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 17XVI A of 1957
MC Setalvad SN Andley Rameshwar Nath and PL Vohra for the appellant
CK Daphtary Attorney General for India ST Desai SJ Banaji and KL 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 s16 of the 31 of 1956 hereinafter called the Act
The appellant is a company duly incorporated under the Indian Companies Act 1882 and the 
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 section 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 section 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 ie 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 ie 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 present enquiry read thus Issue 5
Whether the petitioner appellant herein is entitled to the sum of Rs 1236415 or in the alternative to Rs 660369 or in the further alternative to Rs 595764 as worked out respectively in annexures A to C to the Statement of Claim
Issue 6A
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 7A
Whether the Tribunal has jurisdiction to grant interest on the amount of compensation
Issue 7B
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 595764 out of the allocable paid up capital of Rs 9_79683 the respondent had already received assets equivalent to Rs 135919 the balance receivable under that head was therefore Rs 143764 out of the sum of Rs 595764 payable to the petitioner appellant the respondent was entitled to deduct Rs 143764 and the balance payable by the respondent to the appellant was Rs 452000
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 6A it held that the appellant showed the unpaid dividends in the balance sheets as the liability of the life department that it always regarded 1SC164 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 7A and 7B 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 452000 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 s71 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
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 330023 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 1713651 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 r18 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 171365 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 section 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 330023 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 135919 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 35446 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
 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 ie 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 171365 and that as the aforesaid assets had not till then been transferred to the Defendant the said amount of Rs 171365 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 330023 with a claim for set off on a calculation made in accordance with r18 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 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 section 161of 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 181 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 Total of annual average of surplus PLUS two times the annual average of profits from non life business
or shortly stated L L2 non L 136 On that basis the factor will be Rs 155126 Rs 905238 ie 155126750112 017136488 Rs 155126 being the annual average of surplus from the controlled business as determined by the Corporation and Rs 750112 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 1000000
If the factor was applied the capital allocable to the controlled business would be 017136488 Rs 1000000 Rs 171365
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 155126 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 330023 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 291252 the respondent stated that it was only Rs 155126 and the Tribunal came to the conclusion that the said annual average of the surplus was Rs 291252
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 27968318
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
Rule 12A of the Rules confers ample jurisdiction on the Tribunal to effectuate the said intention of the Legislature
The material part of r12A 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 vs 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 600000
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 452000 was only due to the appellant towards compensation
The next question relates to the outstanding dividends or assets equivalent thereto taken posies 1  139 sion of by the Corporation
Some material facts may be stated
The paid up capital of the Company was Rs 1000000 divided into 40000 shares of Rs 25 each fully paid
On September 28 1953 the appellant declared a dividend of 4 amounting to a sum of Rs 40000 again on September 29 1954 it declared a dividend of 4 amounting to a sum of Rs 40000 and again in the year 1955 it declared a dividend of 6  amounting to Rs 60000
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 89680
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 section 71 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 71 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 Co1 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 LJ in the passage in his treatise on Company Law p 437 which 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  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 section 71 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 s2 of section 7 of the Act constituting assets appertaining to the controlled business
Sub section
2 of section 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 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 s2 of section 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 section 71 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 section 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 section 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 section 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 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 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 
Sections 101and 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 section 101 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 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 of the First Schedule a balance sheet in the forms set forth in 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 section 151 of the  the audited accounts and statements referred to in section 11 or section 13 5 and the abstract and statement referred to in section 13 shall be furnished as returns to the Controller within the time prescribed thereunder
Under section 21 of the said Act if it appears to the Controller that any return furnished to him under the provisions of the 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 section
2 of section 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
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 section
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 18CI64 10 146 it and the original return is proved
The first question is whether under the provisions of the the contents of a certified balance sheet of an insurer are binding on the insurer in a Collateral proceeding
The provisions of the 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 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 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 section 71 of the 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 section 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 him or them
In the circumstances we do not think we are justified in exercise of the extraordinary jurisdiction under article 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 vs Life InSurance Corporation of India1 the appellant will be entitled to interest at 4 on the sum of Rs 452000 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


Summary:
On the enactment of the  providing for the nationalisation of life insurance business
the 126 controlled business ie 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 ithat 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 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 section 71 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 181 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   followed
ii The definition of assets and liability of a controlled business in sub section
2 of section 7 of the Act is certainly comprehensive enough to take in unclaimed dividends and corresponding assets
Sub sections 1 and 2 of section 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  applied
iv The provisions of the 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 it would be accepted as correct
There is no provision in the 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 article 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 National Insurance Co Ltd vs 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 vs Life Insurance Corporation of India   followed