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Sohrabji Dhunjibhoy Medora Vs. the Oriental Government Security Life Assurance Co., Ltd. - Court Judgment

LegalCrystal Citation
SubjectInsurance;Civil
CourtMumbai
Decided On
Case NumberO.C.J. Appeal No. 23 of 1943 and Suit No. 2270 of 1940
Judge
Reported inAIR1944Bom166; (1944)46BOMLR279
AppellantSohrabji Dhunjibhoy Medora
RespondentThe Oriental Government Security Life Assurance Co., Ltd.
DispositionAppeal dismissed
Excerpt:
principal and agent-termination of agency-life assurance company-appointment of chief agent-revocation of appointment-right of agent to commission on future premiums of insurers introduced by him-insurance act (xx of 1940), sections 2(10), 44-'insurance agent'-partnership not coming within the term-indian contract act (ix of 1872), section 206-'reasonable notice' of termination of agency.;in the absence of a definite agreement the commission payable by a principal to his agent ceases on the termination of the agency, especially is this so if the payment is for services, for when the services cease the commission ceases also.;the defendant, a life assurance company, appointed d.j.m., doing business as d.j.m. & co., as its chief agent for gujarat, on certain conditions, some of which.....leonard stone, kt., c.j.1. this is an appeal from the judgment of mr. justice chagla dated april 14, 1943. the action concerns the nature and terms of an agreement which in its original form was entered into in 1892. variations subsequently took place, the most important of which were in the years 1899 and 1917. the original agreement and the variations were effected by correspondence ; and, as appears from the plaint and the written statement, the parties have treated the original agreement as constituting an agency, and that is the relationship which, it is common ground, both in the court below and in this court, is the aspect of the matter on which both parties rely. what is in dispute is whether the agency is, as the advocate general submitted, of a permanent character, or to put it.....
Judgment:

Leonard Stone, Kt., C.J.

1. This is an appeal from the judgment of Mr. Justice Chagla dated April 14, 1943. The action concerns the nature and terms of an agreement which in its original form was entered into in 1892. Variations subsequently took place, the most important of which were in the years 1899 and 1917. The original agreement and the variations were effected by correspondence ; and, as appears from the plaint and the written statement, the parties have treated the original agreement as constituting an agency, and that is the relationship which, it is common ground, both in the Court below and in this Court, is the aspect of the matter on which both parties rely. What is in dispute is whether the agency is, as the Advocate General submitted, of a permanent character, or to put it in other way, whether the authority of the appellants' agency is irrevocable. But if it is revocable, then it is contended on behalf of the appellants that it is only terminable on the reasonable notice, see Section 206 of the Indian Contract Act, and it is further submitted that reasonable notice should be three years. At the same time the appellants contend that they are entitled to commission on all renewals of premiums on all policies in the District of Gujarat in which they were operating.

2. I will proceed to examine, first of all, the relevant passages of the 1892 letters which constituted the original agreement.

3. The correspondence opens with an introductory letter dated March 4, 1892, from Mr. Cawasji J. Medora, who was a relative of Mr. D.J. Medora, whose sons and successors the appellants are. This letter was followed by conversations and by at least one other letter of which nothing is known, and then on June 7, 1892, the manager and actuary of the respondents wrote to Mr. D.J. Medora as follows :

Provided the usual references prove satisfactory, I am prepared to appoint you Chief Agent for Gujarat, your sphere of influence to be Gujarat proper exclusive of Kathiawar. You might work if wished under the title of D.J. Medora & Co. but you alone would be recognised and be held solely responsible for all cash transactions. You might make your headquarters either at Ahmedabad or Baroda as preferred. We allow you a commission of ten per cent. all round on all ordinary assurances and the usual bonus commission. You would have power to appoint canvassers and sub-agents.'

And after some precautionary remarks as in selection of the canvassers the letter continues :

The commission to be allowed to your canvassers and sub-agents would require to be uniform with that the Head Office allow : namely-ten and five per cent. It would, however, be left to you whether or not to grant bonus commission. The existing arrangements in the districts would not be disturbed.

4. Further information was sought by Mr. D.J. Medora, and further concessions were pressed, and finally on July 6, 1892, Mr. D.J. Medora wrote as follows :-

I accept your kind offer of Chief Agentship for Gujarat subject to clear understanding in addition on the following points viz. :-

(1) That the commission would be allowed to me on all premiums remitted through my agency by persons already assured before now and by those who may be hereafter assured through my agency or others.

(2) That the premiums of persona assured through my agency should be always subject to my commission so long as they remained within the Province of Gujarat whether the premium be remitted through my offices or direct.

This letter was replied to by the manager and actuary of the respondents on July 9, 1892, as follows :

With reference to the two conditions you now mention I see from our letter of the 18th ultimo that the first has been already disposed of. As the second goes further than was contemplated in ours of the 28th ultimo I would add that we have no objection to agree to it as now put.

