~A TI ON AL INSURANCE CO. LTD., CALCUTT A v. Dtctm6tr & Ors.

The Life Insurance Corporation determined Rs. 19,:39,669 as compensation for the controlled business vested in the Corporation in accordance with s. 16 read with the First Schedule of the Life Insu· ranee Corporation Act, 1956. After obtaining the approval of the Central Government, by a letter dated February 14, 1957, sent to the Company, the Corporation pointed out that the National Insurance Company was required to pay Rs. 6,00,000 under Insurance Corporation Ruic 18 of Rules, appertaining 1956, and offered the balance of controlled business Rs. 13,39,li69 in full satisfaction of the claim. The National Insurance Company asked for the calculation sheets and they were supplied by the the Life as assets . i962 N1•litJnal !11sura11(e Co. Ltd., Calc11u i "'v: Life .Jusutonce C:orpn. of InJfrt llidqyotullalii J. ' ·976 SUPREME COURT REPORTS [1963] SUPP. In making the reference Life Insurance Corporation. The National Insu rance Company did not accept the compensation offered to it and requested that the dispute be refer red to the Life Insurance Tribunal for decision but asked that the admitted amount might be paid to it without prPjudicc to the claim of 'either side. On May 1, HJ57, 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 May 9, 1957, in which a sum of Rs. 27,!J!l,275 was claimed as comperisatiori was tur ned duwn by the Life Insurance Corporation and the dispute therefore stood referred to' the Tribunal. the' Life In surance Tribunal the Life Insurance Cdrpora tion forwarded the entire con'espondence and · the calculation' shceti! together with other docu~ents on which the calculation sheets were based. · Before the Company claimed a ' sum of the Tribunal, Rs. 43,29.i'iO as compensation due to it. ·The· Com pany also gave its calculation sheets. In addition the Company claimed interest at six per cent; per annum from the appointed day (September 1, 1956) or at least from the date the compensation wrongly deter mined was.offered to the Comp.any, namely, Febfoary 14, HJ57. Earlier, in the letters to which refere nce has alrdady been made the National Insurance 'Co' mpany had demurred to the deduction of Rs. 6,00,000 from the , :~mount of . coillpe!ls'atio.n, offered · to it; Its ,case be(orc. the Tribunal was that under the law; as it stood,' the Corporation ·was bOund 'to offer the entire conipei1sation withoutnfaking a deduction on this accouri t .an.d the claim ~f the Corporation for the assets appchaining to the cohtrcilled b'usiness of the Company s'.hould ~c separati:l~. enforced .. 'fhe ~iffcrence between' the Company arid the Corporaticii) in th~ matter cif ca!Culation arose· be cause the 'parties put different interpretations upon Notirmil Innironu 1 Co. Ltd., -,Calcutta , .,--_, v~ lif1 ltisuremri Corpn. of India --'~ '·. '. '. ; :_ > ' -j . the·' provisions·. of the First Schedule to the Life Insu- t(\nce .Cofp6r'atiori' Act.· That' Schedule' is 'made under. s. f6. of the' Life Insurance Corporation Act; . . which reads :~ . ' '~ _.- .::- 1' . ' ' - --, . ; ' ' - "16, ,(l)}y'here the colltrolled busin~ss .of a~ insurer has b~en transferred to ·and vested in . tlie Cbr'pofatiori under this Act, co~p;¢nsaW:)D shall be given. by the Corporation fo that irisu :·rer fa accordarice''withthe principles contained in'the First'Schcdiile. (2) Tile 'amount .Of the · compensation be· giveri' iii'accordarice with the 'aforesaid prin ci pies· shil.111' 'be determined .by the•Corporation in the· fir's! ill stance, arid if the arriount so determiried•is 'approved by the Central Govern merit if'IShall be' offered to the insurer in full satisfactihn qf the comperisaticin payable tb him under this' Act, and if; on:the other hand, the amount so offered is riot acceptable 'to the insu rer he m:aywithin such time as may be prescri- · · · hed for the purpose.have the·matter referred to the TribunaLfor decision." -{( ' - ,, .We have already •stated that the Corporation had:·offered co'mpens; ition as approved. by the Central Gov'erriment afteri:deducting. ·Rs. 6,0Q,000, under Rule 18 :arid this"dffer was·made in foll satisfaction of 'the compen§ation.·· payable to the Company as required ·by sub·.s.• {2). The Company refused accept .the .. offer· ·hut asked to be paid the•admitted amounL ·This the ,Corporation . declined. We are ofrthe • opinionAhatr the demand -0f the Company for the admitt.ed· :.amomit. even though .without prejudice to the contentions of the parties, was rightly. rejected by the Corporation, as, 1mder sub·s. (2) of s. 16, the Corp!'ration co11lc1 ,~mly ma.ke.the offer.and pay the mohey'in f1ill"sati~faction cif the claim for compen sation. Sub-s. (I) of s. 16 refers to 'the 'principles ' - 1162 Nlltional lnsuranc1 Co. Ltd., Calcutta •• Life lnsnranu Ca,pn, of India Hiiqyatrdl.A, J. 978 SUPREME COURT REPORTS [1963] SUPP. 