KPP -1- WP No. 2468 of 2010
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO. 2468 OF 2010
1. Wills India Insurance Brokers Pvt. Ltd. )
a Company incorporated and registered under the )
Companies Act, 1956, which has its registered office at )
111, Free Press House, Free Press Journal Marg, )
Nariman Point, Mumbai-400 021 )
2. Bhaichand Amoluk Consultancy Pvt. Ltd. )
a Company incorporated and registered under the
ig )
Companies Act, 1956, which has its registered office )
at Commercial Union House, 2nd floor, )
9, Wallace Street, Fort, Mumbai-400 001 )
3. Jayant Vora, Mumbai Indian Inhabitant having his )
office at Commercial Union House, 2nd floor, )
9, Wallace Street, Fort, Mumbai-400 001 )
4. Mitul Vora, Mumbai Indian Inhabitant, having his )
office at 111, Free Press House, Free Press Journal Marg, )
Nariman Point, Mumbai-400 0021. )
5. Rushabh Vora, Mumbai Indian Inhabitant having his )
office at Commercial Union House, 2nd floor, )
9 Wallace Street, Fort, Mumbai-400 001 )...Petitioners
versus
1. Insurance Regulatory and Development Authority, )
established under the provisions of the Insurance )
Regulatory and development Act, 1999, having its )
Office at Parisrama Bhavanam, 5-9-68/B, 3rd floor, )
Basheer Bagh, Hyderabad-500 004 )
2. Mr. G. Prabhakara, Member (Life), IRDA, )
having his office at Parisrama Bhavanam, 5-9-68/B, )
3rd floor, Basheer Bagh, Hyderabad-500 004 )
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3. Mr. M. Ramaprasad, Member (Non Life), IRDA, )
having his office at Parisrama Bhavanam, 5-9-68/B, )
3rd floor, Basheer Bagh, Hyderabad-500 004 )
4. Suresh Mathur, Joint Director, IRDA )
having his office at Parisrama Bhavanam, 5-9-68/B, )
3rd floor, Basheer Bagh, Hyderabad-500 004 )
5. Union of India )
6. Willis Europe B.V., a company incorporated under the )
laws of Netherlands, having its registered office at )
51, Lime Street, London EC3M 7 DQ, 1234512 England )
and Wales. ).Respondents
Mr. N.H. Seervai, Senior Advocate, with Mr. Shyam Mehta, Mr. Ranbir Singh
and Mrs. Deepa Mani, instructed by M/s. Bachubhai Munim & Co., for the
petitioners.
Mr. Zal Andhyarujina with Mr. Paritosh Jaiswal, instructed by M/s. Earnest legal
Associates, for respondent Nos. 1 to 4.
Ms. Poornima Awasthi for respondent No.5.
Dr. V.V. Tulzapurkar, Senior Advocate, with Mr. Nikhil Sakhardande, Mr. Tejas
Karia, Mr. Karan Mehra, Mr. Nitesh Jain and Mr. Tapan Deshpande, instructed
by M/s. Amarchand Mangaldas & S.A. Shroff & Co., for respondent No.6.
CORAM: P.B. MAJMUDAR &
A.A. SAYED
, JJ.
DATE: MARCH 07, 2011.
ORAL JUDGMENT: (Per P.B. Majmudar, J.)
Rule. Learned Counsel appearing for the respondents waive service
of rule. With the consent of the learned counsel appearing in the matter, Rule is
made returnable forthwith.
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2. By way of this petition, the petitioners have challenged the order
passed by the Insurance Regulatory and Development Authority (hereinafter
referred to as the “IRDA”) dated 26th November, 2010. By the impugned order,
the Committee constituted by the authority while exercising powers vested upon
them under Section 14 of the Insurance Regulatory and Development Authority
Act, 1999 (hereinafter referred to as “the IRDA Act”), read with Regulation 14
(1) of the Insurance Regulatory and Development Authority (Insurance Brokers)
Regulations, 2002 (hereinafter referred to as “the IRDA Regulations”), refused to
grant renewal of license earlier granted to the first petitioner to act as a
composite broker.
3. The first petitioner is a company registered in India on 21st October,
2000 by respondent No.6, Willis Europe, B.V., which is a Company incorporated
under the laws of Netherlands. The first petitioner for the period from 2003 till
18th August, 2010 was a joint venture amongst the second petitioner (hereinafter
referred to as “the Bhaichand”) which held 74% of the issued capital.
Respondent No.6 held 26 per cent of the issued capital of the company. The
first respondent, IRDA, established under Section 3 (1) of the IRDA Act is the
authority within the meaning of the IRDA Regulations. The IRDA consists of a
Chairman and not more than 5 whole time members and not more than 4 part-
time members. The second and third respondents are permanent members (life
and non-life) of the first respondent. They are also the members of the two
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persons Committee which was appointed/constituted by the authority to hear an
application for renewal of composite broking license, which Committee was
constituted in view of the order passed by a Division Bench of this Court vide
order dated 21st October, 2010 in Writ Petition (Lodging) No. 2197 of 2010.
4. Since the earlier license granted to the first petitioner was to expire
in 2009, the first petitioner applied vide its application dated 16 th February, 2009
for the renewal of their composite broking license. It seems that at the time of
submitting the said renewal application, a show cause notice was issued to the
first petitioner under Regulation 34 of the IRDA Regulations for
cancellation/suspension of the composite broking license of the first petitioner.
