P S Shreedhara vs The Senior Divisional Manager
2024 Latest Caselaw 11866 Kant

Karnataka High Court

P S Shreedhara vs The Senior Divisional Manager on 29 May, 2024

Author: Hemant Chandangoudar

Bench: Hemant Chandangoudar

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                                                                  NC: 2024:KHC:18093
                                                                WP No. 50606 of 2016




                               IN THE HIGH COURT OF KARNATAKA AT BENGALURU

                                    DATED THIS THE 29TH DAY OF MAY, 2024

                                                   BEFORE
                             THE HON'BLE MR JUSTICE HEMANT CHANDANGOUDAR
                                   WRIT PETITION NO. 50606 OF 2016 (GM-RES)
                        BETWEEN:

                             P. S. SHREEDHARA,
                             S/O. P. V. SHANKARAIAH,
                             SANNAIAH STREET, PETE,
                             PERIYAPATNA TOWN - 571 107.
                                                                    ...PETITIONER
                        (BY SRI. P. RAVI SHANKAR., ADVOCATE)

                        AND:

                        1.   THE SENIOR DIVISIONAL MANAGER,
                             LIC OF INDIA, DIVISIONAL OFFICE,
                             JEEVAN PRAKASH, P.B.NO.37,
                             MYSORE - BANGALORE ROAD,
                             BANNIMANTAP,
                             MYSORE - 570015.

                        2.   THE ZONAL MANAGER,
                             LIFE INSURANCE CORPORATION OF INDIA,
Digitally signed by B        SOUTH CENTRAL ZONAL OFFICE, JEEVAN BHAGYA,
K
MAHENDRAKUMAR                SAIFABAD, HYDERABAD - 500 063.
Location: HIGH
COURT OF
KARNATAKA
                        3.   THE LIFE INSURANCE CORPORATION OF INDIA,
                             REPRESENTED BY ITS CHAIRMAN,
                             "YOGAKSHEMA" JEEVAN BHIMA MARG,
                             CENTRAL OFFICE, PB. NO. 19953,
                             MUMBAI - 400 021.

                        4.   THE BRANCH MANAGER LIC OF INDIA,
                             BRANCH OFFICE, K. R. NAGAR.
                                                                   ...RESPONDENTS
                        (BY SRI. RAJASHEKHAR K., ADVOCATE)

                            THIS W.P. FILED PRAYING TODIRECT THE R-1 TO QUASH
                        THE ORDER OF FORFEITURE OF RENEWAL COMMISSION AND
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                                                    NC: 2024:KHC:18093
                                                WP No. 50606 of 2016




RELEASE FORFEITED RENEWAL COMMISSION ALONG WITH
INTEREST OF 12% P. A FROM THE DATE OF DUEQUASH
ANNEXURE-D PASSED BY R-1 DTD8.7.2014 ANNEXURE-G PASSED
BY R-2 DTD24.8.2015 AND ANNEXURE-H PASSED BY R-3
DTD20.5.2016 BY HOLDING THAT THEY ARE ARBITRARY AND
ILLEGALGRANT AN IANTERIM ORDER TO HOLD THAT THE
PORTION OF THE R-1 ORDER FORFEITING RENEWAL
COMMISSION BE STAYED AND RENEWAL COMMISSION BE
RELEASED IMMEDIATELY DURING THE PENDENCY OF THE
ABOVE W.P.POST THIS W.P. FOR PRELIMINARY HEARING BEFORE
SINGLE JUDGE.CH MEMO25.10.2016

    THIS PETITION, COMING ON FOR ORDERS, THIS DAY, THE
COURT MADE THE FOLLOWING:

                                 ORDER

The petitioner was appointed as an agent by the respondent, Life Insurance Corporation (LIC), on January 13, 1990. While serving as an agent, the petitioner received a notice dated April 5, 2014, from the first respondent, questioning why the agency should not be terminated and the renewal commission forfeited.

2. The notice stated that an insurance policy issued to the petitioner's brother was obtained by concealing his diagnosis of alcoholic liver disease, rheumatic heart disease, severe mitral stenosis with moderate mitral regurgitation, and pulmonary tuberculosis. Additionally, it was noted that the petitioner's wife was the nominee for the policy.

3. The petitioner responded to the notice, but his reply was not accepted. Consequently, the first respondent terminated the agency and forfeited the renewal commission. The petitioner then filed an appeal before the second respondent, who dismissed the appeal, upholding the termination of the agency and forfeiture of the renewal commission. The petitioner also submitted a memorial to the third respondent, which was

NC: 2024:KHC:18093

dismissed as well. Aggrieved by these decisions, the petitioner has filed this petition.