I accordingly have pleasure in formally appointing you Chief Agent for Gujarat. The Agency would stand in the name of D.J. Medora & Co. but as already explained you alone would be our recognised agents and would be Solely responsible. On your retiring or otherwise discontinuing the work the agency would cease and your partner would have absolutely no claim thereunder.

5. It is admitted by all parties that, so far as the sub-agents and canvassers are concerned, exhibit 'F', which is a document dated in 1919, was the form of contract which governed them at all material times up to 1932. The only variation being in respect of the rates of remuneration. The document takes the form of a circular letter written on the respondents' note-paper and signed by D.J. Medora & Co., Chief Agents for Gujarat, and having drawn the attention of the addressee to the very liberal commission allowed by the ' Oriental' to those who introduce new assurers to the company, and pointing out that it afforded an opportunity to gentlemen of various occupations to earn an extra income, ' which is more of less of the character of an annuity,' it extended an invitation ' to register your name as one of the company's agents in our district.' At the foot there is this form of agreement :

I...agree to introduce business of the Oriental Company, through the Chief Gujarat Agency, on terms and conditions stated on the other side of this letter which I have read and understood.

6. On the reverse of the document is set out the rates of commission on the first premium and on renewal premiums, and paragraph (2) is as follows :

The commission will be paid to the Agent so long as his policy-holders pay their premiums to the Chief Gujarat Agency office and so long also as the agent does not work for any other life assurance company or fund, or is not found guilty of any conduct which, in the opinion of the company, unfits him to continue to art as its representative.

There then follows certain laudatory remarks about the 'Oriental', which presumably are to be used by the canvassers when soliciting business.

7. The subsequent history of the matter, which is not in dispute, explains how the appellants come to stand in the shoes of their father, Mr. D. J, Medora.

8. By letter dated February 9, 1899, Mr. D.J. Medora wrote to the manager and actuary of the respondents stating that until then he had no idea that on his retiring or discontinuing the work, the agency would cease and that his partners would have absolutely no claim thereunder, and he continued :

We beg therefore the favour of your being so kind as to cancel the paragraph above referred to and replace the same by the words ' The firm of Messrs. D.J. Medora & Co. should, so long as it stands, have all the rights of the existing agency whether managed by partners or by D.J. Medora's sons.

On March 7, 1899, he wrote a further letter in which he expressed his requirements somewhat differently, namely

In continuation of our letter of the 9th ultimo in order to facilitate matters we beg to suggest that the following men may be admitted as partners, with Mr. D.J. Medora, in our Life Assurance business and recognised as such by the Company.

(1) Mr. Dhunjibhoy Jamsetji Medora of Messrs. Dhunjibhoy Trikamlal, Railway Contractors and Agents, Commercial Ahmedabad Mills Ltd.

(2) Mr. Cawasji Hirjibhoy Medora, Assistant to Messrs. Dhunjibhoy & Trikamlal in the Contractors Department and Sole Manager of the Life and Fire Insurance Business of Mes'srs. D.J. Medora & Co.

(3) Mr. Phirozeshaw Dhunjibhoy Medora, eldest son of Mr. D.J. Medora.

The first of the above named three persons is, in addition to his several business, already a recognised chief agent of the company ; the Second, as you are aware, has been from the very commencement of your agency in sole charge of our life and fire insurance business and has up to now managed our this department most ably and successfully, and the third is the eldest son of Mr. D, J, Medora and though a minor is to be trained up to work also our life and fire insurance department.

The whole question is simplified by above nominations, and we trust you will now write us recognising the two partners, at your earliest convenience.

To this letter the secretary to the respondents replied on March 13, 1899 :

If therefore as indicated is now a suitable time to alter or do away with the clause you put before us and we have pleasure in agreeing to cancel same.

And after giving some reasons why the respondents should do this the letter continues :-

From this date we therefore acknowledge the following as our agents working under the title of D.J. Medora and Co.

Mr. Dhunjibhai Jamsetji Medora

Mr. Cowasji Hirjibhai Medora

Mr. Pherozeshaw Dhunjibhai Medora.

9. Mr. D.J. Medora in fact died in May following, and the agency was continued by his nephew and eldest son for many years until the latter; having died and the former having retired by reason of ill health, the widow of D.J. Medora wrote to the respondents on April 16, 1917 :-

Unfortunately however Mr. C.H. Medora has had to retire from our firm some time back on account of ill health and my sons Sorabji and Jamshedji who have completed their education and undergone some training with a view to be able to conduct the business of our firm have now been carrying on the agency of the company. I beg therefore to request that you will kindly be pleased to register my sons' names as partners' of our firm of D.J. Medora & Co. along with myself. The full names of my sons are :-

Sorabji Dhunjibhoy Medora

and

Jamshedji Dhunjibhoy Medora

and their ages are 24 and 21 respectively.

