Neptune Assurance Co. Ltd. & Ors. v. Un!on of India & Anr.

Judgment

NEPTUNE ASSURANCE CO. LTD. & ORS. UN!ON OF INDIA & ANR. November IO, 1972 · [S. M. S!KRI, C.J., A. N. RAY, D. G. PALEKAR, M. H. BEG AND S. N. DwIVEDY, JJ.] General Insurance (Emergency Provisions) Act 1971 s. l5(a}-'lnsurer' whose business is voluntarily 'lround up or is wound up under order of Court exemHed from operation of Act-Voh<nt,1/'y winding up of business 1vhether includes cessatio11 of busines,j-'/I, :urer' and insurance company, whether distinct-Sections 2(e) and 15(a) of Act whether violative of Art. 14, Constitution of India. Tho first petitioner was a public limited company incorporated under the Indian Companies Act. The second and Jiird petitionei·s were share· holders and directors of the first petitioner. Up to the end of March, 1971 the petitioner company was registered under the Indian Insurance Act, 1938. The registration authorised it to carry on the busine~ of general insurance comprising fire ~nd miscellaneous insurance.

On September 17, 1970 its Board of Directors resolved that it would cease to underwrite any insurance business as from the close of business on Septem~r 30, 1970. On that very date it informed the Controller of Insurance of the resolution and returned its certificate of registration for the year 1970 to the Controller of Insurance. After the close of business on September 30, 1970 it stopped doing any kind o'f general insurance business.. On October 3. 1970 the Controller of Insurance returned the Registration C'zrtifi~te to it with the remark that there was no provision in the Insurance Act for return of certificate. The Controller advised it not to apply for renewal of certificate for the year 1971. On Febuary 2, 1971 the lfoard of Directors of the company passed a resolution cancelling all policies with effect from March 10/12, 1971 ~ftcr giving due notice to the policy-holders.

Another resolution was passed terminating all re· insurance treaties, both inward and outward, with effect from December 31. 1971. The company refunded to the policy-holders a sum of Rs. 48.000 on cancellation of their policies. The uncollected refund amount ~me to Rs. 2013.98, On Febuary 16. 1971 the Controller of Insurance cancelled the registration of the company .with dfect from April 5, •.971 under section 3(4) (f) of the Insurance Act. The company reduced its staff.from the month of September 1970. By the end of Februarv 1971 the total staff cbnsisted of one officer. one clerk, one typist and one peon. ' Tn respect of some of the policies cancelled cases were pending in court. The Union of India, the first respondent, appointed a Custodian over the undertaking of ·the company under s. 4 of the Gcccral Jnsuranc' (Emergency Provisions) Ordinance I 971 on May 13, 1971. The said Ordinance was· eventually re-enacted as General Insurance (Emerg'ocy Provisions) Act. 1971.

The Union of India issued also certain directions on May 13, 1971 to regulaie the management of the undert9king by the Custodian. The company filed petitions under article 32 of the Con· situation claiming that the Act of 1971 was not applicable to it because it was aa insurer whose business was being voluntarily wound up in terms of section 15(a) of the Act and therefore it could not be taken over by the Central Government under s .. 3 of the Act. It was contended that the words "whose business is being voluntarily wound up" in sec~ tion 15(a) also meant "whose business is being voluntarily brought to NEPTuNE ASSURANCE CO, v. UNION a close or final settlement". The company also challenged the constitutionality of part of section 2(e) as also of section 15(a) of the Act,. under Art. 14 of the Constitution of Inoia. Held: per majority (Palekar, Beg and Dwivedi, JJ.) (i) The appellant company could not get the benefit of s. !5(e) ami was subject to the provisions of s.

3 of the Act which pro;ides for the take over of insurance companies. [966 HJ Section 2C of the Insurance Act has limited the denotation of the \vnrd 'insurer' from the date of the commencemeni: of the Insurance (Amendment) Act 1950. Section 2C(l) provides that "no person shall,. atter the commencement of the Insuranee (Amendment) Act 1950 begin, to carry on any any class of business in India and no insure~ carrying on any class of insurance business in India shall, after the expiry of one year from such commencement, continue to carry on any such business unless he is :1 public company 1ncorporated in or out of India ot a society re· gistered under ~ny law relating to Co-operative Societies Act, 1972. In the result at the commencement of the Ordinance and the Act,. ·Insurer' includecl a public company either in<\irporate~. under the Companies Act or under a foreign Company Jaw and a Cooperative Society. Although according to the proviso to s.

2C( 1) the Central Government may hv a Gazette notification exempt from the operation of s. 2C(l) any per·· son or insurer for the purpose of carrying on general insurance business for not more than three years at a time, no such notification was shown to have been in fact issued. Cooperative Societies are under the various State laws relating to Cooperative Societies wound up by an order of the Regis· trar of Cooperative Societies. Therefore the word insurer in s. 15(a) of the Act includes only two classes of persons : (a) public limited co1npany incorporated under the Companies Act; (b) a public company incorporated under a foreign company law. [960 H; 961 BCRF] The twin expressions "being voluntarily wound up" and "being wound up by a court" have acquired a crystallised meaning in the Company and. 'Insurer' included a public company either incorporated under the Com· panies Act and the Insurance Act.

In the Companies Act the expression "voluntary winding up" means a winding up by a special resolution of the company to that effect. Section 54 of the Insurance Act provides its 011·~ procedure for the winding up of aP. insurance company. According t_o 1t. an insurance company shall not be wound up voluntarily "except tor the purpose of effecting a1na1gamation or reconstruction of a company o~. the g'.ound that by reason of· its liability it cannot continue its husmess . Parliament will be. presumed to know that the expression ··voluntmy windin~ up" and "winding up by the Court" have acquired a· tcchmcal meanmg m our Company and Issurance jurisprudence [961 H· 962 A·DJ Sections 433(c}, 560, 583(4.) (a) & 584 of the Companies Act and' sections 2E. 3(5D), 53 of the Insurance Act make a clear distinction holwecn .the. cessation of business of.a company and its voluntary winding up or wmdmg up by an order of the court.

Parliament will be presumed !O be aware of the distinctions between the cessation of business by an rnsurance public company and its voluotary winding up or winding up by an order of the Court. There is nothing unequivocal in s IS(a) of tr.e· ;\ct to show that P~rliament intend,,d to depart from the t~hnical mea~­ [Z~3 o~'.~jse cxpresS1ons and to bid good-bye to the aforesaid distinction. The appellant companv did not claim that it was being wourd up· under s. 54 or s. '\8 of th I nsurance ct. It could not voluntarily be- \vound up otherwise than in accordance with s. 54 of the Jnsurancc Act. Jt was accordingly difficult to comprehend the argument that the cessation of business by the appellant company means volunt.iry winding up of its business. This kind of voluntary \\'inding up of business is unknown to the Insurance Act. [964 E] The winding up of a foreign company by an order of the Court in India really means the wipding up of its business in lndia.

The word 'business' is not therefore redundant in s.15 (a). Jf Parliament really meant that the first limb of s. 15(e) shouJd.aJso apply to as insurer who is in the process of closing its business ·j1 should have expressed the first limb in some such manner as any insurer "whose business is being closed'' or "is being wound up''. The constructio'n put for,vard by the appel· !ant company assigns little significance. to the word "voluntarily" and makes it n •urplusagc. [965 E·F] Regina v. Bocml of Trade. i 1965] .I Q.B. 603 !ind Rajah of Viziana- -~rum v. Of]icltll Receiv"·· Vidanagaram. [1962] Supp. J S.C.R. 344, re· forrcd to. Sections 15(b) and 2(e) of the Act both refer to an insurance company which has ceased to do business for a certain period. Section 15(a) should be construed· in the setting of~. 15(h) and 2(c)~ So construed, it is difficult to believe that P-arliamcnt has not used the expression "whose business is being volu11tarily wound up" in the tcch'lical sense.

[966 DJ One of the professed objects of the Act is "to protect the interest of the policy-holders pendinµ nationali-;ation of the general insurance business''. The interpretation !-.Uggestcd by the aP.pellant company \vould def cur th al object. As5un1ing that ~. 1 S la) h sn'>ccptihle o·f two mcunings-the \\'itlcr and the narrov.cr (tJi.~ technical). the one which fructifies the sai<l legislative object should be preferred. [966 F-Gl (ii) The chall~nge to sc.:ti-:>ns 2(e) and 15(a) of the Act based on Article 14 of the <;onstitution must fail...,f968 E] When the registr<1tion of <1 con1p-nny has remained wholly cancelled for six months fron1 the appointed day. the Controller may ;;1pply to the Court for its winding up under s. 3(5D). As soon as the judicial process is ~ct in motion. the company com.:s under th~ car.trot of the Court.

