Contingent insurance liability survives vesting where statutory transfer provisions preserve contractual repayment obligations

Deposits repayable only out of actuarial surplus remained enforceable after vesting because the contractual repayment obligation was a subsisting contingent liability. Under section 9(1) of the Life Insurance Corporation Act, 1956, that liability transferred to the Corporation as if it had been an original party to the contract. Section 28, which governs use of surplus arising from actuarial valuation, could not be read to defeat the express transfer of liabilities under section 9(1). The provisions were to be construed harmoniously, so section 28 did not bar payment of liabilities preserved by section 9(1).

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Issues: Whether deposits repayable only out of actuarial surplus under the insurance contract remained enforceable against the Life Insurance Corporation after vesting, and whether section 28 of the Life Insurance Corporation Act, 1956 barred payment of such liability.

Analysis: The contractual obligation to repay the deposits was not extinguished merely because, on the date of vesting, the insurer had no actuarial surplus. The obligation was a subsisting contingent liability which, under section 9(1) of the Life Insurance Corporation Act, 1956, stood transferred to and became enforceable against the Corporation as if it had been an original party to the contract. The Court further held that section 28, dealing with utilisation of surplus arising from actuarial valuation, could not be read as defeating the explicit mandate of section 9(1). The two provisions were required to be harmoniously construed, and section 28 did not create a bar to meeting liabilities preserved by section 9(1).

Conclusion: The liability to repay the deposits survived vesting and was enforceable against the Corporation, and section 28 did not prevent such payment.

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