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PETITIONER: THE TROPICAL INSURANCE CO.  LTD. & OTHERS

       Vs.

RESPONDENT: THE UNION OF INDIA & ANOTHER(and connected petition.)

DATE OF JUDGMENT: 22/09/1955

BENCH: IMAM, SYED JAFFER BENCH: IMAM, SYED JAFFER AIYAR, N. CHANDRASEKHARA DAS, SUDHI RANJAN BHAGWATI, NATWARLAL H. AIYYAR, T.L. VENKATARAMA

CITATION:  1955 AIR  789            1955 SCR  (5) 517

ACT:    Insurance-Insurer  doing  life insurance  business  along with general insurance business-Power of Central  Government to appoint Administrator-Such power, if confined exclusively to  life  insurance business-Grounds not taken  in  petition under Art. 32, if can be urged at the hearing-Insurance  Act (IV of 1938), s. 52-A-Constitution of India, Art. 32. 518

HEADNOTE:   The  petitioners,  two Insurance  Companies,  carrying  on business  both  in  life insurance  and  general  insurance, questioned the validity of notifications issued against them under  s.  52-A  of the Insurance  Act  for  appointment  of Administrators  to take over management of their affairs  on the  ground,  inter  alia,  that  s.  52-A  was  exclusively restricted to life insurance business and the Government had no power to take oyer management of general insurance  busi- ness.   Held,  that  the Insurance Act of 1938 no  doubt  makes  a distinction  between  life insurance  business  and  general insurance business, but its main concern is to protect  life insurance  policy-holders.  Although s. 52-A of the Act  has no  application  to an insurer who carries  on  business  in general  insurance  alone,  it  undoubtedly  applies  to  an insurer  who combines both and gives the Central  Government the  power, on the report of the Controller, to  appoint  an Administrator  to  take over the management  of  the  entire business of the insurer including general insurance business when such insurer is found to act in a manner prejudicial to the interests of the life policy-holders. That grounds not specifically taken in petitions under  Art. 32 cannot be urged at the time of the hearing.

JUDGMENT:     ORIGINAL JURISDICTION: Petitions Nos. 186 & 195 of 1954. Under  Article  32  of the Constitution  of  India  for  the

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enforcement of Fundamental Rights. S.C.  Isaacs, (Mohan Behari Lal and P. K. Ghosh,  with  him) for the petitioners in both petitions. M.   C. Setalvad, Attorney-General of India (Porus A.Mehta and P. G. Gokhale, with him) for the respondents. 1955.   September  22.   The  Judgment  of  the  Court   was delivered by IMAM J.-These petitions under article 32 of the Constitution of  India question the validity of the notifications  issued under section 52-A of the Insurance Act of 1938 (hereinafter referred   to  as  the  Act)  and  the  appointment  of   an Administrator.   In  the  case  of  the  Tropical  Insurance Company   Ltd.   an  Administrator  was   appointed,   under notification dated the 14th of July, 1951 and in the case of the   Jupiter   General  Insurance  Company   Ltd.   another Administrator  was  appointed under notification  dated  the 10th of July, 519 1951.   These two insurance companies do insurance  business of   life  insurance  and  general  insurance.    Admittedly previous  to  the  appointment  of  the  Administrators  the Controller   issued  notices  under  section  52-A  to   the petitioners   and  the  Finance  Ministry  of  the   Central Government sent letters to them pointing out the allegations in the report of the Controller to which they replied.   The  learned  Counsel  for the  petitioners  has  candidly stated  that  he could not raise  any  constitutional  point after the fourth amendment to the Constitution of India.  He assumed; therefore, that the provisions of sections 52-A  to 52-G  of the Act were constitutional but he urged  that  the notifications under section 52-A and the taking over of  the management  of  the affairs of the  companies  were  invalid inasmuch  as they were in excess of the powers conferred  by section   52-A  of  the  Act  and  that  the   notifications appointing  the  Administrators  do not fix  the  period  of management  as required by law.  He further urged  that  the provisions  of  the  section 52-B of the Act  had  not  been complied  with  and  in consequence the  management  by  the Administrator  had been excessively prolonged and  thus  had become unlawful.  There has, therefore, been a violation  of the  fundamental rights of the petitioners.  Finally it  was urged   that  there  was  no  authority  either  under   the provisions  of  the  Act or of any other law  by  which  the Government  was  empowered to take over  management  of  the affairs of the company with respect to its general insurance business.   The power of the Government under  section  52-A was restricted exclusively to life insurance business.  As  to  the  first  two contentions,  they  were  urged  in Petitions  Nos.  94 of 1954 and 183 of 1954,  but  were  not allowed  to be put forward by this Court as these  questions had  not  been specifically raised in  the  petitions  under article  32  of the Constitution and they  were  accordingly dismissed.   The position is similar in this respect so  far as  the present applications are concerned and  consequently it  must be held that the petitioners cannot be allowed  now to urge grounds which they had not taken in their petitions. 66 520 There  remains,  however, to consider  the  last  contention urged  on behalf of the petitioners.  It was pointed out  by Mr.  Isaacs  that the petitioners  are  insurance  companies doing  both  life insurance business and  general  insurance business.  He contends that a section 52-A of the Act, on  a true  interpretation of its provisions, applies only to  the life insurance business carried on by an insurer and not  to

