Allowed

Evansu P.S v. Life Insurance Coporation of India

Kerala HC4 Jan 2018WP(C)/20108/2017

Case brief

AI extract

What is this about?

The court set aside the termination order as it was passed by the Zonal Manager without a personal hearing to the petitioner, violating the principle of natural justice mandated by a prior judgment, despite a hearing conducted by a subordinate officer.

What did the court decide?

Impugned termination order set aside; respondent free to pass fresh orders after affording a personal hearing.

Evansu P.S Vs Life Insurance Coporation of… — Pension and Retirement Benefits | Kerala HC (2018)

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT:

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THE HONOURABLE SMT. JUSTICE P.V.ASHA

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THURSDAY, THE 4TH DAY OF JANUARY 2018 / 14TH POUSHA, 1939

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WP(C).No. 20108 of 2017

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PETITIONER

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EVANSU P.S, S/O.SUKUMARAN, AGED 33 YEARS, RESIDING AT PULIKULAM PANAVILA, KOONAYIL, SOUTH PARAVOOR, KOLLAM-691301.

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BY ADVS.SRI.R.LAKSHMI NARAYAN

SMT.R.RANJINI

SRI.M.ASHOK KINI

RESPONDENT(S)

1. LIFE INSURANCE COPORATION OF INDIA, REPRESENTED BY ITS CHAIRMAN, AND MANAGING DIRECTOR, CENTRAL OFFICE, MUMBAI-400001

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2. ZONAL MANAGER,

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LIC OF INDIA, SOUTH ZONAL OFFICE, PB NO.2450,153 , ANNASALAI, CHENNAI-600002.

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3. SENIOR DIVISIONAL MANAGER, LIC OF INDIA, JEEVAN PRAKASH , PATTOM, THIRUVANANTHAPURAM-695001.

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BY ADV. SRI.S.EASWARAN,SC

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THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 04-01-2018, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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K.V.

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WP(C).No. 20108 of 2017 (K)

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APPENDIX

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PETITIONER(S ------------	)' EXHIB --------	ITS ----
EXHIBIT P1	THE 25/6	PHOTOCOPY /2014	OF THE	SHOW-CASUE NOTICE DTD
EXHIBIT P2	THE	PHOTOCOPY	OF REPR	ESENTATION DTD 29/7/2014
EXHIBIT P3	THE (REV SERV	PHOTOCOPY ISION OF ICE),2009	OF DEV CERTAIN .	ELOPMENT OFFICERS TERMS AND CONDITIONS OF
EXHIBIT P4	THE WPC	PHOTOCOPY NO.18220	OF THE OF 2015	JUDGENT DTD 26/10/2015 IN
EXHIBIT P5	THE 9/12	PHOTOCOPY /2015	OF THE	REPRESENTATION DTD
EXHIBIT P6	THE	PHOTOCOPY	OF THE	NOTICE DTD 9/1/2016
EXHIBIT P7	THE	PHOTOCOPY	OF NOTI	CE DTD 8/4/2017
EXHIBIT P8	THE	PHOTOCOPY	OF THE	EXPLANATION DTD 15/5/2017
EXHIBIT P9	THE 31/5	PHOTOCOPY /2017	OF THE	TERMINATION ORDER DTD
EXHIBIT P10	THE	PHOTOCOPY	OF THE	LETTER DTD 20/4/2015
EXHIBIT P11	THE 10/3	PHOTOCOPY /2017	OF DISA	BILITY CERTIFICATE DTD
RESPONDENTS ------------	EXHIBITS --------	: NIL -

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K.V. P.S.TO JUDGE

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P.V.ASHA, J.

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W.P.(C) No.20108 of 2017-K

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Dated this the 4^th day of January, 2018

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JUDGMENT

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Petitioner challenges Ext.P9 order of termination on the ground that the 2^nd respondent passed the order without affording him an opportunity of hearing, despite the direction in Ext.P4 judgment.

