1972 (11) TMI 95 - SC - Indian Laws

Summary

Issues Involved:
1. Application of the General Insurance (Emergency Provisions) Ordinance 1971, the General Insurance (Emergency Provisions) Act 1971, and the General Insurance (Emergency Provisions) Amendment Act 1972.
2. Legality of the order dated 13 May 1971 and directions given under the Ordinance.
3. Interpretation of Section 15(a) of the General Insurance (Emergency Provisions) Act 1971.
4. Constitutionality of the legislative measures under Article 14 and Article 31A of the Constitution.
5. Locus standi of the petitioners.

Detailed Analysis:

1. Application of the General Insurance (Emergency Provisions) Ordinance 1971, the General Insurance (Emergency Provisions) Act 1971, and the General Insurance (Emergency Provisions) Amendment Act 1972:
The petitioners challenged the application of these legislative measures to their company, arguing that their business was being voluntarily wound up and thus should not fall under the purview of these Acts. The company had ceased underwriting new insurance business from 30 September 1970, returned its registration certificate, and canceled all policies by February 1971. The petitioners contended that their business was being voluntarily wound up, and therefore, the legislative measures should not apply.

2. Legality of the Order Dated 13 May 1971 and Directions Given Under the Ordinance:
The petitioners sought a declaration that the order made on 13 May 1971, appointing a custodian under Section 4(1) of the Ordinance and the directions given under Section 4(3) of the Ordinance were illegal. They argued that their business was being voluntarily wound up and thus should not be subject to these orders and directions.

3. Interpretation of Section 15(a) of the General Insurance (Emergency Provisions) Act 1971:
The petitioners relied on Section 15(a) of the Act, which states that the Act shall not apply to any insurer whose business is being voluntarily wound up or is wound up by a court. They argued that their business was being voluntarily wound up and thus should be excluded from the Act's application. The Government contended that Section 15(a) applies only to an insurance company being voluntarily wound up or wound up by a court within the meaning of the Indian Companies Act and the Insurance Act. The court examined the definitions and distinctions between an insurer and an insurance company, concluding that the legislative measures did not intend to exclude companies merely ceasing to do business but rather those undergoing formal winding up processes.

4. Constitutionality of the Legislative Measures Under Article 14 and Article 31A of the Constitution:
The petitioners argued that if the Ordinance and the Act applied to their company, it would violate Article 14 (equality before the law) and Article 31A (protection of certain laws from being challenged on the grounds of violation of fundamental rights). The Government contended that the legislative measures were protected under Article 31A(1)(b) and (d). The court did not find it necessary to express an opinion on these contentions due to its conclusion that the legislative measures did not apply to the petitioners' company.

5. Locus Standi of the Petitioners:
The Government challenged the petitioners' locus standi, arguing that the company could not invoke fundamental rights. The court referred to the Bank Nationalisation case, stating that shareholders are entitled to protection of fundamental rights and that their rights are not lost by reason of being shareholders. The court found that the petitioners had the standing to challenge the legislative measures.

Conclusion:
The court concluded that the business of the insurer was being voluntarily wound up, and therefore, the provisions of Section 15(a) applied, exempting the company from the application of the Ordinance and the Act. The orders dated 13 May 1971 were quashed, and a mandamus was issued requiring the respondents to forbear from acting on and giving effect to the two orders. The petitioners' fundamental rights as shareholders were recognized, and the court granted relief accordingly.