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the   general   insurance  business  done   by   him.    The Administrator appointed under section 52-A of the Act  could therefore  take over management only of the  life  insurance business done by the insurer.  The notifications authorising him to take over the management of the insurance business of the  insurer including his general insurance  business  were thus beyond the powers conferred on Government under section 52-A  of the Act and such taking over of the  management  of the  general  insurance business of the petitioners  by  the Administrator was, therefore, without lawful authority.   In view of the submission made by the learned Counsel,  it is  necessary  to  set out the relevant  provisions  of  the section 52-A.  Sub-section (1) of that section states:-   "If at any time the Controller has reason to believe  that an insurer carrying on life insurance business is acting  in a  manner  likely  to be prejudicial  to  the  interests  of holders  of  life insurance policies, he may,  after  giving such  opportunity  to the insurer to be heard as  he  thinks fit, make a report thereon to the Central Government". Sub-section (2) states:-   "The  Central  Government,  if  it  is  of  opinion  after considering the report that it is necessary or proper to  do so,  may appoint an Administrator to manage the  affairs  of the   insurer  under  the  direction  and  control  of   the Controller". Sub-section (4) states:-   "The management of the business of the insurer shall as on and after the date of appointment of the Administrator  vest in  such  Administrator, but except with the  leave  of  the Controller,  the Administrator shall not issue  any  further policies" 521 Section  52-B  of the Act is concerned with the  powers  and duties  of  the  Administrator.   Under  this  section,  the Administrator  shall conduct the management of the  business of  the insurer with the greatest economy’  compatible  with efficiency and shall, as soon as may be possible, file  with the Controller a report stating what specified courses under the section should be taken which would be most advantageous to  the  general interest of the holders of  life  policies. One  of  the  courses specified is the  winding  up  of  the business  of  the  insurer.   Section 52-D  of  the  Act  is concerned  with  termination  of  the  appointment  of   the Administrator.  Section 53 of the Act is concerned with  the winding  up  by the Court and it enables the  Controller  to apply to the Court for winding up of an insurance company on certain  grounds, one of them being that the continuance  of the  company  would be prejudicial to the interests  of  the policy-holders.   Mr.  Isaacs  urged that the Act made a  clear  distinction between  life  insurance  business  and  general   insurance business of an insurer.  He referred to various sections  of the  Act  with  reference  to  Registration,  Separation  of Accounts and Funds and Balance-Sheets.  It was also  pointed out by him that the Act defines "general insurance business" and  "life  insurance  business"  and  these  two  kinds  of businesses are quite distinct.  There could be little  doubt that  the  Act  does regard  "life  insurance  business"  as something  distinct from "general insurance  business".   It seems to us, however, that while keeping this distinction in mind,  we have to give to the words used in section  52-A(1) their  ordinary  and  natural meaning.  "Insurer"  has  been defined  in section 2 of the Act.  The definition speaks  of an insurer carrying on an insurance business.  This business may  be  either  a  life insurance  business  or  a  general