The said show cause notice dated 6th January, 2010 as well as the order dated 1st
September, 2010 were challenged by the petitioners by way of Writ Petition
(Lodging) No. 2179 of 2010. The Division Bench of this Court disposed of the
said writ petition on 21st October, 2010 by taking note of the contentions made
by the learned counsel Mr. Andhyarujina for the respondent-IRDA that show
cause notice issued would be withdrawn and the first petitioner will be given a
reasonable opportunity of hearing when the renewal application is being
considered afresh. A statement was also made that the renewal application shall
be decided on its own merits. The Division Bench observed that such renewal
application should be decided by a Committee of two Members of the first
respondent. The Division Bench also rejected the prayer on the part of the first
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petitioner that till such renewal application is decided, the first petitioner should
be allowed to renew the policies of its customers. The list of such
clients/accounts was also submitted before the Division Bench. The Division
Bench, however, did not accept the request on behalf of the Petitioners to
continue the business except to the limited extent of fulfilling statutory
obligations as per Regulation 15 of the IRDA Regulations. Before the Division
Bench, on behalf of respondent No.6, a request was made that respondent No.6
also should be heard at the time of deciding the renewal application of the first
petitioner. The said request was made in view of the cancellation of the joint
venture agreement entered into between the first petitioner and the sixth
respondent. However, the Division Bench observed that as per Regulation 14 (1)
of the IRDA Regulations, a reasonable opportunity of being heard is to be given
to the applicant and the application has been submitted by the first petitioner
way back on 16th February, 2009 and if the parties have fallen apart thereafter,
it would not be permissible for the Court to say that respondent No. 6 must also
be heard. The Division Bench thereafter disposed of the said writ petition by
holding that the show cause notice dated 6th January, 2010 and the impugned
order which was challenged in that writ petition stood withdrawn by the
authority and the renewal application dated 16th February, 2009 stands restored
to the file of the first respondent. The Committee of two members of first
respondent was directed to hear and decide the renewal application dated 16th
February, 2009 on its own merits, without being influenced by any remarks
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mentioned in the impugned order in the writ petition. The Division Bench
directed the Committee to take an appropriate decision within the stipulated
time. As stated earlier, the Division Bench, however, declined the prayer made
by the first petitioner to continue with the business. The Division Bench also
observed that all the issues on merits are left open.
5. After the aforesaid order of the Division Bench, the 2 Members
Committee of the IRDA passed the impugned order dated 26th November, 2010.
The authority ultimately came to the conclusion that since the broker has
violated the rules and regulations and having regard to the gravity of the same
and in view of the facts and circumstances of the case, the broker has failed to
adhere to the applicable and relevant regulations while carrying out the activities
as an insurance broker and has acted in a manner prejudicial to the interest of
the policy holders. The authority was of the opinion that the application of the
broker seeking grant of renewal of license that was earlier granted to them to
carry out the functions as a composite insurance broker be rejected.
Accordingly, by the impugned order, prayer for renewal of the license has been
rejected by the first respondent. The said impugned order is the subject matter of
this petition.
6. Mr. Seervai, learned Senior Counsel appearing for the petitioners,
vehemently submits that the impugned order is absolutely arbitrary, illegal and
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contrary to the principles of natural justice. He submits that the relevant facts
were not even brought to the notice of the petitioners as to on what ground the
authority has decided not to renew the license of the first petitioner and the
grounds mentioned in the impugned order have not been brought to the notice
of the petitioners even at the time of deciding the renewal application. It is
submitted that in a very casual manner, the renewal application was rejected
and the hearing was nothing but a farce and no questions were even put to the
petitioners in any manner. It is submitted by Mr. Seervai that in the impugned
order certain grounds are mentioned which were never put to the notice of the
petitioners when renewal application was under consideration. Mr. Seervai
further submits that even on merits, the grounds mentioned in the impugned
order are not sustainable at all and whatever particulars which the petitioners
were required to give at the time of filling the format were submitted. Whatever
materials required by the authority, the same had been submitted by the
petitioners. Learned counsel further submitted that by deciding the renewal
application in such a casual manner, the fundamental right of the petitioners
under Article 19 (1) (g) of the Constitution has been violated and the impugned
order resulted into an economic death of the petitioners as they would be out of
insurance business in which they actively associated. It is further submitted that
in the past the petitioners license was also renewed in 2006 and the grounds
mentioned in the impugned order were also available at that time, still the same
were not taken into consideration and the license was renewed in 2006. The said
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license is not renewed on mala fide grounds as, according to the learned
Counsel, the Chairman of the first respondent was keeping bias and grudge
against the petitioners in connection with the dispute between Bhaichand and
the Export Credit Guarantee Corporation of India Limited (“ECGC”). It is
submitted that Bhaichand had some transactions with ECGC for which some
dispute was going on which was ultimately settled before this Court. The said
fact weighed with the Chairman of the first respondent and same has resulted
into non renewal of the license of the petitioners. It is submitted that so far as
the petitioner No.1 is concerned, it is an independent body and is a Company
and it has no bearing with any of the transaction which might have been carried
out by Bhaichand. It is submitted by Mr. Seervai that even otherwise it was not
required on the part of the first petitioner to mention anything in connection
with the so-called dispute between Bhaichand and ECGC as it had no connection
in the matter of renewal of the license and ultimately irrelevant facts were taken
into consideration by the first respondent in not renewing the license.
Petitioners have also made certain averments alleging mala fide against the
Chairman as, according to the petitioners, since Bhaichand had some dispute
with ECGC and in which the Chairman was personally interested and was asking
Bhaichand to pay up the dues of ECGC which ultimately the petitioners have
paid. It is further submitted by the learned counsel that in any case, the first
petitioner has nothing to do with Bhaichand and at the time of renewal
application no dispute was pending before any forum. Even otherwise, it was
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not necessary to mention the said aspect of dispute in the renewal application
which prescribe particular formats. It is submitted that the first petitioner has
nothing to do with Bhaichand as first petitioner is an independent Company. It is
also pointed out that though respondent No. 6 has subsequently terminated the
joint venture agreement, the same will have no bearing so far as the question of
renewal is concerned. It is further submitted that non-renewal of license will
have serious consequences as the sixth respondent has taken out winding up
proceedings on the said ground and by not renewing the license, the petitioners
are likely to suffer economic death and the action of the first respondent is
violative of Article 19 (1) (g) of the Constitution of India as the petitioners are
deprived of their right to carry out its business. It is further submitted by Mr.
