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PETITIONER: NEPTUNE ASSURANCE CO.  LTD. & ORS.

       Vs.

RESPONDENT: UNION OF INDIA & ANR.

DATE OF JUDGMENT10/11/1972

BENCH: RAY, A.N. BENCH: RAY, A.N. SIKRI, S.M. (CJ) PALEKAR, D.G. BEG, M. HAMEEDULLAH DWIVEDI, S.N.

CITATION:  1973 AIR  602            1973 SCR  (2) 940  1973 SCC  (1) 310

ACT: General Insurance (Emergency Provisions) Act 1971 s.  15(a)- ’Insurer’ whose business is voluntarily wound up or is wound up  under  order of Court exempted from  operation  of  Act- Voluntary winding up of business whether includes  cessation of   business-Insurer’   and  insurance   company,   whether distinct-Sections 2(e) and 15(a) of Act whether violative of Art. 14, Constitution of India.

HEADNOTE: The   first   petitioner  was  a  public   limited   company incorporated under the Indian Companies Act.  The second and third  petitioners  were shareholders and directors  of  the first  petitioner.   Up  to  the  end  of  March,  1971  the petitioner company was registered under the Indian Insurance Act,  1938.  The registration authorised it to carry on  the business   of   general  insurance  comprising   fire and miscellaneous insurance.  On September 17, 1970 its Board of Directors  resolved  that it would cease to  underwrite  any insurance  business  as  from  the  close  of  business   on September  30,  1970.   On that very date  it  informed  the Controller  of Insurance of the resolution and returned  its certificate  of  registration  for  the  year  1970  to  the Controller  of  insurance.  After-the close of  business  on September  30.  1970 it stopped doing any  kind  of  general insurance  business.  On October 3, 1970 the  Controller  of Insurance  returned the Registration certificate to it  with the remark that there was no provision in the Insurance  Act for return of certificate.  The Controller advised it not to ,apply  for  renewal of certificate for the year  1971.   On February  2,  1971  the Board of Directors  of  the  company passed a resolution canceling all policies with effect  from March  10/12,  1971 after giving due notice to  the  policy- holders.  Another resolution was passed terminating all  re- insurance  treaties,  both inward and outward,  with  effect from December 31. 1971.  The company refunded to the policy- holders  a  sum  of  Rs. 48.000  on  cancellation  of  their policies.   The  uncollected  refund  amount  came  to   Rs. 2013.98.  On February 16, 1971 the Controller  of  Insurance

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cancelled  the registration of the company with effect  from April  5, 1971 under section 3(4)(f) of the  Insurance  Act. The  company reduced its staff from the month  of  September 1970.  By the end of February 1971 the total staff consisted of  one  officer, one clerk, one typist and  one  peon.   In respect of some of the policies cancelled cases were pending in  court.   The  Union  of  India,  the  first  respondent, appointed  a Custodian over the undertaking of  the  company under  s. 4 of the General  Insurance(Emergency  Provisions) Ordinance  1971  on  May 13, 1971, The  said  Ordinance  was eventually   reenacted  as  General   Insurance   (Emergency Provisions)  Act.  1971.   The Union of  India  issued  also certain   directions  on  May  13,  1971  to  regulate   the management of the undertaking by the Custodian.  The company filed  petitions  under  article  32  of  the   Constitution claiming  that  the  Act of 1971 was not  applicable  to  it because   it  was  an  insurer  whose  business  was   being voluntarily  wound up in terms of section 15(a) of  the  Act and  therefore  it could not be taken over  by  the  Central Government  under s.. 3 of the Act.  It was  contended  that the words "whose business is being voluntarily wound up"  in section   15(a)   also  meant  "whose  business   is   being voluntarily brought to 941 a  close or final settlement".  The company also  challenged the  constitutionality  of part of section 2(e) as  also  of section 15(a) of the Act, under Art. 14 of the  Constitution of India. Held : per majority (Palekar, Beg and Dwivedi, JJ.) (i)  The  appellant company could not get the benefit of  s. 15(e)  and was subject to the provisions of s. 3 of the  Act which  provides  for the take over of  insurance  companies. [966 H] Section  2C of the Insurance Act has limited the  denotation of  the word ’insurer’ from the date of the commencement  of the Insurance (Amendment) Act 1950.  Section 2C(1)  provides that  "no  person  shall,, after  the  commencement  of  the Insurance (Amendment) Act 1950 begin, to carry on any  class of business in India and no insurer carrying on any class of insurance  business in India shall, after the expiry of  one year  from such commencement, continue to carry on any  such business  unless he is a public company incorporated  in  or out of India or a Society registered under any law  relating to  Co-operative Societies Act, 1972.  In the result at  the commencement of the Ordinance and the Act,’Insurer’ included a public company either incorporated under the Companies Act or  under a foreign Company law and a  Cooperative  Society. Although  according to the proviso to s. 2C(1)  the  Central Government  may  by a Gazette notification exempt  from  the operation of s. 2C(1) any person or insurer for the  purpose of carrying on general insurance business for not more  than three  years  at a time, no such notification was  shown  to have  been in fact issued.  Cooperative Societies are  under the  various  State laws relating to  Cooperative  Societies wound  up  by  an  order of  the  Registrar  of  Cooperative Societies.   Therefore the word insurer in s. 15(a)  of  the Act  includes  only  two classes of  persons  :  (a)  public limited company incorporated under the Companies Act; (b)  a public  company  incorporated under a foreign  company  law. [960 H; 961 BCRF] The twin expressions "being voluntarily wound up" and "being wound up by a court" have acquired a crystallised meaning in the  Company and ’Insurer’ included a public company  either incorporated under the Companies Act and the Insurance  Act. In  the Companies Act the expression " voluntary winding  up

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means a winding up by a special resolution of the company to that  effect. Section 54 of the Insurance Act  provides  its own  procedure for the winding up of an  insurance  company. According to it, an insurance company shall not be wound  up voluntarily   "except   for   the   purpose   of   effecting amalgamation  or reconstruction of a company on  the  ground that  by  reason  of its liability it  cannot  continue  its business".   Parliament  will be presumed to know  that  the expression,  " voluntary winding up" and "winding up by  the Court" have acquired a technical meaning in our Company  and Insurance jurisprudence [961 H; 962 A-D] Sections 433(c), 560, 583(4) (a) & 584 of the Companies  Act and    sections  2E, 3(5D), 53 of the Insurance Act  make  a clear  distinction  between the cessation of business  of  a company  and  its voluntary winding up or winding up  by  an order of the court.  Parliament will be presumed to be aware of the distinctions between the cessation of business by  an insurance  public  company and its voluntary winding  up  or winding  up  by  an order of the Court.   There  is  nothing unequivocal  in s. 15(a) of the Act to show that  Parliament intended  to  depart  from the technical  meaning  of  these expressions   and   to  bid  good-bye   to   the   aforesaid distinction. [963 D-E] The appellant company did not claim that it was being  wound up, under s. 54 or s. 58 of the Insurance Act.  It could not voluntarily be 942 wound  up  otherwise than in accordance with s.  54  of  the Insurance  Act.  It was accordingly difficult to  comprehend the argument that the cessation of business by the appellant company  means voluntary winding up of its  business.   This kind  of voluntary winding up of business is unknown to  the Insurance Act. [964 E] The winding up of a foreign company by an order of the Court in  India  really means the winding up of  its  business  in India.   The  word business’ is not therefore  redundant  in s.15 (a).  If Parliament really meant that the first limb of s.  15(e)  should  also apply to as insurer who  is  in  the process of closing its business it should have expressed the first  limb  in  some  such manner  as  any  insurer  "whose business  is  being  closed" or "is being  wound  up".   The construction  put forward by the appellant  company  assigns little significance to the word "voluntarily" and makes it a surplus age. [965 E-F] Regina  v.  Board of Trade, [1965] 1 Q.B. 603 and  Rajah  of Vizinagram v. Official Receiver, Vizianagaram, [1962]  Supp. 1 S.C.R. 344, referred to. Sections  15(b)  and  2(e)  of the  Act  both  refer  to  an insurance  company  which has ceased to do  business  for  a certain  period.  Section 15(a) should be construed  in  the setting of s. 15(b) and 2(e).  So construed it is  difficult to  believe  that  Parliament has not  used  the  expression "whose  business  is  being voluntarily  wound  up"  in  the technical sense. [966 D] One  of the professed objects of the Act is "to protect  the interest  of the policy-holders pending  nationalisation  of the   general  insurance  business".    The   interpretation suggested by the appellant company would defeat that object. Assuming  that s. 15(a) is susceptible of  two  meanings-the wider  and  the  narrower (the  technical),  the  one  which fructifies the said legislative object should be  preferred. [966 F-G] (ii) The  challenge  to sections 2(e) and 15(a) of  the  Act based on Article 14 of the Constitution must fail. [968 E] When  the  registration  of a company  has  remained  wholly

