Appeal No 21 of 1960
Appeal from the judgment and order dated January 16 1959 of the Madras High Court in Writ Appeal No 67 of 1958 arising out of the judgment and order dated July 15 1958 of the said High Court in Writ Petn
No 922 of 1957
C B Aggarwala section N Andley J B Dadachanji and Rameshwar Nath for the appellant
R Ganapathy Iyer H J Umrigar R H Dhebar and T M Sen for respondent No 2 1960
May 4
The Judgment of the Court was delivered by WANCHOO J
This is an appeal on a certificate granted by the Madras High Court
The appellant Company had been carrying on various classes of insurance business other than life insurance after its incorporation in September 1941
On October 15 1956 an extraordinary general meeting of the shareholders of the Company passed a resolution by which all its insurance business was to cease forthwith and no further policies of insurance of any kind were to be issued thereafter
It was also resolved that no application should be made for renewal of the certificate granted under section 3 of the  No IV of 1938 hereinafter called the Act and that thence forward the Company should only carry on the business of money lending as a loan Company and also to do investment business
In consequence of these resolu tions the Company informed the Controller of Insurance in December 1956 that it was not applying for renewal of its registration for carrying on the business of insurance
In May 1957 the Controller wrote to the Company that its certificates for carrying on insurance business would be deemed to be cancelled from July 1 1957 and the cancellation was notified in the Gazette of India
It appears that the Government of India had been receiving complaints against the Company
Consequently on July 17 1957 the Government of India passed an order under section 33 of the Act directing the Controller of Insurance to investigate the affairs of the Company and to submit a report
Thereupon the Controller appointed Messrs Fraser and Ross to act as auditors to assist him in the investigation
The Company was informed of this order in September 1957
Thereupon it wrote to the Controller that no order under section 33 of the Act could be passed 860 against it as it had closed its business of insurance and the order in question was without jurisdiction
The Controller sent a reply to this communication and pointed to the provisions of section 2D of the Act in justification of the order
Thereupon the Company made an application under article 226 of the Constitution in the Madras High Court
Two main contentions were raised by it in the petition
In the first place it was submitted that the Company having closed all its insurance business no order could be passed against it under section 33
as that section only applied to companies actually carrying on the business of insurance and that in any case no such order could be passed even with the help of section 2D of the Act
In the second place it was contended that even if such an order could be passed under section 33 read with section 2D of the Act it could not be done in the present case as the Company s liabilities in respect of its insurance business did not remain unsatisfied or not otherwise provided for
Messrs Fraser and Ross as well as the Controller were made parties to the petition
The petition was opposed on behalf of the Controller and his contention was that the case was clearly covered by section 2D of the Act and therefore the order under section 33 was validly passed in this case and that it had not been shown that the liabilities had been satisfied or had been otherwise provided for
The learned Single Judge held that an order under section 33 read with section 2D could be passed against the Company and that it had not been shown that the Company s liabilities had been satisfied or otherwise provided for
He therefore dismissed the writ petition
This was followed by an appeal by the Company which was dismissed
The Division Bench sub stantially agreed with the view taken by the learned Single Judge
Thereupon the Company applied for a certificate to enable it to appeal to this Court and obtained it and that is how the matter has come up before us
Mr Aggarwala appearing for the Company has urged the same two points before us
The Act was passed in 1938 to control persons carrying on the business of insurance
Section 29 thereof defines an  insurer  inter alia as weaning any body corporate 861 not being a person specified in sub cl
c of this clause carrying on the business of insurance which is a body corporate incorporated under any law for the time being in force in India or stands to any such body corporate in the relation of a subsidiary company within the meaning of the Indian Companies Act 1913 as defined by sub section
2 of section 2 of that Act
Section 3 provides for registration of any person carrying on the business of insurance and no such business can be carried on unless a certificate of registration for the particular class of insurance business has been obtained from the Controller
Section 34 gives power to the Controller to cancel the certificate for reasons specified therein and section 35B lays down that when a registration is cancelled the insurer shall not after the cancellation has taken effect enter into new contracts of insurance but all rights and liabilities in respect of contracts of insurance entered into by him before such cancellation takes effect shall subject to the provisions of sub section
5D continue as if the cancellation had not taken place
