HIDAYATULLAH, J.: - (1.) THE following Judgment of the court was delivered by
(2.) THIS is an appeal against the order of the Life Insurance tribunal, Nagpur, dated 12/12/1952, by which a dispute about compensation payable to the National Insurance Company by the Life Insurance Corporation on the taking over of the life business of the former was decided. The National Insurance Company is the appellant and the Life Insurance Corporation is the respondent. Another appeal was filed by the Life Insurance Corporation against the same order but was not pressed at the hearing. The National Insurance Company carried on life insurance business in addition to other insurance Co. business and was what the Life Insurance Corporation Act, 1956 (31 of 1956), describes as a `composite insurer.` The Life Insurance Corporation Act was passed in 1956 to nationalise the life insurance business of all insurers by transfer-ring all such business to a Corporation established for the purpose. This Corporation is the well-known Life Insurance Corporation. Under the Act a distinction was made between controlled business' and other insurance business carried on by Insurance Companies. 'Controlled business' meant life insurance business from a date to be fixed by notification in Gazette called the `appointed day' all the and on and the Official assets and liabilities of appertaining to the controlled business of all insurers were transferred to and vested in the Corporation. This date was 1/09/1956. The NationalInsurance Company was a composite insurer and itslife business therefore stood transferred to and vested in the Life Insurance Corporation from the appointed day. Under s. 16 of the Life Insurance Corporation Act, the National Insurance Company was entitled to receive compensation from the Life Insurance Corporation in accordance with the principles contained in the First Schedule to that Act. To these principles we shall make a detailed reference presently. As the National Insurance Company was carrying on a composite business it was necessary to separate the 'assets appertaining to the controlled' business' from those a pertaining to its other business under s. 10 read withs. 7 of -the Corporation Act. These assets were defined in and Explanation added to s. 7 (2) as follows :- `The expression `assets appertaining to the controlled business of an insurer`- (a) in relation to a composite insurer includes that part of the paid-up capital of the insurer or assets representing such part which has or have been allocated to the controlled business of the insurer in accordance with the rules made in this behalf, (b) in relation to a government, means the amount lying to the credit of that business on the appointed day.` S. 7 and 10 (2) conferred on the central government special rule-making powers and inter alia for the allocation of the Daid-up capital or assets representing such paid-up capital, as the case may be between the controlled business of the insurer and any other business. In pursuance of these provisions and s. 48 of the Act the Life Insurance Corporation Rules, 1956, were framed by the central government and Rule 18 provided for allocation of the paid-up capital of a composite insurer. We need not quote Rule 18 providing for the method of allocation of capital of a composite insurer because it was provided there that the paid-up capital allocable to the controlled business shall not, in any case, exceed a sum of Rs. 6,00,000.00 and the maximum amount applied to the National Insurance Company and was payable by it to the Life Insurance Corporation. The Life Insurance Corporation determined Rs. 19,39,669.00 as compensation for the controlled business vested in the Corporation in accordance with s. 16 read with the First Schedule of the Life Insurance Corporation Act, 1956. After obtaining the approval of the central government, by a letter dated 14/02/1957, sent to the Company, the Corporation pointed out that the National insurance Company was required to pay Rs. 6,00,000.00 under Rule' 18 of the Life insurance Corporation Rules., 1956, as assets appertaining to the controlled business and offered the balance of Rs. 13,39,669.00 in full satisfaction of the claim. The National Insurance Company asked for the calculation sheets and they were supplied by the Life Insurance Corporation. The National Insurance Company did not accept the Compensation offered to it and requested that the dispute be referred to the Life Insurance tribunal for decision but asked that the admitted amount might be paid to it without prejudice to the claim of either side. On 1/05/1957, the Life Insurance Corporation replied regretting its inability to pay the admitted amount except in full satisfaction of the claim as required by law. A request for reconsideration of the matter made by the National Insurance Company by a letter dated 9/05/1957, in which -a sum of Rs. 27,99,275.00 was claimed as compensation was turned down by the Life Insurance Corporation and,the dispute therefore stood referred to the tribunal. In making the reference to the Life Insurance tribunal the Life Insurance Corporation forwarded the entire correspondence and the calculation sheets together with other documents on which the calculation sheets were based. Before the tribunal, the Company claimed a sum of Rs. 43,29,470.00 as compensation due to it. The Company also gave its calculation sheets. In addition the Company claimed interest at six per cent. per annum from the appointed day (September I., 1956) or at least from the date the compensation wrongly determined was offered to the Company, namely, 14/02/1957. Earlier, in the letters to which reference has already been made the National Insurance Company had demurred to the deduction of Rs. 6,00,000.00 from the amount of compensation offered to it. Its case before the tribunal was that under the law, as it stood, the Corporation was bound to offer theentire compensation without making a deduction on this account and the claim of the Corporation for the assets appertaining to the controlled business of the Company should be separately enforced.