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Petitioner was working as a Development Officer under the respondents at Chathannoor branch. Ext.P1 show cause notice was issued by the Senior Divisional Manager-the 3^rd respondent, on 25.6.2014, informing him that his cost ratio of the relevant appraisal years exceeded 38% of the eligible premium of the year which ended on 31.5.2014 and that in the preceding year which ended on 31.5.2013 it was 112.74% and in 2014 it was 115.17% which

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exceeded the limit of 38%. Petitioner was directed to show cause against the proposed termination from service under rule 7 of Ext.P3 -the Life Insurance Corporation of India (Revision of Certain Terms and Conditions of Service) Rules, 2009 (hereinafter referred to as “the Rules” for short) along with discrepancies if any in the figures, failing which it was informed that the representation would be rejected and services would be terminated without any further notice. Petitioner

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thereupon submitted Ext.P2 explanation. He pointed out that in the year 2012 the cost ratio was 21% and his probation was declared and he was confirmed on account of the business performance and out of the 17 Probationary Development Officers, he was one among the 9 who got confirmation. He stated that despite the changes made by the Insurance Regulatory Development Authority (IRDA), in the selection process of agents, he was able to recruit 8 agents, which amounts to 23% of the total recruitment of the branch. It was also pointed out that LIC has withdrawn all the 56 plans on 31.12.2013, on account of the new regulations of IRDA and there were only a few products, which were introduced in a periodic manner in the last 5 months of his appraisal. He stated that he was taking tremendous effort for recruitment and retention of agency and he has been working hard. Pointing out that he belongs to a middle class family and he has to look after a family consisting of his wife, parents and small children, he requested to take a lenient view.

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While so petitioner approached this court in W.P.(C) No 29963 of 2014 challenging sub rule 2 and 8 of rule 6 and sub rule 1 of rule 7 of Ext.P3 Rules on the ground that it affected his fundamental rights. By Ext.P4 judgment, that writ petition was disposed of, permitting the petitioner to give explanation to the show cause notice pointing out

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the mitigating factors and directing the respondents to give a personal hearing to the petitioner. As directed in Ext.P4 judgment, petitioner submitted Ext.P5 representation before the Senior Divisional Manager - 3^rd respondent. Petitioner submits that in tune with Ext.P4 judgment, the authority to consider the said representation was the 2^nd respondent, who ought to have given him an opportunity of personal hearing, so as to enable him to convince the reasons for nonacquisition of bench mark level of business. Ext.P5 representation was considered by the 3^rd respondent on 1.1.2016. The petitioner appeared before the 3^rd respondent for personal hearing. In Ext.P6 notice it was stated that “we have recorded your comments and our Senior Divisional Manager has expressed the legal side of Special Rules 2009 to you. You have not pointed out any factual inaccuracies in the calculation of the appraisal. xxxx” . It was therefore stated that services of the petitioner were liable to be terminated under sub rule 8 of rule 6 read with rule 7 of the Rules.

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The 2^nd respondent thereafter issued Ext.P7 show cause notice, calling upon the petitioner to show cause against the proposed termination within a period of 30 days. The said representation was directed to be forwarded through the Senior Divisional Manager. Petitioner thereupon submitted Ext.P8 representation explaining the

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changes introduced by the IRDA. The zonal manager thereafter passed Ext.P9 order. Petitioner submits that in Ext.P8 representation he had pointed out the health condition of his wife, who is suffering from progressive multiple scleroses, when she is already having 50% disability. It is stated that without considering any of such circumstances, the services of the petitioner were terminated as per Ext.P9 order on 31.5.2017.

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The writ petition was filed at that stage alleging that the 2^nd respondent did not consider any of the mitigating factors and 2^nd respondent did not give an opportunity of personal hearing as directed in Ext.P4 judgment and therefore the order of termination is bad for infraction of principles of natural justice; the gravity of the situation faced by the development officers on account of the operation of 2009 Rules was not considered; pointing out Ext.P10 letter dated 20.4.2015 of the Executive Director, it was stated that the gravity of the situation on account of the operation of 2009 Rules was already admitted by the respondents. Petitioner produced Ext.P11 medical certificate in respect of his wife, saying that 2^nd respondent did not consider that position also.

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The respondents field a counter affidavit stating that petitioner was very well aware of the 2009 Rules, under which he was appointed.

