NEPTUNE ASSURANCE CO. LTD. & ORS. versus UN!ON OF INDIA & ANR.

Citation: [1973] 2 S.C.R. 940 · Decided: 10-11-1972 · Supreme Court of India · Bench: S.M. SIKRI · Disposal: Dismissed

Judgment (excerpt)

940 
NEPTUNE ASSURANCE CO. LTD. & ORS. 
v. 
UN!ON OF INDIA & ANR. 
November IO, 1972 · 
[S. M. S!KRI, C.J., A. N. RAY, D. G. PALEKAR, M. H. BEG AND 
S. N. DwIVEDY, JJ.] 
General Insurance (Emergency 
Provisions) Act 1971 s. l5(a}-'ln-
surer' whose business is voluntarily 'lround up or is wound up under order 
of Court exemHed from operation of Act-Voh<nt,1/'y 
winding 
up of 
business 1vhether includes cessatio11 of busines,j-'/I, :urer' and insurance 
company, whether distinct-Sections 2(e) and 
15(a) of Act whether 
violative of Art. 14, Constitution of India. 
Tho first petitioner was a public limited company incorporated under 
the Indian Companies Act. The second and Jiird petitionei·s were share· 
holders and directors of the first petitioner. Up to the end of March, 1971 
the petitioner company was registered under the Indian Insurance Act, 
1938. The registration authorised it to carry on the busine~ of general 
insurance comprising fire ~nd miscellaneous insurance. On September 17, 
1970 its Board of Directors resolved that it would cease to underwrite 
any insurance business as from the close of business on Septem~r 30, 
1970. On that very date it informed the Controller of Insurance of the 
resolution and returned its certificate 
of registration for the year 1970 
to the Controller of Insurance. After the close of business on September 
30, 1970 it stopped doing any kind o'f general insurance business.. On 
October 3. 1970 the Controller of Insurance returned the Registration 
C'zrtifi~te to it with the remark that there was no provision in the In-
surance Act for return of certificate. The Controller advised it not to 
apply for renewal of certificate for the year 1971. On Febuary 2, 1971 
the lfoard of Directors of the company passed a resolution cancelling all 
policies with effect from March 10/12, 1971 ~ftcr giving due notice to 
the policy-holders. 
Another resolution was 
passed terminating all re· 
insurance treaties, both inward and outward, with effect from December 
31. 1971. The company refunded to the policy-holders a sum of Rs. 48.000 
on cancellation of their policies. The uncollected refund amount ~me to 
Rs. 2013.98, On Febuary 16. 1971 the Controller of Insurance cancelled 
the registration of the company .with dfect from April 5, •.971 
under 
section 3(4) (f) of the Insurance Act. The company reduced its staff.from 
the month of September 1970. 
By 
the end of Februarv 1971 the total 
staff cbnsisted of one officer. one clerk, one typist and one peon. ' Tn 
respect of some of the policies cancelled cases were pending in court. 
The Union of India, the first respondent, appointed a Custodian over 
the undertaking of ·the company under s. 4 of the Gcccral Jnsuranc' 
(Emergency Provisions) Ordinance I 971 on May 13, 1971. The said 
Ordinance was· eventually re-enacted as General Insurance (Emerg'ocy 
Provisions) Act. 1971. The Union of India issued also certain directions 
on May 13, 1971 to regulaie the management of the undert9king by 
the Custodian. The company filed petitions under article 32 of the Con· 
situation claiming that the Act of 1971 was not applicable to it because 
it was aa insurer whose business was being voluntarily wound 
up 
in 
terms of section 15(a) of the Act and therefore 
it could not be taken 
over by the Central Government under s .. 3 of the Act. It was contended 
that the words "whose business is being voluntarily wound up" in 
sec~ 
tion 15(a) also meant "whose business is being voluntarily brought to 
B 
c 
D 
E 
F 
G 
H 
A 
B 
c 
D 
F 
G 
H 
NEPTuNE ASSURANCE CO, v. UNION 
941 
a close or final settlement". The company also challenged the constitu-
tionality of part of section 2(e) as also of section 15(a) of the Act,. 
under Art. 14 of the Constitution of Inoia. 
Held: per majority (Palekar, Beg and Dwivedi, JJ.) 
(i) The appellant company could not get the benefit of s. !5(e) ami 
was subject to the provisions of s. 3 of the Act which pro;ides for the 
take over of insurance companies. [966 HJ 
Section 2C of the Insurance Act has limited the denotation of the 
\vnrd 'insurer' from the date of the commencemeni: of the Insurance 
(Amendment) Act 1950. Section 2C(l) provides that "no person shall,. 
atter the commencement of the Insuranee (Amendment) Act 1950 begin, 
to carry on any any class of business in India and no insure~ carrying on any 
class of insurance business in India shall, after the expiry of one year 
from such commencement, continue to car

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