TMI Blog1965 (3) TMI 77X X X X Extracts X X X X X X X X Extracts X X X X ..... le the appellant was prepared to pay ₹ 1, 1 1,466. The respondent claimed that as its life insurance fund was always in deficit before the Act came into force, there was no liability on it under cl.(d) of paragraph 4 of Part B of the First Schedule to the Act. The appellant on the other hand claimed that under that cl. (d), there was a surplus of ₹ 27,86,658 and therefore under cl. (d) a sum of ₹ 26,75,192 was to be debited towards the liabilities of the respondent. That is how the appellant arrived at the compensation of ₹ 1,11,466. The appellant claimed that the words life insurance fund in cl. (d) meant the difference between the total assets and the liabilities under cls. (a) and (c) of the said paragraph 4. The respondent on the other hand contended that the words life insurance fund in cl. (d) had the same meaning as those words had under the Insurance Act, No. 4 of 1938 (hereinafter referred to as the Insurance Act). The respondent therefore claimed that as there was always a deficit in its working as shown by form 1 of the Fourth Schedule to the Insurance Act, no amount was to be deducted as liability under cl. (d) of the said paragraph 4. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urance fund under the Insurance Act have not one meaning only and therefore it is not possible to give that meaning to these words in cl. (d) with which we are concerned. In the alternative it is urged that the context requires that even if the words lift insurance fund have only one meaning under the Insurance Act, they have a different meaning under cl. (d). We have therefore to find out what the words life insurance fund mean under the Insurance Act and whether they have the same meaning throughout the Act. We have already pointed out that the words life insurance fund have not been defined in s. 2 (N)4SCI-4 of the insurance Act, which is the definition section. But there is no doubt that in s. 10 of the Insurance Act, these words have been given a specific meaning to which we shall now refer. The Insurance Act was concerned not only with life insurance business but also with insurance business of other kinds, namely, marine, fire and miscellaneous. It was open to an insurance company to carry on either the life insurance business only or life insurance business along with insurance business of other kinds also. Therefore, S. 10(1) of the InsUrance Act provided that wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rance fund. On the expenditure side of form D there is provision for claims under policies, annuities, surrenders, bonuses in cash, bonuses in reduction of premiums, expenses of management (i.e. salaries etc., travelling expenses, directors' fees, auditors' fees, and charges for advertisements, printing and stationary, other expenses of management, rents for offence belonging to and occupied by the insurer, rent of other offices kept by the insurer), bad debts and other expenditure. Thereafter a balance has to be struck and this balance is the balance of the life insurance fund. This balance is arrived at after taking into account the balance of the fund at the beginning of the year and after making adjustments with respect to profit and loss and transfers from appropriation account. It is this balance which goes into the balance sheet form A provided in the First Schedule of the Insurance Act as life insurance fund and includes as provided in s. 10(2) the deposit made by the insurer in respect of life insurance business. There is no doubt therefore that the words life insurance fund under the Insurance Act have got the meaning assigned to it under s. 10(2) read with s. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icy-holders and cannot be used in any manner except in accordance with the provisions to which we have already referred. Thus the words life insurance fund have a definite meaning under the Insurance Act under s. 10(2), read with s. 1 1 and form D of the Insurance Act and the words surplus and deficiency have also special meaning appearing from a combined reading of s. 13 of the Insurance Act and form H and form 1 of the Fourth Schedule. The next question is whether the words life insurance fund have any other meaning under the Insurance Act. These words appear in a number of provisions of that Act. It is not necessary however to refer to all of those provisions for it is not in dispute that in most of the provisions the words have the meaning assigned to them under s. 10(2) of the Insurance Act. But three provisions have been specifically brought to our notice where it is said that the words have a different meaning. The first is s. 56 which deals with winding-up of insurance companies. In sub-section (2) thereof reference is made to surplus of assets over liabilities and how such surplus which is called prima facie surplus in the sub-section is to be dealt with. It wil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness goes on. Section 58(3) provides that the, provisions of this Act relating to valuation of liabilities of the in-, surer in liquidation and insolvency and to the application of surplus assets of the life insurance fund in liquidation or insolvency shall apply to the winding-up of any part of the affairs of the company. It is argued that the words life insurance fund here are used in a different sense-. We are of opinion that this is not so. Sub-section (3) of s. 58 has to be read along with s. 56 and in particular with Sub- s. (2) thereof and as we have already indicated the words life, insurance fund in the marginal note of s. 56 have no different meaning from that to be found in s. 10(2) the same applies to the use of the words life insurance fund in s. 58(3) mutates mutandis. Lastly reference was made to regulation 7 of Part 1 of the First Schedule, which provides for a certificate that no part of the assets of the life insurance fund has been directly or indirectly applied in contravention of the provisions of the Insurance Act relating to the application and investment of life insurance funds. It is urged that the use of the plural suggests that a different