LIFE INSURANCE CORPORATION OF INDIA versus S. V. OAK AND ANOTHER

Citation: [1965] 1 S.C.R. 403 · Decided: 29-09-1964 · Supreme Court of India · Bench: P.B. GAJENDRAGADKAR · Disposal: Dismissed
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Judgment (excerpt)

403 
A 
LIFE INSURANCE CORPORATION OF INDIA 
B 
c 
E 
F 
G 
H 
v. 
S. V. OAK AND ANOTHER 
September 29, 1964 
(I. B. GAJENDRAGAJ'>KAR, C.J., K. N. WANCHOO, 
M. IiP.>AYATULLAH, RAGHUBA1t DAYAL AND 
J. R. MUDHOLKAR JJ.) 
Life Insuranc• Corporation A.ct 
(31 of 1956), ss. 9 and 28-
ScoJ>C of-"Surp/us", meaning of. 
The respondents had made deposits with a mutual life assurance 
company. 
The Controller of Insurance had di""*<! that tbe deposits 
should be repaid from future valualion surpluses and the respondents 
agreed to this. The insurance 
company, while it worked, had 
not 
shown any valnation surplus as a result of actuarial investigations under 
the Insurance J1ct, 1938. In fact the Company was insolvent from the 
point of . view d the Insurance Act when it was taken over by the Life 
Insurance Corpc•r.ilion. 
When the busfuess of the Com~ merged in 
the business of the Corporation, it became indistinguisllable after 1st 
September 1956, the date when the Life lnsUJ'.IDCO 
Corporation 
Act 
(XXXI of 1956) came into force. 
The workiag of the Corporation. 
showed an enormous valuation surplus and the respondent claimed that 
as the condition on which. their deposits wete held had been fulfilled, the 
Corporation was bound to return their deposits with interest. The Cor-
poratioo. resisted the demand and the matt.er was referred to the Life 
Insurance Tribunal. The Tribunal held that the contrai:ts immediately 
prior to the date of vesting were not suboi3ting or efl'cctive because they 
could not be enforced, there being no surplus of the stated kind. Against 
that decision the depositors filed a petition under Arts. 226 and 227. of 
tbe Comtitution fo the . High Court, 
and the High Court reversed the 
decision of the Tribunal. The CQrporation 
appealed to the Supreme 
Court. 
HELD : The appeal should be dismissed. [4120]. 
(i) It was wrong to contend that as the company had no surplus 
on 1st September 1956, its contingent liabilities ceased to exist. 
The 
contracts s12bsisted as long as the Company. worked but the payments were 
postponed till the condition about actuarial surplus was fultilled. Under 
s. 9 of the Life InsU1'ance Corporation Act the contractllal liability of the 
~any became that of the Corporation there bcfug no express provi-
sion m the Act negativing it ind as the Corporation had actuarial surplus 
the amounts were payable from that surplus. f410C-F]. 
(ii) When ss. 9 and 28 of the Life Insurance Corporation Act' are 
read harmoniously, s. 28 does not put .any bar in the way of the Cor, 
poration in the fulfilment of its obligations under s. 9. The surplus 
under s. 28 is that which results fr11m an actuarial inveatigation under· 
tbe Insurance Act. 
It is to be disposed of by allocating not less than 
9S % of it for the policy holders of the Corporation. The balance of 
the surplus "may" be utilised for such purposes and in such manner 
as the Central Government "may" determine. The. G0vemment while 
making directions is expected to have regard to the liabilities of the Cor-
poration under s. 9 of the Act.· As in the .instant case there was no 
special direction of the Central GC>Vernment, the surplus was available 
for payment of deposits. (41 lE-H; 412CJ .. 
40~ 
SUPREME COURT REPORTS 
(1965] I S.C.ll. 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 443 of A 
1962. 
Appeal from the judgment and order dated July 29, 1960, of 
the Bombay High Court in Special Civil Application No. 279 of 
1960. 
M. C. Setalvad, S. T. Desai, S. N. Andley, Rameshwar Nath 
B 
and P. L. Jlohra, for the appellant. 
K. V. Joshi, S.S. Khanduja, S. K. Manohanda and Ganpat Rai, 
for the respondents. 
G. S. Pathak, I. C. Diwanji, /. B. Dadachanji, 0. C. Mathur 
and Ravinder Narain, for respondent No. 1. 
c 
K. Rajendra Chaudhuri, and K. R. Chaudhuri, for Interveners 
Nos. 2. 
S. V. Gupte, Additional Solicitor-Genera/, and B. R. G. K. 
Achar, for the Attorney-General for India. 
The Judgment of the Court was delivered by 
Hidayatullah J. 
This is an appeal by certificate against the 
judgment of the High Court of Bombay dated July 29, 1960 in a 
petition under Articles 226 and 227 of the Constitution reversing 
the decision of the Life Insurance Tribunal, Nagpur dated Decem-
D 
ber 30, 1959. The proceedings arose from the talcing over of the E 
controlled business of the Continental Mutual Assurance Company 
Ltd., Poona by the Life Insurance Corporation under the Life 
Insurance Corporation Act, 1956 (31 of 1956). T
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