# Mmrs Mohdll/al J/argovind Das, Bidi Merthanls, Jabalpur (M. P.) v. Tht Stale of Madhya Pradesh and anothtr

- **Citation:** [1955] 2 S.C.R. 517
- **Court:** Supreme Court of India
- **Decided:** 1955
- **Bench:** S. R. Das, Acting C.J, Bhagwati, Venka1'Arama Ayyar, Jafer Imam, Chandrasekhara Ayyar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/mmrs-mohdll-al-j-argovind-das-bidi-merthanls-jabalpur-m-p-v-tht-stale-of-madhya-1507
- **Pages:** 7

## Headnote

Insurance-Insurer
doing life insurance business along with
general insurance business-Power of Central Government to appoint
Administrator-Such power, if confined exclusively to life insurance
business-Grounds not taken in petition under Art 32, if can be
urged at the hearing-Insurance Act (IV of 1938), s. 52-A-Constitution of India, Art 32.
1955
Mmrs Mohdll/al
J/argovind Das,
Bidi Merthanls,
Jabalpur (M. P.)
v.
Tht Stale of
Madhya Pradesh
and anothtr
Bhagawati J.
1955
Sep11m/Jel 22
1955
Tht Tropical
Insurance Co. Ltd,
and otlurs
v.
TM Union of India
and anotlur
518
SUPREME COL'RT REPORTS
[19551
The petitioners, two Insurance
Companies, carrying on business both in life insurance and general insurance, questioned the
validity of notifications issued against them under s. 52-A of the Insurance Act for appointment of Administrators to take ov~r management of their affairs on the ground, inter alia, that s. 52-A was exclusively restricted to life insurance business and the Government
had no power to take over n1anagement
of general insurance business.
Held, that the Insurance Act of 1938 no doubt makes a distinc·
tion between life insurance business and general insurance business,
but its main
concern is to protect
life insurance polic·y-holdcrs.
Although s. 52-A of t~e Act has no application to an insurer who
carries on husiness in general insurance alone, it undonhtedlv applies
to an insurer who
combines both and gives the Central Government the powe-r, on the report of the Controller, to appoint an
Administrator to take over the management of the entire business
of the insurer including general insurance business when such insurer
is found to act in a manner prejudicial to the interests of the life
policy-holders.
That grounds not specifically
taken in petitions
under Ait.
32 cannot be urged at the time of the hearing.
ORIGINAL
JuRisDICTioN : Petitions Nos. 186
&
195
of 1954.
Under Article 32 of the Constitution of India for
the enforcement of Fundamental Rights.
S. C. Isaacs,
(Mohan Behari Lal and P. K. Ghosh,
with him) for the petitioners in both petitions.
M. C. Setalvad, Attorney-General of India (Porus
A Mehta and P. G. Gokhale, with him) for the respondents.
1955.
September
22. The

## Text

2 S.C.R.
SUPREME COURT REPORTS
517
chand Nipani
and Shri Maniklal
Chunanlal
Baroda
were not liable to pay any tax
on these transactions
nor could
any such liability for tax be transferred to
the petitioners
by virtue
of such
declarations.
If,
therefore, there was no basis for any such liability,
the declarations
by themselves
cannot
create any
new liability and
the petitioners cannot be held liable
to tax even
by the operation of section 4(6) of the
Act,
the very basis of the liability sought to be imposed
therein having disappeared.
The result, therefore, is that the Respondents will be
restrained from enforcing
the Central Provinces and
Berar Sales Tax Act, 1947, and its provmons against
the petitioners and from imposing a tax in respect of
the transactions
in question and
in particular from
imposing a tax on the purchase price of goods purchased on the declarations under Rule 26 being goods
specified
in the registration certificate as intended for
use as raw
material in the manufacture of goods for
sale by actual
delivery
in Madhya Pradesh
for the
purpose of consumption in that State but utilised for
any other purpose under
the provisions of section
4(6) of the Act.
The Re~ondents will pay the petitioners' costs of this petition.
THE TROPICAL INSURANCE CO LTD.
& OTHERS
v.
