{"id":207142,"date":"2011-03-18T00:00:00","date_gmt":"2011-03-17T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/appearance-vs-mr-pinakin-n-patel-for-the-on-18-march-2011"},"modified":"2016-10-17T20:04:42","modified_gmt":"2016-10-17T14:34:42","slug":"appearance-vs-mr-pinakin-n-patel-for-the-on-18-march-2011","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/appearance-vs-mr-pinakin-n-patel-for-the-on-18-march-2011","title":{"rendered":"Appearance : vs Mr Pinakin N Patel For The on 18 March, 2011"},"content":{"rendered":"<div class=\"docsource_main\">Gujarat High Court<\/div>\n<div class=\"doc_title\">Appearance : vs Mr Pinakin N Patel For The on 18 March, 2011<\/div>\n<div class=\"doc_author\">Author: Mr.S.J.Mukhopadhaya,&amp;Nbsp;Mr.Justice J.B.Pardiwala,&amp;Nbsp;<\/div>\n<pre>   Gujarat High Court Case Information System \n\n  \n  \n    \n\n \n \n    \t      \n         \n\t    \n\t\t   Print\n\t\t\t\t          \n\n  \n\n\n\t \n\t \n\t \n\t \n\t \n\t \n\t \n\t \n\t \n\t \n\t \n\t\n\n\n \n\n\n\t \n\nLPA\/1622\/2010\t 23\/ 23\tJUDGMENT \n \n \n\n\t\n\n \n\nIN\nTHE HIGH COURT OF GUJARAT AT AHMEDABAD\n \n\n \n\n\n \n\nLETTERS\nPATENT APPEAL No. 1622 of 2010\n \n\nIn\n\n\n \n\nSPECIAL\nCIVIL APPLICATION No. 11776 of 2002\n \n\n \n \nFor\nApproval and Signature:  \n \nHONOURABLE\nTHE CHIEF JUSTICE MR. S.J. MUKHOPADHAYA  \nHONOURABLE\nMR.JUSTICE J.B.PARDIWALA\n \n \n======================================\n\n\n \n\t  \n\t \n\t  \n\t\t \n\t\t\t \n\n1\n\t\t\n\t\t \n\t\t\t \n\nWhether\n\t\t\tReporters of Local Papers may be allowed to see the judgment ?\n\t\t\n\t\n\n \n\t  \n\t \n\t  \n\t\t \n\t\t\t \n\n2\n\t\t\n\t\t \n\t\t\t \n\nTo\n\t\t\tbe referred to the Reporter or not ?\n\t\t\n\t\n\n \n\t  \n\t \n\t  \n\t\t \n\t\t\t \n\n3\n\t\t\n\t\t \n\t\t\t \n\nWhether\n\t\t\ttheir Lordships wish to see the fair copy of the judgment ?\n\t\t\n\t\n\n \n\t  \n\t \n\t  \n\t\t \n\t\t\t \n\n4\n\t\t\n\t\t \n\t\t\t \n\nWhether\n\t\t\tthis case involves a substantial question of law as to the\n\t\t\tinterpretation of the constitution of India, 1950 or any order\n\t\t\tmade thereunder ?\n\t\t\n\t\n\n \n\t  \n\t \n\t  \n\t\t \n\t\t\t \n\n5\n\t\t\n\t\t \n\t\t\t \n\nWhether\n\t\t\tit is to be circulated to the civil judge ?\n\t\t\n\t\n\n \n\n \n======================================\n\n\n \n\nCHAIRMAN,\nLIFE INSURANCE CORPORATION OF INDIA  &amp; ORS\n \n\nVersus\n \n\nURMILABEN\nN PRAJAPATI \n\n \n\n======================================\n \nAppearance : \nMR\nAK CLERK for the Appellants  \nMR PINAKIN N PATEL for the Respondent\n \n====================================== \n\n \n\t  \n\t \n\t  \n\t\t \n\t\t\t \n\nCORAM\n\t\t\t: \n\t\t\t\n\t\t\n\t\t \n\t\t\t \n\nHONOURABLE\n\t\t\tTHE CHIEF JUSTICE MR. S.J. MUKHOPADHAYA\n\t\t\n\t\n\t \n\t\t \n\t\t\t \n\n \n\n\t\t\t\n\t\t\n\t\t \n\t\t\t \n\nand\n\t\t\n\t\n\t \n\t\t \n\t\t\t \n\n \n\n\t\t\t\n\t\t\n\t\t \n\t\t\t \n\nHONOURABLE\n\t\t\tMR.JUSTICE J.B.PARDIWALA\n\t\t\n\t\n\n \n\n \n \n\n\n \n\nDate\n:  18\/03\/2011 \n\n \n\n \n \nCAV\nJUDGMENT \n<\/pre>\n<p>(Per<br \/>\n: HONOURABLE MR.JUSTICE J.B.PARDIWALA)<\/p>\n<p>\tThe<br \/>\npresent appeal is directed against judgment and order dated 1st<br \/>\nFebruary 2010 passed by the learned Single Judge in Special Civil<br \/>\nApplication No.11776 of 2002 preferred by the respondent herein<br \/>\nchallenging the action of the appellant-corporation in terminating<br \/>\nhis agency as an agent and forfeiting all commissions due and payable<br \/>\nto the respondent for all times to come.   The learned Single Judge<br \/>\npartly allowed the petition to the extent that the order of<br \/>\ntermination of agency was confirmed and the order with regard to<br \/>\nforfeiture of commissions was quashed and set aside.   The<br \/>\nCorporation being aggrieved by the part of the order passed by the<br \/>\nlearned Single Judge to the extent of forfeiture of commission, has<br \/>\npreferred the present commission.\n<\/p>\n<p>The<br \/>\n\tbrief facts relevant for the purpose of deciding this appeal cam be<br \/>\n\tsummarized as under:\n<\/p>\n<p>The<br \/>\n\tappellant is a corporation duly constituted under the provisions of<br \/>\n\tthe Life Insurance Corporation Act, 1956.  The respondent was<br \/>\n\tworking as an Agent of the appellant-Corporation at Kalol Branch<br \/>\n\tunder Gandhinagar divisions since 21st March 1993.  The<br \/>\n\trespondent introduced a proposal on the life of one Ashokkumar<br \/>\n\tRamjibhai Parmar for a sum assured at Rs.25,000 under the endowment<br \/>\n\tplan on 20th September 1994.  The policy holder i.e.<br \/>\n\tAshokkumar Ramjibhai Parmar passed away on 28th February<br \/>\n\t1996 as he was suffering from pulmonary tuberculosis. It is the case<br \/>\n\tof the appellant-corporation that the respondent knowing fully well<br \/>\n\tthat the insured &#8211; late Ashokkumar Parmar was suffering from<br \/>\n\tpulmonary tuberculosis suppressed this material fact and submitted<br \/>\n\tAgent&#8217;s confidential report dated 30th April 1994<br \/>\n\tstating therein that the proposer was not suffering from any ailment<br \/>\n\tand was having sound health and recommended the acceptance of the<br \/>\n\tlife, which ultimately resulted into Policy bearing No.850364841.