' The plaintiff has brought this suit for recovery of Rs, 33,18,703 stated to be lying in the share- holders' account with the defendant payable to plaintiff. In order to understand the nature of the claim made by the plaintiff in the suit it is necessary to state here the circumstances under which the present suit has been filed by the plaintiff.
2. The life insurance business carried on by the Insurance Companies in Pakistan was nationalized by the Federal Government by Presidential Order No, 10 of 1972 known as Life Insurance (Nationalization) Order of 1972 (1 will hereinafter refer it as the "Order"). Under section 4 of the Order as and from the specified date the Managements of all insurers transacting life insurance business in so far it related to the business of life insurance was to vest in the Central Government and upon such vesting the persons who were immediately before the specified date were vested with such Management were to be divested of such Management. Under Article 5 of the Order the Central Government could appoint trustees for the management of the affairs of one or more insurers transacting life insurance business in relation to such business and upon appointment of trustees the management and the affairs of life insurance business was to vest in such trustees. It is not in dispute that simultaneous with the promulgation of the Order the Central Government on 20-3- 1972 appointed trustees in accordance with the provisions of Article 5 of the Order and as such the life insurance business of all insurers vested in such trustees from that date. The plaintiff which was a composite insurance company carrying on general as well as life insurance business was accordingly divested of the Management in so far it related to the life insurance business on 20-3- 1972 and the same vested in the trustees appointed under Article 5 of the Order from that date. On 1st of November, 1972 the Central Government in exercise of its power under Article 11 of the Order established the defendant to carry on the life insurance business and upon establishment of defendant all assets and liabilities appertaining to life insurance business of all insurers stood transferred to and vested in the defendant by virtue of Article 15 of the Order. Sub-Article (2) of Article 15 of the Order provided that the assets appertaining to the life insurance business of an insurer shall be deemed to include all rights and power, and all properties whether movable or immovable appertaining to the life insurance business including in particular cash balance, reserve fund, investment, deposit and all other interests and right under or arising out of such properties as may be in the possession of the insurers and all books of account or documents relating to the life insurance business of insurers ; and liabilities shall be deemed to include all debts, liabilities and obligation of whatever kind then existed and appertaining to the life insurance business of the insurers. The general effect of the vesting of life insurance business in the Corporation is provided under Article 17 of the Order, which states that all agreements, contracts and other instruments subsisting or having effect immediately before the appointed day (which in this case is 1-11-1972) to which an insurer whose life insurance business has been transferred to the defendant is a party or which are in favour of such insurer shall, in so far as they related to the life insurance business of the insurer, be of full force and effect against or in favour of the Corporation, as the case may be, and may be enforced and acted upon as fully and effectively as if instead of the insurer, the Corporation had been a party thereto. Therefore, on the establishment of defendant on 1-11-1972, the assets and liabilities of the plaintiff appertaining to the life insurance business which vested in the trustees as and from 20-3-1972, appointed under Article 5 of the Order, stood transferred to the defendant. It is the case of the plaintiff that at the time the life insurance business of the plaintiff was transferred to trustees appointed under Article 5 of the Order, the triennial valuation of the life insurance business of the plaintiff for the year 1969, 70 and 71 was under preparation and as such the entire record pertaining to life business was taken over by the trustees. It is stated in the plaint that as a result' of taking over of the record relating to life insurance business the triennial valuation for the aforesaid period was completed by an Actuary under the supervision of the trustees and upon completion of this acturial report the same was submitted to the Chairman of the Board of Trustees which was known as Life Insurance Management Board (for the sake of brevity 1 will refer it hereafter as LIMB). It is claimed by the plaintiff that as a result of this acturial investigation of Life Insurance business a surplus balance of 3.73 crores was shown in the report of actuary. The plaintiff further asserted that the Chairman of LIMB expressed the view that out of the surplus of 3.73 crores reasonable provision should be made for bad debts such as advances given to agents and field workers of the plaintiff. The plaintiff is said to have suggested to the Chairman of LIMB that Rs, 20 lacs be kept to meet the contingency of the bad debts whereas the Chairman of LIMB suggested a figure of 44 lacs. On account of this difference between the plaintiff and Chairman of LIMB, the matter was agreed to be referred to Messrs A. S. Ferguson and Company for their opinion. It is asserted by the plaintiff that while this matter was being looked into by Messrs Ferguson & Company the defendant was constituted and it replaced the LIMB. It is stated in the plaint that on 23rd of December, 1972, Messrs Ferguson & Company forwarded their comments to the defendant's Chairman and recommended that a total sum of Rs, 80 lacs be kept for bad debts. The plaintiff, it is claimed, were not agreeable to the above suggestion of Messrs Ferguson in the beginning but on being given to understand by the Chairman of the defendant that any dispute on the subject would delay the release of funds to the policy holders and share-holders and in order to resolve the impasse, agreed to the recommendation of Messrs Ferguson & Company to keep a sum of Rs, 80 lacs for bad debts out of the surplus and accordingly the surplus balance of 3.73 crores was reduced to 2.93 crores. It is claimed that out of this surplus balance of 2.93 crores a sum of Rs, 2,63,39,176 was earmarked for payment to the policy holders while a sum of Rs, 2,8,56,296 was shown as payable to the share-holders and the balance of Rs, 1,04,528 was carried forwarded unappropriated. The plaintiff is said to have informed its share-holders about payment of the above sum of Rs, 28,56,296 to them and it was also shown in the annual report pertaining to the year 1972 prepared by the plaintiff. The plaintiff's case is that on 12th of January, 1972 with the filing of said valuation report the defendant acknowledged and consented to the payment of the sum of Rs, 28,58,291 to the plaintiff being the amount of the surplus allocated to the shareholders represented by the plaintiff. The plaintiff, thereafter, wrote several letters to the defendant for release of the said fund to the plaintiff for distribution among the share-holders and also warned the defendant that in the event of non-payment of this amount the defendant wig be charged with interest on this amount at 91 % per annum from 12-1-1972 but the defendant have failed to pay the said amount to the plaintiff so far. The plaintiff has accordingly claimed in the suit a sum of Rs, 28,56,296 being the amount allocated from the surplus balance to the share-holders, a sum of Rs, 4,62,407 on account of interest at 9-i% per annum from 12-1-1973 to 25-1-1974 and future interest on the amount at the same rate from the date of institution of the suit till realization of the amount. In the written statement filed on behalf of the defendant the claim of the plaintiff to the above amount is disputed on various legal grounds. By consent of the parties the Court framed the following issues on 8-9-1976 :-
(1) Whether Annexure "A" to the plaint creates any liability on the defendant ?
(2) Whether the amount claimed or any interest thereon is payable by the defendant to the plaintiff ?
(3) What should the decree be ?
' I have heard Mr. Muhammad Ali Sayeed, the learned counsel for the plaintiff and Mr. Mansoor Ahmed Khan, the learned counsel for the defendant in the above case. My findings on both the issues are as follows :- Issues Nos. 1 and 2.-I will deal with both these issues at the same time as they are interconnected and can be conveniently disposed of together. Annexure "A" to the plaint is a statutory statement filed under the Insurance Act to the Controller of Insurance. This document is dated 9th January, 1973 and is signed by the consulting actuary S. A. Zahid, Chairman of the defendant S. U. Baig, Chairman of the plaintiff and two directors of the plaintiff. The contention of the learned counsel for the plaintiff is that as soon as this return is filed with the Controller of Insurance all entries shown in the return are to be taken as true and correct. The learned counsel for the defendant did not dispute the correctness of this proposition but urged that by merely filing this return (Annexure "A") which was a statutory obligation of defendant no liability can be created against them. There is, however, no dispute that the sum of Rs, 28,58,296 shown in the return as the amount in share- holders' account is correct. Mr. Muhammad Ali Sayeed, the learned counsel for the plaintiff has urged that what was acquired by the Government under the Order was the Management, the assets and liabilities as they stood on 20th of March, 1972. It is, therefore, contended by the learned counsel that the surplus as reflected for the years 1969, 70 and 71 did not form part of the assets of the company acquired on 20th March, 1972. It is urged that in spite of acquisition by the Government of the management and the share capital of the plaintiff, the plaintiff continued to remain entitled to deal with the surplus which related to the years 1969, 70 and 71 and therefore, the plaintiff was fully competent to dispose of the same in accordance with the provision contained in its Articles of Association. Mr. Mansoor Ahmed Khan, the learned counsel for the defendant, on the other hand, contended that on 20th of March, 1972 with the coming into force of the Order, the plaintiff stood divested of all the management and participation in the affairs of the company in so far it related to the business of life insurance which then stood vested in the LIMB created by the Government for temporary management of the nationalized insurance companies under Article 5 of the Order and thereafter as and from 1-11-1972 the management of these companies stood vested in the defendant which was established under section 11 of the Order. The further contention of Mr. Mansoor Ahmed Khan, is that on the day the defendant came into existence i.e, 1-11-1972 there was no defined or specified amount payable either to the policy holders or to the shareholders as the acturial valuation account was still under preparation therefore no claim to it was maintainable either by the policy holders or the shareholders until it was decided by the defendant what amount was to be paid to them. The enforcement of the present claim by plaintiff in the submission of learned counsel for the defendant would amount to payment of compensation to plaintiff twice over as the compensation payable to the plaintiff under the provisions of the Order was worked out after taking into consideration, all the assets and liabilities which included the surplus balance, if any, to be found as a result of acturial investigation with regard to the valuation balance sheet of the plaintiff for the years 1969, 70 and 71. It is alternatively, contended by Mr. Mansoor Ahmed Khan that by merely showing an amount in the share-holders' account payable to share-holders it does not become payable as such unless the dividend is specifically declared and in any case the plaintiff as a company cannot sue for recovery of the alleged amount of share-holders' dividend which has not yet been declared by the defendant. It is lastly contended by Mr. Mansoor Ahmed Khan, that in order to maintain the present claim by the plaintiff to the above amount it must be shown that it is payable to them under same provision of the Order.
