K. Kannan, J.
Oral:
1. The writ petition challenges the decision of the Life Insurance Corporation rejecting the plea of the petitioner for commission earned in the business that he had canvassed and the commission payable for the premium paid by the policy holders subsequent to his voluntary resignation. In an earlier round of litigation, the writ petition in C.W.P. No.17150 of 2007 had been originally dismissed but the Hon'ble Supreme Court had directed this Court to decide the case on merits. In C.W.P. No.17150 of 2007, this Court had directed by its order dated 05.12.2008 that the Corporation will take a decision under Rule 19 on the petitioner's entitlement to the commission on voluntary resignation.
2. The Corporation, while dismissing the petitioner's claim passed a cryptic order on 07.03.2009 and the operative portion in so far as it dealt with rejection of the petitioner's claim comes through these words:-
“We have now been informed by the competent authority that after considering the matter in detail and in view of Section 44 (1) (C) of Insurance Act, 1938, the competent authority has regretted in the matter and as such you are not entitled for release of renewal commission.”
3. Learned counsel appearing for the petitioner would contend that the High Court has directed the Corporation to take a decision as per Rule 19 of the Life Insurance Regulations but the Authority have taken a decision under Section 41 (1) (C) of the Insurance Act. The attempt of the petitioner would be, therefore, to say that the Regulations framed under the LIC Act and the provisions of the Insurance Act, 1938 operate on mutually exclusive fields and the disentitlement that might arise under Section 44(1) (C) cannot govern the rights of the petitioner when it has to be considered only under Rule 19 of the Regulations.
4. The respective fields of operation of the Act and the Regulations are to be understood to answer the issue posed in this writ petition. The Insurance Company Act, 1938 deals with insurance business in India and it was an Imperial enactment, which was to consolidate and amend the law relating to the business of insurance. The Act contained several provisions that detail certain concepts relating to insurance i.e. the persons, who could be in business of insurance, the method of doing business, provisions for winding up of the business and authorities, who could lawfully operate the business of insurance. This Act is still in statute book and the Life Insurance Act, 1956 was enacted when the business of life insurance was brought exclusively to Life Insurance Corporation. The Act of 1956 provided a virtual monopoly to the Life Insurance Corporation, which was set up under the Act. The Act contains provisions relating to the establishments of business and the transfer of the existing life insurance business, which had been hitherto enforced under the Insurance Act. Section 49 of the Life Insurance Act, 1956 grants the power to make Regulations, which are exclusive in the sense that any person, who canvasses his business for life insurance, will be governed by the Regulations, which may be framed under the Act. Such Regulations had been framed in the year 1972 and the relevant clause relating to the payment of commission of discontinuance of agency is secured through the Regulation No.19. For our benefit, it is necessary to produce entire clause to understand its true import:-
"19.Payment of commission on discontinuance of agency:
(1) In the event of termination of the appointment of an agent, except for fraud, the commission on the premiums received in respect of the business secured by him shall be paid to him if such agent:
(a) has continually worked for at least 5 years since his appointment and policies assuring a total sum of not less than Rs.2 lakhs effected through him were in full force on a date one year before his ceasing to act as such agent; or
(b) has continually worked as an agent for at least 10 years since his appointment; or
(c) being an agent whose appointment has been terminated under clause (e) of sub-regulation (1) of regulation 16 has continually worked as an agent for at least two years from the date of his appointment and policies assuring a total sum of not less than Rs.1 lakh effected through him were in full force on the date immediately prior to such termination:
Provided that in respect of an absorbed agent the provisions of clause (a) shall apply if for the letters, figures and word "Rs.2 lakhs", the letters and figures "Rs.50,000" had been substantiated.
(2) Any commission payable to an agent under sub-regulation (1) shall, notwithstanding his death, be payable to his nominee or nominees or, if no nomination is made or is subsisting, of his heirs, so long as such commission would have been payable had the agent been alive.
(3) In the event of the death of the agent while his agency subsists, any commission payable to him had he been alive shall be paid to his nominee, or, if no nomination is made or is subsisting, to his heirs, so long such commission would have been payable had the agent been alive, provided he had continually worked as an agent for not less than 2 years from the date of his appointment and policies assuring a total sum of not less than Rs.1 lakh effected thrugh him were in full force on the date immediately prior to his death.
(4) If the renewal commission payable under sub-regulation (1) or sub-regulation (2) or sub-regulation (3) falls below Rs.100/- in any financial year (hereinafter referred to as the said financial year), the competent authority may, notwithstanding anything contained in the said sub-regulation, commute all commission payable in subsequent financial years for a lump sum which shall be three times the amount of renewal commission paid in the said financial year, and on the payment of such lump sum to the agent or his nominees or rheirs, as the case may be, no commission on the business effected through the agent shall be payable in the financial years subsequent to the said financial year.
