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Case Number

Writ Appeal No. 517 of 1978

Advocates

For Appellant.— Sri R. Arunagirinathan.
Sri M.N Krishnamani.

Judges

Sri P.R Gokulakrishnan
O.C.J
Sri V. Ratnam, J.

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Smart Summary

Concise, Structured Summary of the Opinion

Factual and Procedural Background

This is a writ appeal against the order in Writ Petition No. 4622 of 1976. The appellants are the Divisional Manager, Life Insurance Corporation of India (LIC), Madurai; the Zonal Manager, LIC, Madras; and the Chairman, LIC, Bombay. The respondent, R. Sivasathymurthi (the original petitioner in Writ Petition No. 4622 of 1976), challenged by certiorari the termination of his agency by the first appellant by an order dated 28 July 1975, which was upheld by the second and third appellants on 5 March and 4 October 1976 respectively.

Facts as stated in the opinion: the respondent had been appointed an insurance agent in 1967. In 1974 he procured two proposals for Rs. 25,000 each for two insured persons, M. Gopalakrishnan and M. Subramanian, and stated that both were medically examined by Dr. Sankaranarayanan on 23 March 1974. On 19 April 1974 the father of the insured, Mahadeva Iyer, wrote to LIC alleging misrepresentation and that no medical examinations or certificates were obtained on the stated date. LIC sought explanation; after reminders the respondent replied denying the allegations. LIC proceeded under the Life Insurance Corporation of India (Agents) Regulations, 1972 — specifically regulations 16(1)(b) and 16(1)(d) — issued a show-cause notice (17 December 1974), and after further inquiries (including from the doctor and college authorities) terminated the respondent's agency on 28 July 1975. The respondent's appeals were rejected and he filed the writ petition; the single Judge quashed the termination order on grounds summarized below, and the appellants brought this writ appeal.

Legal Issues Presented

Whether the appellants complied with the proviso to Regulation 16 of the Life Insurance Corporation of India (Agents) Regulations, 1972 by giving the respondent a "reasonable opportunity to show cause" before terminating his appointment.
Whether the disciplinary action (termination) could legitimately be founded on the materials relied on by the Corporation — specifically, ex parte statements and vague or missing documentary particulars — or whether those materials amounted only to suspicion insufficient to justify termination.
Whether reliance upon the investigations and inquiries conducted by the Corporation (including information from the doctor and college authorities) justified termination under Regulation 16(1)(b) and 16(1)(d) in the absence of full disclosure of underlying documents and adequate opportunity to the respondent to meet that material.

Arguments of the Parties

Appellants' Arguments

The show-cause notice itself afforded a sufficient and reasonable opportunity for the respondent to explain; the respondent did not request a personal hearing in his reply.
LIC conducted necessary inquiries and obtained sufficient particulars (from the medical officer and college authorities) to justify termination under Regulations 16(1)(b) and 16(1)(d) of the Agents Regulations, 1972.

Respondent's Arguments

The respondent promptly denied the allegations, explained the circumstances under which the medical examinations were said to have been done, and asserted that the complainant (Mahadeva Iyer) had misrepresented facts to recover money he had paid for the proposals.
Copies of the complaint by Mahadeva Iyer and of statements obtained from his sons were not furnished to the respondent by his immediate superior; those documents were taken "behind the back" of the respondent and their non-furnishing deprived him of a reasonable opportunity to explain or rebut the evidence.
The respondent sought a "complete enquiry" in his reply; he denied the charge in his answers to the show-cause notice.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Fedee (Private), Ltd. v. S.N. Bilgrami, A.I.R. 1960 S.C. 415	Standard of "reasonableness" in affording opportunity — the person against whom action is proposed must have a fair chance to convince the authority that the grounds for action are non-existent or insufficient; reasonableness depends on the facts and circumstances.	The Court relied on this standard to hold that mere stating of contents in a show-cause notice without furnishing the underlying documents and evidence was inadequate; the respondent was not given the fair chance contemplated by the precedent.
Union of India v. H.C. Goel, A.I.R. 1964 S.C. 354	Principle that disciplinary proceedings, though not criminal trials, require scrupulous care so that innocent are not punished; procedural care in disciplinary inquiries is essential.	Used to emphasize that disciplinary action requires careful observance of safeguards and that the Corporation should not proceed in a manner that risks punishing an innocent person without proper procedural protections.
Nand Kishore Prasad v. State of Bihar, 1978 — II L.L.N 278	Disciplinary proceedings are quasi-judicial; minimum requirement is that the tribunal arrive at its conclusion on the basis of some evidential material that definitively points to guilt; suspicion cannot replace proof even in domestic inquiries.	The Court applied this principle to find that the materials before the Corporation were meagre and vague, and at best gave rise to suspicion which is insufficient to sustain termination under the statutory regulations.

