TMI Blog1965 (4) TMI 105X X X X Extracts X X X X X X X X Extracts X X X X ..... fer of ₹ 1,10,000/- in 1948 and ₹ 32,000/- in 1952 to the Life Insurance Fund and rightly held that the transfer of ₹ 82,000/- to the General Department by' resolution dated January 6, 1956, was not in accordance with the provisions of the Insurance Act and that consequently that amount continued to form part of the assets of the life insurance business of the company upto September 1, 1956 and that as such vested in the Corporation which could recover it from the company and the directors responsible for the transfer of the amount to the General Department. Appeal dismissed. - Civil Appeals Nos. 676 and 677 of 1962 - - - Dated:- 8-4-1965 - GAJENDRAGADKAR, P.B. (CJ), HIDAYATULLAH, M., DAYAL, RAGHUBAR AND RAMASWAMI, V., JJ. For the Appellant: O.P. Malhotra, Hamendra K. Shah, .1. B. Dadachanji, O.C. Mathur and Ravinder Narain, H.M. Thakar, S.N. Andley, Rameshwar Nath and P.L. Vohra, For the Respondent: C.K. Daphtary, Attorney-General, D.P. Mehta and K.L. Hathi JUDGMENT Raghubar Dayal, J. These appeals, by special leave, are against the decree of the Life Insurance Tribunal, Nagpur, in proceedings on an application by the Life Insurance Corpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o and would form a separate fund called the Life insurance Fund and its assets be kept distinct and separate from all other assets c, If the insurer and deposits made by the insurer in respect of life insurance business. Sub-s. (3) of s. 10 provided that the life insurance fund would be as absolutely the security of the life policy holders as though it belonged to an insurer carrying on no other business than life insurance business and that it should not be applied directly or indirectly for any purpose other than those of the life insurance business of the insurer. The amount in this fund had to be sufficient to meet the net liabilities in regard to the life insurance policies issued by the company, If it was not so maintained the company stood the chance of being barred from carrying on life insurance business. By resolution dated December 18, 1948. Rs. 1.10.000/- were transferred from the General Department to the Life Department as advance to the Life Department Revenue Account for being added to the Life Fund. subject to the condition that the Life Department would not be liable to pay any interest thereon and that no repayment of the lcan would be made except out of the va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the Life Fund. The resolution reads: "Resolved that a loan of Rs. 82,000/- (eighty two thousand only) advanced to Life Department Revenue Account by General Department be and is hereby repaid to Genera1 Department and the balance of Rs. 60,000/- due to General Department by Life Department Revenue Account be and is hereby kept in reserve for future and hence no adjustment in regard to Rs. 60,000/- will be made for the present." This resolution was confirmed by the Board of Directors at its meeting dated February 6, 1956. We may now refer to the changes in law with respect to life insurance business in 1956 and an anticipation of which probably led to the resolution of January 6, 1956. On January 19, 1956, the Life Insurance (Emergency Provisions) Ordinance, 1956 (Ord. No. 1 of 1956) was promulgated by the President. It came into force from that day which was called the 'appointed day'. Section 3(1) provided that the management of the 'controlled business' of a11 insurers would vest in the Central Government on and from the appointed day. 'Controlled business', according to cl. (2) of s. 2, meant all the business appertaining to the life insurance business, if t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provided for the payment of compensation to the insurer whose Controlled business had been transferred to and vested in the Corporation under the Act. Section 17 provided for the constitution of Tribunals which were empowered by sub-s. (4) to regulate their own procedure and decide all matters within their competence. Section 41 provided that no civil Court would have jurisdiction to entertain or adjudicate upon any matter which a Tribunal was empowered to decide or determine under the Act. Section 44 inter alia provided that nothing contained in the Act would apply in relation to any insurer whose business was being voluntarily wound-up or was being wound-up under orders of the Court. The Corporation, by its application under s. 15, contended that the transfer of Rs. 82,000/- from the Life Fund to the General Department under the resolution of January 6, 1956, was illegal. being contrary to and in contravention of the insurance Act and as such was inoperative, bad in law and not binding on the petitioner. It was further contended that the said transfer was without consideration and was not reasonably necessary for the purpose of the controlled business of the company and/or was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at C.A. 676 of 1962 has been filed, by special leave, by Damji Valji Shah and Jayantilal Hirjibhai Chawda and C.A. 677 of 1962 by Ghanshyamdas. This judgment will govern both these appeals. The points raised by learned counsel for the appellants are: (i) The Tribunal had no jurisdiction to proceed with the proceedings on the petition presented by the Corporation without the leave of the High Court in view of s. 446 of the Companies Act, 1956, the company having been ordered to be wound-up by the High Court on November 9, 1959, (ii) In view of s. 44(a) of the LIC Act none of the provisions of the Act applied to the company and therefore