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 par agraphs called 'Paragraph l' and 'Paragraph 2' aud 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-holders 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 pro visions contained in paragraph 1 or paragraph 2 whichever is more advantageous to the insurer. the annual average of the share of the surplus allocated to share-holders as disclosed in the abstracts afore said in respect of the relevant actuarial investi gations 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 calen der years comprised in the period between the date as at which the actuarial investigation im mediately preceding the earliest of the relevant actuarial investigations was made and the date at which the last of such investigation was made. Paragraph 1.-Twenty times (Paragraph 2. Omitted) Explanation l.~For the purposes of para graph 1, • t, -. I •. • 2 s.c.R. SUPREME COURT REPOR1S 979 (a) "relevant ·actuarial investigations" means such minimum number of latest actuarial investigations as at dates earlier than the Ist day of January, 1955 (not being less than two in any case), as would leave the period interve ning 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; /96:/ National lnsuran&I Co. Ltd., Calrutu v. Lij6 Insuranc1 Corpn. qf Indi• _ Hia'!Yatulld, J. (b) "Average business in force" means the average of total sum assured by the_ insurer (including any bonus) in respect of his contro- lled business as on the 31st day of December of each of the relevant calender years. Explanation 2.--For the purpose of para· graph 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 per cent. of any such surplus, the insurer shall be deemed to have allocated 31 per cent. of the surplus. To understand these provisions we have firnt 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 inclu ding 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 intc:i - the financial condition· of the life insurance business . including a valuation of the liabilities in respect - • !962 Naliorial Jnsuranu ·Co. Ltl., ·Calcutta _.;; v. ,; Life Insurance Corpn. of India ~ ·'' Hiidy.tullah, J, - 980 sUPREME COURT REPORTS [1963] SUPP. in respect of thereto and was further required to cause an abstract of the report of such actuary to be made in accor dance 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 (Amend ment) Act. I 950 ( 4 7 of 1950) with effect from June I, 1950. Fourth Schedule was divided into two parts. First part contained Regulations and the second part laid down the requirements applicable to the abstract life insurance business to be prepared at these investigations. which had (1) laid down that all abstracts and Regulation statements must be so arranged that the numbers and letters of thef aragraphs correspond with those of the paragraphs o Part II of that Schedule. Jn 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 (i) a Consolidated Revenue Account in form G for the inter-valuation period, and, (ii) a Valuation Balance-Sheet in the Form I. 'Inter-valuation period' was defined to mean : - them were connection with which "as respects any valuation, the period to the valuation date of that valuation from the valu last preceding valuation ation date of the an abstract was prepared under this Act or under the enact ments 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 June 1, 1950, as three In our case, the first valuation covered a years. 1962 .NatiOniJt 1nmrah¢1 Co. Ltd., . C11lcut1« v;" _, "\ 1Lif1 lnsuionti . -··-· __ , Corpn. of· lniia Hidayatullah, J. 2 S.C.R. SUPREME GOUR T REPORTS 981 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. · The abstract was required to show the valua' tion date and the general principles and full details of the methods adopted in valuation of each of the various classes of Insurance and annuities. In addi tion the abstract was, required to show the other matters which the . actuary had taken into account in preparing the actuarial estimates. Then followed paragraph No .. 8.in which was required to be shown the total amo1111t 0£ profits . arising during the inter valuation peri()d . including profits paid away and sums transferred to the. reserve fund or other accounts during the)a~t' period and the amount brought for ward frqm the, preceding valuation and the allocation of such p~ofits ,,under different headings. Among these were the amounts allocated as bonus to the· policy holders~ and as . dividend among the share holders including amounts which had· already pasied through . th,e ,.