TMI Blog1960 (5) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... Civil Appeal No. 21 of 1960 - - - Dated:- 4-5-1960 - Wanchoo, K. N. , Gajendragadkar, P. B. And Gupta, K. C. Das,JJ. JUDGMENT The Judgment of the Court was delivered by WANCHOO, J.-This is an appeal on a certificate granted by the Madras High Court. The appellant Company had -been carrying on various classes of insurance business other than life insurance after its incorporation in September, 1941. On October 15, 1956, an extraordinary general meeting of the shareholders of the Company passed a resolution by which all its insurance business was to cease forthwith and no further policies of insurance of any kind were to be issued thereafter. It was also resolved that no application should be made for renewal of the certificate granted under s. 3 of the Insurance Act, No. IV of 1938 (hereinafter called the Act), and that thence forward the Company should only carry on the business of money-lending as a loan-Company and also to do investment business. In consequence of these resolutions, the Company informed the Controller of Insurance in December, 1956, that it was not applying for renewal of its registration for carrying on the business of insurance. In May, 1957, the Cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. This was followed by an appeal by the Company, which was dismissed. The Division Bench sub- stantially agreed with the view taken by the learned Single Judge. Thereupon the Company applied for a certificate to enable it to appeal to this Court and obtained it; and that is how the matter has come up before us.- Mr. Aggarwala appearing for the Company has urged the same two points before us. The Act was passed in 1938 to control persons carrying on the business of insurance. Section 2(9) thereof defines an ' insurer' inter alia as weaning any body corporate (not being a person specified in sub-cl. (c) of this clause) carrying on the business of insurance, which is a body corporate incorporated under any law for the time being in force in India or stands to any such body corporate in the relation of a subsidiary company within the meaning of the Indian Companies Act, 1913, as defined by sub-s. (2) of s. 2 of that Act. Section 3 provides for registration of any person carrying on the business of insurance and no such business can be carried on unless a certificate of registration for the particular class of insurance business has been obtained from the Controller. Section 3(4) giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erms: "Every insurer shall be subject to all the provisions of this Act in relation to any class of insurance business so long as his liabilities in India in respect of business of that class remain unsatisfied and not otherwise provided for." The contention of Mr. Aggarwala is that s. 33 and s. 2D both refer to an insurer which is defined in s. 2(9) as a person carrying on the business of insurance. He, therefore, contends that as soon as the insurer who was carrying on the business of insurance closes it down completely be no longer remains an insurer and the provisions of the Act do not apply to him. Therefore, according to him, when s. 33 provides for an order of investigation by the Central Government such an order can only be made in respect of a, person who is actually carrying on the business of insurance and is thus an insurer and cannot be made against a person who was an insurer but has closed his business. Further, according to Mr. Aggarwala, s. 2D also speaks of an insurer and makes him subject to all the provisions of the Act with respect to any class of insurance business so long as his liabilities in respect of that class remain unsatisfied or not other. wise pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the circumstances. Therefore, though ordinarily the word " insurer " as used in the Act would mean a person or body corporate actually carrying on the business of insurance it may be that in certain sections the word may have a somewhat different meaning. A perusal of a few sections of the Act will illustrate this and immediately show that the word " insurer " has been used in some sections to mean not merely a person actually carrying on the business of insurance but also a person who intends to carry on the business of insurance but has not actually started it and also a person who was carrying on the business of insurance but has ceased to do so. For example, s. 3(2) which deals with an application for registration which naturally has to be made before the business of insurance actually commences, lays down in cl. (b) that the application shall be accompanied by the name, address and the occupation, if any, of the directors where the insurer is a company incorporated under the Indian Companies Act. Here the word ,insurer" has been used to indicate the company which is not actually carrying on the business of insurance but is intending to do so and is applying for registra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act. Could it be said in the circumstances that s. 33 only applies to insurers actually carrying on business and not to insurers who have closed their business? If the policy of the Act is to be carried out and the policy- holders and the general public are to be protected, the need for making investigation into the affairs of an insurer who has closed his business is greater, for he may have done so dishonestly. We are therefore of opinion that the word " insurer" as used in s. 33 not only refers to a person who is actually carrying on business but in the context of that section and