9911796707
TMI Blog2011 (3) TMI 1807X X X X Extracts X X X X X X X X Extracts X X X X ..... hile exercising powers vested upon them under Section 14 of the Insurance Regulatory and Development Authority Act, 1999 (hereinafter referred to as the IRDA Act ), read with Regulation 14(1) of the Insurance Regulatory and Development Authority (Insurance Brokers) Regulations, 2002 (hereinafter referred to as the IRDA Regulations ), refused to grant renewal of license earlier granted to the first Petitioner to act as a composite broker. 3. The first Petitioner is a company registered in India on 21st October, 2000 by Respondent No. 6, Willis Europe, B.V., which is a Company incorporated under the laws of Netherlands. The first Petitioner for the period from 2003 till 18th August, 2010 was a joint venture amongst the second Petitioner (hereinafter referred to as the Bhaichand ) which held 74% of the issued capital. Respondent No. 6 held 26 per cent of the issued capital of the company. The first Respondent, IRDA, established under Section 3(1) of the IRDA Act is the authority within the meaning of the IRDA Regulations. The IRDA consists of a Chairman and not more than 5 whole time members and not more than 4 part time members. The second and third Respondents are permanent m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the joint venture agreement entered into between the first Petitioner and the sixth Respondent. However, the Division Bench observed that as per Regulation 14 (1) of the IRDA Regulations, a reasonable opportunity of being heard is to be given to the applicant and the application has been submitted by the first Petitioner way back on 16th February, 2009 and if the parties have fallen apart thereafter, it would not be permissible for the Court to say that Respondent No. 6 must also be heard. The Division Bench thereafter disposed of the said writ petition by holding that the show cause notice dated 6th January, 2010 and the impugned order which was challenged in that writ petition stood withdrawn by the authority and the renewal application dated 16th February, 2009 stands restored to the file of the first Respondent. The Committee of two members of first Respondent was directed to hear and decide the renewal application dated 16th February, 2009 on its own merits, without being influenced by any remarks mentioned in the impugned order in the writ petition. The Division Bench directed the Committee to take an appropriate decision within the stipulated time. As stated earlier, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsel further submitted that by deciding the renewal application in such a casual manner, the fundamental right of the Petitioners under Article 19(1)(g) of the Constitution has been violated and the impugned order resulted into an economic death of the Petitioners as they would be out of insurance business in which they actively associated. It is further submitted that in the past the Petitioners license was also renewed in 2006 and the grounds mentioned in the impugned order were also available at that time, still the same were not taken into consideration and the license was renewed in 2006. The said license is not renewed on mala fide grounds as, according to the learned Counsel, the Chairman of the first Respondent was keeping bias and grudge against the Petitioners in connection with the dispute between Bhaichand and the Export Credit Guarantee Corporation of India Limited ( ECGC ). It is submitted that Bhaichand had some transactions with ECGC for which some dispute was going on which was ultimately settled before this Court. The said fact weighed with the Chairman of the first Respondent and same has resulted into non renewal of the license of the Petitioners. It is submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relied upon the Regulations framed by the first Respondent in this behalf. It is pointed out by Mr. Seervai that assuming that there was some dispute between Bhaichand and ECGC, that ground should not have weighed with the authority in taking such a view against the Petitioners in the matter of renewal of the license. It is submitted that even otherwise the grounds which have been taken into consideration for non renewal are the grounds which were in existence prior to 2006 and so far as the point regarding ECGC is concerned, the same was taken for the first time in 2008. It is submitted that even if there is any complaint against Bhaichand, it is not a ground for not renewing the license of the first Petitioner. It is further submitted that in any case, the dispute between Bhaichand and ECGC is already settled by filing consent terms, which are at page 458 of the compilation. It is further submitted that at the time of so called hearing, nothing was brought to the notice of the Petitioners in any manner otherwise the Petitioners could have given explanation, if it was brought to the notice of the Petitioners that authority may not renew the license on certain grounds. It is submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against Respondent No. 6. 8. Mr. Andhyarujina, learned Counsel appearing for Respondent Nos. 1 to 4, in his turn has submitted that since the impugned order is passed at Hyderabad, this Court is not having territorial jurisdiction as the matter is required to be filed at Hyderabad. It is further submitted by Mr. Andhyarujina that no cause of action has arisen within the territorial jurisdiction of this Court and this petition is not maintainable. It is further submitted that simply because this Court has entertained the petition when it came at the show cause notice stage, it cannot be said that the first Respondent has waived the point of jurisdiction. It is further submitted by Mr. Andhyarujina that the Petitioners' have a right to make representation under the IRDA Regulations and in view thereof, this Court may not entertain the petition. It is further submitted that no bias is attributed to the members of the Committee who passed the impugned order. It is submitted that it is not correct to say that the Chairman was biased or having malice against the Petitioners in any manner. It is further submitted by Mr. Andhyarujina that reasonable opportunity of being heard was gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er submitted that in any case if this Court is of the opinion that the first Petitioner is required to be given further opportunity of being heard in the matter of renewal application, first Respondent is willing to give such hearing and is also willing to take decision with open mind and if appropriate things are brought to the notice of the first Respondent while