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PETITIONER: THE GENERAL ASSURANCE SOCIETY LTD.

       Vs.

RESPONDENT: THE LIFE  INSURANCE CORPORATION OF INDIA

DATE OF JUDGMENT: 18/10/1963

BENCH: SUBBARAO, K. BENCH: SUBBARAO, K. GAJENDRAGADKAR, P.B. WANCHOO, K.N. SHAH, J.C. DAYAL, RAGHUBAR

CITATION:  1964 AIR  892            1964 SCR  (5) 125

ACT:     Life  Insurance Corporation Act, 1956 (31 of  1956),  s. 7(1).   If  amounts  representing  dividends  declared  fall within     "assets   and   liabilities"     of    controlled business--Compensation   and paid up capital  allocable  for controlled business--Tribunals Jurisdiction to set off--Life Insurance  Corporation  Rules, 1956, r. 12A (iv)  and  (vi)- Insurance Act, 1938 (4 of 1938)--Whether precludes challenge of certified balance sheets--Interest on compensation.

HEADNOTE:     On the enactment of the Life Insurance Corporation  Act, providing   for  the  nationalisation  of   life   insurance business. the 126 controlled business i.e., the life insurance business of the appellant,  a composite insurer, vested in  the  respondent- corporation.    Thereafter   disputes  arose   between   the appellant and the respondent in the matter of  ascertainment of the compensation payable to the appellant and in  respect of  incidental  and  consequential  matters  thereto.    The respondent offered to pay the appellant towards compensation a certain amount after setting off the amount due to it from the  appellant in respect of part of the paid up capital  of the  controlled business and assets representing that  part. The  appellant  refused to accept this offer in  toto.   The dispute   was  referred  to  the  Tribunal.   The   Tribunal ascertained  the compensation payable to the  appellant  and set  off against that amount the balance of the  amount  due from  the appellant towards the allocable paid  up  capital. Relying  upon the books of account of the appellant to  find out whether the unpaid dividends of any share holder of  the appellant was the liability of one department or the  other, the  Tribunal  held  that  the  entire  liability  for   the unclaimed dividends and assets appertained to the controlled business,   and   therefore,  statutorily  vested   in   the respondent.   The Tribunal held that it had no  jurisdiction to award interest on the amount of compensation.  On  appeal by special leave, it was contended (i)that the Tribunal  had

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no  jurisdiction  to decide on the question of  the  capital allocable to the controlled business as there was no dispute thereto  between the parties and the said question  was  not referred to it; (ii) the liability of the appellant for  the unclaimed  dividends and assets equivalent to the  liability were  not transferred to and vested in the respondent  under s.  7(1) of the Act, and (iii) that the appellant  would  be entitled  to interest on the amount of compensation  payable to it and the Tribunal had jurisdiction to award the same.     Held:  The dispute between the parties related not  only to  compensation, but to the set off also, that the  dispute was   referred  to  the  Tribunal,  and  the  Tribunal   had jurisdiction to decide that dispute.  A combined reading  of cls.   (iv)  and (vi) of r. 12A of the Rules under  the  Act makes  it  abundantly  clear that a claim  for  set  off  is certainly covered by the wide phraseology of cl. (iv) of  r. 12A.      The  calculations under r. 18(1) show that there is  an integral connection between the compensation payable to  the insurer and the amount representing the capital allocable to the  controlled business transferred to the respondent.   As these  figures cannot be dissociated, the respondent made  a composite  offer.  The Act contemplates the setting off  one against the other.      National Insurance Co. v Life Insurance Corporation  of India [1964] 2 S.C.R. 182, followed.      (ii)  The  definition  of assets  and  liability  of  a controlled  business  in sub-s. (2) of s. 7 of  the  Act  is certainly   comprehensive  enough  to  take   in   unclaimed dividends and corresponding assets.      Sub-sections  (1) and (2) of s. 7 of the  Act  provides that  the  assists and liabilities to  be  transferred  must belong to the controlled 127 business of the insurer.  The antithesis is not between  the company and its business but between the controlled business and  other  business  of the insurer.  All  the  rights  and liabilities  pertaining  to  the  controlled  business   are transferred to the Corporation.     (iii) When a company declared a dividend on its  shares, a  debt immediately becomes payable to each  shareholder  in respect  of his share of the dividend ’for which he can  sue at  law  and  the declaration does not make  the  company  a trustee of the dividend for the shareholder.     In  re Seven and Wye Severn Bridge Railway Co. (1898)  1 Ch. D. 559, applied.     (iv)  The provisions of the Insurance Act, 1938 do  not, expressly   or   by  necessary  implication,   exclude   the jurisdiction of the Courts and Tribunals from going into the correctness   of   the  balance-sheet   certified   by   the Controller.   For the purpose of the Insurance Act it  would be accepted as correct.  There is no provision  in the  Life Insurance Corporation Act making the contents of the balance sheet  final for the purpose of transfer to and  vesting  in the  Corporation the assets and liabilities of the  insurer. It certainly affords valuable evidence in an enquiry  before the  Tribunal; but the contents of the balance-sheet can  be proved to be wrong.     (v)  The circumstances of the ease do not  justify  this Court exercise of the extraordinary jurisdiction under  Art. 136 of the Constitution to permit the appellant to raise the plea  of  apportionment of the unclaimed dividends  for  the first time here and to remand the matter to the Tribunal for apportionment of the dividends and the corresponding assets.     (vi)  In  view  of the decision of  this  Court  in  the

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National Insurance Co. Ltd. v. Life Insurance Corporation of India,  the  appellant will be entitled to interest  at  the rate of 4% on the amount of compensation.     National   Insurance   Co.  Ltd.   v.   Life   Insurance Corporation of India  [1964] 2 S.C.R. 182, followed.