The Court's control \\'ill protect those policy holders who have got unsatisfied claims agr:in?-.t the co1nr:1n~ On the other hand th: company whose registration has remained '"holly c;;tnccllcd for less than six months can revive itself. It cannot b.~ ,.·vund up by the Court at the instance of the Controller. The claim-; of rhe policy-holders agl.linst such a company will remain unprotected. 'fh1...· tukcovcr of. the undertaking of the, company under the Act improves, hy rca~on of the Government's management, the prosp:cts of their cl:iims suti~faction. It is also calculated to protect all interests by applying after the takeover, if that course is deem.-cd necessary. to revive the business of the company. Section 2(e) is therefore not Uiscriminatory. For the sr.me reasons s. 15(a) ~Jso is not discriminatory. f96R B·E) [As the attnck based on Art. 14 did not succeed. the Court found it unnecessary rO deal wi.th the respondents' contention based on Art. 31A(b) (d) of the Constitution.]

Per Sikri C.J. and Ray, J. (dissenting). On the !-anguagc of section 15 (a) the con1pnny in the present case was rin insurer -.vhose business \Vas being voluntarily wcund up. Ther.cfore the Ordinti.ncc a11d the Act did not apply to the petitioner company. [955 G] NEPTUNE ASSURANCE CO. V. UNION 1t is important to notice that the Act uses the word 'insurer' and not the words 'insurance company'. The Insurance Act has throughout the Act used the words 'ir.surer' as well as 'insurance company'. The appropriate section in each instance will indicate as to why the Act uses the word 'insurer' in one section and the words 'insurance company' in the other. An insurer under the definition of the. Insurance Act is of wider amplitude than an in~ur~nce company. It is an indiyidual or any unincorporated body of md1v1duals or a body corporate mcorporated und~r the Jaw of a foreign country.

From section 2C of the Insurance Act 1t follows that an insurer as an individual may be allowed by the Government to carry on general insurani.:e business undzr the Government exemption. [948 DE & 949 C] The Legislature knows the distinction between voluntary winding up of an insurance company or winding up of it by a Court and an insurer whose business is being voluntarily wound up or is wound up by Court. Full effect is to be given to the words used in a legislative measure. The words which arc not found ig the present legislative measure cannot be substituted by words which are used in other statutes. That would be defeating the purpose of the Act. The word 'insurer' cannot be read in place ot msurance company. [952 G-H]

The provisions in the Insurance Act relating to voluntary winding up and partial winding up of insurance companies indicate the difference between the concepts of voluntary winding up under the Insurance Act and the Indian Companies Act and the business of an insurance company being voluntarily wound up. A voluntary winding up under the Insurance Act occurs for the purpose of effecting a reconstruction or amalgamation or on the ground that a company cannot continue its business because it cannot meet its liabilities. None of these contingencies is the same as voluntarily winding up business. A partial Winding up of an insurance company is winding up of a particular type of business. That company does not cease to do business. Nor is the C'Ompany voluntarily wound up in such a case. [953 D·E] In :he pre1ent case the company resolved to wind up its business. The company discontinued to do insurance business. The company canc.elled all outstanding policies in the month of February, 1971.

The company had not undertaken any new business after 30 September, I970. (953 HJ Afte: 30 S~ptember 197~ the company had taken steps to wind up voluntarily all insurance business. The company informed the Controller ?f its .<lecis.ion to ~top doing insurance business. The company returned its ~eg1Strat1on certificate. All t~se features lead to the inescapable concluS1on that the business of the msurer was being voluotarily wound up Therefore the provisions contained in sectio11 15(a) will apply to th~ company whose business is being voluntarily wound up. (954 A·B] . (ii) In the Ban.k Nationalisation case this Court said that the Court will n?l, c'O.nc~ntratmg merely upo.n the technical objection of the action, deny itself 1u11sd1ctton to grant relief to the share holders when the rights of the shareholders as well as of the company are impaired The loc standi of the petitioners could not be challenged. [957 C-0) · R. C. Cooper v. Union of India, (1970] 3 S.C.R. 530, referred to.

ORIGINAL JuR1SDICTION : Writ Petition No. 425 of 1971. P~tition under article 32 of the Constitution of India for the enforcement of fundamental rights. B. Divan and 1. N. Shroff, for the petitioners. V. M. Tarkunde, G. Das and B. D. Sharma, for respondent No.

1M. C. Setalvad, P. C. Bhartari, J. B. Dadachanji, O. C. Mathur and Ravinder Narain, for respondent No.

2The Judgment of D. G. Palekar, M. H. Beg and S. N. Dwivedi, JJ. was delivered by Dwivedi, J. The dissenting Opinion of S. M. Sik~i, C. J. and A. N. Ray, J. was given by Ray, J. RAY, J. This writ petition challenges the application of the General Insurance (Emergency Provisions) Ordinance 1971, the General Insurance (Emergency Provisions) Act 1971 as well as the General Insurance (Emergency Provisions) Amendment Act 1972 to the petitioner company. The petitioners are three in number, viz., the company and two Directors and shareholders. The petitioners asked for a declaration that the order dated 13 May 1971 made in exercise of powers conferred by section 4(1) of the General Insurance (Emergency Provisions) Ordinance 1971 and the directions dated 13 May 1971 given by virtue of powers conferred by section 4(3) of the General Insurance (Emergency Provisions) Ordinance 1971 are illegal. The paid up capital of the Neptune Assurance Company referred to as the company is Rs. 10,00,000.

The petitioner Jalan is a Director of the company. He holds 16, 725 ordinary shares of the face value of Rs. 20 each. The petitioner Goenka is a Director of the company. He holds 2,000 ordinary shares of the face valu~ of Rs. 20 each. The company carried on business as general insurers consisting of fire and miscellaneous insurance business. In the month of September 1970 about 2343 insurance policies of the company were in force. On 17 September 1970 the Board of Directors of the company resolved that the company would cease to underwrite any insurance business as from the close of business hours on 30 September 1970. On 30 September 1-970 the company wrote to the Controller of Insurance about the decision of the company to cease to do business as on the close of business on 30 September 1970. The company returned its registration certificate for the current year to the Controller of Insurance.

After close of business on 30 September 1970 the company stopped doing all insurance business. On 3 October 1970 the Controller of Insurance returned to the company its registration certificate. The Controller pointed out that there was no provision for return of certificate. The Controller advised the company not to apply for renewal of registration certificates for the year 1971. NEPTUNE ASSURANCE CO. v, UNION (Ray, J.) In the month of October 1970 there was an agreement between the comrany and the New Grert Insuranc.: Company of India Ltd. referred to as the New Great in respect of an intended transfer of the entire business of the company to the New Great. The agreement provided inter alia ihc following features. Before transfer of the entire general insurance busint".ss by the company it wiil obtain the consent of the shareholders at the general meeting far transfer of the general insurance business t'} the New Great.

The company shall prepare a detailed list of all the claims received from policies issued by the company and which claims are outstanding and/or pending on 30 September 1970 and give the same to· the New Great with all particulars. On 20 October 1970 notice was given that an extra-ordinary general meeting of the company would be held on 17 November 1970. The extraordinary general meeting was inter alia to transact the business of the proposal for transfer of the company's insurance -business and also of the liabilities in respect of claims relating to the insurance business to the New Great upon the terms recorded in the agreement dated 15 October 1970. The second business to be transacted at the said extraordinary general meeting was to reso:tve that pursuant to section 149 (2A) of the Companies Act 1956 the company would do business as set out in clause III, sub-clauses ( 8) and (9) of the Memorandum of Association of the Company except Banking business.

The company thought of investment and finance business. As required by section 173 of the Companies Act the company gave an explanato~y statement of the extraordinary general meeting. In the month of October 1970 ci:cular letters were issued to all policy holders about the company ceasing to underwrite new insurance business with effect from I October 1970. The company sent to all policy holders letters to express their confirmation of the arrangement for takiDg over the liabilities by the New Great. On 17 November 1970 there was an extraordinary general meeting of the company. The resolutions which had been notified were passed. It may be stated here that about 50 policy holders demanded cancellation of policies on receipt of circular letters. About 1,389 policy holders did not send any reply.