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As per the rules, if the annual remuneration of a Development Officer in any preceding year or the relevant year exceeds 38% of the eligible premium of that year and the aggregate of the annual remuneration in the relevant year and the appraisal year immediately preceding the relevant years exceeds 38% of the aggregate of the eligible premium in those two years, his services are liable to be terminated in accordance with rule 6(8) and rule 7 of the Rules. In the case of petitioner he was paid an annual remuneration of Rs.2,89,058.68 in the 1^st appraisal year from 1.6.2012 to 31.12.2013, immediately after the confirmation. He brought in a premium income of Rs.2,56,373.80 only, which is less than the annual remuneration paid to him. There were only three new recruitments while 8 agents were terminated and as against the cost ratio of 21% the Development Officer clocked a cost ratio of 112.74%, he was therefore given one more opportunity to conform to the expense limit and to perform and that the Corporation took a lenient view and imposed only one decrement as penalty. In the next appraisal year from 1.6.2013 to 31.5.2014, the annual remuneration was Rs.301771.33 as against the premium income of Rs.2,62,015.70 with a recorded cost ratio of 115.17% as against the requirement to work within a cost ratio of 21%. As the cost ratio for the appraisal upto 31.5.2014 exceeded 38% of the eligible premium of

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that year and the aggregate of annual remuneration in the appraisal year ended in May 2013 and May 2014 also exceeded 38% of the eligible premium in those two years petitioner was liable to be proceeded under rule 6 (8) of the Rules 2009; petitioner submitted his reply to the show cause notice Ext.P7, which was rejected as per Ext.P9. It is stated that the Divisional Manager issued the show cause notice under sub rule 8 of rule 6, as the petitioner's services are liable to be terminated in accordance with rules. At the time when the petitioner submitted his representation, pursuant to the judgment, on 9.12.2015 or at the time when personal hearing was conducted on 1.1.2016, petitioner did not point out any new point. Revised show cause notice was issued to him on 9.1.2016 to which the petitioner did not submit any reply. It is in response to the show cause notice issued under rule 7 that petitioner submitted Ext.P8 reply; the competent authority to initiate proceedings under rule 7 against the petitioner is the 2^nd respondent; therefore the Divisional Manager forwarded the papers to the Zonal Manager for further consideration and the show cause notice under sub rule 8 of rule 6 read with rule 7 of the Special Rules was issued thereafter on 8.4.2017; in the reply to the zonal manager, petitioner did not raise any new point; as the cost ratio for the subsequent years ended on 31.5.2015 as well as on 31.5.2016

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were also disappointing at 244.30% and 1531.10% respectively, the Corporation would be compelled to spend more on a person who was not worth continuing in the service of the Corporation. It is stated that personal hearing was allowed to the petitioner by the Senior Divisional Manager on 1.1.2016 and thereafter the minutes of the personal hearing along with the representation were forwarded to the Zonal Manager for further consideration. The Zonal Manager passed orders on 31.5.2017 after considering all the contentions raised by the petitioner. The reasons for non performance by the petitioner could not be accepted. It is further stated that competent authority under rule 7 is the Zonal Manager. The minutes of the meeting of the Senior Divisional Manager with the petitioner and the points raised by the petitioner during the personal hearing were forwarded to the zonal manager along with the representation of the petitioner. The zonal Manager passed orders after considering the same. Therefore there was no violation of the principles of natural justice and there was sufficient compliance. It is also stated that in Ext.P4 judgment no direction was issued to any particular authority or officer to issue a show cause notice or to consider the reply. More over petitioner submitted his representation and he attended the personal hearing without raising any objection against the authority of the Senior

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Divisional Manager. It is stated that in matters of institutional hearing it is sufficient that the LIC is affording an opportunity of hearing and it is not necessary that a particular officer shall give a personal hearing and therefore there is no violation of principles of natural justice. It is also stated the Senior Divisional Manager is not competent to take a decision under the Rules and the order impugned was passed by the zonal manager himself after considering the contentions.

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The petitioner has field a reply affidavit stating that the 2^nd respondent is the competent authority to consider the representation filed under rule 6(4) and it is for him to exercise his discretion after affording a personal hearing and therefore there was total violation of the directions contained in the judgment. It is therefore stated that merely because no reply was submitted to Ext.P6, it cannot be presumed that petitioner did not have any answer so as to enable the respondents to proceed under rule 7. Petitioner points out that in Ext.P6 no reply was called for. Action under sub rule 8 of rule 6 read with rule 7 was taken without affording a personal hearing by the competent authority, despite the direction in the judgment and in case such an opportunity was given, petitioner would have been able to explain the mitigating factors effectively.

