# High Court in Udmiram Koroodimal and Anr v. Balramdas Tularam & Ors. (2 )

- **Citation:** [1960] 3 S.C.R. 857
- **Court:** Supreme Court of India
- **Decided:** 1957-07-17
- **Bench:** P. B. Gajendragadkar, K. N. W Anchoo, K. c. DAS GUPTA
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/high-court-in-udmiram-koroodimal-and-anr-v-balramdas-tularam-ors-2-1901
- **Pages:** 16

## Headnote

Ins1Jrance-Company closing insurance business-Government's
order
directing
investigation
of company's affairs-Legality-
" Insurer", meaning of-Insurer's liability after closing of business
--Extent-" Liabilities not satisfied and not otherwise provided for" -
General Clauses Act, I897 (IO of I897), s. I3-Insurance Act, I938
(4 of I938), SS. 2(9), 2D, 7, 9, 33·
The appellant company had been carrying on various classes
of insurance business other than life insurance after its incorporation in 1941, but in 1956 the shareholders of the company passed
a resolution by which all its insurance business was to be closed.
Accordingly, on application made by the company to the Controller of Insurance, the certificate granted to it for carrying on
insurance business was cancelled with effect from July l, 1957·
In the meantime, complaints against the company were being
received by the Government of India, who, thereupon, passed an
order on July 17, 1957, under s. 33 of the Insurance Act, 1938,
directing the Controller of Insurance to investigate the affairs of
the company and to submit a report. The company challenged
(1) '1923) L.R. 51 I.A. 129.
\2) I.L.R. [1955] Nag. 744·
May 4.
\
Van guard Fire
& General
Insurance Co. Ltd.
v.
Fraser & Ross
858
SUPREME COURT REPORTS
[1960)
the legality of the order on the grounds, ( r) that as all its insurance
business had been closed the Central Government had no jurisdiction to pass an order under s. 33 of the Act, which only enables
the investigation of the affairs of an insurer who, as defined in
s. 2(9), is one who is actually carrying on the business of
insurance, (2) that such an order could not be sustained under
s. 2D of the Act as that section was applicable only to those cases
where an insurer was carrying on different classes of insurance \\
business and had closed some of them but not all of them, (3)
that even if such order could be passed under s. 33 read with s. 2D
it could not be done in the present case as the company's liabilities
did not remain unsatisfied or not otherwise provided for, and (4)
that, in any case, the order in question was invalid because it did
not show on the face of it that the Central Government was
prima facie satisfied that the liabilities had remained unsatisfied
or not otherwise provided for :
Held, (r) that the word "insurer" in s. 33 of the Insurance
Act, 1938, refers not only to a person who is actually carrying on .
the business of insurance but also to one who has subsequently
closed it.
(2) that in s. 2D of the Act an "insurer" means a person
who was carrying on the business of insurance but has closed it.
(3) that the word " class " in s. 2D though used in the
singular includes the plural also and the section is applicable to
the case where an insurer who was carrying on different classes
of insurance business closes all of them.
(4) that the expression " not otherwise provided for" in
s. 2D refers to liabilities in the nature of claims against the
insurer whether the insurer admits them or not and whether a
decree has been finally passed in respect of them or not.
(5) that under s. 2D the satisfaction or "provision otherwise" for the liabilities of insurance business which is closed,
does not refer to the deposit made under s. 7 and has to be over
and above that deposit.
(6) that though an order under s. 33 read with s. 2D of the
Act should show on the face of it that the Central Government
was prima facie satisfied that the liabilities had remained unsatisfied or not otherwise provided for, the fact that the order does
not on the face of it show that the Central Government considered
this aspect of the matter would not make it bad, if in subsequent
proceedings taken to challenge it, it is shown that there were
materials before the Central Government which would justify its
coming to the prima jacie conclusion that the liabilities had not
been satisfied or otherwise provided for, and therefore an investigation into the affairs was called for.
CIVIL A

## Text

"
\
~t
3 S.C.R. SUPREME COURT REPORTS
857
decision is well founded. The propositions in question
r96o
treated an alienation made for the payment of the Luhar Amritlal
father:'s antecedent debt on the same footing as an
Nagji
alienation made in execution of a decree passed against
v.
him and in both cases the principle enunciated is that Doshi Jayantilal
in order to succeed in their challenge the sons must
Je~alal
prove the immoral character of the antecedent debtcajendragadkar J.
and the knowledge of the alienee. Having regard to
the broad language used in stating the two propositions, we do not think that a valid distinction could be
made between a mortgage and a sale particularly after
the decision of the Privy Council in the case of Brij
Narain (1).