The company advised that they would not be completely discharged from their lia~ilities unless and until all policy holders agreed to transfer policies to the other insurance company or desired cancellation. On 2 February 1971 there was a resolution of t·he Board of Directors of the company cancelling the agreement dated 15 October 1970 entered into with the New Great. There was a second resolution cancelling al! policies as from 10/12 March l ~71 after giving due notice to all policy holders. There was a third resolution to terminate all re-insurance treaties both inward 9 4 fi and outward from 31 December 1970. Jhe company and the New Great by mutµal consent cancelled the agreement dated 15 October 1970. In the month of February 197 l the company issued circular letters to all policy holders effecting cancellation of all policies under relevant clause in each policy. The company refunded to policy holders the sum of Rs. 48,000 on cancellation of the policies.

The uncollected refund amounts to Rs. 2013.98. On 16 February l 971 the Controller of Insurance affected cancellation of the registration of the company with effect from 5 April 1971 under section 3(4)(F) of the Insurance Act, 1938. On 22 February 1971 the company gave letters to Indian Guarantee and General Insurance Co. and M/s India Re-Insurance Corporation Ltd. cancelling all re-insurance treaties with effect from 31 December 1970. The company alleged that it ceased to do all new insurance business from the close of business from 30 September, 1970. The . company refunded to policy holders premia excepting a small sum of Rs. 2,000 which was not collected. The company reduced its staff from the month of September 1970. By the month of February 1971 the total staff of the company was reduced to one officer, one clerk, one typist and one peon drawing total emoluments of Rs. 1854.20 per month as contrasted with salary bill of Rs. 7179.10 per month prior to the month of September 1970.

On these allegations the company said that its business was being voluntarily wound up since 30 Septemher 1970. On 13 May 197 l the General Insurance (Emergency Provisions) Ordinance 197 l referred to as the Ordinance was promulgated. On 13 May, 1971 an order under section 4(1) of the Ordinance was made by the Central Government appointing resppndent No. 2 as the custodian of the company. On the same day directions were given by the Central Government under the Ordinance in regard to the manugement of the undertaking of the company. On 17 June 1971 the General Insurance (Emergency Provisions) Act 1971 referred to as the Act was enacted. The Act replaced the Ordinance. The Act was retrospectively brought into force with effect from I '.I May 1971. The Ordinance as well as the Act contain similar provisions.

The purpose of the aforesaid legislative measures was to provide for the taking over in the public interest of the management of general insurance business pending nationalisation of such business. By general insurance business is meant under the Act fire.- marine or miscellaneous insurance business, whether carried on singly or in combination with one or more of them, but does not include capital redemption business and annuity businees. An 0 II insurer under the Act means an insurer as defined in the Insurance Act 1938 referred to as.the Insurance Act who cafoes on general insurance business in India, and includes an insurer whose registration under the Insurance Act has not remained wholly carn::elled for a period of six months inunediately before the appointed day. Undertaking is defined by lhe Act to mean in relation to an insurer incorporated outside India, the undertaking of that insurer in India.

Section 3 of the Act statei. that as from the appointed day which is l 3 May, 1971 the management of the undertakings of all insurers shall vest in the Central Government. It is further provided that pending the appointment of a custodian the persons in charge of the management of the undertaking shall be in charge of the management for and on behalf of the Central Governmenl. An insurer is forbidden without the previous approval of the person specified by the Central Government in this behalf to mak~ any payment or grant any loan otherwise than in accordance with the normal practice observed by him in respect of such matters immediately before the appointed day.

There is similar prohibition to incur any expenditure from the assets appertaining to the undertaking, to transfer or otherwise dispose of any such assets, to invest in any manner any moneys for.ming part of such assets, to acquire any immova\lle property out of any moneys forming part of such assets to enter into contract of service or agency. Every insurer is also required to deliver tn the persons specified by the Central Government various documents, namely, minutes book, current cheque books, registration books containing particulars relating to investments, loans, advances, promissory notes and certificates. Section 4 of the Act is the other important provision. Under that section the Central Government is empowered to appoint a custodian for the management of the company. The Central Government is also empowered to issue directions to the custodian as to his powers and duties in relation to the management of the company. The Act provides for payment of compensation.

The Act places a bar against winding up of a company the management of which is vested in the Central Government. After the appointed day the Controller of Insurance shall not issue any new certificate of insurance lo any person. The crucial provisions are section 15(a) of the Act. It is en- ~cted that nothing contained in this Act shall apply to (a) any msurer whose business is being voluntarily wound up or is being wound 11p by Court. . ~he petitioners strongly rely on section 15(a) of the Act. The petitioners allege that the business of the company was being 9-L52 !Sup.Cl/73 voiuntarily wound up at all material times within the meaning of the Ordinance and the Act. Therefore the petitioners contend that the company is not .viihin the mischief of those legislatlve measures. The Government contention is that section 15 (a) of the Act applies only to an insurance company which is being voluntarily wound up and is being wound up by Court.

It is emphasized that when an insurance company or an insurer ceases to carry on any particular kind of business it is not being voluntarily wound 'Up. Voluntary winding up-or winding up by Court is said by the Government to mean only winding up within the meaning of the Indian Companies AJ:t and the Insurance Act. The meaning of the words "an insurer whose business is voluntarily wound up or is wound up by Court" is, according to the Government, an insurance company which is bein11: voluntarily wound up or wound up by CQur~. At the threshold it is important to notice that the Act u~es the word 'insur~r· and not the words "insurance company". The Insurance Act has throug~o!Jt the Act used the words "insurer" as well as "insurance company". The appropriate section in each instance will indicate as to why the Act uses the word "insurer" in one section and the words "insurance company" in the other.

An insurance company under the Insurance A~t means any insurer being a company, association or partnership which may be wound up under the Indian Compenies Act or to which the Indian Partnership Act applies. A partnership to which the Indian Partnership Act Applies is not a company within the meaning of the Indian Companies Act. The Insurance Act has yet inclu<led a partnership within the meaning of an insurance company.

An insurer, on the 0ther hand, under section 2 clause (9) of the Insurarice Act means (a) any individual or un-incorporated body of individuals or body corporate, incorporated under the law of any country other than India carrying on business not being a person specified in subclause (c) of clause (9) of section 2, (b) any body corporate incorporated under any law for the time being in force in India and ( c) any person who in India has a standing contract with underwriters who are members of the Society of Llyod's whereby such person is authorised within the terms of such contract to issue protection notes, cover notes, or other documents granting insurance cover on behalf of underwriters. Therefore an insurer under the definition of .the Insurance Act is of wider amplitude than an insurance company, it is an individual or any unincorporated body of individuals or a body corporate incorporated under the Jaw of a foreign country is an insurer.

Section ZC of the Insurance Act which ~ame into effect in 1950 enacted that after the commencement of the Insurance (Amendment) Act 1950 which brought that section into existence II 11 NEPTUNE ASSURANCE CO. l', UNION (Ray, /.) no person after the expiry of one year from the commencement of the Amendment Act s.!!all continue to carry on business unless he is (a) a public company, or (b) a society registered under the Cooperative Societies Act, or (c) a body corporate incorporated under the law of any country outside India. Therefore after 1950 :.n individual will not be allowed to carry on business as an insurer.

There is however a proviso to section 2C of the 1950 Amendment that .the Central Governn:ient may by notification in the Official Gazette, exempt from the operation of section 20 any person or iim;rer for the purpose of carrying on the business of granting superannuation allowances and annuities as mentioned in section 2 (ii)(c) of the ,6,.ct or for the purpose of carrying on any general insurance business. It is also provided th.at an insurer carrying on general insurance business will not be entitled to such notification being issued having effect for more than three years at any one time. It, therefore, follows that an insurer as an individual may be allowed by the Government to carry on general insurance business under the Government exemption. The various kinds of insurance business are fire insurance business, general inslJrance business, life insurance busine~s . . marine insurance business and miscellaneous insurance business defined in clauses (6A), (6B), (II)

(13A) and (13B) of section 2 of the Insurance Act. General insurance business means fire. marine or miscellaneous insurance business whether carried singly or in combination with one or more of them. 'Section 3 of the Insurance Act speaks of registration of the persons carrying on insurance business. Se~tion 3 ( 4) of the Insurance Act speaks of cancellation of the registration of an insurer. Section 3(5C) of the Insurance Act states that where the registration is cancelled the Controller may at his discretion revive the registration. The instances where registration may be revived are also specified. If theregistratio.i is cancelled on thl' ground that the insurer is in liquidation the registration cannot bl' rev!ved. It i~ noticeable. th,at t~e Insurance Act .speaks iif liquidal!on of an msurer. L1qu1dat10n here means wmding up of an ins?ra~c.e company.