~.c;co.unts during the. inter-valuation period which.were to be shown separately. . Section 49 (1) then provided inter alia that no insurer includipg. a company, who carried on business of life insuran.ce 'shall, for the purpose of declaring or payil)g any.di'V,idend.to share:holders or any bonus to policy-holders, u,tilize directly or indirectly any por· tjon of the life insurance fund or of ,the fund of such other class or.r sub-class of insurance business as the case may be, exC:ept a surplus shown in the valuation balance-sheet in Form I as set forth in the Fourth Schedule s.ui;>~it~ed .to the , Controller as part of t~e abstract referred to. m s. 15. as a resul.t .of an actuarial valhatioii of'tlie assets ·and. liabilities of the insurer. Sub:section, (2) ,d · s. 49 . then laid down that for the. purpose of s.ub·s. (1), the actual amo.unt of income· tax deducted' ai source during the period following 982 SUPREME COURT REPORTS (1963] SUPP. 1961 N•tionol Insurance Co. Ltd., Calcutta y, Life /ruuranct C.,pn. of Indio Jlidayotulloh, J. the date as at which the last preceding valuation was made and prcctding the date as at which the valua tion in question was made might be added to such surplus after deducting an estimated amount for income·tax on such surplus, such addition and dedu ction being sho;-.n in paragraph 8 (1) of the abstract prepared accordance with Part II of the 4th Schedule to the Act. One or the disputes between the parties arose over the surplus to be taken mto account in calculat ing the compensation. This dispute was whether it should be the net surplus as shown in Form I annexed to the abstract or should include the income-tax and interim bonus as shown in the abstracts. The Com pany claimed that it should include interim bonus already paid and income-tax deducted at source less the prov'sion for income-tax on the surplus as stated in the abstracts while the Corporation claimed that these additions should not be made. The figures for the two actuarial investigations were therefore these: Rs. 41,44,68!i 70,21,280 ( 1951-53) according to the Corporation based on Form I Part II 4th Schedule and Rs. 56,36,815 (1946-50} and Rs. 87,03,650 (1!:151-53) according to the Company based on tbe abstracts with the afore said additions. The Tribunal accepted the larger figures for the two periods and the appeal of the Corporation was filed to question this part of the decision. This controversy need not be decided because the Corporation did not press its appeal before us and the basic figures are thus Rs. 56,36,815 (1946-50) and Rs. 87,03,650 (1951-53). and Rs. (1945-50) Before we enter into a discussion of the terms of the First Schedule of the Life Insurance Corporation Act, 1956, laying down the principles for determina- tion of compensation we shall summarise in the form of a formula what is admittedly the purport of these >- ••~ -, - 2 s.c.R. SUPREME ,COURT REPORTS 983 principles applicable to this case. This formula is: 1962 N111ionnl lnsartmu Co. Lttl., Caleutt1.1 v. Lif• I tuuranu Corpn. qf In& Hidayatullu, J. Anoual average of the surplus deemed to be allocated to the share holders Co~pen- satlon payable. =20x as disclosed in the x abstracts. Average busi- in force during 1950-55 Average busi· in force during 1946-53 Two matters arising from these provisions may be disposed of as there is no dispute about them. Firstly. there is no dispute about the multiple 20. Secondly, there is no dispute that the result was to be multiplied by a figure which represented the propor tion the average business in force during the calender years 1950-1955 bore to the average business in force during the calender years comprised in the period between the date as at which the actuarial investiga· tion immediately preceding the earliest of the relevant investigations was made and the date at which the last of such investigations was made (here the years 1946-53). This factor is 138970857 and was ad mittedly the result of dividing Rs. 55,84,073 (average business in force during 1950-55) by Rs. 40,18,64,885 (average business in force during 1946-53). The only dispute in the case is with regard to the annual average of the surplus deemed to be allocated to the shareholders as disclosed in the abstracts in respect of the relevant actuarial investigation. Admittedly two investigations were made in the present case. One valuation period covered five calender. years 1946-1950 and the other three calender In the two investigation periods years 1951-1953. respectively Rs. 56,36,815 (1946-50} and Rs. 87,03,650 (1951-53). The surplus share-holders was Rs. 4,08,4f6 allocated (1946-50) and Rs. 6,40,504 (1951-53). This was in total surplus was to the 1962 .National Insurance Co. 