Case: Life Insurance Corporation Of India Vs. Rajmata Saheb Chowhanji &amp; Ors

The facts of the case are detailed in the judgment of the High Court and that of the District Judge and it is not necessary for us to repeat the same all over again. Briefly, the present action was brought by the plaintiff for recovery of a sum of Rs. 2, 00, 000 invested by the plaintiff in the Adarsh Bima Company being defendant No. 1 and the predecessor of the appellant, who is defendant No. 3 (Life Insurance Corporation of India). The action was brought on the basis that the Managing Director of the Adarsh Bima Company by practising fraud and misrepresentation on the plaintiff induced him to part with a sum of Rs. 2, 00, 000 by purchasing 200 shares of Rs. 100/each. The courts below have recorded clear findings of fact that the fraud alleged by the plaintiff has been clearly proved and that the plaintiff had parted with a sum of Rs. 2, 00, 000 by investing the same in purchase of 2000 shares as a result of which the shares scrips were handed over to the plaintiff and he was assured of a dividend of 4%. it has also been found as a fact that such a resolution was contrary to the statute of the companyThe suit was contested by the appellant who is defendant No. 3 in the courts below mainly on the ground that after the appellant took over the Adarsh Bima Company, he was not liable for any act of the company which was ultra vires the statutes of the company.

Reasoning: As regards the first contention we find absolutely no substance in the same. There was absolutely no pleading by the defendants that the monies were received by the Managing Director personally and that the same did not go to the coffers of the company.If the share scrips were issued, to the plaintiff then it must be presumed that the money was received by the company. This fact has not been denied by theComing to the next contention the same undoubtedly merits serious considerationAs we have already pointed out that defendant No. 1 Adarsh Bima Company was carrying on the business of life insurance only. Thus the moment the Act was passed, the business of the Adarsh Bima Company vested in the Corporation. Pari passu this contention it was submitted that under section 7(2) of the Act the liability of the appellant would not extend not to any acts which are fraudulent or ultra vires of the statutes of the company. We are, however, unable to agree with this contention. The words of section 7(2) of the Act appear to be of the widest amplitude and the section includes all debts, liabilities, obligations of whatever kind then existing and appertaining to the controlled business of the insurer. There can be no doubt that at t he time when the appellant took over the Adarsh Bima Company the obligation to restitute the benefit received by the company from the plaintiff had been fastened and the appellant was legally bound to return the same to the plaintiff under section 65 of the Contract Act in view of the finding of fact recorded by the Courts below that the contract was void. The question as to whether or not the transaction was ultra vires of the statutes of the company was wholly irrelevant because that was the reason why the contract was void and not a ground for exempting the appellant from its liability to pay. The words "of whatever kind" are wide enough, to take within their sweep all kinds of transactions entered into by the predecessor company. The present transaction was undoubtedly entered into by the predecessor company which had received the sum of Rs. 2, 00, 000 from the plaintiff and had issued share scrips. In these circumstances, therefore, we do not see how the defendant No. 3 can escape his liability even under section 7(2) of the Act. As however the plaintiff will be entitled to restitution of the benefits under section 65 of the Act, he can only get the amount which he had paid to the appellant company and not any interest thereon up to the date of the suit.For these reasons, we are of the opinion that the judgment of the High Court is correct and does not require any interference except a slight modification in the form of the decree.