<br \/>\n\tThe appellant corporation thought it fit to issue charge-sheet cum<br \/>\n\tshow-cause notice to the respondent dated 3rd February<br \/>\n\t2000 calling upon the respondent to show cause as to why penalty of<br \/>\n\ttermination of agency and forfeiture of renewal commissions in terms<br \/>\n\tof Rule 16 1(a) &amp; (b) of the L.I.C. Of India (Agents)<br \/>\n\tRegulations, 1972 (hereinafter referred to as &#8216;the<br \/>\n\tRegulations&#8217; for short) be imposed.\n<\/p>\n<p>The<br \/>\n\tcase of the respondent before the authorities of the Corporation was<br \/>\n\tthat it was not within her knowledge that the insured was suffering<br \/>\n\tfrom tuberculosis and as a matter of fact, this ailment was<br \/>\n\tconcealed by the insured.\n<\/p>\n<p>The<br \/>\n\texplanation of the respondent was not accepted by the competent<br \/>\n\tauthority and ultimately vide order dated 31st March 2000<br \/>\n\tpassed by the Divisional Manager, the agency of the respondent being<br \/>\n\tAgency Code No.3281832 was terminated in terms of Rule 16(a) and (b)<br \/>\n\tof the Regulations with forfeiture of renewal commission.\n<\/p>\n<p>This<br \/>\n\torder of the Senior Divisional Manager was challenged before the<br \/>\n\tZonal Manger, LIC, Mumbai by the respondent by filing appeal vide<br \/>\n\tletter dated 28.07.2000.  The appeal came to be dismissed vide order<br \/>\n\tdate 23rd August 2001.  The order of the appellate<br \/>\n\tauthority was once again made a subject matter of challenge before<br \/>\n\tthe Chairman of the Appellant Corporation in the form of a  Memorial<br \/>\n\tbefore the Chairman under Regulation No.24 of the Regulations.<br \/>\n\tChairman, LIC vide order dated 05.09.2002 rejected the said Memorial<br \/>\n\tand confirmed both the orders i.e. Divisional Manager, Gandhinagar<br \/>\n\tand the appellate authority.\n<\/p>\n<p>Against<br \/>\n\tthe concurrent findings of three authorities of the<br \/>\n\tappellant-corporation, the respondent preferred Special Civil<br \/>\n\tApplication No.11776 of 2002 and the petition was ordered to be<br \/>\n\tpartly allowed by the learned Single Judge.  The learned Single<br \/>\n\tJudge confirmed the order of all authorities so far as termination<br \/>\n\tof the agency is concerned, but quashed and set aside the order of<br \/>\n\tauthorities so far as forfeiture of commission is concerned.\n<\/p>\n<p>The<br \/>\n\tappellant-corporation aggrieved by this order passed by the learned<br \/>\n\tSingle Judge is in appeal before us.\n<\/p>\n<p>We<br \/>\n\thave heard Mr AK Clerk, learned counsel appearing for the<br \/>\n\tappellant-corporation and Mr Pinakin Patel appearing for the<br \/>\n\trespondent.\n<\/p>\n<p>The<br \/>\n\tmain bone of contention on behalf of the learned counsel for the<br \/>\n\tappellant-corporation is that the learned Single Judge has committed<br \/>\n\ta serious error in holding that the Corporation could not have<br \/>\n\tforfeited the commission of the policies for which there was no<br \/>\n\tdispute or there was no complaint and the work of such policies was<br \/>\n\tsatisfactorily performed.\n<\/p>\n<p>Learned<br \/>\n\tcounsel for the appellant would contend that the learned Single<br \/>\n\tJudge has committed an error in coming to the conclusion that the<br \/>\n\tCorporation could forfeit the commission in question i.e. the one<br \/>\n\twhich was procured by playing fraud.\n<\/p>\n<p>Learned<br \/>\n\tcounsel would further contend that the learned Single Judge has not<br \/>\n\tconsidered regulation 19(1) in its true perspective. He would<br \/>\n\tfurther contend that the Corporation is justified in forfeiting the<br \/>\n\tagency commission payable to the respondent and forfeited the<br \/>\n\tcommission on all policies payable to the respondent. Learned<br \/>\n\tcounsel for the appellant would further contend that the learned<br \/>\n\tSingle Judge erred in ignoring that the forfeiture of commission for<br \/>\n\tcommitting fraud provided in regulation 19 of agents commission can<br \/>\n\tonly mean and refer to renewal commission being received by the<br \/>\n\tagents in respect of policies canvassed by the agent in the past as<br \/>\n\tthe agent.\n<\/p>\n<p>Learned<br \/>\n\tcounsel for the appellant has relied on a decision of Division Bench<br \/>\n\tof this Court rendered in Letters Patent Appeal No.213 of 2007 in<br \/>\n\tSpecial Civil Application No.957 of 1997 and submitted that once it<br \/>\n\tis established that the respondent has played fraud with the<br \/>\n\tCorporation, the Corporation would be well within its powers to<br \/>\n\tforfeit the commission on the premium received in respect of the<br \/>\n\tbusiness secured by the agent.\n<\/p>\n<p>Learned<br \/>\n\tcounsel for the appellant has also relied upon another judgment<br \/>\n\trendered by the Division Bench of this Court in Letters Patent<br \/>\n\tAppeal No.257 of 2010.  In this particular judgment the Division<br \/>\n\tBench did not deem fit to interfere with the order passed by the<br \/>\n\tauthority for termination of the agency and forfeiture of commission<br \/>\n\tin respect of the policy for which alleged fraud was found.<br \/>\n\tHowever, the Division Bench thought it fit to quash and set aside<br \/>\n\tthe decision for forfeiture of the commission in respect of policy<br \/>\n\tfor which no fraud was found or no allegation of fraud was levelled<br \/>\n\tand directed the concerned authority of the Corporation to<br \/>\n\treconsider the matter afresh on the principle of proportionality of<br \/>\n\tthe punishment keeping in mind the observations made in the<br \/>\n\tjudgment.