Vested insurance debts remain subject to agrarian debt relief when nationalisation transfers liabilities without creating a new debt origin.

Debts originally owed to insurers and later vested in the Life Insurance Corporation were not exempt from scaling down under the Madras Agriculturists Relief Act. Section 4(e) excluded debts due to a corporation formed under a special Indian law, but the Life Insurance Corporation Act, 1956 merely vested existing insurer assets, liabilities and contracts in the Corporation and did not deem the debts to have been originally due to it. The debts therefore passed to the Corporation with their existing incidents, including liability to be scaled down under the Madras Act.

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Issues: Whether debts originally owed to insurers, and later vested in the Life Insurance Corporation under the Life Insurance Corporation Act, 1956, remained subject to scaling down under Section 4(e) of the Madras Agriculturists Relief Act, 1938.

Analysis: Section 4(e) of the Madras Agriculturists Relief Act excluded from its operation debts due to a corporation formed under a special Indian law. The Life Insurance Corporation was such a corporation, but the decisive question was whether the debts, though recoverable by it after nationalisation, had acquired immunity from the Act merely because of vesting. The relevant provisions of the Life Insurance Corporation Act, 1956 showed that all assets and liabilities of insurers relating to life insurance business vested in the Corporation on the appointed day, and that subsisting contracts, liabilities and pending proceedings continued against or in favour of the Corporation. The statutory scheme did not create a fiction that the debts had been originally due to the Corporation. Instead, the debts passed to the Corporation with the incidents and liabilities attached to them on the appointed day, including the liability to be scaled down under the Madras Act.

Conclusion: The debts were not exempt from the Madras Agriculturists Relief Act by reason of Section 4(e), and the Corporation could recover only subject to the existing liability to scaling down.

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