In order to safeguard the interest of policy holders section 7 provides for deposits by the insurer for various classes of his business
Section 8 lays down that any deposit made under section 7 shall be deemed to be part of the assets of the insurer but shall not be susceptible of any assignment or charge nor shall it be available for the discharge of any liability other than liabilities arising out of policies of insurance issued by the insurer so long as any such liability remains undischarged  nor shall it be liable to attachment in execution of any decree except a decree obtained by a policy holder of the insurer in respect of a debt due upon a policy which debt the policy holder has failed to realise in any other way
Section 91 lays down that where an insurer has ceased to carry on in India any class of insurance business in respect of which a deposit has been made under section 7 and his liabilities in India in respect of business of that class have been satisfied or are other
wise provided for the court may on the application of the insurer order the return to the insurer of so much of the deposit as does not relate to the classes of insurance
 if any which he continues to carry on
Under 112 862 section 10 an insurer who carries on business of more than one kind is required to keep a separate account of all receipts and payments in respect of each such class of insurance business
Section 331 with which we are directly concerned is in these terms  The Central Government may at any time by order in writing direct the controller or any other person specified in the order to investigate the affairs of any insurer and to report to the Central Government on any investigation made by him Provided that the controller or the other person may wherever necessary employ an auditor or actuary or both for the purpose of assisting him in any investigation under this section
 Section 2D is in these terms  Every insurer shall be subject to all the provisions of this Act in relation to any class of insurance business so long as his liabilities in India in respect of business of that class remain unsatisfied and not otherwise provided for
 The contention of Mr Aggarwala is that section 33 and section 2D both refer to an insurer which is defined in section 29 as a person carrying on the business of insurance
He therefore contends that as soon as the insurer who was carrying on the business of insurance closes it down completely be no longer remains an insurer and the provisions of the Act do not apply to him
Therefore according to him when section 33 provides for an order of investigation by the Central Government such an order can only be made in respect of a person who is actually carrying on the business of insurance and is thus an insurer and cannot be made against a person who was an insurer but has closed his business
Further according to Mr Aggarwala section 2D also speaks of an insurer and makes him subject to all the provisions of the Act with respect to any class of insurance business so long as his liabilities in respect of that class remain unsatisfied or not other
wise provided for and therefore section 2D would only apply to those cases where insurance business is being carried on though some class of insurance business might have been closed
The contention therefore is that reading sections 33 and 2D together no order under 863 section 33 can be made in case of an insurer who has completely closed his business of insurance
The main basis of this contention is the definition of the word insurer in section 29 of the Act
It is pointed out that definition begins with the words  insurer means and is therefore exhaustive
It may be accepted that generally the word  insurer has been defined for the purposes of the Act to mean a person or body corporate etc which is actually carrying on the business of insurance ie the business of effecting contracts of insurance of whatever kind they might be
But section 2 begins with the words  in this Act unless there is anything repugnant in the subject or context  and then come the various definition clauses of which 9 is one
It is well settled that all statutory definitions or abbreviations must be read subject to the qualification variously expressed in the definition clauses which created them and it may be that even where the definition is exhaustive inasmuch as the word defined is said to mean a certain thing it is possible for the word to have a somewhat different meaning in different sections of the Act depending upon the subject or the context
That is why all definitions in statutes generally begin with the qualifying words similar to the words used in the present case namely unless there is anything repugnant in the subject or context
Therefore in finding out the meaning of the word  insurer  in various sections of the Act the meaning to be ordinarily given to it is that given in the definition clause
But this is not inflexible and there may be sections in the Act where the meaning may have to be departed from on account of the subject or context in which the word has been used and that will be giving effect to the opening sentence in the definition section namely unless there is anything repugnant in the subject or context
In view of this qualification the court has not only to look at the words but also to look at the context the collocation and the object of such words relating to such matter and interpret the meaning intended to be conveyed by the use of the words under the circumstances