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cancelled  for  six  months  from  the  appointed  day,  the Controller  may apply to the Court for its winding up  under s. 3(5D).  As soon as the judicial process is set in motion, the  company  comes  under the control of  the  Court.   The Court’s  control will protect those policy holders who  have got  unsatisfied claims against the company.  On  the  other hand  the  company whose registration  has  remained  wholly cancelled  for less than six months can revive  itself.   It cannot  be  wound  up by the Court at the  instance  of  the ,:Controller.  The claims of the policy-holders against such a  company  will remain unprotected., The  takeover  of  the undertaking  of  the  company under the  Act  improves,  by reason  of  the Government’s management,  the  prospects  of their claims satisfaction.  It is also calculated to protect all interests by applying after the takeover, if that course is deemed necessary, to revive the business of the  company. Section 2(e) is therefore not discriminatory.  For the  same reasons s. 15(a) also is not discriminatory. [968 B-E] [As  the attack based on Art. 14 did not succeed, the  Court found   it  unnecessary  to  deal  with   the   respondents’ contention based on Art. 31A(b)  (d) of the Constitution.] Per Sikri C.J. and Ray, J. (dissenting). On the language of section 15(a) the company in the  present case  was  an insurer whose business was  being  voluntarily wound up.  Therefore the ordinance and the Act did not apply to the petitioner company. [955 G] 943 It  is  important  to  notice that the  Act  uses  the  word ’insurer’  and  not  the  words  ’insurance  company’.   The Insurance  Act  has  throughout  the  Act  used  the   words ’insurer’  as well as ’insurance company’.  The  appropriate section  in  each instance will indicate as to why  the  Act uses  the  word  ’insurer’ in one,  section  and  the  words ’insurance  company’  in the other.  An  insurer  under  the definition  of the insurance Act is of wider amplitude  than an  insurance  company.   It is an  individual  or  any  un- incorporated  body  of  individuals  or  a  body   corporate incorporated  under  the  law of a  foreign  country.   From section  2C of the Insurance Act it follows that an  insurer as  an individual may be allowed by the Government to  carry on   general   insurance  business  under   the   Government exemption. [948 DE & 949 C] The  Legislature  knows the  distinction  between  voluntary winding up of an insurance company or winding up of it by  a Court  and  an insurer whose business is  being  voluntarily wound  up  or is wound up by Court.  Full effect  is  to  be given to the words used in a legislative measure.  The words which  are  not  found in the  present  legislative  measure cannot  be  substituted  by words which are  used  in  other statutes.   That would be defeating the purpose of the  Act. The  word  ’insurer’ cannot be read in  place  of  insurance company.  L952 G-H] The  provisions in the Insurance Act relating  to  voluntary winding  up  and partial winding up of  insurance  companies indicate  the difference between the concepts  of  voluntary winding up under the Insurance Act ,and the Indian Companies Act   and  the  business  of  an  insurance  company   being voluntarily  wound  up.  A voluntary winding  up  under  the insurance  Act  occurs  for  the  purpose  of  effecting   a reconstruction  or  amalgamation  or on the  ground  that  a company cannot continue its business be-cause it cannot meet its liabilities.  None of these contingencies is the same as voluntarily winding up business.  A partial winding up of an insurance  company  is winding up of a  particular  type  of business.  That company does not cease to do business.   Nor

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is the company voluntarily wound up in such a case. [953  D- E] In  the  present case the company resolved to  wind  up  its business.    The  company  discontinued  to   do   insurance business.  The company cancelled all outstanding policies in the month of February, 1971.  The company had not undertaken any new business after 30 September, 1970. [953 H] After 30 September 1970 the company had taken steps to  wind up voluntarily all insurance business., The company informed the  Controller  of  its decision to  stop  doing  insurance business.     The   company   returned   its    registration certificate.   All  these features lead to  the  inescapable conclusion  that  the  business of  the  insurer  was  being voluntarily wound up.  Therefore the provisions contained in section  15(a) will apply to the company whose  business  is being voluntarily wound up.. [954 A-B] (ii) In  the Bank Nationalisation case this Court said  that the Court will not, concentrating merely upon the  technical objection  of the action, deny itself jurisdiction to  grant relief  to  the  share  holders  when  the  rights  of   the shareholders  as well as of the company are  impaired.   The locus,  standi of the petitioners could not  be  challenged. [957 C-D] R.  C.  Cooper  v.  Union of India,  [1970]  3  S.C.R.  530, referred to.

JUDGMENT: ORIGINAL JURISDICTION : Writ Petition No. 425 of 1971. Petition  under article 32 of the Constitution of India  for the enforcement of fundamental rights. 944 B.   Divan and I. N. Shroff, for the petitioners. V.   M.  Tarkunde,  G.  Das and B.  D.  Sharma,          for respondent No. 1. M.   C. Setalvad, P. C. Bhartari, J. B. Dadachanji, O.C. Mathur    and Ravinder Narain, for respondent No. 2. The  Judgment of D. G. Palekar, M. H. Beg and S. N. Dwivedi, JJ. was   delivered by Dwivedi, J. The dissenting Opinion of S. M. Sikri, C. J. and A. N. Ray, J. was given by Ray, J. RAY, J. This writ petition challenges the application of the General Insurance (Emergency Provisions) Ordinance 1971, the General  Insurance (Emergency Provisions) Act 1971 as  ’Well as  the General Insurance (Emergency  Provisions)  Amendment Act  1972  to the petitioner company.  The  petitioners  are three  in  number, viz., the company and two  Directors  and shareholders. The petitioners asked for a declaration that the order dated 13 May 1971 made in exercise of powers conferred by  section 4(1)   of  the  General  Insurance  (Emergency   Provisions) Ordinance 1971 and the directions dated 13 May 1971 given by virtue  of powers conferred by section 4(3) of  the  General Insurance   (.Emergency  Provisions)  Ordinance   1971   are illegal. The  paid  up  capital  of  the  Neptune  Assurance  Company referred to as the company is Rs. 10,00,000.  The petitioner Jalan  is  .a  Director of the  company.   He  holds  16,725 ordinary  shares  of  the face value of Rs.  20  each.   The petitioner  Goenka is a Director of the company.   He  holds 2,000 ordinary shares of the face value of Rs. 20 each. The company carried on business as general insurers consist- ing  of fire and miscellaneous insurance business.   In  the month of September 1970 about 2343 insurance policies of the company  were in force.  On 17 September 1970 the  Board  of

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Directors  of  the company resolved that the  company  would cease to underwrite any insurance business as from the close of  business  hours on 30 September 1970.  On  30  September 1970 the company wrote to the Controller of Insurance  about the  decision of the company to ,cease to do business as  on the  close  of business on 30 September 1970.   The  company returned its registration certificate for the ,current  year to the Controller of Insurance.  After close of business  on 30  September 1970 the company stopped doing  all  insurance business. On  3 October 1970 the Controller of Insurance  returned  to the  company its registration certificate.   The  Controller pointed  out  that  there was no  provision  for  return  of certificate.   The  Controller advised the  company  not  to apply for renewal of registration certificates for the  year 1971. 945 In the month of October 1970 there was an agreement  between the  company  and the New Great Insurance Company  of  India Ltd. referred to as the New Great in respect of an  intended transfer  of the entire business of the company to  the  New Great.   The  agreement provided inter  alia  the  following features.   Before transfer of the entire general  insurance business  by the company it will obtain the consent  of  the shareholders  at  the general meeting for  transfer  of  the general  insurance business to the New Great.   The  company shall  prepare  a detailed list of all the  claims  received from  policies  issued by the company and which  claims  are outstanding and/or pending on 30 September 1970 and give the same to the New Great with all particulars. On  20 October 1970 notice was given that an  extra-ordinary general meeting of the company would be held on 17  November 1970.   The extraordinary general meeting was inter alia  to transact  the business of the proposal for transfer  of  the company’s insurance business and also of the liabilities  in respect of claims relating to the insurance business to  the New Great upon the terms recorded in the agreement dated  15 October  1970.  The second business to be transacted at  the said  extraordinary  general  meeting was  to  resolve  that pursuant  to section 149 (2A) of the Companies Act 1956  the company  would  do business as set out in clause  III,  sub- clauses (8) and (9) of the Memorandum of Association of  the Company  except  Banking business.  The company  thought  of in-vestment  and finance business.  As required  by  section 173  of  the Companies Act the company gave  an  explanatory statement of the extraordinary general meeting. In-  the month of October 1970 circular letters were  issued to   all  policy  holders  about  the  company  ceasing   to underwrite new insurance business with effect from 1 October 1970.   The  company sent to all policy holders  letters  to express  their  confirmation of the arrangement  for  taking over the liabilities by the New Great.  On 17 November  1970 there  was an extraordinary general meeting of the  company. The resolutions which had been notified were passed.  It may be  stated  here  that  about  50  policy  holders  demanded cancellation  of  policies on receipt of  circular  letters. About  1,389  policy holders did not send  any  reply.   The company advised that they would not be completely discharged from  their liabilities unless and until all policy  holders agreed  to transfer policies to the other insurance  company or desired cancellation. On  2 February 1971 there was a resolution of the  Board  of Directors  of the company canceling the agreement  dated  15 October  1970 entered into with the New Great.  There was  a second resolution canceling all policies as from 10/12 March