Liqu~dation in the first place does nor apply to md1v~duals or P,artnersh1ps, and secondly liquidation is not thl' same thmg as ceasmg to carry on business. Under section 3 (50) wh~re the ~egistration is cancelled the Controller may after the expiry of stx months from the date on which the cancellation took effect. aP,ply t? the Court to wind up the insurance companv unles.s the reg1strat1on has been revived under sub-section (SC). - !he Insurance Act in sections 53 to 60 speaks of winding up. ~cl!on 53 states that the Court may order the winding up of an msurance .company. Section 54 speaks of the voluntary windin~ up of an msurance company. Section 55 deals with valuation ~f liabilities in the winding up of an insurance company. Section 56 deals with application of sl'rplus assets of life insurance fund in liquidation of insurance company or insolvency of insurer. Liquidation is spoken of companies. Insolvency is spoken of insurers.

The distinction between an insurer and an insurance company is apparent to emphasise the. difference between winding up and insolvency. Section 57 relates to winding up of secondary companies. That section defines secondary company to be an insurance company whose insurance business or any part of the insurance business has been transferred under an arrangement to a principal company. If the principal company is wound up by or under the supervision of the Court the Court shall order the secondary cc;mpany to be wound up in conjunction with the principal company. Section 58 deals with partial winding up of imurance companies. Partial winding up happens when the affairs of an insurance company in respect of any class of business should be wound up but any other class of business should continue to be carried on by the company or transferred to another insurer. scheme for partial winding up is to be submitted to Court for confirmation.

A scheme shall provide for allocation and distribution of the assets and liabilities of the company. A scheme is to contain provisions for altering the memorandum of the company with respect to its objects giving effect to the scheme when the company carries on another class of business. There may be winding up of the company when under the scheme it is propo_sed to transfer the business to another insurer. The provision relating to the valuation of liabilities of insurers in liquidation and insolvency and to the application of surplus assets of the life insurance fund in liquidation are to apply to the winding up of any part of the affairs of the company in case of any partial winding up.

An order of the Court confirming a scheme under this Section whereby the memorandum is altered as to its objects shall as respect the alteration have effect as if it were an order confirmed under section 12 of the Indian Companies Act 1913 and the provisions of sections 15 and 16 of that Act shall apply accordingly. Section 59 speaks of return of deposits in the case of winding up of an insurance company other than in a case to which section 58 applies. Section 60 states that on the winding up of an insurance company, the persons appearing by the books be entitled to or interested in the policies granted by the company are to be given notice of policy values. Section 61 states that where an insurance company is in liquidation the Court may make an order reducing the amount of the insurance contracts of the company.

The first noticeable feature is that sections 53, 5:4 and 58 of the Insurance Act which deal with winding up by Court, volu1.1tary winding up and partial winding up respectively speak only Qf insurance company. There are some sections which speak of insolvency of any other insurer. These sections are 55, 56 and 61 of the Insurance Act which deal respectively with valuation of liabilities, application of surplus assets of life insurance fund and powers of the Court to reduce contracts of insurance. In• solvency of other insurer will refer to Co-9petative Societies, inc!ividuals and companies which are incorporated outside India. Under the Insurance Act these are not insurance companies. A foreign company which is in voluntary liquidation or is being wound up by Court will be an insurer within the meaning of the 197 l Act and will also be described as an insurer who is insolvent. These sections indicate the distinction between an illsurance company and an insurer.

The second important matter to be noticed in all the sections relating to wi[lding up i~ the Insurance Act is that voluntary winding up and partial winding up of insurance companies is not the same as under the Indian Companies Act. A voluntary winding up under the Insurance Act is impermissible except for the purpose of effecting an amalgamation or a reconstruction of the company or on the ground that by reason of its liabilities it 1 cannot continue its business. The provisions of the Indian Companies Act do not apply to such voluntary'winding up of an insurance company. Under the Indian Companies Act 1956 company may be voluntarily wound up if the compaQy passes special resolution that the company be wound up voluntarily. The special provisions of the Insurance Act regarding voluntary windin6 up rule out the application of the provisions of the J ndial! Companies Act. Amalgamation and Reconstruction under the Indian Companies Act are a different matter.

Under section 394 of the Indian Companies Act a transferer company on Amalgamation may be dissolved without any winding up. Again under section 392 of the Indian Companies Act 1956 the Court at the time of sanctioning a compromise· of an arrangement may make an order winding up the company. It will be treated as winding up by Court. These provisions indicate that voluntary winding up of co!fipanies under the fndian Companies Act and the voluntary winding up of insurance companies under the Insurance Act are not the same. Next comes :he partial winding· up of Insurance companies. The~e is .no. such provision in the Indian Companies Act. partial wmdmg up under the Insurance Act is treated as an alteration of a memorandum of the company. A partial winding up under the Insurance Act will in relation to that part which is [1973] 2 S.C.R, wound up attract the provisions of the Insurance Act regarding valuation of liabilities and application of surplus assets in liquidatioli or insolvency.

The Government relied on sections 53; 54 and 5.8 of the Insurance Act in supp<>rt of the contention that the winding up or a voluntary winding up will mean only voluntary winding up or w~ding ·UP.. of the company and will never mean the voluntary cesser of doing any kind of insurance business by a company. It is said that if a business can be said to be voluntarily wound up without a voluntary winding up of the company the sections will be robbed .of their full effect. Reliance was also placed by the Government on section 2D of the Insurance Act which state-; 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 liabilities in India in respect of business of that class remain unsatisfied or not otherwise provided for.

The Government leaned on this sec.lion to emphasize that if a company ceasing to do any busin~ss could be said to be one whose business was being voluntarily wound up it could not again be said to be subject to the provisions of the Act on the ground that the liabilities remain unsatisfied. The Insurance Act speaks of winding up of insurance companies. . The legislature has yet in the General Insurnace (Emergency Provisions) Ordinance .I 971 and the General Insurance (Emergency Provisions) Act 1971 not spoken of an insurance comp~ny being voluntarily wound up or wound up by Court. On the contrary, the legislative measures in the present case have used the words "an insurer" whose business is voluntarily wound up or is being wound up. by a Court. In this context, it may be state_d that when the Life Insurance (Emergency Provisions) Act 1956 came into existence both the Life Insurance (Emergency Provisions) Ordinance 1956 am! its successor the Life Insurance (Emergency Provisions)

Act 1956 used identical words that "nothing in the Ordinance or in the Act shall apply to any insurer whose business is voluntarily wound up or is wound up under order of Court". The legislature knows the distinction between voluntary winding up of an insurance company or winding up of it by a Court and an insurer whose business is, being voluntarily wound up or is wound up by Court. Full effect is to be given to the words used in a legislative measure. The words which are not found in the present legislative measures cannot be substituted by words which are used in other statutes. That would be defeating the entire purpose, of the Act. The word "insurer" cannot be read in place of insurance com9any. An insurer is not for all purposes the same as an insurance company. An individual is an insurer. A co-operative society ll u NEPTUNE ASSURANCE CO. v. UNION (Ray, J.) is an insurer. A con}pany incorporated in a foreign country and carrying on business in India is an insurer.

A co-operative society is not wound up under the Indian Companies Act. A co-operate society is dissolved under the provisions of the Cooperative Societies Act. The consequence of dissolution of a cooperative society is the winding up of the society by the appointment of a liquidator. A company incorporated in a foreign country is neither voluntarily wound up nor woun4 up by Court like other companies under the Indian Companies Act. A foreign company may under section 584 of the Indian Companies Act be wound up as an unregistered company. Therefore the words ·'an insurer whose business .is being voluntarily wound up or is being wound up by a Court" will refer not only to an insurance company incorporated in India ceasing to do insurance business but also to individuals or co-operative societies or foreign companies in the same position.

The provisions in the Insurance Act relating to voluntary winding up and partial winding up of insurance companies indicate the difference between the concepts of voluntary winding up under the Insurance Act and the Indian Companies Act and the business of an insurance company being voluntarily wound up. A voluntary winding up under the Insurance Act occurs for the purpose of effecting a reconstruction or amalgamation or on the ground that a company cannot continue its business because it cannot meet its liabilities. None of these contingencies is the same as voluntarily winding up business. A partial winding up of an insurance company. is winding up of a particular type of business. That company does not cease to do business. Nor is the company voluntarily wound up in such a case.