Therefore though ordinarily the word  insurer  as used in the Act would mean a 864 person or body corporate actually carrying on the business of insurance it may be that in certain sections the word may have a somewhat different meaning
A perusal of a few sections of the Act will illustrate this and immediately show that the word  insurer  has been used in some sections to mean not merely a person actually carrying on the business of insurance but also a person who intends to carry on the business of insurance but has not actually started it and also a person who was carrying on the business of insurance but has ceased to do so
For example section 32 which deals with an application for registration which naturally has to be made before the business of insurance actually commences lays down in cl
b that the application shall be accompanied by the name address and the occupation if any of the directors where the insurer is a company incorporated under the Indian Companies Act
Here the word insurer has been used to indicate the company which is not actually carrying on the business of insurance but is intending to do so and is applying for registration
Further in section 32 e which also deals with an application for registration it is provided that an insurer having his principal place of business or domicile outside India shall send along with the application a statement verified by an affidavit of the principal officer of the insurer setting forth various requirements
Here again the word  insurer  has been used for an intending insurer for the business of insurance would only begin after the registration certificate is granted on the application made under section 32
Then in section 9 it is provided that where an insurer has ceased to carry on business the court may on the application of the insurer order the return to him of the deposit made under section 7
shows that though the insurer is not actually carrying on the business of insurance he is still termed an insurer and on his application the deposit may be refunded to him
Again section 55 which deals with a situation arising out of the winding up of an insurance company or the insolvency of any other insurer provides that the value of the assets and liabilities of the insurer shall be ascertained in such manner and upon such basis as the liquidators 865 or the receiver in insolvency thinks fit
The word  insurer has thus been used in this section for a person or body corporate etc which is not actually carrying on the business of insurance and has gone into liquidation or  has become insolvent
Therefore though the ordinary meaning to be given to the word insurer  is as given in the definition clause section 29 and refers to a person or body corporate etc carrying on the business of insurance the word may also refer in the context of certain provisions of the Act to any intending insurer or quondam insurer
The contention therefore that because the word  insurer has been used in section 33 or section 2D those sections can only apply to insurers who are actually carrying on business cannot necessarily succeed and we have to see whether in the context of these provisions an insurer will also include a person who was an insurer but has closed his business
As we have said already the Act was passed to control the business of insurance in the interest of policy holders and the general public and section 33 is obviously a provision by which the Central Government can order investigation into the affairs of any insurer in order to carry out the policy of the Act
Could it be said in the circumstances that section 33 only applies to insurers actually carrying on business and not to insurers who have closed their business If the policy of the Act is to be carried out and the policy holders and the general public are to be protected the need for making investigation into the affairs of an insurer who has closed his business is greater for he may have done so dishonestly
We are therefore of opinion that the word  insurer as used in section 33 not only refers to a person who is actually carrying on business but in the context of that section and taking into account the policy of the Act and the purposes for which the control envisaged by the Act was imposed on insurers also refers to insurers who were carrying on the business of insurance but have closed it
Further if there were any doubt whether the word  insurer  in section 33 refers to those insurers also who had closed their business that doubt in our opinion is completely dispelled by section 2D
That section 866 provides that every insurer shall be subject to all the provisions of the Act in relation to any class of insurance business so long as his liability in India in respect of business of that class remains unsatisfied or not otherwise provided for
Obviously this section applies to those insurers who have closed their business
It was not necessary to enact this section if the word insurer here also meant a person actually carrying on the business of insurance for the provisions of the Act apply to such a person proportion vigor
Therefore when the word  insurer  is used in section 2D it must mean a person who was carrying on the business of insurance but has closed it
If that is so section 33 which provides for investigation would apply to such an insurer who has closed his business by virtue of section 2D
Mr Aggarwala next contends that section 2D would only apply to those cases where an insurer was carrying on different classes of insurance business and had closed some of them but not all of them
