LexLIFE INSURANCE CORPORATION OF INDIA versus RAJMATA SAHEB CHOWHANJI & ORS.
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LIFE INSURANCE CORPORATION OF INDIA
v.
RAJMATA SAHEB CHOWHANJI & ORS.
August 2, 1978
[S. MURTAZA FAZAL ALI, P. N. SHINGHAL AND A. D. KosHAL, JJ.]
Life Insurance Corporation Act, 1956 Section 7(2)-Scope of vis-a-vis
obligation to restitute the benefit under s. 65 of the Contract Act.
The plaintiff-~espondenl.-filed a- ~uit-for recovery of a sum of Rs.
2 lakhs
invested by_,,him in the Adarsh Bima Company, which was taken over by the
,appeltan4 (defendant no. 3) herein, on the basis that the managing director of
the Adarsh Bima Company by practising fraud and misrepresentation on the
plaintiff that the plain.tiff would be entitled to an assured dividend of 4% that
too contrary to the statute of the company induced him to part with the said
sum by purchasing 200 shares of Rs. 100/- each.-' The suit was contested by
the appellant mainly on the ground that after the appellant took over the
Adarsh Bima Company he v.·as not liable for any act of the company v.·hich
was ultra-vires of the sl2.tutes of the company. The trial Court passed a decree
i.'1 favour of the respondents. and the High Court affirrr.ed it by di:iniissing the
appeal by the appellant.
Jn appeal. by certificate, the appellant contended (a) _that on the findinz; that
a fraud was committed on the plaintiff and the act of the managing director
being ultra vires of the statutes of the company, the company \Vould
not be
liable although the managing director may be personaIIy liable; and (b) assum-
ing that the company was liable, but in view of the provisions of s. 7 ('.!) of the
Life Insurance Corporation Act, 1956, the liability of the
appellant
\Vould
extend only to matters appertaining to th~ controlled business as defined in the
Act.
Dismissing the appeal the Court,
HELD-: (1) The words of s. 7(2) of the Life Insurance Corporation Act
are of the widest amplitude and the ·section includes all debts, liabilities, obliga-
tions of whatever kind then existing and appertaining to the controlled business
of_ the insurer. There can be no doubt that at the time when
the appellant
took over the Adarsh Bima Company, the obligation to restitute the
benefit
received by the company from the plaintiff had been fastened and the appellant
was legally bound to return the same to the plaintiff under section 65 of the
Contract Act,. in ··.rie-n· of the findings of the Courts below that the contract was
yoid. .[15G·H, J6A-I)
(2) ·The question as to whether or not the transaction was 11/rra vires of the
statutes of the company was wholly irrelevant because that v.'a.s the reason why
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the contract was void and not a ground for exempting the appellant from its
liability to pay. [16AI
(3) The \\'Ords "of whatever kind .. in s. 7(2) are wide enough to take
":ithin "its sweep all kinds of transactions entered into by the predecessor com-
;pany. The ,present transaction was undoubtedly entCred into by the predecessor
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SUPREME COURT REPORTS
[1979] l S.C.R.
company which had received the sum of Rs. 2 lakhs from the plaintiff and had
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issued share slips and the appellant, therefore, cannot escape his liability even
under S. 7(2).
[16 A·CJ
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( 4) As the plaintiff will be entitled to restitution of the
benefits
under
section 65 of the Contract Act, he can get only the amount which he had paid
to the appellant company .'lnd not any interest upto the date of the ruit. [16C']
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[However the Court awarded interest at six percent per annum from
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date of the, suit, to the date of payment under S. 34 of the C.P .C.]
(5) The contention that on the finding that a fraud was con1roitted on the
plaintiff and the1 act of the managing director being ultra vires of the statutes of
the company, the company would not be liable although the managing director
may be personally liable is wrong.
There was absolutely no pleading by the
defendants that the n1onies were received by the 1 managiilg director per~onally
and in fact the same did not go to the coffers of the company. From the, issue
of the share scrips to the plaintiff, it must be presumed that the money
'!h'as
received by the company.
Moreover this question not having
being raised
before any Courts below and also being a question of fact C«annot be gone into.
[l3C, E, F, 14D·E]
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CJv1L APPELLATE JurusDICTION: Civil Appeal No. 237 l of 1968.
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From the Judgment and Decree dated 20th April, 1967 of foe
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