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1971  after giving due notice to all policy holders.   There was  a  third  resolution  to  terminate  all   re-insurance treaties both inward 946 and outward from 31 December 1970.  The company and the  New Great  by  mutual consent cancelled the agreement  dated  15 October  1970.   In the month of February 1971  the  company issued  circular  letters to all  policy  holders  effecting cancellation  of all policies under relevant clause in  each policy.   The company refunded to policy holders the sum  of Rs. 48,000 on cancellation of the policies.  The uncollected refund amounts to Rs. 2013.98. On  16  February 1971 the Controller of  Insurance  affected cancellation of the registration of the company with  effect from  5  April 1971 under section 3(4)(F) of  the  Insurance Act, 1938. On  22  February  1971 the company gave  letters  to  Indian Guarantee  and General Insurance Co. and M/s India  Re-Insu- rance  Corporation Ltd. canceling all re-insurance  treaties with effect from 31 December 1970. The  company alleged that it ceased to do all new  insurance business from the close of business from 30 September, 1970. The  company refunded to policy holders premia  excepting  a small sum of Rs. 2,000 which was not collected.  The company reduced its staff from the month of September 1970.  By  the month  of February 1971 the total staff of the  company  was reduced  to one officer, one clerk, one typist and one  peon drawing  total  emoluments  of  Rs.  1854.20  per  month  as contrasted  with salary bill of Rs.7179. 10 per month  prior to  the month of September 1970.  On these  allegations  the company  said that its business was being voluntarily  wound up since 30 September 1970. On 13 May 1971 the General Insurance (Emergency  Provisions) Ordinance 1971 referred to as the Ordinance was promulgated. On 13 May, 1971 an order under section 4(1) of the Ordinance was made by the Central Government appointing respondent No. 2  as  the  custodian  of the  company.   On  the  same  day directions  were given by the Central Government  under  the Ordinance in regard to the management of the undertaking  of the company. On 17 June 1971 the General Insurance (Emergency Provisions) Act  1971  referred  to as the Act  was  enacted.   The  Act replaced the Ordinance.  The Act was retrospectively brought into  force with effect from 13 May 1971.  The Ordinance  as well as the Act contain similar provisions. The  purpose  of the aforesaid legislative measures  was  to provide  for the taking over in the public interest  of  the management    of   general   insurance   business    pending nationalisation  of  such business.   By  general  insurance business   is   meant  under  the  Act   fire,   marine   or miscellaneous insurance business, whether carried on  singly or  in  combination with one or more of them, but  does  not include  capital redemption business and  annuity  business. An 947 insurer  under the Act means an insurer. as defined  in  the Insurance  Act  1938 referred to as the  Insurance  Act  who carries on general insurance business in India, and includes an  insurer whose registration under the Insurance  Act  has not  remained  wholly cancelled for a period of  six  months immediately  before  the  appointed  day.   Undertaking   is defined  by  the  Act  to mean in  relation  to  an  insurer incorporated outside India, the undertaking of that  insurer in India. Section  3 of the Act states that as from the appointed  day

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which is 13 May, 1971 the management of the undertakings  of all  insurers shall vest in the Central Government.   It  is further provided that pending the appointment of a custodian the  persons in charge of the management of the  undertaking shall  be in charge, of the management for and on behalf  of the Central Government.  An insurer is forbidden without the previous  approval  of the person specified by  the  Central Government  in this behalf to make any payment or grant  any loan  otherwise than in accordance with the normal  practice observed  by  him  in respect of  such  matters  immediately before  the appointed day.  There is similar prohibition  to incur  any expenditure from the assets appertaining  to  the undertaking,  to transfer or otherwise dispose of  any  such assets,  to invest in any manner any money forming  part  of such  assets, to acquire any immovable property out  of  any moneys forming part of such assets to enter into contract of service  or  agency.   Every insurer  is  also  required  to deliver  to the persons specified by the Central  Government various  documents,  namely, minutes  book,  current  cheque books, registration books containing particulars relating to investments,   loans,   advances,   promissory   notes   and certificates. Section  4  of the Act is. the  other  important  provision. Under  that section the Central Government is  empowered  to appoint a custodian for the management of the company.   The Central Government is also empowered to issue directions to- the custodian as to his powers and duties in relation to the management of the company. The  Act  provides  for payment of  compensation.   The  Act places a bar against winding up of a company the  management of  which  is vested in the Central Government.   After  the appointed  day the Controller of Insurance shall  not  issue any new certificate of insurance to any person. The crucial provisions are section 15(a) of the Act.  It  is enacted  that nothing contained in this Act shall  apply  to (a) any insurer whose business is being voluntarily wound up or is being wound up by Court. The  petitioners strongly rely on section 15(a) of the  Act. The petitioners allege that the business of the company  was being 948 voluntarily  wound  up  at all  material  times  within  the meaning  of  the  Ordinance  and  the  Act.   Therefore  the petitioners  contend  that  the company is  not  within  the mischief of those legislative measures. The Government contention is ’,hat section 15(a) of the  Act applies  only  to  an  insurance  company  which  is   being voluntarily wound up and is being wound up by Court.  It  is emphasized  that  when an insurance company  or  an  insurer ceases  to carry on any particular kind ’of business  it  is not  being  voluntarily wound up.  Voluntary winding  up  or winding  up by Court is said by the Government to mean  only winding  up within the meaning of the Indian  Companies  Act and  the  Insurance  Act.  The meaning of  the  words  "’an, insurer whose business is voluntarily wound up ,or is  wound up  by Court" is, according to the Government, an  insurance company  which is being voluntarily wound up or wound up  by Court. At the threshold it is important to notice that the Act uses the  word ’insurer’ and not the words  "insurance  company". The  Insurance  Act has throughout the Act  used  the  words "insurer"  as well as "insurance company".  The  appropriate section  in  each instance will indicate as to why  the  Act uses  the  word  "insurer"  in one  section  and  the  words "insurance  company"  in the other.   An  insurance  company

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under  the Insurance Act means any insurer being a  company, association or partnership which may be wound up .under  the Indian Companies Act or to which the Indian Partnership  Act applies.  A partnership to which the Indian Partnership  Act Applies  is not a company within the meaning of  the  Indian Companies  Act.   The  insurance  Act  has  yet  included  a partnership within the meaning of an insurance company.   An insurer,  on the other hand, under section 2 clause  (9)  of the Insurance Act means (a) any individual or unincorporated body  of individuals or body corporate,  incorporated  under the law of any country other than India carrying on business not being a person specified in subclause (c) of clause  (9) of section 2, (b) any body corporate incorporated under  any law for the time being in force in India and (c) any  person who  in India has a standing contract with underwriters  who are members of the Society of Llyod’s whereby such person is authorised  within  the  terms of  such  contract  to  issue protection notes, cover notes, or. other documents  granting insurance  cover  on behalf of underwriters.   Therefore  an insurer  under  the definition of the Insurance  Act  is  of wider  amplitude  than  an  insurance  company,  it  is   an individual  or any unincorporated body of individuals  or  a body  corporate  incorporated  under the law  of  a  foreign country is an insurer. Section  2C of the Insurance Act which came into  effect  in 1950  enacted that after the commencement of  the  Insurance (Amendment)  Act  1950  which  brought  that  section   into existence 949 no person after the expiry of one year from the commencement of  the  Amendment Act shall continue to carry  on  business unless  he  is,  (a)  a public company,  or  (b)  a  society registered  under  the Cooperative Societies Act, or  (c)  a body  corporate  incorporated under the law of  any  country outside India.  Therefore after 1950 an individual will  not be  allowed  to carry on business as an  insurer.  There  is however  a proviso to section 2C of the 1950 Amendment  that the  Central Government may by notification in the  Official Gazette, exempt from the operation of section 20 any  person or  insurer for the purpose of carrying on the  business  of granting   superannuation   allowances  and   annuities   as mentioned in section 2(ii)(c) of the Act or for the  purpose of  carrying on any general insurance business.  It is  also provided  that  an  insurer carrying  on  general  insurance business  will  not be entitled to such  notification  being issued  having effect for more than three years at  any  one time.   It,  therefore,  follows  that  an  insurer  as   an individual  may  be allowed by the Government  to  carry  on general insurance business under the Government exemption. The various kinds of insurance business are. fire  insurance business,   general  insurance  business,   life   insurance business,   marine  insurance  business  and   miscellaneous insurance business defined in clauses (6A), (6B), (11) (13A) and  (  13B)  of section 2 of the  Insurance  Act.   General insurance  business  means , fire, marine  or  miscellaneous insurance   business  whether  carried  on  singly   or   in combination with one or more of them. Section 3 of the Insurance Act speaks of registration of the persons  carrying on insurance business.  Section 3  (4)  of the Insurance Act speaks of cancellation of the registration of  an insurer.’ Section 3(5C) of the Insurance, Act  states that where the registration is cancelled the Controller  may at  his discretion revive the registration.   The  instances where  registration may’ be revived are also specified.   If the registration is cancelled on the ground that the insurer