Court's Reasoning and Analysis

The Court examined the sequence of events, the materials gathered by the Corporation, the responses of the respondent, and the requirements of Regulation 16 together with established Supreme Court principles on disciplinary proceedings and natural justice.

Key elements of the Court's analysis drawn from the opinion:

The respondent promptly denied the allegations and gave an explanation of events: he stated that the complainant's father had earlier represented financial inability and asked to postpone proposals, and that when the father returned in March 1974 the respondent got the assured examined by the doctor named for the relevant date.
The doctor's letter dated 28 August 1974 indicated that the doctor's diary containing examination details was missing but promised to send it; in the circumstances the mere absence of the diary could not be treated as proof that no examination took place.
The inquiries made by LIC produced mixed responses: one college informed that Subramaniam was not in the college on 23 March 1974, and the other college did not reply. The Corporation also relied on statements taken from the proposed assured and Mahadeva Iyer.
The respondent was not furnished copies of the complaint and the statements which the Corporation relied upon. While the show-cause notice set out the contents, the Court found that furnishing only the contents without copies of the documents and evidence was "far from satisfactory" in giving a reasonable opportunity to rebut the materials.
Applying the precedents cited, the Court held that disciplinary action requires evidential material that more than merely creates suspicion. The materials before the Corporation were described as meagre and vague; the Corporation had made certain presumptions from those vague statements and acted on them.
Given the combination of (a) reliance on ex parte statements and vague particulars, (b) non-furnishing of the documents which formed the basis of the case, and (c) the lack of a procedure that allowed the respondent a fair chance to contradict the evidence, the Court concluded that the principles of natural justice and the requirement of a reasonable opportunity under Regulation 16 had not been satisfied.
The Court agreed with the single Judge's finding that natural justice was not observed and that suspension or termination could not be based on mere suspicion; accordingly the single Judge's order quashing the termination was upheld.
The Court expressly left open LIC's right to start a fresh enquiry if it chose to do so, but instructed that any such enquiry should proceed from the stage of the respondent's explanation and must afford the respondent sufficient opportunity to prove his case.

Holding and Implications

Holding: The Court dismissed the writ appeal and upheld the single Judge's order quashing the termination of the respondent's agency. The core ruling is:

DISMISSED — the writ appeal is dismissed; the termination order is quashed.

Direct consequences and implications (as stated in the opinion):

The termination order dated 28 July 1975 (and its confirmations) stand quashed as a result of the single Judge's order which this Court has affirmed.
The Life Insurance Corporation of India is permitted, if it chooses, to commence a fresh enquiry beginning from the stage of the respondent's explanation, but any such enquiry must give the respondent sufficient opportunity to prove his case and must observe the standards of natural justice set out in the opinion.
There will be no order as to costs.

Broader legal implications: The opinion applies established Supreme Court authorities to reaffirm that disciplinary action under statutory regulations requires more than suspicion; an affected person must be given a fair and reasonable opportunity, including adequate disclosure of the evidence relied upon, to meet the case against him. The opinion itself does not announce a new legal principle beyond the authorities it applied.

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Life Insurance Corporation Of India (By Divisional Manager, Madurai) And Others v. R. Sivasathyamurthi

Gokulakrishnan, O.C.J:— This writ appeal is against the order passed in Writ Petition No. 4622 of 1976. The Divisional Manager, Life Insurance Corporation of India, Madurai, the Zonal Manager, Life Insurance Corporation of India, Madras, and the Chairman, Life Insurance Corporation of India, Bombay, have filed the writ appeal. The respondent by name R. Sivasathymurthi, residing at Vikramasinga-puram, Ambasamudram taluk, Tirunelveli district, was the petitioner in Writ Petition No. 4622 of 1976. He prayed for a writ of certiorari, calling for the records of the first appellant in the order, dated 28 July, 1975, which was confirmed by the second and third appellants on 5 March and 4 October, 1976, respectively, and for quashing the same.

