Sajith T, Ambily T.S. and Bindu K. George v. Life Insurance Corporation of India and others

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** ## **THE HONOURABLE MR. JUSTICE A.K.JAYASANKARAN NAMBIAR** **THURSDAY, THE 17TH DAY OF NOVEMBER 2016/26TH KARTHIKA, 1938** **WP(C).No. 25344 of 2016 (P) ----------------------------** ## **PETITIONER(S):** **-------------** ## **1. SAJITH T** **FINANCIAL SERVICE EXECUTIVE LIC OF INDIA, KOTTAYAM BRANCH OFFICE, RESIDING AT SREE ANADANAM, CHEEROTH LANE, KODIMATHA, KOTTAYAM-686 039.** **2. AMBILY T.S.** **FINANCIAL SERVICE EXECUTIVE, LIC OF INDIA, BRANCH OFFICE, KOTTAYAM, RESIDING AT THUNDIL HOUSE, EROOR SOUTH, KEERIKKAD, ALAPPUZHA-690 510.** **3. BINDU K. GEORGE,** **FINANCIAL SERVICE EXECUTIVE, LIC INDIA, BRANCH OFFICE, PUNALUR, KANDATHIL HOUSE, VETTITHITTA P.O., PIRAVANTHOOR VIA, KOLLAM-689 696.** **BY ADVS.SRI.P.RAMAKRISHNAN SMT.PREETHI KESAVAN SRI.T.C.KRISHNA SRI.C.ANIL KUMAR SMT.ASHA K.SHENOY** **RESPONDENT(S):** - **--------------** **1. LIFE INSURANCE CORPORATION OF INDIA** **REPRESENTED BY ITS CHAIRMAN, YOGAKSHEMA, PB NO. 19953, JEEVAN BHIMA MARG, NARIMAN POINT, MUMBAI-400 021.** **2. THE SENIOR DIVISIONAL MANAGER, LIC OF INDIA, DIVISIONAL OFFICE, KOTTAYAM-686 001.** **3. THE SENIOR DIVISIONAL MANAGER, LIC OF INDIA, DIVISIONAL OFFICE, THIRUVANANTHAPURAM-695 001.** **4. THE INSURANCE REGUALTORY AND** - **DEVELOPMENT AUTHORITY OF INDIA, 3RD FLOOR, PARISHRAM BHAVAN, BASHEER BAGH, HYDERABAD-500 004.** **R1-R3 BY ADV. SRI.S.EASWARAN** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 17-11-2016, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **WP(C).No. 25344 of 2016 (P)** ## **----------------------------** ## **APPENDIX** **PETITIONER(S)' EXHIBITS** **----------------------EXT. P1 TRUE COPY OF THE INITIAL ORDER OF APPOINTMENT DATED 10.1.2009 ISSUED TO THE 1ST PETITIONER BY THE 2ND RESPONDENT.** **EXT. P2 TRUE COPY OF THE INITIAL ORDER OF APPOINTMENT DATED 10.1.2009 ISSUED TO THE 2ND PETITIONER BY THE 2ND RESPONDENT.** **EXT. P3 TRUE COPY OF THE INITIAL ORDER OF APPOINTMENT DATED 22.12.2008 ISSUED TO THE 3RD PETITIONER BY THE 2ND RESPONDENT.** **EXT. P4 TRUE COPY OF THE MODIFIED LIC OF INDIA (FINANCIAL SERVICES EXECUTIVES) SCHEME.** **EXT. P5 TRUE COPY OF THE ADMINISTRATIVE INSTRUCTIONS ISSUED BY THE 1ST RESPONDENT.** **EXT. P6 TRUE COPY OF THE EXTENSION ORDER DATED 14.3.2014 ISSUED IN THE CASE OF THE 1ST PETITIONER.** **EXT. P7 TRUE COPY OF THE EXTENSION ORDER DATED 5.2.2015 ISSUED IN THE CASE OF THE 1ST PETITIONER.** **EXT. P8 TRUE COPY OF THE EXTENSION ORDER DATED 4.2.2016 ISSUED IN THE CASE OF THE 1ST PETITIONER.** **EXT. P9 TRUE COPY OF THE JUDGMENT DATED 9.3.2015 IN WA NO. 1707/2014.** **EXT. P10 TRUE COPY OF THE SCHEDULE II OF INSURANE REGULATORY AND DEVELOPMENT AUTHORITY OF INDIA (REGULATION OF CORPORATE AGAINST) REGULATION 2015.** **EXT. P11 TRUE COPY OF THE CIRCULAR DATED 9.4.2016 ISSUED BY THE 1ST RESPONDENT.** **RESPONDENT(S)' EXHIBITS -----------------------** **EXT.R1(a) TRUE COPY OF THE WRIT PETITION AS AMENDED, W.P.No.9608 OF 2014 FILED BY FINANCIAL SERVICE EXECUTIVES WITHOUT EXIHIBITS** **EXT.R1(b) TRUE COPY OF THE JUDGMENT DATED 17.11.2014 IN W.P.No.9608 OF 2014** **EXT.R1(c) TRUE COPY OF THE ORDER DATED 09.03.2016 IN SLP No.14641 OF 2015** **EXT.R1(d) TRUE COPY OF THE REPRESENTATION DATED 17.03.2015 SUBMITTED BY THE FINANCIAL SERVICE EXECUTIVE ASSOCIATION** **EXT.R1(e) TRUE COPY OF THE ORDER DATED 13.06.2016 ISSUED BY THE CHAIRMAN OF THE CORPORATION.** **EXT.R1(f) TRUE COPY OF THE FINANCIAL EXECUTIVES SCHEME, 2007.** // True copy // PA to Judge das ## **A.K.JAYASANKARAN NAMBIAR, J.** =========================================== ## **W.P.(C). No. 25344 of 2016** ===================================================== **Dated this the 17[th] day of November, 2016** ## **JUDGMENT** The petitioners, three in number, are Financial Service Executives ( _hereinafter referred to as 'FSE' for short_ ) appointed by the 1[st] respondent Corporation under a scheme known as the LIC of India (Financial Services Executive) Scheme 2007. The petitioners have approached this Court apprehending a termination of their engagement, on contract basis, as Financial Service Executives in the light of an appraisal conducted by the respondent Corporation based on Clause 23 of Ext.P4 scheme, which reads as under: ## **23. Termination of Contract** In case a Financial Services Executive does not procure the stipulated minimum New Business in two successive quarters, then his/her contract shall be terminated forthwith without giving any notice to him/her. The Contract shall also be liable for being terminated, if the Financial Services Executive commits breach of any Statutory Provisions or is found to be indulging in activities detrimental to the interests of the Corporation provided however that, before termination of contract for reasons other than for minimum business parameters as stipulated elsewhere in the scheme, a Show Cause Notice shall be issued to the FSE. The engagement of FSE shall remain suspended during the period of issuance of Show Cause Notice and final decision on the reply thereof. The Sr./Divisional Manager-in-charge of the Division shall be the Competent Authority for termination of contract on any of the grounds mentioned herein.” -2- W.P.