'Ltd., · Calcutla v. Lif• Inmranc1 CMpn: ef Inlia HiJay11iullah, J. 984 SUPREMECOURT REPORTS [1963JSUPP. excess. of, the five per cent. as. laid down in.explana·. tion 2 to Paragraph I to the First Schedule of the Life Insurance Corporation . Act already quoted. Reducing- this surplus allocated to· the share-holders to five per cent. We get for the years 1946-!iO the sum ofR~. 2,81,8.l-l and for the years 10.51-53 the sum of Rs. 4)15,182 .. We may now again stale the formula with these figures and the factor introduced in the appropriate places to show the area of contro versy left. Annual average of Compen-·· Rs. 2,81,841 (1946-.'iO) sation -"20 x and Rs. 4,35, 182 (l!.l.51- x 1.38970357 payable. ' 53) allocated to the share· holders. Nqw the dispute between the parties is (a) what it the period .. in which the allocation to the share holders can be said to be. made and (b) what is meant. In regard to (a) the company by 'annual average.' claims tha.t the surplus must be taken to be allocated to the perjod in which the surplus must have been handed out to the share·holders and that can only .be the period following the investigations. In this case the first investigation covered a period of live calender years from 19!6 to 1950 (both inclusive), and the valuation date was Decemb.er 31, HJ50. The second investigation covered a period of three calender years from 195L.to 195:1 (both inclusive) and the valuation date was December 31, 1953. The Company· con tends that the allocation of Rs. 2,81,841 took place in the triennium between the two valuation dates and similarly the allocation of Rs. 4,35, 182 took ·place in the two complete calender years (HJ5! to 1955).follow ing December, 31, 1953. before the controlled'. busi ness was :taken over by thr; Corporation·on Septem ber I, 1956. The Corporation contcndq that the surplus must be taken to have been allocated in' the years for - I I r ... . 1<'.: ""~ ' 1962 ... National lns11ranc1 Co. Ltd., (,'ri/cult1 Life Insu,,ance Corpn. of India Hidayatutlah, J, -... - 2 S.C.R. SUPREME COURT REPORTS 985 In other words, which the investigation was made. the sum of Rs. 2,81,841, must be deemed to be allo cated in the five years for which the first investigation was made (calender years 194G-50) and the sum of Rs. 4,35,182 must be deemed to have been alh.·ated in the three years for which the second investigation was made (calender years 1951-53). Then comes the next part of the dispute which is over the meaning of the words 'annual average'. Both sides claim to calculate the average on different principles. The Corporation adds the two surpluses deemed to be allocated to the share-holders and divides the result by eight years, that is to say, the sum total of the two investigation periods of five years and three years. The Company on the other hand has four alternative modes of calculation. Two such modes are based on the basis of allocation to 3 and 2 years as stated by the company and two on the basis of the allocation to 5 and a years as stated by the Corporation. These calculations· lead to the following different results :- FORMULA A (based on annual average calculated as suggested by the Company of the two sums allocated as suggested by the Company). 20 (2:~!, 8+1 + 4, 35,!_~x ! ) x 1.38910857 il years 2 years =Rs. 43,29,470 FORMULA B (based on annual average calculated as suggested by the Corporation of the two sums allocated as sugges ted by thr Company). '>O (~-~l,841+1~~~,18~) ~ 3 years 2 years x 1.38970857 =Rs. 39,85,812 1962 National lnsll'ft1.n"t Co. Ltd., Calculta •• Lif1 l'flSUTf ,,,., Co•po. of India Hi®yatullali, J. ,.. ... - 986 SUPREME COURT REPORTS (1963) SUPP. FORMULA C (based on annual average calculated as suggested by the Company of the two sums allocated as suggested by the Corporation). 20 (2,81,841 + 4,35,182 l ) x 1.38970857 5 years 3 years x =Rs. 27,99,276 FORMULAD (based on annual average calculated as suggested by the Corporation of the two sums allocated as suggest ed by the Corporation). 