3. In the earlier part of this order I have already referred to articles 4, 5, 11, 15 and 17 of the Order. A reading of these provisions will show that as and from 20th March, 1972 the plaintiff was divested of the control and managements including the assets and liabilities appertaining to the life insurance business and same stood transferred/vested firstly in the LIMB which was created by the Government for temporary take over of the nationalized insurance companies and thereafter in the defendant from 1-11-1972. By force of the provision of article 15 of the Order all assets and liabilities appertaining to the life insurance business as and from the appointed date (which was the date on which the defendant was established) stood transferred and vested in the corporation (defendant). Sub-Article (2) of Article 15 is important in this regard as it defined the assets and liabilities of the insurance companies which stood vested in the corporation (defendant) constituted under Article 11.
4. The fate of the present claim by the plaintiff largely depends on the interpretation of the various provisions of the Order and specially the effect of Article 15 which is as follows :- "15. Transfer of assets and liabilities of existing insurers carrying on life insurance business. -(1) All the assets and liabilities appertaining to the life insurance business in Pakistan of all insurers shall, on the appointed date stand transferred to, and vested in, (a)the Corporation, if there be only one, and (b)such of the Corporations, where there are more than one, in such manner and to such extent as the Central Government may specify in this behalf.
(2) The assets appertaining to the life insurance business of an insurer shall be deemed to include all rights and powers, and all property, whether movable or immovable, appertaining to his life insurance business including in particular, cash, balances, reserve funds, investments, deposits and all other interests and rights in or arising out of such property as may be in the possession of the insurer and all books of account or documents relating to the life insurance business of the insurer ; and liabilities shall be deemed to include all debts, liabilities and obligations of whatever kind then existing and appertaining to the life insurance business of insurer."
' Upon reading of the above provision there can be no manner of doubt that all assets appertaining to the life insurance business of an insurer which included all rights and powers, all properties whether immovable or movable including cash balance, reserve fund, investment, deposits and all other interests or rights under or arising out of such properties as may be in possession of the insurer and all books of account and documents relating to the life insurance business stood transferred and vested in the corporation. This provision is very widely worded and leaves no room for speculation that any of the properties of the plaintiff pertaining to life insurance business which were available on the date the defendant was established were left out from being acquired and vested in the corporation (defendant). I am therefore, of the view that on 1-11-1972 whatever assets in the form of movable or immovable property including cash balance, reserve fund, investment, deposits and all other interests and rights arising out of such properties as were in the possession of the plaintiff stood vested in the defendant. It A cannot be disputed that on the day when the defendant came into existence the entire life fund was in the hands of the plaintiff which included the surplus balance. The fact that the acturial investigation in respect of years 1969, 70 and 71 were then under preparation could not change the character of the property so as to exclude it from the operation and effect of Aricle 15 of the Order. The clear effect of Article 15 was that all accounts available with the plaintiff whether settled or unsettled in whatever form and shaps with all its corresponding liabilities vested with the defendant. I, therefore, find no substance in the contention of the learned counsel for the plaintiff that the surplus balance for the years 1969 to 1971 was out of the purview of the Order and that plaintiff in spite of the effect of vesting as produced in Article 15 of the Order were entitled to deal with the same. The defendant as and from 1-11-1972 were the only authority competent to deal with the surplus balance which became available as a result of acturial investigation carried out for the aforesaid years. It is admitted before me that out of the surplus balance, 97f % of the amount was declared by the defendant as bonus payable to the policy holders and this act of defendant is not challenged before me. If the surplus balance was outside the purview of acquisition and plaintiff were entitled to deal with the same, as contended by Mr. Muhammad All Sayeed, how could the defendant deal with the disposal of this amount. The plaintiff has claimed the amount of Rs, 28,58,296 on the basis that it is shown in the valuation report filed by the defendant before the Controller of Insurance. Filing of this report is a statutory obligation on all the persons engaged