JUDGMENT:      CIVIL APPELLATE JURISDICTION:  Civil Appeal No. 568  of 1961.      Appeal  by special leave from the order dated  February 17,  1958, of the Life Insurance Tribunal at Nagpur in  Case No. 17/XVI-A of 1957.      M.C.  Setalvad,  S.N. Andley, Rameshwar Nath  and  P.L. Vohra for the appellant.      C.K. Daphtary, Attorney General for India, S.T.  Desai, S.J. Banaji and K.L. Hathi, for the respondent.      October  18,  1963.  The  Judgment  of  the  Court  was delivered by 128     SUBBA  RAO J.--This Appeal by special leave is  directed against   the   order  of  the  Life   Insurance   Tribunal, hereinafter  called the "Tribunal", determining the  dispute that  was  referred to it under s.16 of the  Life  Insurance Corporation  Act, 1956 (31 of 1956), hereinafter called  the Act.     The  appellant is a company duly incorporated under  the Indian  Companies  Act, 1882, and the Insurance  Act,  1938. Prior to December 1957, its registered office was at  Ajmer, but  now  it  is in Calcutta. It  was  a  composite  insurer carrying  on life insurance and general insurance  business. The  Act  was passed to provide for the  nationalization  of life  insurance business in India by transferring  all  such business to a Corporation established for the purpose.   The Act came into force on July 1, 1956.  On September 1,  1956, under  s. 3 of the Act the Central Government established  a Corporation called the Life Insurance Corporation of  India, hereinafter called the Corporation, which is the  respondent in this appeal.  Under s. 7 of the Act on the appointed day, which was September 1, 1956, all the assets and  liabilities appertaining to the controlled business of all insurers were statutorily  transferred to and vested in  the  Corporation. Accordingly,  the  controlled business of the  appellant  as defined under the Act, i.e., all the business pertaining  to its  life insurance business, was transferred to and  vested in  the Corporation.  Thereafter disputes arose between  the appellant and the respondent in the matter of  ascertainment of the compensation payable to the appellant and in  respect of  incidental  and  consequential matters  thereto.   By  a letter dated May 21, 1957, the respondent offered to pay  to the  appellant  towards compensation  certain  amount  after setting  off  the  amount due to it from  the  appellant  in respect  of  part of the paid-up capital of  the  controlled business and assets representing that part.  By letter dated August  9,  1957, the appellant refused to accept  the  said offer in toto.  On August 20,  1957,  the respondent wrote a letter  to the appellant informing it that as its offer  was not accepted by the appellant 129 it had referred the dispute to the Tribunal.  In due course, both  the parties, i.e., the appellant and  the  respondent, appeared  before  the Tribunal and  filed  their  respective statements;  and  the Tribunal framed as many as  8  issues. Issues  Nos.  5,  6A, 7A and 7B which are  relevant  to  the

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present enquiry read thus:                 Issue  5. Whether the petitioner  (appellant               herein)   is  entitled  to  the  sum  of   Rs.               12,36,415   or  in  the  alternative  to   Rs.               6,60,369 or in the further alternative to  Rs.               5,95,764   as  worked  out   respectively   in               annexures A to C to the Statement of Claim.                Issue   6(A).   Whether  the  petitioner   is               entitled to the unpaid dividends  attributable               and   pertaining  to  the  General   Insurance               Business  of  the  petitioner  as  claimed  in               paragraph 6 of the Statement of Claim.                  Issue   7(A).   Whether  the  Tribunal   has               jurisdiction  to grant interest on the  amount               of compensation.               Issue 7(B).  If so at what rate and for  which               period.      On  issue 5 the Tribunal calculated the amount  payable by  the respondent to the appellant on the following  lines: Amount payable towards compensation to the appellant was Rs. 5,95,764;  out  of  the allocable  paid-up  capital  of  Rs. 9_,79,683,  the  respondent  had  already  received   assets equivalent  to  Rs. 1,35,919; the balance  receivable  under that  head was, therefore, Rs. 1,43,764; out of the  sum  of Rs.  5,95,764  payable  to  the  petitioner-appellant,   the respondent  was  entitled to deduct Rs.  1,43,764;  and  the balance  payable by the respondent to the appellant was  Rs. 4,52,000.  Briefly stated what the Tribunal did was that  it ascertained  the compensation payable to the  appellant  and set off against that amount the balance of the amour due  to it from the appellant towards the allocable paid-up capital.      On  Issue  6(A) it held that the appellant  showed  the unpaid  dividends in the balance-sheets as the liability  of the life department, that it always regarded 1SC1/64--9 130 it  as a liability appertaining to the life  department  and that  as it was impossible to allocate the unpaid  dividends of  any shareholder to the several businesses carried on  by the insurer, it would rely upon the books of accounts of the insurer  to  find out whether it was the  liability  of  one department or the other.  On that reasoning it held that the entire  liability  for the unclaimed  dividends  and  assets equivalent  to that liability appertained to the  controlled business   and,   therefore,  statutorily  vested   in   the respondent-Corporation.     On issues 7(A) and 7(B) the Tribunal held that it had no jurisdiction   to   award   interest  on   the   amount   of compensation.   On  the  basis  of  the  said  findings  the respondent  was directed to pay to the appellant within  two weeks  a  sum of Rs. 4,52,000 less any sum that  might  have been  paid  by  the respondent to the appellant  by  way  of admitted compensation.  Hence the appeal.     Mr.   Setalvad,  learned  counsel  appearing   for   the appellant, raised before us the following three points:  (1) the  Tribunal had no jurisdiction to decide on the  question of the capital allocable to the controlled business as there was  no  dispute thereto between the parties  and  the  said question  was,  therefore,  not  referred  to  it;  (2)  the liability of the appellant-Company for  unclaimed  dividends and   assets   equivalent  to  that   liability   were   not transferred to and vested in the Corporation under s.7(1) of the  Act:  and  (3)  the  appellant  would  be  entitled  to interest on the amount of compensation payable to it and the Tribunal had jurisdiction to award the same.