taking into account the policy of the Act and the, purposes for which the control envisaged by the Act was imposed on insurers also refers to insurers who were carrying on the business of insurance but have closed it. Further if there were any doubt whether the word " insurer " in s. 33 refers to those insurers also who had closed their business that doubt in our opinion is completely dispelled by s. 2D. That section provides that every insurer shall be subject to all the provisions of the Act in relation to any class of insurance business so long as his liability in India in respect of business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of the Act so long as his liabilities in India in respect of any business of all classes remain unsatisfied or not otherwise provided for. Therefore on a plain reading of, s. 2D there can be no doubt that an insurer who has closed all classes of his insurance business remains subject to all the provisions of the Act in relation to such classes so long as his liabilities in India remain unsatisfied or not otherwise provided for. Therefore s. 33 will certainly apply to a case where all classes of insurance business have been closed so long as the liabilities remain unsatisfied or not otherwise provided for. The first contention of the appellant therefore that no investigation can be ordered under s. 33 in its case because it has closed all classes of its insurance business fails. Turning now to the second contention, the argument on behalf of the appellant is three-fold. In the first place it is urged that an order can only be made under s. 33 read with s. 2D when the Central Government is satisfied that the liabilities have not been satisfied or otherwise provided for, and that the order should show on the face of it that the Central Government had considered this a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... find from the materials on the record that there were complaints before the Central Government from those who had claims against the company. Those complaints were apparently referred to the Company and it does not appear that the Company satisfied the Central Government that the complaints were unjustified. It was in this situation that the order for investigation was made in July, 1957, after the Company had closed its insurance business. Further on the materials available on the record it does appear that even now there are claims pending to the tune of about one lac of rupees against the Company. So it cannot be said that there were no liabilities of the Company outstanding which were not satisfied or otherwise provided for when the order was made in July, 1957. In the circumstances the order cannot be held to be bad because it does not show on the face of it that there were liabilities which had remained unsatisfied or not otherwise provided for. In the second place it is urged that there can be no question of satisfying or otherwise providing for liabilities unless the liabilities are ascertained and either admitted or proved. In other words the argument is that it is only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties of the Company and therefore when such liabilities do not appear to exceed that amount they have otherwise been provided for. The question thus raised is whether the Company is entitled to take into account the security deposit under s. 7 in order to show that the liabilities have been otherwise provided for. The contention on behalf of the Controller is that when the Act envisages " provision otherwise ", this provision has to be over and above the security deposit made by the Company under s. 7. It appears from s. 8 that this deposit is available for the discharge of liabilities arising out of policies of insurance issued by the insurer so long as any such liability remains unsatisfied. But even if a decree has been obtained by a policy-holder on the basis of a liability under the policy he is not entitled to attach any part of this deposit until he shows that he has failed to realise the decree in any other way. Further it appears that s. 8 only contemplates policy-holders holding a decree attaching part of the security deposit in case they fail to realise their debt in any other way ; it does not contemplate, for example, third parties who have decrees against an insurer, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king " provision otherwise " he will have to satisfy the court that the " provision otherwise " has been fully made and the court will be in a position to investigate into the matter. This, however, does not mean that if the insurer does not want to take advantage of s. 9 of the Act he can say without submitting to the terms of that section that he has made " provision otherwise ", because the deposit which is made under s. 7 is more than all his liabilities of the insurance business that he has closed. It is urged that it is hard, for example, on an insurer who has a large deposit and whose liabilities are small that he should not be able to fall back on his deposit for the purposes of s. 2D. We do not, however, see any hardship in a case of this kind, for if it is a fact that the deposit of the insurer is large and his liabilities are small he can always take advantage of s. 9 of the Act and submit to an investigation by the court and take back his deposit after depositing the small sum required to meet his liabilities. We are, therefore, of opinion that when s. 2D speaks of satisfaction or " provision otherwise " for the liabilities of insurance business which is closed it conte ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