To this the manager to the respondents replied on April 19, 1917 :-

I have to advise you that at yesterday's Board Meeting sanction was given to these two sons coming into the firm as partners in connection with our agency. It is understood that both will give their full time to the agency doing all in their power to keep up to past records and that they will make every) endeavour to increase the business by opening fresh connections throughout every part of the large district under the agency control.

10. The other fact that should be noted is that by written notice dated September 14, 1939, the respondents informed the appellants that they had with regret resolved as a matter of uniform policy to terminate ' your chief agency as from January 1 next'.

11. Viewed in terms of agency, there is no escape from the proposition that the authority on which the agency depends must be either revocable or irrevocable. Looking at the letters as a whole, it is my opinion that no irrevocable authority was either given or intended.

12. Three principal questions arise : First, whether there is any express or implied term in the agreement between the parties that D.J. Medora or his successors should be entitled after termination of the authority to commission on the renewal premiums on the policies previously taken out in their sphere of operations ; secondly, if the answer is in the negative, then whether the appellants are entitled to the benefit of Section 44 of the Insurance Act of 1938 ; and, thirdly, what notice, if any, they are entitled to on the termination of the relationship, the appellants contending that they are entitled to three years' noticef and the learned Judge in the Court below having held them entitled to two years' notice, There is a cross-appeal as well as an appeal on this point.

13. It was urged by the Advocate General that there is an express terra, namely, condition No. 1 in the letter of July 6, 1892. In the Court below the learned Judge dealt with this contention as follows (p. 283 ante) :

The next contention of the plaintiffs is that even if the defendant company were entitled to terminate their agency, the defendant company is liable to pay to them commission on renewal premiums on all policies effected by them after the termination of the agency. This claim of the plaintiffs is sought to be supported, firstly, on the ground that there is an express term in the agreement to this effect; and reliance is placed on the term of the agreement to which I have already drawn attention, namely, ' that the premiums of the persons assured through the plaintiffs' agency should always be subject to their commission so long as they remained within the province of Gujarat whether the premiums be remitted through their offices or direct.' The Advocate General particularly emphasizes the word ' always' in this term. This term must be read with the other terms of the agency agreement. What the plaintiffs were seeking to obtain from the defendant company was payment of renewal commission in respect of all policies effected by them whether the payment of the premiums was made direct to the defendant company or made through the agency office.

The learned Judge held, that that was not an express term. I agree with that statement. I do not think that it was ever within the contemplation of the parties that the commission should continue indefinitely. Any such provision would indeed raise the greatest possible difficulty with the sub-agents and convassers, who were remunerated out of the commission which Mr. D.J. Medora was to get.

14. We have been referred to several cases as showing that an implied term ought to be imported. The first of those cases is Wilson v. Harper [1908] 2 Ch. 370. In that case a commission of five per cent., was held to continue payable on all accounts introduced by the plaintiff so long as the defendants did business with the persons he placed on their books. But when that case is examined, it is found that there was an express term in the agreement. The same is to be found in Levy v. Goldhill (1917) 2 Ch. 297. In Weare v. Brimsdown Lead Company Limited (1910) 103 L.T. 429, the plaintiff was employed for a fixed term as agent for the sale of white lead and was to receive a commission of two and a half per cent, on sales. At the expiration of the term the plaintiff continued in the employment. Avory J., with whom Fhillimore J. agreed, said (p. 429) :

I think the question in this case is simply whether the parties contracted either that the plaintiff should be employed for all time or that he should be paid commission after he had left the defendants' service on orders) given by customers previously introduced by him. The authorities which have been cited may all be reconciled in this way; in some of them the court has construed the contract as implying a term that the plaintiff is to be employed for all time, or as implying a term that the plaintiff is to be paid commission after he has left his service.

Applying that test to the case before them, they found nothing in the terms of the contract importing either that the plaintiff was to be employed for all time or that he was to be paid commission on orders given by customers after he had left the defendants' service. There is also a case of the Madras High Court in Empire of India Life Assurance Company, Ltd. v. Nanu Ayyar I.L.R. (1920) Mad. 170 which is the case of an agent of a life insurance company, and at p. 177 Napier J. says this :

In my opinion it may very well foe that where the claimant has to do no work beyond making the first introduction of the customer to a trading firm he can claim commission on repeat orders but where, as in the language of Cairns, L.C., and the Court of Appeal in Boyd v. Mathers and South Africa (Limited)(1893) T.L.R. 443 he is paid commission in respect of his services, and services are expected to be rendered in respect of the renewals, when he has ceased to be in a position to render the services he cannot claim to receive the commission. I prefer, therefore, to follow the reported case of the Court of Appeal and the earlier decisions of this Court and hold that in the absence of a definite agreement to that effect the right to receive the commission lapses on dismissal.