Seervai that Bhaichand is merely a shareholder with the first petitioner. He has
also submitted that one of the issues raised against the petitioner in the
impugned order was regarding charging of interest which was also rectified in
2006 when the license was renewed. It is submitted that on all irrelevant
grounds, prayer for renewal of license has not been granted. In order to
substantiate his say, Mr. Seervai has also relied upon the Regulations framed by
the first respondent in this behalf. It is pointed out by Mr. Seervai that assuming
that there was some dispute between Bhaichand and ECGC, that ground should
not have weighed with the authority in taking such a view against the petitioners
in the matter of renewal of the license. It is submitted that even otherwise the
grounds which have been taken into consideration for non renewal are the
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grounds which were in existence prior to 2006 and so far as the point regarding
ECGC is concerned, the same was taken for the first time in 2008. It is submitted
that even if there is any complaint against Bhaichand, it is not a ground for not
renewing the license of the first petitioner. It is further submitted that in any
case, the dispute between Bhaichand and ECGC is already settled by filing
consent terms, which are at page 458 of the compilation. It is further submitted
that at the time of so-called hearing, nothing was brought to the notice of the
petitioners in any manner otherwise the petitioners could have given
explanation, if it was brought to the notice of the petitioners that authority may
not renew the license on certain grounds. It is submitted that if Section 9 of the
IRDA Act is interpreted in a wide manner, it may amount to giving unfettered
powers to the first respondent and in that case Section 9 is required to be struck
down on the ground that unfettered and arbitrary powers are given to the first
respondent in this behalf. Mr. Seervai has also relied upon the format prescribed
under the Rules. According to Mr. Seervai, as per the prescribed format, the first
petitioner was required to give particulars and not beyond that. It is further
submitted by Mr. Seervai that in any case when the transaction between
Bhaichand and ECGC took place, Bhaichand was not the shareholder of the first
petitioner as Bhaichand became the shareholder in April, 2003. Mr. Seervai
further submitted that there is no alternate efficacious remedy available
especially when petitioners have made allegations against the Chairman. Mr.
Seervai also tried to justify the stand taken by Bhaichand in connection with the
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dispute with ECGC on the ground that the transaction in question between
Bhaichand and ECGC was of 1996 for which ECGC had filed a complaint in
2008. It is further submitted that ECGC was not supposed to inform the first
Respondent in this behalf but the said aspect was brought to the notice of the
first respondent only with a view to see that the Chairman may intervene in the
matter for settlement and Chairman took personal interest in the said dispute
and ultimately even though Bhaichand had settled the dispute, yet the license
has not been renewed. On the aforesaid grounds the impugned order is attacked
by Mr. Seervai. It is also submitted by Mr. Seervai that since respondent No.1
has acted in an absolutely arbitrary manner in not considering the request of the
petitioners for renewal of the license, this Court may issue mandamus by asking
the first respondent to renew the license of the petitioners. It is lastly submitted
by Mr. Seervai that Bhaichand had settled the dispute with ECGC even though
the claim of ECGC was time barred and considerable amount was paid towards
settlement. Inspite of the same, the impugned order came to be passed.
7. Mr. Seervai further submits that even though allegations have been
made against respondent No.6, he is not pressing any of the allegations against
respondent No.6 in the instant matter and seeks liberty to take out other
appropriate proceedings in this behalf against respondent No.6.
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8. Mr. Andhyarujina, learned counsel appearing for respondent Nos. 1
to 4, in his turn has submitted that since the impugned order is passed at
Hyderabad, this Court is not having territorial jurisdiction as the matter is
required to be filed at Hyderabad. It is further submitted by Mr. Andhyarujina
that no cause of action has arisen within the territorial jurisdiction of this Court
and this petition is not maintainable. It is further submitted that simply because
this Court has entertained the petition when it came at the show cause notice
stage, it cannot be said that the first respondent has waived the point of
jurisdiction. It is further submitted by Mr. Andhyarujina that the petitioners’
have a right to make representation under the IRDA Regulations and in view
thereof, this Court may not entertain the petition. It is further submitted that no
bias is attributed to the members of the Committee who passed the impugned
order. It is submitted that it is not correct to say that the Chairman was biased
or having malice against the petitioners in any manner. It is further submitted
by Mr. Andhyarujina that reasonable opportunity of being heard was given to
the petitioners and in the matter of considering the application for renewing the
license, it is not necessary to give any show cause notice to the petitioners. It is
further submitted that the charges were known to the petitioners which were the
subject matter of earlier show cause notice. The petitioners could have pointed
out the said aspect to the two members Committee by giving appropriate
explanation in this behalf but nothing was brought to the notice of the
Committee. It is submitted that since no legal practitioner is allowed at the
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hearing, the grievance of the petitioners that they were not permitted to engage
Advocate is not justified. Mr. Andhyarujina further pointed out that the affairs
of the second petitioner and its conduct are relevant for deciding the application
for renewal as they are having 74 per cent shareholding in the Company and as a
regulatory body, first respondent is supposed to know the consequences of
renewal of license in case ultimately it is found that the affairs of first petitioner
are not properly conducted. It is submitted that over and above the aforesaid
aspects, other factors were are also taken into consideration such as charging
interest which is not permissible by the broker and in that view of the matter, the
decision taken by the Regulatory Authority is not required to be interfered with
by this Court in its extraordinary jurisdiction under Article 226 of the
Constitution of India. It is further submitted by Mr. Andhyarujina that though
the first petitioner is a company registered under the Companies Act it is a sort of
glorified partnership and, therefore, the relationship of partners as well as the
conduct of one of the partners i.e. second petitioner who is having majority
shareholding is also required to be taken into consideration before granting the
renewal. It is further submitted that even a subsequent development viz.
Respondent No.6 having terminated the joint venture agreement is also required
to be taken into consideration. The licensing authority is not required to decide
the matter in a mechanical manner. It is submitted that in the past simply
because license was renewed from time to time itself is not a ground for
renewing the license. If some additional material is brought on the record, it may
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justify the action of first respondent in not renewing the license. Mr.
Andhyarujina has further submitted that in any case if this Court is of the
opinion that the first petitioner is required to be given further opportunity of
being heard in the matter of renewal application, first respondent is willing to
give such hearing and is also willing to take decision with open mind and if
appropriate things are brought to the notice of the first respondent while
deciding such renewal application, first respondent may consider the said aspect
objectively as there is no question of any bias on the part of the first respondent.
