Forfeiture of renewal commission based on a relative's alleged crime is arbitrary and legally unsustainable.

The petitioner served as an agent for the Life Insurance Corporation of India (LIC) for over 18 years

In 2002, an FIR was registered against seven individuals, including the petitioner’s son, alleging a conspiracy to obtain a surrender value of Rs. 8,303/- via forged documents in the name of a deceased policyholder

Although the petitioner was not named in the FIR, LIC issued a show-cause notice and subsequently terminated her agency on July 21, 2003, under Rule 16(1)(b) of the LIC of India (Agents) Regulations, 1972, while forfeiting her renewal commissions under Rule 19(1)

Following unsuccessful appeals to the Zonal Manager and Chairman, and a prior round of litigation in Special Civil Application No. 4619 of 2005 (which directed a fresh reasoned order), the respondent-authority maintained the penalty via an order dated April 9, 2010

During the pendency of this litigation, the petitioner’s son was acquitted by the trial court

Whether the termination of the petitioner’s agency and the forfeiture of her renewal commissions were legal and justified in the absence of evidence connecting her to the alleged conspiracy

Whether the acquittal of the petitioner’s son, which formed the factual basis for the suspicion against the petitioner, renders the respondent-authority's orders unsustainable

The court applied Article 226 of the Constitution of India regarding writ jurisdiction to correct arbitrary administrative actions

It interpreted the Life Insurance Corporation of India (Agents) Regulations, 1972, specifically Rule 16(1)(b) (termination) and Rule 19(1) (forfeiture of renewal commission)

The court also relied on the principle of Audi Alteram Partem and the requirement that administrative penalties must be supported by evidence rather than mere conjectures

The court found that the petitioner had no personal involvement in the alleged fraud; her name was absent from the FIR and charge sheet, and no witnesses or statements implicated her

The respondent’s decision was based solely on the criminal charges against the petitioner’s son

The court observed that the petitioner, a widow who had served the Corporation for 18 years, was subjected to an "economic-death penalty" without proof of gain from the fraudulent transaction

Critically, the court noted that the foundational reason for the disciplinary action—the alleged criminal conspiracy—ceased to exist following the son’s acquittal by the competent criminal court

Consequently, the court held that the termination and forfeiture were arbitrary, illegal, and lacked a factual basis

The court held that the action against the petitioner was unjust and illegal given the acquittal of the primary accused

The respondent-Corporation was directed to release the withheld commissions with 6% interest per annum from the date the payments were due

The court further ordered that the payment be processed within eight weeks, failing which the interest rate would increase to 9% per annum from the date of the order until actual payment