\n<\/p>\n<p>Per<br \/>\n\tcontra, learned counsel for the respondent submitted that the order<br \/>\n\tpassed by the learned Single Judge is just and proper and the<br \/>\n\tappellant Corporation could not have passed an order of forfeiture<br \/>\n\tof commission in respect of other policies where no fraud has been<br \/>\n\tplayed upon or no illegality or irregularity has been committed by<br \/>\n\tthe respondent prejudicial to the interest of the Corporation.  He<br \/>\n\twould submit that at the most, the commission in respect of the<br \/>\n\tpolicy for which alleged fraud is said to have been established and<br \/>\n\tproved can be forfeited.\n<\/p>\n<p>Having<br \/>\n\tregard to the facts and circumstances of the case and the rival<br \/>\n\tcontentions put forward by the learned counsel for the respective<br \/>\n\tparties we would like to examine the matter in detail as there<br \/>\n\tappears to be some conflict of opinion expressed by two other<br \/>\n\tDivision Benches of this Court.\n<\/p>\n<p>In<br \/>\n\tthe present case, the appellant Corporation initiated the<br \/>\n\tproceedings against the respondent on the premise that the<br \/>\n\trespondent knowingly perpetuated fraud by pushing a life on the<br \/>\n\tbooks of the Corporation by withholding and suppressing the fact<br \/>\n\tthat the insured &#8211; late Ashokkumar R Parmar was suffering from<br \/>\n\tpulmonary tuberculosis.   The defence of the respondent all<br \/>\n\tthroughout remained that it was not within her knowledge and this<br \/>\n\tfact was suppressed by deceased &#8211; Ashokkumar R Parmar.\n<\/p>\n<p>It<br \/>\n\t would be expedient for better adjudication of the controversy to<br \/>\n\tmake a mention of the fact that the action against the respondent<br \/>\n\twas initiated in the form of a charge-sheet cum show-cause notice<br \/>\n\tdated 3rd February 2000.\n<\/p>\n<p>In<br \/>\n\tthe charge-sheet cum show-cause notice there is a reference that the<br \/>\n\tCorporation proposed to impose upon the respondent penalty of<br \/>\n\ttermination of agency with forfeiture of renewal commissions in<br \/>\n\tterms of Regulation 16(1)(a) and (b) of the Regulations of 1972.\n<\/p>\n<p>The<br \/>\n\tfirst order passed by the competent authority namely the Divisional<br \/>\n\tManager also says that the authority is inclined to impose a penalty<br \/>\n\tunder Regulation 16(1)(a) and (b) of the Regulations and ultimately<br \/>\n\tpassed an order that the agency stands terminated in terms of<br \/>\n\tRegulation 16(1)(a) and (b) of the Regulations with forfeiture of<br \/>\n\trenewal commissions.\n<\/p>\n<p>The<br \/>\n\tappellate authority also observed stating that the penalty of<br \/>\n\ttermination of agency is confirmed under Regulation 16(1)(a) and (b)<br \/>\n\tof the Regulations.  In the same manner, Chairman of the<br \/>\n\tCorporation, in exercise of the powers under Regulation 24 of the<br \/>\n\tRegulations confirmed the three orders referred to above making<br \/>\n\treference of Regulation 16(1)(a) and (b) of the Regulations.\n<\/p>\n<p>This<br \/>\n\tis  suggestive of the fact that all throughout all the authorities<br \/>\n\thave proceeded under Regulation 16 only.   Regulation 16 of the<br \/>\n\tRegulations reads as under:-\n<\/p>\n<p>&#8220;Regulation<br \/>\n\t16: Termination of agency for certain lapses:\n<\/p>\n<p>The<br \/>\n\tcompetent authority may, by order, determine the appointment of an<br \/>\n\tagent.\n<\/p>\n<p>(a)<br \/>\n\tif he has failed to discharge his functions, as set out in<br \/>\n\tregulation 8, to the satisfaction of the competent authority;\n<\/p>\n<p>(b)if<br \/>\n\the acts in a manner prejudicial to the interests of the Corporation<br \/>\n\tor to the interests of its policyholders;\n<\/p>\n<p>(c)<br \/>\n\tif evidence comes to its knowledge to show that he has been allowing<br \/>\n\tor offering to allow rebate of the whole or any part of the<br \/>\n\tcommission payable to him;\n<\/p>\n<p>(d)<br \/>\n\tif it is found that any averment contained in his agency application<br \/>\n\tor in any report furnished by him as an agent in respect of any<br \/>\n\tproposal is not true;\n<\/p>\n<p>(e)<br \/>\n\tif he becomes physically or mentally incapacitated for carrying out<br \/>\n\this functions as an agent;\n<\/p>\n<p>(f)<br \/>\n\tif he being an absorbed agent, on being called upon to do so, fails<br \/>\n\tto undergo the specified training or to pass the specified tests,<br \/>\n\twithin three years from the date on which he is so called upon;\n<\/p>\n<p>provided<br \/>\n\tthat the agent shall be given a reasonable opportunity to show cause<br \/>\n\tagainst such termination.\n<\/p>\n<p>Every<br \/>\n\torder of termination made under sub-regulation (1) shall be in<br \/>\n\twriting and communicated to the agent concerned.\n<\/p>\n<p>Where<br \/>\n\tthe competent authority proposes to take action under Sub-regulation<br \/>\n\t(1) it may direct the agent not to solicit or procure new life<br \/>\n\tinsurance business until he is permitted by the competent authority<br \/>\n\tto do so.&#8221;\n<\/p>\n<p>On<br \/>\n\tfair analysis of Regulation 16 it is very clear that the competent<br \/>\n\tauthority is empowered to determine the appointment of an agent if<br \/>\n\tthe agent has failed to discharge his functions, as set out in<br \/>\n\tregulation 8, to the satisfaction of the competent authority or if<br \/>\n\tthe agent acts in a manner prejudicial to the interests of the<br \/>\n\tCorporation or to the interests of its policyholders.  