That is the view taken by the Nagpur
High Court in Udmiram Koroodimal and Anr. v.
Balramdas Tularam & Ors. (2 ).
In the result the appeal fails, but in the circumstances of this case there will be no order as to costs.
Appeal dismissed.
THE VANGUARD FIRE AND GENERAL
INSURANCE CO. LTD., MADRAS
v.
M/S. FRASER AND ROSS AND ANOTHER.
(P. B. GAJENDRAGADKAR, K. N. W ANCHOO and
K. c. DAS GUPTA, JJ.)
Ins1Jrance-Company closing insurance business-Government's
order
directing
investigation
of company's affairs-Legality-
" Insurer", meaning of-Insurer's liability after closing of business
--Extent-" Liabilities not satisfied and not otherwise provided for" -
General Clauses Act, I897 (IO of I897), s. I3-Insurance Act, I938
(4 of I938), SS. 2(9), 2D, 7, 9, 33·
The appellant company had been carrying on various classes
of insurance business other than life insurance after its incorporation in 1941, but in 1956 the shareholders of the company passed
a resolution by which all its insurance business was to be closed.
Accordingly, on application made by the company to the Controller of Insurance, the certificate granted to it for carrying on
insurance business was cancelled with effect from July l, 1957·
In the meantime, complaints against the company were being
received by the Government of India, who, thereupon, passed an
order on July 17, 1957, under s. 33 of the Insurance Act, 1938,
directing the Controller of Insurance to investigate the affairs of
the company and to submit a report. The company challenged
(1) '1923) L.R. 51 I.A. 129.
\2) I.L.R. [1955] Nag. 744·
May 4.
\
Van guard Fire
& General
Insurance Co. Ltd.
v.
Fraser & Ross
858
SUPREME COURT REPORTS
[1960)
the legality of the order on the grounds, ( r) that as all its insurance
business had been closed the Central Government had no jurisdiction to pass an order under s. 33 of the Act, which only enables
the investigation of the affairs of an insurer who, as defined in
s. 2(9), is one who is actually carrying on the business of
insurance, (2) that such an order could not be sustained under
s. 2D of the Act as that section was applicable only to those cases
where an insurer was carrying on different classes of insurance \\
business and had closed some of them but not all of them, (3)
that even if such order could be passed under s. 33 read with s. 2D
it could not be done in the present case as the company's liabilities
did not remain unsatisfied or not otherwise provided for, and (4)
that, in any case, the order in question was invalid because it did
not show on the face of it that the Central Government was
prima facie satisfied that the liabilities had remained unsatisfied
or not otherwise provided for :
Held, (r) that the word "insurer" in s. 33 of the Insurance
Act, 1938, refers not only to a person who is actually carrying on .
the business of insurance but also to one who has subsequently
closed it.
(2) that in s. 2D of the Act an "insurer" means a person
who was carrying on the business of insurance but has closed it.
(3) that the word " class " in s. 2D though used in the
singular includes the plural also and the section is applicable to
the case where an insurer who was carrying on different classes
of insurance business closes all of them.
(4) that the expression " not otherwise provided for" in
s. 2D refers to liabilities in the nature of claims against the
insurer whether the insurer admits them or not and whether a
decree has been finally passed in respect of them or not.
(5) that under s. 2D the satisfaction or "provision otherwise" for the liabilities of insurance business which is closed,
does not refer to the deposit made under s. 7 and has to be over
and above that deposit.
(6) that though an order under s. 33 read with s. 2D of the
Act should show on the face of it that the Central Government
was prima facie satisfied that the liabilities had remained unsatisfied or not otherwise provided for, the fact that the order does
not on the face of it show that the Central Government considered
this aspect of the matter would not make it bad, if in subsequent
proceedings taken to challenge it, it is shown that there were
materials before the Central Government which would justify its
coming to the prima jacie conclusion that the liabilities had not
been satisfied or otherwise provided for, and therefore an investigation into the affairs was called for.
CIVIL APPELLATE
JuRISDIOTION:
Civil
Appeal
No. 21 of 1960.
Appeal from the judgment and order dated
January 16, 1959, of the Madras High Court in Writ
Appeal No. 67 of 1958, arising out of the judgment
3 S.C.R. SUPREME COURT REPORTS
859
and order dated July 15, 1958, of the said High Court
r960
in Writ Petn. No. 922 of 1957.
..
