# Lallr.itttltli Chi11no 1't11),:tzla l,'trlai v. IM.kiruldl L11k.thmmno Shah J

- **Citation:** [1964] 2 S.C.R. 182
- **Court:** Supreme Court of India
- **Decided:** 1964
- **Bench:** P. B. Ga.Jendragadkar, M. HwAYA'ITLLAll, J. c. SHAii
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/lallr-itttltli-chi11no-1-t11-tzla-l-trlai-v-im-kiruldl-l11k-thmmno-shah-j-2835
- **Pages:** 9

## Headnote

Liff'.
ln,lfurance-Co1i..~tructiutt
uf
1':flalutc--C'u11ipu~itr.
inJurer-"Cvnlrolltd businP.1A"-Mcaniny and SCUjic -;f-If include.~ capilnl reckmptian ln~1°ntlfS 1Lntl annility cR.,ia£n husintssLife In.•urance Corporation Act, 1956 (31 of J'J.)G) ss. ~. 7.
~fhc appellant company was iil.Ginitt1:J 1;:
••
co1npositc
insurer because it r.arricd on general in5· .. r~nc<e. bu1iness in
addition to the busineS> which fell within the definitio~ or controlled business. The company also carried 011 both capital
redemption businCS! and annuity ccr1ain
busin~ss which it
compendiously called capital obligation businc.•s.
By the operation of s. 7 (I) of the Life fnsnrance Corporation Act, 1956, all
the a~cts and liabilities
appertainirr~ to
the
"-.~ontrollcd
business" of all insnrers were transferrcrl. to 1 and ''~tcd in the
Life lnsura1lcc Corporation front
the 'appointed day'.
In
pursuance of this provision the I.ife Insurance Corporation took
over the life insurance Uusincss
1 ! the appellant company.
Dispute arose between the parties as to \VJ.at pOlrt or 1hc business
of the appellant cornpany vests in the Corpc.ration and what
are the assets of the business. The appellant comp•ny r.ontended
•
-
-
2 s.C.R.
SUPREME COURT REPORTS
is3
that on a proper interpretation of the relevant provisions of
the Life Insurance Corporation Act, 1956,
particularly the
explanation to the definition of "controlled businc.)'i" the capital
obligation business of the cornpany
vvbich included capital
redemption business and annuity certain business, did not vest
in the Corporation. The Corporation on the other hand claimed
that this business also vested in the Corporation. This dispute
was referred to the Life Insurance Corporation ~fribunal, Nagpur,
and the Tribunal decided
in favour
of the Corporation
and the company appealed to this Court with special leave.
It was contended in the appeal that the force of the word
"only" in the Explanation to s. 2 (3) of the Act which defines
"controlled business" is that where an insurer carries on life
business and capital redemption business but no other kind of
business and or annuity certain business but no other kind of
business then the controlled busineos can be said to include in
addition to Life business the capital redemption business or
annuity certain 'business or both, but \\'here an insurer carries
on Life business and general business, life, fire and marine
insurance etc., the capital redemption business or the annuity
certain business or both cannot be in I uded in the controlled
business.
It was further contended
that the expression
"business appertaining to his life
insurance business" in
sub-els. (i) and (ii) of s. 2 (3) should also be given the same
meaning.
Held, that on an interpretation of s. 2 (3) and the
Explanation thereto the capital redemption business and tke
annuity certain business must be included in the expression
"controlled business" even in the case of a composite insurer
like the appellant company,
CIVIL APPELL.i'.l'E JURISDICTION : Civil Appeal
No. 134 of 1961.
Appeal by special leave from the jud~ment aad
order dated December 30, 1959 and May 17, 1960
of the Life Insurance Tribunal, Nagpur in Case
No. 33/Xll of 1959.
G. S. Pathak, Datta and B. P. Maheshwari,
for the appellant.
H. N. Sanyal, Additional Solicitor-General of
India, ill.. C. Set,alvad, and K. L. Hathi, for the
respondent.
1963
Nationtl brsuronce
Cn., Lti ..
••
Life Insurance Cor·
ft6T4l'iotr. tJj /Mia
1913
Ncti•tl /mur~1
C':• Lti.
v.
