LexLIFE INSURANCE CORPORATION OF INDIA versus CROWN LIFE INSURANCE CO.
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
LIFE INSURANCE CORPORATION OF INDIA
A
v.
CROWN
CO.
March 26, 1965
[K. N. WANCHOO, J. R. MuDHOLKAR AND S. M. SIKRI, JJ.J
Life Insurance Corporation Act (31 of 1956), First Schedule, Pa.rt
B, Para 4, cl. (d) and Insurance Act (4 of 1938), s. 10(2)-"Life insnr-
B
ance fund". Meaning of.
Under s. 10(2) of the Insurance Act, 1938, where an
carries
on the business of life insurance, all receipts due in respect of su.ch
business shall be carried to and form a separate fund called the life
insurance fund. Section 11 ( c) provides for keeping a revenue account
in Form D of the Third Schedule, which applies to life insurance
business also. This account, on the receipt side, has rnainly income
C
from premiums and out of investments from life fund and, on the
expenditure side, all expenses and bad debts connected with the life
business. A balance is struck after taking into account the balance of
the fund at the beginning of the year and after making some adjuot-
rnents and transfers, and the "life insurance fund". is arrived at.
Form I of the Fourth Schedule to the Insurance Act, provides for
determining the surplus or deficit, which is the difference between
D
the net liability in business determined by actuarial valuation of
policies in force and the Life Insurance Fund,. If there is a surplus,
s. 49(1) of the Insurance Act provides, that 7!% of the surplus shall
be allocated to shareholders. and the balance shall remain in the
fund for policv holders. When transfer of life insurance business from
the life insurance companies to the Life Insurance Corporation took
place, a provision had to be made for carrying out the effect of s.49(1).
E
That provision was made in Cl. (d) of para. 4· of Part B of the First
Schedule to the Life Insurance Corporation Act, 1956, according to
which, where there is surplus in the life insurance fund, as a result
of the actuarial valuation of policy liabilities under Cl. (b) of the
same para. 4, 96% of such surplus shall be shown as a liability, that
is, 96% of that surplus shall go to the Corporation in order to meet
the liabilities, and to that extent the compensation to be paid to the
F'
insurance company would he reduced. Part B applies to those insurers,
who, having a surolus in Form 1 have not allocated the whole or any
part of such sUrpl.us to policy holders, an<l also provides, how com-
nensation is to be paid to companies who had no surplus as disclosed
in Form I. In the latter case, that is, if there was a deficit in Form T,.
there could be no allocation to the policv holders under s.49(1) of the
Insurance Act, and there would be no liability under Cl. (d).
Ci
On the taking over of 1 he business of the respondent, a life insu·
ranee company incorporated in Canada, by the appellants, under the
Life Insurance Corporation Act, the respondent claimed Rs. 27 lacs and
odd as compensation. The respondent contended that the words "life
insurance fund" in Cl. (d) referred to above had the same meaning'
as those words in the Insurance Act, and since there was deficit in its
working as shown by Form I. no amount was to be deducted as liab!-
H
lity under Cl. (d). The appellant was prepared to pay only Rs. 1 lac
and odd, on the basis that, the words "life insurance fund" in Cl.
( d) meant the difference between the total assets and the liabilities
474
A
B
c
D
E
•
F
G
H
L. I. c. v. CROWN INSURANCE (!f.anchoo, J.)
475
under Cls. (a) and (c) ancl since there was a surplus of Rs. 27 lacs
and odd, a sum of Rs. 26 lacs and odd, forming, 96';{ of it, was to be
clebited towards the liabilities of the respondent.
The Insurance Tribunal accepted the respondent's contention and
awarded the compensation claimed by it.
In its appeal to this Court, the appellant contended that: (i) the
words "life insurance fund" under the Insurance Act have more
than one meaning under that Act, and therefore it was not pcssible
to give the meaning, claimed by the respondent, to those words in
Cl. (d) under the Corporation Act, and (ii) even if those words have
only one meaning under the Insurance Act, they have a different
meaning under the Cl. (d).
HELD: (i) A combined reading of ss. 10(2), 11 and 13 of the In-
su:ance Act and Form D cf the Third Schedule and Form I of the
Fourth Schedule to the Insurance Act, shows, that the words "life
insurance fund", ''surplus" and "dEficit'' have only the definite mean-
ing set out above, as contended by theExcerpt shown. Read the full judgment & AI analysis in Lexace.