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is in liquidation the registration cannot be revived.  It is noticeable, that the Insurance Act speaks of liquidation  of an  insurer.   Liquidation  here  means  winding  up  of  an insurance company.  Liquidation in the first place does  not apply   to   individuals  or  partnerships,   and   secondly liquidation  is  not the same thing as ceasing to  carry  on business.   Under section 3 (5D) where the  registration  is cancelled the Controller may after the expiry of six  months from  the date on which the cancellation took effect,  apply to  the  Court to wind up the insurance company  unless  the registration has been revived under sub-section (5C). The Insurance Act in sections 53 to 60 speaks of winding up. Section 53 states that the Court may order the winding up of an  insurance company.  Section 54 speaks of  the  voluntary winding  up of an insurance company.  Section 55 deals  with valuation of 950 liabilities  in  the  winding up of  an  insurance  company. Section 56 deals with application of surplus assets of  life insurance  fund  in  liquidation  of  insurance  company  or insolvency of insurer.  Liquidation is spoken of  companies. Insolvency  is spoken of insurers.  The distinction  between an insurer and an insurance company is apparent to emphasise the  difference between winding up and insolvency.   Section 57  relates  to, winding up of  secondary  companies.   That section defines secondary company to be an insurance company whose  insurance  business  or any  part  of  the  insurance business  has  been transferred under an  arrangement  to  a principal company.  If the principal company is wound up  by or under the supervision of the Court the Court shall  order the secondary company to be wound up in conjunction with the principal company. Section  58 deals with partial winding up of insurance  com- panies.   Partial winding up happens when the affairs of  an insurance company in respect of any class of business should be wound up but any other class of business should  continue to  be carried on by the company or transferred  to  another insurer.  A scheme for partial winding up is to be submitted to  Court  for  confirmation.  A scheme  shall  provide  for allocation and distribution of the assets and liabilities of the company.  A scheme is to contain provisions for altering the  memorandum of the company with respect to  its  objects giving  effect  to the scheme when the  company  carries  on another  class of business.  There may be winding up of  the company when under the scheme it is proposed to transfer the business to another insurer.  The provision relating to  the valuation  of  liabilities of insurers  in  liquidation  and insolvency  and to the application of surplus assets of  the life  insurance  fund  in liquidation are to  apply  to  the winding up of any part of the affairs of the company in case of any partial winding up.  An order of the Court confirming a  scheme  under  this Section  whereby  the  memorandum  is altered  as to its objects shall as respect  the  alteration have  effect as if it were an order confirmed under  section 12  of the Indian Companies Act 1913 and the  provisions  of sections 15 and 16 of that Act shall apply accordingly. Section  59  speaks  of return of deposits in  the  case  of winding  up of an insurance company other than in a case  to which  section  58 applies.  Section 60 states that  on  the winding up of an insurance company, the persons appearing by the  books  be  entitled to or interested  in  the  policies granted  by  the company are to be given  notice  of  policy values.   Section 61 states that where an insurance  company is  in liquidation the Court may make an order reducing  the amount of the insurance contracts of the company.

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951 The first noticeable feature is that sections 53, 54 and  58 of  the Insurance Act which deal with winding up  by  Court, voluntary  winding  up and partial winding  up  respectively speak  only of insurance company.  There are  some  sections which  speak  of  insolvency of any  other  insurer.   These sections  are 55, 56 and 61 of the Insurance Act which  deal respectively  with valuation of liabilities, application  of surplus  assets  of life insurance fund and  powers  of  the Court to reduce contracts of insurance.  Insolvency of other insurer  will refer to Co-operative  Societies,  individuals and  companies which are incorporated outside India.   Under the  Insurance  Act these are not  insurance  companies.   A foreign  company  which is in voluntary  liquidation  or  is being  wound.  up  by Court will be an  insurer  within  the meani ng  of the 1971 Act and will also be described  as  an insurer  who  is  insolvent.  These  sections  indicate  the distinction between an insurance company and an insurer. The  second important matter to be noticed in all  the  sec- tions  relating to winding up in the Insurance Act  is  that voluntary  winding  up and partial Winding up  of  insurance companies is not the same as under the Indian Companies Act. A   voluntary  winding  up  under  the  Insurance   Act   is impermeable   except  for  the  purpose  of   effecting   an amalgamation  or a reconstruction of the company or  on  the ground that by reason of its liabilities it cannot  continue its business.  The provisions of the Indian Companies Act do not  apply  to  such voluntary winding up  of  an  insurance company.  Under the Indian Companies Act 1956 a company  may be  voluntarily  wound  up if  the  company  passes  special resolution  that the company be wound up  voluntarily. The special provisions of the Insurance Act regarding  voluntary winding up rule out the application of the provisions of the Indian Companies Act.  Amalgamation and Reconstruction under the  Indian  Companies Act are a  different  matter.   Under section  394  of  the Indian  Companies  Act  a  transferrer company on Amalgamation may be dissolved without any winding up.   Again  under section 392 of the Indian  Companies  Act 1956 the Court at the time of sanctioning a compromise of an arrangement  may make an order winding up the  company.   It will  be treated as winding up by Court.   These  provisions indicate  that  voluntary  winding up of  corner  under  the Indian  Companies  Act  and  the  voluntary  winding  up  of insurance  companies  under the Insurance Act  are  not  the same. Next  comes the partial winding up of  Insurance  companies. There  is no such provision in the Indian Companies Act.   A partial winding up under the Insurance Act is treated as  an alteration  of  a  memorandum of  the  company.   A  partial winding up under the Insurance Act will in relation to  that part which is 952 wound  up  attract  the  provisions  of  the  Insurance  Act regarding  valuation  of  liabilities  and  application   of surplus assets in liquidation or insolvency. The  Government  relied  on sections 53, 54 and  58  of  the Insurance Act in support of the contention that the  winding up  or  a  voluntary winding up  will  mean  only  voluntary winding up or winding up of the company and will never  mean the voluntary cesser of doing any kind of insurance business by a company.  It is said that if a business can be said  to be  voluntarily wound up without a voluntary winding  up  of the  company  the  sections will be  robbed  of  their  full effect.   Reliance  was  also placed by  the  Government  on section  2D  of the Insurance Act which  states  that  every

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insurer shall be subject to all the provisions of the Act in relation  to any class of insurance business so long as  his liabilities  in India in respect of business of  that  class remain  unsatisfied  or  not otherwise  provided  for.   The Government  leaned  on this section to emphasize that  if  a company  ceasing to do any business could be said to be  one whose  business was being voluntarily wound up it could  not again be said to be subject to the provisions of the Act  on the (,round that the liabilities remain unsatisfied. The  Insurance  Act speaks of winding up of  insurance  com- panies.   The legislature has yet in the  General  Insurance (Emergency  Provisions)  Ordinance  1971  and  the   General Insurance (,Emergency Provisions) Act 1971 not spoken of  an insurance company being voluntarily wound up or wound up  by Court.   On  the contrary, the legislative measures  in  the present case have used the words "an insurer" whose business is voluntarily wound up or is being wound up by a Court.  In this context, it may be stated that when the Life  Insurance (Emergency  Provisions) Act 1 956 came into existence  both the  Life Insurance, (Emergency Provisions) Ordinance 1  956 and its successor the Life Insurance (Emergency  Provisions) Act 1956 used identical words that nothing in the  Ordinance or  in the Act shall apply to any insurer whose business  is voluntarily wound up or is wound up Linder order of  Court". The  legislature  knows the  distinction  between  voluntary winding up of an insurance company or winding up of it by  a Court  and an insurer whose business is,  being  voluntarily wound  up  or is wound up by Court.  Full effect  is  to  be given to the words used in a legislative measure.  The words which  are  not found in the  present  legislative  measures cannot  be  substituted  by words which are  used  in  other statutes.  That would be defeating the entire purpose of the Act.   The  word  "insurer"  cannot  be  read  in  place  of insurance company. An insurer is not for all purposes the same as an  insurance company.   An  individual  is an  insurer.   A  co-operative society 953 is an insurer.  A company incorporated in a foreign  country and  carrying  on business in India is an  insurer.   A  co- operative society is not wound up under the Indian Companies Act.  A co-operate society is dissolved under the provisions of  the  Cooperative  Societies  Act.   The  consequence  of dissolution  of a cooperative society is the winding  up  of the  society by the appointment of a liquidator.  A  company incorporated  in  a foreign country is  neither  voluntarily wound  up nor wound up by Court like other  companies  under the  Indian  Companies  Act.  A foreign  company  may  under section  584 of the Indian Companies Act be wound up  as  an unregistered company.  Therefore the words "an insurer whose business is being voluntarily wound up or is being wound  up by  a  Court" wilt refer not only to  an  insurance  company incorporated  in India ceasing to do insurance business  but also  to  individuals or co-operative societies  or  foreign conipanies in the same position. The  provisions in the Insurance Act relating  to  voluntary winding  up  and partial winding up of  insurance  companies indicate  the difference between the concepts  of  voluntary winding up under the Insurance Act and the Indian  Companies Act   and  the  business  of  an  insurance  company   being voluntarily  wound  up.  A voluntary winding  up  under  the Insurance  Act  occurs  for  the  purpose  of  effecting   a reconstruction  or  amalgamation or on the  L,round  that  a company cannot continue its business because it cannot  meet its liabilities.  None of these contingencies is the came as

