THE INSURANCE ACT, 19381
[AS AMENDED BY INSURANCE (AMENDMENT) ACT, 2002]
[4 of 1938]
An Act to consolidate and amend the law relating to the business of insurance
Whereas it is expedient to consolidate and amend the law relating to the business of insurance; it is hereby enacted as follows: -
PART I
Preliminary
Short title, extent and commencement.
1. (1)) This Act may be called Insurance Act, 19382.
(2) It extends to the whole of
(3) It shall come into force on such date3 as the Central Government may, by Notification in the Official Gazette, appoint in this behalf.
Definitions.
2. In this Act, unless there is anything repugnant in the subject or context, -
(1) “actuary” means an actuary possessing such 3a[qualifications as may be specified by the regulations made by the Authority];
4[(1A) “Authority” means the Insurance Regulatory and Development Authority established under sub-section (1) of section 3 of the Insurance Regulatory and Development Authority Act, 1999;]
(2) “policy-holder” includes a person to whom the whole of the interest of the policy-holder in the policy is assigned once and for all, but does not include an assignee thereof whose interest in the policy is defeasible or is for the time being subject to any condition;
(3) “approved securities,” means-
(i) Government securities and other securities charged on the revenue of the Central Government or of the Government of a State or guaranteed fully as regards principal and interest by the Central Government or the Government of any State;
(ii) debentures or other securities for money issued under the authority of any Central Act or Act of a State Legislature by or on behalf of a port trust or municipal corporation or city improvement trust in any Presidency-town;
(iii) shares of a corporation established by law and guaranteed fully by the Central Government or the Government of a State as to the repayment of the principal and the payment of the divided;
(iv) securities issued or guaranteed fully as regards principal and interest by the Government of any Part B State and specified as approved securities for the purposes of this Act by the Central Government by notification in the Official Gazette; and
(4) "Auditor" means a person qualified under the Chartered Accountants Act, 1949 (38 of 1949), to act as an auditor of companies ;
(4A) "banking company" and "company" shall have the meanings respectively assigned in them in clauses (c) and (d) of sub-section (1) of Section 5 of the Banking Companies Act, 1949 (10 of 1949);
(5) "certified" in relation to any copy or translation of a document required to be furnished by or on behalf of an insurer or a provident society as defined in Part III means certified by a principal officer of 6Esuch insurer or provident society to be a true copy or a correct translation, as the case may be;
(5A) "chief agent" means a person who, not being a salaried employee of an insurer, in consideration of any commission-
(i) performs any administrative and organising functions for the insurer, and
(ii) procures life insurance business for the insurer by employing or causing to be employed insurance agents on behalf of the insurer;
[(5‑B) "Controller of Insurance" means the officer appointed by the Central Government under section 2B to exercise all the powers, discharge the functions and performs the duties of the Authority under this Act or the Life Insurance Corporation Act, 1956 (31 of 1956) or the General Insurance Business (Nationalisation) Act, 1972 (57 of 1972) or the Insurance Regulatory and Development Authority Act, 1999;]
(6) "Court" means the principal Civil Court of original jurisdiction in a district and includes the High Court in exercise of its ordinary original civil jurisdiction;
(6A) "fire insurance business" means the business of effecting, otherwise than incidentally to some other class of insurance business, contracts of insurance against loss by or incidental to fire or other occurrence customarily included among the risks insured against in fire insurance Policies;
(6B) "general insurance business" means fire, marine or miscellaneous insurance business, whether carried on singly or in combination with one or more of them;
(7) "Government security" means a Government security as defined in the Public Debt Act, 1944 (18 of 1944);
2[(7A) “Indian insurance company” means any insurer being a company-
(a) which is formed and registered under the Companies Act, 1956 (1 of 1956);
(b) in which the aggregate holdings of equity shares by a foreign company, either by itself or through its subsidiary companies or its nominees, do not exceed twenty-six percent paid-up equity capital of such Indian insurance company;
(c) whose sole purpose is to carry on life insurance business or general insurance business or re-insurance business.