Vanguard Hre
0. B. Aggarwala, S. N. Andley, J.B. DadachanJi
c;. General
and Rameshwar Nath, for the appellant.
Insurance Co. Ltd.
R. Ganapathy Iyer, H. J. Umrigar, R. H. Dhebar
Fraser v&, Ross
and T. M. Sen, for respondent No. 2.
1960. May 4.
The Judgment of the Court was
delivered by
WANCHOO, J.-This is an appeal on a certificate
Wanchoo ].
granted by the Madras High Court. The appellant
Company had been carrying on various classes of
insurance business other than life insurance after its
incorporation in September, 1941. On October 15, 1956,
an extraordinary general meeting of the shareholders
of the Company passed a resolution by which all its
insurance business was to cease forthwith and no
further policies of insurance of any kind were to be
issued thereafter. It was also resolved that no appli.;
cation should be made for renewal of the certificate
granted under s. 3 of the Insurance Act, No. IV of
1938 (hereinafter called the Act), and that thenceforward the Company should only carry on the business of money-lending as a loan-Company and also to
do investment business. In consequence of these resolutions, the Company informed the Controller of Insurence in December, 1956, that it was not applying for
renewal of its registration for carrying on the business
of insurance. In May, 1957, the Controller wrote to
the Company that its certificates for carrying on
insurance business would be deemed to be cancelled
from July 1, 1957, and the cancellation was notified
in the Gazette of India.
It appears that the Government of India had been
receiving complaints against the Company. Consequently on July 17, 1957, the Government of India
passed an order under s. 33 of the Act directing the
ControUer of Insurance to investigate the affairs of
the Company and to submit a report. Thereupon
the Controller appointed Messrs. Fraser and Ross to
act as auditors to assist him in the investigation.
The Company was informed of this order in September 1957.
Thereupon it wrote to the Controller that
no order under s. 33 of the Act could be pass~d
1960
Vanguard Fire
0- General
Insurance Co. Ltd.
v.
Fraser & Ross
Wanchoo ].
860
SUPREME COURT REPORTS
[1960]
(-M_
against it, as it had closed its business of insurance
aud the order in question was without jurisdiction.
The Controller sent a reply to this communication
and pointed to the provisions of s. 2D of the Act in
justification of the order. Thereupon the Company
made an application under Art. 226 of the Constitution in the Madras High Court. Two main contentions
were raised by it in the petition. In the first place it
was submitted that the Company having closed all its
insurance business no order could be passed against it
under s. 33, as that section only applied to companies
actually carrying on the business ofinsurance and that
in any case no such order could be passed even with
the help of s. 2D of the Act. In the second place it
was contended that even if such an order could be
passed under s. 33 read with s. 2D of the Act, it could
not be done in the present case, as the Company's
liabilities in respect of its insurance business did not
remain unsatisfied or not otherwise provided for.
Messrs. Fraser and Ross as well as the Controller were
made parties to the petition. The petition was opposed on behalf of the Controller, and his contention
was that the case was clearly covered by s. 2D of the
Act and therefore the order under s. 33 was validly
passed in this case and that it had not been shown
that the liabilities had been satisfied or had been
otherwise provided for.
The learned Single Judge held that an order under
s. 33 read with s. 2D could be passed against the Company and that it had not been shown that the
Company's liabilities had been satisfied or otherwise provided for.
He therefore dismissed the writ
pet.ition. This was followed by an appeal by the Company, which was dismissed. The Division Bench substantially agreed with the view taken by the learned
Single Judge. Thereupon the Company applied for
a certificate to enable it to appeal to this Court and
obta.ined it ; and that is how the matter has come
up before us.
]\fr. Aggarwala appearing for the Company has
urged the same two points before us.
The Act was
passed in 1938 to control persons carrying on the
business of insurance. Section 2(9) thereof defines
an 'insurer' inter alia as meaning any body corporate
-
3 S.C.R. SUPREME COURT REPORTS
861
(not being a person specified in sub-cl. (c) of this
I96o
clause) carrying on the business of insurance, which is
Vanguard Fire
a body corporate incorporated under any law for the
& General
time being in force in India or stands to any such Insurance Co. Ltd.
body corporate in the relation of a subsidiary company
v.