We take note<br \/>\n\tof a very important fact that Regulation 16 nowhere refers the word<br \/>\n\t&#8216;fraud&#8217;.   Clause (1) of Regulation 19 makes a reference of<br \/>\n\t&#8216;fraud&#8217;.   Regulation 19 provides for appointment of<br \/>\n\tcommission of discontinuance of agency.  Any order passed under<br \/>\n\tRegulation 19(1) is not appealable.  Regulation No.19(1) reads as<br \/>\n\tunder:-\n<\/p>\n<p>&#8220;Regulation<br \/>\n19 Payment of commission on discontinuance of agency:\n<\/p>\n<p>In<br \/>\n\tthe event of termination of the appointment of an agent, except<br \/>\n\tfor fraud, the commission on the premiums received in respect of<br \/>\n\tthe business secured by him shall be paid to him if such agent :\n<\/p>\n<p>(a)<br \/>\n\thas continually worked for at least 5 years since his appointment<br \/>\n\tand policies assuring a total sum of not less than Rs. 2 lakhs<br \/>\n\teffected through him were in full force on a date one year before<br \/>\n\this ceasing to act as such agent; or<\/p>\n<p>(b)<br \/>\n\thas continually worked as an agent for at least 10 years since his<br \/>\n\tappointment; or<\/p>\n<p>(c)<br \/>\n\tbeing an agent whose appointment has been terminated under clause\n<\/p>\n<p>\t(e) of sub-regulation (1) of regulation 16 has continually worked as<br \/>\n\tan agent for at least two years from the date of his appointment and<br \/>\n\tpolicies assuring a total sum of not less than Rs.1 lakh effected<br \/>\n\tthrough him were in full force on the date immediately prior to such<br \/>\n\ttermination;\n<\/p>\n<p>Provided<br \/>\n\tthat in respect of an absorbed agent the provisions of clause (a)<br \/>\n\tshall apply as if for the letters, figures and word &#8220;Rs.2<br \/>\n\tlakhs&#8221;, the letters and figures &#8220;Rs.50,000&#8221; had<br \/>\n\tbeen substituted.\n<\/p>\n<p>Any<br \/>\n\tcommission payable to an agent under sub-regulation (1) shall,<br \/>\n\tnotwithstanding his death, be payable to his nominee or nominees or,<br \/>\n\tif no nomination is made or is subsisting, to his heirs, so long as<br \/>\n\tsuch commission would have been payable had the agent been alive.\n<\/p>\n<p>In<br \/>\n\tthe event of the death of the agent while his agency subsists, any<br \/>\n\tcommission payable to him had he been alive shall be paid to his<br \/>\n\tnominee, or, if no nomination is made or is subsisting, to his<br \/>\n\theirs, so long such commission would have been payable had the agent<br \/>\n\tbeen alive, provided he had continually worked as an agent for not<br \/>\n\tless than 2 years from the date of his appointment and policies<br \/>\n\tassuring a total sum of not less than Rs. 1 lakh effected through<br \/>\n\thim were in full force on the date immediately prior to his death.\n<\/p>\n<p>If<br \/>\n\tthe renewal commission payable under sub-regulation (1) or<br \/>\n\tsub-regulation (2) or sub-regulation (3) falls below Rs.100\/- in any<br \/>\n\tfinancial year (hereinafter referred to as the said financial year),<br \/>\n\tthe competent authority may, notwithstanding anything contained in<br \/>\n\tthe said sub-regulation, commute all commission payable in<br \/>\n\tsubsequent financial year for a lump sum which shall be three times<br \/>\n\tthe amount of renewal commission paid in the said financial year,<br \/>\n\tand on the payment of such lump sum to the agent or his nominees or<br \/>\n\theirs, as the case may be, no commission on the business effected<br \/>\n\tthrough the agent shall be payable in the financial year subsequent<br \/>\n\tto the said financial year.&#8221;\n<\/p>\n<p>\tTo<br \/>\nour mind, the position is very clear.  In the event of the<br \/>\ntermination of an agent &#8216;except for fraud&#8217; (emphasis supplied)<br \/>\nthe Commission on the premium received in respect of the business<br \/>\nsecured by the agent shall be paid to the said agent as prescribed<br \/>\nunder Regulation 19.  Regulation prescribes that, &#8216;except in case of<br \/>\nfraud&#8217; after discontinuance of the agency, the agent is required to<br \/>\nbe paid the commission on the premiums received in respect of the<br \/>\nbusiness secured by him in the past.\n<\/p>\n<p>Now,<br \/>\n\twe shall deal with an important Regulation i.e. Regulation 15, which<br \/>\n\trefers and talks about fraud.  Regulation 15 reads as under:-\n<\/p>\n<p>\t&#8220;15.\n<\/p>\n<p>Termination of agency on account of certain \tdisqualifications:\n<\/p>\n<p>\tIf<br \/>\nan agent:\n<\/p>\n<p>\t(a)<br \/>\n\tis found to be of unsound mind by a court of \tcompetent<br \/>\njurisdiction;\n<\/p>\n<p>(b)<br \/>\nis found to be guilty of criminal misappropriation or criminal breach<br \/>\nof trust or cheating or forgery or an abetment of or attempt to<br \/>\ncommit any such offence by a court of competent jurisdiction;\n<\/p>\n<p>(c)  in any judicial proceedings, has<br \/>\n\tbeen found to have knowingly participated in or connived at any<br \/>\n\tfraud, dishonesty or misrepresentation against the Corporation or<br \/>\n\tany of its subsidiaries or against any person having official<br \/>\n\tdealings with the Corporation or any of its subsidiaries,  his<br \/>\n\tappointment shall be liable to be terminated without notice and the<br \/>\n\tcompetent authority shall forthwith terminate his appointment.