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   On  the  first  question the  learned  counsel  took  us through  the correspondence that passed between the  parties and  the pleadings before the Tribunal, and  contended  that the said correspondence, pleadings, and the issues disclosed that there was no dispute between the parties in respect  of the  capital  allocable  to  the  controlled  business  and, therefore,  the Tribunal went wrong in deducting under  that head a higher 131 amount  than  was agreed upon between the  parties.  As  the answer  to  this  argument  mainly  depends  upon  the  said correspondence   and   the  pleadings,  we   shall   briefly scrutinise  them.  On May 21, 1957, the res-pondent  offered to  the  appellant  to pay a sum of  Rs.  3,30,023  in  full satisfaction  of the compensation payable to  the  appellant for  the  acquisition of its controlled business  under  the Act,  and to set off’ against the said sum an amount of  Rs. 1,71,365,1  being  the part of the paid-up  capital  of  the appellant-Company  and assets representing such part,  which had  been  allocated  to  the  controlled  business  of  the appellant-Company  in  accordance  with  r.18  of  the  Life Insurance Corporation Rules, 1956, made under the Act.   The letter concluded thus:                      "As  the aforesaid assets have not  yet               been  transferred to the Corporation the  said               amount  of  Rs.  1,71,365  will  be  set   off               against, and form a deduction from, the amount               of compensation payable to your Company."     The  offer was couched in clear and  unambiguous  terms. It was a composite offer.  The letter could not be construed to   contain  two  different  matters,  one  an   offer   of compensation  and  the  other a demand for  payment  of  the amount  due  to  the respondent in respect  of  the  paid-up capital allocable to the controlled business.  On the  other hand,  in  express  terms  the  offer  was  for  payment  of compensation  after  setting  off  the  amount  due  to  the respondent. On August 9, 1957, the appellant wrote a  letter in  reply to the respondent’s.  Therein an attempt was  made to split up the offer.  The appellant stated that the amount of  compensation offered in the letter, namely, the  sum  of Rs.  3,30,023  was not acceptable to it. In  regard  to  the amount of capital allocated by the Company to the controlled business,  it stated that the assets worth Rs. 1,35,919  had already  been transferred to the respondent and that  having regard  to the amount claimed by the respondent  under  that head, only a sum of Rs. 35,446 remained to be transferred to the Corporation by it.  It asked that the said amount 132 might be deducted from the amount of compensation that might be  ordered and decreed to be ’paid to it by  the  Tribunal. It  would  be  seen  from this  letter  that  the  appellant accepted  a  part of the offer and rejected  the  rest.   On August  20,  1957, the respondent replied to  the  appellant that  as  its  offer  was not  accepted,  it  had  sent  the necessary  paper to the Tribunal.  On August 22,  1957,  the appellant received a notice from the Tribunal.  The preamble to that notice read:                      "Whereas  you  have  not  accepted  the               amount  determined  by  the  Corporation   and               offered in full settlement of the compensation               to  you  under the Act and  whereas  you  have               requested the  Corporation to have the  matter               referred  to  the Tribunal  for  decision  and               whereas  the Corporation has so  referred  the               matter."