THE UNION OF INDIA & ANOTHER
(and connected petition.)
[S. R. DAS, ACTING C.J., BHAGWATI, VENKA1'ARAMA AYYAR, JAFER IMAM and CHANDRASEKHARA AYYAR JJ.)
Insurance-Insurer
doing life insurance business along with
general insurance business-Power of Central Government to appoint
Administrator-Such power, if confined exclusively to life insurance
business-Grounds not taken in petition under Art 32, if can be
urged at the hearing-Insurance Act (IV of 1938), s. 52-A-Constitution of India, Art 32.
1955
Mmrs Mohdll/al
J/argovind Das,
Bidi Merthanls,
Jabalpur (M. P.)
v.
Tht Stale of
Madhya Pradesh
and anothtr
Bhagawati J.
1955
Sep11m/Jel 22
1955
Tht Tropical
Insurance Co. Ltd,
and otlurs
v.
TM Union of India
and anotlur
518
SUPREME COL'RT REPORTS
[19551
The petitioners, two Insurance
Companies, carrying on business both in life insurance and general insurance, questioned the
validity of notifications issued against them under s. 52-A of the Insurance Act for appointment of Administrators to take ov~r management of their affairs on the ground, inter alia, that s. 52-A was exclusively restricted to life insurance business and the Government
had no power to take over n1anagement
of general insurance business.
Held, that the Insurance Act of 1938 no doubt makes a distinc·
tion between life insurance business and general insurance business,
but its main
concern is to protect
life insurance polic·y-holdcrs.
Although s. 52-A of t~e Act has no application to an insurer who
carries on husiness in general insurance alone, it undonhtedlv applies
to an insurer who
combines both and gives the Central Government the powe-r, on the report of the Controller, to appoint an
Administrator to take over the management of the entire business
of the insurer including general insurance business when such insurer
is found to act in a manner prejudicial to the interests of the life
policy-holders.
That grounds not specifically
taken in petitions
under Ait.
32 cannot be urged at the time of the hearing.
ORIGINAL
JuRisDICTioN : Petitions Nos. 186
&
195
of 1954.
Under Article 32 of the Constitution of India for
the enforcement of Fundamental Rights.
S. C. Isaacs,
(Mohan Behari Lal and P. K. Ghosh,
with him) for the petitioners in both petitions.
M. C. Setalvad, Attorney-General of India (Porus
A Mehta and P. G. Gokhale, with him) for the respondents.
1955.
September
22. The
Judgment
of
the
Court was delivered by
IMAM J.-These petitions under article 32 of the
Constitution of India question the validity of the notifications issued
under section 52-A of the Insurance
Act of 1938 (hereinafter referred to
as the Act) and
the appointment of an Administrator. In the case of
the Tropical Insurance
Company Ltd. an Administrator was
appointed
under notification dated the 14th
of July, 1951 and in the case
of the Jupiter
General
Insurance Company· Ltd. another Administrator
was
appointed
under
notification
dated the 10th of July,
2 S.C.R.
SUPREME COURT REPORTS
519
1951.
These two insurance companies do insurance
business of life
insurance and general insurance. Admittedly previous to the appointment of the Administrators
the Controller
issued notices
under section
52-A to the petitioners and the
Finance Ministry of
the Central Government sent letters to them pointing
out the allegations
in the report of
the Controller to
which they replied.
The learned Counsel for the petitioners has candidl y stated that he coultl not raise any constitutional
point after the fourth amendment to the Constitution
of India.
He assumed, therefore, that the provisions
of sections 52-A to 52-G of. the Act were constitutional
but he urged that the notifications under section 52-A
and the taking over of the management of the affairs
of the companies were invalid inasmuch as they were
in excess of the powers conferred by section 52-A
of
the Act and that
the notifications
appointing
the
Administrators do not fix
the period of management
as required
by law.
He further urged
that the provisions of the
section 52-B of the Act had not
been
complied
with and
in consequence the management
by the Administrator had been excessively prolonged
and thus had become unlawful.