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voluntarily winding up business.  A partial winding up of an insurance  company,  is winding up of a particular  type  of business.  That company does not cease to do business.   Nor is the conical voluntarily wound up in such a case. The deliberate choice of words in the Ordinance and the  Act of  1971 in the present case indicates that the  legislature did not by the crucial words in section 15(a) mean voluntary winding  Lip of insurance companies.  The legislature  meant also  insurers who are not necessarily insurance  companies. The concept of voluntarily winding up business is more  akin to  individuals another persons winding up business than  to companies  being ,voluntarily wound up under the  provisions of  the Insurance Act.  The voluntary winding up under th  e Insurance Act is applicable not only to reconstruction or to amalgamation  but  to  a company being  unable  to  continue business because of liabilities.  The idea of business being voluntarily wound up is quite a different matter. In  the  present case, the company resolved to wind  up  its business.    The  company  discontinued  to   do   insurance business.  The company cancelled all outstanding policies in the month of February, 1971.  The company has not undertaken any new busi- 95 4 ness  after 30 September 1970.  After 30 September 1970  the company had taken steps to wind up voluntarily all insurance business.   The  company  informed  the  Controller  of  its decision  to  stop doing insurance  business.   The  company returned  its registration certificate.  All these  features lead to the inescapable conclusion that the business of  the insurer  was  being voluntarily wound  up.   Therefore,  the provisions  contained  in section 15(a) will  apply  to  the company whose business is being voluntarily wound up. The provisions in section 2D of the Insurance Act show  that an  insurer  is subject to liabilities under the  Act.   The company does not dispute that proposition.  The company  has made  provisions to meet those liabilities.  The company  is required  under  section 7 of the Insurance Act to  keep  in deposit with the Reserve Bank of India sums of money.  Under section  9 where an insurer has ceased to carry on in  India all  classes  of insurance business and his  liabilities  in India  in respect of all classes of insurance business  have been satisfied or are otherwise provided for, the Court may, on  the application of the insurer, order the return to  the insurer  of  the deposit made by him.  Section  10  provides that  where an insurer carries on business of more than  one of  the  classes  of  insurance business  he  shall  keep  a separate  account  of  all  receipts  and  payments.   These provisions  show  that liabilities under the Act are  to  be satisfied and provided for over and above the deposit  under section  7 of the Insurance Act even after the business  has been voluntarily wound up. Counsel  for the Government relied on the decision  of  this Court  in The Vanguard Fire and General Insurance Co.  Ltd., Madras v. M\s Fraser and Ross & Anr.(1) in order to find out the  meaning  of closing of business of  any  insurer.   The company  in that case carried on various kinds of  insurance business   other   than  life   insurance   business.    The shareholders of the company passed a resolution by which the business  was  to  be closed.  On  the  application  of  the company   the  Controller  cancelled  the   certificate   of business.    Thereafter  complaints  are  received  by   the Government  against the company.  The Government  passed  an order  under section 33 of the Insurance Act  directing  the Controller  to investigate the affairs of the company.   The company  challenged the legality of the order on the  ground

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that  the Government had no jurisdiction to pass  an  order. The  contention of the company was that section 33 spoke  of an  order of investigation by the Central Government of  the affairs  of an insurer who, as defined in section  2(9),  is one  who is actually carrying on the business of  insurance. Section  2D  of  the  Insurance  Act  was  contended  to  be applicable to cases where an insurer was carrying on (1)  [1960] 3 S.C.R. 857. 955 different  classes of business’ and had closed some of  them but  not  all  of them.  Section 2D was also.  said  by  the company  to be not applicable as the  company’s  liabilities did not remain unsatisfied.  This Court held that section 33 of  the  Insurance Act refers not only to a  person  who  is carrying  on the business of insurance but also to  one  who has substantially closed it.  Section 2D was also held to be applicable  to  cases where an insurer who was  carrying  on different  classes  of  business but  closed  all  of  them. Section  2D  was also held to apply to  make  provision  for liabilities of the company over and above the deposit.   The words in section 33 are that the Central Government may,  at any  time, direct the Controller to investigate the  affairs of  an  insurer.   The meaning ascribed to  a  Word  in  the definition  clause  was  held  by  this  Court  to  be   not inflexible because there might be sections in the Act  where the meaning might have to be departed from. This Court in the Vanguard Fire & General Insurance Co. Ltd. case  (supra) said that the word ’insurer’ has been used  in some sections to mean not only a person carrying on an insu- rance  but also one who intends to carry on the business  of insurance but has not actually started it and also a  person who was carrying on the business of insurance but has ceased to  do so.  Section 9 of the Insurance Act which  speaks  of refund of deposit furnishes an instance of the Act  applying the  word  ’insurer’ in relation to one who  has  ceased  to carry on business.  Section 55 of the Act also speaks of the insolvency  of an insurer.  An insurer in section 2D of  the Act  is  an  insurer who was carrying  on  the  business  of insurance but has closed it.  Section 2D was held to  dispel all doubts that the word ’insurer’ would not be referable to one who ceased to carry on any business inasmuch as ail  the provisions  of the Act applied to an insurer so long as  his liabilities  remained unsatisfied or otherwise not  provided for.   Some  provisions of the Insurance Act will  apply  to insurers who ceased to carry on business. It  was said on behalf of the Government that if section  15 (a)  applied  to the case of an insurer  whose  business  is being voluntarily wound up or is being wound up by Court  it might not be applicable to the case of an insurance  company which was being voluntarily wound up under the provisions of the  Insurance Act.  It is for the legislature to  legislate as  to  the  class  to which the Act  will  apply.   On  the language of section 15(a) the company in the present case is an  insurer  whose business is being voluntarily  wound  up. Therefore  the  Ordinance and the Act do not  apply  to  the petitioner company. It  was  also contended on behalf of the  insurance  company that if the Ordinance and the Act applied Article 31A of the Constitution  could  not  protect the  taking  over  of  the manage- 9 56 ment  of  the company.  Under Article 3 1 A ( 1  )  (b)  the taking  over  of management of the property  for  a  limited period  either in public interest or in order to source  the proper  management of the property is protected.  It  cannot

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be  said in the present case that the management  was  taken over  for a limited period nor was it said on behalf of  the Government that Article 31A(1)(b) applied. On behalf of the Government it was said that Article  31A(1) (d) applied because the legislative measures in the  present case  modified  the rights of the managing agents.   It  was also  said on behalf of the petitioners that Article 14  was offended.  In view of our conclusion that the Ordinance  and the  Act  do not apply to the petitioner-company it  is  not necessary  to  express any opinion on  the  two  contentions based on those two Articles. The  Government contended that the petitioner company  could not  invoke fundamental rights.  Apart from the company  the other petitioners are two shareholder and Directors.  In  R. C.  Cooper v. Union of India(1) which is referred to as  the Bank  Nationalisation  case the petitioner  fulfilled  three capacities.   He was a shareholder, a Director and a  holder of deposit of current account in the Bank.  The locus  stand of the petitioner was challenged in the Bank Nationalisation case (supra) on the (,round that no fundamental right of the petitioner was directly impaired by the Ordinance or the Act or any action taken thereunder.  The petitioner in that case claimed that rights guaranteed under Articles 14, 19 and  31 of the Constitution were impaired.  The ruling of this Court in the Bank Nationalisation(1) case was this               "A   measure  executive  or  legislative   may               impair  the rights of the company  alone,  and               not  of  its shareholders; it may  impair  the               rights  of  the shareholders and  not  of  the               company;  it  may  impair the  rights  of  the               shareholders  as  well  as  of  the   company.               Jurisdiction  of  the Court  to  grant  relief               cannot  be  denied, when by State  action  the               rights  of  the  individual  shareholder   are               impaired if that action impairs the rights  of               the company as well.  The test in  determining               whether the shareholder’s right is impaired is               not formal; it is essentially qualitative;  if               the  State  action impairs the rights  of  the               shareholders  as well as of the  company,  the               Court will not, concentrating merely upon that               technical operation of the action, deny itself               jurisdiction to grant relief". 95 7 It follows that the Court finds out whether the  legislative measure directly touches the company of which the petitioner is, a shareholder.  A shareholder is entitled to  protection of   fundamental  rights.   That  individual  right   of   a shareholder  is not lost by reason of the fact that he is  a shareholder.   The reason why the shareholders’  fundamental rights are protected is that when. their fundamental  rights as  shareholders  are  impaired by State  action  the  Court applies   the  qualitative  test  on  the  ratio  that   the shareholders’  rights are equated to and correspond  to  the rights  of the company.  The shareholders own  the  property through.  the company.  The shareholders carry  on  business through  the  medium  of  the  company.   The  shareholders’ investment in the shares is affected by the State action  or the legislative measure. In  the Batik Nationalisation case (supra) this  Court  said that  the  Court  will not, concentrating  merely  upon  the technical objection of the action, deny itself  jurisdiction to  grant  relief  to the shareholders when  the  rights  of shareholders  as well as of the company are  impaired.   The locus standi of the petitioners cannot be challenged.

