being an agent appointed on or after the 1st
May, 1972, has served the insurer continually in respect of life
insurance business for at least five years and policies assuring a
total sum of not less than two lakhs rupees effected through him
for the insurer were in force on a date one year before his ceasing
to act as such agent for the insurer: or(bbb) such agent, having worked as an insurance agent for
the insurer continually for at least two years from the date of his
appointment, ceases to act for the insurer by reason of the
termination of his appointment by the insurer solely on the ground
of his having been physically or mentally incapacitated and policies
assuring a total sum of of less than one lakh of rupees effected
through him were in force on the date immediately prior to such
termination: or”
xx xx xx”
But, clause (c) of the proviso to Section 44(1) was left untouched.
Therefore, going by the same, the petitioner would not be eligible for
payment of renewal commission on cessation of agency. The
petitioner himself admits that he had resigned as an agent from the
LIC by Ext. P10 dated 24-6-2008. His contention is that in view of
Section 48(2C), the provisions of the Insurance Act is not applicable
to the petitioner. The said clause 2(cc) and sub-clause (2C) of Section
48 of the LIC Act read thus:
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“48. Power to make rules:-
(1) xx xx xx
(2) xx xx xx
(cc) the terms and conditions of service of the employees
and agents of the Corporation, including those who became
employees and agents of the Corporation on the appointed day
under this Act;
xx xx xx
(2C) The provisions of clause (cc) of sub section (2) and sub
section (2B) and any rules made under the said clause (cc) shall
have effect, and any such rule made with retrospective effect from
any date shall also be deemed to have had effect from that date,
notwithstanding any judgment, decree or order of any court,
tribunal or other authority and notwithstanding anything
contained in the Industrial Disputes Act, 1947 (14 of 1947), or any
other law or any agreement, settlement, award or other
instrument for the time being in force.”
The contention of the petitioner is that in view of sub section (2C) and
since the Rules made under Section 48(2)(cc) would prevail over any
other law including Section 44 of the Insurance Act, the petitioner is
entitled to agency commission even after cessation of agency. I am
unable to agree. Sub section (2C) would only mean that the Rules
would have effect notwithstanding any other law for the time being in
force. Once a notification under Section 43 of the LIC Act is issued
making Section 44 with modifications applicable to LIC, the same
forms part of the Life Insurance Corporation Act, 1956 itself and
therefore Section 44 as applicable to LIC ceases to be any other law.
7. The petitioner’s contention that in view of the modified
Section 44, the petitioner is eligible for the modified Section (b) of
Section 44, does not appeal to me. If I hold that the provisions would
be applicable to the petitioner, then sub-clause (c) of the proviso to
Section 44 would become meaningless and would not be applicable to
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anybody. In the above circumstances, I am satisfied that in view of
sub-clause (c) of the proviso to Section 44 of the Insurance Act made
applicable to the LIC by notification under Section 43 of the Life
Insurance Corporation Act, the petitioner has ceased to become
eligible for payment of renewal commission on cessation of agency
since as proved by the respondents he has been soliciting or
procuring insurance business for another person. Therefore, the
petitioner is not entitled to the reliefs prayed for.
Accordingly, the writ petition is dismissed.
Sd/- S. Siri Jagan, Judge.
Tds/