Explanation- For the purpose of this clause, the expression “foreign company” shall have the meaning assigned to it under clause (23A) of section 2 of the Income-tax Act, 1961 (43 of 1961);]
(8) "insurance company" means any insurer being a company, association or partnership which may be wound up under the Indian Companies Act, 1913 (7 of 1913), or to which the Indian Partnership Act, 1932 (9 of 1932), applies;
(8A) “insurance co-operative society” means any insurer being a co-operative society,-
(a) which is registered on or after the commencement of the Insurance (Amendment) Act, 2002, as a co-operative society under the Co- operative Societies Act, 1912 (2 of 1912) or under any other law for the time being in force in any State relating to Co-operative Societies or under the Multi-State Co-operative Societies Act, 1984 (51 or 1984);
(b) having a minimum paid-up capital, (excluding the deposits required to be made under section 7), of rupees one hundred crores;
(c)in which no body corporate, whether incorporated or not, formed or registered outside India, either by itself or through its subsidiaries or nominees, at any time, holds more than twenty-six per cent of the capital of such Co-operative Society;
(d) whose sole purpose is to carry on life insurance business or general insurance business in
(9) "Insurer" means-
(a) any individual or unincorporated body of individuals or body corporate incorporated under the law of any country other than India, carrying on insurance business not being a person specified in sub-clause (c) of this clause which-
(i) carries on that business in
(ii) has his or its principal place of business or is domiciled in
(iii) with the object of obtaining insurance business, employs a representative, or maintains a place of business, in
(b) any body corporate [not being a person specified in sub-clause (c) of this clause] carrying on the business of insurance, which is a body corporate incorporated under any law for the time being in force in India; or stands to any such body corporate in the relation of a subsidiary company within the meaning of the Indian Companies Act, 1913 (7 of 1913), as defined by sub‑section (2) of section 2 of that Act, and
(c) any person who in India has a standing contract with underwriters who are members of the Society of Lloyd's whereby such person is authorised within the terms of such contract to issue protection notes, cover notes, or other documents granting insurance cover to others on behalf of the underwriters.
but does not include a principal agent' chief agent, special agent' or an insurance agent or a provident society as defined in Part III;
(10) "insurance agent" means an insurance agent licensed under Sec. 42 who receives agrees to receive payment by way of commission or other remuneration in consideration of his soliciting or procuring insurance business including business relating to the continuance, renewal or revival of policies of insurance;
(10A)"investment company" means a company whose principal business is the
acquisition of shares, stocks debentures or other securities;
(10B) “intermediary or insurance intermediary” shall have the meaning assigned to it in clause (f) of sub-section 2 of the Insurance Regularoty and Development Authority Act, 1999 (41 of 1999)
(11) “life insurance business" means the business of effecting contracts of insurance upon h
(12) "Manager" and "officer" have the meanings assigned to those expressions in clauses
(9) and (11), respectively of Section 2 of the Indian Companies Act, 1913 (7 of
1913);
(13) "Managing agent" means a person, firm or company entitled to the management of the whole affairs of a company by virtue of an agreement with the company, and under the control and direction of the directors except to the extent, if any, otherwise provided for in the agreement, and includes any person, firm or company occupying such position by whatever name called.
Explanation.—If a person occupying the position of managing agent calls himself manager or managing director, he shall nevertheless be regarded as managing agent for the purposes of Sec. 32 of this Act;
(13A)"marine insurance business" means the business of effecting contracts of insurance
upon vessels of any description, including cargoes, freights and other interests which may be legally insured, in or in relation to such vessels, cargoes and freights, goods, wares, merchandise and property of whatever description insured for any transit, by land or water, or both, and whether or not including warehouse risks or similar risks in addition or as incidental to such transit, and includes any other risks customarily included among the risks insured against in marine insurance policies;
(13B)"miscellaneous insurance business" means the business of effecting contracts of
insurance which is not principally or wholly of any kind or kinds included in clause (6A), (11) and (13A);
(14) "prescribed" means prescribed by rules made under this Act; and
(15) "principal agent" means a person who, not being a salaried employee of an insurer,
in consideration of any commission,—
(i) performs any administrative and organising functions for the insurer; and
(iii) procures general insurance business whether wholly or in part by
employing or causing to be employed insurance agents on behalf of the
(16) "private company" and "public company" have the meanings respectively assigned
to them in Clauses (13) and (13‑A) of Sec. 2 of the Indian Companies Act, 1913 (7 of 1913);
(17) "special agent" means a person who, not being a salaried employee of an insurer, in consideration of any commission, procures life insurance business for the insurer whether wholly or in part by employing or causing to be employed insurance agents on behalf of the insurer, but does not include a chief agent.