Life lt»urui<t c.,.
J•rtiti•" •! ltciio
.......
184 SUPREME COURT REPORTS [1964) VOL.
I U63. March 4. The Judgment of the Court was
delivered by
·
HIDAY AT ULLAH J .-This appeal arises
out
of two orders of the Life
Insurance Corporation
Tribunal, Nagpur. dated December 30, HJM), and
May 17, 1960. The National Insurance Co. Ltd.
is the appellant and the Life Insurance Corporation
of India the respondent.
The Life
Insurance Corporation Act, lfl51i,
(31 of 19.~6) was passed to provide for the

## Text

1963
Lallr.itttltli Chi11no
1't11),:tzla l,'trlai
v.
IM.kiruldl
L11k.thmmno
Shah J,
1963
Ma"il 4
-
is2 SUPREME cotJRt RtPoit'fs [1964] voL.
his interest in the property devised iu his favour
under the will or V cnkata Konda Reddy so as to
blend it with the joint family property. In the
absence of any such evidence, the High Court was,
in our judgment, right in holding that Lakshmama
was entitled to a fourth share in the property devised
under the will or Vcnkata Konda Reddy.
The appeal therefore
fails and is dismissed
with costs.
Appwl tli.~111·iBscd.
:'l:AfIONAL INSURANCE CO. LTD.
LIFE INSURANCE CORPORATION OF INDIA
(P. B. GA.JENDRAGADKAR, M. HwAYA'ITLLAll and
J. c. SHAii JJ.)
Liff'.
ln,lfurance-Co1i..~tructiutt
uf
1':flalutc--C'u11ipu~itr.
inJurer-"Cvnlrolltd businP.1A"-Mcaniny and SCUjic -;f-If include.~ capilnl reckmptian ln~1°ntlfS 1Lntl annility cR.,ia£n husintssLife In.•urance Corporation Act, 1956 (31 of J'J.)G) ss. ~. 7.
~fhc appellant company was iil.Ginitt1:J 1;:
••
co1npositc
insurer because it r.arricd on general in5· .. r~nc<e. bu1iness in
addition to the busineS> which fell within the definitio~ or controlled business. The company also carried 011 both capital
redemption businCS! and annuity ccr1ain
busin~ss which it
compendiously called capital obligation businc.•s.
By the operation of s. 7 (I) of the Life fnsnrance Corporation Act, 1956, all
the a~cts and liabilities
appertainirr~ to
the
"-.~ontrollcd
business" of all insnrers were transferrcrl. to 1 and ''~tcd in the
Life lnsura1lcc Corporation front
the 'appointed day'.
In
pursuance of this provision the I.ife Insurance Corporation took
over the life insurance Uusincss
1 ! the appellant company.
Dispute arose between the parties as to \VJ.at pOlrt or 1hc business
of the appellant cornpany vests in the Corpc.ration and what
are the assets of the business. The appellant comp•ny r.ontended
•
-
-
2 s.C.R.
SUPREME COURT REPORTS
is3
that on a proper interpretation of the relevant provisions of
the Life Insurance Corporation Act, 1956,
particularly the
explanation to the definition of "controlled businc.)'i" the capital
obligation business of the cornpany
vvbich included capital
redemption business and annuity certain business, did not vest
in the Corporation. The Corporation on the other hand claimed
that this business also vested in the Corporation. This dispute
was referred to the Life Insurance Corporation ~fribunal, Nagpur,
and the Tribunal decided
in favour
of the Corporation
and the company appealed to this Court with special leave.
It was contended in the appeal that the force of the word
"only" in the Explanation to s. 2 (3) of the Act which defines
"controlled business" is that where an insurer carries on life
business and capital redemption business but no other kind of
business and or annuity certain business but no other kind of
business then the controlled busineos can be said to include in
addition to Life business the capital redemption business or
annuity certain 'business or both, but \\'here an insurer carries
on Life business and general business, life, fire and marine
insurance etc., the capital redemption business or the annuity
certain business or both cannot be in I uded in the controlled
business.