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The question to be considered is whether the 2^nd respondent

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was duty bound to afford a personal hearing and whether the personal hearing afforded by the Senior Divisional Officer was sufficient or not. In other words is it an institutional hearing which is contemplated. This court after referring to the judgment of the Division Bench allowed the petitioner to submit his explanation. Though Ext.P4 judgment does not indicate the authority who has to afford personal hearing to the petitioner, there is no direction that LIC is to pass orders. There is no dispute over the fact that the authority competent to take a decision under Ext.P3 Rules is the Zonal Manager. Zonal manager is the authority competent to terminate the services of a Development Officer. Proviso to rule 7 provides that the Development Officer shall be given an opportunity to show cause against the proposed termination. Sub rule 4 to rule 6 provides that appointing authority shall be the competent authority for implementing the provisions of sub rule 1 to 3. Proviso to rule 4 provides that before deciding any matter the Development Officer shall be given an opportunity to make a representation. On the other hand sub rule 5 provides that when a representation is received the competent authority shall forward it to the Zonal Manager for decision. Clause b of rule 5 provides that the competent authority shall forward the representation to Zonal Manager and sub rule 6 provides that the Zonal Manager shall pass orders after

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considering the merits of the representation. Therefore the consideration of the representation by the Zonal Manager is fatal.

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Rules 6(8) and 7 of the Rules 2009, read as follows:

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"6(8) Notwithstanding anything contained in sub-rules (1) to (7) where the annual remuneration of a Development Officer in any preceding year (hereafter in this sub-rule referred to as the "relevant year") exceeds 38% of the eligible premium of that year and the aggregate of the annual remuneration in the relevant year and the appraisal year immediately preceding the relevant year exceeds 38% of the aggregate of the eligible premium in those two years, his services shall be liable to be terminated in accordance with R.7."

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xxxx xxxxx xxxxxxxxxxxxxxxxx

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"7(1) Where a Development Officer has failed to conform to the expense limit and where no opportunity to conform to such limit could be given under the provisions of R.6, the Zonal Manager may terminate his services after giving him three months notice or salary in lieu thereof:

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Provided that the Development Officer shall be given an opportunity to show cause against such proposed termination of his service."

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The Division Bench in the judgment in Life Insurance

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Corporation of India & another V Sonia Bhasker & another:

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2015 KHC 667 , while considering the validity of rules 6(8) and 7 of

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the Rules 2009, read down the provisions contained in rule 6(8) and held as follows:

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“Issue No. II. Under R.6(8) of the 2009 Rules in event the Development Officer has exceeded the 38% of the eligible premium, it is not mandatory for the Zonal Officer to terminate the services of the Development Officer. The word 'shall' in R.6(8) has to be read down as 'may'.

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Issue No. III. Under the proviso to R.7(1) a Development Officer can submit any valid explanation in reply to the termination notice and the Zonal Manager is obliged to consider such

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explanation and it cannot be said that any ground apart from the figures of annual remuneration and cost ratio is prohibited. Issue No. IV. It is obligatory for the Zonal Manager to consider the explanation given by the Development Officer and take a decision and in the event there is any valid explanation for not achieving the cost ratio, the termination notice can be validly dropped.”

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In Ext.P4 judgment this court found that the order of termination which was under challenge in the writ petition filed by the petitioner was issued without considering the mitigating factors as interpreted by the Division Bench in Sonia's case. The following observations in paragraphs 8 to 10 of Ext.P4 judgment are relevant:

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“8. Necessarily, this could also be a reason which could be considered in mitigation of the termination stipulated in sub rule 1 of Rule 6 of 2009, if the same has been projected in the representation. As of now it may not be possible for this court to postulate the various possible instances, which could be advanced as a plausible explanation for exceeding the cost ratio. It is to be noticed that the Division Bench also had not stipulated the specific situations, but has merely referred to some and held that any valid cause on the part of the Development Officer resisting action as contemplated in rule 6 of the rules of 2009 should be considered by the authority, who is empowered to take action under the rules. The conclusion of the Division Bench and answer to issue no. III, as extracted above has employed the words, 'any valid explanation in reply to the termination notice'(sic).

