NAVAJIBAN INSURANCE CO LTD Vs. SUPERINTENDENT OF INSURANCE, GOVERNMENT OF INDIA, DEPARTMENT OF COMMERCE

JUDGEMENT

(1.) This rule is directed against an order of the District Judge of Jalpaiguri dated 5 April 1941, rejecting an application of the petitioner for refund of deposit under Section 9, Insurance Act. The petitioner company carries on, at present, the business of life insurance. Before this, it had been doing in addition to that business in miscellaneous insurance under which policies were issued under table M of the company. This miscellaneous business was based upon the "dividing principle" and under Section 52, Insurance Act, it had to be stopped within the period of three years from the date of the commencement of the Act. The petitioner discontinued this business from November 1940. Under Section 7 (1)(e), Insurance Act, the total amount that has got to be deposited by the insurer who carries on a combined business of this sort is three lacs of rupees out of which two lacs of rupees are regarded as the deposit for the life insurance business alone. Under Sub-section (3) of the section the insurer has the right to deposit this amount in certain instalments. The petitioner company, as is admitted, has deposited the sum of Rs. 1,50,000 in three instalments in respect of the combined business up to January 1940. On 2 January, 1941 after this miscellaneous insurance was discontinued, the company filed an application before the District Judge of Jalpaiguri under Section 9, Insurance Act, for refund of the sum of Rs. 50,000 which, it was stated, was in deposit in the Reserve Bank of India in respect of this miscellaneous business. This application was opposed by the Superintendent of Insurance, Government of India, who is the opposite party before us, on a three-fold ground. It was contended in the first place that the deposit contemplated by Section 9 was a deposit of the full amount as laid down in Section 7(1), Insurance Act, and no application for refund of a part of such deposit was maintainable in law. The second ground taken was that as the liabilities in respect of the miscellaneous business were not satisfied or otherwise provided for, no order could be made under Section 9. The last point raised was that there was no provision in Section 7, Insurance Act, under which the instalments of deposit made in respect of a combined business could be split up and certain specified share allotted out of it to any particular business.

(2.) The learned District Judge overruled the last contention of the opposite party but gave effect to the other two. The result was that the application under Section 9, Insurance Act, was dismissed. It is against this order that the present rule has been obtained. The first point that requires consideration in this rule is whether Section 9, Insurance Act, is at all attracted to the facts of this case when the insurer had deposited not the whole but only a portion of the amount as laid down in Section 7. In the opinion of the District Judge, the word deposit in Section 9 can mean only the entire deposit as is referred to in Section 7(1) and it does not contemplate an instalment of the deposit. The learned Advocate-General who appears for the opposite party has not attempted to support the decision of the District Judge on that ground, and he has presented his case before us in a some what different manner. His contention in substance is, that under Section 9, Insurance Act, the insurer can obtain refund of so much of the deposit as does not relate to the class of in-Insurance which he continues to carry on. In the present case, it is said that as the petitioner has not deposited the full amount of three lacs of rupees or at any rate any thing in excess of two lacs of rupees, it is not possible to say that any part of the amount now lying in deposit relates to the life insurance business which the company is still carrying on and, in these circumstances, no claim for refund can be entertained. We do not think we can accept this contention as sound. It seems to us that on this point the view taken by the District Judge is right, viz., that as the entire deposit of rupees three lacs as required under Section 7(1) is to be divided into two parts the instalments permitted under Sub-section (3) are susceptible of similar division and it would be quite proper to allocate one-third of such instalments to the miscellaneous insurance business and the remaining two-thirds to the life insurance. This follows from the provisions of Section 7 itself as well as of the other sections of the Act, The deposit that is required from an insurer under Section 7(1), Insurance Act, is only in respect of the insurance business that is actually carried on in British India. If it is purely life insurance business, the amount to be deposited is rupees two lacs. If, on the other hand, miscellaneous insurance business is combined with life insurance the deposit is increased to rupees three lacs; but Section 7(1)(e) expressly lays down that out of this, rupees two lacs should be regarded as deposit for life insurance business. This clause does not in our opinion mean, as is suggested by the learned Advocate- General, that unless the full amount of rupees three lacs is deposited by the insurer no allocation or apportionment of the amount is possible and no particular portion of it can be set apart or ear-marked for the life insurance business. It is quite open to an insurer to start a combined business and then to discontinue one class of insurance. Under Section 52, Insurance Act, it is compulsory on the insurer to stop certain kinds of insurance work. It would be, in our opinion, extremely unreasonable to hold that although he cannot carry on a certain kind of work and has got to discontinue it, he will still be bound to make deposits in respect of both kinds of business; and unless and until the full amount is deposited no separation of funds is permissible. It is not disputed that if the business of the petitioner is taken to be purely a life insurance business, the amount that would remain after allowing the refund would be an adequate deposit in accordance with the provisions of Section 7, Insurance Act. As regards the miscellaneous insurance business that has been discontinued, it is the duty of the Court to see that all liabilities in respect of the same are either satisfied or fully provided for. In the circumstances, we have no hesitation in holding that it is not necessary that the petitioner should deposit the full amount as is required under Section 7(1), Insurance Act, before he can present an application for refund under Section 9 of the Act.

(3.) The next point for our consideration is as to whether the liabilities in respect of the discontinued business have been fully satisfied or otherwise provided for. No order for refund can certainly be made unless this condition is fulfilled. This matter, it must be noted, was not properly investigated by the Court below. The company, it appears, made a proposal for setting apart the sum of Rs. 25,000 for the purpose of. meeting the liabilities of the policyholders in respect of the miscellaneous business. The learned Judge remarked in his judgment that without proper audit by an auditor it was not possible to say as to whether this amount was sufficient to meet all these liabilities. In this Court we had the matter investigated more fully by a qualified actuary and his report is now before us. The actuary reports that the total number of policies under the heading of miscellaneous insurance in force on 30th November 1940 was 775. Out of these, 678 policies were subsequently satisfied, leaving 97 policies which are unsatisfied at the present day. The actuary has further found that 74 policies matured into claims before November 1940 and out of these, claims of 65 policy- holders are still to be paid, the amount due to them being Rs. 1656-11-0. As regards the 97 policy-holders mentioned above the actuary suggested that the premiums contributed by them should be refunded less a percentage of 12 1/2 per cent for management and other incidental expenses of the business. We agree with the learned Advocate-General that the entire premiums of these policy-holders should be refunded without any deduction whatsoever,