The deliberate cb.oice of words in the Ordinance and the Act of 1971 in the present case indicates that the legislature did not by the crucial words in section 15 (a) mean voluntary winding up oJ insurance companies. The legislature meant also insurers who are not necessarily insurance companies. The concept of voluntarily winding up business is more akin to individuals or other persons winding up business than to companies being voluntarily wound up under the provisions of the Insurance Act. The voluntary winding up under the Insurance Act is applicable not only to reconstruction or to amalgamation but to a company being unable to continue business because of liabilities. The idea of business being voluntarily wound up is quite a different matter. In the present case, the company resolved to wind up its business. The company discontinued to do insurance business. The company cancelled all outstanding policies in the month of February, 1971.

The company has not undertaken any new business after 30 September 1970. After 30 September 1970 the company had taken steps to wind up voluntarily all insurance business. The company informed the Controller of its decision to stop doing insurance business. The company returned its registration certificate. All these features lead to the inescapable conclusion that the business of the insurer was being voluntarily wound up. Therefore, the provisions contained in section 15 (a) will apply ti) the company whose business is being voluntarily wound up. The provisions in section 20 of the Insurance Act show that an insurer is subject to liabilities under the Act. The company does. not dispute that proposition. The company has made provisions to meet those liabilities. The company is required under six:tion 7 of the Insurance Act to keep in deposit with the Reserve Bank of India sums of money.

Under section 9 where an insurer has ceased to carry on in India all classes of insurance business and his liabilities in India in respect of all classes of insurance . business have been satisfied or are otherwise provided for, the Court may, on the application of the insurer, order the return to the insurer of the deposit made by him. Section 10 provides that where an insurer carries on business of more than one of the classes of insurance business he shall keep a separate account of all receipts and payments. These provisions show that liabilities under the Act are to be satisfied and provided for over and above .the deposit under section 7 of the Insurance Act even. after the business has been voluntarily wound up. Counsel for the Government relied on the decision of this Court in The Vanguard Fire and General Insurance Co. Ltd .. Madras v. M/s Fraser and Ross & Anr.(') in order to find out the meaning of closing of business of any insurer.

The company in that case carried on various kinds of insurance business other than life insurrtnce business. - The shareholders of the company passed a resolution by which the business was to be closed. On the application of the company the Controller cancell~d the certificate· of business. Thereafter complaints are received by the Government against the company. The Government passed an order under section 3 3 of the Insurance Act directing the Controller to investigate the affairs of the company. The company challenged the legality of the order on the ground that the Government had no jurisdiction to pass an order. The contention of the company }Vas that section 33 spoke of an order of investigation by the Central Government of the affairs of an insurer who. as defined in section 2 ( 9), .is one who is actually carrying on the business of insurance.

Section 20 of the Insurance Act was contended to be applicable to cases where an insurer was carrying on (1l [196013S.C.R.857. different classes of business and had closed some of them but not alt of them.. Section 20 was also said by the company to be not applicable as the company's liabilities did not remain unsatisfied. This Court held that section 33 of the Insurance Act refers not only to a person who is carrying on the business of insurance but also to one who has substantially closed it. Section 20 was also held to be applicable to cases where an insurer who was carrying on different classes of business but closed alt of them. Section 20 was also held to apply to make provision for liabilities· of the· company over and above the deposit. The ·words in section 33 are that the Central Government may, at any time, direct the Controller to investigate the affairs of an insurer.

The meaning ascribed to a word in the definition clause was held by this Court to be not inflexible because there might be sections in the Act where the meaning might have to be departed from. This Court in the Vanguard Fire & General Insurance. Co. Ltd. case (supra) said that the word 'insurer' has been used in some sections to mean not only a. person carrying on an insurance but also one who intends to carry on the business of insurance but has not actually started it and also a person who was · carrying on. the business of insurance but has ceased to do so. Section 9 of the Insurance Act which speaks of refund of deposit furnishes an instance of the Act applying the word 'insurer in relation to one who has ceased to carry on ·business. Section 55 of the Act also speaks of the insolvency of an insurer. An insurer in section 20 of the Act is an insurer who was carrying on the business of insurance but has closed it.

Section 20 was held to dispel all doubts that the word 'insurer' would not be referable to one who ceased to carry on any business inasmuch as all the provisions of the Act applied to an insurer so long as his liabilities remained unsatisfied or otherwise not provided for. Some provisions_of the Insurance Act will apply to insurers who ceased to carry on business. It was said on behalf of the Government that if section 15 (a~ applied to the case of an insurer whose business is being volun, tarily wound up or is being wound up by Court -it might not be applicable to the case of an insurance company which was bein~ voluntarily wound up under the provisions of the Insurance Ac!: It i~ for the legislature to legislate as to the dass to which th~ ~ct will apply. On the language of section 15(a) the company m the present case is an insurer whose business is beina voluntarily wound uj>. Therefore the Ordinance and the A~t 0do not . apply tothe petitioner company. .

I~ was also. contended on behalf of the insurance compam·. that 1~ t~c Ordmance and the Act applied Article 31 A of the Const1tut1on could not protect the taking over ot the manaeement of the company. Under Article 31 A (I ) (b) the taking over of management of the property for a limited period either in public interest or in order to secµrc the proper management of the property is protected. It cannot be said in the present case that •.he management was taken over for a limited period nor was it said on behalf of the Government that Article 31A(l)(b) applied. On behalf of the Government it was said that Article 31 A ( l ) I d) applied because the legislative measures in the present case modified the rights of the managing agents. It was also said on behalf of th~ petitioners that Article 14 was offended.

In view of our conclusion that the Ordinan~e and the Act do not apply to the petitioner company it is not necessary to express any opinion on the two contentions based on those two Articles. The Government contended that the petitioner company could not invoke fundamen\al rights. Apart from the company th~ other petitioners are two shareholC.:er and Directors. In /?. C. Cooper v. Union of illdia(') which is referred to as the /lank Natio11alisation case the petitioner fulfilled three capacities. He was a shareholder, a Director ·and a holder of deposit of current account in the Bank. The locus stand! of the petitioner was d1allenge<l in the Ba11k Natio11alisation case (supra) on the ground that no fundamental right of the petitioner was directly impaired by the Ordinance or the Act or any action taken thereunder. The petitioner in that case claimed that rights guaranteed under Articles l 4, I 9 and 31 of the Constitution were impaired.

The ruli'ng of this Court in the Bank Nationalisation(') l':P .. c \Vas th is : 111ca~urc cxe~utive or legislative 111ay i1npair the rights of the company alone, and not of its shareholders: it may impair the rights of the shareholders and not of the company; it may impair the rights of the shareholders as well as of th~ company. Jurisdiction of the Court to grant relief cannot be denied. when by State action the rights of the individual shareholder are impaired if that action impairs the rights of the company as well. The test in determining whether the shareholder's right is impaired is not formal; it is essentially qualitative: if the State action impairs the rights of the shareholders as well as of the company, the Court will not. concentrating merely upon that tech· nical operation of the action. deny itself jurisdiction to grant relief". (l) (t970J J s.c.R. SJJ. t 1l NEPTUNE ASSURANCE co. I', UNION (Dwivedi, J.)

It follows tha_t the Court finds out whether the legislative measure directly touches the company of which the petitioner is a shareholder. A shareholder is entitled to protection of fundamental rights. That individual right of a sharehold,er is not lost by reason of the fact that he is a shareholder. The reason why th~ shareholders' fundamental rights are protected is that when their fundamental rights as shareholders arc impaired by State action the Court applies the qualitative test on )he ratio that the shareholders' rights an: equated to and correspond to the rights of the company. The shareholde•s own the property through the company. The shareholders carry on business through the medium of the company. The shareholders' investment in the shares is affected by the State action or the legislative measure.

In the Bank Nationalisation case (supra) this Court said that the Court will not, concentrating merely. upon the technical objection of the action, deny itself jurisdiction to grant relief to the shareholders when the rights of shareholders as wen· as of the company are impaired. The loc11s standi of the petitioners cannot be challenged. For these reasons, the petitioners succeed._ There will be an order quashing the orders dated 13 May 1971 being Exhibits ·K' and 'L' to the petition. A· mandamus will also go requiring the respondents to forbear from acting on and giving effect to the two orders. Parties will pay and bear their owrt costs. Dw1vrn1, J .-There are three petitioners in 'this petition under Article 32 of the Constitution: (I) The Neptune Assura,nce Company Ltd. (2) Sanwar Prashad Jain and (3) Krishna Murari. The lirst petitioner is a public company incorporated under the Indian Companies Act.