It was further contended
that the expression
"business appertaining to his life
insurance business" in
sub-els. (i) and (ii) of s. 2 (3) should also be given the same
meaning.
Held, that on an interpretation of s. 2 (3) and the
Explanation thereto the capital redemption business and tke
annuity certain business must be included in the expression
"controlled business" even in the case of a composite insurer
like the appellant company,
CIVIL APPELL.i'.l'E JURISDICTION : Civil Appeal
No. 134 of 1961.
Appeal by special leave from the jud~ment aad
order dated December 30, 1959 and May 17, 1960
of the Life Insurance Tribunal, Nagpur in Case
No. 33/Xll of 1959.
G. S. Pathak, Datta and B. P. Maheshwari,
for the appellant.
H. N. Sanyal, Additional Solicitor-General of
India, ill.. C. Set,alvad, and K. L. Hathi, for the
respondent.
1963
Nationtl brsuronce
Cn., Lti ..
••
Life Insurance Cor·
ft6T4l'iotr. tJj /Mia
1913
Ncti•tl /mur~1
C':• Lti.
v.
Life lt»urui<t c.,.
J•rtiti•" •! ltciio
.......
184 SUPREME COURT REPORTS [1964) VOL.
I U63. March 4. The Judgment of the Court was
delivered by
·
HIDAY AT ULLAH J .-This appeal arises
out
of two orders of the Life
Insurance Corporation
Tribunal, Nagpur. dated December 30, HJM), and
May 17, 1960. The National Insurance Co. Ltd.
is the appellant and the Life Insurance Corporation
of India the respondent.
The Life
Insurance Corporation Act, lfl51i,
(31 of 19.~6) was passed to provide for the nation·
alisation of life insurance business in India by trans·
ferring all such business to a Corporation to
be
established for the purpose and to orovide for regulation and control of the business of that Corporation
and for matters connected therewith or incidental
thereto.
The Life
Insurance Corporation is that
Corporation. It took over th~ life insurance business
of the National Insurance Co. I.tel., among other
companies, and the two broad questions on which the
present dispute has arisen arc : what part of the busi·
ness of the appellant Company vests in the Corpora·
tion and what are the assccs of that business ?
The Life Insurance Corporation Act providec1.
that the Corporation would be established with effect
from such date as the Central Government
bv a
notification in the Official Gazette might app~int.
September 1,
I !JiiG, was notified as that dare.
The
Act defined the expression "appointed day" as the
date on which the Corporation was to be established
and
September
I,
I (};)(i,
also
became
the
"appointed date"
for the purposes of the
Act.
Section 7 (I) of the Act then enjoined that on the
appointed
day there shall be transferred to and
vested in the Corporation all che assets and liabilitirs
appertaininr, to the "controlled business'' of all in·
surers.
Prior to the Act an Ordinance was passed bv
the Preside!~! (Ordinance :-.lo. I of Hl5!i) and a Custo'-
dian appointed thereunder had already taken over
-
-
2S.C.R.
SUPREME COURT REPORTS
185
management
of
such business of the
insurers
as was to vest later in the Corporation as the "Controlled business". Under sub-s. (2) of S. 7 the assets of the controlled business included all rights and
powers and all property, whether movable or im ·
movable, including in particular cash balances, reserve funds, investments, deposits and all interests
and rights in and arising out of such properties as
may be in the possession of the insurer and all books
of accounts and documents relating to the controlled
business o! the imurer.
Similarly, liabilities were
deemed to include all debts, liabilities and obligations of whatever kind then existing and appertaining to the controlled business
of the insurer.
An Explanation to S. 7 reads :
"Explanation.--The
expression
"assets
appertaining to the controlled business of an
insurer"-
(a) in relation to a composite insnrer,
includes that part of the paid-up capital
of the insurer or
assets
representing
such part which has or have been allocated ta. the controlled business of the insurer
in accordance with the rules made in this
behalf:
x
x
x
x"
The express10n "Composite insurer" was defined to
mean:
"An insurer carrying on in addition to controlled business any other kind of insurance
business."
"Controlled business", in so far as relevant to our
purpose, was defined as follows :-
'"' (")
~ ,,
"controlled business" means-
(i)
in the case of any insurer specified
in sub-clause (a) (ii) or
1963
National lnsur4nc1
Co., Ltd.
v.
