Case: Tropical Insurance Company Limited &amp; Others Vs. Union of India &amp; Another

These petitions under Art. 32 of the Constitution of India question the validity of the notifications issued under S. 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,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 S. 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.

Reasoning:
It seems to us, however, that while keeping this distinction in mind, we have to give to the words used in S. 52-A (1) their ordinary and natural meaning. "Insurer has been defined in S. 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 insurance business or both. Under S. 7 of the Act deposits have to be made by every insurer other than an insurer specified in sub-cl. (c) of Cl. (9) of section2. 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 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 S. 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 life insurance business? S. 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 S. 52-A of the Act and the Controller is authorised to make a report to the Central Government.The Central Government, after considering 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 unnatural meaning to the words used in S. 52-A of the Act.In the present case the insurers are public limited companies 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 S. 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 S. 53 a Court may order a winding up of an insurance company if on an application by the Controller, it is satisfied that the continuance of the company is prejudicial to the interests of the policy holders.The winding up of the company 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 S. 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 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 S. 52-A of the Act.