deciding such renewal application, first Respondent may consider the said aspect objectively as there is no question of any bias on the part of the first Respondent. Mr. Andhyarujina, however, submitted that if the matter is remitted back, the authority shall reconsider the same and pass an appropriate order after giving an opportunity of hearing to the Petitioners and whatever material is placed, the same shall also be considered again. Mr. Andhyarujina further submitted that this Court cannot straightway issue mandamus directing the authority to renew the license and in a given case even if such directions can be given, this is not a fit case which justifies giving such mandatory direction directing the first Respondent to renew the license as at the most this Court may ask the first Respondent to reconsider the matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of this Court. We are, therefore, of the opinion that substantial part of the cause of action can be said to have arisen within the jurisdiction of this Court and the petition before this Court is maintainable. At this stage Mr. Andhyarujina has relied upon the decision of the Supreme court in the case of State of Rajasthan and Ors. v. Swaika Properties and Anr. 1 (1985) 3 SCC 217 In the aforesaid case, the proceedings regarding acquisition of the land were initiated by Rajasthan State Government. The land was located at Jaipur. The Company was located at Calcutta. The Company representative appeared before the authority at Jaipur. The acquisition of the land was recommended by the authority to the State Government. The notification acquiring the land was issued by the Rajasthan State Government. The petition challenging the acquisition proceedings and notification was filed in the Calcutta High Court and considering the facts of the case it was held that the petition before the Calcutta High Court was not maintainable. In the aforesaid case it was noted that the cause of action arose in Jaipur. As pointed out earlier, the land was situated at Jaipur. The notification was issued at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e offer of the Appellant Bank. Subsequently the Government of the State of Sikkim rejected the said acceptance. Writ Petition was filed by the Appellant at Punjab and Haryana High Court. The said petition was dismissed by the High Court for want of territorial jurisdiction. The Supreme Court found that no part of the cause of action arose within the territorial jurisdiction of the High Court at Chandigarh. It was found that the facts pleaded by the Appellant were not essential, integral or material facts so as to constitute a part of the cause of action within the meaning of Article 226(2) of the Constitution. 15. On behalf of the Petitioners, Mr. Seervai on the point of jurisdiction has relied upon the decision of the Supreme Court in the case of Navinchandra N. Majithia v. State of Maharashtra and others (2000) 7 SCC 640. It has been held that the High Court will have jurisdiction, if any part of the cause of action arises within the territorial limits of its jurisdiction, even though the seat of Government or authority or residence of person against whom direction, order or writ is sought to be issued is not within the said territory. It was held that writ petition filed befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the territorial limits of the Court's jurisdiction and such infringement may take place by causing him actual injury or threat thereof. 19. Considering the issue involved in the matter and considering the fact that the office of Respondent No. 1 is located at Hyderabad from where the decision is required to be taken in connection with the renewal application, the person who is likely to be affected in connection with his business on the basis of such decision taken by the head office can approach the Court where he is affected by such decision. By no stretch of imagination it can never be said that no part of the cause of action arose within the territorial jurisdiction of this Court. We accordingly negative the preliminary contention raised by Mr. Andhyarujina and, in our view, the petition filed before this Court is maintainable. 20. The next submission is regarding alternate remedy. It is required to be noted that in view of the fact that the Court has already decided to dispose of the matter finally, this Court has heard the matter on merits at length and considering the fact that there are serious allegations even against the Chairman of the first Respondent, of whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the first Petitioner invested the money belonging to Insurance Bank Account in fixed deposits during the financial years 2003 2004, 2004 2005, 2005 2006 and 2006 2007 and thereby earned interest. Thus the broker violated the provisions of Regulation 23 of the Regulations and the said fact has been admitted by the Petitioners in their letter dated 23rd July, 2010 to the authority. Accordingly, on the aforesaid grounds, the Respondent No. 1 refused to grant renewal license. 22. Mr. Seervai vehemently argued that the factum regarding dispute between Bhaichand and ECGC is absolutely irrelevant in the matter of renewal of license. It is submitted that since irrelevant point has been considered, the order deserves to be set aside. It is further submitted that this fact was not brought to the notice of the Petitioners when renewal application was heard by the Committee of the first Respondent. Form A of Schedule 1 of IRDA Regulations prescribes the format in connection with the grant of license as an insurance broker and/or for renewal of license. It is not in dispute that the dispute between Bhaichand and ECGC was settled by a consent decree in Suit No. 1268 of 2009 and even the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n not renewing the license on the said ground. The rejection of the renewal application on the aforesaid ground about non disclosure of the dispute between Bhaichand and ECGC, therefore, was not a relevant aspect which was required to be considered at the time of considering the renewal application. In any case, it is not in dispute that the said fact was not brought to the notice of the first Petitioner when renewal application was under consideration and when Petitioner No. 1 was given hearing in this behalf. Considering the material on record and other relevant documents, we are of the opinion that rejection of the renewal application on the aforesaid ground is not justified. 