2. The short facts are as follows: The respondent herein was appointed as the insurance agent in the year 1967. In 1974, he procured two proposals for insurance, each for a sum of Rs. 25,000, in respect of two individuals, M. Gopalakrishnan and M. Subramanian. The respondent has stated that the lives assured were medically examined by Dr. Sankaranarayanan on 23 March, 1974. On 19 April, 1974, one Mahadeva Iyer, father of the said assured wrote a letter to the Life Insurance Corporation of India that the respondent secured the proposals on the basis of misrepresentation and fraud. According to the said Mahadeva Iyer, there was absolutely no medical examination of the insured who were then students and no medical certificates were also obtained on the date stated by the respondent. On receipt of this letter, on 10 May, 1974, the Life insurance Corporation of India, Tenkasi (Madurai), called for explanation from the respondent. To this letter, the respondent did not reply. Then to the reminder on 24 May, 1974, the respondent replied on 28 May, 1974, denying the allegations made in those letters. It is pertinent to note here that the service conditions of the respondent herein are governed by the Life insurance Corporation of India (Agents) Regulations, 1972. Regulation 16 therein deals with termination of agency for certain lapses. It is in respect of lapses contained in regulations 16 (b) and 16 (d), action was taken against the respondent hereinafter complying with the pro viso to regulation 16. Since the Life Insurance Corporation of India was not satisfied with the explanation of the respondent, it issued a show-cause notice on 17 December to which the respondent replied denying the charge. Even though the respondent did not ask for personal hearing in his reply, dated 29 December, 1974, he has requested them to make complete enquiry regarding the allegations levelled against him. The first applleant after calling for particulars from the medical officer, who is alleged to have examined the insured and from the college authorities, passed orders on 28 July terminating the agency of the respondent. The appeal preferred by the respondent to the second appellant was rejected on 5 March, 1976, and a further memorial to the Chairman, Life Insurance Corporation, the third appellant herein was also rejected by him on 4 October, 1976. In these circumstances, the respondent filed the writ petition as aforesaid challenging the legality of the order of termination passed on 28 July, 1975.

3. The learned single Judge of this Court after elaborately discussing the facts of the case observed that the Corporation seemed to have taken ex parte statements from the two proposes and Mahadeva Iyer and relied on the same without giving an opportunity to the respondent to disprove the allegations made against him, that the regulation required that the agent shall be given a reasonable opportunity to show cause against the termination, that would mean that the allegations against him should be directly put to him with the evidence in support of the same and he should be given enough opportunity to contradict such evidence, and that as the principles of natural justice have not been followed in this case he consequently allowed the writ petition by quashing the impugned order. It is as against this, the present writ appeal has been filed.

4. It is seen from the records that the respondent has promptly denied the charge that there was no medical examination of the assured by Dr. Sankaranarayanan on the date mentioned in the show-cause notice, since at that time one of the assured was studying in Suratkal, South Canara, Karnataka State, and the other was studying in Agricultural College at Dhampur in Uttar Pradesh State. He has stated that when he took the assured to Dr. Sankaranaryanan, the father of the assured Mahadeva Iyer represented to him that he had no money and requested him to postpone the proposal to March 1974, and when Mahadeva Iyer approached him in March 1974, for the proposal, the respondent got them examined by the same doctor in March 1974, and made the proposal. He has categorically stated that when the assured were examined by the doctor on the relevant date, they were not in their respective colleges as alleged by Mahadeva Iyer and it is only Mahadeva Iyer who misrepresented the fact to get back the amount paid by him for the proposal. It is seen from the letter of the doctor, dated 28 August, 1974, that the diary in which he has noted down the details of the examination of the assured was found to be missing and, when it is found, the doctor has promised to send the same. In the face of this reply by the doctor, it cannot be presumed that there was no examination of the assured by the doctor. Then, the records show that one of the colleges informed that Subramaniam was not in the college on 23 March, 1974, and the other college in which Gopalakrishnan was studying did not send any reply to the letter sent by the insurance company. On the above materials, the first appellant has passed the impugned order which was confirmed by the second and the third appellants.

5. Sri Arunagiri, learned counsel for the appellants, submits that sufficient opportunity has been given in the show-cause notice itself and that the respondent has not asked for any personal enquiry in his reply statement. According to the learned counsel, the authorities of the Life Insurance Corporation after making necessary enquires and gathering sufficient particulars, have correctly terminated the agency of the respondent as provided under regulations 16 (b) and 16 (d) of the Life Insurance Corporation of India (Agents) Regulations, 1972, and a reasonable opportunity to show cause against such termination was given to the respondent as per proviso to regulation 16.

6. Regulation 16(1) is as under:

“The competent authority may, by order, determine the appointment of an agent.”

Regulations 16(1)(b) and 16(1) (d) are as follows:

“(b) if he acts in a manner prejudicial to the interests of the Corporation or to the interests of its policy holders;

(d) if it is found that any averment contained in his agency application or in any report furnished by him as an agent in respect of any proposal is not true.”

