Case: National Insurance Co. Ltd Vs. Life Insurance Corporation Of India

to include in addition to life business the capital redemption business or annuity certain business or both; but where an insurer carries on life business and -general business like fire or marine insurance etc. the capital redemption business or the annuity certain business, or both, (as the case may be) cannot be included in the controlled business. He further contends that the expression "business appertaining to his life insurance business" in subclauses (i) and (ii) of the definition of "controlled business" must also be given this meaning. In our opinion this argument cannot be accepted. The definition of "controlled business" contemplates two kinds of insurers-(i) insurers who carry on life business only, and (ii) insurers who carry on composite business, that is to say certain other business which does not ex facie come within controlled business. Under sub-clause (a) of s. 2 (3) (i) controlled business covers the entire life business of an insurer if he carries on no other class of insurance business and under sub-clause (b) all the business appertaining to his life insurance business is included if he is a composite insurer. The controlled business in either case is intended to embrace all the business concerning life insurance. In the first case it means the whole of the business of the insurer and in the second case the part which comes within the life business but no other. The explanation, that is annexed to the definition, then shows what comes within life business and the explanation is designed to serve the purposes of (a) and (b) to sub-clause (i) of the definition. The explanation first seeks to explain who can be said to carry on "no class of insurance business other than life insurance business" and says that such would be an insurer who in addition to life business carries on only capital redemption business or annuity certain business or both. The word "only" shows that with the life business go the two named businesses but no other. An insurer who carries on life business and in addition only the one or the other of the two named businesses or both is to be regarded still as one carrying on no business other than life insurance business. The explanation next says that the expression "business appertaining to his life insurance business" which occurs- in (b) should be construed "accordingly". The word "accordingly" clearly means "in a similar manner".We are concerned here with a composite insurer and sub- clause (b) says that the "controlled business" in such a case would include all business which appertains to life insurance business but no other business and the explanation says that the expression "business appertaining to life insurance business" should be construed as in the first part of the explanation This means that included in the life insurance business of a composite insurer are those businesses which go with the life business in the first part of the explanation, that is to say, capital redemption business and annuity certain business or both. Both the grammar and the sense of the matter lead to the same result. Indeed the argument of the learned counsel to be valid must shift the word "only" from the place it occupies to the end of the first part of the explanation so as to control the entire sentence and not only a part of it. This cannot be done. In our opinion, the capital redemption business and the annuity certain business must be included in the expression "controlled business even in the case of a composite insurer like the appellant Company. The first part of the contention of the Company therefore fails.4. The dispute with regard to the assets of the Capital Obligation Business (which term includes both the capital redemption business and the annuity certain business) arises in the following circumstances. The Company maintained a fund called the "Capital Obligation Fund" which amounted to Rs. 12, 80, 882-8-9 on August 31, 1956. On the establishment of the Corporation the Company made over to the Corporation all the policies relating to this Fund and the liability relating to these policies as they stood on December 31, 1955, was Rs. 12, 88, 727. Tim Company was, therefore, asked to hand over either cash or investments of an equal value.On the eve of the transfer of assets, the Company made changes in its investments relative to the life business and general business. These investments included approved investments under s. 27 A of the Insurance Act and others. What the Company did was to transfer certain unapproved investments at their book value to its Capital Obligation Business and made them over to the Corporation. The Corporation declined to receive them. It asked the Company to give stocks and shares of the appropriate market value or allow the Corporation to select stocks and shares from the investments. The Company contended that the Corporation was not entitled to "pick and choose" from the various investments. The Company had already transferred all the gilt-edged investments from the life and the Capital Obligation Fund to the general business leaving investments (which were not approved) of the book value sufficient to cover Rs. 12, 87, 000 odd which represented the Capital Obligation Business. These investments were rated at half their book value by the Corporation.5. The Tribunal reversed the entries in respect of the investments relating to sundry funds. It is contended that the Tribunal reversed only a few of the book entries which had been made on the eve of vesting but not all and did not restore the status quo existing on December 31, 1955. It is also contended that the Corporation should not be allowed to pick and choose from the investments. The point about fr., picking and choosing" and that about reversing the entries lose all force in view of the fact that before the Tribunal the Company conceded that the Corporation may pick any investments of the value of Rs. 12, 80, 890 which represented the Capital Obligation Business.