The second and third petitioners are shareholders and Directors of the first petitioner (hereinafter called the Ncrtunc Assurance). The Union of India, the first respondent. appointed a custodian over the undertakina of the 1\'cptune Assurance under 4 of the General "Insurance ( Emer~cncy P~<wisions) OrdiMnce. 1971 on May 13, 1971. The said Ordmance was eventually re-enacted as General Insurance (Emergency Provjsions) Act, 1971 (hereinafter called the Act). The Custodian appointed under the Ordinance is continuing to manage the undertaking by virtue of s. 4 of the Act. The Union ~f India also issued certain directions on May 13 19'. l. Those directions regulate the management of the underta],;;~~g of the Neptune Assurance the Custodian. The J>~lltmners challenge the validity of the aforesaid ordu and direcfion~. They also question the constitutionality of a part of s. 2 ( e) an~ s. 15 (a) of ~he. ~ct.

They pray for the quashing nf the aforesaid order and dtrecllon and for a direction to the respondents to hand over charge of. the undertaking of the Neptune Assurance to the petitioners. Upto the end of March, 1971, the Neptune Assurance was registerec;l under the Indian Insurance Act, 1938. The registration authorise<' it to carry on ·the business of general insurance comprising fire and miscellaneous insurance. On September 17, 1970, its Roard of Directors resolved that it would cease to underwrite any insurance business as from the close of business hours on September 30, 1970. On that very date it informed the Controller of Insurance of the resolu1ion and returned its certificate of registration for the year 1970 to the Controller o£ Insurance. After ·the dose of business on September 30, 1970, it stopped doing .any l:ind of general insurance business.

On October 3, 1970, the Controller of Insurance retnrned the registration certificate to it with the remari.: that there was no provision in the Insurance Act for return of a certificate. The Controller advised it not •to apply for renewal of certificate for the year 1971. In October 1970 there was an agreement between it and the .New Great Insurance Company of India Ltd. with respect to transfer of its entire business to the New Great Insurance Company of fodia Ltd. On October 20, 1970 nmice was given to the share- . holders of the Neptune Assurance that an extraordinary general meeting would be held on November 17, 1970 to consi1er the proposal of transferring its insurartce business and liabilities to the New Great Insurance Company of India Ltd. The agenda .of the meeting included certain other matters for consideration. It is not necessary to mention them.

On.November 17, 1970, in the extra-ordinary general meeting ·the aforesaid resolution regarding transfer of. business and liabilities was passed. In the month of October 1970 a letter was sent to all the policy-holders informing them that the Neptune Assurance had cea>ed to underwrite new insurance business with effect from October 1, 1970. It also sought their approval to transfer of business and liabilities of the Neptune Assurance to ·the New Great Insurance Company of India Ltd. About 50 policy-holders demanded cancellation of the policies. About 1389 policy-holders did not send any reply. n appears that the Neptune Assurance was advised that it would not be' completely discharged from its liabilities unles~ and u~til all the policy-holders had agreed to the transfer of its b~mess and liabilities to •the New Great Insurance Company of India Ltd. So ·on February 2, 1971, the Board of Director§ of the Neptune Assurance cancelled the agreement with the New Great Insurance ·Company of India Ltd. The Board of Directors also passed a ll resolution cancelling all policies with effect from March 10/ 12, 1971 after giving due notice to the policy-holders.

Another resolution was passed tem1inating all re-insurance treaties, both inward and outward, with effect from December 31, 1971. As the agreement was cancelled, it did not have any effect. In February, 1971 the Neptune Assurance issued circular letters to all policy-holders cancelling the policies in accordance with the cancellation clause tn each policy. The Neptune Assurance refunded to policy-holders a sum of Rs. 48000 on cancellation, of their policies. The uncollected refund amount comes to Rs. 2013.98. On February 16, 1971, the Controller of Insurance cancelled the registration of tht: Neptune Assurance with effect from April 5. 1971. He cancelled the registration under s. 3 ( 4) (fl of the Insurance Act. On February 22. 1971, the Neptune Assurance sent letters to the Indian Guarantee and General Insurance Company and M/s India Re-Insurance Corporation Ltd. cancelling all re-insurance treaties with effect from December :u. f-970.

The Neptune Assurance reduced its staff 'trom the month of September 1970. By the end of February 1971 the total staff consisted of one officer, one clerk, one typist and one peon. The total emoluments of the staff upto September 1970 were Rs. 7179. l per month, but after that month they have come down to Rs. 1154.20 per month. It is not disputed that many claims which 'halilaccrued before the cancellation of policies are still outstanding against the Neptune Assurance. Some cases are pending in courts with respect to some of them. The first argwnent is that as the Neptune Assurance had ceased 1o do general insurance .business several months before the commencement of tl!e Ordinance and the Act, it is out of the purview of the Act by virtue of s.15 (a) of the Act. It cannot be taken over by the Central Government under s. 3 of the Act.

The rival contention of the respondents is 1hat it is not covered by the provisions of s.15 (a) and that accordingly it can be taken over by the Central Government under s.

3So the real issue is; what is the true construction of s. 15(a)? Section 15, in so· far it is relevant for this case, provides; "Nothing contained in this Act shall apply to- (a) any insurer whose business is being voluntarily wound up or is wound up by a court; (b) any insurer to whom the Insurance Act does not apply by reason of the provisions contained in section 2E thereof : " [1973)2 S.C.R. The argument of the Neptune Assurance is that the expression· "whose business is being voluntarily wound up" in cl. (a) aJso signifies the voluntary cessation of business by an insurance company. One of the dictionary meanings of the word "wind up" is '"to bring to a close; to bring an affair to a final settlement" (See Shorter Oxford Dictionary, 3rd edition). Adopting that n:eaning, counsel for the Neptune Assurance submits th;it the expressions "whose 1*!siness is being voluntarily wounlf up" would also mean "wh&se business is 'being voJun1arily brought to a close or to a finai settlement".

The true meaning oi cl. (a}' of s. 15 is to be determined in the light of its language, scheme and setting. Language and setting : The last word in cl. (a) is 'Court'. This word is not defined jn the Qrdinance and the Act. Bat s. 2(i) oi the Act provides that the words and expressions used in the Act 'but not defined and defined in the Insurance Act have the meaning assigned to them in that Act. Section 2 ( 6) of the Insurance Act defines .the word 'Court' as the principal Civil Court· ,of original jurisdiction in a district, and incluges the High Court in exercise of its ordinary original civil jurisdiction. The word '·insurer" in clause (a) of s. 15 ,is defined ins. 2(e) of the Act. For our present purposes it is sHfficient to say that it means an insurer as defined in the Insurance Act, who carries on general insurance business in India.

Section 2 ( 9) of the fosurance Act defines "insurer" as (a) any individual or unincorporated body of :ndividuals .ai; body corporate incorporated under the law of ar.y country otner than India, carrying on insurance business in India, or having his or its principal place of business or domicile in India or employing a representative or maintaining a place of business in India with the object of obtaining insurance business; (b) any body corporate incorporated under any law for the time being in force in India and carrying on business of insurance. There is yet another class of insurer, but we are not concerned with it in this case. The word "lnsuran~e Company" is defined in s. 2(8) of the Insurance Act as any insurer being a company, or partnership which may be wound up under the Companies Act, or to which the Partnership Act applies.

Tt is apparent from the definition of 'insurer' in "the Insurance Act that an insurer may be an individual, a partnership firm, an association of persons and a company incorporated in or outside India. Section 20 of the Insurance Act, however, has limited the denotation of "insurer" from the date of the commencement of the Insurance (Amendment) Act, 1950. Section 2c(I) provides that no person shall, after the commencement of the Insurance (Amendment) Act, 1950 begin to carry on any class of business in India and no insurer carrying on any class of insurance business in India shall after the expiry of one year from su~h con~­ mencement, continue to carry on any &uch \:1Usiness unless h~ 1s a puouc company incorporated in or out of India or a society registered under any law relating to Co-operative Societies Act.

19li In the result, at the commencement of the Ordiance and the Act, ·Insurer· included a public company either incorporated under the Companies Act or under a foreign company law and a co-operative society. An individual, a partnership Jinn, and an unincorporated assodation of persons could not be an insurer at the time of the commencement of the Ordinance and the Act. According to .the proviso to s. 2C( I) the Central Government may by a Gazette notification, exempt from the operation of s. 2C( I) any person or insurer for the purpose of carrying on genera I insurance business for not more than three years at any one time. Counsel for the Neptune Assurance has admitted that the Central Government has issued no such notification. In any case no such notification has been shown to us. Co-operative Societies are excluded from the ambit of 'Insurer· in s. 15 (a).