He contends that the section provides that the insurer shall remain subject to the provisions of the Act in relation to any class of insurance business so long as his liabilities with respect to that class of business remain unsatisfied or not otherwise provided for
This according to him contemplates a closure of only some out of many classes of business of insurance and not of all
We see no reason however to limit the words used in this section only to a case where out of many classes of business some are closed and others are being carried on
Under section 13 of the  No X of 1897 in all Central Acts and Regulations unless there is anything repugnant in the subject or context words in the singular shall include the plural and vice versa
Though therefore section 2D speaks of any class of insurance business in the singular it includes the plural also and would refer to all classes of insurance business
Mr Aggarwala does not contend that where for example four classes of business are being carried on and three of them are closed and one is continued the section will not apply but he contends that at least one must continue and the section will not apply if all are closed
We do not see why if the section 867 applies even though the word class is in the singular to a case where three out of four classes are closed and one is continued it should not apply to a case where all four classes are closed
We see no repugnancy in the context in holding that if all classes of business are closed the insurer shall be subject to all the provisions of the Act so long as his liabilities in India in respect of any business of all classes remain unsatisfied or not otherwise provided for
Therefore on a plain reading of section 2D there can be no doubt that an insurer who has closed all classes of his insurance business remains subject to all the provisions of the Act in relation to such classes so long as his liabilities in India remain unsatisfied or not otherwise provided for
Therefore section 33 will certainly apply to a case where all classes of insurance business have been closed so long as the liabilities remain unsatisfied or not otherwise provided for
The first contention of the appellant therefore that no investigation can be ordered under section 33 in its case because it has closed all classes of its insurance business fails
Turning now to the second contention the argument on behalf of the appellant is three fold
In the first place it is urged that an order can only be made under section 33 read with section 2D when the Central Government is satisfied that the liabilities have not been satisfied or otherwise provided for and that the order should show on the face of it that the Central Government had considered this aspect of the matter and had come to the conclusion that the liabilities remained unsatisfied or not otherwise provided for
Further there is nothing in the present order to show that the Central Government ever considered this aspect of the matter and was satisfied that the liabilities of the appellant Company remained unsatisfied or not otherwise provided for
There is no doubt that the order is utterly silent on this point and it was only in his letter of October 15 1957 that the Assistant Controller pointed out section 2D of the Act and referred to this aspect of the matter
It seems to us only just and proper that when an order is being passed under section 33 read with section 2D of the Act it should show on the face of it that the 868 Central Government was prima facie satisfied that the liabilities had remained unsatisfied or not otherwise provided for it is only when the liabilities have not been satisfied or otherwise provided for that an order under section 33 read with section 2D would be justified in the case of an insurer who has closed his business
We use the word  prima facie  advisedly for it seems to have been suggested in the High Court that no order could be passed under section 33 unless it was proved to the hilt that there were liabilities which remained unsatisfied or otherwise unprovided for
It is obvious that such proof would only be available after investigation in to the affairs of the insurer
Therefore in order that section 2D may be workable all that is required under it is that the Central Government should be satisfied after such prima facie inquiry as it considers necessary that there are reasons to believe that the liabilities of the insurer who has closed his business remain unsatisfied or not otherwise provided for and in coming to this prima facie conclusion the Central Government may make enquiry from the insurer with respect to complaints that it may have received against him
But the fact that the order does not on the face of it show that the Central Government considered this aspect of the matter would not make it bad if in subsequent proceedings taken to challenge it is shown that there were materials before the Central Government which would justify its coming to the prima facie conclusion that the liabilities had Dot been satisfied or otherwise provided for and therefore an investigation into the affairs was called for
In the present case we find from the materials on the record that there were complaints before the Central Government from those who had claims against the company
Those complaints were apparently referred to the Company and it does not appear that the Company satisfied the Central Government that the complaints were unjustified
