LIFE INSURANCE CORPORATION OF INDIA versus VISHWANATH VERMA AND ORS.

Citation: [1994] SUPP. 4 S.C.R. 87 · Decided: 30-09-1994 · Supreme Court of India · Bench: S. MOHAN · Disposal: Appeal(s) allowed

Judgment (excerpt)

LIFE INSURANCE CORPORATION OF INDIA 
v. 
VISHWANATH VERMA AND ORS. 
SEPTEMBER 30, 1994 
(S. MOHAN AND G.N. RAY, JJ.) 
' 
Life Insurance Corporation Act, 1956 : Sections 30, 37, 44(f). 
Life Insurance Corporatiolt-Exclusive power to do life insurance busi-
nes>--F' amily benefit scheme framed by Jabalpur Municipal Corpora-
tion-Held the scheme has essential ingredients of life insurance business--
Scheme held violative of Section 30-Scheme held not covered by exemption 
provided under section 44([). 
Insurance Act, 1938 : Section 2( 11 ). 
Life Insurance Business-Meaning of-Life Insurance Contracts--
Types of. 
Madhya Pradesh Municipal Corporation Act, 1956 : Section 421. 
State Government-Power to suspend resolution or order-Scheme 
framed in violation of Life Insurance Act, 1956-He/d State Government can 
invoke its power for cancellation of scheme. 
A 
B 
c 
D 
E 
The Jabalpur Municipal Corporation framed a scheme known as 
'Family Benefit Fund Scheme'. The purpose or the scheme was to provide F 
financial help to its employees after retirement or death. The salient 
features or the scheme were (I) the employees were to make voluntary 
contribution towards the scheme; (ii) the contribution made by an 
employee was to be paid to him on his retirement; (iii) in the event of death 
or an employee while in service, a specified amount was payable to his G 
dependents; (iv) the family was to inclnde wife, husband, minor son who 
has not attained the age or 18 years, minor unmarried daughter who has 
not attained the age of 21 years, father or mother; (v) the benefit or the 
scheme was available to the legal heirs or the deceased in .case the aforesaid 
members of the family were not available and if the nomination letter was 
not filed in the prescribed form nnder the rule the benefit was not available H 
87 
88 
SUPREME COURT REPORTS (1994) SUPP.4S.C.R. 
A to the married daughter under any circumstances. 
B 
During the operation or the scheme, a question arose whether the 
scheme was violative of Section 30 of the Life Insurance Act, 1956 because 
under the Act the Life Insurance. Corporation has the exclusive power to 
do life insurance business. By its order dated 31st March 1977 the State 
Government directed the suspension of the scheme. However, by its order 
dated 16.12.80 passed in exercise of its power under Section 421 of the 
Madhya Pradesh Municipal Corporation Act 1956, the State Government 
directed the Corporation to cancel the scheme. Further, the matter was 
considered by Controller or Insurance who advised that in terms of section 
C 30 of the Life Insurance Corporation Act, 1956, Life Insurance Corpora-
tion has the exclusive privilege to do life insurance business and the 
scheme framed by the Corporation was not covered by the exemption 
provided under section 44(0. 
The respondents filed a writ petition in the High Court which held 
D that (i) the Scheme does not fall within the ambit or 'Life Insurance 
Business' and therefore section 30 was not applicable; (ii) the scheme does 
not fall within the ambit of section 421 or the Madhya Pradesh Municipal 
Corporation Act, 1956 because the scheme was wholly run on contributions 
made by the employees and not on the funds of the Municipal Corporation. 
E Therefore, the State Govt. has no jurisdiction to cancel the same. 
F 
G 
In appeal to this Court, it was contended on behalf of the appellant-
Life Insurance Corporation that (i) the High Court erred in putting the 
narrow interpretation of 'Life Insurance Business' ; the scheme was in 
violation ofsection 30 of the Life Insurance Act, 1956 in as much as it has 
the essential ingredients of Life Insurance Business; (ii) it was not covered 
by the exemption provided under section 44(0 and was also against the 
interest or employees themselves because the payment was not guaranteed 
either by the Municipal Corporation or by the State Government. 
Allowing the appeal, this Court 
HELD : 1. The scheme run by the Jabalpur Municipal Corporation 
for the benefit or its employees is a clear case or life insurance. Under 
Section 30 of the Life Insurance Corporation Act, 1956, Life Insurance 
Corporation is to have the exclusive privilege of carrying on life insurance 
H business in India. Consequently it will be illegal on the part or the Jabalpur 
L.I.C. v. V. VERMA 
89 
Municipal Corporation to run the said scheme. [97·B·CJ 
A 
2. 'file High Court is not right in holding that the scheme is not any 
kind of bu

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