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For these reasons, the petitioners succeed.-, There will  be an  order  quashing  the  orders dated  13  May  1971  being Exhibits ’K’ and ’L’ to the petition.  A mandamus will  also go  requiring the respondents to forbear from acting on  and giving effect to the two orders.  Parties will pay and  bear their own costs. DWIVEDI,  J.-There  are three petitioners in  this  petition under  article  32  of the  Constitution:  (1)  The  Neptune Assurance  Company  Ltd.  (2) Sanwar Prashad  Jain  and  (3) Krishna  Murari.  ’The first petitioner is a public  company incorporated under the Indian Companies Act.  The second and third  petitioners  are shareholders and  Directors  of  the first petitioner (hereinafter called the Neptune Assurance). The  Union  of  India, the  first  respondent,  appointed  a custodian  over  the undertaking of  the  Neptune  Assurance under  s. 4 of the General Insurance (Emergency  Provisions) Ordinance,  1971  on May 13, 1971.  The said  Ordinance  was eventually   reenacted  as  General   Insurance   (Emergency Provisions)  Act,  1971 (hereinafter called the  Act).   The Custodian  appointed  under the Ordinance is  continuing  to manage the undertaking by virtue of s. 4 of the Act. The Union of India also issued certain directions on May  13 1971.   Those  directions  regulate the  management  of  the undertaking of the Neptune Assurance by the Custodian.   The petitioners  challenge the validity of the  aforesaid  order and directions.  They also question the constitutionality of a part of s. 2 (e) and s. 15 (a) of the Act.  They pray  for the quashing, of the aforesaid order and direction and for a direction to the, 958 respondents  to hand over charge of the undertaking  of  the Neptune Assurance to the petitioners. Upto  the  end  of March, 1971, the  Neptune  Assurance  was registered  under  the  Indian  Insurance  Act,  1938.   The registration  authorised  it  to carry on  the  business  of general   insurance   comprising  fire   and   miscellaneous insurance.   On September 17, 1970, its Board  of  Directors resolved  that  it would cease to underwrite  any  insurance business I as from the close of business hours on  September 30,  1970.  On that very date it informed the Controller  of Insurance of the resolution and returned its certificate  of registration  for  the  year  1970  to  the  Controller   of Insurance.   After  the close of business on  September  30, 1970,  it  stopped  doing  any  kind  of  general  insurance business. On October 3, 1970, the Controller of Insurance returned the registration  certificate to it with the remark  that  there was  no  provision  in the Insurance Act  for  return  of  a certificate.   The  Controller advised it not to  apply  for renewal of certificate for the year 1971. In  October 1970 there was an agreement between it  and  the New  Great Insurance Company of India Ltd. with  respect  to transfer  of its entire business to the New Great  Insurance Company of India Ltd.  On October 20, 1970 notice was  given to  the  shareholders  of  the  Neptune  Assurance  that  an extraordinary general meeting would be held on November  17, 1970 to consider the proposal of transferring its  insurance business and liabilities to the New Great Insurance  Company of  India Ltd.  The agenda of the meeting  included  certain other  matters  for consideration.  It is not  necessary  to mention them. On November 17, 1970, in the extra-ordinary general  meeting the aforesaid resolution regarding transfer of business  and liabilities  was  passed.  In the month of  October  1970  a letter  was  sent to all the policy-holders  informing  them

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that  the  Neptune Assurance had ceased  to  underwrite  new insurance  business  with effect from October 1,  1970.   It also  sought  their  approval to transfer  of  business  and liabilities  of  the  Neptune Assurance  to  the  New  Great Insurance Company of India Ltd. About   50  policy-holders  demanded  cancellation  of   the policies.  About 1389 policy-holders did not send any reply. It  appears that the Neptune Assurance was advised  that  it would  not  be’ completely discharged from  its  liabilities unless  and until all the policy-holders had agreed  to  the transfer  of its business and liabilities to the  New  Great Insurance Company of India Ltd.  So on February 2, 1971, the Board  of Directors of the Neptune Assurance  cancelled  the agreement  with  the New Great Insurance ’Company  of  India Ltd.  The Board of Directors also passed a 959 resolution  cancelling all policies with effect  from  March 10/ 12, 1971 after giving due notice to the  policy-holders. Another  resolution was passed terminating all  re-insurance treaties, both inward and outward, with effect from December 31, 1971. As the agreement was cancelled, it did not have any  effect. In  February,  1971 the Neptune  Assurance  issued  circular letters  to  all policy-holders cancelling the  policies  in accordance with the cancellation clause in each policy.  The Neptune  Assurance refunded to policy-holders a sum  of  Rs. 48000  on cancellation of their policies.   The  uncollected refund amount comes to Rs. 2013.98. On February 16, 1971, the Controller of Insurance  cancelled the  registration of the Neptune Assurance with effect  from April 5, 1971.  He cancelled the registration under s.  3(4) (f) of the Insurance Act.  On February 22, 1971, the Neptune Assurance  sent letters to the Indian Guarantee and  General Insurance  Company  and M/s India  Re-Insurance  Corporation Ltd.  cancelling all re-insurance treaties with effect  from December 31, 1970. The  Neptune Assurance reduced its staff from the  month  of September  1970.   By  the end of Fe 1971  the  total  staff consisted  of  one officer, one clerk, one  typist  and  one peon, The total emoluments of the staff upto September  1970 were  Rs. 7179.1 per month, but after that month  they  have come down to Rs. 1154.20 per month. It is not disputed that many claims which had accrued before the  cancellation of policies are still outstanding  against the  Neptune  Assurance.  Some cases are pending  in  courts with respect to some of them. The  first  argument is that as the  Neptune  Assurance  had ceased  to  do  general insurance  business  several  months before the commencement of the Ordinance and the Act, it  is out  of the purview of the Act by virtue of s.15 (a) of  the Act.   It  cannot be taken over by  the  Central  Government under  s.  3  of  the Act.   The  rival  contention  of  the respondents  is that it is not covered by the provisions  of s.15  (a) and that accordingly it can be taken over by  the Central Government under s. 3. So the real issue is; what is the  true construction of s. 15 (a) ? Section 15, in so  far it is relevant for this case, provides;               "Nothing contained in this Act shall apply to-               (a)   any  insurer  whose  business  is  being               voluntarily  wound  up  or is wound  up  by  a               court;               (b)   any  insurer to whom the  Insurance  Act               does  not  apply by reason of  the  provisions               contained in section 2E thereof :" 96 0

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The argument of the Neptune Assurance is that the expression "whose  business is being voluntarily wound up" in  cl.  (a) also  signifies  the voluntary cessation of business  by  an insurance  company.  One of the dictionary meanings  of  the word  "wind up" is "to bring to a close; to bring an  affair to  a final settlement" (See Shorter Oxford Dictionary,  3rd edition).   Adopting that meaning, counsel for  the  Neptune Assurance  submits that the expressions "whose  business  is being voluntarily wound up" would also mean " whose business is  ’being  voluntarily  brought to a close or  to  a  final settlement". The true meaning of cl. (a) of S. 15 is to be determined  in the light of its language, scheme and setting. Language and setting : The, last word in cl. (a) is ’Court’. This word is not defined in the Ordinance and the Act.   But S.  2(1) of the Act provides that the words and  expressions used in the Act but not defined and defined in the Insurance Act have the meaning assigned to them in that Act.   Section 2(6)  of the Insurance Act defines the word ’Court’  as  the principal   Civil  Court  of  original  jurisdiction  in a district,  and  includes the High Court in exercise  of  its ordinary original civil jurisdiction.  The word "insurer" in clause  (a) of S. 15 is defined in S. 2(e) of the Act.   For our  present purposes it is sufficient to say that it  means an  insurer as defined in the Insurance Act, who carries  on general  insurance business in India.  Section 2(9)  of  the Insurance  Act defines "insurer" as (-a) any  individual  or unincorporated   body  of  individuals  or  body   corporate incorporated under the law of any country other than  India, carrying  on insurance business in India, or having  his  or its  principal  place of business or domicile  in  India  or employing  a  representative  or  maintaining  a  place   of business  in  India with the object of  obtaining  insurance business  (b) any body corporate incorporated under any  law for  the  time  being  in force in  India  and  carrying  on business  of  insurance.   There is  yet  another  class  of insurer, but we are not concerned with it in this case.  The word  "Insurance  Company"  is defined in  S.  2(8)  of  the Insurance Act as any insurer being a company, or partnership which  may be wound up under the Companies Act, or to  which the  Partnership  Act  applies.  It  is  apparent  from  the definition  of  ’insurer’  in the  Insurance,  Act  that  an insurer  may  be  an  individual,  a  partnership  firm,  an association  of  persons and a company  incorporated  in  or outside India. Section  20 of the Insurance Act, however, has  limited  the denotation of "insurer" from the date of the commencement of the Insurance (Amendment) Act, 1950.  Section 2c(1) provides that  no  person  shall,  after  the  commencement  of   the Insurance (Amendment) Act, 1950 begin to carry on any  class of business in India and no insurer carrying on any class of insurance busi- 96 1 ness  in India shall after the expiry of one year from  such commencement, continue to carry on any such business  unless he  is a pubic company incorporated in or out of India or  a society  registered under any law relating  to  Co-operative Societies Act, 1912.  In the result, at the commencement  of the  Ordnance  and  the Act,  ’Insurer’  included  a  public company either incorporated under the Companies Act or under a  foreign  company  law and @t  co-operative  society.   An individual,      a     partnership     firm,     and      an unincorporated,association  of  persons  could  not  be   an insurer  at the time of the commencement of  the,  Ordinance and  the  Act.   According to the proviso to  s.  2C(1)  the