There has, therefore,
been a violation of the "fundamental rights of the petitioners. Finally it was
urged that there was no authority either under the provisions of the Act or of any
other law by which
the Government
was empowered
to take over management of the affairs of the company with respect
to its general irtsurance
business.
The power of the Government under section 52-A was
restricted exclusively
to life insurance business.
As to the first two contentions, they were urged in
Petitions Nos. 94 of 1954 and 183 of 1954 but were
not allowed to be put forward by this Court as these
questions had not been specifically raised
in the petitions under article 32 of the
Constitution and
they
were accordingly dismissed.
The position
is simila~
in this respect so far as the present applications are
concerned and consequently it must be held that the
. petitioners
cannot
be allowed now to urge grounds
which they had not taken in their petitions.
66
1955
T"4 Tropical
Iruurance Co. Ltd.
and others
v.
The Union of Indio
and another
Imam].
1955
The Tropical
Insurana Co. IJd.
and others
v.
T/11 Union oj
4 India
and another
Imam].
520
SUPREME COURT REPORTS
L1955J
There remains, however, to consider the last contention urged on behalf of the petitioners.
It was
pointed out by Mr. Isaacs that the petitioners
are insurance companies doing both life insurance business
and general
insurance
business.
He contends
that
section 52-A of the Act, on a true interpretation of its
provisions,
applies only to the life insurance business
carried on by an insurer and not to the general insurance business done
by him. The Administrator appointed under section 52-A Gf the Act could therefore
take over management
only of the life insurance business done
by the insurer. The notifications authorising him to take over the management of the insurance
business of the insurer including his general insurance
business were thus beyond the powers conferred on
Government under section 52-A of
the Act and such
taking over of the management of the general insurance
business of the petitioners by the Administrator
was, therefore, without lawful authority.
In view of the submission made by the learned Counsel, it is necessary to set out the relevant provisions
of the section 52-A. Sub-section
(1) of that section
states:-
"If
at
any time the Controller has reason to believe that an insurer carrying· on life insurance business is acting
in a manner likely to be prejudicial to
the interests of
holders of life insurance policies, he
may, after giving such opportunity to the insurer to
be heard as he thinks
fit, make a report
thereon to
the Central Government".
Sub-section (2) states:-
"The Central Government, if it is of opinion after
considering the report
that it is necessary or proper
to do so, may appoint
an Administrator to manage
the affairs of the insurer under the direction and control of the Controller''.
Sub-section ( 4) states :-
"The management
of
the business of the insurer
shall as on and after the date of appointment of the
Administrator
vest
in such Administrator, but except
with
the leave
of the Controller the Administrator
shall not issue any further policies".
2S.C.R.
SUPREME COURT REPORTS
521
Section 52-B of the Act is concerned with the powers
and duties
of the Administrator.
Under this section,
the Administrator shall conduct the management of
the business of
the insurer with the greatest economy
compatible
with efficiency and shall, as soon as may
be possible, file with the Controller a report stating
what specified courses unde:r the section
should be
taken which would
be most advantageous to the
general interest of the holders of life policies.
One of
the courses specified is the winding up of the business
of the insurer.
Section 52-D of the Act is concerned
with termination of the appointment of the Administrator. Section 53 of the Act is concerned with the
winding up by the Court and it enable the Controller
to apply to the Court for winding
up of an insurance,
company on certain grounds, one of them being that
the continuance of the company would be prejudicial
to the interests of the policy-holders·
Mr. Isaacs urged that the Act made a clear distinction between life insurance business and general insurance business of an insurer.
He referred to various
sections of the Act with reference to Registration,
Separation of Accounts and Funds and Balance-Sheets.
It
was also pointed out by him that the Act defines
"general insurance business" and "life insurance business"
and these two kinds of businesses are quite distinct.
There could be little doubt that
the Act does
regard
"life insurance business" as something distinct
from "general
insurance business".
It seems to us.
however, that while keeping this distinction in mind,
we have to give to the words used
in section 52-A(l)
their ordinary and natural meaning.
"Insurer" has
been defined in section 2 of
the Act.
The definition
speaks of an insurer cc.rrying
on an insurance business.
This business may be either a life insurance
business
or a
general insurance
business or
both.
