9911796707
TMI Blog1960 (5) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... se resolutions, the Company informed the Controller of Insurance in December, 1956, that it was not applying for renewal of its registration for carrying on the business of insurance. In May, 1957, the Controller wrote to the Company that its certificates for carrying on insurance business would be deemed to be cancelled from July 1, 1957, and the cancellation was notified in the Gazette of India. It appears that the Government of India had been receiving complaints against the Company. Consequently on July 17, 1957, the Government of India passed an order under s. 33 of the Act directing the Controller of Insurance to investigate the affairs of the Company and to submit a report. Thereupon the Controller appointed Messrs. Fraser and Ross to act as auditors to assist him in the investigation. The Company was informed of this order in September 1957. Thereupon it wrote to the Controller that no order under s. 33 of the Act could be passed against it, as it had closed its business of insurance and the order in question was without jurisdiction. The Controller sent a reply to this communication and pointed to the provisions of s. 2D of the Act in justification of the order. Thereupon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the business of insurance and no such business can be carried on unless a certificate of registration for the particular class of insurance business has been obtained from the Controller. Section 3(4) gives power to the Controller to cancel the certificate for reasons specified therein and s. 3(5B) lays down that when a registration is cancelled the insurer shall not after the cancellation has taken effect, enter into new contracts of insurance, but all rights and liabilities in respect of contracts of insurance entered into by him before such cancellation takes effect shall, subject to the provisions of sub-s. (5D), continue as if the cancellation had not taken place. In order to safeguard the interest of policy- holders, s. 7 provides for deposits by the insurer for various classes of his business. Section 8 lays down that any deposit made under s. 7 shall be deemed to be part of the assets of the insurer but shall not be susceptible of any assignment or charge; nor shall it be available for the discharge of any liability other than liabilities arising out of policies of insurance issued by the insurer so long as any such liability remains undischarged ; nor shall it be liable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rer and makes him subject to all the provisions of the Act with respect to any class of insurance business so long as his liabilities in respect of that class remain unsatisfied or not other. wise provided for and therefore s. 2D would only apply to those cases where insurance business is being carried on, though some class of insurance business might have been closed. The contention therefore is that reading ss. 33 and 2D together, no order under s. 33 can be made in case of an insurer who has completely closed his business of insurance. The main basis of this contention is the definition of the word "insurer" in s. 2(9) of the Act. It is pointed out that definition begins with the words " insurer means" and is therefore exhaustive. It may be accepted that generally the word " insurer" has been defined for the purposes of the Act to mean a person or body corporate, etc., which is actually carrying on the business of insurance, i.e., the business of effecting contracts of insurance of whatever kind they might be. But s. 2 begins with the words " in this Act, unless there is anything repugnant in the subject or context " and then come the various definition clauses of which (9) is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndian Companies Act. Here the word ,insurer" has been used to indicate the company which is not actually carrying on the business of insurance but is intending to do so and is applying for registration. Further in s. 3(2) (e) which also deals with an application for registration, it is provided that an insurer having his principal place of business or domicile, outside India shall send along with the application a statement verified by an affidavit of the principal officer of the insurer setting forth various requirements. Here again, the word " insurer " has been used for an intending insurer, for the business of insurance would only begin after the registration certificate is granted on the application made under s. 3(2). Then in s. 9 it is provided that, where an insurer has ceased to carry on business, the court may on the application of the insurer order the return to him of the deposit made under s. 7. This. shows that though the, insurer is not actually carrying on the business of insurance he is still termed an insurer and on his application the deposit may be refunded to him. Again s. 55 which deals with a situation arising out, of the winding-up of an insurance company or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... D. That section provides that every insurer shall be subject to all the provisions of the Act in relation to any class of insurance business so long as his liability in India in respect of business of that class remains unsatisfied or not otherwise provided for. Obviously this section applies to those insurers who have closed their business. It was not necessary to enact this section if the word ,insurer" here also meant a person actually carrying on the business of insurance, for the provisions of the Act apply to such a person proportion vigor. Therefore, when the word " insurer " is used in s. 2D it must mean a person who was carrying on the business of insurance but has closed it. If that is so, s. 33, which provides for investigation, would apply to such an insurer who has closed his business, by virtue of s. 2D. Mr. Aggarwala next contends that s. 2D would only apply to those cases where an insurer was carrying on different classes of insurance business and had closed some of them but not all of them. He contends that the section provides that the insurer shall remain subject to the provisions of the Act in relation to any class of insurance business so long as his liabilitie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Government is satisfied that the liabilities have not been satisfied or otherwise provided for, and that the order should show on the face of it that the Central Government had considered this aspect of the matter and had come to the conclusion that the liabilities remained unsatisfied or not otherwise provided for. Further there is nothing in the present order to show that the Central Government ever considered this aspect of the matter and was satisfied that the liabilities of the appellant Company remained unsatisfied or not otherwise provided for. There is no doubt that the order is utterly silent on this point and it was only in his letter of October 15, 1957, that the Assistant Controller pointed out s. 2D of the Act and referred to this aspect of the matter. It seems to us only just and proper that when an order is being passed under s. 33 read with s. 2D of the Act it should show on the face of it that the Central Government was prima facie satisfied that the liabilities had remained unsatisfied or not otherwise provided for it is only when the liabilities have not been satisfied or otherwise provided for that an order under s. 33 read with s. 2D would be justified in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there can be no question of satisfying or otherwise providing for liabilities unless the liabilities are ascertained and either admitted or proved. In other words the argument is that it is only those liabilities which are admitted by the insurer or which have been decreed against him and the decrees have become final which can be taken into account in deciding whether the liabilities have remained unsatisfied or not otherwise provided for. It is urged that only those liabilities which are ascertained and either undisputed or proved can be satisfied and that the same applies to their being otherwise provided for. It is true that only those liabilities, which are ascertained and either admitted or proved, can be satisfied; but it does not follow that " provision otherwise " must also be only of liabilities which are ascertained and either admitted or proved. If that were go a dishonest insurer who closes his business could always get out of the provisions of s. 33 read with s. 2D by repudiating all claims made against him and then saying that there are no liabilities which remained unsatisfied or otherwise `unprovided for. There can be no doubt, therefore, if these provisions have t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decree attaching part of the security deposit in case they fail to realise their debt in any other way ; it does not contemplate, for example, third parties who have decrees against an insurer, like the Company (which in its motor insurance business indemnifies the policy-holders against third party risk up to a certain extent), doing so. Such third parties cannot under any circumstances attach any part of the deposit, for s. 8 only permits its attachment in the last resort by a policy-holder of the insurer in respect of a debt due upon a policy. But under s. 2D the decree of a third party in such a case would be the liability of the insurer in respect of his motor insurance business which could not be realised by attachment of any part of the deposit under s. 7. Besides, even with respect to decrees of policy-holders the deposit could only be attached when all other ways of realising the money have failed. In these circumstances it can hardly be said that the fact that this deposit is there is itself a " provision otherwise " to meet the liabilities of the insurer. The policy-holder cannot attach this deposit unless he first exhausts all other means. Even if be has got a decree an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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