in the business of life insurance. The correctness of the amount shown as allocated to the shareholders' account is not disputed by the defendant. There is therefore, no doubt that this amount which is shown as allocated to shareholders' account carries with it the corresponding liability to pay the same to the shareholders as and when the dividend is declared by the defendant. The point presently for determination is whether the plaintiff could claim this amount from the defendant as having been allotted to the share-holders' account. The learned counsel for the plaintiff was unable to point out any provision either under the Order or under the Company's Act which could entitle them to sue for recovery of the amount shown as allocated to the shareholders' account. In my view until such time the actual amount of dividend payable to share-holders is declared by the Company the amount allocated to the share-holders' account cannot become a debt recoverable by a shareholder. Mr. Muhammad Ali Sayeed, was also unable to show how the plaintiff which is a limited Company could sue for recovery of the amount B due to its individual share-holders, more so when the defendant has not yet declared the amount of dividend payable to the individual share-holder. Mr. Mansoor Ahmed Khan, learned counsel for the defendant referred to the case of Dr. A. Lakshmanaswami v. Life Insurance Corporation of India (1) to support the contention that until the dividend is declared the share- holder cannot sue for recovery of the amount out of the share-holder dividend's account. In that case the Company which was carrying on life insurance business on 15th of July, 1955 by a resolution passed in the general meeting of share-holders donated a sum of Rs, two Lacs out of the share-holders' dividend account to a charitable trust and a part of the amount was also paid on the same day and balance was paid thereafter. The insurance companies in India were nationalized by the Life Insurance Corporation Act of 1956 which came into effect on 1-7-1956. After nationalization of the Insurance Companies, the Insurance Corporation of India made a demand with the trustees of the Trust for refund of the amount paid to it by the Directors of the defunct-life insurance company on the ground that the impugned resolution of the Company did not declare any dividend payable to the share-holders of the Company and by merely showing the amount in share-holders' Dividend Account the amount as such did not become a debt recoverable by the share-holders unless the amount of dividend is declared by the Company and as such the resolution of the Company sanctioning the amount out of share-holders Dividend Account was ultra vires and therefore in view of provision of section 15 of the India Life Insurance Act (1956) the corporation as entitled to claim back this amount. The contention of Life Insurance Corporation was resisted on behalf of Trust on the ground that the share-holders' Dividend Account was distinct and separate account from the general assets of the Company and as such the amount lying therein is the exclusive property of the share-holders and the Company held it on behalf of share- holders as a trust for them and therefore no exception should be taken to its disposal according to the wishes of shareholders. The contention raised on behalf of Trust was repelled by the Supreme Court of India and it was observed that the position of a shareholder is that on buying the share he becomes entitled to participate in the profit of the Company if and when the Company declared subject to the Articles of Association of the Company. It was further held that the fund which was lying to the credit of the share-holders in Share-holders Dividend Account admittedly belonged to the Company until its destination is determined by a resolution of the Company declaring a dividend pursuant to the recommendation of the Directors. A similar contention was also considered by the Supreme Court of India in the case of General Assurance Society Ltd. v. Life Insurance Corporation of India (2) where it was held that the assets equivalent to the liabilities of unclaimed declared dividend by the
(1) AIR 1963 SC 1185 (2) AIR 1964 SC 892 ' Insurance Company vested in the Corporation by virtue of the definition of assets and liabilities as given in subsection (2) of section 3 of Indian Act. It was further held in that case that in spite of declaration of dividend by the Company the amount representing the dividend continue to form part of the assets of the Company and the dividend continue to be its debts.
' I am in respectful agreement with the view expressed in the above two Indian cases.
5. The result of the above discussion is that in spite of showing the sum of Rs, 28,58,296 by the defendant in the Share-holder's Dividend Account it continues to form part of the assets of the nationalized Insurance Company and until such time the dividend is declared by the defendant the amount will not become a debt recoverable by the share-holder and as such the present suit by the plaintiff for the recovery of the amount is not maintainable. As the defendant has succeeded on a technical ground there will be no order as to costs.