Then Sadasiva Ayyar J. says this (p. 178) :

Apart from the English authorities I am inclined to agree with my learned brother that where the duty of the agent does not cease with the first introduction of the customer to the principal, commission could not be claimed on payments made by the customer after the agency ceases....

15. In my judgment, the result of those cases is this, that in the absence of a definite agreement, the commission does not continue, especially is this so, if the payment is for services, for when the services cease the commission ceases also. In the present case the commission was paid for services, and not merely for the introduction of new policy-holders. Mr. D.J. Medora and his successors had numerous services which they had to perform which necessitated the upkeep of a large office and supervision of various canvassers. For these reasons, in my judgment, there is no continuation of the right to the commission after the services are terminated.

16. The next question is with regard to the Insurance Act of 1938. The matter really turns on whether the appellants can bring themselves within the definition of ' insurance agent' in that Act. The definition is to be found in Section 2(10), and is as follows :

Insurance agent' means an insurance agent licensed under Section 42 being an individual who received or agrees to receive payment by way of commission or other remuneration in consideration of his soliciting or procuring insurance business.

Before parting with the definition section, it is pertinent to observe that in some of the other sub-sections the word ' individual' is used in contradistinction to 'un-incorporated body' and 'incorporated body,' for example, in the definition of ' insurer ' in Sub-section (19) (a). The group of sections, which applies to this matter, commences with Section 40. That section is a prohibition against payment of any remuneration or reward whether by way of commission or otherwise for soliciting or procuring insurance business in India to any person except an insurance agent or a person acting on behalf of an insurer who for the purposes of insurance business employs insurance agents. It is very relevant to notice in that section that there are two types of persons who may qualify. One is an insurance agent, and the other is a person acting on behalf of an insurer who himself employs insurance agents. Section 43 makes it incumbent upon every insurer to keep a register of the insurance agents he employs. Section 44 is the section which is relied on as giving a continuation of the right to commission. The section is as follows :

Notwithstanding anything to the contrary in a contract between any person and an insurance agent forfeiting or stopping payment of renewal commission to such insurance agent, no such person shall in respect of life insurance business done in India refuse payment to an insurance agent, of commission on renewal premiums due to him under the agreement by reason only of the termination of his agreement except for fraud.

Then there is a proviso making ten years' service a necessary qualification. Now, it is to be noticed that the benefit of this section is given to ' an insurance agent' that is to say to the individual defined by Section 2(10), and not to the other class of persons who are described in Section 40 as ' persons acting on behalf of an insurer who themselves employ insurance agents.' In, my opinion, what is defined by the Act as ' an insurance agent' is not such a partnership as there was in this case. The firm of Messrs. D.J. Medora & Co. has been described as chief agents ; but in effect the firm managed a district clearing house for the respondent company. The Act draws a clear distinction between insurance agents and persons who carry on such a business as the appellants have, and, in my judgment Messrs. D.J. Medora & Co. and their successors do not come within the category of persons to whom the benefit of Section 44 is given.

17. Another point was raised in argument, namely, that even if the appellants came within the scope of the Act, the relationship between them and the respondent had terminated before they were duly licensed. That depends on the construction of the words ' as from 1st January next' contained in the notice of termination dated September 14, 1939. On the view I take of the matter, this question does not arise.

18. The remaining question is with regard to notice. What is a reasonable notice is a question for the jury. In this case the learned Judge in the Court below was sitting as a jury and, after considering the circumstances of the case, held two years to be a reasonable period. No one has suggested that the learned Judge took into account any fact or circumstance which he ought not to have considered or that he omitted to consider any admissible circumstance. I am not prepared to disturb the finding of the learned Judge that two years was a reasonable period.

19. In the result, it is my opinion that the appeal and the cross-appeal must be dismissed with costs.

Kania, J.

20. The relevant correspondence under which D.J. Medora & Co. were appointed chief agents for Gujarat of the respondent company, together with the forms under which sub-agents were appointed, has been set out in the judgment of the learned Chief Justice.

21. On this appeal four questions have been argued : (1) Whether the employment of D.J. Medora & Co, as chief agents was liable to be determined by a notice, or whether that employment could not be determined so long as the two partners of D.J. Medora & Co., whose names were approved by the respondent-company, were capable and willing to work? (2) Even if the employment was capable of being determined, whether D.J. Medora & Co. were entitled to commission on the renewal premia (3) Whether their right to such commission in any event was safeguarded by the provisions of the Insurance Act (IV of 1938) (4) Whether the notice given by the respendent-company was sufficient, and, if not, whether the decision of the trial Court, allowing two years' notice as reasonable, was proper ?

