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2007 DIGILAW 1802 (DEL)

POONAM KHATTAR v. LIC OF INDIA

2007-09-25

S.RAVINDRA BHAT

body2007
ORDER 1. The petitioner seeks a mandatory order against the First respondent (hereafter called LIC) restraining it from deducting the credit/ commission earned by her on account of three policies known as: Keyman Insurance Policies (hereafter the policy) issued to cover the seventh respondent (hereafter called the insured). 2. The brief facts of the case are that LIC had framed the policy to insure the risk in respect of the important management personnel or decision makers in companies and organizations. The insurable interest in such persons were to be suitably evaluated and the LIC assured the payment of substantial amounts, in terms of the policy, on the happening of various eventualities - not only confined to death or accident, but additionally, other contingencies. 3. The petitioner is a LIC agent. She had got the policy issued in favour of the insured M/s. Addi Industries Ltd. In terms of the agreement between the petitioner, and the LIC she was entitled to credit of certain commission forming part of the premium paid. It is not in dispute that the said commission was credited to her account, maintained by the LIC. 4. The respondent No.6 Ms. Swati Chopra addressed a complaint on 25.4.2003, to LIC alleging interference in the issuance of the policy. She too is an LIC agent. According to the contents of the complaint, the insured had secured an earlier Keyman Policy pursuant to a proposal approved on 29.1.2003 after the medical tests prescribed by the LICs Regulations were completed. Within a day i.e. on 30.1.2003 the insured sought withdrawal of the proposal and also followed a request with a reminder dated 7.2.2003. The proposal was accordingly withdrawn and the amount refunded on 13.2.2003. Another Keyman Policy was later issued, at the petitioners behest. 5. The petitioner, on becoming aware of impending recovery proceedings addressed several representations and wrote letters to the LIC. The insure also wrote letters to the LIC; its position was that the first proposal submitted by Ms. Swati Chopra was unacceptable because that agent had allegedly made exaggerated claims. Subsequently, the same Keyman Insurance Policy was acquired by it. 6. The LIC by its impugned orders dated 30.5.2006 and 18.7.2006, directed that the credit from the concerned agent namely, the petitioner be withdrawn and that suitable credit be given to Ms. Swati Chopra, the 6th respondent. 7. Swati Chopra was unacceptable because that agent had allegedly made exaggerated claims. Subsequently, the same Keyman Insurance Policy was acquired by it. 6. The LIC by its impugned orders dated 30.5.2006 and 18.7.2006, directed that the credit from the concerned agent namely, the petitioner be withdrawn and that suitable credit be given to Ms. Swati Chopra, the 6th respondent. 7. It is contended by learned Counsel for the petitioner that the procedure adopted by the LIC was unfair. Although it was aware that the petitioner addressed several representations and even brought materials in the form of communications by the insured, it did not proceed to hear the petitioner; the order which has admitted adverse consequences, does not disclose any reason. 8. The petition is resisted by the LIC as well ns the sixth respondent, the concerned agent in whose favour the credit has now been directed. It is contended that a suitable inquiry was actually carried out before the impugned orders were made. Learned Counsel for the LIC further relied upon Regulation 8 of the LIC Agents Regulations, 1972. It was contended that Ms. Swati Chopra had approached and persuaded the insured to take out the policy and according to the records, the petitioner induced the insured to seek refund and again submit a fresh proposal for the same policy. This, it was submitted, was contrary to Regulation 8 and, therefore, the LIC was justified for reversing the credit. 9. The provision relied upon namely Para 8(3) of the Chapter entitled Functions of Agents, apparently drawn up pursuant to Regulation 8 and forming part of the Code of Conduct, reads as follows: "If an agent has already introduced a proposal and another agent interferes with the case and diverts the business to his agency by securing another proposal, it is the first agent who will be allowed the credit of the business even if the second proposals secured by the other agent results into a policy while the first proposal remains incomplete. The other agent can only get credit of the proposal introduced by him provided it results into a policy after the first proposal has become stale and is cancelled on the expiry of a period of one year from the date of completion of the proposal if under non-medical scheme or from the date of medical examination there under in other cases, or in the event of date of expiry of the period of postponement. The first agent should, however, see that every effort is made to steer the first proposal to completion, without delay so as to leave no room for another agent to interfere with the proposal." 10. The undisputed facts are that the petitioner was able to induce the insured to go in for the policy and submit a proposal after the previous proposal submitted at the behest of Ms. Swati Chopra, was withdrawn. In the facts of this case there could be some truth in the allegations levelled by the said agent. However, an important aspect cannot be lost sight of i.e. that the impugned orders undoubtedly result in adverse civil consequences. The LIC determined that the petitioner was not entitled to the commission which in the first instance it had credited in her favour. This in my opinion caused an obligation upon it to deal with her (as indeed with any other agent placed under similar circumstances), in a far and transparent manner. The pleadings do not persuade me to conclude that such a course was adopted. It is far too well settled that before making any adverse orders the State or the Executive Agency has to put the person likely to be affected on notice, outlining the allegations made, grant suitable and reasonable opportunity to be heard and thereafter proceed to make the order. The order should be a reasoned one, in such circumstances. All these safeguards were not followed in this case. 11. For the above reasons, the petition deserves to succeed. It is accordingly allowed. The impugned orders are hereby quashed. The respondent- LIC shall issue notice to the petitioner and grant her reasonable opportunity of representing against the allegations levelled; and later proceed to make appropriate reasoned orders dealing with all the contentions raised. 12. The Writ Petition is allowed in the above terms. Order dasti. Petition allowed.