the Tribunal could not proceed on the application of the Corporation subsequent to the company being wound-up. (iii) The transfer of Rs. 82,000/- from the Life Fund to the General Department of the company was for consideration and was necessary for the life insurance business. The fourth point sought to be urged was that the provisions of s. 15(1)(f) of the LIC Act were ultra rites as they contravened the provisions of Arts. 14 and 19 of the Constitution. This contention was not raised before the Tribunal during the arguments and was therefore c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ust follow that the consequential provision of sub-s. (1) of s. 446 of the Companies Act will not operate on the proceedings which be pending before the Tribunal or which may be sought to be commenced before it. Further, the provisions of the special Act i.e, the LIC Act, will over-ride the provisions of the general Act viz., the Companies Act which is an Act relating to companies in general. It is however contended for the appellants that in view of s. 44(a) of the LIC Act, s. 41 will not apply to the company whose business was being wound-up under orders of Court and that therefore the provisions of s. 446 of the Companies Act will affect the proceedings before the Tribunal. The contention is not sound. The question of the applicablity of the Act to a particular insurer is to be considered in relation to facts existing when the Act came into force. In view of s. 44 of the LIC Act it will not apply to wound-up under orders of Court at the time when that Act came into force in 1956 or on the 'appointed day' i.e., September 1, 1956. When the assets and liabilities pertaining to the controlled business of the company stood transferred and vested in the Corporation. The company wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral Government either in cash or in approved securities or partly in cash and partly in approved securities the sums specified in the various clauses in-regard to the different types of life insurance businesses. Clause (a) requires a deposit of Rs. 2,00,000/- where the business done or to be done is life insurance only. Clause (e) requires a deposit of Rs. 3,00,000 /- where the business done or to be done is life insurance and any one of the three el. asses mentioned in clauses (b) to (d). Clause (e) further provides that out of the deposit of Rs. 3,00,000/-, Rs, 2.00,000/'-shall be the deposit for 'life insurance business. Section 7 lays down a statutory amount which the insurer has to deposit. It does not however restrict the insurer to deposit a larger amount in respect of life insurance business. Sectionplaces certain restrictions about the use to be made of the deposits under s. 7. Section 8(2) hewever deals with any deposit and provides that where a deposit is made in respect of life insurance business, the deposit made in respect thereof shall not be available for the discharge of any liability of the insurer other than liabilities arising out of policies of life insurance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e amount of Rs. 82,000/- was not transferred as a result of the actuarial valuation as contemplated by the various resolutions which authorised the transfer of the amount from the General Department to the Life Department Revenue Account. It was definitely provided in those resolutions that no repayment of the amount would be made except out of valuation surpluses of the Life Department. The expression 'valuation surplus' has a technical meaning under the Act. Section 13(1) of the Insurance Act provides that every insurer carrying 0n life insurance business shall. in respect of the life insurance business transacted in India. cause once at least in every three years an investigation to be made by an actuary into the financial condition of the life insurance business carried on by him, including the valuation of his liabilities in respect thereto. An abstract of the report of the actuary is to be made in accordance with the regulations contained in Part I of the Fourth Schedule and in conformity with the requirements of Part II of that Schedule. Section 13(2) provides that the provisions of sub-s. (1) regarding the making of an abstract shall apply whenever at any other time an in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion as on 31-12-55 will surely enable you to declare a higher bonus." Firstly, it does net appear that the actuary had really conducted an investigation and submitted the valuation report as required by s. 13, of the Insurance Act. There is nothing on the record to show that any abstract in Form I, Fourth Schedule, was prepared and submitted to the Controller. Further the letter shows that the networking surplus was only Rs. 58,733/- as the ostensible surplus of Rs. 1,12,033/- included Rs. 53,300/- by which certain investments of the company had appreciated in that period. When the net working surplus was much less than Rs. 82,000/- which were transferred from the Life Department to the General Department, the transfer of Rs. 82,000/- cannot be said to have been in accordance with the terms on which the alleged loan was made to the Life Department from the General Department. When the Life Department had not Rs. 82,000/- with itself, there could not have been any necessity to pay that amount to the General Department. In fact, the alleged loan could be paid only when there would have been a valuation surplus in the accounts of the lfie Department but this does not mean that the L ..... X X X X Extracts X X X X X X X X Extracts X X X X
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