DAMJI V ALJI SHAH AND ANOTHER versus LIFE INSURANCE CORPORATION OF INDIA & ORS.

Citation: [1965] 3 S.C.R. 665 · Decided: 08-04-1965 · Supreme Court of India · Bench: P.B. GAJENDRAGADKAR · Disposal: Dismissed
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Judgment (excerpt)

A 
DAMJI V ALJI SHAH AND ANOTHER 
V. 
LIFE INSURANCE CORPORATION OF INDIA & ORS. 
B 
April 8, 1965. 
D 
E 
F 
.B 
[P. B. GAJENDRAGADKAR, C. J., M. HIDAYATULLAH, 
RAGHUBAR DAYAL AND V." RAMASWAMI. JJ.J 
Life Insurance Corporation Act, 1956, ss. 15 .and 44(a)-Indian 
Companies Act, 1956, ss. 446(1 )-Application by Life Insurance Cor-
poration under s. 15 of L.I.C. Act-Defendant company ordered to be 
wound.up by court--..:Permission of High Court under s. 446(1). of 
Companies Act whether necessary for proceeding with application 
under s. 15. 
Indian Insurance Act, 1938 s. )(}-Transfer of Funds from Life 
Insurance Fund to General Department of composiite 1nsurer-Per-
1nissibility. 
The appellants were directors of an insurance company which 
was a composite insurer i.e. Qne carrying on other classes of ~1fe 
insurance business besides life insurance. Under s. 10(1) of the Indian 
Life Insurance Act, 1938, a composite insurer had to keep sepa~ate 
accounts in respect of the different classes of business, and its receipts 
in respect of life insurance business had to &:o into a fund called 
the Life Insurance Fund which could be appl!ed only for the pur-
poses of the Life Insurance business and had always. to be sufficient 
to meet the net .liabilities of the Life Insurance busmess. By resolu-
tion dated December 18, 1948, a sum of Rs. 1,10,000 was transferred 
from the General Department of the company to the Life Depart-
ment to be added to the Life Fund; if this had not been done the 
said fund would have shown a deficit in the actuarial valuation 
report dated July' 18, 1949. In the profit appropriation account of 
the company for the latter year a sum of Rs. 60,000 out of the above 
sum was written off so that the sum advanced was reduced to 
Rs. 50,000. A further sum of Rs. 32,000 was again similarly transfer-
red from the General to the Life Department by resolution passed 
in August 1953 with retrospective effect from December 31, 1952, 
in order to strengthen the position of the Life Fund which again 
would have shown a deficit if this had not been done. The advances 
thus made on both occasions were according to the relevant resolu-
tions repayable only out of the 'valuation surplus', if any, in the 
life department. On January 8, 1956, the Board of Directors of the 
company transferred a sum of Rs. 82,000 from the Life Department 
to the General Department. by way of repayment of the above loans. 
On January 19, 1956, by Ordinance No. 1 of 1956 the management 
of the life insurance business of all insurers in the country passed 
to the Central Government. On September 1, 1956, the Life Insur-
ance Corporation of India came into being under the Life Insurance 
Corporation Act, 1956, and the assets and liabilities of the life insur-
ance business carried on by all insurers became ·.,rested in it. The 
corporation filed an application under s. 15 of the said Act before 
the Tribunal constitµted under the Act allegin!i' that transfer of 
Rs. 82,000 from the Life Department to the General Department of 
the aforesaid company was without consideration and not for any 
665 
SUPREME COURT REPORT8 
[!96fi] 3 s.c.R. 
necessity of the life insurance business and prayed for a decree A 
against appellants and the company jointly and severally for the 
said amount. The Tribunal overruled the defendants' objections as 
to its jurisdiction and granted a decree to the Corporation as 
prayed. The company did not appeal but the appellants came to this 
Court by special leave. 
The following COI\tentions were raised on behalf of the appel-
B 
!ants; (1) The tribunal had no jurisdiction to proceed with the pro-
ceedings on the petition presented by the Corporation without the 
leave of the High Court in .view of s. 446 of the Companies Act, 1956, 
the Company having been ordered to be wound up the High Court 
on November 9, 1959; (2) In view of s. 44(a) of the L.I.C. Act noi..; 
of the provisions of the Act applied to the company and therefore 
the Tribunal could not proceed on the application of the CorPora-
C 
tion subsequent to the company being: wound-up; (3) The transfer of 
Rs. 82,000 from the Life Fund to the General Department of the 
company was for corisic\eration and was necessary for the life insur-
ance business. 
HELD: (i) The provisions of s. 446 of the Companie.> Act did not 
affect the proceedings before the Tribunal. 
It is in view of the exclusive jurisdiction conferred upon the 
company court in sub-s. (2) of
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