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9. That, definitely would be a matter of discretion to be exercised by the authority, which this court could not preempt or fetter while listing out the various causes or the probable explanations. Suffice it to notice that the exercise of discretion, in visiting an employee with the adverse, drastic consequence of termination has to be done in a proper manner, in accordance with the principles governing it; with utmost objectivity and totally eschewing a subjective determination. Necessary safeguard is available in examining the exercise of discretion, in the rules itself by way of an appeal under sub rules 2 and 3 of rule 7; which again could be subjected to judicial review.

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10. The issue being covered by the division bench, now for

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the consideration grounds raised in the respective writ petitions need be made by this court. However it is to be noticed that Ext P14 in W.P.(C) No 29963 of 2014 and Ext P1 in W.P.(C) No 28220 of 2014 were orders issued prior to the judgment of the Division Bench and the authority had though noticed the factors pointed out by the Development Officer, did not consider the same in the proper perspective, since at that point of time, on the mere cost ratio being exceeded, termination was a necessary consequence. A reconsideration of such aspects hence would be necessary."

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Thereafter the following directions were issued in paragraph 35:

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35.In such circumstances Ext P14 in W.P.(C) No. 29963 of 2013 and Ext P1 in W.P.(C) No. 28220 of 2014 are set aside merely for reason of the mitigating factors having not been considered in the perspective, in which the Division Bench read down sub rule 8 of Rule 6 of 2009. The 1st petitioner in W.P.(C) No. 29963 of 2014 and the petitioner in W.P.(C) No. 28220 of 2014 shall, if so advised prefer a representation pointing out the mitigating factors, which according to them could absolve them from the order of termination and the same shall be considered within a period of one month and thereafter, after giving an opportunity of personal hearing to the respective petitioners. With respect to the petitioners 2, 3 and 4 in W.P.(C) No. 29963 of 2014 they shall be permitted to give an explanation, in objection to the show cause notice again pointing out the mitigating factors, which according to them would absolve them from termination, which again shall be considered after affording an opportunity of personal hearing and within the time stipulated as herein above. The petitioner shall give such representations within 2 weeks of the date of receipt of the certified copy of judgment, failing which the respondents would consider the issue on the available representation/objection; but definitely affording an opportunity of hearing.”

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Ext.P5 representation was submitted thereafter. It is true that it is

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addressed to the Senior Divisional Officer. The personal hearing should have been therefore given by the authority who was competent to order termination, as contended on behalf of the petitioner. This court set aside the order seeing that the mitigating factors were not considered before passing the order of termination and allowed the petitioner to submit his

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representation and to take a decision after affording a personal hearing.

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Such a personal hearing directed by this court cannot be considered to be or treated as an institutional hearing as stated by the respondents, in the light of the judgment of the apex court in Union of India V Shiv Raj:(2014) 6 SCC 638 . In that case the proceedings of land acquisition were challenged on the ground that the objections filed by the owners of land under Section 5 A of the Land Acquisition Act, 1894 were heard by one Land Acquisition Collector and orders were passed by another District Collector. The apex court held as

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follows:

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12. The rules of natural justice have been ingrained in the scheme of Section 5-A of the 1894 Act with a view to ensure that before any person is deprived of his land by way of compulsory acquisition, he must get an opportunity to oppose the decision of the State Government and/or its agencies/instrumentalities to acquire the particular parcel of land.

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13. Section 5-A(2) of the 1894 Act, which represents statutory embodiment of the rule of audi alteram partem, gives an opportunity to the objector to make an endeavour to convince the Collector that his land is not required for the public purpose specified in the notification issued under Section 4(1) of the 1894 Act or that there are other valid reasons for not acquiring the same. Thus, Section 5-A of the 1894 Act embodies a very just and wholesome principle that a person whose property is being or is intended to be acquired should have a proper and reasonable opportunity of persuading the authorities concerned that acquisition of the property belonging to that person should not be made.