22. In support of the first contention it was pointed out that this is a contract in which the respondent-company selected the agent for his personal capacity. The correspondence in 1892 was relied upon to show that the respondents were particular in stating that they would look to Mr. Dhunjibhoy Medora, in the first instance, personally for the cash payments. The appellants also rely on the letter of the insurance company dated July 9, 1892, by which they accepted the terms of employment suggested by Mr. Dhunjibhoy Medora in his preceding letter of July 6. The words there used are as follows :

I accordingly have pleasure in formally appointing you chief agent for Gujarat. The agency would stand in the name of D.J. Medora & Co. but as already explained you alone would be our recognised agents and would be solely responsible. On your retiring or otherwise discontinuing the work the agency would cease and your partner would have absolutely no claim thereunder.

* * * ' I hope our relations will be of a satisfactory and permanent character and that you will early achieve the success we expect you to attain....

23. Taking the first argument, the correspondence shows that although in form the chief agents were D.J. Medora & Co., Mr. Dhunjibhoy alone was going to be relied upon to push the work of the defendant company and held responsible for the cash and work of the company. I do not consider the emphasis put on the words in employing Mr. Dhunjibhoy or on the words used in the later communications to D.J. Medora & Co. in approving the names of the then partners, as spelling out an agreement of permanent agency, or an employment of agents without power in the company to revoke the employment. It must be borne in mind that the chief agents were to handle very substantial amounts in cash which they would receive as first premium or renewal premium on various policies which the chief agents secured for the company. It was, therefore, necessary for the defendant company in the correspondence to emphasise that although they recognised the firm in name as the agents, they would personally expect Mr. Dhunjibhoy, whom they evidently knew and whom they considered' a man of integrity, to look after and be responsible for the cash which they would receive on behalf of the company. The later correspondence in selecting individuals and approving their names as partners brings out the same position and nothing more. This is particularly noticeable when, after the death of Dhunjibhoy, his widow applied for the continuance of the agency in the name of the two sons. On April 16, 1917, Kharsetbai, the widow of Dhunjibhoy, wrote to the then manager of the defendant company a letter in which she stated as follows :-

I beg therefore to request that you will kindly be pleased to register my sons' names as partners of our firm of D.J. Medora and Co., along with myself. The full names of my sons are : Sorabji Dhunjibhoy Medora and Jamshedji Dhunjibhoy Medora, and their ages are 24 and 21 respectively.

To that letter the then manager replied on April 19 as follows :.I have to advise you that at yesterday's board meeting sanction was given to these two sons coming into the firm as partners in connection with our agency. It is understood that both will give their full time to the agency doing all in their power to keep up to past records and that they will make every endeavour to increase the business by opening fresh connections....

The correspondence which took place in 1899 is also significant on this point. It appears that on February 9, 1899, the clause, which I have quoted earlier from the letter of July 9, 1892, came to the notice of the then partners, and it was realised that according to that clause they had no rights after Dhunjibhoy's death. Being apprehensive of their position they wanted the defendant company to assure them that so long as the firm continued to work satisfactorily there should be no objection to allow them to work. It was, pleaded that otherwise they would lose the advantages of their past labours and sacrifices. I must admit that this correspondence does suggest that the employment was not of a transient nature. It was intended and expected that ample opportunities would be given to the chief agents to develop the work. But from that it is not right to contend that it was not open to the defendants to terminate the employment during the lifetime of the partners whose names were approved by the company. In my opinion, this correspondence does not support that contention. I am also unable to read the clause quoted above from the letter of July 9, 1892, as spelling out an affirmative promise on the part of the company to continue the employment of Dhunjibhoy till he voluntarily retired or discontinued through ill-health or otherwise. The words are used to ' protect the rights of the company ', and emphasise that on Dhunjibhoy retiring or otherwise discontinuing, although the firm of D.J. Medora & Co. was recognised as chief agents, the other partner has no right to ask the company to keep the agents because the firm continued. It was argued that these words were unnecessary if the agency was liable to be terminated on a reasonable notice. In my opinion, as I have previously stated, they only emphasised that this was not a transient employment, so that both sides might get the advantage of the agency which had been established.

24. A person must have confidence in the honesty, integrity, capacity and perseverance of the agent employed to do this work. As a mental estimate of these qualities of an individual is bound to change from time to time, the wish to continue the agent must also similarly change. Therefore, this employment is personal, and in the words of Cairns L.C. in Llanelly Railway and Dock Co. v. London and North Western Railway Co. (1875) L.R. 7 E. & I. A. C. 550 prima facie the employment cannot be supposed to be of a perpetual character. In exceptional cases only the authority is irrevocable. One such case is when the agent has an interest in the agency. That is recognised by the Indian Contract Act also. It was argued that in the present case as Dhunjibhoy Medora had to spend his own money to build and develop the business in the beginning he had such interest. This argument is unsound. Under the terms of employment it was not provided that Dhunjibhoy had to spend money out of his own pocket. The correspondence does show that the company was aware that Dhunjibhoy would spend some money of his own to develop the business, but that was with a view that Dhunjibhoy himself might get a quick and large income. In my opinion, therefore, the contention that the employment of D.J. Medora & Co. was not liable to be revoked by reasonable notice fails.