Life Insurance Co1·
poration of India
lfidayatuYah /,
1953
}.'oJiD,,ol buuran .. ·-:
Co .• Ltd.
v.
I.if, /11JtJra11ce CM·
porafio1f ef lntiia
/Mo.Jalu/lah J.
l86 SUPREME COURT REPORTS [1964)VOL.
sub·clausc (b) or clause {9) of section 2 of the Insurance Act and
carrying on life insurance business-
(a) all his business, if he carries
on no other class of insurance
business;
(b) all the business appertaining
to his life insurance business,
if he carries on any other
class of insurance business
also;
x
x
x
x
x
Explanation.-An insurer is said to carry
on no class of insurance business other than
life insurance business, if, in addition to life
insurance business, he carries on only capital
redemption business or annuity certain business
or both; and the expression "business appertaining to his life insurance b11siness" in sub.
clauses (i) and (ii) shall be construed accor·
dingly;
x
x
x
x"
The appellant Company was admittedly a
composite insurer because it carried
on
general
insurance business in addition to the businesses which
fell within the definition of "controlled business".
Admittedly also the Company carried on both capital
redemption
business and annuity certain busine>S
which it called compendiously ~n its books, Capital
Obligation Business.
On the appointed
day the
"controlled business" of the Company vested by opera·
tion of law in the Corporation together with all assets
and liabilities appertaining to that business.
The
Company contends that on a proper interpretation
-
-
2 s.c.k. sbiikEME cot.JR.T REP6kts
is~
of the above· provisions particularly the explanation to the definition of "controlled business", the
Capital Obligation Business of the Company, which
included capital redemption business and annuity
certain business, did not vest in the Corporation.
The Corporation on the other hand claims that this
business also vested in the Corporation and hence
the dispute which was referred to the Tribunal.
The Tribunal decided in favour of the Corporation
and the Company has filed this appeal with the
special leave of this Court.
Mr. G. S. Pathak argues that the words "only"
and ''accordingly" in the said explanation must receive their proper meaning. According to him the word
"only" indicates that the capital redemption business
and the annuity certain business or both vest as part
of the controlled business if and only if no other
kind of insurance business is carried on by the
insurer.
According to Mr. Pathak the
force
of the word "only" is that where an
insurer
carries on life business and capital
redemption
business and
or annuity certain business but
no other kind of business then the controlled business
can be said to include in addition to life business the
capital redemption business or annuity certain business or both; but where an insurer carries on life
business and general business like fire or marine
insurance etc. the capital redemption business or the
annuity certain business, or both, (as the case may
be) cannot be included in the controlled business.
He further contends that the expression "business
appertaining to his life insurance business" in subclauses (i) and (ii) of the definition of "controlled
business" must also be given this meaning.
In our
opinion this argument cannot be accepted.
The definition of "controlled business" contemplates two kinds of insurers-(i) insurers who carry
on life business only, and (ii) insurers who carry on
1963
.\'"a.tirm.a.l Jns1J.r.11t1.c.e
Co., Ltd.
v.
Life lnsuranc.e C'?t,-
flHalion of I'lf.ditJ.
Hid•yatuil.h J.
1963
National [,uu,•nrt
Co., 1.td.
••
Lif1 /nsuranct·Cor·
p.ratkm of lnrlia
Jlidayatullah /,
188
SUPREME COURT REPORTS [1964] VOL.
composite business, that is to say certain other business which docs not ex facie come within controlled
business. Under sub-clause (a) of s. 2 (3) (i) controlled business covers the entire life business of an
insurer if he carries on no other class of insurance
business and undn sub-clause (b) all the business
appertaining to his life insurance business is included
if he is a composite insurer.
The controlled business
in either case is intended to embrace aII the business
concerning life insurance. , In the first case it means
the whole of the business of the insurer and in the
second case the part which comes within the life
business but no other.
The explanation, that is
annexed to the definition, then shows what comes
within life business and th~ explanation is designed
to serve the purposes of (a) and (b) to sub-clause (i)
of the definition.
