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1994 (9) TMI 354 - SUPREME COURT

1994 (9) TMI 354 - SUPREME COURT - 1995 AIR 189, 1994 (4) Suppl. SCR 87, 1994 (3) Suppl. SCC 569, 1994 (6) JT 379, 1994 (4) SCALE 364 - Civil Appeal No. 6493 of 1994 - Dated:- 30-9-1994 - S. MOHAN AND G.N. RAY JJ. JUDGMENT: The Judgment of the Court was delivered by MOHAN, J. Leave granted. The Jabalpur Municipal Corporation formulated a scheme for the benefit of its employees known as Nagar Nigam Karamachari Privarik Kalyan Yojna. That scheme provided, in the event of death of an employee while .....

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d amount in terms of the scheme was also made to the retiring employees as also to the dependants of the employees who died while in service. While the scheme was in operation the question arose as to the validity of the scheme. The Government of Madhya Pradesh examined that question from the perspective whether the said scheme was violative of the provisions of the Life Insurance Corporation Act, 1956 (hereinafter referred to as the Act) or the Insurance Act, 1938. By its order dated 31.3.77 th .....

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dered in detail; By order dated 16.12.80 the Government of Madhya Pradesh directed the Jabalpur Municipal Corporation to stop the scheme forthwith. The Municipal Corporation was also advised that on receipt of confirmation of withdrawal of scheme opinion could be obtained from the Central Government: Thereafter the matter was considered by the Controller of Insurance who by his letter dated 23rd March, 1981 advised the Secretary, Local Govt. Department, Government of Madhya Pradesh to the follow .....

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ed 7th February, 1981 and to say that in terms of Section 30 of the Life Insurance Corporation Act, 1968, the Life Insurance Corporation of India has the exclusive Privilege of carrying on life insurance business except to the extent otherwise expressly provided in the Act. An exception is made in the case of compulsory life insurance schemes for employees of Government, vide Section 44(f) of the Act reproduced below : "44. Nothing contained in this Act shall apply in relation to - (f) any .....

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odies. Yours faithfully, sd/- For controller of Insurance." The said order was challenged by an employee of the Municipal Corporation, Jabalpur (the first respondent) and the Jabalpur Corporation Karamchari Sangh (the second respondent) in Misc. Petition No. 69 of 1981. The Division Bench of the High Court under the impugned judgment allowed the writ petition principally on two grounds : 1. The Scheme run by the employees of the Municipal Corporation win not fall within the ambit of Life In .....

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nce in India. The sums assured by all policies issued by the appellant-Corporation including bonuses declared in respect thereof in terms of section 37 of the Act are guaranteed as to payment in cash by the Central Government. The term "Life Insurance Business" is defined under Section 2(11) of the Act. The definition contained therein is merely illustrative and not exhaustive. On a reading of Sections 2(3), 30 and 44(f) it would be clear that on the establishment of Life Insurance Cor .....

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essential ingredients of life insurance business, the High Court went wrong in putting a narrow interpretation on life insurance business. In fact, the word "business" has a wider meaning. The scheme run by the Employees' Union is also against the interest of the employees themselves because the payment is not guaranteed either by the Municipal Corporation or by the State Government. The exemption under Section 44(f) is not applicable because this is a scheme run by Corporation not .....

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es in lump sum. Therefore, this is not a case it could be said that this Union was running Life Insurance Business. Consequently, it must be held, there is no violation of Section 30. In such a case the exemption under Section 44(f) does not arise. No exception could be taken to the impugned judgment. In any event, the Government will have no power to cancel the same under Section 421 of the Madhya Pradesh Municipal Corporation Act, 1956. The State Government has no jurisdiction to pass the impu .....

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f any contingency dependent on human life, and any contract which is subject to payment of premiums for a term dependent on human life and shall be deemed to include. (a) the granting of disability and double or triple indemnity accident benefits, if so provided in the contract of insurance, (b) the granting of annuities upon human life; and (c) the granting of superannuation allowances and annuities payable out of any fund applicable solely to the relief and maintenance of persons engaged or wh .....

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sideration of the payment by the assured of a named sum annually or at certain times, stipulates to pay a large sum at the death of the assured. This Court had occasion to deal with the scope of Section 2(11). In General Family Pension Fund v. Commissioner of Income-tax, West Bengal, AIR (1955) SC 50 it was held (no doubt as a concession): "The business of a company consisting exclusively in granting terminable pensions or annuities dependent on human life in favour of the subscribers or th .....

