Judgment

HIDAYATULLAH. J. : This is an appeal by certificate against the judgment of the High Court of Bombay dated July, 29, 1960 in a petition under Articles 226 and 227 of the Constitution reversing the decision of the Life Insurance Tribunal Nagpur dated December 30, 1959. The proceedings arose from the taking over of the controlled business of the Continental Mutual Assurance Company Ltd., Poona by the Life Insurance Corporation under the Life Insurance Corporation Act, 1956 (31 of 1956). The Insurance Company was a Mutual Company and thus had no share capital. It received deposits from Directors and other persons and the respondents V. V. Oak and S. V. Oak had made five deposits totalling Rs. 7,408. 81 P. 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 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 Rs. 72,924 and its balance-sheet showed some assets totalling Rs. 11,216 which were perhaps not realisable. 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 then revived the certificate of registration but as the deficit was not removed, before the end of October, 1952 the Chairman of the Insurance Company informed the Controller that immovable property of the value of Rs. 49,000 from the deposits was being purchased and the deposits would not be returned except from surplus assets. The Controller then told the Insurance Company that the deposit should be paid from future valuation surpluses and not from surplus assets. The Insurance Company agreed to this and the depositors, including the respondents, gave undertakings to the same effect. The letter of the Controller and the undertaking given by the respondents are set out as they are extremely brief :

"Copy of letter dated 7-11-52 from the Assistant Controller of Insurance to the Company.

x x x x x x x x x x x x x x x x x x x

With reference to your letter dated the 29th October, 1952, on the above subject, I have to say that the deposits or loans obtained by the company to cover its insolvency are to be repaid only out of the future valuation surpluses and not out of surplus assets. This may kindly be noted.

x x x x x x x x x x x x x x x x x x x".

"Copy of letter dated 29-1 1-52, from V. V. Oak, the 1st Respondent to the Company.

x x x x x x x x x x x x x x x x x x x

I hereby give my consent to keep the amount of my deposit of Rs. 7,408-0-0 (Rupees Seven thousand four hundred and eight only), with the company and that the same is repayable only out of adequate surplus along with interest thereon, as from the dale of the last valuation, and that these amounts will be allowed to be kept with you till such adequate surplus is shown. The amount of interest payable for the intervening period will be paid out of valuation surplus and to the extent of 7 1/2 % of such surplus, with retrospective effect.

Yours faithfully,

Sd./- V. V. Oak."

This undertaking was given by V.V. Oak on behalf of his son, S. V. Oak, also.

2. The affairs of the Insurance Company did not improve. In fact, they took a turn for the worse. The actuarial valuation as on December 31, 1954 disclosed a deficit of Rs. 89,923 and before the next actuarial valuation the Life Insurance Corporation Act came into operation. Even befor