25. The next argument is that under the agreement arrived at between the parties in 1892, and particularly by clause (2) in the letter of July 6, 1892, it was stipulated that even after the agency terminated, the right to commission on renewal premia continued, The relevant clause is in these terms :

That the premiums of the persons assured through my agency should be always subject to my commission so long as they remained within the province of Gujarat whether the premiums be remitted through my office or direct.

It was contended that the word ' always ' showed that the right to commission was not determined on the termination of the agency. The clause thus provided that the right continued in respect of all policies which were secured through the agency, and, was subject to two conditions only : (1) so long as the premium was paid, and (2) so long as the policy-holders remained within the province of Gujarat. It was immaterial whether the premium was remitted through the chief agents' office or was received direct by the company. It was strenuously contended that the Court had no jurisdiction to read in this express term another stipulation, namely, ' and that the agency continued.' It must be noticed that the clause is silent as to the duration for which the commission was to be paid. The word ' always ' does not, in my opinion, mean what is contended for. It means that the premium received in respect of policies secured through the chief agents should always, that is, in all circumstances, be subject to the agents' commission. But it must be recognised that for this purpose the existence of the agency is assumed. The word ' always' does not cover the contingency of the non-existence of the chief agency. The point, therefore, is whether this clause contains an implied term, that the commission shall be paid whether the agency continues or not.

26. Various cases were cited. I do not propose to deal with them in detail. In Halsbury's Laws of England, Hailsham Edition, Vol. I, Article 434, at p. 260, it is stated as follows :

No remuneration is, as a rule, payable upon transactions between the principal and third persons introduced to him by the agent arising after the termination of the employment, whether such transactions are due to the agent's introduction or not.

The cases cited therein are largely cases of canvassers of advertisements or orders for particular goods. The statement of law continues as follows :-

But remuneration may be payable in respect of such further transactions if they are in fact part of a transaction in which the agent was employed, or if there was an express contract to that effect, or a clear intention to continue such remuneration after determination of the agent's employment can be discovered from the construction of the contract of agency; and in the latter cases it will be payable even though the agent was dismissed, and may be so though he was not the effective cause of the transaction.

In the foot note dealing with such implied term of contract various cases are collected. It is pointed out that such intention was implied in Bilbee v. Hassee & Co. (1888-89) T.L.R. 677 and the cases following that, while the cases on the other side of the line were Weare v. Brimsdown Lead Company Limited (1910) 103 L.T. 429 and; the othen cases there cited. In Levy v. Goldhill [1917] 2 Ch. 297 the cases were reviewed, and the fact that the employment was for a fixed term was held to be a material factor to be taken into consideration. The decisions individually do not help, because, as pointed out in each case, one has to turn to the contract between the parties to ascertain whether there was an implied term of agreement to give to the agent remuneration in respect of receipts after the employment had ceased. The principle, however, to my mind is clear. Unless those receipts flowed from the work already done, and were not the result and had no connection with work to be done subsequently, the agent was not entitled to commission on the subsequent receipts. To put it in other words, the cases show that when a particular client is secured, and it is from that introduction or that contract that the subsequent receipts or orders come, without any further thing being done, the canvasser is held entitled to the remuneration, even though the orders come afterwards. On the other hand, if in respect of the subsequent orders the canvasser has to do some work;, then the implied intention is that on the termination of employment the agent does not get remuneration. Empire of India Life Assurance Co., Ltd. v. Nanu Ayyar (1920) I.L.R. 44 Mad. 170, which is approved of in Pravat Kamal v. Phoenix Assurance 40 C.W.N. 694 adopts that line of reasoning. In the Madras case three decisions of that Court, which are unreported, are also referred to. Although the Madras case contained a clause, which was held expressly to negative this right, the question of an implied term is considered and discussed at length and the relevant authorities are all considered in detail. It, therefore, appears that the consensus of judicial opinion is that if in respect of receipts after termination of agency some work has to be done by the agent, he does not get the commission ; otherwise he does.

27. The question then becomes one of fact in the present case. Plaintiff No. 2 gave evidence and admitted that in respect of renewal premia he had to work. He stated that the policy-holders had to be approached and, if necessary, persuaded to continue the policy. He had sometimes to go personally, and very often send his sub-agents for that work. Under the terms of employment it was his duty to receive the further premia, if tendered, at his office. That he could do only if he continued in the position of an agent. If he ceases to be an agent he has no authority to accept the premia on behalf of the company. And, therefore, that part of the work he cannot do. It is, therefore, clear on the evidence that it was necessary for the appellants to do work in respect of the renewal premia. Under the circumstances there cannot be an implied agreement to pay commission on such renewal premia after the termination of the agency.