meani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance fund becomes part of that fund. Note (e) which appertains to other income of the said form makes it clear that all the amounts received by the insurer directly or indirectly whether from his head office or from any other source outside 'India shall also be shown separately in the revenue account except such sums as properly appertain to the capital account. Therefore sums invested for purposes of s. 27(1) of the Insurance Act do not necessarily form part of the life insurance fund.It is only such moneys which are included in form D and which are not of capital nature that form part of the life insurance fund. In the present case it is not in dispute that the business of the respondent 1 in India always had shown a deficit in form . It is also not in dispute that in order to meet that deficit as required by s, 27(1), the respondent took advantage of s. 27(6) which provides that the assets required by this section to be held invested by an insurer incorporated or domiciled outside India shall subject to certain exceptions be held in India and all such assets shall be held in trust for the discharge 'of the liabilities of the nature referred to in sub-s. (1) and shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the life insurance- fund. Part B applies to.' two kinds of insurance companies--viz., those which had deficits and those which had surplus but had not distributed it at the relevant time. It is the latter class of companies that cl. (d) is really meant to cover. As we have already. said s. 27(1) has nothing to do with the life insurance fund and is meant only as a safety device for policyholders, particularly in cases where there is deficit in the life insurance fund.: But where such deficit is made up for the purpose of s. 27(1), the extra amount so invested by the insurer to make up the deficit does not automatically become part of the life insurance fund unless it is put through the revenue account form D. That was admittedly never done in this case and form I always showed a deficit in the case of the respondent. Section 27(1) therefore does not help the appellant, for it is not in dispute that an insurer is not bound to make up the deficit by putting money in the life insurance fund though he is bound to keep assets invested to make up the deficit; but such assets may be kept outside the life insurance fund. Now we come to the last question whether there is anything ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the past and could not be with reference to the future, for so far as the future was concerned, the Life Insurance Corporation alone was responsible. But if there was a deficit in form I of the insurance company which was being taken over by the Life Insurance Corporation there could be no allocation to the policy-holders under s. 49(1) of the Insurance Act and there would be no liability for the past. So there would be no liability for the past under cl. (d) on the insurer whose business was being taken over by the Life Insurance Corporation. In the present case admittedly there was no surplus in form I in the case of the respondent and therefore there would be no liability on the respondent under cl. (d) of the aforesaid 4th paragraph. This in our opinion is the rationale behind the provision in cl. (d) and as there was always a deficit in connection with the working of the respondent, there could be no liability on the respondent under cl. (d). But apart from this rationale behind cl. (d) we find that the language of Part A and Part B of the First Schedule relating to principles for determining compensation also leads to the same inference. Part A provides that compensatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gn insurer to repatriate certain assets. It says that an insurer incorporated outside India may, before the appointed day, make an application to the Central Government stating that among the assets appertaining to the controlled business of the insurer there are assets brought into India by him for the purpose of building up his life insurance business in India which should not be transferred to and vested in the Life Insurance Corporation. On receipt of such an application, the Central Government has to determine the value of the assets of the insurer appertaining to his controlled business in existence on December 31, 1955 in accordance with the provisions contained in paragraph 3 of Part B of the First Schedule to the Act and deduct therefrom the total amount of the liabilities of the insurer appertaining to his controlled business as on December 31, 1955 computed in accordance with the provisions contained in the Second Schedule to the Act; and if there is any excess, the Central Government may direct that such assets equivalent in value to the excess shall not be transferred to or vested in the Life Insurance Corporation. It is obvious from these provisions that where the leg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or comes to him as compensation plus repatriation of excess assets. If the words life insurance fund are interpreted to mean what the respondent says, the result would be this. If it applies for repatriation it would get ₹ 15,73,540 as repatriation of excess assets and ₹ 27,86,658 as compensation under Part B: total ₹ 43,60,198. If it does not apply for repatriation and if cl. (d) has the meaning urged on behalf of the respondent, its total compensation would come to the same figure, namely, ₹ 43,60,198. This clearly shows that the legislature intended the words life insurance fund to mean what they meant in s. 10(2) for that would give in our opinion the same result whether an insurer applied under s. 35 or not. We have already said that cl. (d) provides for past surplus in form 1, the responsibility for which passes on to the Life Insurance Corporation when it takes over the life business of an insurer. So far as the future is concerned, cl. (b) of the aforesaid 4th paragraph provides for a higher valuation for with-profits policies with the result that the liability which the insurer whose business is being taken over has to bear with respect t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