(3.) THE difference between the Company and the Corporation in the matter of calculation arose because the parties put different interpretaions upon the provisions of the First Schedule to the Life Insurance Corporation Act. That Schedule is made under s. 16 of the. Life Insurance Corporation Act, which reads :`16. (1) Where the controlled business of an insurer has been transferred to and vested in the Corporation under this Act, compensation shall be given by the Corporation to that insurer in accordance with the principles contained in the First Schedule. (2) THE amount of the compensation to be given in accordance with the aforesaid principles shall be determined by the Corporation in the first instance, and if the amount so determined is approved by the central government it shall be offered to the insurer in full satisfaction of the compensation payable to him under this Act, and if, on the other hand, the amount so offered is not acceptable to the insurer he may within such time as may be prescribed for the purpose have the matter refer-red to the tribunal for decision.` We have already stated that the Corporation had offered compensation as approved by the central government after deducting Rs. 6,00,000.00, under Rule 18 and this offer was made in full satisfaction of the compensation payable to the Company as required by sub-s. (2). The Company refused to accept the offer but asked to be paid the admitted amount. This the Corporation declined. We are .of the opinion that the demand of the Company for the admitted amount even though without prejudice to the contentions of the parties, was rightly rejected by the Corporation, as, under sub-s. (2) of s. 16. the Corporation could only make the offer and pay the money in full satisfaction of the claim for compensation. Sub-s. (1) of s. 16 refers to the principles contained in the First Schedule. That Schedule is divided into three parts which are marked A, B and C. It was admitted before us that part A alone applied and that part contains principles in two paragraphs called 'Paragraph 1, Paragraph 2 and that Paragraph is to be applied to a particular case which is more advantageous to the insurer. Here Paragraph 1 is applicable. The relevant portions may now be read. `The compensation to be given by the Corporation to an insurer having a share capital on -which dividend or bonus is payable, who has allocated as bonus to policy-holdersw the whole or any part of the surplus as disclosed in the abstracts prepared in accordance with Part II of the Fourth Schedule to the Insurance Act in respect of the last actuarial investigation relating to his controlled business as at a date earlier than the 1st day of January, 1955, shall be computed in accordance with the provisions contained in paragraph 1 or paragraph 2 whichever is more advantageous to the insurer. Paragraph 1.--Twenty times the annual average of the share of the surplus allocated to shareholders as disclosed in the abstracts aforesaid in respect of the relevant actuarial investigations multiplied by a figure which represents the proportion that the average business in force during the calender years 1950 to 1955 bears to the average business in force during the calender years comprised in the period between the date as at which the actuarial investigation immediately preceding the earliest of the relevant actuarial investigations was made and the date at which the last of such investigation was made. (Paragraph 2. Omitted) Explanation 1--For the purposes of paragraph I (a) ``relevant actuarial investigations` means such minimum number of latest actuarial investigations as at dates earlier than the 1st day of January, 1955 (not being less than two in any case), as would leave the period intervening between the date as at which the actuarial investigation immediately preceding the first of such investigations was made and the date as at which the last of such investigations was made, to be not less than four years; (b) `'Average business in force` means the average of total sum assured by the insurer (including any bonus) in respect of his controlled business as on the 31st day of December of each of the relevant calender years. Explanation 2.--For the purpose of paragraph 1, where an insurer has allocated to share-holders more than 5 per cent. of any surplus as is referred to therein, the insurer shall be deemed to have allocated only 5 per cent. of the surplus and where an insurer has not allocated any such surplus to share-holders or has allocated to share-holders less than 31/2 per cent. of any such surplus, the insurer shall be deemed to have allocated 3-1/2 percent. of the surplus. To understand these provisions we have first to see certain provisions of the Insurance: Act, 1938 (4 of 1938). That Act was passed to consolidate and amend the law relating to the business of insurance. Under s. 13 of the Insurance Act every insurer including a company carrying on life business was required, in respect of the life insurance business transacted, once at least in every five years to cause an investigation to be made by an actuary into the financial -condition of the life insurance business including a valuation of the liabilities in respect thereto and was further required to cause an abstract of the report of such actuary to be made in accordance with Parts I and II of the Fourth Schedule to the Insurance Act. The period of five years in s. 13 was altered to three years by the Insurance (Amendment) Act. 1950. (47 of 1950) with effect from 1/06/1950. Fourth Schedule was divided into two parts. First part contained Regulations and the second part laid down the requirements applicable to the abstract in respect of life insurance business which had to be prepared at these investigations. Regulation (1) laid down that all abstracts and statements must be so arranged that the numbers and letters of the paragraphs correspond with those of the paragraphs of Part II of that Schedule. In other words, the abstracts and statements prepared by the actuary were required to follow the same scheme and to supply the particulars in the same order as stated in Part II. Part II prescribed a number of tabular statements which were required to be annexed to every abstract prepared in accordance with Part II. Among them were (i) a Consolidated Revenue Account in form G for the inter-valuation period, and, (ii) a Valuation Bala'nce-Sheet in the Form I. 'Intervaluation period' was defined to mean :teas respects any valuation, the period to the valuation date of that valuation from the valuation date of the last preceding valuation in connection with which an abstract was prepared under this Act or under the enactments repealed by this Act, or, in a case where no such valuation has been made in respect of the class of business in question from the date on which the insurers began to carry on that class of business; ` In plain language it meant a period between two valuation dates. The minimum period was fixed at first as five years and after 1/06/1950, as three years. In our case, the first valuation covered a period of five years and the second a period of three years and the only 'intervaluation period' was the period of three years which was between the two valuation dates. ;