Judicial Analysis Court Copy Headnote Facts Arguments Court observation

1965 Supreme(SC) 100

SUPREME COURT OF INDIA
26th March, 1965
K.N. WANCHOO, J.R. MUDHOLKAR AND S.M. SIKRI, JJ.
Life Insurance Corporation of India, Appellant
Versus
Crown Life Insurance Co., Respondent.
Civil Appeal No. 999 of 1964.
Advocates appeared
Mr. C. K. Daphatry, Attorney General for India (M/s. S. J. Banaji, Atiqur Rehman and K. L. Hathi, Advocates with him), for Appellant; Mr. N. A. Palkhivala, Senior Advocate, (Mr. S. J. Sorabjee, Advocate and M/s. J. B. Dadachanji, O. C. Mathur and Ravinder Narain, Advocates of M/s. J. B. Dadachanji & Co. with him), for Respondent.

Advocates:
Atiqur Rehman, C.K.DAFTARY, J.B.DADACHAN, K.L.Hathi, N.A.PALKHIWALA, O.C.MATHUR, Ravindra Narayan,

The words "life insurance fund" in cl.(d) of the said paragraph 4 have the same meaning as in the Insurance Act, 1938.

Headnote:
LIFE INSURANCE FUND - INTERPRETATION - LIFE INSURANCE CORPORATION ACT, 1956, S. 2(10), FIRST SCHEDULE, PART B, PARA 4(D) - INSURANCE ACT, 1938, SS. 10(2), 11, 27(1), 49(1), 56(2), 58(3), FOURTH SCHEDULE, FORMS D, H, I - MEANING OF THE WORDS "LIFE INSURANCE FUND" IN PARA 4(D) OF PART B OF THE FIRST SCHEDULE TO THE LIFE INSURANCE CORPORATION ACT, 1956 - WHETHER THE WORDS HAVE THE SAME MEANING AS IN THE INSURANCE ACT, 1938.
Fact of the Case:

The respondent, Crown Life Insurance Company, a Canadian company, claimed compensation from the appellant, Life Insurance Corporation of India, on the takeover of its business under the Life Insurance Corporation Act, 1956. The respondent claimed Rs. 27,86,658 as compensation, while the appellant was prepared to pay Rs. 1,11,466. The respondent contended 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 Rs. 27,86,658 and therefore under cl. (d) a sum of Rs. 26,75,192 was to be debited towards the liabilities of the respondent.
Finding of the Court:

The Life Insurance Tribunal accepted the contention of the respondent and held that the words "life insurance fund" in cl. (d) of the said paragraph 4 have the same meaning as in the Insurance Act, and that there is only one meaning of these words in the Insurance Act. It rejected the contention raised on behalf of the appellant and awarded compensation at Rs. 27,86,658.
Issues: Whether the words "life insurance fund" in cl.(d) of the said paragraph 4 have the same meaning as in the Insurance Act.
Ratio Decidendi: The words "life insurance fund" in cl.(d) of the said paragraph 4 have the same meaning as in the Insurance Act, 1938. Section 2(10) of the Life Insurance Corporation Act, 1956, provides that all other words and expressions used in the Act and defined in the Insurance Act shall have the meanings respectively assigned to them in that Act. The words "life insurance fund" have been given a specific meaning in S. 10(2) of the Insurance Act, 1938, read with S. 11 and form D of the Third Schedule. This meaning is consistent with the provisions of S. 49(1) of the Insurance Act, which requires that 92 1/2 per centum of the surplus in form I shall be kept for the policy-holders. Clause (d) of the said paragraph 4 is related to the provision in S. 49(1) of the Insurance Act and provides that where there is a surplus in the life insurance fund as a result of the actuarial valuation of policy liabilities made under cl. (b) of the aforesaid paragraph 4, 96 per centum of such surplus shall be shown as a liability. This means that just as under S. 49(1), 92 1/2 per centum of the surplus in form I was meant for the policy-holders so in the case of transfer, 96 per centum of that surplus shall go to the Life Insurance Corporation in order to meet the liabilities arising under S. 49(1) of the Insurance Act for past surplus and to that extent the compensation to be paid to the insurance company from which the Life Insurance Corporation was taking over business would have to be reduced.
Final Decision: Appeal dismissed with costs to the respondent.

Judgment

WANCHOO, J.; The only question that, arises for determination in this appeal by special leave from the order of the Life Insurance Tribunal, Bombay, is the interpretation of the words. "life insurance fund" as used in paragraph 4 of Part B of the First schedule to the Life Insurance Corporation Act, No. 31 of 1956 (hereinafter referred to as the Act). The question arose in connection with the payment of compensation to the respondent, the Crown Life Insurance Company which is incorporated in Canada, by the appellant, the Life Insurance Corporation of India on the taking over of the business of the respondent by the appellant under the Act. The respondent claimed Rs. 27,86,658 as compensation while the appellant was prepared to pay Rs. 1,11,466. 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 Rs. 27,86,658 and therefore under cl. (d) a sum of Rs. 26,75,192 was to be debited towards the liabilities of the respondent. That is how the appellant arrived at the compensation of Rs. 1,11,466.

2. 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 I of the Fourth Schedule to the Insurance Act, no amount was to be deducted as liability under cl.(d) of the said paragraph 4. It is this difference in the meaning assigned to the words "life insurance fund" by the parties that is responsible for the large difference in the amount claimed by the respondent and offered by the appellant.

3. The Insurance Tribunal has accepted the contention put forward on behalf of the respondent and has held that the words "life insurance fund" in cl.(d) of the said paragraph 4 have the same meaning as in the Insurance Act, and that there is only one meaning of these words in the Insurance Act. It has rejected the contention raised on behalf of the appellant and has in consequence awarded compensation at Rs. 27,86,658. Aggrieved by this order, the appellant got special leave from this Court; and that is how the matter has come up before us.

4. The sole question that falls for determination therefore depends on the interpretation of the words "life insurance fund" and for that purpose we shall have to consider certain provisions of the Insurance Act as well as of the Act. We may at the outset refer to S. 2(10) of the Act, which is as follows :

"In this Act, unless context otherwise require--

10. All other words and expressions used herein but not defined and defined in the Insurance Act shall have the meanings respectively assigned to them in that Act."

It is not in dispute that the words "life insurance fund" appear in the Insurance Act though not in the definition section thereof. Section 2(10) of the Act however does not refer only to the definitions in the definition section of the Insurance Act; it lays down generally that any words and expressions used in the Act and defined in the Insurance Act shall have the meanings assigned to them in the Insurance Act (and that means anywhere in the Insurance Act) unless the context otherwise requires. We have therefore to turn to the Insurance Act first to find out the meaning of the words "life insurance fund" as given therein and then to see whether the context of cl.(d) of the said paragraph 4 requires otherwise. If we come to the conclusion that it does not require otherwise, the words "life insurance fund" in cl.(d) of the

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