TaxTMI 
TaxTMI 
1965 (4) TMI 105
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....ance Company, and another director, to pay to the Corporation jointly and severally the sum of Rs. 82,000/- together with interest there at 6 % per annum from September 1, 1956, till full payment. The decree ordered the company to pay a further sum. but we are not concerned with that part of the decree as the company has not appealed against it. The facts of the case briefly are these. The company was a composite insurer. i.e., an insurer who carried on. in addition to life insurance business. other classes of-insurance business. The LIC Act came into force on july 1. 1956 and the Corporation was established on September 1. 1956 which was the "appointed day" according to s. 2(1) of that Act. On that day. in view of s. 7. all the assets and liabilities appertaining to the life insurance business (called the controlled business, vide s. 2(3)) of the Company stood transferred to and vested in the Corporation. It was found that certain amounts which had been transferred from the Life Insurance Fund in the books of the company to the General Department had not been transferred in accordance with the provisions of the Insurance Act 1938 (Act 4 of 1938) which governed the company and sho....
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.... prior to December 31, 1948, this valuation report would have shown the net liability exceeding the amount in the life fund by about a lakh of rupees. It is clear that the amount was so transferred in order to avoid the consequences of the net liabilities exceeding the Life Fund. The Profit & Loss Appropriation Account for the year 1949 shows that Rs. 60,000/- out of this amount of Rs. 1,10,000/- was written off as the company had made profits. Rs. 32,000/- were again similarly transferred to the Life Fund from the General Department with retrospective effect from December 31, 1952 in order to strengthen the position of the Life Fund. The second actuarial valuation report for the period 1949-52, dated September 9, 1953, showed that the policy liability amounted to Rs. 15,3,3,068, that the Life Fund stood at Rs. 15,35,890/- and that thus the Life Fund exceeded the net liability by Rs. 2,822/-. There was thus a surplus as Rs. 32,000/- had been transferred to strengthen the Life Fund, with retrospective effect in view of the resolution dated August 20, 1953 which reads. "Resolved that a loan of Rs. 32,000/- (t....
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....an for the purpose of making routine payments etc., specified in that clause. Those purposes do not include the repayment of an advance made from the General Department to the Life Fund or to the Life Department Revenue Account. Clause (c) of sub-s. (3) further prohibited the insurer, without the previous approval of the authorised person, to transfer or otherwise dispose of any such assets appertaining to the controlled business or create any charge or hypothecation, lien or other encumbrance thereon. It would therefore appear that possibly the Board of Directors were not right in confirming the resolution of January 6, 1959 after the Ordinance had come into force. However, that is not the point raised in these proceedings. We have already referred to the coming into force of the LIC Act an July 1, 1956 and of the transfer and vesting in the Corporation of all the assets and the liabilities pertaining to the life insurance business in view of s. 7 of that Act. Section 15 provides that the Corporation may apply for relief to the Tribunal in respect of a transaction which is made by the insurer whose controlled business had been transferred to and vested in the Corporation under th....
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....1962 as respondents Nos. 1 and 4 and the appellant in C.A. 677 of 1962 as respondent No. 2. Ghanshyamdas and Damji Valji were also parties to the resolution dated February 7. 1956. Other directors who were parties to the resolution of January 6 were also impleaded. The aforesaid three directors, the appellants before us, contested the claim of the Corporation and justified the transfer of Rs. 82,000/- to the General Department from the Life Fund on the ground that the amount had been lent by the General Department to the Life Department and had been paid back to the General Department by transfer from the Life Fund when the LifE Fund showed surplus, according to the report of the Actuary dated July 25, 1955. It was also contended before the Tribunal that the petition could not be proceeded with without the leave of the Bombay High Court in view of s. 446 of the Indian Companies Act and that the petition was also not maintainable by reason of s. 44 of the LIC Act. Several other grounds were also taken before the Tribunal. We are not now concerned with them. The Tribunal held that the amounts of Rs. 1,10,000/- and Rs. 30,000/- were not advanced to the Life Department as loans and t....