(C). No. 28344 of 2016 2. It is the case of the petitioners that, the job description of an FSE, as apparent from Ext.P5 instructions issued by the respondent Corporation for implementation of the aforementioned scheme, mandates that the FSE shall be directly responsible for the following activities, namely: 1) procuring new business from the bank branches / other outlets allotted to them. 2) canvassing LIC's Products and closing the Sale 3) completing the documentation work for completing the proposal and getting all requirements that may be called for during the completion of proposal. 4) ensuring issue of FPR and Policy Bond to these customers. 5) providing policy servicing to the existing and new customers of these bank branches / other outlets. 6) any other job as per instructions given to them by Manager (B&AC) and the Sr.Divisional Manager of the Division from time to time. The procuring of new business from bank branches is an activity, that has since been restricted through amendments to the Insurance Regulatory and Development Authority (Licensing of -3- W.P.(C). No. 28344 of 2016 Corporate Agents Regulations). It is in particular pointed out that with effect from 01.07.2010, the Insurance Regulatory and Development Authority (Licensing of Corporate Agents) Amendment Regulations 2010 came into force, which had the effect of amending the erstwhile Regulations of 2002 to insert clauses in Regulation 9, which prevented a Corporate Agent/Corporate Insurance Executive/specified person from engaging, encouraging or entering into a contract with or having any sought of arrangement with, any person other than the specified person, to refer, solicit, generate, lead, advise, introduce, find or provide contact details of prospective policy holders in furtherance of the distribution of the insurance product. It is contended that, while the erstwhile regulations permitted persons such as the petitioners, who were functioning as FSE's, to directly contact customers of Banks for the purposes of canvasing business for the respondent Corporation, with the amendment that was introduced in 2010, the canvassing of Life Insurance business from customers of the various banks was restricted to specified persons, who had to be employees of the bank itself. By the said amendment therefore, the petitioners were prevented through the regulations from canvassing insurance business from the Bank's -4- W.P.(C). No. 28344 of 2016 customers, on behalf of the respondent Corporation and therefore, were prejudicially affected in the discharge of their duties as FSEs. It is therefore, that they contend in the writ petition that, a proposal to terminate their engagement as FSE on the ground of non performance would tantamount to ignoring the fact that they were prevented by the regulations aforementioned from discharging the duties expected from them under the contract. It is also pointed out that, the procuring of new business from the bank branches, was the only work that was allotted to them, although the contract permitted the respondent Corporation to allow other outlets also to them for the purposes of procuring business for the respondent Corporation. 3. In a counter affidavit filed on behalf of respondents 1 to 3, the stand taken is that the issue as to whether the amendment of 2010 to the Insurance Regulatory and Development Authority (Licensing of Corporate Agents Regulations) worked to the prejudice of the petitioners while meeting their targets, was the subject matter of an earlier round of litigation, which eventually culminated in a dismissal of the Special Leave Petition preferred by the Association, of which the petitioners were -5- W.P.(C). No. 28344 of 2016 members. It is stated that in the said round of litigation, the issue of prejudice caused to the petitioners on account of the amendment in the regulations aforementioned, was directly and substantially involved and therefore, the findings of the Court in the earlier round of litigation would have to be held against the petitioners in the current round of litigation on the principles of _res judicata_ . Alternatively, it is stated that the petitioners, having entered into the contract with the respondent Corporation knowing fully well that the 2010 amendments to the regulations of 2002 had the effect of disabling them from performing their obligations under the contract, could not be heard to contend at a later stage that they would not able to achieve the target levels expected of them under the contract. 4. In respect of petitioners 2 and 3 in the writ petition, it is stated by the learned counsel for the respondent that, their contracts have since been renewed for a further period, after taking note of substantial performance by them notwithstanding the regulations that were in place. It is stated that the extension of contract to the petitioners 2 and 3 was granted after exercising the power of relaxation, and taking note of the performance -6- W.P.