5. Learned counsel appearing for the petitioner would submit that only in case of fraud, it is possible for the Corporation to forfeit the payment of commission on discontinuance of agency. It is an admitted fact that the discontinuance of agency arose by a voluntary resignation given by the petitioner on 18.05.2006. This resignation came somewhat in peculiar circumstances, when a fact had come to surface that even while he was acting as an agent, he had joined as a Sales Manager in Kotak Mahindra, a company that was engaged, inter alia, in the activities of insurance business. As a matter of fact, he had assumed charge as a Sales Manager on 25.11.2005, that was before the date when he had resigned. Now, the counsel's contention is that since the agency was not secured by any fraud and the termination of agency itself was not on account of any allegation of fraud, the question of denying to him the commission does arise. Section 19 alone is the sole repository for determination of his entitlement to commission and the Regulation that is sourced to the Life Insurance Act cannot, in any way, be understood with reference to provisions of the Insurance Act, 1938.
6. This argument, in my view, contains a fundamental flaw in assuming that the Insurance Act operates in a different field from the Regulations, which are framed under the Life Insurance Corporation Act. I have already tried to elucidate that the Life Insurance Corporation Act of the year 1956 was brought with a view to create an exclusive Corporation to deal with life insurance business, which was a genre of insurance business, which was regulated under the Insurance Act. Here, there exists no conflict between the Insurance Act, 1938 and LIC Act, 1956 except in so far as the latter Act makes specific provisions for life insurance business and it transfers the assets and business, which were being done by the insurance companies established under the Insurance Act, 1938. The Regulations that were brought later under Section 49 relate no doubt to the conduct and rights of the agent. Apart from other provisions, to the extent to which the petitioner's service is governed, there is no doubt the Regulations have a full sway but if the Regulation makes provision that he will be entitled to commission except where the termination occurs by fraud, it cannot be assumed that the petitioner can insist that no provision of the Insurance Act of 1938 would apply. It is a fundamental precept that Regulations or Rules, which are executive formalities cannot override the provisions of the Act. Regulations framed under Section 49 cannot be read to be in conflict with the provisions of LIC Act. A fortiorari, the same conflict cannot also be read with the Insurance Act itself. We have already seen that there exists no conflict between the Insurance Act and the LIC Act itself. One has given place to another. It is also pointed out by the counsel for the insurance company that Section 44, which was not originally operative, was latter extended by notification dated 23.08.1958 and the provision of Insurance Act itself was incorporated into the LIC Act by section 43 of Life Insurance Act, which reads thus:-
"43. Application of the Insurance Act.- (1) XXX XXX XXX
(2) The Central Government shall as soon as may be after the commencement of this Act, by notification in the Official Gazette, direct that the following sections of the Insurance Act shall apply to the Corporation subject to such conditions and modifications as may be specified in the notification namely:-
Sections 2D, 10, 11, 13, 14, 15, 20, 21, 22, 23, 25, 27A, 28A, 35, 36, 37, 40, 40A, 40B, 43, 44, 102 to 106, 107 to 110, 111, 113, 114 and 116A.
XXX XXX XXX XXX XXX XXX
7. In another way of saying, the LIC Act, which is an Act of the Parliament regulates its business in life insurance but it has lean out to the Insurance Act in so far as it contains fundamental provisions such as understanding the basic concept of actuaries, the nature of insurance business, the activities of insurance agents, the manner of establishing insurance business etc. If Section 44 were to be applied, the first attempt must be to see whether any portion of the Regulation under LIC conflicts with Section 44 of the Insurance Act. Regulation 19 provides for continuance of commission except in cases where there is fraud. Section 44 deals specifically with non-payment of commission in cases where there exists fraud. The language is couched in a negative form. Even if there is a clause in the agency that prohibits payment of commission after the termination of agency, such clause would not be operative. This is hemmed with three provisos that includes situation of a person, who is directly or indirectly involved in the business of selling or procuring insurance business for any other person i.e. if at any time a person even after the termination of such service, engages in insurance business then he shall not be a person competent to secure the commission. This a fundamental norm on which any regulation could come.
8. The contention of the learned counsel for the petitioner is that Regulation 19 does not contain the same prohibition and therefore, except in cases of fraud, there is no prohibition against the person from entering into any new business or associated with any other person engaged in the business of insurance. According to him, there is indeed no prohibition for a person to be in business of insurance even after termination. This contention cannot be accepted. There is a clear inverdict of his entitlement to secure commission after assumption of his entitlement in another insurance business. In this case, the moment he had taken up a position in an organization that was in the business of insurance, he became disentitled. An agent, who canvassed his business in the Life Insurance Corporation contract under normal sitaution of his unwillingness to carry on the work for any other insurance business. In this case, the termination itself has come about on account of forced resignation when it became known that he had taken up a job elsewhere, which he had not disclosed earlier to the Life Insurance Corporation. To that extent, even the act of the respondent would constitute a fraud. The ultimate decision taken by the Corporation denied to the petitioner the renewal of commission was, under the circumstances, perfectly justified and I find no reason to differ with the same.
8. The writ petition is consequently dismissed.