&#8221;\n<\/p>\n<p>Regulation<br \/>\n15 talks about termination of agent on account of certain<br \/>\ndisqualifications and very importantly we take note of the fact that<br \/>\nin Regulation 15 the word used is &#8216;shall&#8217; meaning to say that<br \/>\nif an agent incurs disqualification on account of being found to be<br \/>\nof unsound mind by a court of competent jurisdiction or is found to<br \/>\nbe guilty of criminal misappropriation or criminal breach of trust or<br \/>\ncheating or forgery or an abetment of or attempt to commit any such<br \/>\noffence by a court of competent jurisdiction or   in any judicial<br \/>\nproceedings, has been found to have knowingly participated in or<br \/>\nconnived at any fraud, dishonesty or misrepresentation against the<br \/>\nCorporation or any of its subsidiaries or against any person having<br \/>\nofficial dealings with the Corporation or any of its subsidiaries his<br \/>\nappointment as agent stands terminated.  On plain reading of the<br \/>\nlanguage of Regulation 15 it is very clear that once the agent is<br \/>\ndisqualified in the event of any order passed by the competent court<br \/>\nof law in judicial proceedings and once there is a finding recorded<br \/>\nby the competent court of law in any judicial proceedings as regards<br \/>\nfraud, the appointment stands automatically terminated without notice<br \/>\nand the competent authority is left with no other option, but<br \/>\nforthwith terminate his appointment.  There is no discretion because<br \/>\nof the word &#8216;shall&#8217;.   As against that, Regulation 16 talks<br \/>\nabout termination of agent on account of certain lapses.  The lapses<br \/>\nhave been enumerated in clauses (a) to (f) of Regulation 16.  Again,<br \/>\nthe language of Regulation 16 is important.  It says that the<br \/>\ncompetent authority &#8216;may&#8217; by order determine the appointment<br \/>\nof an agent.  This is suggestive of the fact that in the event of<br \/>\ncertain lapses on the part of the agent, the competent authority may<br \/>\nor may not determine appointment of an agent.  That means, there is a<br \/>\ndiscretion with the authority.  In a given case the authority may<br \/>\nfind lapse of such a nature which may not warrant termination of the<br \/>\nappointment of an agent.  Therefore, unlike Regulation 15 where there<br \/>\nis no discretion there appears to be some discretion in Regulation<br \/>\n16, which talks only about lapses.\n<\/p>\n<p>What<br \/>\n\tcan be deduced on plain interpretation of Regulations 15, 16 and 19<br \/>\n\tis that for coming to the conclusion that the agent has played fraud<br \/>\n\twith the Corporation in connivance with any person may be the person<br \/>\n\the has insured there must be a fullfledged trial in the court of a<br \/>\n\tcompetent court.  In the trial evidence would be led by both the<br \/>\n\tsides and after considering the evidence if in any judicial<br \/>\n\tproceeding there is a finding that the agent is guilty of fraud, the<br \/>\n\tappointment stands automatically terminated.  We do not propose to<br \/>\n\tsay,  that fraud would stand established only if there is criminal<br \/>\n\tprosecution and pursuant to that a full-fledged trial resulting in<br \/>\n\tfindings regarding fraud.  It may not be possible or would not be<br \/>\n\tfeasible at times to initiate criminal prosecution in all cases.  In<br \/>\n\tsuch eventuality, it is expected from the Corporation, which is a<br \/>\n\t&#8216;State&#8217; within the meaning of Article 12 of the Constitution to<br \/>\n\tadopt a fair and reasonable procedure.  When we say fair and<br \/>\n\treasonable procedure we mean a regular departmental enquiry.   In a<br \/>\n\tregular departmental enquiry also the person concerned will get an<br \/>\n\topportunity of leading oral evidence as well as documentary evidence<br \/>\n\twhich includes cross-examination of witnesses, if any.  That would<br \/>\n\tat least give a reasonable opportunity to the agent to meet with the<br \/>\n\tcharge of fraud.  We are saying this because, the lapses enumerated<br \/>\n\tunder Regulation 16 nowhere refers in explicit terms &#8216;fraud&#8217;<br \/>\n\tthough it does refer to some lapses on the part of the agent which<br \/>\n\tmight be equated with incorrect statement made by the agent or false<br \/>\n\tinformation given by the agent.  We also take notice of the fact<br \/>\n\tthat appeal is provided under Regulations 16, 17, 18 and 19, but no<br \/>\n\tappeal is provided against order passed under Regulation 19.  It<br \/>\n\twould be profitable to quote the wordings of Honourable Supreme<br \/>\n\tCourt in the matter of  <a href=\"\/doc\/148615146\/\">Union of India v. M\/s Chaturbhai M Patel &amp;<br \/>\n\tCo.<\/a> reported in AIR 1976 SC 712.  In paragraph 7 it has been<br \/>\n\theld as under:-\n<\/p>\n<p>&#8220;It<br \/>\n\tis well settled that fraud like any other charge of a criminal<br \/>\n\toffence whether made in civil or criminal proceedings, must be<br \/>\n\testablished beyond reasonabe doubt: per Lord Atkin in <a href=\"\/doc\/1582217\/\">A. L. N.<br \/>\n\tNarayanan Chettyar v. Official Assignee, High Court Rangoon, AIR<\/a><br \/>\n\t1941 PC 93. However suspicious may be the circumstances, however<br \/>\n\tstrange the coincidences, and however grave the doubts, suspicion<br \/>\n\talone can never take the place of proof. In our normal life we are<br \/>\n\tsometimes faced with unexplainable phenomenon and strange<br \/>\n\tcoincidences, for, as it is said, truth is stranger than fiction.