28. It was strenuously urged on behalf of the appellants that it was no fault of theirs if the insurance company put an end to their employment, and thus prevent them from doing the work which they have always been ready and willing to do. In my opinion, this argument is the result of mixing up two separate principles of law. The question is not of any wrongful act. If the insurance company were entitled to terminate the employment, in law, their act of terminating the agency cannot be a wrongful act. If a man is authorised by law to do a thing, and does that, and thereby puts the other party in a position in which he is unable to do a particular thing, there is no principle of law under which he could be asked to compensate the other party. The position can only be considered in that way. By an act, which in law the defendants were authorised to do, they had put the plaintiffs in a position where they could not perform the work which they were obliged to do to earn their commission. That may be an unfortunate situation, but gives no right to the plaintiffs. That, in my opinion, is a sufficient answer to this contention. Under the circumstances, there being no implied agreement, the second ground urged by the appellants must fail.

29. The terms of the sub-agency agreements made by Dhunjibhoy and the plaintiffs were relied upon to support the contention that after the termination of employment the plaintiffs were entitled to commission on renewal premia. In this litigation we are not called upon to determine the rights of the sub-agents under their agreements. It is clear, to my mind, that the sub-agents' agreements cannot affect in any way the rights and obligations of the plaintiffs to the defendants in the matter in question;

30. That leads to the consideration of the Insurance Act. The contention on behalf of the appellants is that under Section 44 of the Insurance Act there is a liability of the insurance company to pay commission on renewal premia, even after the termination of employment of the insurance agents. In my opinion, this argument proceeds on an incorrect reading of the scheme of the Insurance Act. Section 2 defines, amongst other things, ' an insurance agent.' It starts by describing such party as 'an individual.' Considering the other terms defined in the definition section, it is clear that ' individual ' and ' person ' are deliberately used to indicate different entities in the Act. The next prevalent section is Section 40. In that section in the first part the Legislature has provided that six months after the commencement of the Act no insurer shall be permitted to pay remuneration to any individual who was not an insurance agent or a person acting on behalf of an insurer who for the purposes of insurance business employs insurance agents. ' Insurance agent' being defined in Section 2, in the normal course, I think it is obligatory in construing the later sections to give the words ' insurance agent' the same meaning as given in the definition section. It is not disputed that in Section 40, Sub-section (1), the term ' insurance agent' carries the meaning given in the definition section. Sub-section (2) prescribes the limit of remuneration which could be paid to the insurance agent. It is to be noticed that it does not prescribe any limit in the case of persons acting on behalf of an insurer who employs insurance agents and to whom remuneration is to be paid also under Sub-section (1). Then comes Sub-section (3), which is clearly a saving clause. It saves from the operation of the section all contracts made between an insurer and an agent or a canvasser in respect of the agent's or canvasser's remuneration if the contract was before January 27, 1937, which, we are told, was the day when the Bill was first published. Originally the saving clause covered only the case of an insurance agent. It appears to have been realised shortly after the Act came into force that it would affect adversely various persons who did not fall under the definition of ' insurance agent' in the Act. By the amendment, therefore, in substitution of the words ' an insurance agent' the following words were substituted : ' any person, whether an insurance agent within the meaning of this Act or not.' In my opinion, this amendment is very significant for the present discussion. By that amendment the Legislature, after applying its mind to the defects in the then existing scheme, put right one clear defect, namely, the adverse effect of Section 40 on contracts between persons who may not propose to take out licences after the coming into force of the Act. It, therefore, widened the circle so as to include not only an ' insurance agent' as defined by the Act, but also ' any person' which would include an individual or an unincorporated body or a limited company, and whether such entity answered the definition of 'insurance agent' as given in the Act or not. Contracts of such parties were saved by this saving clause, provided they were made before January 27, 1937.

31. Section 44, in my opinion, is also a| saving section. The section provides that when a contract exists between an insurer and an insurance agent, in which it is provided that the insurance agent shall not get commission on renewal premia after the termination of his employment as insurance agent, that portion of the contract will be inoperative, provided, as stated in the proviso, such agent had served such insurer continually and exclusively for at least ten years. It is significant that while Section 40, Sub-section (3), was amended by substituting ' any person, whether an insurance agent within the meaning of this Act or not,' for ' an insurance agent', no amendment was made in Section 44. In my opinion this is important because at that time the Legislature had considered the case of parties whose contracts were liable to be adversely affected by the Act which was brought into force recently. It is difficult to believe that at that time they had not before their mind Section 44. Section 44, therefore, must be construed according to the ordinary recognized manner of construction of a statute and the words ' an insurance agent', under the circumstances, must mean 'an insurance agent' as denned by the Act.