Under section 7 of the Act deposits have to be made
by every insurer other than an insurer specified in
sub-clause ( c) of clause (9) of section 2.
The section
specifies μie amount of deposit to be made where the
business done is life insurance only.
Similarly it
specifies the deposit to be made in the case of business.
15-93 S.C. India/59
1955
TlllTropieal
11u.,_ Co. Ltd.
11114 al/urs
v.
Thi Ullin of India
""" •. ,,..,
1-J.
1955
Tht Tropical
Iruurance Co. [Jr!.
and others
v.
The Union of Ilfdia
and ,,,.,,,,,,.
1-1.
522
SUPREME COURT REPORTS
[1955]
done which comes
within the description of general
insurance business only.
It also contemplates a
combination of life insurance business and general insurance
business and specifies
the deposit to be made in
such event. It is clear
that section 52-A ( 1) does not
apply to an insurer doing
only general insurance business.
The question . for decision is does it apply to
him when he also does along with such business life
insurance
business?
Section 52-A(l) speaks
of "an
insurer carrying on life insurance business".
It
does
not speak of "only
life insurance business".
It
is
permissible for an insurer to combine in his insurance
business both life and general insurance
business. If
he acts in a manner which is likely to be prejudicial
to the interests of the holders of the life insurance
policies with him, he makes himself amenable to the
provisions of the section 52-A of the Act and the Controller is authorised to make a report
to the Central
Government.
The Central Government,
after
considering
the report, may
appoint an Administrator to
manage '.'the affairs" of
th~ insurer and the management of
"the business" of the insurer shall vest in the
Administrator.
The words
"the affairs"
and "the
business"
of the insurer are wide enough to empower
the Central Government to take over the management of the entire
business
of the insurer including
his general insurance
business.
To
hold otherwise
would be to give an unnatural meaning to the words
used in section 52-A of the Act.
In the present case
the insurers are public
limited
companies and it is
difficult to conceive that
the Act intended to vest in
the Administrator
the management
of only the life
insurance business while the insurers would be free to
manage the general insurance business,
because under
section 52-B the Administrator
may suggest to
the
Controller
for the winding up of the company after
managing
its insurance
busines.s economically
and
efficiently.
Under section 53 a Court may order
a
winding up of an insurance company if on an application by the Controller, it is satisfied that the continuance of the company is prejudicial to the interests
of the policy-holders.
The winding up of the com-.
2S.C.R.
SUPREME COURT REPORTS
523
pany would be concerned
with its entire insurance
business including life and general
insurance business,
because
there could be no partial winding
up of a
company.
It is not difficult to imagine that the affairs
of the company with reference to its general insurance
business may be in such a hopeless state that winding
up may be the only course to be taken to protect the
interests
of the life . policy-holders.
When the provisions of the Act are closely examined, it will be noticed
that its main policy has
been to safeguard the interests
of life
policy-holders, who
are deeply affected
by the manner in which the insurance business of an
insurer is carried
on. We have no difficulty in interpreting section 52-A(l) to mean that where an insurer
is carrying on
insurance
business
of various kinds
which
includes
life insurance
business,
he becomes
amenable to
the provisions
of section 52-A if he is
acting in a manner prejudicial to the interests of the
holders of life policies and he would have to suffer the
consequences following the report made by the Controller and the appointment of an Administrator by
the Government.
The provisions in the Act making
a distinction
between
life insurance
business
and
general insurance
business,
the keeping of separate
accounts
:md balance-sheets have been enacted for the
safeguard of the holders of life insurance policies and
they provide an over-all picture of the business done
by the insurer showing the exact state of affairs concerning !he life insurance business of the insurer. These
provisions cannot and do not aflect the provisions of
of section 52-A of the Act.
These
pet1t1ons
are
accordingly dismissed
with
costs to be paid by Petitioners 2, 3 and 4 in Petition
No. 186 of 1954 and Petitioners 2 and 3 in Petition
No. 195 of 1954.
1955
Tiu Tropical
Insurance Co. !Jd.
and olhtrs
v.
Tiu Union of India
and anothtr
/11111m].