It was in this situation that the order for investigation was made in July 1957 after the Company had closed its insurance business
Further on the materials available on the record it does appear that even now there are claims pending to the tune of about one lac of rupees against the Company
So it cannot 869 be said that there were no liabilities of the Company outstanding which were not satisfied or otherwise provided for when the order was made in July 1957
In the circumstances the order cannot be held to be bad because it does not show on the face of it that there were liabilities which had remained unsatisfied or not otherwise provided for
In the second place it is urged that there can be no question of satisfying or otherwise providing for liabilities unless the liabilities are ascertained and either admitted or proved
In other words the argument is that it is only those liabilities which are admitted by the insurer or which have been decreed against him and the decrees have become final which can be taken into account in deciding whether the liabilities have remained unsatisfied or not otherwise provided for
It is urged that only those liabilities which are ascertained and either undisputed or proved can be satisfied and that the same applies to their being otherwise provided for
It is true that only those liabilities which are ascertained and either admitted or proved can be satisfied but it does not follow that  provision otherwise  must also be only of liabilities which are ascertained and either admitted or proved
If that were go a dishonest insurer who closes his business could always get out of the provisions of section 33 read with section 2D by repudiating all claims made against him and then saying that there are no liabilities which remained unsatisfied or otherwise unprovided for
There can be no doubt therefore if these provisions have to serve the purpose for which they were enacted namely the protection of the interest of the policy holders and the general public the words not otherwise provided for in section 2D must refer to liabilities in the nature of claims against the insurer whether the insurer admits them or not and whether a decree has been finally passed in respect of them or not
The intention of making this provision in section 2D is to ensure that probable claims arising out of the insurance business that is closed are provided for before the insurer who has closed his business can say that he is not governed by all the provisions of the Act
There can be no doubt therefore 113 870 that when  provision otherwise  has to be made it must be with respect to probable claims also that are likely to arise out of the insurance business which has been closed
In the present case even the Company admits that there are probable claims to the tune of about rupees one lac still pending and in the circumstances until they are satisfied or it is shown that they have been provided for otherwise all the provisions of the Act including section 33 will apply to the Company
The last argument in support of the second contention is that the liabilities have been otherwise provided for
It is said that the Company deposited Rs 394000 as security under section 7 of the Act which is still available to pay off the liabilities of the Company and therefore when such liabilities do not appear to exceed that amount they have otherwise been provided for
The question thus raised is whether the Company is entitled to take into account the security deposit under section 7 in order to show that the liabilities have been otherwise provided for
The contention on behalf of the Controller is that when the Act envisages  provision otherwise  this provision has to be over and above the security deposit made by the Company under section 7
It appears from section 8 that this deposit is available for the discharge of liabilities arising out of policies of insurance issued by the insurer so long as any such liability remains unsatisfied
But even if a decree has been obtained by a policy holder on the basis of a liability under the policy he is not entitled to attach any part of this deposit until he shows that he has failed to realise the decree in any other way
Further it appears that section 8 only contemplates policy holders holding a decree attaching part of the security deposit in case they fail to realise their debt in any other way  it does not contemplate for example third parties who have decrees against an insurer like the Company which in its motor insurance business indemnifies the policy holders against third party risk up to a certain extent doing so
Such third parties cannot under any circumstances attach any part of the deposit for section 8 only permits its attachment in the last resort by a policy holder of the 871 insurer in respect of a debt due upon a policy
But under section 2D the decree of a third party in such a case would be the liability of the insurer in respect of his motor insurance business which could not be realised by attachment of any part of the deposit under section 7
Besides even with respect to decrees of policy holders the deposit could only be attached when all other ways of realising the money have failed
In these circumstances it can hardly be said that the fact that this deposit is there is itself a  provision otherwise  to meet the liabilities of the insurer
The policy holder cannot attach this deposit unless he first exhausts all other means