Fraser & Ro•s
within the meaning of the Indian Companies Act, 1913,
as defined by sub-s. (2} of s. 2 of that Act. · Section 3
wanchoo ]•
provides for registration of any person carrying on the
business of insurance and no such business can be
carried on unless a certificate of registration for the
particular class of insurance business has been obtained from the Controller. Section 3(4) gives power to
the Controller to cancel the certificate for reasons
specified therein and s. 3(5B) lays down that when a
registration is cancelled the insurer shall not after the
cancellation has taken effect, enter into new contracts
of insurance, but all rights and liabilities in respect of
contracts of insttran'Ce entered into by him before
such cancellation takes effect shall, subject to the
provisions of sub-s. (5DJ, continue as if the cancellat.ion had not taken place. In order to safeguard the
interest of policy-holders, s. 7 provides for deposits
by the insurer for various classes of his business.
Section 8 lays down that any deposit made under s. 7
shall be deemed to be part of the assets of the insurer
but shall not be susceptible of any assignment or
charge; nor shall it be available for the discharge
of any liability other than liabilities arising out of
policies of insurance issued by the insurer so long as
any such liability remains undischarged ; nor shall it
be liable to attachment in execution of any decree
except a decree obtained by a policy-holder of the
insurer in respect of a debt due upon a policy which
debt the policy-holder has failed to realise in any other
way. Section 9(1) lays down that where an insurer
has ceased to carry on in India any class of insurance
business in respect of which a deposit has been made
under s. 7 and his liabilities in India in respect of
business of that class have been satisfied or are otherwise provided for, the court may on the application of
the insurer order the return to the insurer of so much
of the deposit as does not relate to the classes of insurance, if any, which he continues to carry on. Under
ua
862.
SUPREME COURT REPORTS
[1960)
s. IO an insurer who carries on business of more than
one kind is required to keep a separate account of all
VanguaYd.F.ire:
.
h
& General
receipts and payments in respect of eac such class of
Insuran~e Co. Ltd.· insurance business.
Section 33(1) with which we are
v.
F.-raser &, R.ossc
lf'.'llnchoo J;
directly concerned, is in these terms :-
"The Central Government may at any time by
order in-writing direct the controller or any other
person specified in the order to investigate th0
affairs of any insurer and to report to the Central
Government. on any investigation made by him :
Provided that the controller or the other person
, may, wherever necessary, employ an auditor or
actuary or both for the purpose of assisting. him in
any investigation under this section."
Section 2D is in these terms:
" Every insurer shall be subject to all the provi-
.. sions of this Act in relation to ·any class of insurance
, business so long as his liabilities in India in respect
• of business of that class remain unsatisfied and not
. otherwise provided for;" ·
The contention of Mr. Aggarwala is that s. 33 and
s. 2D both refer to an insurer which is defined in
s. 2(9) as a person carrying on the business of insurance. He, therefore, contends that as soon as the
insurer who was carrying on the business of insurance
closes it down completely he no longer remains an
insurer and the provisions of the Act do not apply to
him. Therefore, according to him, whens. 33 provides
for an order of investigation by the Central Government such an order can only be made in respect of a
person who is actually carrying on the business of
insurance and is thus an insurer and cannot be made
against a person who was an insurer but has closed
his business. Further, according to Mr. Aggarwala,
s. 2D also speaks of an insurer and makes him subject
to all the provisions of the Act with respect to any
class of insurance business so long as his liabilities in
respect of that class remain unsatisfied or not otherwise provided· for and therefore s. 2D would only
apply to those cases where insurance business is being
carried on, though some class of insurance business
might have been closed.
The contention therefore is
that reading ss. 33 and 2D together, no order under.
1
I
'
j
3 S.C.R. SUPREME COURT REPORTS
863
s. 33 can be made in case of an insurer who has com1960
pletely closed his business of insurance.
The main basis of this cont,ention is the definition
Va~'G:~~,!?"
of the word "insurer" in s. 2(9) of the Act. It is Insurance Co. Ltd.
pointed out that that definition begins with the words
v.
Fraser 0-- Ross
"insurer means" and is therefore exhaustive. It may
be accepted that generally the word "insurer" has
Wanehoo J.