(C). No. 28344 of 2016 already achieved by them in the changed circumstances. The averments in the counter affidavit are, therefore, confined to the case of the 1[st] petitioner in the writ petition, and in respect of the said petitioner, it is stated that, even if the services of the 1[st] petitioner as FSE are terminated, no prejudice will be caused to the said petitioner, since he always has an option of getting appointment as a Chief Life Insurance Adviser. 5. I have heard Sri.P.Ramakrishnan, the learned counsel appearing for the petitioners as also Sri.S.Easwaran, the learned Standing Counsel appearing for the respondent Corporation. 6. On a consideration of the facts and circumstances of the case as also the submissions made across the bar, I find that the appointment of the petitioners, on contract basis, by the respondent Corporation, was on the specific understanding that the petitioners would be able to discharge the duties allotted to them by the respondent Corporation. In fact, the job description of the Financial Service Executive, as obtaining in Ext.P5 instructions, makes it clear that the FSE shall be directly responsible for procuring new business from the banks' -7- W.P.(C). No. 28344 of 2016 branches/other outlets allotted to them. It is apparent, therefore, that it was open to the respondent Corporation to not only confine the outlets, from which the FSE could procure new business, to bank branches alone, but it could provide other outlets to the FSE for procuring new business relating to the respondent Corporation. It is not in dispute in the instant case that, the petitioners were not allotted any other outlet, except bank branches, for the purposes of procuring new business. Under the said circumstances, I am of the view that, proposing a termination of the contract of the petitioners, for the sole reason that they have not met the expected levels of performance as contemplated for the said business from bank branches, may not be justified in terms of Clause 23, since the respondent Corporation cannot ignore the regulatory mechanism in place regulating the insurance sector, which after 2010, made it impossible for persons such as the petitioners, with the limited role envisaged to them through the job description prescribed by the respondent Corporation, to achieve the levels of business, that was expected of them under the contract. I am of the view that it would be apposite for the respondent Corporation to revisit Clause 23 of Ext.P4 scheme, in the context of others similarly placed as the petitioners herein, who are continuing -8- W.P.(C). No. 28344 of 2016 under contracts with the respondent Corporation; in particular, the issue as to whether an appraisal can be done in respect of the business done by them, taking note of the restrictions that are in place after the amendment of the regulations in 2010. While on the subject, I must deal with the submission of the learned counsel for the respondent Corporation that the issue with regard to the prejudice caused to the petitioners, consequent to the amendment of the regulations in 2010, had already been the subject matter of litigation in an earlier round. I note in this connection that the earlier round of litigation was at the instance of an Association of FSE's, of which the 1[st] petitioner was the Secretary. The said litigation pertained to a claim by the members of the association for regularisation in the services of the respondent Corporation, taking note of their long years of service as FSEs. The writ petition preferred by the Association was rejected on the ground that, even as per the terms of appointment, the FSEs could, on expiry of the period of the contract, aspire only for appointment as direct agents of the respondent Corporation. Taking note of the said factual position, it was found by the learned Single Judge, that the issue as to whether the amended regulations would have any prejudicial effect on the discharge of duties by the FSEs, was not -9- W.P.(C). No. 28344 of 2016 germane, while considering the issue of regularisation in service as claimed by the Association of FSEs in the writ petition before him. It was under those circumstances, that the claim of the Association, with regard to regularisation in service of the respondent Corporation of its members, was negatived by this Court. An appeal preferred by the Association before a Division Bench of this Court as also an SLP preferred before the Supreme Court, did not meet with any success, and the same were also dismissed. The question then arises as to whether the issue, with regard to the prejudice that could be caused to the members of the Association consequent to the amendment of the regulations, could be considered as an issue that had a bearing on the outcome of the earlier round of litigation, so as to operate against the petitioners in the present round of litigation on the principles of _res judicata_ . In this connection, it is relevant to note that the principle of _res judicata_ as obtaining in Civil Law, which applies even to proceedings under Article 226 of the Constitution of India, operates as a bar to try the same issue once over. The principle essentially aims to prevent multiplicity of proceedings and accords finality to an issue, which directly and substantially had arisen in the former suit between the same parties or their privies and was decided and has become final -10- W.P.