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1Fix the driver behind crashes, sound loss and screen glitches2Repair Windows errors before they cause bigger problems3Scan for outdated or missing drivers - takes under a minuteIn LIC v. Gangadhar Vishwanath Ranade, the Supreme Court held the Life Insurance Corporation of India (LIC) liable for interest after it delayed making a sworn statement required by section 226(3)(vi) of the Income-tax Act, 1961. The delay held up payment on four matured policies that Ranade had assigned absolutely to his wife, and the Court dismissed LIC’s appeal with costs. The 15% annual rate concerned this dispute; the judgment does not make that rate automatic for every late insurance payment.
What was the dispute?
Gangadhar Vishwanath Ranade took out four LIC policies between 1958 and 1960. In April 1969, he absolutely assigned them to his wife, Kamalabai G. Ranade, and LIC registered the assignment. The policies matured on 14 September 1972, 28 December 1973, 9 November 1975 and 21 December 1975.
On 27 January 1971, an Income-tax Officer served LIC with a notice under section 226(3), seeking money due from or held by LIC for Ranade to satisfy his tax arrears. LIC told the assignee to have the notice vacated and said it would not pay her until that happened. The officer also questioned whether the assignment had been made to defraud the revenue.
What did section 226(3)(vi) require LIC to do?
LIC maintained that the policy money was held for the assignee, not for the tax debtor. The Supreme Court reasoned that LIC therefore had to make the prescribed statement on oath under section 226(3)(vi), explaining that money was not due to Ranade. The Income-tax Officer could then decide whether further recovery steps were warranted.
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The Court held that the tax notice did not, by itself, invalidate the registered assignment. The assignment remained effective unless a competent authority invalidated it. LIC could not simply withhold payment while leaving its statutory response unmade.
Why did the Court hold LIC liable for interest?
After earlier proceedings, the Supreme Court directed LIC to make the required sworn statement. LIC filed it on 5 December 1975. The Income-tax Officer withdrew the notice in April 1977, after which LIC paid the policy amounts to the assignee but disputed her claim for interest.
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The Court attributed the inordinate delay to LIC’s misconstruction of the statutory provision and its misunderstanding of its obligations. Because the assignee became entitled to the policy proceeds on their maturity dates, the Court said she had to be compensated for LIC’s failure to perform its statutory duty within a reasonable time. Justice J.S. Verma delivered the judgment.
What did the Supreme Court decide about the interest rate?
The appeal concerned LIC’s liability for interest after the policies matured. The Court upheld the interest award of 15% per annum for the period at issue and dismissed LIC’s appeal with costs. That rate is a case-specific result, not a statutory tariff or a guarantee that every delayed insurance claim earns 15% interest.
What does the decision mean for policyholders?
- A registered absolute assignment was central to this dispute: it preceded the tax recovery notice and identified the wife as the person entitled to the policy proceeds.
- A recovery notice did not itself cancel that assignment. Where LIC relied on the assignment to say the debt was not owed to the tax debtor, it had to make the sworn statement required by section 226(3)(vi).
- The Court’s award turned on LIC’s delay in performing that statutory duty and the circumstances of this case. It does not establish automatic interest at 15% for every late insurance payment.
The detailed judgment text consulted is a third-party reproduction. The decision supports an account of this historical dispute, but does not by itself establish how later courts have treated it, the current text or operation of tax recovery law, or the outcome of any individual insurance claim.
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