&#8221;\n<\/p>\n<p>In<br \/>\n\tthe present case all throughout when the authorities have proceeded<br \/>\n\tunder Regulation 16 they have read fraud or  rather, we should say<br \/>\n\tpresumed and assumed fraud only because, according to the<br \/>\n\tcorporation, the respondent acted in a manner prejudicial to the<br \/>\n\tinterests of the Corporation.  Again, going back to Regulation 16(b)<br \/>\n\tit is very clear that if an agent acts in a manner prejudicial to<br \/>\n\tthe interests of the Corporation it does not necessarily mean that<br \/>\n\the has played fraud.  All acts prejudicial to the interests<br \/>\n\tof the Corporation are not necessarily or can be said to be falling<br \/>\n\twithin the ambit of fraud.  When allegations of fraud are levelled<br \/>\n\tthey cannot be easily presumed and that is why, perhaps, the<br \/>\n\tRegulations have referred to the word &#8216;fraud&#8217; in Regulation 15<br \/>\n\tsaying that if there is a finding of fraud in any judicial<br \/>\n\tproceedings, the appointment shall be liable to be terminated<br \/>\n\twithout notice.\n<\/p>\n<p>We<br \/>\n\ttake notice of the fact that if fraud is to be read in all cases<br \/>\n\tfalling within the ambit of Regulation 16(b) then, it will be a<br \/>\n\tdangerous proposition.  If the Corporation wants to forfeit the<br \/>\n\tcommissions due and payable to the agent with regard to policies<br \/>\n\twhere there is no complaint, they would easily read or would say<br \/>\n\tthat fraud has been played upon by the agent by acting in a manner<br \/>\n\tprejudicial to the interest of the Corporation.  There is a scope of<br \/>\n\tmischief.  The Division Bench of this Court in the matter of  <a href=\"\/doc\/884985\/\">State<br \/>\n\tv. Prathmesh Farms Private Limited,<\/a> reported in 2011 (1) GLR 159<br \/>\n\tin paragraph 12.1 has observed as under:-\n<\/p>\n<p>&#8220;12.1\tWhen<br \/>\nmaterial words are capable of bearing two or more constructions, the<br \/>\nmost firmly established rule for construction is the rule laid down<br \/>\nin Heydon&#8217;s case,<br \/>\nwhich is also known as &#8220;purposive construction&#8221;  or<br \/>\n&#8220;mischief rule&#8221;.  Court is required to make such<br \/>\nconstruction as shall suppress the mischief and advance the remedy,<br \/>\nand suppress certain inventions and evasions for continuance of the<br \/>\nmischief, and  pro privato commodo,<br \/>\nand to add force and  life to<br \/>\nthe cure and remedy, according to the true intent of the<br \/>\nmakers of the Act, pro bono publico,<br \/>\n as discussed in several judgments of the Apex Court, including<br \/>\n<a href=\"\/doc\/1629830\/\">Bengal Immunity Co. v. State of Bihar<\/a> [AIR 1955 SC 661]<br \/>\nand <a href=\"\/doc\/1199911\/\">Ameer Trading Corporation Ltd. v. Shapoorji Data<br \/>\nProcessing Ltd.<\/a> [AIR 2004 SC 355].\n<\/p>\n<p>  In the words of Lord<br \/>\nGriffith: &#8220;The<br \/>\ncourts now adopt a purposive approach which seeks to give effect to<br \/>\nthe true purpose of legislation and are prepared to look at much<br \/>\nextraneous material that bears on the background against which the<br \/>\nlegislation was enacted&#8221;.\n<\/p>\n<p>[Pepper v. Hart (1993) 1 All ER 42].&#8221;\n<\/p>\n<p>Lapses<br \/>\n\tenumerated under Regulation 16 which have been relied upon by the<br \/>\n\tauthorities of the Corporation all  throughout nowhere refers in<br \/>\n\texplicit terms &#8216;fraud&#8217;.  At this stage we would also like to quote<br \/>\n\tand rely upon the observations made by the Division Bench of this<br \/>\n\tCourt in Letters Patent Appeal<br \/>\n\tNo.257 of 2002 in which one Honourable Judge of the Bench while<br \/>\n\tgiving supplementary reasons in support of the conclusion has<br \/>\n\tobserved as under:-\n<\/p>\n<p>&#8220;A<br \/>\nbare perusal of Regulation-15 shows that the termination of agency is<br \/>\nto be brought about in case of certain disqualifications and those<br \/>\ndisqualifications are enumerated in sub clause (a), (b) and (c) of<br \/>\nRegulation 15. Sub clause (c)  of Regulation-15 clearly points out<br \/>\nthat &#8220;in any judicial proceeding, the agent has been found to<br \/>\nhave knowingly participated in or connived at any fraud, dishonesty<br \/>\nor misrepresentation against the Corporation or any of its<br \/>\nsubsidiaries or against any person<br \/>\nhaving official dealings with the corporation or<br \/>\nany of its subsidiaries&#8221; then, in such a situation his<br \/>\nappointment is made liable to be terminated as an agent without<br \/>\nnotice. As against this, and reading in<br \/>\njuxtaposition with this position of Regulation 15 with<br \/>\nprovision of Regulation 16 it would be seen that Regulation<br \/>\n16 emphasize the competent authority of LIC to bring about<br \/>\ntermination of agency for certain lapses. The lapses enumerated under<br \/>\nRegulation 16 nowhere refers in explicit term &#8220;fraud&#8221;.