been defined for the purposes of the Act to mean a
person or body corporate, etc., which is actually carry·
ing on the business of in8•irance, i.e., the business of
effecting contracts of insuunce of whatever kind they
might be. But s. 2 begins with the words "in this
Act, unless there is anything repugnant in the subject
or context" and then come the various definition
clauses of which (9) is one. It is well settled that all
statutory definitions or abbreviations must be read
subject to the qualification variously expressed in the
definition clauses which created them and it may be
that even where the definition is exhaustive inasmuch
as the word defined is said to mean a certain thing, it
is possible for the word to have a somewhat different
meaning in different sections of the Act depending
upon the subject or the context. That is why all
definitions in statutes generally begin with the qualifying words similar to the words used in the present
case, namely, unless there is anything repugnant in
the subject or context. Therefore in finding out the
meaning of the word "insurer " in various sections of
the Act, the meaning to be ordinarily given to it is
that given in the definition clause. But this is not
inflexible and there may be sections in the Act where
the meaning may have to be departed from on
account of the subject or context in which the word
has been used and that will be giving effect to the
opening sentence in the definition section, namely,
unless there is anything repugnant in the subject or
context. In view of this qualification, the court has
not only to look at the words but also to look at the
context, the collocation and the object of such words
relating to such matter and interpret the meaning
in tended to be conveyed by the use of the words under
the circumstances. Therefore, though ordinarily the
word "insurer" as used in the Act would m~au u.
864
SUPREME COURT REPORTS
[1960]
person or body corporate actually carrying on the
business of insurance it may be that in certain sections
Vanguard Fire
h
d
h
h
d"ff
.
.s. Gen,,•I
t e wor may ave a somew at 1 erent meanmg.
Insurance Co. Ltd.
A perusal of a few sections of the Act will illustrate
v.
Fraser & Ross
Wanchoo ].
this and immediately show that the word " insurer"
has been used in some sections to mean not merely
a person actually carrying on the business of insurance
but also a person who intends to carry on the business
of insurance but has not actually started it and also a
person who was carrying on the business of insurance
but has ceased to do so. For example, s. 3(2) which
deals with an application for registration which
naturally has to be made before the business of insurance actually commences, lays down in cl. (b) that the
application shall be accompanied by the name, address
and the occupation, if any, of the directors where the
insurer is a company incorporated under the Indian
Companies Act. Here the word "insurer" has been
used to indicate the company which is not actually
carrying on the business of insurance but is intending
to do so and is applying for registration. Further in
s. 3(2) ( e) which also deals with an application for
registration, it is provided that an insurer having his
principal place of business or domicile outside India
shall send along with the application a statement
verified by an affidavit of the principal officer of the
insnrer setting forth various requirements. Here again,
the word "insurer " has been used for an intending
insurer, for the business of insurance would only begin
after the registration certificate is granted on the
application made under s. 3(2). Then in s. 9 it is
provided that where an insurer has ceased to carry on
business, the court may on the application of the
insurer order the return to him of the deposit made
under s. 7. This shows that though the insurer is not
actually carrying on the business of insurance he is
still termed an insurer and on his application the
deposit may be refunded to him.
Again s. 55 which
deals with a situation arising out of the winding-up
of an insurance company or the insolvency of any
other insurer, provides that the value of the assets
and liabilities of the insurer shall be ascertained in
such manner and upon such basis as the liquidator
..
•
a S.C.R
SUPREME COURT REPORTS
865
or the receiver in insolvency thinks fit.
The word
z960
"insurer" has thus been used in this section for a
b d
t
h • h ·
t
t
II
Vanguard Fire
person or o y corporate, e c., w IC
IS no ac ua y
& General
carrying on the business of insurance and has gone Insurance Co. Ltd.
into liquidation or has become insolvent. Therefore,
v.
h
h h
d•
•
b
·
h
Fraser & Ross
t oug t e or mary meanmg to
e given to t e word
"insurer" is as given in the definition clause (s. 2(9))
Wanchoo J.
and refers to a person or body corporate, etc., carrying
on the business of insurance, the word may also refer
in the context of certain provisions of the Act to any
intending insurer or quondam insurer. The contention
therefore that because the word " insurer" has been
used in s. 33 or s. 2D those sections can only apply to
insurers who are actually carrying on business cannot
necessarily succeed, and we have to see whether in
the context of these provisions an insurer will also
include a person who was an insurer but has closed
his business.
As we have said already the Act was passed to
control the business of insurance in the interest of
policy-holders and the general public and s. 33 is
obviously a provision by which the Central Government can order investigation into the affairs of any
insurer in order to carry out the policy of the Act.
Cuuld it be said 1in the circumstances that s. 33 only
applies to insurers actually carrying on business and
not to insurers who have closed their business? If
the policy of the Act is to be carried out and the
policy-holders and the general public are to be protected, the need for making investigation into the
affairs of an insurer who has closed his business is
greater, for he may have done so dishonestly. We are
therefore of opinion that the word " insurer" as used
in s. 33 not only refers to a person who is actually
carrying on business but in the context of that section
and taking into account the policy of the Act and the
purposes for which the control envisaged by the Act
was imposed on insurers also refers to insurers who
were carrying on the business of insurance but have
closed it. Further if there were any doubt whether
the word "insurer " in s. 33 refers to those insurers
also who had closed their business that doubt in our
opinion is completely dispelled by s. 2D. That section
.r960
Vanguard Fire
& General
I nsuranee Co. Ltd.
v.
