Judgment

HIDAYATULLAH, J. : This is an appeal against the order of the Life Insurance Tribunal, Nagpur, dated December 12, 1952 by which a dispute about compensation payable to the National Insurance Company by the Life Insurance Corporation on the taking over of the life business of the former was decided. The National Insurance Company is the appellant and the Life Insurance Corporation is the respondent. Another appeal was filed by the Life Insurance Corporation against the same order but was not pressed at the hearing.

2. The National Insurance Company carried on life insurance business in addition to other insurance business and was what the Life Insurance Corporation Act 1956 (31 of 1956) describes as a "composite insurer". The Life Insurance Corporation Act was passed in 1956 to nationalise the life insurance business of all insurers by transferring all such business to a Corporation established for the purpose. This Corporation is the well-known Life Insurance Corporation. Under the Act a distinction was made between controlled business and other insurance business carried on by Insurance Companies. Controlled business meant life insurance business and on and from a date to be fixed by notification in the Official Gazette called the appointed day all the assets and liabilities appertaining to the controlled business of all insurers were transferred to and vested in the Corporation. This date was September 1, 1956. The National Insurance Company was composite insurer and its life business therefore stood transferred to and vested in the Life Insurance Corporation from the appointed day. Under S. 16 of the Life Insurance Corporation Act, the National Insurance Company was entitled to receive compensation from the Life Insurance Corporation in accordance with the principles contained in the first Schedule to that Act. To these principles we shall make a detailed reference presently. As the National Insurance Company was carrying on a composite business it was necessary to separate the assets appertaining to the controlled business from those appertaining to its other business under S. 10 read with S.7 of the Corporation Act. These assets were defined in an Explanation added to S. 7 (2) as follows :

"The expression "assets appertaining to the controlled business of an insurer" -

(a) in relation to a composite insurer includes that part of the paid up capital of the insurer or assets representing such part which has or have been allocated to the controlled business of the insurer in accordance with the rules made in this behalf;

(b) in relation to a Government, means the amount lying to the credit of that business on the appointed day."

3. Sections 7 and 10 (2) conferred on the Central Government special rule-making powers and inter alia for the allocation of the paid-up capital or assets representing such paid-up capital, as the case may be, between the controlled business of the insurer and any other business. In pursuance of these provisions and S. 48 of the Act the Life Insurance Corporation Rules 1956 were framed by the Central Government and Rule 18 provided for allocation of the paid-up capital of a composite insurer. We need not quote Rule 18 providing for the method of allocation of capital of a composite insurer because it was provided there that the paid-up capital allocable to the controlled business shall not, in any case, exceed a sum of Rs. 6,00,000/and the maximum amount applied to the National Insurance Company and was payable by it to the Life Insurance Corporation.

4. The Life Insurance Corporation determined Rs. 19,39,669/- as compensation for the controlled business vested in the Corporation in accordance with S. 16 read with the First Schedule of the Life Insurance Corporation Act, 1956. After obtaining the approval of the Central Government, by a letter dated February 14, 1957, sent to the Company, the Corporation pointed out that the National Insurance Company was required to pay Rs. 60,000/- under