<br \/>\nThough it does refer to some lapses on the part of the agent which<br \/>\nmight be equated with  incorrect statement made by an agent or false<br \/>\ninformation given by the agent. It is required to be noted at this<br \/>\nstage that for bringing about termination of agency on account of<br \/>\nlapses enumerated in Regulation 16 on the part of the agent, then a<br \/>\nreasonable opportunity is required to be given to the agent, much<br \/>\nless to holding appropriate inquiry in an appropriate manner. It is<br \/>\nrequired to be noted at this stage that, appeal is provided from<br \/>\norder made under Regulations 15,16, 17 and 18, but no appeal is<br \/>\nprovided for any order or against any order passed under Regulation\n<\/p>\n<p>19. Meaning thereby Regulation 19 cannot be construed to clothe the<br \/>\nLIC with any substantive power. It is more of a mechanical objection<br \/>\nresulting in exercise of the determination  of agency brought about<br \/>\neither under Regulation 15 or under 16.  Regulation 15 in terms refer<br \/>\nto &#8216;fraud&#8217; on the part of the agent. I reiterate at the cost of<br \/>\nrepetition that Regulation 15 refers to disqualifications on the part<br \/>\nof the agent and on<br \/>\nagent&#8217;s suffering from any one of those disqualifications;<br \/>\nnamely from Regulation 15 (a), (b) and (c). The termination of agency<br \/>\ncannot be qualified to be termination on account of invocation of<br \/>\nRegulation 15.&#8221;\n<\/p>\n<p>\tIn<br \/>\nparagraph 3 of the said judgment it is further observed as under:-\n<\/p>\n<p>&#8220;3.\tIn<br \/>\nthe instant case, as could be seen from the impugned show cause<br \/>\nnotice which came to be issued on 19\/12\/1997 as well as the order of<br \/>\nterminating agency dated<br \/>\n24\/9\/1999, it can well be said  that the authority has proceeded<br \/>\nunder Regulation 16 only. Regulation-15 which is disqualifications<br \/>\nhave neither been invoked nor been attributed or alleged against the<br \/>\npetitioner herein above. Thus when the authorities have made out a<br \/>\ncase only based upon the lapses enumerated under Regulation 16, then,<br \/>\nquestion arises as to whether 19(1) could be invoked, where under the<br \/>\ncommission is forfeited on account of fraud or disqualification<br \/>\ninvolving fraud is attracted by the agent. In other words in case if<br \/>\nany action is taken under Regulation 15 against the agent then<br \/>\nRegulation 19 (1) cannot be invoked when only action  against agent<br \/>\nis invoked on account of lapses enumerated under Regulation 16, i.e.<br \/>\nfrom Regulation 16  (1) (a) to (f), (2) and (3). The Legislature and<br \/>\nRule Framing Authority could not have clothed the one contracting<br \/>\nparty to forfeit the commission for the work already done by the<br \/>\nagent and procuring<br \/>\nclients and on their payment of premium,<br \/>\nas one contracting party could not have legitimately decided about<br \/>\nother party&#8217;s  fraud taking up on its own task of terming him to be<br \/>\nfraudulent so as to deprive the agent of all the benefits<br \/>\nof his past work. In fact, therefore, as could be<br \/>\nseen from the language employed in Regulation 15, it is a<br \/>\ndisqualification which the agent incurs on account of he being found<br \/>\nto be unsound mind by a court of competent jurisdiction being<br \/>\nadequate guilty of criminal misappropriation by court of competent<br \/>\njurisdiction or being found fraudulent in any judicial proceedings.<br \/>\nTherefore, in my view, for  visiting the agent with dire consequences<br \/>\nof forfeiture of his entitlement to receive commission on the past<br \/>\ncontracts or policies which he procured the requirement of Regulation<br \/>\n15 are to be fully satisfied. In the instant case, as could be seen<br \/>\nfrom the record, the authorities have not invoked Regulation 15 at<br \/>\nall against the present petitioner, and therefore, in my view there<br \/>\nis no question of visiting him with forfeiture in his entitlement of<br \/>\nreceiving commission in future.&#8221;\n<\/p>\n<p>\tWe<br \/>\n\tare of the view that the Corporation having invoked Regulation 16<br \/>\n\tall throughout would not be justified in forfeiting the right of the<br \/>\n\trespondent in receiving the commission as it is admissible under<br \/>\n\tRegulation 19(b) and (c) as applicable to this case.\n<\/p>\n<p>The<br \/>\n\tjudgment which has been relied upon by the learned counsel for the<br \/>\n\tappellant-corporation rendered in Letters Patent Appeal No.257<br \/>\n\tof 2002 is in two parts.  Both the Honourable Judges of the Division<br \/>\n\tBench have expressed their opinion on the subject but the final<br \/>\n\tconclusion remains the same.  The Division Bench thought<br \/>\n\tit fit to remit the matter to the concerned authority of the<br \/>\n\tCorporation for the purpose of reconsideration of the matter afresh<br \/>\n\ton the aspect of proportionality of the punishment.  We are of the<br \/>\n\tview that the principle of proportionality of the punishment would<br \/>\n\tnot be applicable in such type of cases when an agency is terminated<br \/>\n\tand the commissions payable to the agent are ordered to<br \/>\n\tbe forfeited.  Determining the agency and forfeiting the commissions<br \/>\n\tis not by way of punishment.   It is on the strength of terms of<br \/>\n\tcontract entered into between the Corporation and the agent.  In<br \/>\n\tthis view of the matter, we are not inclined to accept the<br \/>\n\tsubmissions of the learned counsel of the Corporation that we may<br \/>\n\talso remit the matter to the concerned authority for fresh<br \/>\n\tconsideration so far as forfeiture of commissions of all policies is<br \/>\n\tconcerned.