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TMI Blog1994 (9) TMI 354X X X X Extracts X X X X X X X X Extracts X X X X ..... dants of the employees who died while in service. While the scheme was in operation the question arose as to the validity of the scheme. The Government of Madhya Pradesh examined that question from the perspective whether the said scheme was violative of the provisions of the Life Insurance Corporation Act, 1956 (hereinafter referred to as the Act) or the Insurance Act, 1938. By its order dated 31.3.77 the Government of Madhya Pradesh directed the suspension of the scheme as administered by the Jabalpur Municipal Corporation. However, by order dated 15.2.78 the Government directed till further orders appropriate deductions may be continued from the employees' salary. By a Resolution dated 18. 8. 80 the Municipal Corporation, Jabalpur in order to provide higher benefits to the employees increased the contribution from ₹ 5 to ₹ 10 and from ₹ 10 to Rs, 20. The matter was considered in detail; By order dated 16.12.80 the Government of Madhya Pradesh directed the Jabalpur Municipal Corporation to stop the scheme forthwith. The Municipal Corporation was also advised that on receipt of confirmation of withdrawal of scheme opinion could be obtained from the Central ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hin the ambit of Section 421 of the Madhya Pradesh Municipal Corporation Act, 1956. In questioning the correctness of this judgment Mr. Harish Salve, learned counsel appearing for the appellant urges the following: Section 30 of the Act confers exclusive privilege on the appellant- Corporation to carry on business of life insurance in India. The sums assured by all policies issued by the appellant-Corporation including bonuses declared in respect thereof in terms of section 37 of the Act are guaranteed as to payment in cash by the Central Government. The term Life Insurance Business is defined under Section 2(11) of the Act. The definition contained therein is merely illustrative and not exhaustive. On a reading of Sections 2(3), 30 and 44(f) it would be clear that on the establishment of Life Insurance Corporation of India all life insurance business which was then carried on by the Central Government or the State Governments was to come to an end. Of course, the compulsory schemes of Central Government or the State Governments which were in existence at the time of establishment of Life Insurance Corporation of India were allowed to continue. Similar schemes could, in fut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... insurance, (b) the granting of annuities upon human life; and (c) the granting of superannuation allowances and annuities payable out of any fund applicable solely to the relief and maintenance of persons engaged or who have been engaged in any particular profession, trade or employment or of the dependants of such persons. Life insurance is a promise to pay a certain sum upon the death of the assured. Life insurance is a contract whereby the insured agrees to pay certain sums, called premiums, at specified times, and in consideration thereof the insurer agrees to pay certain sums of money on certain conditions and in specified ways. Life insurance imports a mutual agreement, whereby the insurer, in consideration of the payment by the assured of a named sum annually or at certain times, stipulates to pay a large sum at the death of the assured. This Court had occasion to deal with the scope of Section 2(11). In General Family Pension Fund v. Commissioner of Income-tax, West Bengal, AIR (1955) SC 50 it was held (no doubt as a concession): The business of a company consisting exclusively in granting terminable pensions or annuities dependent on human life in favour o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge of 21 years, father or mother. The benefit of the Scheme will be available to the legal heirs of the deceased in case the aforesaid members of the family are not available and if the nomination letter has not been filed in the prescribed form under the rules benefit will not be payable to the married daughter under any circumstances. (Emphasis supplied) Therefore, we find no escape for the Jabalpur Municipal Corporation. If that be so, it is a clear case of life insurance. The High Court is not right in holding as follows: Admittedly the scheme is not any kind of business as no benefits derived from the scheme go to anyone except the contributors. It is also not disputed that the employees of the Corporation make a voluntary contribution although the amount of contribution is deducted because they give declaration to the Corporation for getting the deductions done from their salaries. On their retirement they get whatever is accumulated with interest and on mishap certain amounts is paid to the members of the family as provided in the scheme. It is, therefore, dear neither it is paid as insurance of the business nor anything which could attract the provisions of Section 30 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assured for a particular term. Therefore, life insurance has a wide concept in modern days. Life insurance is designated by various names according to the nature of the terms and conditions of the different forms of contracts or policies. They may be- (i) Endowment insurance, i.e,, a contract to pay a fixed sum to insured if he survives for a specified period, or, if he dies within such period, to some other person nominated or indicated. Under this head includes child's endowment or deferred life insurance. Considerable difficulties have arisen with regard to the latter type of insurance as normally a person has no insurable interest in the life of his child and such a policy would, therefore, be illegal but when the policy is in the form now commonly current, the proposer will be regarded as holding the policy in trust for the child. (ii) Limited-payment insurance, i.e., a form of life insurance which contemplates payment of premiums by insured for a specified period or until his death with such period and for payment by insurer on the death of the insured. The difference between the endowment insurance and the limited-payment lies in this that the latter becomes pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance Corporation of India undertakes various kinds of life insurance, of which mention may be made of- (1) limited payment life insurance; (2) endowment insurance; (3) joint-life insurance; (4) multi-purpose insurance; (5) children's deferred insurance; (6) two-year temporary insurance; (7) whole life-insurance; (8) double endowment insurance; (9) triple benefit insurance; (10) anticipated endowment insurance; (11) convertible whole life insurance ; (12) special whole life insurance ; (13) annuity insurance including single premium to immediate or deferred annuity insurance and including single premium to immediate or deferred annuity insurance and educational annuity insurance; (14) fixed-term marriage endowment insurance. We are unable to support the finding of the High Court. This scheme run by the Jabalpur Municipal Corporation is against the interest of the employees themselves since the payments under the scheme, whether on retirement or death, are not guaranteed either by the Jabalpur Municipal Corporation or by the Madhya Pradesh State Government. Section 44 makes Life Insurance Corporation Act inapplicable in certain cases. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Government may, after considering the said representation, either cancel, modify or confirm the order passed by it under Section 1 or take such other action in respect of the matter as may in the opinion of the Government be just or expedient having regard to all the circumstances of the case. The High Court is of the view that the scheme does not fall within the ambit of the above Section. No. question of municipal funds arises in this case as the scheme is wholly run on contributions made by the employees and not on the funds of the Jabalpur Municipal Corporation. Therefore, the State Government has no jurisdiction to cancel the Resolution. A careful reading of sub-section (1) of Section 421 shows that if the doing an act which is not in conformity with law, certainly it could prohibit the doing of such an act. We have already found that the scheme is in violation of the life Insurance Corporation Act, particularly Section 30. Therefore, the State Government is well empowered to invoke the power under Section 421. The exercise of such a power cannot be found fault with. In the result, the civil appeal will stand allowed with costs. - - TaxTMI - TMITax - Indian Laws ..... X X X X Extracts X X X X X X X X Extracts X X X X
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