Even if be has got a decree and even if the insurer admits his claim and wants to pay it he cannot do so out of the money in deposit under section 7
As for third parties who may have decrees against the insurer they can never attach this deposit in view of the provisions of section 8
It could not be the intention of the legislature when it was in effect exempting the insurer from all the provisions of the Act on his liabilities being otherwise provided for that such provision should include the security deposit under section 7 when it has made it so difficult for a policy holder to get his debt satisfied from that deposit and when it is clear that a third party could not in any way attach the deposit
In these circumstances we are of opinion that when section 2D provides that the insurer shall be subject to all the provisions of the Act so long as his liabilities in India in respect of the business which is closed remain unsatisfied or not otherwise provided for the satisfaction or  provision otherwise  does not refer to the deposit under section 7 and has to be over and above that deposit
It is true that section 9 provides that the insurer can take back the deposit after satisfying the court that he has satisfied or otherwise provided for his liabilities
But this  provision otherwise  for the purposes of section 9 must obviously be other than the deposit itself
Further when the insurer wants to take back his deposit on making  provision otherwise  he will have to satisfy the court that the  provision otherwise  has been fully made and the court will be in a position to investigate into the matter
This however does not mean that if the insurer does 872 not want to take advantage of section 9 of the Act he can say without submitting to the terms of that section that he has made  provision otherwise  because the deposit which is made under section 7 is more than all his liabilities of the insurance business that he has closed
It is urged that it is hard for example on an insurer who has a large deposit and whose liabilities are small that he should not be able to fall back on his deposit for the purposes of section 2D
We do not however see any hardship in a case of this kind for if it is a fact that the deposit of the insurer is large and his liabilities are small he can always take advantage of section 9 of the Act and submit to an investigation by the court and take back his deposit after depositing the small sum required to meet his liabilities
We are therefore of opinion that when section 2D speaks of satisfaction or  provision otherwise  for the liabilities of insurance business which is closed it contemplates such satisfaction or  provision otherwise over and above the deposit made under section 7
It is not in dispute in this case that there are some liabilities still pending it is also not in dispute that they are not satisfied and no provision has been made otherwise for them irrespective of the security deposit
This also appears to have been the position when the order was made in July 1957
In the circumstances the order is good and cannot be called in question by the Company
The appeal therefore fails and is hereby dismissed with costs
Appeal dismissed


Summary:
The assesses firm which was doing business in Bombay was served with a notice on January 21 1953 by the Income tax Officer under section 111 of the Business Profits Tax Act 1947 in respect of the chargeable accounting period from November 13 1947 to October 31 1948 calling upon it to submit its return
It filed the return under protest stating that the notice was barred under section 14 of the Act as it was served beyond the period of four 989 years
The question was whether in section 11 of the Act a limitation corresponding to the limitation contained in section 14 must be necessarily read and whether in a case where the profits were not brought to assessment because notice under section 11 was not issued in time they must be deemed to have escaped assessment and action could only be taken under section 14 within the time specified therein  Held per section K Das and Kapur JJ Hidayatullah J dissenting 1 that the words  profits escaping assessment  in section 14 of the Business Profits Tax Act 1947 apply equally to cases where a notice was received by the assessee but resulted in no assessment under assessment or excessive relief and to cases where due to any reason no notice was issued to the assessee and therefore there was no assessment of his income 2that sections 11 and 14 Of the Act have to be read together and that a notice under section 11 cannot be issued against an assessee beyond the period of four years indicated in section 14
Kamal Singh vs Commissioner of Income tax 1959 Supp 1 SCR 10 and Mahayajadhiraj Sir Kameshwar Singh vs State Of Bihar   relied on
Gokuldas Ratanji Mandavia vs Commissioner of Income tax  distinguished
Per Hidayatullah J Section 11 of the Business Profits Tax Act 1947 is confined to cases where there has been no prior assessment while section 14 is applicable to cases where after an assessment there is discovery that profits have escaped assessment due to one reason or another
The use of the words  escaped assessment  in the context of the Act has reference only to those cases where profits of a business were brought to process once but for some reason some profits escaped assessment or were under assessed or received excessive relief
For the subsequent and re opened assessment there is a limit of four years but for the assessment for the first time there is no limit