We have examined the provisions of the Co-operative Societies Act, 1912, and various State laws relating to cooperative societies. It appears from those laws that a co-operativ society can neither be voluntarily wound up nor wound up by a Comt. It is wound up by an order of the Registrar of Co-operative Societies. It is significant to notice that 1he cessation of busin~'' by a co-operative society is one of the grounds for its being wound up b.y ~n order of the Registrar. So various State law dealing with co-operative societies make a dis1inction bet~een the cessation of business by a co-operative society and its wi!lding up by an order of the Registrar. When a co-operative society has cessed to do business, it cannot be said that it is voluntarily wound up. To sum up, the word 'insurer' in s. 15(a) of the Act inclucks only two classes of persons : (a) a public company incorporated under the Compenies Act; and (2) a public company incorporated under a foreign Company Jaw.

The next important word in s. 15(a) is "business". It is not disputed that it means the entire business ot an insurer. It will follow from this discussion that cl. (a) s. 15 may be paraphrased in this manner; "Any public company incorporated under the Companies Act or under a foreign company law who'c entire business is being voluntarily wound up by-·a Court." Turning now to the crucial words "being volutarily wound up'' and "being wound up by a court", it is necessary to observe .that these twin expressions have acquired a crystallised mcarung m the Company and Insurance jurisprudence. They have been [1973] 2 S.C.R, used in that sense in the Companies Act and the Insurance Act. In the Companies Act the expression "voluntary winding up"' means a winding up by a special ,resolution of a company to that effect. Similarly, the expression "winding up by the court" means winding up by an order of the Court in accordance with s. 433 of the Companies Aot.

Section 53(i) o.f the Insuranre Act provides that an insurance company may be wound up in accordance with the Companies Act. Section 53(2) supplements the grounds for the winding up o,f an insurance company by 1he Court. ~ection · 54 does not apply the provisions o{ the, Companies Act m rega~d to the voluntary winding up of an insurance company. It ~rov•des, its own procedure fpr ,clhe .v?lu.nt~cy, winding up of an lllSurancc company.

Accordll)g ,to, it, an msurance company 'hall not be wound up voluntarily "except for the purpose of effect-· ing amalgamati?n or reconstrucd0n of a company . or. on the ground that,,:p~ireasQt:i 'Cfjts ·lia~ilil~.~~~'a'!mtit\-i;Qntihu~ ifs busines~~!;.; ,,;flt~:·~!lJ?J,;i~~.:~~;~:.~i~;;;,'),~'.';:; ;''../1'.'.t,,,' .. ,'., . · .i\ citfre'n i~~~ulric<i:io~o«i~~ti~w~s~•·iduhir:y,; ·A Jortiori, Parliament will' be presumed to know fliat the expressions ··voluntary winding up" and "winding up by the Court" have ace qui~ a technical nieaning'in our Company_. and Insura.ncejurisprudence.' Like the c<>"operative society Jaws, the Companies Act and lhe Insurance Act also inake a distinction between the cessation of business by a company and its voluntary winding up or winding up by an order of the Court. Section 433 ( c) of the Companies Acl provides that a company miiy be wound up by the Court, if it "suspends its business for a whole year."

Section 560 deals with the powers of the Registrar to strike a defunct company off the register. It provides that where the Registrar has reasonable cause to bi:Iieve that a company "is not carrying on business" .he shall proceed to strike its name off the register in the manner provided therein. According to s. 51l3 ( 4 )(a) on a registered company may be wound up if it "has ceased to car~y on business." Section 584 provides that where a company which has been incorporated outside India and which has been carrying on business in India "ceases to carry on business in India", it may be wound up as an unregistered company. Section 2E of the Insurance Act provides that, where an insurer as defined in paragraph (i) and (iiJ of sub-~I. (a) of cl. 9 of s. 2 in relation to any class of insurance busipess "has ceased before the commencement of that Act to enter ipto any new contracts of that class of business," the lnsuranee Act. shall not apply to him. According to s.

3(5D) where the registration of ~n insurance public company stands cancelled for more than six months from the date of its cancellation, .the Controller of Insurance may apply to the Court for an order to wind it up. The re- 8 gistration may be cancelled inter alia •. on the ground that th~ insurance public company. has ~ot ~pplied for the ren~wal of ~ts registration. When the registration is cancelled, ~e company JS forbidden from entering into any new contracts of msurance. So when an insurance company has ceased to do the business of ~uran.ce for more than six months from the date of the cancellation of its registration, it may be wound up by an orde~ of the Court .1t the instance of the Controller. As already menuoned s. 53 ( 1) of the Insurance Act provides that an insurance public company may be wountl up in accordance with the Companies Act. We have already mentioned that s.

433 ( c) of the Companies Act provides for the winding up of a company when it "suspends its business for a whole year." It would follow from the foregoing provisions that the Insurance Act also makes a distinction b\etw~n the cessation of insurance business by an insurance public company and its voluntary winding up or winillng up b(y an order of the Court. Indeed, the cessation of its busine.ss for a whole year or the cessation of its business for more tllan six months from the date of the cancellation of its registration tor not applying for renewal thereof is one of the grounds for its winding up by the Court. Parliament will be presumed to be aware of the distinction between the cessation of business by an insurance public company and its voluntary winding up or winding up by an order of the Court. There is nothing unequivocal in s.

15 (a) of the Act to show that Parliament intended to depart from the technical meaning ol the "voluntary winding up" and "winding up by the Court" and to bid a· good-by to the distinction in our Company and Insurance jurisprudence between mere cessation of business by a company and its voluntary winding up or winding up by an order of the Court. Section 15.(a) consists of two limbs : (a) an insurer "whose bus!ness !s ~Ing voluntarily wound up"; (2) ~n insurer "whose business 1s be mg wound up by a Court". The word "wound up" forms part of both limbs. It is reasonable to assume that it is u~ed in the same sense in b!>th limbs. It is not and cannot ~e _disputed that \n the second limb it is used in the sense in which 1t 1s understo.od m our Company and Insurance jurisprudence. !he Companies Act and the Insurance Act provide for the winding ~p of a company by an order of the Court.

Neither of them proy1des for the winding up of anything other than the entire busin~ss of a company by an order o.f the Court. The specified cas~ m s. 58 of the l?surance Act of partial winding up of any particular c1ass of business by preparing scheme for confirmation by the cou~t :an_not be des7ribed as 'windin!! up by the titdet of th7. court, ~1thm the meaning of s. 53 .. We \,ave earlier shown ~liat insurer m s; 15(a) means a public company incorporated m and out of India and none else. Accordingly in the second IO-L521Sup.CI/73 [1973] 2 S.C.lt, limb the expression "whose 1*Jsiaess is being wound up by the Coun" must be construed to mean the winding up of an insurance public company by an order ol! the Court. This should settle the meaninl( of the word "wounc! up" in the first limb also. The phrase "voluntarily wound up" in the first limb would mean the voluntary winding up of an insurance public company in accordance with s. 54. of the Insurance Act.

A company is a creature of statute. Its birth, progress, and extinction are all controlled by the sta!lute. As the Neptune Assurance is carrying on the business of General insurance, it is controlled by the Insurance Act read wi'lh the Companies Act. Seotion 54 of the Insurance Act provides for the voluntary winding up of an insurance company. According to it, an insurance company may be voluntarily wound up only in three circumstances. Those circumstances are: (I) amalgamation, (2) reC'.ons'truction of the company; or ( 3) the inability to carry on business on account of its liabilities. Section 58 (I) oi the Insurance Act provides for the winding up of only a class of an il!iurance business of a company in certain circumstances provided a scheme for that purpose is submitted to and confirmed by the Coun. The Neptune Assurance has not claimed before us that it is being wound up uncler s. 54 ors. 58.

The Neptune Assurance could not voluntarily be wound up otherwise. than in accordance with s. 54. It is accordingly difficU!t to comprehend the argument that the cessation of business by he Neotune Assurance means voluntary winding up ol. its business. This kind of voluntary winding up of business is unknown to the Insurance Act. It is said that 011r construction makes redundant the word "business" ins. 15(a). But there is no redundancy. A company which is being wound up voluntarily or by the coun may, without the least violence to language, be described as a company whose business is being voluntarily wound up or is being wound up by the Court. Winding up of a company is, in effect, the same as the winding up of the entire business of the company. ·Both expressions in substance convey the same sense.

