Section 40(1) and 42(7) of the Insurance Act, 1938, prohibit the payment of commission to anyone other than a licensed insurance agent.

ORDER:- The respondent who is the same in both the above revisions filed a suit O.S.No.334 of 1966 on the file of the District Munsif's Court, Tirupattur, against the petitioner herein (the Life Insurance Corporation of India) for recovery of a sum of Rs.617-46 being the commission due to him in respect of a policy for Rs.20,000/-in the name of one Dr. T.K. Ganesan which he had canvassed. His case was that he applied for a licence on 16-1-1963 to act as an agent of the petitioner for procuring life insurance business, that on the assurance given by the Development Officer, Tirupattur, that he would be given commission for the business procured by him from the date of the application for licence he canvassed and obtained a proposal from the said Dr. T.K. Ganesan for a sum of Rs.20,000/- which proposal was ultimately accepted by the petitioner, and a policy No.112511025 had been issued to him. but that contrary to the earlier assurance given by the Development Officer, the petitioner had refused to pay the commission due to him on the said policy.

2. The petitioner resisted the suit contending that it was true that the respondent sent in his application for appointment as an insurance agent on 16-1-1963. that he was granted the necessary licence only on 17-7-1963, that he had been specifically informed by the petitioner by its letter dated 7-5-1963 that any business that he may procure till the grant of the licence would be treated only as a direct business, and that he will not be entitled to any commission for procurement of any business till he is appointed as an agent. The petitioner also contended that the respondent was not authorised to canvass any business on behalf of the petitioner prior to the issue of the licence and as such, he will not be entitled to any commission at all. The petitioner also denied that the Development Officer, Tirupattur had authorised the respondent to procure any business on its behalf, and that in any event the Development Officer had no authority to assure the payment of commission for any business that may be procured till the date of respondent's appointment as an agent, and that even if any assurance had been given, it would not be binding on the petitioner. It was also contended by the petitioner that the provisions of the Insurance Act not only prohibits any person from procuring business as an insurance agent without the requisite licence, but also imposes a ban on the insurer paying any commission to such a person for any business that might have been procured by him.

3. The trial court went into the following two questions: (1) whether the plaintiff-respondent is entitled to any commission and (2) whether the business procured by the plaintiff when he was not an agent is hit by Section 42(7) of the Insurance Act and therefore not entitled to any commission. On the first question the trial court held that the plaintiff is entitled to claim commission under Section 70 of the Contract Act even though there was no specific or express agreement by the petitioner to pay commission. On the second question it was held that the business secured by the respondent before he was appointed as an agent under the petitioner is not hit by Section 42(7) of the Insurance Act. The trial court, however, found that the respondent's claim for a sum of Rs.617-46 cannot be allowed in entirety and that he would be entitled to only a sum of Rs.238-50 as his commission as per the relevant rules of the Life Insurance Corporation and decreed the suit only for Rs.238-50 and dismissed the suit as regards the balance of the claim.

4. Both the petitioner and the respondent filed appeals against the decision of the trial court and the said two appeals came to be disposed of by a common judgment. The lower appellate court has upheld the view of the trial court that even though there is no specific or express agreement to pay commission to the respondent by the petitioner, Section 70 of the Contract Act would enab