(C). No. 28344 of 2016 for that the parties are not vexed twice over. The underlying principle is that the exercise of litigation is to be put an end to and valuable time of the Court saved. It follows, however, that if the issue in question was not one, that was germane for deciding the lis in the earlier round of litigation, then a party to the lis cannot be prevented from raising the issue afresh in a subsequent round of litigation. The decisions of the Supreme Court, referred to at the time of hearing, proceed on the ground that the principles of _res judicata_ would operate against a litigant in a subsequent litigation, if the earlier decision was founded on the issue that is urged by the party in the subsequent litigation. (See Union of India _v._ Nanak Singh **[AIR 1968 SC 1370]** and Nagabhushanammal (Dead) by Legal Representatives _v._ C.Chandikeswaralingam **[2016 (4) SCC page 434]** ). I am therefore, of the view that the contention of the petitioners in the writ petition, with regard to the amendments in the regulations operating to their prejudice in the discharge of their contractual obligations vis-a-vis the respondent Corporation, cannot be said to be hit by the principles of _res judicata_ . 7. I next turn to the contention of the learned counsel for -11- W.P.(C). No. 28344 of 2016 the respondent Corporation that the petitioners, having accepted the terms of appointment offered to them, cannot subsequently be heard to say that they could not perform the obligations expected of them under the contract, on the ground of impossibility of performance. It is contended that, since the petitioners knew, at the time of entering into the contract, of the amended regulations, they ought to have appreciated the difficulties that would follow in the performance of their obligation while entering into the contract. Persuasive though the submission may appear at first blush, I am afraid, I cannot accept the same, since the express terms of appointment of the petitioners, as seen on a perusal of their contract, indicates that the mutual understanding between the parties was that there would be an allocation of outlets by the respondent Corporation that would enable the petitioners to discharge their obligations under the contract. As already noted above, while the job description of FSE, in the instructions of the respondent Corporation, makes it clear that the FSE had to procure business from bank branches and such other outlets as were allotted to them, it is an undisputed fact that the respondent Corporation did not allot any other outlet, other than bank branches, to the petitioners. Thus, this is not a case where the -12- W.P.(C). No. 28344 of 2016 petitioners had accepted a contract, which required them to procure business from one source alone, and the petitioners having accepted the contract, later on contended that the business from that source could not legally be procured. This is more of a case where the petitioners were assured that they would be offered an opportunity to procure business for the respondent Corporation from various sources, but were eventually allotted only one source to procure business from, which turned out to be a source from which the petitioners could not legally procure business. I therefore, cannot accept the said contention urged by the learned counsel for the respondent Corporation. In the result, I am of the view that, on the facts of the instant case, and considering the obligations that were expected of the petitioners in the contract entered into with them by the respondent Corporation, the respondent Corporation would not be justified in relying on Clause 23 of Ext.P4 scheme for the purposes of disengaging the 1[st] petitioner for alleged non achievement of the minimum business parameters. I also take note of the fact that the petitioner has been continuing in terms of the existing contract, from 05.08.2016, on the strength of an interim order against disengagement that was granted by this Court. I further, note that the petitioner can -13- W.P.(C). No. 28344 of 2016 be engaged on contract basis only upto February 2017, since the said date would mark the end of the eight year period, which is the maximum period for which a contract can be entered into with the 1[st] petitioner. Under the circumstances, I direct the respondent Corporation to permit the 1[st] petitioner to function through the entire contract period till February 2017 by not disengaging him till then. The writ petition is thus disposed as above, reiterating the caveat to the respondent Corporation that it should revisit the provisions of Clause 23 of Ext.P4 scheme in the light of currently subsisting contracts, such as the ones entered into with the petitioners herein. I also make it clear that the directions in this judgment have been rendered in the context of the peculiar factual situation obtaining in the instant case, and should not be treated as a precedent in future cases. ## Sd/- **A.K.JAYASANKARAN NAMBIAR JUDGE** das/ 17.11.2016