24. However, there is an additional ground for rejecting the renewal application and that is in connection with the Petitioners having invested the only belonging to the Insurance Bank Account in FD during the financial years 2003 2004, 2004 2005, 2005 2006 and 2006 2007 and thereby earned interest. In this connection, it is alleged that the Petitioner No. 1 has violated Regulation 23 of IRDA Regulations. The said Regulation reads as under. 23. Segregation of insurance money: (1) The provisions of Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arate account. He submits that the Petitioners also admit the said fact. Mr. Seervai however submitted that the said fact was also there even earlier in 2006, yet the license was renewed. He states that other brokers are also doing similar thing by putting the interest in their own FD account. So far as this aspect is concerned, at the time of hearing of the renewal application, it should have been brought to the notice of the first Petitioner so that the first Petitioner could have pointed out the same to the Respondents. Hearing of renewal application is not a formality but is a matter of substance as it affects the rights of the Petitioners to carry on its business. It is required to be noted that there is reference to certain documents in para 3 (d) of the impugned order. The first Respondent should have brought to the notice of the Petitioners by informing the first Petitioner to give its explanation in connection with the aforesaid aspect so that the Petitioners, if they had any reasonable or plausible explanation, could have furnished the same. Reference of some correspondence is made without bringing the same to the notice of the Petitioners and without placing the same bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at statements have been made affecting him: and then he must be given a fair opportunity to correct or contradict them. This appears in all the cases from the celebrated judgment of Lord Loreburn L.C. in Board of Education v. Rice (1911) AC 179, 182: 27 T.L.R. 378 J.L down to the decision of Their Lordship's Board in Ceylon University v. Fernando (1960) 1 W.L.R. 223: (1960) 1 All E.R. 631 P.C It follows, of course, that the judge or whoever has to adjudicate must not hear evidence or receive representations from one side behind the back of the other. The court will not inquire whether the evidence or representations did work to his prejudice. Sufficient that they might do so. The Court will not go into the likelihood of prejudice. The risk of it is enough. No one who has lost a case will believe he has been fairly treated if the other side has had access to the judge without his knowing. ... Applying these principles, their Lordships are of opinion that Inspector Kanda was not in this case given a reasonable opportunity of being heard. They find themselves in agreement with the view expressed by Righby J. in these words In my view, the furnishing of a copy of the findings o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r us to again remand the matter to the Appellants to consider the grant of No Objection Certificate to the Respondent/trust as that will only lead to further delay, and further arbitrariness. 28. Reference is required to be made to the decision of the Supreme Court in the case of Al Karim Educational Trust and Anr. v. State of Bihar and others (1996) 8 SCC 330 wherein it has been held as under. 11. In the matter of grant of affiliation, it is ordinarily for the State Government after consulting the Medical Council of India to arrive at a decision. However, if it is found that the affiliation is being withheld unreasonably or the decision is being prolonged for one reason or the other, this Court would, though reluctantly, be constrained to exercise jurisdiction. We must make it clear that we are not diluting the importance of fulfilling the essential prerequisite set by the Medical Council before granting recognition. The facts of this case are very special and exceptional . 12. In the totality of the circumstances disclosed in the case and having regard to the fact that at each stage new deficiencies are being pointed out, the latest being the report dated 28 6 1995 (ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the High Court cannot itself perform the functions of a statutory authority. Thus in G. Veerappa Pillai v. Raman and Raman Ltd. AIR 1952 SC 192 it was held that the High Court under Article 226 of the Constitution of India cannot direct the Regional Transport Authority to grant bus permits as the grant of the permit is entirely within the discretion of the Regional Transport Authority. Of course, if the Regional Transport Authority rejects the application for grant of permits arbitrarily or illegally, the High Court can s et aside the order of the Regional Transport Authority and direct the Regional Transport Authority to pass a fresh order in accordance with law, but the High Court cannot itself order grant of permits, in that case it will be taking over the function of the Regional Transport Authority. 30. Considering the case law on the subject, we are of the opinion that the court can, in an appropriate case, issue mandamus directing the authority to take a particular decision such as directing them to renew license or in a service matter to pass a particular order regarding punishment. However, this is not one of such an exceptional case that this Court would like to issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity of hearing to the Petitioner and such decision may be communicated to the Petitioners forthwith. 32. Mr. Seervai has frankly submitted that since the Petitioners are aware about the ground on which renewal application is not granted, it would not be necessary to give any show cause notice to the Petitioners and asking explanation regarding Regulation 23 of the IRDA Regulations. The Petitioners may submit its appropriate explanation regarding Regulation 23 by giving written submission in writing. As pointed out earlier, if any additional ground on which the authority wants to rely and if there is any legal impediment in passing the order of renewal, the same may be brought to the notice of the Petitioners. Mr. Seervai submits that while taking such a decision, Advocates may be heard. We are not in a position to accede to the said request. However, if written submissions are given, the authority shall consider the same and appropriate decision may be taken within four weeks from today in accordance with law. We are sure the authority will not ask for further extension in this behalf. 33. Rule is made absolute to the aforesaid extent with no order as to costs - - TaxTMI ..... X X X X Extracts X X X X X X X X Extracts X X X X
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