Compulsory employee benefit schemes linked to death or retirement can qualify as life insurance business and be suspended if unlawful.

A compulsory municipal employees' family benefit scheme requiring monthly contributions and providing payments on retirement or death was treated as life insurance business because the benefits depended on contingencies related to human life. The exclusive privilege of the Life Insurance Corporation therefore applied, and the statutory exemption was confined to schemes already in existence or framed with Central Government approval for Government employees, not a municipal corporation scheme. The State Government could also suspend the scheme under the municipal corporation statute because it was not in conformity with law; illegality alone was sufficient, and the absence of any burden on municipal funds did not limit that power.

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Issues: (i) Whether the municipal employees' family benefit scheme amounted to life insurance business so as to attract the exclusive privilege of the Life Insurance Corporation and fall outside the statutory exemption; (ii) Whether the State Government had authority to suspend the scheme under the municipal corporation statute on the ground that it was contrary to law.

Issue (i): Whether the municipal employees' family benefit scheme amounted to life insurance business so as to attract the exclusive privilege of the Life Insurance Corporation and fall outside the statutory exemption.

Analysis: The scheme required compulsory monthly contributions and assured payment of money on retirement or death, with benefits payable to the employee or dependants on contingencies dependent on human life. On that characterisation, it answered the statutory definition of life insurance business. The exclusive privilege granted to the Life Insurance Corporation extended to such business, and the exemption for schemes under the relevant saving clause applied only to schemes in existence or framed with Central Government approval for Government employees, not to a municipal corporation scheme.

Conclusion: The scheme was held to be life insurance business and was not protected by the exemption; the conclusion was against the municipal corporation and in favour of the appellant.

Issue (ii): Whether the State Government had authority to suspend the scheme under the municipal corporation statute on the ground that it was contrary to law.

Analysis: The power under the municipal corporation provision enabled the Government to suspend an act or resolution not in conformity with law. Since the scheme was found to be inconsistent with the Life Insurance Corporation Act, the statutory condition for intervention was satisfied. The absence of any burden on municipal funds did not defeat the power because the ground of illegality itself was sufficient.

Conclusion: The State Government had jurisdiction to suspend the scheme; the conclusion was against the respondents and in favour of the appellant.

Final Conclusion: The impugned judgment was set aside and the challenge to the suspension order failed, with the result that the appeal succeeded.

Ratio Decidendi: A compulsory contribution scheme that assures payment on death or retirement on human-life contingencies can constitute life insurance business, and where such a scheme is unlawful, the State may invoke a statutory power to suspend municipal action that is not in conformity with law.

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