Fraser & Ross
Wanehoo }.
866
SUPREME COURT REPORTS
[1960]
l.,..
provides that every insurer shall be subject to all the
provisions of the Act in relation to any class of
insurance business so long as his liability in India in
respect of business of that class remains unsatisfied or
not otherwise provided for.
Obviously this section
applies to those insurers who have closed their business. It was not necessary to enact this section if the
word "insurer" here also meant a person actually
carrying on the business of insurance, for the provisions of the Act apply to such a person proprio vigore.
Therefore, when the word "insurer" is used in s. 2D
it must mean a person who was carrying on the business of insurance but has closed it. If that is so, s. 33,
which provides for investigation, would apply to such
an insurer who has closed his business, by virtue of
s. 2D.
Mr. Aggarwala next contends thats. 2D would only
apply to those cases where an insurer was carrying on
different classes of insurance business and had closed
some of them but not all of them. He contends that
the section provides that the insurer shall remain subject to the provisions of the Act in relation to any
class of insurance business so long as his liabilities with
respect to that class of business remain unsatisfied or
not otherwise provided for.
This, according to him,
contemplates a closure of only some out of niany
classes of business of insurance and not of all.
We sec
no reason however to limit the words used in this
section only to a case where out of many classes of
business, some are closed and others are being carried
on. Under s. 13 of the General Clauses Act, No. X of
1897, in all Central Acts and Regulations, unless there
is anything repugnant in the subject or context, words
in the singular shall include the plural and vice versa.
Though therefore s. 2D speaks of any class of insurance business in the singular it includes the plural
also and would refer to all classes of insurance business.
Mr. Aggarwala does not contend that where,
for example, four classes of business are being carried
on and three of them are closed and one is continued,
the section will not apply; but he contends that at
least one mwit continue and the section will not apply
if all are closed. We do not see why if the section
1
1
~, 3 S.C.R.
SUPREME COURT REPORTS
867
applies, even though the word "class" is in the
z960
;:;ingular, to a case where three out of four classes are
I
d
d
.
.
d .
h
Id
I
Vanguard Fire
c ose an one is contmue it s ou
not app y to a
& General
case where all four classes are closed.
We see no Insurance Co. Ltd.
repugnancy in the context in holding that if all
v.
cla>ises of business are closed the insurer shall be subFraser & Ross
ject to all the provisions of the Act so long as his
Wanchoo ].
liabilities in India in respect of any business of all
classes remain unsatisfied or not otherwise provided
for.
Therefore on a plain reading of s. 2D there can
be no doubt that an insurer who has closed all classes
of his insurance business remains subject to all the
provisions of the Act in relation to such classes so
long as his liabilities in India remain unsatisfied or
not otherwise provided for.
Therefore s. 33 will certainly apply to a case where all classes of insurance
business have been closed so long as the liabilities
remain unsatisfied or not otherwise provided for. The
first contention of the appellant therefore that no investigation can be ordered under s. 33 in its case
because it has closed all classes of its insurance business fails.
Turning now to the second contention, the argument
on behalf of the appellant is three-fold. In the first
place it is urged that an order can only be made under
s. 33 read with s. 2D when the Central Government is
satisfied that the liabilities have not been satisfied or
otherwise provided for, and that the order should show
on the face of it that the Central Government had
considered this aspect of the matter and had come to
the conclusion that the liabilities remained unsatisfied
or not otherwise provided for.
Further there is
nothing in the present order to show that the Central
Government ever considered this aspect of the matter
and was satisfied that the liabilities of the appellantCompany remained unsatisfied or not otherwise pro-.
vided for.
There is no doubt that the order is utterly
silent on this point and it was only in his letter of
October 15, 1957, that the Assistant Controller pointed
out s. 2D of the Act and referred to this aspect of the
matter. It seems to us only just and proper that when
an order is being passed under s. 33 read withs. 2D of
the Act it should show on the face of it that the
Vangua,.d Fi,.e
& Gene,.ai ·
Insurance Co. Ltd.
v.
F,.ase,. & Ross
Wanchoo }.