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   This clearly shows that the dispute before the  Tribunal arose as the appellant did not accept the amount  determined by  the  Corporation and offered in full settlement  of  the compensation  payable  to the appellant under the  Act.   It does  not indicate that the accepted part of the  offer  was considered to be a closed matter between the parties and the disputed part only was put in issue.  On September 13, 1957, the  appellant wrote a letter to the  respondent  requesting it  to pay the amount of compensation offered by it  subject to  adjustment on the basis of the decision to be  given  by the Tribunal.  It also requested the respondent to supply to it a copy of the calculation sheet to show how the amount of compensation offered by it had been arrived at.  On the same day,  the  respondent sent a copy of  the  said  calculation sheet,   which  clearly  showed  not  only  the  amount   of compensation payable but also the amount of paid-up  capital allocable  to the controlled business deductible  therefrom. On  September 17, 1957, the respondent made it clear to  the appellant that if the appellant agreed to accept the  amount offered  by  it  in full satisfaction  of  the  compensation payable to the appellant under the Act, the respondent 133 could  make  payment  of  the said amount  to  it.   It  is, therefore,  clear  that  the  dispute  between  the  parties related to the composite offer made by the respondent  i.e., the  compensation  payable  as well as the set  off  of  the amount  due to the respondent calculated under r. 16 of  the Rules made under the Act.     That  this  was the dispute is also  apparent  from  the pleadings  before  the Tribunal.  On October 10,  1957,  the appellant filed a statement before the Tribunal and in  para 4  thereof,  the  contents  of the  letter  written  by  the respondent  on  May  21,  1957  were  extracted.   How   the appellant  understood the scope of the offer is  clear  from the following extract from the said paragraph:                     "By  and  under  the  said  letter   the               Defendant  inter alia stated that part of  the               paid  up  capital  of   the   Claimant,    and               assets  representing such part, which had been               allocated  to the controlled business  of  the               Claimant  in  accordance with Rule 18  of  the               Life   Insurance  Corporation   Rules,   1956,               amounted  to  Rs.  1,71,365 and  that  as  the               aforesaid  assets  had  not  till  then   been               transferred to the Defendant, the said  amount               of Rs. 1,71,365 would be set off against,  and               form   a   deduction  from   the   amount   of               compensation payable to the Claimant."     The  appellant,  therefore, understood the  offer  as  a composite  one.  In para 5 thereof, the appellant  gave  the contents of its reply.  On November 7, 1957, the  respondent filed  a  statement  before the Tribunal  and  in  para..  3 thereof  it  reiterated  its offer of  compensation  of  Rs. 3,30,023  with a claim for set off on a calculation made  in accordance   with  r.18  of  the  Rules.    Throughout   the correspondence  and  in  the pleadings  the  respondent  was consistently  standing by the composite offer.  It did  not, either  expressly  or by necessary implication,  accept  the attempt  made by the appellant to split up the  said  offer. When  one party makes a composite offer, each  part  thereof being  dependent  on the other, the other  party  cannot  by accepting a part of the offer compel the other 134 to  confine  its  dispute only to that  part  not  accepted, unless the party offering the composite offer agrees to that

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course.   In this case not only there was no such  agreement between  the  parties,  but the  respondent  was  throughout insisting upon the acceptance by the appellant of the entire offer  in full settlement of the appellant’s  claim  against the respondent.      Reliance is placed upon the circumstance that there was no  specific issue framed by the Tribunal in respect of  the paid-up capital allocable to the controlled business of  the appellant.   But the pleadings clearly pinpoint the  dispute between  the parties in respect of the set off.  As we  will indicate  later  in  our judgment, the  calculation  of  the amount   due  towards  paid-up  capital  allocable  to   the controlled business depends on a basic factor that goes into the  calculation of the amount due towards compensation.  It was presumably found not necessary to frame a specific issue in  respect thereof, for if that factor was settled one  way or  other,  the amount due under the said head  was  only  a matter  of  calculation and could certainly  be  taken  into consideration  in  awarding the set off  under  the  general issue, 8.       Further,  it  does not appear from the  order  of  the Tribunal that this question was raised before it. Indeed, it appears  that both the parties proceeded on the  basis  that the  calculation of the amount due towards compensation  and that due towards paid-up capital allocable to the controlled business  were linked together and that by  calculating  the said  two figures on the same basis one should  be  deducted from  the other.  If the question raised before us had  been raised before the Tribunal, one would expect the Tribunal to deal  with that matter.  On the other hand, para 19  of  the order shows that the appellant did not dispute the manner of the  set  off  on the basis of the  amount  of  compensation ascertained by the Tribunal. Mr  Setalvad contended that under s. 16(1)of the  Act,  read with Part A of the First Schedule, com- 135 pensation   should  be  computed  in  accordance  with   the provisions  contained  in para 1 or para 2 and paid  to  the insurer  on  the  basis of the computation  which  was  more advantageous to him and that for the purpose of  calculating the  compensation  payable  in accordance with  para  1  the amount  representing  the paid-up capital allocable  to  the controlled  business had no relevance.  He  illustrated  his argument  by taking us through the alternative  calculations made  by  the Tribunal and pointing out that  while  in  the calculations made in terms of para 2 of Part A of the  First Schedule  the  paid-up capital allocable to  the  controlled business  went  into the calculations, in  the  calculations made in accordance with para 1 that item was not taken  into consideration  at  all.  Though prima  facie  this  argument appears  to be plausible, a deeper scrutiny of  the  figures indicates  that there is an integral connection between  the compensation  and  the  amount   representing  the   paid-up capital allocable to the controlled business.    Under  r.  18(1)  of the Rules, in respect of  a  Part  A insurer like the appellant, the paid-up capital allocable to the  controlled  business shall be that  proportion  of  the total  paid-up  capital  of the  insurer  which  the  annual average  of the profits from the controlled business  during the  period covered by the relevant actuarial  investigation bears to the total of the annual average of profits plus two times the annual average of the profits from other  business during that period.The factor will be,         Annual average of surplus -------------------------------------------