\n<\/p>\n<p>\tLearned<br \/>\n\tcounsel for the Corporation has also relied upon a judgment of<br \/>\n\tDivision Bench of this Court in Letters Patent Appeal No.213 of<br \/>\n\t2007.  In that case, the Division Bench of this Court took the view<br \/>\n\tthat the conduct of the agent in collecting the cheque from a policy<br \/>\n\tholder for revival of his policy and utilising those cheques for<br \/>\n\tfresh proposals on the lives of others clearly amounts to fraud and<br \/>\n\tby such fraudulent act the agent obtained unlawful gain.  The Court<br \/>\n\tfurther observed that the conduct of agent would amount to<br \/>\n\tmisappropriation of amount which falls within the expression o f<br \/>\n\t&#8216;fraud&#8217;.  In that case,  the Court having regard to the peculiar<br \/>\n\tfacts came to the conclusion that it would amount to fraud, but as<br \/>\n\twe have discussed in our judgment fraud cannot be presumed and that<br \/>\n\tevery lapse on the part of the agent or any act of the agent<br \/>\n\tprejudicial to the interests of the Corporation need not necessarily<br \/>\n\tbe a fraud.\n<\/p>\n<p>\tThe<br \/>\nDivision Bench while deciding Letters Patent Appeal No.263 of 2007<br \/>\nhas not considered the entire issue keeping in mind Regulation 15 of<br \/>\nthe Regulations, 1972.  The Division Bench proceeded on the footing<br \/>\nthat since it is a case of misappropriation of amount the Corporation<br \/>\nwould be justified in terminating the agency as well as all<br \/>\ncommissions.   It appears that the matter was not examined from the<br \/>\npoint of view as regards omission of the word &#8216;fraud&#8217; in<br \/>\nRegulation 16 and as to whether all acts prejudicial to the interest<br \/>\nof the Corporation can be termed as acts of &#8216;fraud&#8217;.  We are in<br \/>\nagreement with the ratio propounded by the Division Bench of this<br \/>\nCourt in Letters Patent Appeal No.257 of 2002 except to the extent of<br \/>\nremitting the matter to the authorities of the Corporation for<br \/>\nreconsidering the issue on the principle of proportionality of<br \/>\npunishment.\n<\/p>\n<p>\tAgain,<br \/>\n\tat the cost of repetition, we would like to mention that in the<br \/>\n\tpresent case the allegations against the agent are to the effect<br \/>\n\tthat she knew that late Ashokkumar R Parmar was suffering from<br \/>\n\tpulmonary tuberculosis and in spite of this knowledge, as an agent,<br \/>\n\tshe recommended the Corporation for the policy.  We take notice of<br \/>\n\tthe fact that without any proper departmental enquiry or detailed<br \/>\n\tinvestigation in this regard, the Corporation could not have jumped<br \/>\n\tto the conclusion that the agent is guilty of fraud by suppressing<br \/>\n\tthe fact that the insured was suffering from pulmonary tuberculosis.<br \/>\n\t We take notice of the fact having perused all the three orders<br \/>\n\tpassed by the Corporation i.e. first order of the Divisional<br \/>\n\tManager, second order passed by the appellate authority and the<br \/>\n\tthird order in the form of Memorial by the Chairman of the<br \/>\n\tCorporation that all the three authorities have based their<br \/>\n\tconclusions solely taking into consideration the reply filed by the<br \/>\n\trespondent to the show-cause notice.  There was no other enquiry of<br \/>\n\tany nature worth the name at the end of the appellant-Corporation.<br \/>\n\tIt can be a case of carelessness or negligence.  However, though we<br \/>\n\tare not supposed to go into the questions of facts, but in the<br \/>\n\tpresent case, having regard to the peculiar circumstances, we are<br \/>\n\tconstrained to observe that there is not an iota of material on<br \/>\n\trecord to suggest that there was any meeting of minds or any<br \/>\n\tconspiracy hatched for the purpose of defrauding the Corporation.\n<\/p>\n<p>\tFor<br \/>\n\tthe reasons recorded above, we are of the view that the appellant &#8211;<br \/>\n\tCorporation could not have forfeited the amount of renewal<br \/>\n\tcommissions.  To that extent, the judgment and order passed by the<br \/>\n\tlearned Single Judge is just, proper and justified. We do not see<br \/>\n\tany reason to interfere with the order passed by the learned Single<br \/>\n\tJudge.   In the result, the appeal fails and the same is hereby<br \/>\n\tdismissed.  No costs.\n<\/p>\n<p>\t\t\t\t\t\t\t(S.J.\n<\/p>\n<p>Mukhopadhaya, CJ.)<\/p>\n<p>\t\t\t\t\t\t\t(J.B.Pardiwala,<br \/>\nJ.)<\/p>\n<p>*mohd<\/p>\n<p>\t\t   \u00a0\u00a0\u00a0<\/p>\n<p>\t\t   Top<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Gujarat High Court Appearance : vs Mr Pinakin N Patel For The on 18 March, 2011 Author: Mr.S.J.Mukhopadhaya,&amp;Nbsp;Mr.Justice J.B.Pardiwala,&amp;Nbsp; Gujarat High Court Case Information System Print 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 [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[16,8],"tags":[],"class_list":["post-207142","post","type-post","status-publish","format-standard","hentry","category-gujarat-high-court","category-high-court"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Appearance : vs Mr Pinakin N Patel For The on 18 March, 2011 - Free Judgements of Supreme Court &amp; 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