4. The learned counsel for the petitioner limits his challenge to the forfeiture of the renewal commission. He contends that, in the absence of any rules or regulations authorizing the forfeiture of the renewal commission for suppression of material facts, the impugned order lacks authority. He, therefore, requests the quashing of the forfeiture of the renewal commission. In support of his argument, he cites the following judgment: (a) Life Insurance Corporation of India and others v. Smt. B.V. Sujatha, dated March 25, 2022, in W.A. No. 3862/2019.

5. He further submits that the policyholder died four years after the policy's issuance. Regulations stipulate that if the policyholder dies within two years of the policy issuance, it is treated as an early claim, necessitating an investigation by the Corporation to verify whether the policy was obtained by suppressing the brother's medical condition.

6. On the other hand, the learned counsel for the respondent - Corporation argues that the petitioner submitted the proposal for issuing a medical policy to his brother, fully aware of his diagnosis with alcoholic liver disease. After conducting an investigation, the Corporation rightly terminated the agency and forfeited the renewal commission, a decision that does not warrant interference.

7. The submissions of the learned counsels for both parties have been duly considered.

8. The policy was issued to the petitioner's brother on April 28, 2009, and was subsequently renewed. He died on April 1, 2013, four years after the policy's issuance.

NC: 2024:KHC:18093

9. The Life Insurance Corporation of India (Agents) Regulations, 1992, define the recruitment method, terms, and conditions of appointment, and work of LIC agents.

10. Regulation 15 provides for the termination of an agency on account of certain disqualifications, such as being found of unsound mind by a competent court, guilty of criminal misappropriation, criminal breach of trust, cheating, forgery, or knowingly participating in or conniving in any fraud, dishonesty, or misrepresentation against the Corporation in any judicial proceeding. Regulation.

11. Regulation 16 deals with the termination of an agency for certain lapses, and sub-clause (1B) allows for termination if the agent acts in a manner prejudicial to the interests of the Corporation or its policyholders.

12. Regulation 19(1) deals with the payment of commission upon the discontinuation of an agency. It states that if an agent's appointment is terminated, except for fraud, the commission on the premiums received for the business secured by the agent shall be paid if the agent has continuously worked for the periods specified in sub-clauses (a), (b), and (c).

13. Since the petitioner's brother died four years after the policy's issuance, it is not considered an early claim. Investigations are only required if the policyholder dies within two years of the policy issuance. Information obtained under the Right to Information Act indicated that no claim investigation report was obtained.

14. Regardless, the LIC regulations do not provide for the forfeiture of the renewal commission, and LIC is obligated to pay the renewal commission as stated under Regulation 19, except in cases of fraud. Since the petitioner has not been found guilty of fraud by a jurisdictional

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court as required under Regulation 16, the impugned order forfeiting the renewal commission lacks authority and is deemed arbitrary and discriminatory.

15. The Supreme Court, in the case of Sri P.G. Natarajan, has ruled that LIC cannot withhold the renewal commission due to the appellant when fraud by the agent is not established, referencing Regulation 19.

16. The Division Bench of this Court, in W.A. No. 3862/2019, ruled that Rule 16 refers to various lapses that do not include fraud, unlike Rule 15(c). The issue at hand is covered by the Co-ordinate Bench of this Court. Therefore, there is no ground to take a different view, and the order passed by the learned Single Judge is confirmed. The Corporation, having invoked Regulation 15, is not justified in forfeiting the respondent's right to receive the commission under Regulation 19.

17. Conclusion: Based on the above considerations and legal precedents, it is evident that the impugned order passed by the respondents, forfeiting the petitioner's renewal commission, lacks authority and is arbitrary and discriminatory. The petitioner's challenge to the forfeiture of the renewal commission is upheld, and the forfeiture order is quashed.

                                  ORDER
i)    The petition is allowed.

ii) The impugned order dated 08.07.2014 passed by the respondent No.1 at Annexure - D, the order dated 24.08.2015 passed by the respondent No.2 at Annexure - G and the order dated 25.06.2016 passed by the respondent No.3 at Annexure - H are here by quashed.

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iii) The respondents are hereby directed to pay the renewal commission as stipulated under Regulation 19 of the Regulations to the petitioner within a period of three months from the date of receipt of the certified copy of this order with interest of the rate of 6% per annum from the date on which it was due till actual payment.

iv) The respondents are granted liberty to take action against the petitioner under Rule 15(c) of the Regulations, in accordance with the Law.

Sd/-

JUDGE

TIN