As you are aware that ‘A fraud is an act of deliberate deception with the design of securing something by taking unfair advantage of another. It is a deception in order to gain by another’s loss. It is a cheating intended to get an advantage.
In this Article, we are going to know some factors related to Appointment, Resignation and Termination of Services of an Agent of LIC and the case in which his /her commission can be forfeited by the Corporation.
LET’S FIRST DISCUSS ABOUT FRAUD WITH A CASE IN WHICH APEX COURT HAS EXPRESSED HIS CONCERNS.
The Apex Court in Smt. Shrisht Dhawan Vs. M/s. Shaw Brothers AIR 1992 SC 1555-dealing with the concept of fraud held that,” Fraud and collusion vitiate even the most solemn proceedings in any civilised system of jurisprudence. It is a concept descriptive of human conduct. It has been defined as an act of trickery or deceit.
In Webster fraud inequity has been defined as an act or omission to act or concealment by which one person obtains advantage against conscience over another or which equity or public forbids as being prejudicial to another.
In Black’s Legal Dictionary, fraud is defined as an intentional perversion of truth for the purpose of inducing another in reliance upon it to part some valuable thing belonging to him or surrender a legal right; a false representation of a matter of fact whether by words or conduct, by false or misleading allegations, or by concealment of that which should have been disclosed, which deceives and is intended to deceive another so that he shall act upon it to his legal injury.
In Oxford, it has been defined as criminal deception, use of false representation to gain unjust advantage; dishonest; artifice or trick.
Halsbury’s Laws of England – a representation is deemed to have been false, and therefore a misrepresentation, if it was at the material date false in substance and in fact.
Section 17 of the Contract Act, defines fraud as an act committed by a party to a contract with intent to deceive another.
From dictionary meaning or even otherwise fraud arises out of deliberate active role of representor about a fact, which he knows to be untrue yet he succeeds in misleading the representee by making him believe it to be true. The representation to become fraudulent must be of fact with knowledge that it was false.
RESIGNATION /TERMINATION OF AGENCY AND RIGHT TO RECEIVE COMMISSION:
Regulation 17 of LIC(Agents) Regulations, 2017- provides for termination of AGENCY by notice and, inter alia, provides that an agent may by giving one month notice in writing to the competent authority, discontinue his AGENCY and, after expiry of the period of one month, the same shall stand terminated. The Cessation of relationship takes place by automatic operation of law after expiry of the prescribed period, subject to cases of fraud, misrepresentation or the like.
Regulation 19 provides for payment of commission after discontinuance of AGENCY and inter alia, lays down to the effect that, in the event of termination of AGENCY, except for fraud, the commission on the premiums received in respect of the business secured by him shall be paid to him if such agent has continually worked as an agent for at least ten years since his appointment. The admitted position is that the when the agent had worked continually for more than ten years as an agent of the Corporation.
Therefore, he is entitled to receive the agent’s commission after discontinuance of AGENCY subject to any act of fraud, misrepresentation or the like, and the Corporation has no discretion in the matter.
LIABILITY OF LIC TO PAY COMMISSION TO AN AGENT IN CASE OF FRAUD BY AGENT-
As regard the liability of the corporation to pay the commission due to an agent on the premium received in respect of the business secured by him, the exception is confined to cases of fraud as the term occurs in the statute in question. Then it seems to be quite logical to confine such cases of fraud having been perpetrated by the agent, and so found in any judicial proceedings involving the corporation or any of its subsidiaries or against any person having official dealing with the Corporation [Rule 15(c) of the Rules].
An agent of the Corporation is not an employee and hence not entitled to salary. He is entitled to only such benefits as payable by the Corporation by way of commission in terms of Rule 10 of the Rules and Gratuity and term insurance benefits due to him under Rule 11 of the Rules. The termination and appointment of an agent will have to be resorted to only under the circumstances provided under Rule 13 to 18 of the Rules.
Rule 15 of the Rules contemplates termination of AGENCY on account of certain disqualifications incurred by the agent. The Rule Making Authority seems to have kept in its mind different situations warranting application of Rule 15 or Rule 16 of the Rules, as the case may be.
The “Fraud” or “Fraudulent” does not find in place Rule 16. “Fraud” either resultant upon act of commission or omission on the part of the agent is contemplated and provided for only under Rule 15(c) of the Rules. It that be so, it is only where the termination of appointment of an agent is resultant upon Rule 15(c) of the Rules, that the Corporation is given liberty to forfeit the commission payable to an agent.
If in any judicial proceedings, it is found that the agent concerned has knowingly participated to or connived any fraud, against the Corporation or any of its subsidiary or against any person having official dealings with the Corporation or any of its subsidiaries, then the termination of agency can be followed by or accompanied by forfeiture of commission in terms of Rule 19(1). But the crucial aspect is that finding a fraud must be in a judicial proceeding as provided under Rule 15(c) of the Rule that the Corporation is entitled to forfeit the commission payable to an agent.
Where fraudulent conduct on the part of the agent is found in a Judicial Proceedings, the Corporation would be entitled to terminate the agency under Rule 15(c) of the Rule and also forfeit the commission payable to the agent under Rule 19(1) of the Rules. The allegation of fraudulent conduct on the part of an agent and finding in that regard by the officer of the Corporation, who exercises powers under Rules in question is not substitute for the same; not is it otherwise sufficient to justify the forfeiture of the commission payable to the agent.
The fraud as a basis for forfeiting the commission payable to an agent in a judicial proceeding, in the manner indicated in Rule 15(c) of the Rules. The Termination of an AGENCY should have been under Rule 15(c) of the Rules, on the ground of fraud, to justify the forfeiture of the commission otherwise payable to the agent in terms of the Rule 19 of the Rules.
CONCLUSION: Money payable to an agent by way of commission for the business secured by him. No person shall be deprived of his property except in accordance with law. No doubt, right of property is no longer a Fundamental Right. but nevertheless, the right to retain property and receive the same and protect it are valuable rights in the hand of citizen. Deprivation from such rights can only be in accordance with law, which in the given circumstances would be the Statutory Rules defining the method of appointment and service for the agents of the Corporation. The Rules provides for payment of commission to the agent whose, appointment has been terminated except in a case, which is also specifically provided for under the Rules. In such circumstances, the forfeiture must also strictly in accordance with the Rules. Where fraud is considered as sufficient to terminate the appointment of an agent, then the circumstances so provided under the Rules alone can form the basis of a legitimate action on the part of the Corporation to forfeited the commission payable to an agent.
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DISCLAIMER: the above article is only for information of readers. In case of necessity do consult with Insurance Professionals for more clarity and understanding on subject matter.
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