32. Even if an extended meaning is given to the term ' insurance agent', in my opinion, the plaintiffs do not answer that description. They were appointed chief agents. Their normal function, therefore, was to appoint sub-agents who would canvass business. The scheme under which they were appointed shows that, although they were given thirty per cent. on the first premia and seven and a half per cent. on renewals, it is stated that out of these, when sub-agents were employed, twenty-five per cent, and five per cent., respectively should be the minimum commission paid to them. It was argued on behalf of the appellants that they were not obliged to employ sub-agents, and if they only employed a staff who went out and canvassed business, they were insurance agents. I am not concerned with a hypothetical case. In this case the evidence shows that even when they themselves secured business, the plaintiffs nominated sub-agents to whom the commission provided for sub-agents was paid. The contention that Section 44 includes the plaintiffs, in my opinion, is wrong also because it assumes the existence of a contract between an insurer and an insurance agent. By taking licences only in their names, I do not see how the plaintiffs, without the consent of the defendants, can bring about a contract between an insurer and an insurance agent as defined by the Act. It is not shown that after obtaining the licences they had entered into any contracts with the defendants. It is possible that after the Act came into force the defendants may not want to employ the plaintiffs as their (licensed) insurance agents as defined by the Act. The other difficulty I feel is this. If the term ' insurance agent' is given a wider meaning, would the expression ' insurance agent' cover the sub-agent and also the chief agent, when a distinction between insurance agents and persons occupying the position of chief agents like the plaintiffs is clearly found in Section 40 of the Insurance Act? In my opinion Section 44 has to be read as a counterpart of Section 40. Because the Legislature restricted the right of an insurance agent to receive commission up to the percentage prescribed by Section 40, it provided by Section 44 that notwithstanding a contract to the contrary the insurance agent should continue to receive his commission on renewal premia after the termination of his employment provided he had continuously and exclusively served the insurer for ten years. Similarly because under Section 40 the right to receive commission of persons like chief agents was not limited, their contracts required no protection and their rights were left to be governed by the terms of their contract. It must be remembered that sanctity of contract between adults is a fundamental principle of law, and when Legislature interferes with the contracts of parties, the extent of such interference must be strictly limited to the words used in the section. The Court must be always slow and reluctant to give any extended meaning to words used in such section, particularly when the attempt is to include parties whose contracts are not very clearly covered by the section. I think there is considerable force in the contention urged on behalf of the respondents that Section 44 contemplates only agreements made after the coming into force of this Act, and all agreements made prior thereto are saved [only] to the extent provided under Section 40, Sub-section (3).

33. It was argued on behalf of the appellants that in giving notice it was stated that the agency shall terminate ' as from January 1, 1940,' and, therefore, the same came to an end after January 1, 1940, and was operative on that date. It was furthers contended that as licences were obtained by the two appellants on January 1, 1940, they were entitled to the benefit of Section 44. In my opinion, the appellants do not come within the expression ' insurance agent' and I do not think this contention is sound also. In my opinion, therefore, Section 44 does not confer any right on the appellants, and they are not entitled to commission on renewal premia as claimed by them.

34. The last question is in respect of the notice to be given to the appellants. Under Section 205 of the Indian Contract Act, where an agent is employed for a feed period, the law provides for the consequences of not keeping him for the period. Section 206 provides for giving reasonable notice in case of all employments, and it depends on the particular nature of business to determine what is reasonable notice. In the present case the learned Judge had before him the nature of the work done by the plaintiffs and their predecessors, the time, money and energy devoted by them in that work, and an estimate of the expenses incurred for earning their own remuneration. Plaintiff No. 2 gave evidence on the point and no evidence was led against that. He also considered the nature of the work of the chief agents. The difficulty of the Court in a matter of this sort is considerable, and as there is no reported decision in which a chief agent's employment is terminated, there is no guidance from judicial decisions. Cases of editors of newspapers, in my opinion, stand on a different footing. In those cases it is the individual, with his personal equipment, who walks out of one office and has to find employment in another. A chief agent's position is materially different. He has got to create an organization which gives him the benefit of his work. Having regard to these considerations, which all appear to have been taken into account by the learned trial Judge, there appears no reason to differ from his conclusion, and, therefore, in my opinion, on that point the contention of the appellants, as also of the respondents on their cross-objections, fails.

35. On the footing that two years' notice is proper, it has not been argued before us that the damages have not been properly calculated, or that there was any error in arriving at the amount awarded by the trial Court.

36. The result, therefore, is that the appeal fails and the cross-objections also fail. Both of them are dismissed with costs.


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