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Central  Government may’ by a Gazette  notification,  exempt from the operation of s. 2C(1) any person or insurer for the purpose  of carrying on general insurance business  for  not more  than  three years at any one, time.  Counsel  for  the Neptune  Assurance has admitted that the Central  Government has  issued  no  such notification.  In  any  case  no  such notification has been shown to us. Co-operative  Societies  are  excluded  from  the  ambit  of ’Insurer’ in s. 15 (a).  We have examined the provisions  of the Co-operative Societies Act, 1912, and various State laws relating  to cooperative societies.  It appears  from  those laws  that a cooperative society can neither be  voluntarily wound  up  nor wound up by a Court.  It is wound  up  by  an order  of  the Registrar of Co-operative Societies.   It  is significant  to notice that the cessation of business  by  a co-operative  society  is one of the grounds for  its  being wound up by an order of the Registrar.  So various State law dealing  with  co-operative  societies  make  a  distinction between  the  cessation  of,’  business  by  a  co-operative society  and  its winding up by an order of  the  Registrar. When  a co-operative, society has cessed to do business,  it cannot be said that it is voluntarily wound up. To  sum  up,  the word ’insurer’ in s. 15  (a)  of  the  Act includes only two classes of persons : (a) a public  company incorporated  under  the  Companies Act; and  (2)  a  public company incorporated under a foreign Company law. The  next important word in s. 15(a) is "business".   It  is not  disputed  that  it  means the  entire  business  of  an insurer. It  Will follow from this discussion that cl. (a) s. 15  may be   paraphrased  in  this  manner;  "Any   public   company incorporated  under  the Companies Act or  under  a  foreign company law whose entire business is being voluntarily wound up by a Court." Turning now to the crucial words "being volubleness wound UP and "being wound up by a court", it is necessary to  observe that  these  twin expressions have acquired  a  crystallised meaning  in the Company and Insurance  jurisprudence.   They have been 962 used  in that sense in the Companies Act and  the  Insurance Act.  In the Companies Act the expression "voluntary winding up", means a winding up by a special resolution of a company to  that effect.  Similarly, the expression "winding  up  by the  court"  means winding up by an order of  the  Court  in accordance with S. 433 of the Companies Act.  Section  53(1) of the Insurance Act provides that an insurance company  may be  wound up in accordance with the Companies Act.   Section 53(2)  supplements  the  grounds for the winding  up  of  an insurance  company by the Court. Section 54 does  not  apply the  provisions  of  the  Companies Act  in  regard  to  the voluntary  winding up of an insurance company.  It  provides its  own  procedure  for  the voluntary  winding  up  of  an insurance  company.  According to it, an  insurance  company shall not be wound up voluntarily "except for the purpose of effecting amalgamation or reconstruction of a company or  on the  ground  that  by  reason of  its  liability  it  cannot continue its business". A  citizen is presumed to know the laws of his  country.   A fortiori,  Parliament  will  be presumed to  know  that  the expressions ,.voluntary winding up;" and "winding up by  the Court" have acquired a technical meaning in our Company  and Insurance  jurisprudence.   Like  the  co-operative  society laws,  the Companies Act and the Insurance Act also  make  a distinction  between the cessation of business by a  company

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and  its voluntary winding up or winding up by an  order  of the  Court.  Section 43 3 (c) of the Companies Act  provides that a company may be wound up by the Court, if it "suspends its  business for a whole year." Section 560 deals with  the powers of the Registrar to strike a defunct company off  the register.    It  provides  that  where  the  Registrar   has reasonable cause to believe that a company "is not  carrying on  business"  he shall proceed to strike its name  off  the register  in the manner provided therein.  According  to  s. 583(4)  (a)  on a registered company may be wound up  if  it "has ceased to carry on business." Section 584 provides that where  a company which has been incorporated  outside  India and which has been carrying on business in India "ceases  to carry  on  business  in India", it may be  wound  up  as  an unregistered company. Section  2E of the Insurance Act provides that where an  in- surer as defined in paragraph (i) and (ii) of sub-cl. (a) of cl. 9 of s. 2 in relation to any class of insurance business "has  ceased  before the commencement of that Act  to  enter into  any  new  contracts of that class  of  business,"  the Insurance  Act  shall not apply to him.  According to  s.  3 (5D) where the registration of an insurance public.  company stands  cancelled for more than six months from the date  of its  cancellation, the Controller of Insurance may apply  to the Court for an order to wind it up.  The re- 96 3 gistration  may be cancelled inter alia, on the ground  that the insurance public company has not applied for the renewal of its registration.  When the repstration is cancelled, the company is forbidden from entering into any new contracts of insurance.   So when an insurance company has ceased  to  do the business of insurance for more than six months from  the date  of  the cancellation of its registration,  it  may  be wound  up by an order of the Court at the, instance  of  the Controller.  As already mentioned s. 53(1) of the  Insurance Act  provides that an insurance public company may be  wound up  in accordance with the Companies Act.  We  have  already mentioned  that s. 433(c) of the Companies Act provides  for the  winding up of a company when it "suspends its  business for  a  whole  year." It would  follow  from  the  foregoing provisions  that the Insurance Act also makes a  distinction between the cessation of insurance business by an  insurance public company and its voluntary winding up or winding up by an  order  of  the  Court.  Indeed,  the  cessation  of  its business  for a whole year or the cessation of its  business for  more than six months from the date of the  cancellation of its registration for not applying for renewal thereof  is one  of  the  grounds  for its  winding  up  by  the  Court. Parliament  will be presumed to be aware of the  distinction between  the  cessation of business by an  insurance  public company  and  its voluntary winding up or winding up  by  an order  of  the Court.  There is nothing  unequivocal  in  s. 15(a) of the Act to show that Parliament intended to  depart from the technical meaning of the "voluntary winding up" and "winding  up  by  the Court" and to bid a  good-by  to  the distinction  in  our  Company  and  Insurance  jurisprudence ’between  mere  cessation of business by a company  and  its voluntary winding up or winding up by an order of the Court.    Section  15(a)  consists of two limbs :  (a)  an  insurer "whose  business  is  being voluntarily wound  up";  (2)  an insurer "whose business is being wound up by a Court".   The word "wound up" forms part of both limbs.  It is  reasonable to  assume that it is used in the same sense in both  limbs. It is not and cannot be disputed that in the second limb  it is  used  in  the sense in which it  is  understood  in  our

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Company and Insurance jurisprudence.  The Companies Act  and the Insurance Act provide for the winding up of a company by an  order  of the Court.  Neither of them provides  for  the winding  up of anything other than the entire business of  a company by an order of the Court.  The specified case in  s. 58  of  the  Insurance  Act of partial  winding  up  of  any particular  class  of  business  by  preparing  scheme   for confirmation   by the court cannot be described as  ’winding up  by the order of the court’ within the meaning of s.  53. We  have  earlier shown that ’insurer’ in s. 15(a)  means  a public  company  incorporated in and out of India  and  none else.  Accordingly, in the second 10-L52lSup.Cl/73 964 limb the expression "whose business is being wound up by the Court"  must  be  construed to mean the  winding  up  of  an insurance  public  company by an order of the  Court.   This should  settle  the meaning of the word "wound up?’  in  the first  limb also.  The phrase "voluntarily wound up" in  the first  limb  would  me-an the voluntary  winding  up  of  an insurance  public  company in accordance with s. 54  of  the Insurance Act. A  company is a creature of statute.  Its  birth,  progress, and  extinction are all controlled by the statute.   As  the Neptune’  Assurance is carrying on the business of General insurance,  it is controlled by the Insurance Act read  with the Companies Act.  Section 54 of the Insurance Act provides for  the  voluntary  winding up  of  an  insurance  company. According  to  it, an insurance company may  be  voluntarily wound  up only in three circumstances.  Those  circumstances are  ( 1 ) amalgamation, (2) reconstruction of the  company; or (3) the inability to carry on business on account of  its liabilities.  Section 58(1) of , the Insurance Act  provides for the winding up of only a class of an insurance  business of a company in certain circumstances provided a scheme  for that  purpose  is submitted to and confirmed by  the  Court. The  Neptune Assurance has not claimed before us that it  is being wound up under S. 54 or s. 58.  The Neptune  Assurance could  not  voluntarily  be  wound  up  otherwise  than   in accordance  with  S.  54.  It is  accordingly  difficult  to comprehend  the argument that the cessation of business  by he  Neptune  Assurance  means voluntary winding  up  of  its business.  This kind of voluntary winding up of business  is unknown to the Insurance Art. It  is said that our construction makes redundant  the  word "business"  in  s. 15(a).  But there is  no  redundancy.   A company which is being wound up voluntarily or by the  court may, without the least violence to language, be described as a company whose business is being voluntarily wound up or is being wound up by the Court.  Winding up of a company is, in effect, the same as the winding up of the entire business of the company.  Both expressions in substance convey the  same sense.  Moreover, the expression "any insurer whose business is  being  wound  up by the  court"  is  more  appropriately applicable  to  the  context  of  a  foreign  company  whose business  in India is being wound up by the Court  under  s. 584 of the Companies Act, 1956.  The expression "any insurer who is being wound up by the court" would not be appropriate in  its application to foreign company because the  business of that company outside India cannot be wound up by an order of the Court in India.  Its entire business in India may be wound  up.  That may be, a reason for introducing  the  word "business" in s. 15(a).  Section 481 of the 965 Companies  Act,  1956 provides that "when the affairs  of  a