20 (2,61,841 + 4,35,182) x 1.3890875 a years 5 years =Rs. 24,91,123 Formula D was adopted by the Corporation but as the basic figures were lower the resulting amount was Rs. 19,39,669. The Tribunal also approved formula D but as the basic figures were increased by the Tribunal, the amount awarded was Rs. 24,91,123. The question is which of the formulae must be applied. This depends upon : - . (1) How is the annual average in paragraph I of the First Schedule to the Life Insurance Corpo ration Act to be calculated ? • (a) Is the surplus allocated in the years for which the investigation is made or in the years that follow till the next valuation date? ,. '"--- (b) Is the annual average the average of the total amount divided ·by the number of 2 s.c.R. SUPREME COURT REPORTS 987 years involved in the two .investigations, (formula D) ? (c) Is the annual average the average of the 1962 Nali0111Jl lnnat»M Co. Ltd.. C.Zct1tta •• 1.if1 1.,.,_, Cmpn. ef Iodia average of each period taken separately ? Hi<4Jalldlali, J. The Tribunal in reaching its conclusion observ· ed that "paragraph I does not provide for taking two averages but only one average for the entire period of account." It rejected formulae A and C above as ~ they involved an average of an average. The Tribunal then followed its own decision in an earlier case and held that the Paragraph I of the Schedule did not warrant the construction sought to be placed by the Company. The Tribunal had observed there as follows:- "The paragraph does not refer to the years during which the amount of dividend in the abstract is actually paid to the share-holders. It refers to the surplus allocated to shareholders as disclosed in the abstract and requires annual average to be taken of the share of such surplus. Therefore, on a plain reading of this paragraph the annual average has to be taken of the share of surplus allocated as shown in the abstract, or in view of Explanation 2, deeIJled to be allocated to share-holders on calculations now made." • It is contended by the Company that the deci· sion of the Tribunal is not correct. In support of the construction which the Company seeks to place upon Paragraph I it is argued that the word is "allo· cation" and a. sum cannot be allocated till ·it. is known. Further it is said the allocation can only be made after the ·share-holders get a right to divi· dend which would be after the report of the actuary; It is, therefore, contended that since the sum was 1962 National /n.surance Co. Ltd., Calcuttll v. I.ife Insurance Corpn. of lr1dia Hiduyatullah, J. 988 SUPREME COURT REPORTS [1963] SUPP. not known during the period for which the investiga- tion was made and the share-holders had no right till after the ascertainment of the profits by an actuary, the word "allocation" can only be read in relation to the years that follow the actuary's report and not in relation to the period for which the It is also argued actuary makes the investigation. that the lan~uage of the paragraph does not bear the construction which the Tribunal has placed upon it. -- The learned Attorney General, however, admits ~ that the comtruction which he seeb to place may fo ii at lc;;st in the last of the two periods in those cases whrre the last valuation date is within a few If th~ valuation date months of September l, 1956. in the present case had been December 31, l!l55, there should have been no complete year for which to have been made and the allocation could be said the calculation on the basis suggested by the Company would have been impossible. Again, if instead of the last valuation on December 31, 1953, it had been made on December 31, 1954, the whole of the profits would then be deemed to have been allocated to one year instead of two. It is clear enough that the Paragraph could not be intended to prescribe an something uncertain system of calculation but definite. The compensation was meant to give to the shareholders an equivalent of their annual profits capitalised at 20 years purchase and to reflect the advance or fall in the business by multiplying the result with the factor. The intention therefore is to get a trne average spread over a number of years so that compensation may not be related to any excep tional year or years-whether insurer or against him. be based upon what represents the average business "'~ done by a company over a number of years. This intention is quite evident from the Explanations which have been added to the paragraph. Explanation l (a} in favour of It is intended that it should ~· • 1962 Nation.t Insurance Co. Lid., Calcutta v. Lif1 Insurance Corp.. ef India Hidoymullalo, J. 2 S.C.R. SUPREME COURT REPORTS 989 shows that there should be not less than two <.1ctuarial investigations and they should cover a period of not less than four years. This shows that the intention was to base the calculation upon a wide view