Mr. Andhyarujina, however, submitted that if the matter is remitted back, the
authority shall reconsider the same and pass an appropriate order after giving an
opportunity of hearing to the petitioners and whatever material is placed, the
same shall also be considered again. Mr. Andhyarujina further submitted that
this Court cannot straightway issue mandamus directing the authority to renew
the license and in a given case even if such directions can be given, this is not a
fit case which justifies giving such mandatory direction directing the first
respondent to renew the license as at the most this Court may ask the first
respondent to reconsider the matter afresh. On the said aspect, both the sides
have also relied upon certain decisions regarding the powers of the Court to
issue such writ and/or directions.
9. Dr. Tulzapurkar, learned senior Counsel appearing for respondent
No. 6, states that since Mr. Seervai has given up the allegation of mala fides
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against respondent No.6, he is not required to say anything more in the matter
except that respondent No.6 has already filed winding up petition of first
petitioner Company and that joint venture agreement has already been
terminated by the respondent No. 6 company. It is also submitted that suit is
also filed by respondent No.6 in connection with breach of trade mark and trade
name which is pending.
10. We have heard the learned counsel appearing in the matter at great
length. We have considered voluminous documents forming part of the
petition. We have also gone through the reply and rejoinder.
11. So far as the preliminary objection taken up by Mr. Andhyarujina
regarding territorial jurisdiction of this Court is concerned, it is required to be
noted that the registered office of the Company is located at Mumbai, the
application for renewal is made at Mumbai, the decision was taken by the first
respondent at Hyderabad as the office of first respondent is located at
Hyderabad. At this stage, reference is required to be made to Article 226 (2) of
the Constitution of India which reads thus:
“(2) The power conferred by clause (q) to issue directions,
orders or writs to any Government, authority or person may
also be exercised by any High Court exercising jurisdiction in
relation to the territories within which the cause of action,
wholly or in part, arises for the exercise of such power,
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KPP -16- WP No. 2468 of 2010or the residence of such person is not within those territories.”
12. In view of the above, it cannot be said that the first petitioner
company is not affected by the impugned decision within the territorial
jurisdiction of this Court. Simply because the head office of respondent No.1 is
located at Hyderabad and since the decision was taken at Hyderabad which is
communicated to the first petitioner at Mumbai, it cannot be said that only
Hyderabad High Court will have jurisdiction to decide the dispute. It can safely
be said that part of the cause of action has arisen within the territorial
jurisdiction of this Court. We are, therefore, of the opinion that substantial part
of the cause of action can be said to have arisen within the jurisdiction of this
Court and the petition before this Court is maintainable. At this stage Mr.
Andhyarujina has relied upon the decision of the Supreme court in the case of
State of Rajasthan and others vs. M/s. Swaika Properties and another1 . In the
aforesaid case, the proceedings regarding acquisition of the land were initiated
by Rajasthan State Government. The land was located at Jaipur. The Company
was located at Calcutta. The Company representative appeared before the
authority at Jaipur. The acquisition of the land was recommended by the
authority to the State Government. The notification acquiring the land was
issued by the Rajasthan State Government. The petition challenging the
acquisition proceedings and notification was filed in the Calcutta High Court
and considering the facts of the case it was held that the petition before the
1 (1985) 3 SCC 217
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Calcutta High Court was not maintainable. In the aforesaid case it was noted
that the cause of action arose in Jaipur. As pointed out earlier, the land was
situated at Jaipur. The notification was issued at Jaipur. Considering the
aforesaid factual background, it was held that the Calcutta High Court had no
jurisdiction to enter into the matter. In the instant case, as pointed out earlier,
the first petitioner’s registered office is located at Mumbai, it operates its
business from Mumbai but since the office of first respondent is at Hyderabad
that the renewal application was required to be preferred at Hyderabad. In our
view, part of the cause of action can be said to have arisen within the territorial
jurisdiction of this Court.
13. Mr. Andhyarujina next relied upon the decision of the Supreme
Court in the case of Union of India and others vs. Adani Exports Ltd. and another 1.
In the aforesaid case the Company filed Special Civil Application before the
Gujarat High Court claiming the benefit of passbook scheme established under
the import export policy in relation to certain credits to be given on export of
shrimps. It was found that none of the respondents in the Civil Application
(Union of India) was stationed at Ahmedabad. The passbook in question, benefit
of which the respondents sought in the civil applications was issued by an
authority stationed at Chennai. The entries in the passbook under the scheme
concerned were to be made by the authorities at Chennai. The export of the
prawns made by the respondents and the import of the inputs, benefit of which
1 (2002) 1 SCC 567
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the respondents had sought in the applications also were to be made through
Chennai. Considering the said factual aspect of the matter, the Supreme Court
found that no part of the cause of action had arisen within the territorial
jurisdiction of Gujarat High Court and under the circumstances, the decision
taken by the High Court entertaining the petition was set aside by the High
Court.
14. Mr. Andhyarujina has also relied upon the decision of the Supreme
Court in the case of Alchemist Ltd. and another vs. State Bank of Sikkim and
others1. In the said judgment, it is held that the writ petition can now be
instituted in the High Court within the territorial jurisdiction of which the cause
of action in whole or in part arises. In the aforesaid case, the State of Sikkim
invited offers for strategic partnership with the respondent Bank functioning in
the said State. The appellant Company in the said case was having its registered
office at Chandigarh. Respondent bank accepted the offer of the appellant Bank.
Subsequently the Government of the State of Sikkim rejected the said
acceptance. Writ Petition was filed by the appellant at Punjab and Haryana
High Court. The said petition was dismissed by the High Court for want of
territorial jurisdiction. The Supreme Court found that no part of the cause of
action arose within the territorial jurisdiction of the High Court at Chandigarh.
It was found that the facts pleaded by the appellant were not essential, integral
or material facts so as to constitute a part of the cause of action within the
1 (2007) 11 SCC 335
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meaning of Article 226 (2) of the Constitution.
