SUPERINTENDENT OF INSURANCE Vs. NAVABHARAT INSURANCE COMPANY LTD

JUDGEMENT

(1.) THIS is a special case stated for the opinion of the Court as to the true construction of Section 27(1) of the Indian Insurance Act, 1938.

(2.) SECTION 27 provides for the making of a deposit by insurance companies incorporated or domiciled in British India, and in construing such a section one must remember the reason why, in the case of insurance companies, the Legislature requires deposits to be made. The general nature of insurance business is that in return for a present payment the insurer undertakes to discharge a future liability, and the obvious risk is that, when the time arrives for discharging the future liability, the insurer may have no assets. In order to avoid or minimise that risk Legislatures frequently impose on insurance companies the obligation of covering their future liabilities, and SECTION 27 is one of the sections imposing such liability. That is perfectly plain from its language. Now, what the section says is this : Every insurer incorporated or domiciled in British India shall, subject to the provisions of Sub-section (3), at all times invest and hold invested assets equivalent to not less than fifty-five per cent. of the sum of the amount of his liabilities to holders of life insurance policies in India on account of matured claims and the amount required to meet the liability on policies of life insurance maturing for payment in India, less the amount of any deposit made under SECTION 7 or SECTION 98 by the insurer in respect of his life insurance business and less any amount due to the insurer for loans granted by him on policies of life insurance maturing for payment in India and within their surrender values, in the manner following, namely, twenty-five per cent. of the said sum in Government securities and a further sum) equal to not less than thirty per cent. of the said sum in Government securities or other approved securities or securities of or guaranteed as to principal and interest by the Government of the United Kingdom.

(3.) IN my opinion, the construction of the section really presents no difficulty, and by giving the words their natural meaning, effect is given to what would appear to be the natural intention of the Legislature, namely, to provide a cover for uncovered liabilities.