LIFE INSURANCE CORPORATION OF INDIA & ANR. versus GANGADHAR VISHWANATH RANADE (DEAD) BY LRS.

Citation: [1989] SUPP. 1 S.C.R. 97 · Decided: 08-09-1989 · Supreme Court of India · Bench: N.D. OJHA · Disposal: Dismissed

Judgment (excerpt)

LIFE INSURANCE CORPORATION OF INDIA & ANR. 
v. 
GANGADHAR VISHWANATH RANADE (DEAD) BY LRS. 
SEPTEMBER 8, 1989 
[N.D. OJHA AND J.S. VERMA, JJ.] 
Income Tax Act, 1961-Sections 226(3)(vi) and 281-Assignment 
of policies by insurer-Assignment accepted by LIC-ITO of opinion 
that transfer of policy with intent to defraud Revenue-/nordi-,,ate delay 
by L/C in making statement on oath before ITO-Liability of LIC to 
pay interest to assignee of policies for delay in fulfilling statutory 
obligation. 
One Sh. G. V. Ranade took four policies on his own life from the 
L_IC during the period 1958 to 1960. In April 1969 G.V. Ranade as-
signed absolutely all these four policies in favour of his wife Smt. 
Kamalabai G. Ranade and the assignment was duly registered by the 
LIC. These policies were paid up and the date of maturity of these were 
14.9. 72, 28.12. 73, 9. ll. 75 and 21.12. 75. 
There were some income tax dues against the said G.V. Ranade 
for recovery of which income tax officer ·commenced recovery proceed-
ings. The Income Tax Officer on 27. l. 71 issued a notice under Section 
226(3) of the Income Tax Act,_ 1961 to the. Manager of the LIC at 
Nagpur directing the LIC to pay to I.T.O. forthwith any amount due 
from the LJC to or, held by the LIC for or on account of the said 
Ranade to meet the amount due from Ranade as arrears of income tax. 
The Divisional Manager of the LIC at Nagpur intimated this fact of 
receipt of the notice under section 226(3) of the Income Tax Act 1961 to 
the assignee of these policies Smt. Kamalabai G. Ranade, suggesting 
that she take steps to get the notice vacated in order to safeguard her 
interest in the policies. By further correspondence the ITO required 
the LIC to deposit the amount of Rs.3415. 70 payable against the first 
policy which was to mature on 14.9. 72 and the LIC informed the 
assignee that the moneys due under the policies will be paid to her only 
after her getting the notice served on LIC by the ITO vacated. 
On 5.9.72 Smt. kamalabai G. Ranade filed a Writ Petition in the 
High Court of Bombay impleading LIC and the ITO claiming several 
reliefs including a direction to the LIC for payment of Rs.3415.70 and 
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also to make a statement that no part of the said amount is due to G. V. 
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97 
98 
SUPREME COURT REPORTS 
[1989] Supp. 1 S.C.R. 
,_ 
A 
Ranade nor df!,eS the LIC hold any part of the sum for or on account of 
Ranade. This Writ Petition was dismissed in limine, Smt. Kamalabai 
G. Ranade filed an appeal by special leave in this court and this court 
disposed of the appeal on the counsel for the LIC stating that he would 
file the necessary statement on oath in accordance with S. 226(3)(vi) of 
the Income Tax Act, 1961 stating that no sum of money is due to the 
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Assessee, insured person, before the ITO except one policy in respect of 
which the LIC having already paid the money to ITO no statement need 
be made and consequently no order can be made u/s 226(3)(vi) and the 
appeal was disposed of accordingly. 
It appears ihat the ITO did got revoke the order of attachment 
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inspite of the LIC making the requisite statement on oath under section 
226(3)(vi) of the Income Tax Act on 5.12.75. This led to the filing of 
another Writ Petition in the Bombay High Court by Smt. Kamalabai 
praying for a direction to the ITO to revoke all notices issued under 
section 226(3) to the LIC and to the LIC to pay her the amount due 
against the policies which had matured. On 4.4.1977 counsel for the 
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ITO produced before the High Court a copy of the order dated 1.4. 77 
passed by the ITO withdrawing the notice u/s 226(3) of the Income Tax 
Act and the Writ Petition was dismissed as withdrawn. 
Smt. Kamalabai then sent notice to the LIC demanding payment 
of the total amount due against the four policies together with interest·@ 
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15% since the delay in payment had been occasioned by the default of 
the LIC. LIC made the payment of these amounts to her but disputed its 
liability to pay interest thereon for the period subsequent to the date of 
maturity on the ground that the delay was occasioned by the ITOs 
notice u/s 226(3). This dispute regarding the LIC's liability to pay 
interest led to the filing of Writ Petition No. 1248 of 1977 decided on 
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January 7, 1981 which gives rise to this appeal. 
The impugned judgment holds that the last two policies having 
matured on 9.11. 75 and 21.12. 75 a few days.before or after 5.12.75\when 
the statement on 

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