15. On behalf of the petitioners, Mr. Seervai on the point of jurisdiction
has relied upon the decision of the Supreme Court in the case of Navinchandra
N. Majithia vs. State of Maharashtra and others1. It has been held that the High
Court will have jurisdiction, if any part of the cause of action arises within the
territorial limits of its jurisdiction, even though the seat of Government or
authority or residence of person against whom direction, order or writ is sought
to be issued is not within the said territory. It was held that writ petition filed
before the Bombay High Court for quashing of criminal complaint filed at
Shillong on the ground that it was false and had been filed with a mala fide
intention of causing harassment and putting pressure on the petitioner to
reverse the transaction relating to transfer of company shares, which had
entirely taken place at Mumbai, was found to be maintainable and it was held
that the Bombay High Court had erred in dismissing the writ petition on the
ground that it had no jurisdiction to quash the complaint filed at Shillong as
prayed for.
16. Mr. Seervai thereafter referred to the decision of the Supreme Court
in the case of Dinesh Chandra Gahtori vs. Chief of Army Staff and another 2
wherein the Supreme Court has observed in para as follows:
1 (2000) 7 SCC 640
2 (2001) 9 SCC 525
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“4. The writ petition was filed in 1992. The impugned order
was passed in 1999. This is a fact that the High Court should
have taken into consideration. More importantly, it should have
taken into consideration the fact that the Chief of Army Staff
may be sued anywhere in the country. Placing reliance only on
the cause of action, as the High Court did, was not justified.”
17. Mr. Seervai has also relied upon the decision of the Supreme Court
in the case of Dinesh Chandra Gahtori vs. Chief of Army Staff and another1. In
paragraph 4 it has been held as under:
“4. The writ petition was filed in 1992. The impugned order was
passed in 1999. This is a fact that the High Court should have
taken into consideration. More importantly, it should have takeninto consideration the fact that the Chief of Army Staff may be
sued anywhere in the country. Placing reliance only on the cause
of action, as the High Court did, was not justified.”
18. Mr. Seervai has cited another judgment of the Supreme Court int he
case of Om Prakash Srivastava vs. Union of India and another2 wherein the
Supreme Court has observed in para 7 as under:
“7. The question whether or not cause of action wholly or in
part for filing a writ petition has arisen within the territorial
limits of any High Court has to be decided in the light of thenature and character of the proceedings under Article 226 of
the Constitution. In order to maintain a writ petition, a writ
petitioner has to establish that a legal right claimed by him has
prima facie either been infringed or is threatened to be infringed
by the respondent within the territorial limits of the Court’s
jurisdiction and such infringement may take place by causing
him actual injury or threat thereof.”
1 (2001) 0 SCC 525
2 (2006) 6 SCC 207
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KPP -21- WP No. 2468 of 2010
19. Considering the issue involved in the matter and considering the fact
that the office of respondent No.1 is located at Hyderabad from where the
decision is required to be taken in connection with the renewal application, the
person who is likely to be affected in connection with his business on the basis of
such decision taken by the head office can approach the Court where he is
affected by such decision. By no stretch of imagination it can never be said that
no part of the cause of action arose within the territorial jurisdiction of this
Court. We accordingly negative the preliminary contention raised by Mr.
Andhyarujina and, in our view, the petition filed before this Court is
maintainable.
20. The next submission is regarding alternate remedy. It is required
to be noted that in view of the fact that the Court has already decided to dispose
of the matter finally, this Court has heard the matter on merits at length and
considering the fact that there are serious allegations even against the Chairman
of the first respondent, of which there may or may not be any foundation, we
would not like to relegate the petitioner to alternate remedy. Accordingly both
the sides have advanced lengthy arguments on merits of the issue. Even
otherwise, since the matter is heard at great length, it would not be proper to
dispose of the matter only on the ground that the petitioners have to approach
the authority by way of an alternate remedy. In view of the various averments
made against the Chairman, it would not be just and proper to relegate the
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KPP -22- WP No. 2468 of 2010
petitioner to approach the authority by way of revision. Apart from the above,
earlier also the Division Bench had not relegated the matter to the Chairman in
view of the controversy involved and had directed the first respondent to
constitute a Committee consisting of two members which decided the renewal
application of the petitioners in which the impugned order is passed. This Court,
therefore, would not like to relegate the petitioners to the alternate forum by
way of making representation to the Chairman.
21. So far as the main issue involved in the petition is concerned, we have
heard the counsel at great length. So far as the impugned order is concerned,
para 3 of the impugned order refers to certain instances while considering the
application for renewal. Point one is regarding settlement of dispute with ECGC.
It pertains to the role played by Bhaichand who owed considerable amount of
Rs. 5.08 crores as due to ECGC as recovery from reinsurers on claims lodged by
them and also that Bhaichand had received substantial amount of dues from the
foreign brokers which they had failed to remit to ECGC. ECGC had also filed a
suit against petitioner No.2 for recovery of the dues. There is a reference about
the said transaction in clauses (b), (c), (d) and (e) of the said impugned order. It
has been observed that Bhaichand being a dominant partner of the first
petitioner has failed to discharge the responsibilities of a broker as specified in
the IRDA Regulations and they have failed to disclose the disputes with ECGC
at the time of submitting the requirements during the renewal of the license in
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KPP -23- WP No. 2468 of 2010
the years 2006 as well as 2009. It is further observed that the petitioners by not
furnishing the required information in item 5.1 of Form-A under Regulation 13
of the Regulations, have violated the said provisions. Another ground mentioned
in the said order is that the first petitioner invested the money belonging to
Insurance Bank Account in fixed deposits during the financial years 2003-2004,
2004-2005, 2005-2006 and 2006-2007 and thereby earned interest. Thus the
broker violated the provisions of Regulation 23 of the Regulations and the said
fact has been admitted by the petitioners in their letter dated 23rd July, 2010 to
the authority. Accordingly, on the aforesaid grounds, the respondent No.1
refused to grant renewal license.