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     Total of annual average of surplus       PLUS two times the annual average       of profits from non-life business. or shortly stated,                       L                    --------------                      L+2 non-L 136 On that basis the factor will be,                Rs. 15,512.6 ---------------------------------------- Rs. 90,523.8 (i.e. 15,512.6+75,011.2)                  =0.17136488 Rs.  15,512.6 being the annual average of surplus  from  the controlled  business,  as  determined  by  the  Corporation, and Rs. 75,011.2 being twice the annual average  of  profits from non-life business.  It is not disputed that the paid-up capital of the Company was Rs. 10,00,000.  If the factor was applied, the capital allocable  to the  controlled  business would  be,  0.17136488  Rs.  10,00,000  Rs.  1,71,365.   The compensation  to be given by the Corporation to the  insurer to whom Part A of the First Schedule to the Act  applies--it is conceded that the said Part applies to the  appellant--is 20  times  the annual average of the share  of  the  surplus allotted to the shareholders of the appellant.  On the basis that  Rs.  15,512.6 was the annual average  of  the  surplus allotted   to  the  shareholders  of  the   appellant,   the Corporation ascertained the amount of compensation at a  sum of Rs. 3,30,023 and offered the same to the appellant.     It  will  be seen from the aforesaid  calculations  that there  is  an integral connection between  the  compensation payable  to  the  insurer and the  amount  representing  the capital allocable to the controlled business transferred  to the Corporation.  The common factor for both the amounts  is the   annual  average  of  the  surplus  allotted   to   the shareholders.   The  same  surplus must  be  the  basis  for calculating  both  the  figures.   Obviously  two  different figures  cannot  be  given for the  same  surplus.   If  two different  figures are given for the same surplus, not  only one  of  the  calculations must be  wrong,  but  also  grave injustice  would be done to one of the parties.  As the  two figures  cannot  be  disassociated, the  respondent  made  a composite offer.     What happened before the Tribunal is this: the appellant in annexure C to the Statement of 137 Claim claimed that the annual average of the surplus  deemed to  be allocated to the share-holders was Rs. 29,125.2;  the respondent  stated  that it was only Rs. 15,512.6:  and  the Tribunal came to the conclusion that the said annual average of  the surplus was Rs. 29,125.2.  The result was  that  the calculations  made  by the Corporation under  the  said  two heads were upset.  On that basis, applying the same  formula the  compensation was raised  to  a sum of Rs.  2,79,683.18. The  Tribunal, therefore, rightly set off the  said  figures one  against  the  other and held that  the  balance,  after making  other  admitted  deductions,  was  payable  to   the appellant.     The above discussion clearly establishes the reason  why a composite offer was made and why the dispute in respect of the  said offer could not be split up into two parts.   Both the  amounts  are payable under the provisions of  the  Act. Calculation of both depends upon the same "surplus".  It is, therefore, reasonable to hold that the Act contemplates  the setting  off one against the other.

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   Rule 12A of the Rules confers ample jurisdiction on  the Tribunal   to   effectuate  the  said   intention   of   the Legislature.  The material  part of r.12A reads:                      "The Tribunal may exercise jurisdiction               in the whole of India and shall have power  to               decide   or  determine  all  or  any  of   the               following matters, namely :--                      (iv)   all  claims   for   compensation               payable  under  the  Act  to  insurers   whose               controlled  business has been  transferred  to               and vested in the Corporation; and all matters               connected with the determination, payment  and               distribution of such compensation.                      (vi)  such supplemental, incidental  or               consequential  matters which the Tribunal  may               deem  it’ expedient or necessary to decide  or               determine for the               138               purpose  of  securing  that  the  jurisdiction               vested  in it under the Act and in respect  of               matters   referred  to  above  is  fully   and               effectively exercised.     A  combined reading of cls. (iv) and (vi) of r.  12A  of the Rules makes it abundantly clear that a claim for set off of  the  nature  that we are now  considering  is  certainly covered  by  the wide phraseology of cl. (vi)  of  the  said rule.   This  rule,  it is said, was  introduced  after  the decision  on the dispute in the instant case was given.   Be it  as  it  may,  the material  clauses  of  the  rule  only recognize  the  pre-existing  principles  inherent  in   the relevant dispute under the provisions of the Act.     This  Court in National Insurance Co. v. Life  Insurance Corporation of India (1) held that the claim for set off was within  the jurisdiction of the Tribunal.  Hidayatullah  J., speaking for the Court, observed at p. 1178:                     "No   doubt,  the  Act  says  that   the               Corporation shall pay the compensation due  to               the  Company but in another part it also  says               that  the  Company shall pay in  lieu  of  the               assets appertaining to the controlled business               a sum of Rs. 6,00,000. These two provisions of               law  must be read together and in our  opinion               the  Corporation was entitled to a set-off  in               respect  of  the  amount due  to  it  and  the               Tribunal  was perfectly right when it  ordered               such a set off."      We,  therefore,  hold  that  the  dispute  between  the parties  related  not only to the compensation, but  to  the set-off also, that dispute was referred to the Tribunal  and that  the Tribunal had jurisdiction to decide that  dispute. The  Tribunal  in para 19 of its order rightly set  off  the amounts  due  from the one to the other and  held  that  the balance  of  Rs.  4,52,000 was only  due  to  the  appellant towards compensation.     The  next question relates to the outstanding  dividends or assets equivalent thereto taken posies  (1) [1964] 2 S.C.R. 182. 139 sion  of  by the Corporation.  Some material  facts  may  be stated.   The  paid-up  capital  of  the  Company  was   Rs. 10,00,000 divided into 40,000  shares  of Rs. 25 each  fully paid.   On  September  28, 1953, the  appellant  declared  a dividend  of 4% amounting to a sum of Rs. 40,000;  again  on September  29, 1954, it declared a dividend of 4%  amounting to  a  sum  of Rs. 40,000; and again in  the  year  1955  it