868
SUPREME COURT REPORTS
(1960]
Central Government was prima facie satisfied that the
liabilities had remained unsatisfied or not otherwise
provided for, for it is only when the liabilities have
not been satisfied or otherwise provided for that an
order under s. 33 read with s. 2D would be justified in
the case of an insurer who has closed his business. We
use the word "prima f acie" advisedly, for it seems to
have been suggested in the High Court that uo order
could be passed under s. 33 unless it was proved to the
hilt that there were liabilities which remained unsatisfied or otherwise unprovided for. It is obvious that
such proof would only be available after investigation
in to the affairs of the insurer. Therefore in order that
s. 2D may be workable, all that is required under ·it is
that the Central Government should be satisfied after
such prima facie inquiry as it considers necessary that
there are reasons to believe t.hat the liabilities of the
insurer who has closed his business remain unsatisfied
or not otherwise provided for and in coming to this
prima facie conclusion the Central Government may
make enquiry from the insurer with respect to complaints that it may have received against him. But
the fact that the order does not on the face of it show
that the Central Government considered this aspect
of the matter would not make it bad, if in subsequent
proceedings taken to challenge it, it is shown that
there were materials before the Central Government
which would justify its coming to the prima facie conclusion that the liabilities had not been satisfied or
otherwise provided for, and therefore an investigation
into the affairs was called for. In the present case we
find from the materials on the record that there were
complaints before the Central Government from those
who had claims against the company. Those complaints were apparently referred to the Company and
it does not appear that the Company satisfied the
Central Government that the complaints were unjustified. It was in this situation that the order for investigation was made in July, 1957, after the Company
had closed its insurance business. Further on the
materials available on the record it does appear that
even how there are claims pending to the tune of about
one lac of rupees against the Company. So it ca.nnot
I
~
I
-f3 S.C.R. SUPREME COURT REPORT8
869
be said that there were no liabilities of the Company
•96o
outstanding which were not satisfied or otherwise proVanguard Fire
vided for when the order was made in July, 1957. In
&General
the circumstances the order cannot be held to be bad Insurance Co. I.td.
because it does not show on the face of it that there
v
Fraser & Ross
were liabilities which had remained unsatisfied or not
otherwise provided for.
Wanchoo ].
In the second place it is urged that there can be no
question of satisfying or otherwise providing for
liabilities unless the liabilities are ascertained and
either admitted or proved. In other words the argument is that it is only those liabilities which are
admitted by the insurer or which have been decreed
against him and the decrees have become final which
can be taken into account in deciding whether the
liabilities have remained unsatisfied or not otherwise
provided for. It is urged that only those liabilities
which are ascertained and either undisputed or proved
can be satisfied and that the same applies to their
being otherwise provided for. It is true that only
those liabilities, which are ascertained and either
admitted or proved, can be satisfied; but it does not
follow that " provision otherwise " must also be only
of liabilities which are ascertained and either admitted
or proved. If that were so a dishonest insurer who
closes his business could always get out of the provisions of s. 33 read withs. 2D by repudiating all claims
made against him and then saying that there are no
liabilities which remained unsatisfied or otherwise unprovided for.
There can be no doubt, therefore, if
these provisions have to serve the purpose for which
they were enacted, (namely, the protection of the ·
interest of the policy-holders and the general public),
the words " not otherwise provided for" in s. 2D
must refer to liabilities in the nature of claims against
· the insurer whether the insurer admits them or not
and whether a decree has been finally passed in respect
of them or not. The intention of making this provision in s. 2D is to ensure that probable claims arising
out of the insurance buRiness that is closed are provided for before the insurer who has closed his business can say that he is not governed by all the provisions of the Act. There can be no doubt, therefore,
113
870
SUPREME COURT REPORTS
[1960]
VanguaYd Fire
& General
Insurance Co. Ltd.
that when "provision otherwise" has to be made it
must be with respect to probable claims also that are
likely to arise out of the insurance business which has
been closed. In the present case even the Company
admits that there are probable claims to the tune of
v.
F1'aser &- Ross
Wanchoo ].
about rupees one lac still pending and in the circumstances until they are satisfied or it is shown that they
have been provided for otherwise, all the provisions
of the Act, including s. 33, will apply to the Com.
pany.
The last argument in support of the second contention is that the liabilities have been otherwise provided for. It is said that the Company deposited
Rs. 3,94,000 as security under s. 7 of the Act, which
is still available to pay off the liabilities of the Company and therefore when such liabilities do not appear
to exceed that amount they have otherwise been provided for.
The question thus raised is whether the
Company is entitled to take into account the security
deposit under s. 7 in order to show that the liabilities
have been otherwise provided for.