22. Mr. Seervai vehemently argued that the factum regarding dispute
between Bhaichand and ECGC is absolutely irrelevant in the matter of renewal of
license. It is submitted that since irrelevant point has been considered, the
order deserves to be set aside. It is further submitted that this fact was not
brought to the notice of the petitioners when renewal application was heard by
the Committee of the first Respondent. Form-A of Schedule-1 of IRDA
Regulations prescribes the format in connection with the grant of license as an
insurance broker and/or for renewal of license. It is not in dispute that the
dispute between Bhaichand and ECGC was settled by a consent decree in Suit
No. 1268 of 2009 and even the criminal complaint which was filed against
Bhaichand was also quashed by the High Court. Both the aforesaid aspects had
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KPP -24- WP No. 2468 of 2010
taken place before the impugned order was passed by the authority. It is
required to be noted that as per the format prescribed, whatever information
was required to be disclosed was disclosed by the petitioners. In our view, it
cannot be said that at the relevant time when the petitioners had applied for
renewal in 2009, any dispute was pending before any authority or before any
court of law in any manner. It is true that Bhaichand is having major
shareholding in the first petitioner Company but while considering the renewal
application of the first petitioner, disputes between Bhaichand and ECGC which
was not pending even before any Court at the relevant time had no bearing.
Simply because the first petitioner failed to mention about the so-called dispute
between Bhaichand and ECGC, the said ground, in our view was not relevant in
rejecting the renewal application of first petitioner on the ground of suppression
of material facts. Section 9 of the IRDA Act though gives wide powers to the
regulatory authority but such power has to be exercised in a reasonable manner
and only relevant aspects are required to be considered while taking decision. It
is required to be noted that the petitioner No.1 is a legal entity and as per the
format prescribed, what is required to be given is details of all settled and
pending disputes by the applicant /proprietor or any of the partners, directors or
key managerial personnel in the last three years. At the time when the
petitioners applied for renewal, no dispute was pending before any authority or
any Court between Bhaichand and ECGC.
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KPP -25- WP No. 2468 of 2010
23. Considering the aforesaid aspect, we are of the opinion that the
Committee of the first Respondent has not properly applied its mind while
rejecting the renewal application. It is also required to be noted that in fact
dispute between Bhaichand and ECGC was pending since long even before 2006.
When the renewal was granted in 2006, simply because ECGC might have
complained to the first respondent and it is pointed out that the Chairman of the
first respondent tried to see that the dispute is settled and assuming that
because of his intervention that Bhaichand has ultimately settled with ECGC,
that fact should not have been weighed in the mind of the first respondent in not
renewing the license on the said ground. The rejection of the renewal application
on the aforesaid ground about non-disclosure of the dispute between Bhaichand
and ECGC, therefore, was not a relevant aspect which was required to be
considered at the time of considering the renewal application. In any case, it is
not in dispute that the said fact was not brought to the notice of the first
petitioner when renewal application was under consideration and when
petitioner No.1 was given hearing in this behalf. Considering the material on
record and other relevant documents, we are of the opinion that rejection of the
renewal application on the aforesaid ground is not justified.
24. However, there is an additional ground for rejecting the renewal
application and that is in connection with the petitioners having invested the
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KPP -26- WP No. 2468 of 2010
money belonging to the Insurance Bank Account in FD during the financial years
2003-2004, 2004-2005, 2005-2006 and 2006-2007 and thereby earned interest.
In this connection, it is alleged that the petitioner No.1 has violated Regulation
23 of IRDA Regulations. The said Regulation reads as under.
” 23. Segregation of insurance money:- (1) The provisions of
Section 64VB of the Act shall continue to determine the
question of assumption of risk by an insurer.
(2) In the case of reinsurance contracts, it may be agreed
between the parties specifically or as part of international
market practices that the licensed reinsurance broker orcomposite broker can collect the premium and remit to the
reinsurer and/or collect the claims due from the reinsurer to
be passed on to the insured. In these circumstances the money
collected by the licensed insurance broker shall be dealt with inthe following manner:-
(a) he shall act as the trustee of the insurance money that he
is required to handle in order to discharge his function asa reinsurance broker and for the purposes of this
regulation it shall be deemed that a payment made to the
reinsurance broker shall be considered as payment madeto the reinsurer;
(b) ensure that ‘insurance money’ is held in an “Insurance
Bank Account’ with one or more of the Scheduled Banks orwith such other institutions as may be approved by the
Authority;
(c) give written notice to, and receive written confirmation
from, a bank, or other institution that he is not entitled tocombine the account with any other account, or to
exercise any right of set off, charge or lien against money
in that account;
(d) ensure that all monies received from or on behalf of an
insured is paid into the ‘Insurance Bank Account’ which
remains in the ‘Insurance Bank Account’ to remain in
deposit until it is transferred on to the reinsurer or to the
direct insurer;
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KPP -27- WP No. 2468 of 2010
(e) ensure that any refund of premium which may become
due to a direct insurer on account of the cancellation of a
policy or alteration in its terms and conditions orotherwise shall be paid by the reinsurer directly to the
direct insurer;
(f) interest on recovery/payment received shall be for the
benefit of the direct insurer or reinsurer;
(g) only remove from the ‘Insurance Bank Account’ charges,
fees or commission earned and interest received from any
funds comprising the account;
(h) take immediate steps to restore the required position if at
any time he becomes aware of any deficiency in the
required ‘segregated amount’.”
25. It is argued by Mr. Andhyarujina that the petitioners cannot
appropriate the interest amount for its own purpose and it was required to be
deposited in a separate account. He submits that the petitioners also admit the
said fact. Mr. Seervai however submitted that the said fact was also there even
earlier in 2006, yet the license was renewed. He states that other brokers are
also doing similar thing by putting the interest in their own FD account. So far as
this aspect is concerned, at the time of hearing of the renewal application, it
should have been brought to the notice of the first petitioner so that the first
petitioner could have pointed out the same to the respondents. Hearing of
renewal application is not a formality but is a matter of substance as it affects
the rights of the petitioners to carry on its business. It is required to be noted
that there is reference to certain documents in para 3 (d) of the impugned
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KPP -28- WP No. 2468 of 2010
order. The first respondent should have brought to the notice of the petitioners
by informing the first petitioner to give its explanation in connection with the
aforesaid aspect so that the petitioners, if they had any reasonable or plausible
explanation, could have furnished the same. Reference of some correspondence
is made without bringing the same to the notice of the petitioners and without
placing the same before the first respondent. Mr. Seervai points out that if the
attention of the petitioner was focussed, the petitioners could have explained the
aforesaid aspects so that the authority might have been convinced about the
explanation of the petitioners. It is required to be noted that once the license is
not renewed on any particular ground, at least the material on which reference
is made is required to be pointed out to the person so affected. It is not in
dispute that from the earlier order of the Division Bench, decision was required
to be taken in consonance with the principles of natural justice and after
hearing the petitioners. Since that has not been done, in our view, in connection
with the aforesaid alleged violation of Rule 23, the matter is required to be sent
back to the authority for re-consideration and to pass appropriate order after
affording an opportunity of hearing to the petitioner in this behalf. Mr.