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declared  a  dividend  of 6 % amounting to  Rs.  60,000.  In regard to the said amounts so declared certain payments were made  to  some of the shareholders and the  balance  of  the outstanding  dividends  as  on December 31,  1955,  was  Rs. 89,680.  The balance-sheets of the Company showed the unpaid dividends as the liability of  the life  department.  Though the   amounts  representing  the  said  dividends  are   not specifically shown in the assets, it cannot be disputed that the  said amounts must have been included in the  assets  or cash  shown in the balance-sheets. The result was  that  the entire  liability  for the unclaimed  dividends  and  assets equal  to that liability were taken over by the  respondent. The  Tribunal relying on the books of account, the  balance- sheets  and  other documents of the Company  held  that  the liability was only that of the life insurance business.     Mr.   Setalvad,  learned  counsel  for  the   appellant, contended that under s. 7(1) of the Act only the assets  and liabilities  appertaining to the controlled business  of  an insurer   shall  be  transferred  to  and  vested   in   the Corporation  and that the dividends declared and the  assets equivalent to the said liability were assets and liabilities of the Company and not those appertaining to the  controlled business   and,  therefore,  they  did  not  vest   in   the Corporation.  Section 7(1) of the Act reads:                      "On  the appointed day there  shall  be               transferred  to and vested in the  Corporation               all the assets and liabilities appertaining to               the controlled business of all insurers."     An attempt is made to separate the Company’s assets  and liabilities from the assets and liabilities 140 of the controlled business, and an argument is advanced that on  a  declaration of dividends the said dividends  and  the assets  corresponding  thereto  cease to  appertain  to  the business but belong to the Company. The question, therefore, is  whether  the dividends declared and the amounts  in  the hands  of  the Company representing them  appertain  to  the controlled  business of the insurer.  Before we answer  this question  it will be convenient to know precisely the  legal effect  of  a  declaration of a dividend of  a  company.  In Palmer’s  Company  Law,  20th Edn., the  legal  position  is stated thus, at p. 625:                      "Where  a  dividend  is  declared   and               becomes payable, it is a debt--in England,  as               will be explained  in the following section, a               speciality   debt--and  each  shareholder   is               entitled   to   sue  the   Company   for   his               proportion. Until the dividend is declared and               payable, the shareholder has no right to sue."                In  re   Savern  and Wye  and  Severn  Bridge               Railway Co.(1), Romer J. observed thus:                      "In the first place, they contend  that               the  company was in the position of a  trustee               for them of these dividends.  In my  judgment,               this  was  not so. The  declaration  that  the               dividend was payable did not make the  company               a trustee of it for the shareholders.               " The learned Judge said at p. 564 thus:                      "The   dividends   in   question   were               declared  and became payable more than  twenty               years before the present claims were made, and               constituted debts due to the shareholders  for               which  they  could have sued at  law,  as  was               pointed out by Lindley L.J. in the passage  in               his  treatise on Company Law (p.  437),  which

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             was cited in the argument before me."     This  decision is an authority for the view that when  a company   declares  a  dividend  on  its  shares,   a   debt immediately  becomes payable to each shareholder in  respect of his share of the dividend for which (1) [1896] 1 Ch. D. 559, 565. 141 he  can  sue at law and the declaration does  not  make  the company  a  trustee  of the dividend  for  the  shareholder. Indeed,  this  legal position is not disputed.  If  so,  the shareholders  in the present case were only in the  position of  creditors in respect of the dividends declared in  their favour and the amounts representing the dividends  continued to  be a part of the assets of the Company; and  indeed  the balance-sheets  filed  in  the present  case  show  that  no particular  amounts  had  been  earmarked  for  payment   of dividends.  To put it differently, the amount equivalent  to the dividends declared continued to be a part of the  assets of the Company and the dividends continued to be its  debts. The  said  assets  were part of the general  assets  of  the Company  and the said liabilities were part of  the  general liabilities of the Company.  There cannot be any  difference in law, in the matter of ownership of the assets, between  a part of the assets equivalent to the dividends declared  and the rest of the assets.     With this background let us scrutinize the provisions of s.  7(1)  of  the  Act.   Under  that  sub-section,  on  the appointed  day there shall be transferred to and  vested  in the Corporation all the assets and liabilities  appertaining to  the  controlled  business of all  insurers.   The  first question  is whether the dividends declared and the  amounts representing the said dividends fell outside  the expression "assets and liabilities" of the controlled business.  It  is said that though they are part of the assets and liabilities of  the  Company, they do not appertain  to  the  controlled business.  The word  "appertain" in its ordinary meaning  is "belong  to, be appropriate to, relate to". The  assets  and liabilities  must,  therefore,  belong  to  the   controlled business  of the insurer. That is no doubt a  limitation  or qualification  imposed or made on "assets and  liabilities". As  the section is providing for the transfer of assets  and liabilities  of  a Company which may have  businesses  other than life insurance business, it has become necessary to say that the said assets  and liabilities are those that pertain only to the controlled business.  The  antithesis is not 142 between  the  Company  and  its  business  but  between  the controlled business and the other businesses of the insurer. That this is so is clear from the exhaustive enumeration  of the  categories of property in sub-s.(2) of s. 7 of the  Act constituting assets appertaining to the controlled business. Sub-s. (2) of s. 7 embodies an inclusive definition and in a sense  it  enlarges the meaning of the word  "assets".   The enumerated  categories  of assets include both  movable  and immovable properties and "all other interests and rights  in or arising out of such property as may be in the  possession of  the insurer."  Liabilities  shall be deemed  to  include all  debts and obligations of whatever kind existing at  the time  of  the statutory transfer. All the  said  rights  and liabilities  pertaining  to  the  controlled  business   are transferred  on the appointed day to the  Corporation.   The said enumeration does not leave any margin for allotment  of any  assets  to  the  Company  as  distinguished  from   its controlled  business.   To illustrate, take the  case  of  a company  doing only the life insurance business.  How is  it

