TaxTMI 
TaxTMI 
1964 (9) TMI 65
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....ctors and other persons and the respondents V. V. Oak and S. V. Oak bad made five deposits totaling- ₹ 7,408.81P. in the last weeks of December 1950 and 1951. These deposits carried interest at 4-1/2% per annum. The Insurance Company was incorporated in 1946 and carried on only life insurance business. As required by the Insurance Act, 1938 (4 of 1938), it caused actuarial investigation and valuation to be made at intervals as laid down in the Insurance Act. The first valuation was of the business as on December 31, 1950 and it showed a loss of ₹ 72,924 and its balance-sheet showed some assets totaling ₹ 11,216, which were perhaps not realizable. The certificate of registration of the Insurance Company was cancelled in 1952 and the Controller of Insurance threatened to wind up the Insurance Company if the insolvency was not removed. In July 1952, all the Directors of. the Insurance Company addressed a letter to the Controller guaranteeing to make good the deficit before the end of October of that year and assured the Controller that the depositors had given their consent not to press for the return of their deposits until the deficit was removed. The Controller th....
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....the Life Insurance Corporation Act, the 'controlled business' of all insurers vested on September 1, 1956 in the Life Insurance Corporation. Under the Life Insurance Corporation Act 'controlled business' means life insurance business and in the case of an insurer carrying on only life insurance business, all his business. The Insurance Company was of this description and all its business, therefore, vested in the Life Insurance Corporation under s. 7 of the Life Insurance Corporation Act. Section 9 of the Life Insurance Corporation Act provided for certain effects of this vesting. The first sub-section of that section is material for our purposes and may be reproduced here: "9. General effect of vesting of controlled business. (1) Unless otherwise expressly provided by or under this act, all contracts, agreements and other instruments of whatever nature subsisting or having affect immediately before the appointed day and to which an insurer whose controlled business has been transferred to and vested in the Corporation is a party or which are in favour of such insurer shall insofar a.-, they relate to the controlled business of the insurer be of as full forc....
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....g the 'respondents from proceeding further in the suit in the Bombay City Civil Court., Bombay. The Tribunal, by its Order dated December 30, 1959 (Case No. 31/XII of 1959), held that the amount was not repayable. The main reason given by the Tribunal was that the contracts immediately prior to the date of vesting were not subsisting or effective because they could not be enforced, there being no surplus of the stated kind. According to the Tribunal, it would have been otherwise if the Insurance Company had earned a surplus before the date of vesting and the deposits only remained to be returned to the depositors. The Tribunal also rejected a claim made under s. 65 of the Indian Contract Act. Earlier the Tribunal had sent an injunction to the Bombay City Civil Court, Bombay and in its final order the Tribunal held that as they had disallowed the claim, the suit to recover the deposits did not lie. Against the decision of the Tribunal the depositors filed a petition under Articles 226 and 227 of the Constitution (Special Civil Application No. 279 of 1960) in the High Court of Bombay. The petition was disposed of on July 29, 1960 by the order of the High Court, now under appeal.....
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....tion of policies with the balance of the Life Insurance Fund as shown in the Balance Sheet to find out the surplus or the deficiency, as the case may be, He contended that the word "surplus" had a technical meaning and not the ordinary meaning accepted by the High Court and that this was also pointed out by the Controller in his Memorandum of November 7, 1952 which we have quoted earlier. He contended, therefore, that the contracts were not enforceable because there was no such surplus of the Insurance Company and the amount was payable only from the valuation surplus of the Insurance Company. Alternatively, he contended that if the deposits must be repaid from the valuation surplus of the Corporation s. 28 of the Life Insurance Corporation Act made the payment impossible. He accordingly submitted that the decision of the Tribunal was right. In reply, Mr. K. V. Joshi for the respondents and Mr. G. S. Pathak, who appeared for the interveners .(Chandra Banghir and Others) contended that s. 9 of the Life Insurance Corporation Act was explicit in its terms and that no express provision from the Act was pointed out to over-ride s. 9 by which the Corporation stood substituted ....
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.... ceased to exist on that date. The contracts subsisted as long as the Insurance Company worked but the payments were postponed till the condition about actuarial surplus was fulfilled. That it was a contingent liability on September 1, 1956 did not make it any the less a liability of the Insurance Company on the date of vesting. Under s. 9 of the Life Insurance Corporation Act this r liability became the liability of the Life Insurance Corporation and under the clear terms of that section this liability was to be of full force and effect unless there was some express provision in the Life Insurance Corporation Act which negatived it. Sections 14, 15 and 36 of the Life Insurance Corporation Act illustrate express provisions which have been made in relation to certain contracts contemplated under s. 9. No similar provision was brought to our notice relative to the present purpose and none exists. The contracts were, therefore, binding upon the Corporation as on the Insurance Company and, in fact, as if the Corporation itself had undertaken the liability. The contracts being thus enforceable, the money had to be paid provided there was an actuarial surplus. Since the business of the I....