Seervai tried to justify his argument that there is no violation of Rule 23.
However, we would not like to go in detail about this aspect as it is for the
authority to apply its mind and take an appropriate decision after hearing the
petitioners in this behalf.
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KPP -29- WP No. 2468 of 2010
26. On the point of principles of natural justice, Mr. Seervai has relied
upon the decision of the House of Lords in the case of B. Surinder Singh Kanda
vs. Government of the Federation of Malaya1 wherein it is observed as under:
“In the opinion of Their Lordships, however, the proper
approach is somewhat different. The rule against bias is one
thing. The right to be heard is another. These two rules are theessential characteristics of what is often called natural justice.
They are the twin pillar supporting it. The Romans put them inthe two maxims: nemo judex in causa sua : and audi alteram
partem. They have recently been put in the two words,
impartiality and fairness. But they are separate concepts and
are governed by separate considerations. In the present caseInspector Kanda complained of a breach of the second. He said
that his constitutional right had been infringed. He had been
dismissed without being given a reasonable opportunity of
being heard.
If the right to be heard is to be a real right which is worth
anything, it must carry with it a right in the accused man to
know the case which is made against him. He must know that
evidence has been given and what statements have been made
affecting him: and then he must be given a fair opportunity to
correct or contradict them. This appears in all the cases fromthe celebrated judgment of Lord Loreburn L.C. in Board of
Education v. Rice2 down to the decision of Their Lordship’s
Board in Ceylon University vs. Fernando3 It follows, of course,
that the judge or whoever has to adjudicate must not hear
evidence or receive representations from one side behind theback of the other. The court will not inquire whether the
evidence or representations did work to his prejudice.
Sufficient that they might do so. The Court will not go into the
likelihood of prejudice. The risk of it is enough. No one who
has lost a case will believe he has been fairly treated if the
other side has had access to the judge without his knowing.”
1 1962 PC 322
2 (1911) AC 179, 182 : 27 T.L.R. 378 J.L.
3 (1960) 1 W.L.R. 223 : (1960) 1 All E.R. 631 P.C.
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KPP -30- WP No. 2468 of 2010
“… Applying these principles, their Lordships are of opinion
that Inspector Kanda was not in this case given a reasonable
opportunity of being heard. They find themselves in agreement
with the view expressed by Righby J. in these words “In my
view, the furnishing of a copy of the findings of the Board of
inquiry to the adjudicating officer appointed to hear the
disciplinary charges, coupled with the fact that no such copy
was furnished to the plaintiff, amounted to such a denial of
natural justice as to entitle this court to set aside those
proceedings on this ground. It amounted, in my view, to a
failure to afford the plaintiff a reasonable opportunity of being
heard in answer to the charge preferred against him which
resulted in his dismissal.” The mistake of the police authorities
was no doubt made entirely in good faith. It was quite proper
to let the adjudicating officer have the statements of the
witnesses. The Regulations show that it is necessary for him to
have them. He will then read those out in the presence of the
accused. But Their Lordships do not think it was correct to let
him have the report of the Board of Inquiry unless the accused
also had it so as to be able to correct or contradict the
statements in it to his prejudice.”
27. Mr. Seervai has vehemently submitted that since the authority has
acted in an absolutely arbitrary manner, this Court, instead of sending the matter
back, issue mandamus for which he has relied upon the decision of the Madras
High Court in the case of Government of Tamil Nadu represented by its Secretary,
Health and Family Welfare Department and the Director of Medical Education vs.
Sri Nandha Educational Trust rep. by its Chairman and Managing Trustee, Mr. V.
Shanmugham1. In the aforesaid case, there was delay in granting no objection
certificate for seven years despite the compliance by the writ petitioner therein
with the directives of the respondents. Considering the facts of the case, the
Court directed the appellants therein to grant no objection certificate. In
1 MANU/TN/1117/2005
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KPP -31- WP No. 2468 of 2010
paragraph 33 it was observed as follows:-
“33. In the present case, the grant of “No Objection Certificate
has been delayed or rejected for the past seven years despite
compliance by the writ petitioner on ten occasions of directives
of the respondents to remove the alleged deficiencies, and
inspection by the inspection teams on three occasions, andfiling of three writ petitions on three occasions. We are satisfied
that all the requirements of the State Government for
establishing the Nursing College and grant of No Objection
Certificate have been complied with. Hence we agree with thelearned single Judge that it is not necessary for us to again
remand the matter to the appellants to consider the grant of“No Objection Certificate” to the respondent/trust as that will
only lead to further delay, and further arbitrariness.”
28. Reference is required to be made to the decision of the Supreme
Court in the case of Al-Karim Educational Trust and another vs. State of Bihar
and others1 wherein it has been held as under.
” 11. In the matter of grant of affiliation, it is ordinarily for
the State Government after consulting the Medical Council of
India to arrive at a decision. However, if it is found that the
affiliation is being withheld unreasonably or the decision is
being prolonged for one reason or the other, this court would,
though reluctantly, be constrained to exercise jurisdiction. Wemust make it clear that we are not diluting the importance of
fulfilling the essential prerequisite set by the Medical Council
before granting recognition. The facts of this case are very
special and exceptional”.
