OFFICIAL LIQUIDATOR KARACHI MUTUAL ASSURANCE CO LTD Vs. L B SUJAN

JUDGEMENT

(1.) HIS is an application by the Official Liquidator of the Karachi Mutual Assurance Co. Ltd. Ajmer (hereinafter called the Company) in liquidation u/s 106 of the Insurance Act No. IV of 1938 and as modified by Act No. 54 of 1955 (hereinafter called the Act) The respondents are the five directors of the company, namely, Sri L. B. Sujan, Messrs. Khemchand Ganga-ram, Messrs. Tolaram Harumal, Sri L. C. Lodha and Sri P. T. Advani.

(2.) THE allegations in the application are that the company was originally incorporated and registered with the Registrar of the Joint Stock Companies of Karachi, now in West Pakistan, in the year 1945. THE company secured registration certificate from the Controller of Insurance in March 1946 for doing life business. As the company did not deposit in the Reserve Bank of India the amount as provided in sub-sec. 2 of sec. 98 of Act, the Controller of Insurance on 1st March, 1951 cancelled the registration certificate issued by him to the company and the said order was to take effect from 27th April, 1951. THE Controller of Insurance on 9th September, 1953 applied to the District Court at Ajmer for compulsory winding up of the company and the court made a winding up order on 16th April, 1955 and Sri J. B. Hingorani was appointed its Official Liquidator. On going into the records the Liquidator found that the company had borrowed from the directors and other persons on fixed and temporary deposits a sum amounting to Rs. 1,06,000/-and out of this Rs. 52,000/- were payable on fixed deposit receipts which matured on 31st December, 1950. In September the Managing Director sought an opinion from their solicitors Messrs. Little & Co. , Bombay if the depositors could claim a charge or lien on the company's deposits made in the Reserve Bank of India under sub sec. 2 of sec. 98 of the Act and he was advised that they could not. THEreafter the company at the end of 1950 was not able to pay any amount on the fixed or temporary deposits. THE Directors with the fraudulent intention of making available the amount deposited with the Reserve Bank of India u/s 98 (2) of the Act to themselves and to some other depositors converted their deposits of the value of Rs. 52,000/- into single premium policies and issued the same maturing on expiry of 5 years. Out of the single premium policies of Rs. 52,000/- the policies of the value of Rs. 28,000/- were issued in favour of the Directors and the remaining of Rs. 24,000/- in favour of others. THE Official Liquidator repudiated the liability of the company in respect of Rs. 28,000/- the amount due to the Directors but had to allow the claim of the other depositors of the amount of Rs. 24,000/- because after a period of 6 months of the issue of the policies they could not be repudiated on the ground of undue preference, so far as other depositors were concerned. THE Directors as that very sitting also resolved to transfer the affairs of the company to another insurance company.