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possible to hold that the declared dividends and the  assets representing  the  said dividends are those of  the  company unconnected  with  the  business ? That may  be  so  if  the declared  dividends are held in trust by the Company  for  a shareholder.   But, as we have pointed out, the settled  law on the point does not countenance any such concept of trust. The  shareholders can only realise their dividends from  the assets  of  the  business,  for  they  include  the  amounts representing the dividends.  In any view, the definition  of assets and liabilities of a controlled business in sub-s.(2) of s. 7 of the Act is certainly comprehensive enough to take in the said declared dividends and the corresponding assets. We cannot, therefore, accept this argument.     Even  so,  it is contended that, the appellant  being  a composite  insurer,  the dividends declared and  the  assets equivalent  to  that liability appertained not only  to  the life  business  but  also to the  general  business  of  the insurer and, therefore, under s. 7(1) of 143 the  Act  only such part of the said  assets  and  dividends allocable to the controlled business shall be transferred to the  Corporation,  but the Tribunal wrongly  held  that  the entire dividends and the assets representing, the same  were transferred   to  the  Corporation.   To   appreciate   this argument,  some of the relevant provisions may  be  noticed. We have already  noticed s. 7 (1) of the Act where under all the  assets and liabilities appertaining to  the  controlled business  of, the insurer shall be transferred to an  vested in  the  Corporation.  Explanation (a) to s. 7  of  the  Act reads:                     "The expression "assets appertaining  to               the  controlled  business of  an  insurer"  in               relation to a composite insurer, includes that               part of the paid-up capital of the insurer  or               assets  representing  such part which  has  or               have been allocated to the controlled business               of  the insurer in accordance with  the  rules               made in this behalf."                   A further clarification is found in s.  10               of the Act, which reads:               (1)   "For the removal of doubts it is  hereby               declared  that  in any case where  an  insurer               whose controlled business has been transferred               to and vested in the Corporation under the Act               is a composite insurer, the provisions of  the               preceding  sections  shall only apply  to  the               extent to which any property appertains to his               controlled  business and to rights and  powers               acquired,   and  to  debts,  liabilities   and               obligations   incurred   and   to   contracts,               agreements  and other instruments made by  the               insurer  for  the purposes of  his  controlled               business and to legal proceedings relating  to               those  purposes, and the provisions  of  those               sections shall be construed accordingly."                 (2).  The Central Government may.  by  rules               made in this behalf, provide--                  (b)  for  the  allocation  of  the  paid-up               capital  or assets representing  such  paid-up               capital,               144               as  the  case may be, between  the  controlled               business   of  the  insurer  and   any   other               business;                 (c) for the apportionment and the making  of

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             financial  adjustments  with  respect  to  any               debts, liabilities or obligations incurred  by               any  such insurer partly for the  purposes  of               his  controlled business and partly for  other               purchases  and for any necessary variation  of               mortgages  and encumbrances relating  to  such               debts. liabilities or obligations." Rule   18   of  the   Rules  provides   for  the  method  of allocation of the paid-up capital of the composite  insurer. These  provisions  make  it  clear that in  the  case  of  a composite   insurer  only  such  part  of  the  assets   and liabilities  allocable to the controlled business  shall  be transferred  to  and  vested  in  the  Corporation.  As  the dividends  declared  and the assets  representing  the  said dividends  appertain  to the composite business,  there   is force  in  the argument of the learned counsel that  only  a part  of  such  assets  and  liabilities  referable  to  the controlled  business could be transferred to and  vested  in the  Corporation, and that the rest should be left with  the insurer.   This argument is sought to be met by the  learned Attorney  General by contending: that the  appellant  showed the  said  assets  and  liabilities  as  part  of  the  life insurance  business  in the balance-sheets duly approved  by the  Controller under the Insurance Act, 1938 (Act No. 4  of 1938)  and, therefore, it is precluded from questioning  the correctness  of  the said  balance-sheets.  This  contention takes  us to the consideration of the Insurance  Act,  1938. Sections 10(1)and 11 of the said Act provide for separations of  accounts  and  funds, and  maintaining  of  account  and balance-sheets  for  different businesses in  the  insurance line.   Under  s. 10(1), an insurer shall  keep  a  separate account  of  all receipts and payments in  respect  of  each class  of insurance business mentioned’ therein;  and  under cl. (2) thereof, if he carried on the business of life 145 insurance,  all  receipts due in respect  of  such  business shall  be  carried to and shall form a  separate  fund,  the assets  of which shall, after the expiry of six  months,  be kept  distinct  and separate from all other  assets  of  the insurer.   Section  11 of the Insurance  Act  enjoins  every insurer  in respect of insurance business transacted by  him to  prepare with reference to every year in accordance  with the  regulation contained in Part I of the First Schedule  a balance-sheet  in  the forms set forth in Part  II  of  that Schedule.  Form  A has two columns, one  under  the  heading "Life  Annuity  Business" and the other  under  the  heading "Other  classes  of  business".   Under  s.  15(1)  of   the Insurance Act, the audited accounts and statements  referred to  in  s. 11 or s. 13 (5) and the  abstract  and  statement referred  to in s. 13 shall be furnished as returns  to  the Controller within the time  prescribed thereunder.  Under s. 21 of the said Act, if it appears to the Controller that any return  furnished  to  him  under  the  provisions  of   the Insurance Act is inaccurate or defective in any respect,  he may  get  the  necessary information from  the  insurer  and decline  to accept the same unless the inaccuracy  has  been corrected  and the deficiency has been supplied  before  the time prescribed. Under sub-s. (2) of s. 21 of the said  Act, the  Court may, on the application of an insurer  and  after hearing  the  Controller,  cancel  any  order  made  by  the Controller or may direct the acceptance of any return  which the  Controller  has  declined to  accept,  if  the  insurer satisfied the Court that the action of the Controller was in the circumstances unreasonable.  Section 22 of the said  Act confers  power  on  the  Controller  to  order  revaluation.