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]In our opinion this argument cannot be accepted. The definition of "controlled business" contemplates two kinds of insurers-(i) insurers who carry on life business only, and (ii) insurers who carry on composite business, that is to say certain other business which does not ex facie come within controlled business. Under sub-clause (a) of s. 2 (3) (i) controlled business covers the entire life business of an insurer if he carries on no other class of insurance business and under sub-clause (b) all the business appertaining to his life insurance business is included if he is a composite insurer. The controlled business in either case is intended to embrace all the business concerning life insurance. In the first case it means the whole of the business of the insurer and in the second case the part which comes within the life business but no other. The explanation, that is annexed to the definition, then shows what comes within life business and the explanation is designed to serve the purposes of (a) and (b) to sub-clause (i) of the definition. The explanation first seeks to explain who can be said to carry on "no class of insurance business other than life insurance business" and says that such would be an insurer who in addition to life business carries on only capital redemption business or annuity certain business or both. The word "only" shows that with the life business go the two named businesses but no other. An insurer who carries on life business and in addition only the one or the other of the two named businesses or both is to be regarded still as one carrying on no business other than life insurance business. The explanation next says that the expression "business appertaining to his life insurance business" which occurs- in (b) should be construed "accordingly". The word "accordingly" clearly means "in a similar manner".We are concerned here with a composite insurer and sub- clause (b) says that the "controlled business" in such a case would include all business which appertains to life insurance business but no other business and the explanation says that the expression "business appertaining to life insurance business" should be construed as in the first part of the explanation This means that included in the life insurance business of a composite insurer are those businesses which go with the life business in the first part of the explanation, that is to say, capital redemption business and annuity certain business or both. Both the grammar and the sense of the matter lead to the same result. Indeed the argument of the learned counsel to be valid must shift the word "only" from the place it occupies to the end of the first part of the explanation so as to control the entire sentence and not only a part of it. This cannot be done. In our opinion, the capital redemption business and the annuity certain business must be included in the expression "controlled business even in the case of a composite insurer like the appellant Company. The first part of the contention of the Company thereforedispute with regard to the assets of the Capital Obligation Business (which term includes both the capital redemption business and the annuity certain business) arises in the following circumstances. The Company maintained a fund called the "Capital Obligation Fund" which amounted to Rs. 12, 80, 882-8-9 on August 31, 1956. On the establishment of the Corporation the Company made over to the Corporation all the policies relating to this Fund and the liability relating to these policies as they stood on December 31, 1955, was Rs. 12, 88, 727. Tim Company was, therefore, asked to hand over either cash or investments of an equal value.On the eve of the transfer of assets, the Company made changes in its investments relative to the life business and general business. These investments included approved investments under s. 27 A of the Insurance Act and others. What the Company did was to transfer certain unapproved investments at their book value to its Capital Obligation Business and made them over to the Corporation. The Corporation declined to receive them. It asked the Company to give stocks and shares of the appropriate market value or allow the Corporation to select stocks and shares from the investments. The Company contended that the Corporation was not entitled to "pick and choose" from the various investments. The Company had already transferred all the gilt-edged investments from the life and the Capital Obligation Fund to the general business leaving investments (which were not approved) of the book value sufficient to cover Rs. 12, 87, 000 odd which represented the Capital Obligation Business. These investments were rated at half their book value by theTribunal reversed the entries in respect of the investments relating to sundry funds. It is contended that the Tribunal reversed only a few of the book entries which had been made on the eve of vesting but not all and did not restore the status quo existing on December 31, 1955. It is also contended that the Corporation should not be allowed to pick and choose from the investments. The point about fr., picking and choosing" and that about reversing the entries lose all force in view of the fact that before the Tribunal the Company conceded that the Corporation may pick any investments of the value of Rs. 12, 80, 890 which represented the Capital Obligation Business.