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company have been completely wound up", the court shall make an order that the company be dissolved from the date of  the order.   Upon that order the company shall stand  dissolved. The  phrase "the affairs of a company have  been  completely wound  up"  is significant.  It shows that  the  expressions "winding up of a company" and "winding up of the affairs of, a  company"  convey the same sense, for we  think  that  the phrase  ",the  affairs  of a  company"  means  the  business affairs  of  a  company(1).  In  Rajah  of  Vizianagaram  v. Official Receiver Vizianagaram(2) speaking about the winding up  of a foreign company in India, this Court said : "It  is therefore necessary that if a company carries on business in countries   other   than  the  country  in   which   it   is incorporated,  the courts of those countries too  should  be able  to conduct winding up proceedings of its  business  in their   respective  countries.   Such  winding  up  of   the business........  is really an ancillary winding up  of  the main company." (emphasis added). It appears from these observations that the winding up of  a foreign  company  by an order of the Court in  India  really means  the  winding  up of its business  in  India.   Having regard to the foregoing consideration we are of opinion that the  word "business" is not redundant in S. 15 (a).  On  the other  hand,  the charge of redundancy may  really  be  made against the construction suggested by the Neptune Assurance. That construction makes the word "voluntarily" redundant  in the first limb.  If Parliament had really intended that  the first  limb  should apply also to an insurer who is  in  the process  of closing its business, it should  have  expressed the  first  limb in some such manner as any  insurer  "whose business  is  being  closed" or "is  being  wound  up."  The construction put forwarded by the Neptune Assurance  assigns little significance to the word "voluntarily" and makes it a surplusage. Section  15 (b) of the Act provides that the Act  shall  not apply  any insurer to whom the Insurance Act does not  apply by  reason of S.. 2E thereof.  Section 2E of  the  Insurance Act  provides  that  it shall not apply to  any  insurer  as defined  in  paragraphs (i) and (ii) of  sub-clause  (a)  of clause  9  of  S. 2 in relation to any  class  of  insurance business   where   the  insurer  has   ceased   before   the commencement of that Act to enter into new contracts of that class  of business.  Section 29(a) (i) and (ii) of that  Act includes  in  the definition of ’insurer’ a  public  company incorporated under a foreign law and carrying on business in India or having its principal place of business or  domicile in India.  If such (1)  Regina  vs. Board of Trade ,[1965] 1 Q.B. 603  In  this case it was held that the phrase "the affair of a company in s.  16  of the English Companies Act connotes  its  business affairs." Section 1655 corresponds to s.     237   of    the Companies Act, 1956. (2)  [1962] Supp: 1 S.C.R. 344. 966 a  company  has  ceased  before  the  commencement  of   the Insurance  Act to enter into any new contracts of  insurance business  or a class of insurance business, as the case  may be,  it  shall  not be governed by  the  provisions  of  the Insurance  Act.   According to S. 15 (b) of the Act  such  a company shall also not be governed by the Act.  Thus s.15(b) refers to a foreign insurance company which had ceased to do insurance  business or class of insurance business in  India before the commencement of the Insurance Act.  Section  2(e) of  the  Act  excludes  from  the  definition  ’insurer’  an insurance  public  company  whose  registration  under   the

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Insurance Act has remained wholly cancelled for a period  of six months immediately before May 13, 1971.  We have already discussed  that  the  registration of  an  insurance  public company  may be cancelled by the Controller if  the  Company has not applied for the renewal of its registration.  One of the  reasons  for  not  so  applying  may  be  cessation  of business.   So  s. 2(e) also refers to an  insurance  public company  which  has  ceased to do  business  for  a  certain period. Section 15(a) should be construed in the setting of s. 15(b) and  2(e).   So construed, it is difficult to  believe  that Parliament  has not used the expression "whose  business  is being  voluntarily’  wound up" in the technical  sense.   If Parliament had intended to exempt from the operation of  the Act an insurance public company which has of its own  accord ceased  to do business before the, commencement of the  Act, it would have inserted in the Act a clear provision like  s. 15(b) or s. 2(e).  Now the deliberate insertion of s.  15(b) and  S.  2(e) necessarily implies that  Parliament  did  not intend  to  exclude an insurance public  company  which  has merely ceased to do business of its own accord. Scheme  :-One  of the professed objects of the  Act  is  "to protect   the   interest  of  the   policy-holders   pending nationalisation  of  the general  insurance  business."  The interpretation  suggested  by the  Neptune  Assurance  would defeat  that legislative object.  Assuming that s. 15(a)  is susceptible of two meanings-the wider and the narrower  (the technical),  the one which fructifies the  said  legislative object should be preferred.  This preference is the Act.  Section 15 carves out an exception to section 3. It excludes   certain insurance public companies and some other institutions  from the  operation  of  the Act.   Ordinarily  an  exception  is strictly  construed.   So  the  technical  meaning  of  the’ expression  "whose business is being voluntarily  wound  up" should   be-preferable   to  the  wider  meaning   of   that expression. In  the light of the foregoing discussion we are of  opinion that  the  Neptune Assurance cannot get the  benefit  of  s. 15(a) 967 and  will  be subject to the provisions of s.3  of  the  Act which  provides for the take-over. of the management of  the insurance companies. The next submission of the Neptune Assurance is that a  part of s. 2 (e) and s. 1 5 (a) as construed by us run a foul  of Art. 14 of the Constitution.  The offending part of s.  2(e) according to it is this : "and includes an insurance company whose  registration under that Act has not  remained  wholly cancelled for a period of six months immediately before  the appointed day." It is said that this part of s. 2(e) creates two  classes  of  insurance  companies.   The  first   class consists  of those insurance companies,  whose  registration under the Insurance Act has remained wholly cancelled for  a period  of six months immediately before the appointed  day; the   second  class  consists  of  those   companies   whose registration  under  the Insurance Act has  remained  wholly cancelled  for less than six months immediately  before  the appointed  day.   The  Neptune Assurance  falls  within  the second class.  It is complained that the temporal difference as  to  the  cancellation of registration  between  the  two classes  is no valid reason for treating  them  differently. The  second  class should also have been excluded  from  the definition  of ’insurer’ in s. 2(e).  The same  argument  is reiterated with reference to s.15(a). It is said that  there is no reason why any insurance company which is closing  its

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business; of its own accord should not be excluded from  the purview  of  the Act.  The respondents, on the  other  hand, have urged that Art. 14 will not help the Neptune  Assurance on account of the Act being protected by Art. 31A(b) and (d) of the Constitution. It  is  not and cannot be denied that an  insurance  company whose  registration  under the Insurance  Act  has  remained wholly  cancelled  for  six months  immediately  before  the appointed  day  is in one very important  respect  radically unlike  the insurance company whose registration  under  the Insurance  Act has remained wholly cancelled for  less  than six  months  immediately  before  the  appointed  day.    An insurance company whose registration under the Insurance Act has remained wholly cancelled for more than six months  from the appointed day has become defunct.  It cannot be revived. It  may be wound up by the Court on the application  of  the Controller  under  s.  3  (5D) of  the  Insurance  Act.   An insurance company whose registration under the Insurance Act has remained wholly cancelled for less than six months  from the appointed day is in a state of suspended animation.   It can   revive   itself.   The  Controller  cannot   make   an application  to the Court for its winding up.  The  temporal differential as to the cancellation of registration  between the two classes of companies determines the liability of one of  them  to  be  wound  up under s.  3  (5D).   This  is  a meaningful   and  intelligible  differentia.   It   is   not arbitrary,  whimsical or illusory.  The differentia has  got rational relation 968 to  one  of  the  objects of  the  Act.   According  to  the preamble,  the  protection of the interests  of  the  policy holders  is  an  object  of the  Act.   The  differentia  is calculated to accomplish this legislative object.  Where the registration of a company has remained wholly cancelled  for six months from the appointed day, the Controller may  apply to the Court for its winding up under s. 3 (5D).  As soon as the  judicial  process is set in motion, the  company  comes under  the  control  of the Court.   A  liquidator  will  be appointed to wind up its affairs.  The Court’s control  will protect those policy-holders who have got unsatisfied claims against the company.  The liquidator will collect the assets of the company and pay those claims as far as possible  from the  realised  assets.  The company whose  registration  has remained wholly cancelled for less than six months from  the appointed  day can revive itself.  It cannot be wound up  by the Court at the instance of the Controller.  The claims  of the   policy-holders   against  such  a  company   will   go unprotected.  The company may or may not pay the claims.  It may  fritter away its assets.  The policy-holders  would  be constrained  to resort to.litigation against the company  or realisation  of their claims against it.  The  take-over  of the  under-taking of the company under the Act  improves  by reason  of  Government’s management the prospects  of  their claims  satisfaction.  It is also calculated to protect  all interests by applying after the take-over, if that course is deemed  necessary,  to revive the business of  the  company. Section 2(e) is in our view not discriminatory. For  the  foregoing  reasons,  section  15(o)  also  is  not discriminatory. As  in our view the attack based on Art. 14 cannot  succeed, it  is unnecessary to deal with the respondents’  contention based on Art. 3 1 A (b) and (d) of the Constitution. In the result, we would dismiss the petition with costs.                 ORDER In  accordance  with the opinion of the majority,  the  writ

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petition is dismissed with costs. G.C. 96 9