of a company's business. Now, 'allocation' means the allocation as made in the abstracts. Part A says that the compensation to be given by the Corporation to an insurer having a share capital on which dividend or bonus is payable and who has allocated as bonus to policy-holders the whole or any part of surplus as disclosed in the abstracts, shall be computed in accordance with the provisions cop.tained in one of the two paragraphs that follow. The words of the Schedule to be empha sised are "has allocated as bonus to policy holders the whole or any part of the surplus as disclosed in the abstracts." The abstracts are nothing but a summary , of the investigations over a particular period and the allocation of lonus and dividends must also be for the same period. The abstracts contain no reference to any future period and in fact there are no words in the abstracts which show that the allocation must In paragraph I the be for the years that follow. words are "the share of the surplus allocated in respect of investigations." relative actuarial These words refer to the abstracts and the share of the surplus stated therein. Since that share comes out of the profits which accrue to the Company during the period of investigation the allocation must also be taken to be for the period during which the profits arise. The argument of the learned Attorney General that the allocation can only be when the amount is known and also when the right : accrues to the share-holders because the profits have ~ to be found first is not acceptable to us because life insurance business is carried on with periodic actua rial investigations which shows how much profits have been made and that depends on what the existing liability of the Company is in relation to its I 1361 N'atiOMI fnntr_, Go. Lid., Calcutto v. Lif1 /nsutON:I Corpn. of India Hida. Ydtvl/411, J. 990 SUPREME COURT REPORTS[I963]SUPP. reserves and other likely income. It is the result of - these investigations which entitles the policy-holders as well as the share-holders to share in the profits whether by way of bonus or dividend but the share is in respect of the years for which the investigations were made. Profit can only be found after the receipts of a particular period have been found and _. compared with the payments that have been made during the same period and the liabilities existing on the date on which the actuarial investigation is made, are found out, and the reserves which have to be _ .. kept to make good these liabilities are ascertained. To connect the profits with a future period is to make the scheme unworkable because insurance business is based upon the actuarial assessments of the position of the company. Nothing much turns upon the use of the singular in "share" and "surplus" and it cannot be said that ther, that the twJ "shares" and "surpluses ' cannot be aggregated. Indeed even after aggregation the words "share" and In "surplus" will still continue to be applicable. our judgment, the Tribunal was right in holding that the surpluses were related to the five years and three years respectively covered by the two actuarial investigations in this case and must be deemed to have been allocated for the same period. indicate , The next question is how is the average to be found. Here the words are "annual average". The , word "annual" must be given its full meaning. By the word "annual" is meant something which reckoned by the year. The addition of the word "averages" shows that what is to be found is an aver age reckoned by the year. If the two periods were to be viewed separately and an annual average is found out for each of the periods there would be two annual ~ averages and they would almost always be different. When an average of these periods is taken there is no longer an "annual average". The result can only be described as the average of two annual averages. The Tribunal was right when it said that 1962 Natinal 1 - Co. Ltd., Calcutta v. Lif1 Insur..,. Crrpn. of lndill Hidayatulloh, I 2 S.C.R. SUPREME COURT REPORTS 991 the law contemplates one average and not the average of two averages. Giving the word "annual" its full meaning it is obvious that that system must be adopted which will lead to a result which can be described both as "annual" and as an "average''. That can only be when the amount of the surplus as disclosed in the two investigations is aggregated and the result is divided by the total number of years. One finds an average by dividing the aggregate of several quantities by the number of quantities. In this case one can only get the "annual average" by