The proviso to the above regulation reads as follows:

“Provided that the agent shall be given a reasonable opportunity to show cause against such termination.”

It is, therefore, clear that the said proviso to the regulation specifically states that reasonable opportunity to show cause against such termination has to be given.

7. Sri Krishnamani, learned counsel for the respondent, states that the copy of the complaint by Mahadeva Iyer and the copies of the statements obtained from the sons of Mahadeva Iyer were not given to him by the immediate superior of the respondent which would afford him reasonable opportunity to explain away the complaints against him before the impugned order was passed.

8. Sri Arunagiri, learned counsel for the appellants, submits that no doubt copies of these documents were not furnished but the contents of the same were made known to the respondent herein in the show-cause notice itself. Such explanation in our view is far from satisfactory.

9. Fedee (Private), Ltd. v. S.N Bilgrami [A.I.R 1960 S. C 415], cited by the learned counsel for the appellants clearly brings out the standard of reasonableness in affording such opportunity. The Supreme Court at page 419 observes thus:

“There can be no invariable standard for ‘reasonableness’ in such matters except that the Court's conscience must be satisfied that the person against whom an action is proposed had a fair chance of convincing the authority who proposes to take action against him that the grounds on which the action is proposed are either non-existent or even if they exist they do not justify the proposed action. The decision of this question will necessarily depend upon the peculiar facts and circumstances of each case, including the nature of the action proposed, the grounds on which action is proposed, the material on which the allegations are based, the attitude of the party against whom the action is proposed in showing cause against such proposed action, the nature of the plea raised by him in reply, the requests for further opportunity that may be made, his admissions by conduct or otherwise of some or all the allegations and all other matters which help the mind in coming to a fair conclusion on the question.”

In Union of India v. H.C Goel [A.I.R 1964 S.C 354], cited by the learned counsel for the respondent the Supreme Court has specifically held thus:

“It may be that the technical rules which govern criminal trials in Courts may not necessarily apply to disciplinary proceedings, but nevertheless, the principle that in punishing the guilty scrupulous care must be taken to see that the innocent are not punished applies as much to regular criminal trials as to disciplinary enquiries held under the statutory rules.”

In Nand Kishore Prasad v. State of Bihar [1978 — II L.L.N 278], the Supreme Court had occasion to deal with the principles that have to be followed in disciplinary matters. The Supreme Court has held as follows in Para. 18, at page 282:

“Before dealing with the contentions canvassed, we may remind ourselves of the principles, in point, crystallized by judicial decisions. The first of these principles is that disciplinary proceedings before a domestic tribunal are of a quasi-judicial character; therefore, the minimum requirement of the rules of natural justice is that the tribunal should arrive at its conclusion on the basis of some evidence, i.e, evidential material which with some degree of definiteness points to the guilt of the delinquent in respect of the charge against him. Suspicion cannot be allowed to take the place of proof eyen in domestic inquiries….”

10. Considering the abovesaid principles laid down by the Supreme Court, it is clear from the facts placed before us for the appellants that no conviction or action could be taken with such meagre materials. It has been held in the above decision that suspicion cannot be allowed to take the place of proof even in domestic enquiries. It is all the more so when actions are being taken in pursuance of the statutory regulations for taking such disciplinary proceedings. Thus, the reasonable opportunity to show cause against such termination contained in the proviso to regulation 16 definitely visualizes the furnishing of various copies of documents to the respondent which were taken behind the back of the respondent herein. Even apart from these statements, the particulars from the college authorities and the doctor concerned which were taken for the purpose of establishing the specific allegation against the respondent, are not definite but are vague. On the other hand, the appellants herein have presumed certain things from such vague statements referred to above and passed the impugned order. In this context the Supreme Court has held that it may, at best create a suspicion, but suspicion itself cannot take the place of proof and in this case on suspicion the agency of the respondent has been terminated.

11. Taking all these aspects into consideration the learned Judge of this Court has correctly held that the principles of natural justice have not been followed either by the first appellant initially or by the second and third appellants subsequently. We are in complete agreement with the said findings of the learned single Judge of this Court.

12. In the circumstances, we are of opinion that the appeal has to be dismissed, as there are no materials or ground to interfere with the findings of the learned single Judge. However, we make it clear that it is open to the Life Insurance Corporation of India to start the enquiry, if it so desires, from the stage of the explanation given by the respondent and complete the same after giving the respondent sufficient opportunity to prove his case.

13. Accordingly, the writ appeal is dismissed but there will be no order as to costs.

Life Insurance Corpo... v. R. Sivasathyamurthi