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Section  23 thereof says that every return furnished to  the Controller, which has been certified by the Controller to be a  return  so furnished, shall be deemed to be a  return  so furnished  and  under  sub-s. (2)  thereof  every  document, purporting to be certified by the Controller to be a copy of a return so furnished, shall be deemed to be a copy of  that return  and shall be received in evidence as if it were  the original return, unless some variation between 18CI/64--10 146 it and the original return is proved.  The first question is whether  under  the  provisions of  the  Insurance  Act  the contents  of  a certified balance-sheet of  an  insurer  are binding  on  the insurer in a  Collateral  proceeding.   The provisions  of  the  Insurance  Act  do  not  say  that  the correctness of the balance-sheet certified by the Controller is  conclusive  for  all purposes or that it  could  not  be questioned  in a collateral proceeding.  For the purpose  of the Insurance Act it would be accepted as correct.  The said Act does not, expressly or by necessary implication, exclude the jurisdiction of courts and tribunals from going into the correctness  of the said balance-sheets.  There is  also  no provision  in the Life Insurance Corporation Act making  the contents of the said balance-sheets final for the purpose of transfer  to and vesting in the Corporation the  assets  and liabilities  of the insurer.  It certainly affords  valuable evidence in an enquiry before the Tribunal; but the contents of the balance-sheets can be proved to be wrong.     Mr. Setalvad argued that for the purpose of  convenience of disbursement of dividends, the entire amount is shown  as appertaining  to  the life insurance business, as  the  head office  in  Ajmer  was  only  dealing  with  life  insurance business and making the disbursements.  Be it as it may,  it is  obvious  in  this  case  that  the  dividends   declared appertained  to  the composite business and only a  part  of them  appertained to the controlled business.  The  relevant entries in the certified balance-sheets are, therefore,  not correct.   If so, it follows that under s. 7(1) of the  Life Insurance  Corporation  Act on the appointed day  only  such part  of  the said dividends and  the  corresponding  assets appertaining to the controlled business were transferred  to and vested in the Corporation.     The  next question is how to apportion the  said  assets and  liabilities  between the Corporation and  the  Company. Before   the  Tribunal  the  appellant  did  not   ask   for apportionment of the dividends but wanted a transfer of  the entire liability to it with the assets 147 corresponding   to’ the  liability undertaking to  reimburse the respondent for any claim of the shareholders against it. In  the  petition for special leave the  appellant  did  not specifically ask for apportionment of the dividends  between the  Corporation  and  the Company.  Even  at  the  time  of arguments  Mr. Setalvad sought to sustain the claim  of  the appellant on a construction of s. 7 of the Act, namely, that the  said  assets and liabilities only  appertained  to  the Company,   though   at  a  later  stage   he   pressed   for apportionment   as  an  alternative  argument.    The   main contention we  have rejected.  Even if the apportionment was made, the allocable assets and liabilities would cancel each other,  for  both the Corporation and the Company  would  be liable  to  pay  the  entire  amounts  so  allotted  to  the shareholders. But there may be a practical advantage to  one or  other  of  the parties in so far  as  a  shareholder  or shareholders may not care to claim the dividends payable  to

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him  or them.  In the circumstances, we do not think we  are justified  in  exercise of  the  extraordinary  jurisdiction under  Art. 136 of the Constitution to permit the  appellant to raise the plea for the first time before us and to remand the  matter  to  the  Tribunal  for  apportionment  of   the dividends  and  the corresponding  assets.   We,  therefore, cannot  accede  to  the request of  Mr.  Setalvad  for  this indulgence at this very late stage of the matter.     The last point relates to the payment of interest.  Both the  parties  agreed that in view of the  decision  of  this Court  in the National Insurance Co. Ltd. v. Life  InSurance Corporation  of India(1), the appellant will be entitled  to interest at 4% on the sum of Rs. 4,52,000 from May 24, 1957, to the date of payment.     In  the  result, subject to the said  modification,  the appeal is dismissed with proportionate costs.               Appeal dismissed with modification. (1) [1964] 2 S.C.R. 182 148