12. In the totality of the circumstances disclosed in the case
and having regard to the fact that at each stage new
deficiencies are being pointed out, the latest being the report
dated 28-6-1995 (explained by the subsequent affidavit of the
appellants dated 4-9-1995), we are satisfied beyond any
manner of doubt that the deficiencies have been substantially
complied with and minor deficiencies pointed out in the last
mentioned report of 28-6-1995 are not such as to permit
1 (1996) 8 SCC 330
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KPP -32- WP No. 2468 of 2010
withholding of the affiliation to which the appellants’
institution is entitled. From the manner in which the
deficiencies have been pointed out from time to time, each
time the old deficiencies are shown to have been removed,
new deficiencies are shown, gives the impression that the
affiliation is unnecessarily delayed. For the removal of minor
deficiencies pointed out in the report of 28-6-1995, a
compliance affidavit dated 4-9-1995 is filed. Once the
institution feels secure on the question of affiliation, we have
no doubt that these minor deficiencies, if they exist, shall be
taken care of by those in charge of the Institution. For taking
such further steps, the grant of affiliation need not wait. We
make this position clear. The steps for the grant of affiliation
to the appellants’ institution may now be expedited and we
direct the respondents to issue the necessary orders without
loss of time. The appeal is disposed of accordingly. In the facts
and circumstances of the case, we make no order as to costs.”
29. Mr. Andhyarujina has relied upon the decision of the Supreme Court in
the case of Union of India and another vs. Bilash Chand Jain and another1
wherein the Supreme Court has held that even if High Court in writ petition
against the Central Government’s order refusing to grant consent to execute
decree under Section 86 (3) of the CPC, considers the order to be arbitrary, it
can remand the matter to the Government for reconsideration in accordance
with law instead of itself directing the Government to give consent under Section
86 (3). In paras 5 and 6, the Supreme Court has observed as under:
“5. It may be mentioned that there is a distinction between
“judicial review” and “appellate jurisdiction”. The High Court
in a writ petition when examining an administrative order is
not exercising the appellate power but exercising the power of
judicial review which is much narrower than the appellate1 (2009) 16 SCC 601
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KPP -33- WP No. 2468 of 2010power. Such judicial review can only be exercised on
Wednesbury principles.
6. It is well settled by a series of decisions of this Court that
the High Court cannot itself perform the functions of a
statutory authority. Thus in G. Veerappa Pillai v. Raman and
Raman Ltd.1 it was held that the High Court under Article 226
of the Constitution of India cannot direct the RegionalTransport Authority to grant bus permits as the grant of the
permit is entirely within the discretion of the Regional
Transport Authority. Of course, if the Regional Transport
Authority rejects the application for grant of permits arbitrarily
or illegally, the High Court can s et aside the order of theRegional Transport Authority and direct the Regional
Transport Authority to pass a fresh order in accordance withlaw, but the High Court cannot itself order grant of permits, in
that case it will be taking over the function of the Regional
Transport Authority.”
30. Considering the case law on the subject, we are of the opinion that
the court can, in an appropriate case, issue mandamus directing the authority to
take a particular decision such as directing them to renew license or in a service
matter to pass a particular order regarding punishment. However, this is not one
of such an exceptional case that this Court would like to issue mandamus
directing the first Respondent to renew the license of the first petitioner. Instead
this Court is of the opinion that considering the facts and circumstances of the
case, the first respondent should take a fresh decision on the renewal application
of the first petitioner. While taking fresh decision, the first ground mentioned
which is in our view is not relevant i.e. non-disclosure of dispute between
Bhaichand and ECGC, the same shall not be taken into consideration but the
1 AIR 1952 SC 192
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KPP -34- WP No. 2468 of 2010
petitioners may be given hearing on the question about the alleged violation of
Regulation 23 which is in connection with charging of interest. After giving
appropriate opportunity to the petitioners, an appropriate decision may be taken
within a period of four weeks from today and that too after hearing the
petitioners.
31. During the course of hearing, Mr. Seervai has frankly pointed out
that in a given case if the authority has got any other material, the same can be
considered while considering the case for renewal of license but such material
should be brought to the notice of the petitioners asking the petitioners to
submit its say in connection with any queries which are in the mind of the
authority concerned. In view of the same, while deciding the renewal
application afresh, it will be open to the authority to consider any other relevant
material by which it may not be possible to renew the license such as any legal
impediments in this behalf. The authority to take a fresh decision in accordance
with law. In the meanwhile, it would not be proper to allow the first petitioner
to continue with its business especially in view of the earlier order passed by the
Division Bench of this Court wherein the Division Bench declined to grant such
relief. The earlier Committee which took the decision now may take a fresh
decision on the renewal application in accordance with law. It is clarified that if
there is any other ground available with the authority, the same may also be
considered provided the same should be brought to the notice of the petitioners.
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KPP -35- WP No. 2468 of 2010
It is, however, clarified that since we have found that non-disclosure of the
dispute between Bhaichand and ECGC was not a relevant aspect, the same may
not be taken into consideration while deciding the renewal application afresh.
It is needless to state that the decision may be taken objectively and after giving
opportunity of hearing to the petitioner and such decision may be
communicated to the petitioners forthwith.
32. Mr. Seervai has frankly submitted that since the petitioners are
aware about the ground on which renewal application is not granted, it would
not be necessary to give any show cause notice to the petitioners and asking
explanation regarding Regulation 23 of the IRDA Regulations. The petitioners
may submit its appropriate explanation regarding Regulation 23 by giving
written submission in writing. As pointed out earlier, if any additional ground on
which the authority wants to rely and if there is any legal impediment in passing
the order of renewal, the same may be brought to the notice of the petitioners.
Mr. Seervai submits that while taking such a decision, Advocates may be heard.
We are not in a position to accede to the said request. However, if written
submissions are given, the authority shall consider the same and appropriate
decision may be taken within four weeks from today in accordance with law. We
are sure the authority will not ask for further extension in this behalf.
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KPP -36- WP No. 2468 of 2010
33. Rule is made absolute to the aforesaid extent with no order as to
costs.
P. B. MAJMUDAR, J.
A.A. SAYED, J.
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