Moreover, the expression "any insurer whose business is being wound up by the court" is more appropriately applicable 10 the context of a foreign company whose business in India is being wound up by the Cou~ under s. 584 of the Companies Act, 1956. The expression "any insurer who is being wound up by, the court" wouI~ not ~ appropriate in its application to a foreign company because the busines.s ol. that company outside India cannot be wound up by an order of -the Court in India. Its entire business in India may be wound up. That may be a reason for introducing the word "business" in s. 15(a). Section 481 of the JI 8 Companies Act, 1956 provides that "when the affairs ot a company have been completely wound up". the court shall make an order that the company be dissolved from the date of the order. Upon that order the company shall stand dissolved. The phrase "the affairs of a company have been completely wound up" is significant.

It shows that othe expressions "winding up of a company" and "winding up of the affairs oi: a company" convey the same sense, for we think that the phrase "1he affairs of a company" means the business affairs of a company('). In Rajah of Vizianagaram v. Official Receiver Vizianagaram(') speaking about the winding up of. a foreign company in India, this Court said : "It is therefore necessary that if a company carries on business in countries other than the country in which it is incorporated, the courts of those countries too should be able to conduct winding up proceedings of its business in their respective countries. Such winding up of the business . ....... is really an ancillary winding up of the main company." (emphasis added). It appears from these observations that the winding up of a foreign company by an order of the Court in India really means the winding up of its business in India.

Having regard to the foregoing consideration we are of ·opinion that the word "business'.' is not redundant ins. 15(a). On the other hand, the charge of redundancy may really be made against the construction suggested by the Neptune Assurance. That construction makes the word "voluntarily" redundant in the first limb. If Parliament had really intended that the first limb should apply also to an insurer who is in the process of closing its business, it should have expres.o;ed the first limb in some such manner as any insurer "whose business is being closed" or "is being wound up." The construction put forwarded by the Neptune Assurance assigns little significance to the word "voluntarily" and makes it a surplusage. Section 15 (b) of othe Act provides that the Act shall not apply any insurer to whom the Insurance Act does not apply by reason of s. 2E thereo{.

Section 2E of the Insurance Act provides that it shall not apply to any insurer as defined in" paragraphs ( i) and (ii) of sub-clause (a) of clause 9 of s. 2 in relation to any class of insurance business where the insurer has ceased before the commencement of that Aot to enter into new contracts of that class of btusiness. Section 29(a) (i) and (ii) of that Act includes in the definition of 'insurer' a public company incorporated under a foreign Jaw and carrying on business in India or having its principal place of bu3iness or domicile in India. If such (1) Regina vs. Board of Trade, [1965] 1 \).11. 60). In this case it was held that the phrase "the affair of a comp1oy ins. 16 of the English Com~ panies Act connotes its business affairs." Section 1655 corresponds to s. 237 of the Companies Act, 1956. (2) [1962] Su;ip. I S.C.R. 344. a company has ceased before the commencement of the Insurance Act to enter into any new contracts of insurance business or a class of insurance business, as the case may be, it shall not be governed by the provisions of the Insurance Act.

According to s.15 ( b) of the Act such a company shall also not be governed b\y the Act. Thus s.15 (b) refers to a foreign insurance company which had ceased to do insurance bJUsiness or class of insurance business in India before the commencement of the Insurance Act. Section 2 ( e) of the Act excludes from the . clefinition 'insurer' an insurance public company whose registration under the Insurance Act has remained wholly cancelled for a period of six months immediately before May 13, 1971. We have already discussed that the reghtra\ion of an insurance public compa:iy may be cancelled by the Controller if the Company has not applied for the renewal of its registration; One of the reasons for not so applying may be cessation of business. So s. 2 ( e) also refers to an insurance public company which has ceased to do business for a certain period. Section 15(a) should be construed in the setting of s. 15(b) and 2 ( e).

So construed, it is difficult to believe that Parliament has not used the. expression "whose business is being voluntarily wound up" in the technical sense. If Parliament had intended to exempt from the operation of the Act an insurance public company which has of its own accord ceased to do business before the commencement of the Act, it would have inserted in the Act a clear provision like s. 15 (b) or s. 2 ( e). Now the deliberate insertion.of s. 15(1J) ands. 2(e) necessarily implies that Parliament did not intend to exclude an insurance public company which has merely ceased to do business of its own accord. Scheme :-One of the professed objects of the Act is "to protect the interest of the policy-holders pending nationalisation of the general insurance ~siness." The interpret<\tion suggested by the Neptune Assurance would defeat that iegislative object. Assuming thats.

15(a) is susceptible 9f two meanings-the wider and the narrower (the technical), the one which fructifies the said legislative object should be preferred. This preference is also made persuasive by the nature of the provisions of s. 15 of the Act. Section 15 carves out an exception to section 3. It excludes certain insurance public companies and some other institutions from the operation of the Act. Ordinarily an exception is strictly construed. So the technical meaning of the expression "whose business is being voluntarily wound up". should he preferable to the wider meaning of that expression. In the light of the foregoing discussion we are of opinion that the Neptune Assurance cannot get the benefit of s. 15(a) and will be subject to the provisions of s.3 of the Act which provides tor the take-over of the man'!lgement of the insurance companies. The next submission of the Neptune Assurance is that a part of s. 2(e) ands. 15(a) as construed by us run a foul of Art. 14 of the Constitution.

The offending part of s. 2 ( e) according to it is this : "and includes an insurance cO!Ilpany whose registration under that Act has ·not remained wholly cancelled for a period of six. months immediately before the appointed day.'? It is said that this part of s. 2 ( e) creates two classes of insurance companies. The first class consists of those insurance companies, whose registration under the Insurance Act has remained wholly cancelled for a period of six months immediately before the appointed d!iY; the second class consists of those companies whose registration under •the Insurance Act has remained wholly cancelled for less than six months immediately before the appointed day. The Neptune Assurance falls within the second class. It is complained that the temporal difference as ·to the cancellation of registration between the two classes is no valid reason for. treating them diffc:ently. The second class should also have been excluded from the definition of 'insurer' in s. 2 ( e).

The same argument is reiterated with reference to s.lS(a). It is said that there is no reason why any insurance company which is closing its business of its own accord should not be excluded from the purview of the Act. The respondents, on the other hand, have urged'1Jiat Art. 14 will not help the Neptune Assurance on accom1t of the Act being protected by Art. 31A(b) and (d) of the Constitution. It is not and cannot be denied that an insurance com:pany whose registration under the Insurance Act has remained wholly cancelled for six months immediately before the appointed day is in one very important respect radically unlike the insurance company whose registration under <the Insurance Act has remained wholly cancelled for less than six months immediately before the appointed day. An .insurance company whose registration under the Insurance Act has remained wholly cancelled for morethan six months from the appointed day has become defunct. It cannot be revived.

It may be wound up by the Court on the application of the Controller under s. 3 (SD) of the Insurance Act An · insurance company whose registration under the Insurance Act has remained wholly cancelled for less than six months from the appointed day is in a state of suspended animation. It can revive itself. The Controller cannot make an application to the Court for its winding up. The temporal differentia as to the cancellation u' of registration between the two classes of companies determines the liability of one of ~hem to be wound up under s." 3 (SD). This is ~ n;eaningf~l and inte\ligi?le difJ'.erentia. It is not arbitrary, wh1ms1cal or illusory. The d1fferent1a has got rational relation to rme of the objects of the Act. According to the preamble, the protection of the interests of the policy holders is an object of · the Act. The differentia is calculated to accomplish this legislative object.

Where the registration of a company has remained wholly cancelled for six months from the appointed day, the Controller may apply to the Court for its winding up under s. 3(5D). As soon as· the judicial process is set in motion, the company comes under the. control of the Court. A liquidator will be appointed to wind up· its affairs. The Court's control will protect ithose policy-holders w)lo have got unsatisfied claims against the company. The liquidator will collect the assets of the company and pay those claims as far as possible from the realised assets. The company whose registration has remained wholly cancelled fot less than six months from the appointed day can revive itself. It cannot be wound up by the Court at the instance of the Control1er. The claims of the policy-holders against such a company will go unprotected. The company may or may not pay the claims. It may fritter away its assets.

Th.e policy-holders would be. constrained to resort to litigation against the· company or realisation of their claims against it. The take-over of the undertaking of the company under the Act improves by reason of Government's management the prospects of their claims satisfaction. It is also calculated to protect all interests by applying after the take-over, if that courseis deemed necessary, to revive the business of the company. Section 2(e) is in our view not discriminatory. For the foregoing reasons, section 15 ( o) also is not discrimi: natory. As jn our view the attack based on Art. 14 cannot succeed. it is unnecessary 10 deal with the respondents' contention based on Art. 31A(b) and (d} of the Constitution. In the result, we would dismiss the petition with costs. ORDER In acqordance with the opinion of the ma_jority, the writ petition is dismissed with costs. G.C.