The contention on
behalf of the Controller is that when the Act envisages " provision otherwise ", this provision has to be
over and above the security deposit made by the
~
Company under s. 7. It appears from s. 8 that this
deposit is available for the discharge of liabilities
arising out of policies of insurance issued by the insurer
so long as any such liability remains unsatisfied. But
even if a decree has been obtained by a policy-holder
on the basis of a liability under the policy he is not
entitled to attach any part of this deposit until he
· shows that he has failed to realise the decree in any
other way. Further it appears thats. 8 only contemplates policy-holders holding a decree attaching part
of the security deposit in case they fail to realise their
debt in any other way; it does not contemplate, for
example, third parties who have decrees against an
insurer, like the Company (which in its motor insurance business indemnifies the policy-holders against
third party risk up to a certain extent), doing so. Such
third parties cannot under any circumstances attach
any part of the deposit, for s. 8 only permits its
v,,ttaolpne11t !11 the last resort by a policy-holder of the
r
3 S.C.R. SUPREME COURT REPORTS
871
insurer in respect of a debt due upon a policy. But
r96o
under s. 2D the decree of a third party in such a case v
d p·
ld b
h 1. b"l"
f
h .
.
f h"
anguar
ire
wou
e t e Ia I ity o t e msurer m respect o
IS
&- General
motor insurance business which could not be realised Inmrance.Co. Ltd.
by attachment of any part of the deposit under s. 7.
Fraser~ Ross
Besides, even with respect to decrees of policy-holders
the deposit could only be attached when all other ways
Wanchoo J.
ofrealising the money have failed.
In these circumstances it can hardly be said that the fact that this
deposit is there is itself a " provision otherwise " to
meet the liabilities of tho insurer. The policy-holder
cannot attach this deposit unless he first exhausts all
other means. Even if he has got a decree and even if
the insurer admits his claim and wants to pay it, he
cannot do so out of the money in deposit under s. 7.
As for third parties who may have decrees against the
insurer, they can never attach this deposit in view of
the provisions of s. 8. It could not be the intention
of the legislature when it was in effect exempting the
insurer from all the provisions of the Act on his
liabilities being otherwise provided for that such
provision should include the security deposit under s. 7,
when it has made it so difficult for a policy-holder to
get his debt satisfied from that deposit and when it is
clear that a third party could not in any way attach
the deposit. In these circumstances we are of opinion
that when s. 2D provides that the insurer shall be
subject to all the provisions of the Act so long as his
liabilities in India in respect of the business which is
closed remain unsatisfied or not otherwise provided
for, the satisfaction or "provision otherwise" does
not refer to the deposit under s. 7 and has to be over
and above that deposit. It is true thats. 9 provides
that the insurer can take back the deposit after satisfying the court that he has satisfied or otherwise provided
for his liabilities. But this " provision otherwise" for
the purposes of s. 9 must obviously be other than the
deposit itself. Further when the insurer wants to
take back his deposit on making " provision otherwise" he will have to satisfy the court that the "provision otherwise " has been fully made and the court
will be in a position to investigate into the matter.
This, however, does not mean that if the insurer does
872
SUPREME COURT REPORTS
[1960]
,960
not want to take advantage of s. 9 of the Act he can
say without submitting to the terms of that section
Va;;_g~=~~,;,fre that he has made "provision otherwise", because the
lnsu .. nce Co. Ltd. deposit which is made under s. 7 is more than all his
v.
liabilities of the insurance business that he has closed.
Fram & Ross It is urged that it is hard, for example, on an insurer
Wanchoo J.
who has a large deposit and whose liabilities are small
that he should not be able to fall back on his deposit
for the purposes of s. 2D. We do not, however, see any
hardship in a case of this kind, for if it is a fact that
the deposit of the insurer is large and his liabilities are
small he can always take advantage of s. 9 of the Act
and submit to an investigation by the court and take
back his deposit after depositing the small sum required to meet his liabilities. We are, therefore, of opinion
that when s. 2D speaks of satisfaction or "provision
otherwise" for the liabilities of insurance business
which is closed it contemplates such satisfaction or
" provision otherwise" over and above the deposit
made under s. 7. It is not in dispute in this case
that there are some liabilities still pending; it is also
not in dispute that they are not satisfied and no
provision has been made otherwise for them irrespective of the security deposit. This also appears to have
been the position when the order was made in July,
1957. In the circumstances the order is good and
cannot be called in question by the Company.
The appeal therefore fails and is hereby dismissed
with costs.
.Appeal dismissed.