2016 (7) TMI 1534 - HC - Indian Laws

Entitlement of a former agent of LIC to get renewal commission viz., commission on the renewal premium on the policies effected through him - Interpretation of statute - Insurance Act - Whether the second limb of clause (c) of the proviso to Section 44(1) of the Act is one which would also apply to the other different clauses thereunder viz., clauses (a), (b), (bb) and (bbb) introduced to that proviso for application to LIC so as to import the said embargo even in respect of persons falling under clauses (a) to (bbb)? HELD THAT - A purposive construction of the proviso to Section 44(1) of the Act applicable to LIC on the question of applicability of the second limb of clause (c), would always acknowledge and accept the construction that it applies to all categories of former LIC agents falling under clauses (a) to first limb of Clause (c) of the proviso to Section 44(1) of the Act as applicable to LIC. In the light of the discussions as above, we are inclined to answer the referred question in the affirmative - the second limb of clause (c) of the proviso to Section 44(1) of the Act is one which would apply to the other different clauses thereunder applicable to LIC viz., clauses (a), (b), (bb) and (bbb) introduced to that proviso so as to import the said embargo even in respect of persons falling under clauses (a) to (bbb). Whether we should finally decide the appeal as also the review petition or return them to the Division Bench? - HELD THAT - Since the appellant is a person who falls under clause (c) of the proviso to section 44(1) and became disentitled to renewal commission owing to the violation of the condition therein it has to act as a disqualification disentitling him from claiming renewal commission under any of the heads, going by the way we answered the referred question - there is no illegality or error in the judgment of the learned Single Judge warranting an appellate interference especially in view of the manner in which we answered the reference and also taking note of the fact that we have dismissed the review petition filed against W.A. No. 2712 of 2009 - the writ appeal is liable to fail. Appeal dismissed.

Summary

Issues Involved:
1. Applicability of the second limb of clause (c) of the proviso to Section 44(1) of the Insurance Act, 1938, to other clauses under the same proviso.
2. Entitlement of former LIC agents to renewal commission after joining a competitor insurance company.
3. Constitutionality of the prohibition under Section 44(1)(c) of the Insurance Act.

Detailed Analysis:

1. Applicability of the Second Limb of Clause (c) of the Proviso to Section 44(1) of the Insurance Act:
The primary legal question was whether the second limb of clause (c) of the proviso to Section 44(1) of the Insurance Act, 1938, which prohibits former LIC agents from soliciting or procuring insurance business for another person, applies to other clauses (a), (b), (bb), and (bbb) under the same proviso. The court examined the syntax and punctuation of the proviso, noting that semicolons and the conjunction "or" between clauses indicate that they form a single sentence with different eligibility criteria for renewal commission. The court concluded that the second limb of clause (c) acts as an embargo applicable to all clauses under the proviso, ensuring that former LIC agents who solicit or procure insurance business for competitors are disqualified from receiving renewal commission, regardless of which clause they fall under.

2. Entitlement of Former LIC Agents to Renewal Commission:
The court addressed the entitlement of former LIC agents to renewal commission after joining a competitor insurance company. The appellant and the review petitioner argued that the embargo under clause (c) should only apply to agents under clause (c) and not to those under other clauses. However, the court found that the second limb of clause (c) applies to all former LIC agents eligible for renewal commission under any clause, thereby disqualifying those who join a competitor. This interpretation avoids arbitrary discrimination and ensures equal application of the law to all former agents.

3. Constitutionality of the Prohibition under Section 44(1)(c) of the Insurance Act:
The appellant sought to challenge the constitutionality of the prohibition under Section 44(1)(c) of the Insurance Act, arguing that it violated Article 14 of the Constitution by creating an anomalous situation where agents with lesser service could join competitors and still receive renewal commission, while those with more than ten years of service could not. The court rejected this contention, holding that the restriction is reasonable and not illegal. The court emphasized that the appellant failed to provide specific grounds for challenging the constitutional validity of the provision, and thus, the prohibition stands as a reasonable restriction.

Final Decision:
The court dismissed both the review petition and the writ appeal, affirming the judgments of the learned Single Judge and the Division Bench. The court held that the second limb of clause (c) of the proviso to Section 44(1) applies to all clauses under the proviso, disqualifying former LIC agents who join competitors from receiving renewal commission. The court also upheld the constitutionality of the prohibition under Section 44(1)(c) of the Insurance Act, finding it to be a reasonable restriction.