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by another party (Halsbury's Laws of England, 3rd Edn. Vol. 22; p. 273). It was held by the Court of Appeal in Gould v. Curtis, (1913) 6 Tax. Cas. 293 that for the purpose of the statutory provisions relating to relief in respect of life insurance premiums for purposes of income-tax, a contract by which a sum is payable on the death of the assured within a specified period and a larger sum if he is alive at the end of the period must be held to be an insurance on life. There is no definitio .....

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human life." Again, in Commissioner of Wealth-tax, Punjab, J. & K., Chandigarh, Patiala v. Yuvraj Amrinder Singh, AIR 1986 SC 959 at page 964 this Court observed thus: "The definition of 'life insurance business' as given in S. 2(11) of our Insurance Act, 1938 clearly includes, by a deeming provision, the business of granting of annuities upon human life within the expression life insurance business." In this case, the scheme run by the Jabalpur Municipal Corporation f .....

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in case the aforesaid members of the family are not available and if the nomination letter has not been filed in the prescribed form under the rules benefit will not be payable to the married daughter under any circumstances. (Emphasis supplied) Therefore, we find no escape for the Jabalpur Municipal Corporation. If that be so, it is a clear case of life insurance. The High Court is not right in holding as follows: "Admittedly the scheme is not any kind of business as no benefits derived fr .....

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insurance of the business nor anything which could attract the provisions of Section 30 of the Life Insurance Corporation Act." Then the question is whether Section 30 of the Life Insurance Corporation Act, 1956 is attracted. The said Section reads as follows : "Corporation to have the exclusive privilege of carrying on life insurance business. - Except to the extent otherwise expressly provided in this Act, on and from the appointed day the Corporation shall have the exclusive privile .....

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sted with the power to run such a business. The history leading to the passing of Life Insurance Corporation Act, 1956 is analysed. It is clear the life insurance business in the country was run by a large number of private insurance. They were not managing the affairs honestly. As a result, savings of a large number of policy holder were neither safe nor secure. It was in this background, with a view to provide security to policy holders and insurers the savings were employed in nation building .....

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the part of the Jabalpur Municipal Corporation to run the said scheme. Unfortunately, the High Court has taken a narrow view as to the scope of life insurance. The High Court failed to note that there is a large variation of life insurance contracts built up by a combination in various ways of contracts. There maybe insurance contracts providing for the payment of premier in the event of death or again there may be endowment contracts providing for payment in the event of survival of the assured .....

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insurance. Considerable difficulties have arisen with regard to the latter type of insurance as normally a person has no insurable interest in the life of his child and such a policy would, therefore, be illegal but when the policy is in the form now commonly current, the proposer will be regarded as holding the policy in trust for the child. (ii) Limited-payment insurance, i.e., a form of life insurance which contemplates payment of premiums by insured for a specified period or until his death .....

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assigns in consideration of periodical payment of fixed premium. (iv) Paid-up insurance, i.e., where no further premiums are to be paid. It may be of two kinds : (a) where premium is paid as a single payment and the money becomes payable at a time stipulated or at death if it occurs earlier; (b) where the original policy is converted into a paid-up policy, because of a default in the payment of premiums it means insurance reduced to an amount corresponding to the premiums paid, so that no furth .....

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ew and extend the insurance during successive years if required premiums were paid was held to be a contract of insurance for the term of one year only, with provisions for renewal for successive years. (vi) Advance insurance, i.e. insurance providing for the payment to insured of a lump sum immediately for consideration of his agreeing to make certain periodical payments to insurer for a specified period or for the life of insured if his life should terminate before the end of that period. Exam .....

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r earlier if death should occur to the insured. The life Insurance Corporation of India undertakes various kinds of life insurance, of which mention may be made of- (1) limited payment life insurance; (2) endowment insurance; (3) joint-life insurance; (4) multi-purpose insurance; (5) children's deferred insurance; (6) two-year temporary insurance; (7) whole life-insurance; (8) double endowment insurance; (9) triple benefit insurance; (10) anticipated endowment insurance; (11) convertible who .....

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hether on retirement or death, are not guaranteed either by the Jabalpur Municipal Corporation or by the Madhya Pradesh State Government. Section 44 makes Life Insurance Corporation Act inapplicable in certain cases. Clause (f) of the said Section will not also come to the rescue of the Jabalpur Municipal Corporation. That is evident from the following: "(f) any scheme in existence on the appointed day or any Scheme framed after the appointed day with the approval of the Central Government .....

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heme of the State Government will be eligible to exemption under Section 44(f) of the Act. Such an exemption is not available to the scheme of the Jabalpur Municipal Corporation. What remains now to be considered is whether the State Government could exercise its jurisdiction under Section 421 of the Madhya Pradesh Municipal Corporation Act, 1956. That Section runs as follows: "Powers of Government to suspend any resolution or order. (1) If the Government is of opinion that the execution of .....

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