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.... pending at the date of the winding-up order, shall be proceeded with against the company except by leave of the Court and subject to such terms as the Court may impose. Sub-s. (2) provides. inter alia, that the Court which is winding-up the company shall, notwithstanding anything contained in any law for the time being in force, have jurisdiction to entertain or dispose of any suit or proceeding and any claim made by or against the company. Sub-s. (3) provides that any suit or proceeding by or against the company which is pending in any Court other than that in which the winding-up is proceeding may, not- withstanding anything contained in any other law for the time being in force, be transferred to and disposed of by that Court. The question is whether these provisions would affect the proceedings of the Tribunal. In this connection, reference may be made to s. 41 of the LIC Act which provides that no civil Court shall have jurisdiction to' entertain or adjudicate upon any matter which a Tribunal is empowered to decide or determine under that Act. It is not disputed that the Tribunal had jurisdiction to entertain the application of the Corporation and adjudicate on the matters r....
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.... and means an insurer as defined in the Insurance Act who carries on life insurance business in India and includes the Government and a provident society as defined in s. 65 of the Insurance Act. On November 9, 1959, when the company was ordered to be wound up it was not an 'insurer' within the meaning of the definition as the company did not carry on life insurance business in India on that date. Its life insurance business had been taken over by the Corporation on the appointed day and it ceased to carry on that business thereafter. It follows therefore that the company was not an insurer on November 9. 1959 and cannot take advantage of the provisions of cl. (a) of s. 44 of the LIC Act. We are therefore of opinion that the Tribunal had jurisdiction to continue the proceedings after November 9, 1959 when the company was ordered to be wound-up and that the provisions of s. 446, Companies Act, or s. 44(a), LIC Act, do not in any way affect its jurisdiction to continue the proceedings. We now come to the third point raised for the appellants. We agree with the Tribunal that the amounts of Rs. 1.10,000/-and Rs. 32,000/- were not lent to the Life Department as such by the General Dep....
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....000/- and Rs. 32,000/- would thus amount to deposits made by the company in respect of life insurance business in order to augment the life fund. This can be done either to bring the funds to an amount exceeding the expected net liabilities on the policies or merely to augment that fund. It makes no difference to the company how it distributed its funds so long as its statutory liabilities were satisfied. The very conduct of the company with respect to these amounts belies the alleged nature of the transfers of these amounts to the Life Department. The sum of Rs. 60,000/-out of Rs. 1.10,000/- was written off in 1949. A loan of such an amount is not usually written off. No special reason is assigned for writing off the loan. The resolution about the transfer of Rs. 32,000,'itself speaks of the possibility of the amount being written off. A lender does not think in this way at the time he advances a loan. It is clear that the amount was really being transferred to the Life Fund through the Life Department Revenue Account as otherwise the Life Fund on the actuarial valuation would have stood at a figure much below the amount of the net liabilities on the policies as calculated in For....
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....er actual or contingent have been furnished to the actuary for the purpose of investigation. Section 15 requires the submission of the aforesaid abstract to the Controller within the specified period. Part II of the Fourth Schedule requires that every extract prepared in accordance with the requirements of that part of the Schedule will have the statement of a consolidated revenue account in Form G, a summary and valuation in Form H. a valuation balance sheet in Form I and a statement in Form DDD as set forth in Part H of/he Third Schedule annexed to it. The valuation balance sheet in Form I requires the noting of a surplus, if any, of the balance of the life insurance fund as compared to the net liability in the business as shown in the summary and valuation of policies. It is the surplus no, led in this Form 1 which is really the valuation surplus. It was out of such surplus that the company resolved that the advances of Rs. 1,10,000/and Rs. 32,000/- could be paid to the General Department by the Life Department. No such actuarial valuation was made by the actuary prior to the transfer of Rs. 82,000/- to the General Fund by the resolution dated January 6, 1956. Reliance in this ....