aggregating the surplus related to at least two actuarial investigations covering a period of more than four years and by dividing the result and by the number of years involved. In our judgment formula D alone was applicable to the facts of this case and as that formula has been applied the result reached by the Tribunal was correct. It remains to consider the other two questions which have been debated before us and they are whether in making the offer the Corporation was entitled to make a deduction on account of the assets of the controlled business which were of the value of Rs. 6,00,000. The Tribunal has also ordered the Corporation to pay the amount of compensation, less Rs. 6,00,000 due to the Corporation. Apait from any other consideration, it seems to us somewhat anomalous that the Company should demand that the whole of the compensation should be paid to it and the Corporation be left to its own devices to In a case of recover this admitted sum due to it. this type the Corporation was entitled to say: "You have our Rs. 6,00,000. You pay yourself that amount and here is the balance". Such an attitude. is so just that it is impossible to hold that the Tribu nal ought to have reached any other conclusion except this. No doubt, the Act says that the Corporation shall pay the compensation due to the Company but in another part it also says that the Company shall pay in lieu of the assets of pertaining to the controlled - ' • 1962 National Inruranc1 Co. Lid., Calcutta v. Lif1 Insuranc1 Corpn. qf lndilJ Hitla; atullah, J. 992 SUPREME COURT REPORTS [1963) SUPP. business a sum of Rs. 6,00,000. These two provisions of law must be read together and in our opinion the Corporation was entitled to a set-off in respect of the amount due to it and the Tribunal was perfectly right when it ordered such a set-off. is whetht>r Tht> last question interest was payable. The Tribunal held that it had no jurisdic tion to aw:ml interest because there is no provision in It followed its own decision in the order the Act. passed in an earlier case and declined to grant inte· rest. During the arguments before us the Corpora tion agreed that interest is awardable and the dispute only centred round the rate of interest, the amount on which it is payable and the date from which is should be given. There is no doubt that the Life Insurance Corporation Act and the Rules do not contain any express provisions for grant of interest. The Company relied on cases of purchases of immovable property where interest is awarded as a general rule of equity if the purchaser enters into possession without having paid the purchase-money to the seller. The reason of the rule was stated a long time ago by Lord St. Leonards L.C. Birch v. Joy (1) as follows.- "The parties change characters, the property remains at law just where it was, the purchaser has the money in his pocket, and the seller still has the estate vested in him; but they ex change characters in a Court of Equity, the seller becomes the owner of the money and the purchaser becomes the owner of the estate". ' On entering possession the purchaser becomes entitled to the rents but if he has not paid the price, interest in equity is deemed payable by him on the purchase price which belongs to the seller. This principle was applied by the House of Lords in cases In Swift &: Oo. v. Board of compulsory purchases. o.f Tmde (') Viscount Cave L.C. gave the reason that the practice rests upon the principle that the (I) (1852) III H.L.C. 555 1 10 E.R. i21. . (2) [1925] \.C. 520. 2 S.C.R. SUPREME COURT REPORTS 993 taking of possession is an implied agreement to pay interest which was stated by Sir William Grant M. R. in Fludyer v. Cocker ('). This principle was further extended by the Privy Council to the compulsory taking over of a business as a going concern in Inter national Railway Company v. Niagara ParkB Com misBion('). 1962 -NmioMI 1.,.,.,,., C•. Ltl. C41<11t1<1 y. Lif11..., .. ., Corjo. qf Indio HUIA7<10JJloA, J. In this Court also the principle was applied to the East Punjab Requisition of Immovable Property Act (Temporary Powers Act) (Pun. 48 of 1948) replaced by the Punjab Requisition and Acquisition of Immovable Property Act (Pun. 11 of 1953): vide Satinder Singh v. Amrao Singh('\. Under that Act though compensation was payable there was no provision for the payment of interest. This Court approved the decision of the Privy Council in Ingle wood Pulp and Paper Company Ltd, v. BrullBWick Electric Power OommiBsion('). Where the Judicial Committee had observcd- "But for all that, the owner is deprived of his property in this