1965 (3) TMI 77 - SC - Indian Laws

Court affirms Insurance Tribunal decision on 'life insurance fund' definition. Appeal dismissed, compensation awarded.

LIC of India Versus Crown Life Insurance Co

The court upheld the Insurance Tribunal's decision, affirming that the term 'life insurance fund' in clause (d) of paragraph 4 of Part B of the First ... - Issues Involved:1. Interpretation of the term 'life insurance fund' in paragraph 4 of Part B of the First Schedule to the Life Insurance Corporation Act, 1956.2. Determination of compensation payable to the respondent by the appellant under the Life Insurance Corporation Act, 1956.Issue-wise Detailed Analysis:1. Interpretation of the term 'life insurance fund':The core issue in this appeal was the interpretation of the term 'life insurance fund' as used in paragraph 4 of Part B of the First Schedule to the Life Insurance Corporation Act, 1956. The respondent argued that the term should have the same meaning as under the Insurance Act, 1938, where it is defined in Section 10(2) and includes assets kept distinct and separate from all other assets of the insurer. The appellant contended that the term meant the difference between the total assets and liabilities under clauses (a) and (c) of the said paragraph.The court examined Section 2(10) of the Life Insurance Corporation Act, which states that words and expressions not defined in the Act but defined in the Insurance Act shall have the meanings assigned to them in the Insurance Act unless the context otherwise requires. The court noted that the term 'life insurance fund' is not defined in the definition section of the Insurance Act but is given a specific meaning in Section 10(2) of the Insurance Act. This section mandates that all receipts from life insurance business form a separate fund, the life insurance fund, which must be kept distinct and separate from all other assets of the insurer.The court also reviewed various provisions and forms under the Insurance Act, including Form D of the Third Schedule, which outlines the revenue account for life insurance business, and Form I of the Fourth Schedule, which is used to determine the surplus or deficit in the life insurance fund. The court concluded that the term 'life insurance fund' under the Insurance Act has a definite meaning and does not include all assets of an insurance company.The court rejected the appellant's argument that the term 'life insurance fund' has different meanings in different contexts within the Insurance Act. It held that the term consistently refers to the fund defined in Section 10(2) of the Insurance Act.2. Determination of compensation payable to the respondent:The respondent claimed compensation of Rs. 27,86,658, while the appellant offered Rs. 1,11,466, based on their interpretation of the 'life insurance fund.' The Insurance Tribunal accepted the respondent's interpretation and awarded the claimed compensation.The court analyzed the rationale behind clause (d) of paragraph 4, which is related to Section 49(1) of the Insurance Act. This section requires that a significant portion of the surplus in the life insurance fund be allocated for policyholders. The court concluded that clause (d) ensures that 96% of any surplus in the life insurance fund is allocated to the Life Insurance Corporation to meet liabilities arising under Section 49(1) of the Insurance Act.The court found that, in the present case, the respondent's life insurance fund always showed a deficit, and therefore, there was no surplus to be allocated under clause (d). Consequently, there was no liability on the respondent under clause (d) of paragraph 4.The court also noted that if the appellant's interpretation were accepted, it would lead to inconsistencies and unfair results, such as the potential loss of share capital for insurance companies showing a deficit in Form I. The court emphasized that the legislature could not have intended such outcomes.Conclusion:The court upheld the Insurance Tribunal's decision, affirming that the term 'life insurance fund' in clause (d) of paragraph 4 of Part B of the First Schedule to the Life Insurance Corporation Act has the same meaning as in Section 10(2) of the Insurance Act. The appeal was dismissed, and the respondent was awarded the claimed compensation of Rs. 27,86,658. The respondent was also granted liberty to withdraw the money deposited in the court towards compensation.