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Xxxxx

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15. Therefore, Section 5-A of the 1894 Act confers a valuable right in favour of a person whose lands are sought to be acquired. It is trite that hearing given to a person must be an effective one and not a mere formality. Formation of opinion as regard the public purpose as also suitability thereof must be preceded by application of mind having due regard to the

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relevant factors and rejection of irrelevant ones. The State in its decision-making process must not commit any misdirection in law. It is also not in dispute that Section 5-A of the 1894 Act confers a valuable important right and having regard to the provisions, contained in Article 300-A of the Constitution of India has been held to be akin to a fundamental right. Thus, the limited right given to an owner/person interested under Section 5-A of the 1894 Act to object to the acquisition proceedings is not an empty formality and is a substantive right, which can be taken away only for good and valid reason and within the limitations prescribed under Section 17(4) of the 1894 Act.

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16. The Land Acquisition Collector is duty-bound to objectively consider the arguments advanced by the objector and make recommendations, duly supported by brief reasons, as to why the particular piece of land should or should not be acquired and whether the plea put forward by the objector merits acceptance. In other words, the recommendations made by the Land Acquisition Collector should reflect objective application of mind to the entire record including the objections filed by the interested persons. [See Munshi Singh v. Union of India, Union of India v. Mukesh Hans, Hindustan Petroleum Corpn. Ltd. v. Darius Shapur Chenai¹¹ , Anand Singh v. State of U.P, Dev Sharan v. State of U.P., Raghbir Singh Sehrawat v. State of Haryana, Usha Stud and Agricultural Farms (P) Ltd. v. State of Haryana and Women’s Education Trust v. State of Haryana] xxxxx

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20. In view of the above, the law on the issue can be summarised to the effect that the very person/officer, who accords the hearing to the objector must also submit the report/take decision on the objection and in case his successor decides the case without giving a fresh hearing, the order would stand vitiated having been passed in violation of the principles of natural justice.”

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Though Ext.P5 representation which was submitted by the petitioner pursuant to Ext.P4 judgment was before the Senior Divisional Manager, the 2^nd respondent cannot be absolved from the responsibility to hear the petitioner before orders are passed, in view of the observations in paragraphs 8 to 10 of Ext.P4 judgment. The

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appreciation of the mitigating circumstances which the petitioner wanted to present, may not be the same when a matter is heard by a different person. Though it was not specifically indicated in the judgment-Ext.P4 that the 2^nd respondent should hear the petitioner, when the order of termination was set aside for facilitating submission of an explanation and affording an opportunity of hearing, personal hearing ought to have been before the competent authority, who is to take a final decision on that representation. A hearing before any officer other than the 2^nd respondent can be said to be sufficient to satisfy the principles of natural justice. Petitioner got an opportunity to submit a representation as well as a personal hearing only on the basis of the judgment of the Division Bench read with Ext.P4 judgment. Such a hearing, on the basis of the directions of this court cannot be said to be an institutional hearing, as argued on behalf of the petitioners.

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Therefore the factual circumstances arising in this case and those which arose for consideration before the Full Bench of this court in Sudheer V Susheela: 2009(4) KLT 29 are entirely different. In that case an order passed by Government in exercise of its revisional powers under the Statute was under consideration. The 2009 Rules do not contain any such provision authorising the LIC to pass orders, as

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stated in the counter affidavit of respondents, so as to satisfy the principles of natural justice. Therefore the contention of the respondents that it was an institutional hearing and that a personal hearing by 2^nd respondent is not necessary since no prejudice is caused to the petitioner because of the denial of personal hearing or that he does not deserve a hearing taking into account his performance for the subsequent years, cannot also be accepted, when this court has directed the respondents to afford an opportunity for personal hearing, taking note of the judgment of the Division Bench which interpreted sub rule 8 of rule 6. The contention that appellate remedy is available to the petitioner will also not stand for the very same reason.

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In these circumstances, it can only be concluded that there is violation of principles of natural justice, in passing Ext.P9 order. As held by the apex court in the land acquisition case, hearing afforded by the Senior Divisional Manager will not be sufficient compliance of the direction in Ext.P4 judgment. As the authority who is competent to issue orders of termination is the Zonal Manager alone, the order of termination passed by the Zonal Manager without affording a personal hearing to petitioner is unsustainable.

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Ext.P9 order is therefore set aside. The 2^nd respondent is free to

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pass fresh orders after affording an opportunity of hearing to petitioner.

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The writ petition is allowed to the above extent.

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