case as much as m the other and the rule has long been accepted in the interpretation of statutes that they arc not to be held to deprive individuals of property without compensation unless the intention to do so is made quite clear. The right to receive interest takes the place of the right to retain p0ssession and is within the rule". This Court observed as follows : - "It would thus be noticed that the claim for interest proceeds on the assumption that when the owner of immovable property loses possession of it he is entitled to claim interest in place ·of the right to retain possession". The learned counsel for the Corporation did not give any reply to the argument detailed above and agreed to pay interest. In this view of the (2) (1!144) A.O. 128. (f) [19211] A.O. 492. (I) (1805) SS E.R. 10. (S) [1961] S S.O.ll.1176, 694. ' - ' •• ., 1162 N•llonol lruurat1t:1 Co, Ud. Co/cull• v. Lif• lruurant1 Corf"'. of Indio llWl(µJullah, J, 994 SUPREME COURT REPORTS[l963]SUPP. matter it is not necessary to express an opinion whether interest can be demanded by the . company. We have only to determine the rate and the amount on which and the date from which interest should run. In the present case compensation was payable in full satisfaction only of all claims. The Corpora tion offered compensation as determined by it in full satisfaction and refused to pay it unless the Company gave a discharge to the Corporation from all lia bilities and claims. This amount was found to be incorrect and insufficient and the refusal of the Company to receive it was justified. We have held already that the Corporation could not pay the admittcid sum tentatively even though without prejudice to the rights of the parties. The offer was made on February 14, 1957. In view of the fact that some time must elapse before the compensation is worked out it would, we think, be fair to award interest from February 14, 1957, which was the date when the dispute was referred to the Tribunal. We think interest in this case should be calculated at four per cent. simple. That is the usual rate which is awarded by courts in such circumstances. The compensation has been found to be Rs. 24,91,133 under formula D which we have held was the correct formula to apply. The Corporation was entitled to set-off Rs. 6,00,000 representing the assets of the controlled business. the balance (Rs. 18,91,133) will be payable at four per cent per annum simple from February 14, 1957, till October 31, 1957, when Rs.5,51,464 were withheld and the balance was paid to the Company. Interest on Rs. 5,5l,4fi4 at four per cent. shall be payable from November I, 1957, till December 26, 1957. There shall be no interest payable on Rs. 6,00,000 as claimed by the appellent. Interest on In the result this appeal fails except for the grant of interest. It is dismis§ed exceft for interest granted by us. The Company shal bear its own costs and pay that of the Corporation. The appeal 1962 N""""41 1 - Co. LU. Col'""" v. Lif•l- eor,.. of r.m. HillrJ"""'411, /. 1962 D1t1mbn, IZ. 2 S.C.R. SUPREME COURT REPORTS 995 of the Corporation is dismissed with costs. There will be a right to set-off the costs in the two appeals.

#0. A. No. 551 of 1960 diamisse,d, ezupt for inte rest. 0. A. No. 652 of 1960 di8mis1e,d,. KURAPATI VENKATA MALLAYYA AND -ANOTHER "· THONDEPU RAMASWAMI AND CO. AND ANOTHER (S. J. IMAM, J. L. KAPUR, K. SUBBA RAo and J. R. MUDHOLXAR, JJ.) . RtuitJ<r-'--ApPoimment bg 0""'1-1/ emo - M. Ail OID9 fllJfrlt-lnter/eronu-Oonetll'f'tflt finding o//ad-Praclica-OOIH of Oiml Procedtirt, 1908 (Vo/ 1908), o_ 40, r_ 1. A Receiver authorised and appointed by a Court to collect the debts due to the plaintliF-mpondent instituted a suit against the appellant-firm and its alleged partnen for the recovery of the price of tobacco and interest thereon. The right of the receiver to institute a suit in hi• oW.. name was challenged by the appellant. Thereupon the respondent-firm amended the plaint by dcocribing the plaintifl' 81 "M/1. T. R. & Co., represented by I. Surayanarayana Garu receiver appoin kd in 0.S. 275 of 1948 on the file of the District Munsift"'1 Court, Guntur." The appellant-firm amended the written statement and contended that the amendment of the plaint was time barred, that it did not cure the initial defect in the suit and that consequently, die suit was barred by limitation. The trial court diomlssed the wit on the ground that Suryanarayana was not entitled to institute a suit in his capacity 81 Receiver, that the amendment of the plaint was beyond time and that therefore time bam:d. On appeal the High the suit wao