The explanation first seeks to explain who can be said to carry on "no class of insurance business other than life insurance business" and
says that such would be an insurer who in addition
to life business carries on only capital redemption
business or annuity certain business or both. The
word "only" shows that with the life business go the
two named businesses but no other.
An insurer who
carries on life business and in addition only the one
or the other of the two named businesses or both is to
be regarded still as one carrying on no business other
than life insurance business.
The explanation next
says that the expression "business appertaining to his
life insurance business" which occurs in (b) should be
construed "accorrlingly". The word "accordingly"
clearly means "in a similar manner".
We are concerned here with a composite insurer
and sub-clause (b) says that the "controlled business"
in such a case would include all business which appertains to life insura11ce business but no other business
and the explanation says that the expression "business
appertaining to life insurance business" should
be construed as in the first part of the explanation.
-
-
-
2 S.C.R.
' .
,.
'
,.
"
SUPREME COURT REPORTS
189
This means
that included in the life insurance
b•1siness of a composite insurer are those businesses
which go with the life business in the first part of
the explanation, that is to say, capital redemption
business and annuity certain business or both. Both
the grammar and the sense of the matter lead to the
same result.
Indeed the argument of the learned
counsel to be valid must shift the word "only" from
the place it occupies to the end of the first part of
the explanation so as to control the entire sentence
and not only a part of it. This cannot be done.
In our opinion, the capital· redemption business and
the annuity certain business must be included in the
expression "controlled business" even in the case of
a composite insurer like the appellant Company.
The first part of the contention of the Company
therefore fails.
The dispute with regard to the assets of the
Capital Obligation Business (which term includes
both the capital redemption business and the annuity
certain business) arises in the following circums·
tances. The Company maintained a fund called the
"Capital Obligation Fund" which amounted to
Rs. 12,80 ,882-8·9 on August 31, 1956. On the
establishment of the Corporation the Company
made over to the Corporation all the policies relating to this Fund and the liability relating to these
policies as they stood on December 31, 1955, was
Rs. 12,88, 727.
The Company was, therefore, asked
to hand over either cash or investments of an equal
value.
On the eve of the transfer of assets,
the
Company made changes in its investments relative
to the life business and general business.
These in·
vestments included
approved investments under
s. 27 A of the Insurance Act and others. What the
Company did was to transfer certain unapproved
1963
NtJtional lnsur1111c.e
Go., Ltd.
v.
Lif~ Insurance Cor·
poration of lnJia
Hii•yatulloh J,
1963
N•tiimal buM{O'l't
Co., ltJ.
••
Lift btsut•rr.:e C,orpor,ziow. of India
fnd•)atullah J,
•
190
SUPREME COURT REPORTS (1964] VOL.
investments at their book value to its Capital Obligation Business and made them over to the Corporation. The Corporation declined to
receive
them. 1t asked the Company to give stocks and
shares of the appropriat<" market value or allow the
Corporation
to select stocks and shares from the
investments.
The Company contended that the
Corporation was not entitled to "pick and choose"
from the various investments.
The Company had
already transfrrred all the _gilt-cdEjed
investments
from the life and the Capital Obligation Fund to the
general business leaving investments (which
were
not approved) of the book value sufficient to cover
Rs. I 2,Si,0(~) odd which
represented the Capital
Obligation Business. These investments were rated at
half their book value by the Corporation.
The Tribunal reversed the entries i11 respect
of the investments relating to sundry fonds. It is
contrndcd that the Tribunal reversed only a few of
the book entries which had been made on the eve of
vesting but not all and did not restore the .•tatus quo
existing on December :H, I!J55. It is also cuntende.d
that the Corporation should not be allowed to pick
and choose from the investments.
The point about
"picking and choosing'' and that about reversing
the entries lose all force in
view of the fact that
before the Tribunal the Company conceded that the
Corporation may pick any investments of the·value
of Rs. 12,80,890 which represented the Capital Obligation Business.
In view of this concession
the
points now ~ough~ to be pressed ca~not ar~se .. T~ere
is no force
111 tlus appeal. It fails and 1s <l1sm1ssecl
with coses.