NATIONAL INSURANCE COMPANY LIMITED Vs. UNION OF INDIA

JUDGEMENT

(1.) This petition under articles 226 of the Constitution of India seeks a declaration that the provisions of clauses (e), (e) and (g) of section 2 of the Delhi Sales Tax Act, 1975, are ultra vires of article 285 of the Constitution of India and prays for striking down the said provisions as void. The impugned provisions are :

(2.) Under article 285 of the Constitution, the property of the union shall, save in so far as Parliament may by law otherwise provide, be exempt from all taxes imposed by a State or by any authority within a State, unless it comes within the specified circumstances detailed in the proviso. The challenge to the constitutional validity in substance is that the petitioner's trade, assets and properties are that of the Central Government with effect from 2nd January, 1973, by virtue of sections 4 (1) and 5 (1) of the General Insurance Business (Nationalisation) Act, 1972, and, as such, the same being the property of the Union Government, is exempt from State tax by virtue of article 285 of the Constitution of India. Two essential questions, therefore, arise tor determination; firstly, whether the tax is one on property and, secondly, whether such property is vested in the Union. I will deal with the second question first as to whether the petitioner is the Central Government. In order to appreciate this point, it is necessary to state briefly the provisions of the General Insurance Business (Nationalisation) Act, 1972.

(3.) By the General Insurance (Emergency Provisions) Ordinance, 1971, which was later replaced by an Act of Parliament, the management of the undertaking of all insurers carrying on general insurance business was vested in the Central Government, pending nationalisation. In the year 1972, the Parliament enacted an Act known as the General Insurance Business (Nationalisation) Act of 1972 (hereinafter referred to as the Act). Section 3 (b) defines the "appointed day" as meaning such day not being a day later than the 2nd day of January, 1973, as the Central Government may be notification appoint. Section 4(1) provides that on the appointed day, all the shares in the capital of every Indian insurance company shall, by virtue of the Act, stand transferred to and vested in the Central Government free of all trusts, liabilities and encumbrances affecting them. Section 4 (2) provides that out of the shares so transferred and vested, the Central Government shall, immediately thereafter, by notification provide for the transfer of not less than ten shares of every such company to such persons as may be specified in the notification to enable the Indian insuarance company to function as a Government company. Section 5 provides for the transfer of undertaking of other existing insures who is not an Indian insurance company and the vesting in the Central Government. Section 6 provides the effect of transfer of undertaking. Section 7 provides for the transfer of service of existing employees in certain cases. Section 9 provides that the Central Government shall form a Government company in accordance with the provisions of the Companies Act, to be known as the General Insurance Corporation of India, for the purpose of superintending controlling and carrying on the business of general insurance. Section 10 provides that all the shares in the capital of every Indian Insurance company which stand transferred to and vested in the Central Government by virtue of section 4 (with the exception of the shares transferred to any person under subsection (2) of that section), shall immediately after such vesting, stand transferred to and vested in the corporation and every Indian insurance company shall forthwith give effect to such transfer of shares and rectify its register of members by including therein the corporation as the holder of such shares. It is the petitioner's case that after the commencement of the Nationalisation Act, the Central Government issued notifications under the Act, by virtue of which the business of certain insurance companies was merged in the petitioner-company, which is incorporated under the Companies Act. The shares have been transferred and vested in the Central Government.