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insurance  business  or both.  Under section 7  of  the  Act deposits  have  to be made by every insurer  other  than  an insurer specified in sub-clause (c) of clause (9) of section 2.  The section specifies the amount of deposit to  be  made where  the business done is life insurance only.   Similarly it specifies the deposit to be made in the case of business 522 done which comes within the description of general insurance business  only.  It also contemplates a combination of  life insurance  business  and  general  insurance  business   and specifies the deposit to be made in such event.  It is clear that section 52-A(1) does not apply to an insurer doing only general  insurance business.  The question for  decision  is does  it  apply to him when he ’also does  along  with  such business insurance business?  Section 52_A(1) speaks of  "an insurer  carrying on life insurance business".  It does  not speak of "only life insurance business".  It is  permissible for  an  insurer to combine in his insurance  business  both life and general insurance business.  If he acts in a manner which  is likely to be prejudicial to the interests  of  the holders  of the life insurance policies with him,  he  makes himself  amenable to the provisions of the section  52-A  of the Act and the Controller is authorised to make a report to the Central Government.  The Central Government, after  con- sidering the report, may appoint an Administrator to  manage "the  affairs"  of the insurer and the  management  of  "the business"  of the insurer shall vest in  the  Administrator. The  words "the affairs" and "the business" of  the  insurer are  wide enough to empower the Central Government  to  take over  the management of the entire business of  the  insurer including his general insurance business.To         hold otherwise would be to give an unnaturalmeaning to the words used in section 52-A of the Act.In  the present case  the insurers are public limitedcompanies and it is  difficult to   conceive  that  the  Act  intended  to  vest   in   the Administrator  the  management of only  the  life  insurance business  while  the insurers would be free  to  manage  the general  insurance business, because under section 52-B  the Administrator may suggest to the Controller for the  winding up  of  the company after managing  its  insurance  business economically and efficiently.  Under section 53 a Court  may order  a winding up of an insurance company if on an  appli- cation  by  the Controller, it is satisfied  that  the  con- tinuance  of the company is prejudicial to the interests  of the policy-holders.  The winding up of the com- 523 pany would be concerned with its entire insurance  business- ,including  life  and general  insurance  business,  because there  could be no partial winding up of a company.   It  is not  difficult  to imagine that the affairs of  the  company with  reference to its general insurance business may be  in such a hopeless state that winding up may be the only course to  be  taken to protect the interests of the  life  policy- holders.   When  the  provisions  of  the  Act  are  closely examined,  it will be noticed that its main policy has  been to  safeguard the interests of life policy-holders, who  are deeply  affected  by  the  manner  in  which  the  insurance business of an insurer is carried on.  We have no difficulty in  interpreting  section  52-A(1) to  mean  that  where  an insurer  is carrying on insurance business of various  kinds which includes life insurance business, he becomes  amenable to  the  provisions  of section 52-A if he is  acting  in  a manner  prejudicial to the interests of the holders of  life policies  and  he  would have  to  suffer  the  consequences following  the  report  made  by  the  Controller  and   the

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appointment  of  an Administrator by  the  Government.   The provisions  in  the Act making a  distinction  between  life insurance  business  and  general  insurance  business,  the keeping  of separate accounts and balance-sheets  have  been enacted  for the safeguard of the holders of life  insurance policies  and  they  provide  an  over-all  picture  of  the business  done  by the insurer showing the  exact  state  of affairs  concerning  the  life  insurance  business  of  the insurer.   These  provisions cannot and do  not  affect  the provisions of of section 52-A of the Act.   These petitions are accordingly dismissed with costs to be paid  by Petitioners 2, 3 and 4 in Petition No. 186 of  1954 and Petitioners 2 and 3 in Petition No. 195 of 1954. 524