Delhi High Court Upholds LIC’s Decision to Withhold Commissions: “Regulation 19 Bars Payments to Former Agents Engaged in Insurance Business, Gazette Notification is Sufficient Notice”

Court’s Decision

The Delhi High Court dismissed the appeal filed against the Life Insurance Corporation of India (LIC) regarding the non-payment of commissions to a former agent. The court upheld the learned Single Judge’s ruling that the appellant was bound by the LIC Regulations, 2017, and specifically Regulation 19, which barred him from receiving commission payments. The appellant’s claim that he was unaware of the 2017 Regulations was rejected, with the court emphasizing that publication in the official gazette was sufficient legal notification.

The appellant failed to prove that he was not directly or indirectly involved in promoting life insurance business while working for his new employer, HDFC Ergo General Insurance Company. The court held that, in light of Regulation 19, the appeal lacked merit and was dismissed.

Facts of the Case

1. Appointment as LIC Agent (2008)
   • The appellant was appointed as an agent by LIC on September 19, 2008, to sell life insurance policies.
2. Resignation from LIC and New Employment (2021)
   • On July 5, 2021, the appellant applied for a job with HDFC Ergo General Insurance Company Limited.
   • On July 7, 2021, he resigned from LIC by submitting a letter to the Branch Manager.
   • He also submitted a letter stating that he would not be engaged in selling life insurance with HDFC Ergo.
   • Without receiving any formal response to his resignation, the appellant joined HDFC Ergo as Deputy Manager (Customer Experience Management) on July 13, 2021.
3. Discontinuation of Commission Payments
   • Before resigning, the appellant had been receiving renewal and other commissions twice a month.
   • On July 15, 2021, LIC stopped paying his commissions without any prior notice.
4. Legal Notice and Writ Petition (2022-2023)
   • The appellant sent a legal notice on May 13, 2022, to LIC, demanding the release of his commissions and detachment of his Income Tax PAN.
   • Receiving no response, he filed a writ petition before the Delhi High Court, seeking directions for LIC to pay his due commissions.
   • The learned Single Judge dismissed the petition on November 2, 2023, citing Regulation 19 of the LIC Regulations, 2017.
5. Appeal Against Single Judge’s Decision (2025)
   • Aggrieved by the dismissal, the appellant filed the present appeal, arguing that the 2017 Regulations were never communicated to him and that he was governed by the earlier LIC Regulations, 1972.

Issues Raised

1. Whether LIC was obligated to pay commission to the appellant even after his resignation.
2. Whether the appellant was governed by the LIC Regulations, 2017, or the older LIC Regulations, 1972.
3. Whether LIC had a duty to individually notify agents about changes in regulations beyond gazette publication.
4. Whether the appellant’s employment with HDFC Ergo amounted to indirect solicitation of life insurance business, thereby violating Regulation 19.

Petitioner’s Arguments

1. Lack of Notification About New Regulations
   • The appellant claimed that LIC never made the 2017 Regulations known to him or the public. He argued that since he was appointed under the 1972 Regulations, those should continue to govern his case.
2. Personal Notification Requirement
   • The appellant contended that LIC had a duty to individually notify its agents about any regulatory changes, failing which, new regulations could not be applied to his detriment.
3. Nature of Employment at HDFC Ergo
   • He claimed that HDFC Ergo was a general insurance company, not a life insurance company, and that his role was limited to dealing with Mediclaim insurance, not life insurance.
   • To support this claim, he relied on an email from HDFC Ergo dated September 20, 2021, stating that his department handled only Mediclaim insurance and not life insurance policies.
4. Right to Choose Regulations
   • The appellant argued that he should have been given an option to choose whether to be governed by the 1972 Regulations or the 2017 Regulations, as the latter worked to his detriment.

Respondent’s Arguments (LIC’s Defense)

1. Applicability of LIC Regulations, 2017
   • LIC argued that once the 2017 Regulations were published in the official gazette, they automatically applied to all agents, including the appellant.
2. Regulation 19 as a Bar on Commissions
   • Regulation 19 states that an agent who joins another insurance company and engages in life insurance-related activities within two years of resignation is not entitled to any commissions from LIC.
   • LIC contended that the appellant had failed to provide concrete proof that he was not engaged in life insurance solicitation.
3. Sufficiency of Gazette Notification
   • LIC maintained that official publication in the gazette was sufficient notification of the new regulations, and no additional duty to personally inform each agent existed.
4. Burden of Proof on the Appellant
   • The respondents asserted that the appellant had the burden to prove that he was not in violation of Regulation 19, which he failed to do.

Analysis of the Law

1. Applicability of LIC Regulations, 2017

• The Supreme Court in Union of India vs. Ganesh Das Bhojraj (2000) 9 SCC 461 held that publication in the official gazette is sufficient for a regulation to come into force.
• Since LIC Regulations, 2017 were duly gazetted, they applied to all agents, including the appellant.

2. Regulation 19 as a Legal Barrier

• Regulation 19 prohibits a former agent from receiving commissions if they engage, directly or indirectly, in life insurance business for another entity within two years of ceasing to be an LIC agent.
• The court found that the appellant failed to provide evidence that his role at HDFC Ergo did not involve life insurance solicitation.

3. Legal Precedents Cited

• B.K. Srinivasan v. State of Karnataka (1987) 1 SCC 658
  • Held that once a regulation is published in the official gazette, it takes effect immediately and does not require additional publicity.
• Pankaj Jain Agencies v. UOI (1994) 5 SCC 198
  • Reiterated that laws come into force upon gazette publication, even if individuals claim ignorance of them.

The court relied on these precedents to reject the appellant’s arguments regarding notification requirements.

Court’s Reasoning

1. LIC Regulations, 2017 Apply by Default
   • The argument that the appellant was unaware of the 2017 Regulations was rejected. The court ruled that official gazette publication was legally sufficient.
2. Failure to Prove No Violation of Regulation 19
   • The learned Single Judge had already examined the issue and found that the appellant had failed to prove he was not involved in life insurance solicitation.
   • Even before the appellate court, the appellant failed to present conclusive proof.
3. No Right to Choose Between Regulations
   • The court rejected the claim that the appellant should have been given an option to choose between the 1972 and 2017 Regulations. The latter, being in force at the time of his resignation, applied by default.

Conclusion

The appeal was dismissed as being devoid of merit. The court upheld the learned Single Judge’s ruling that the appellant was bound by the LIC Regulations, 2017 and that Regulation 19 barred him from receiving commissions.

Implications of the Judgment

1. Strict Enforcement of LIC Regulations, 2017
   • This ruling affirms that LIC agents who resign and join another insurance company cannot claim commissions from LIC.
2. Sufficiency of Gazette Notification
   • The judgment reinforces that legal amendments do not require additional public circulation beyond gazette publication.
3. Regulation 19 Bars Dual Benefits
   • Former LIC agents working in any insurance-related organization within two years of resignation will not be entitled to commissions.

This decision sets a precedent for future cases where former agents challenge the applicability of LIC’s regulations.

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