Interpretation of certain words and expressions
2A. Words and expression used and not defined in this Act but defined in the Life Insurance Corporation Act, 1956 (31 of 1956), the General Insurance Business (Nationalisation) Act, 1972 (57 or 1972), and the Insurance Regulatory and Development Authority Act, 1999 shall have the meanings respectively assigned to them in those Acts.
Appointment of Authority of Insurance.
2B. [(1) If at any time, the Authority is superseded under sub-section (1) of section19 of the Insurance Regulatory and Development Authority Act, 1999, the Central Government may, by notification in the Official Gazette, appoint a person to be the Controller of Insurance till such time the Authority is reconstituted under sub-section (3) of section 19 of that Act
(2) In making any appointment under this section, the Central Government shall have due regard to the following considerations, namely, whether the person to be appointed has had experience in industrial, commercial or insurance matter and whether such person has actuarial qualifications.
PART II
Provisions Applicable to Insurers
Prohibition of transaction of insurance business by certain persons.
2C. (1) Save as hereinafter provided, no person shall, after the commencement of the
Insurance (Amendment) Act, 1950 (47 of 1950), begin to carry on any class of insurance business in India and no insurer 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-
(a) a public company, or
(b) a society registered under the Co‑operative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any State relating to co-operative societies, or
(c) a body corporate incorporated under the law of any country outside
Provided that the Central Government may, by notification in the official Gazette, exempt from the operation of this section to such extent for such period and subject to such conditions as it may specify, any person or insurer for the purpose of carrying on the business of granting superannuation allowances and annuities of the nature specified in sub-clause (c) of clause (11) of Section 2 or for the purpose of carrying on any general insurance business:
Provided further that in the case of an insurer carrying on any general insurance business no such notification shall be issued having effect for more than three years at any one time:
Provided also that no insurer other than an Indian insurance company shall begin to carry on any class of insurance business in
(2) Every notification issued under subsection (1) shall be laid before Parliament as soon as may be after it is issued.
(3) Notwithstanding anything contained in sub-section (1), an insurance co-operative society may carry on any class of insurance business in
Insurers to be subject to this Act while liabilities remain unsatisfied
2D. Every insurer shall be subject to all the provisions of this Act in relation to any class of insurance business so long as his liabilities in 3[India] in respect of business of that class remain unsatisfied or not otherwise provided for.
This Act not to apply to certain insurers ceasing to enter into new contracts before commencement of Act
2E. The provisions of this Act shall not apply to an insurer as defined in paragraphs (i) or (iii) of sub-clause (a) of clause (9) of Section 2 in relation to any class of his insurance business whether such insurer hits ceased, before the commencement of this Act, to enter into any new contracts of that class of business.
Registration
3. (1) No person shall, after commencement of this Act, being to carry on any class of insurance business in India and no insurer carrying on any class of insurance business in India shall, after the expiry of three months from the commencement of this Act, continue to carry on any such business, unless he has obtained from the Authority a certificate of registration for the particular class of insurance business:
Provided that in case of an insurer who was carrying on any class of insurance business in India at the commencement of this Act, failure to obtain a certificate of registration in accordance with the requirements of this sub‑clause shall not operate to invalidate any contract of insurance entered into by him if before such date as may be fixed in this behalf by the Central Government by notification in the official Gazette, he has obtained that certificate:
Provided further that a person or insurer, as the case may be, carrying on any class of insurance business in India, on or before the commencement of the Insurance Regulatory and Development Authority Act, 1999, for which no registration certificate was necessary prior to such commencement, may continue to do so for a period of three months from such commencement or, if he had made an application for such registration within the said period of three months, till the disposal of such application:
Provided also that any certificate of registration, obtained immediately before the commencement of the Insurance Regulatory and Development Authority Act, 1999, shall be deemed to have been obtained from the Authority in accordance with the provisions of this Act
(2) Every application for registration shall be made in such manner as may be determined by the regulations made by the Authority and shall be accompanied by-
(a) a certified copy of the memorandum and articles of association, where the applicant is a company and incorporated under the Indian Companies Act, 1913 (7 of 1913), or under the Indian Companies Act, 1882 (6 of 1882), or under the Indian Companies Act, 1866 (10 of 1866); or under any Act repealed thereby,] or, in the case of any other insurer specified in sub‑clause (a) (ii) or sub‑clause (b) of clause (9) of section 2, a certified copy of the deed of partnership or of the deed of constitution of the company, as the case may be, or, in the case of an insurer having his principal place of business or domicile outside India, the document specified in Clause (a) of Section 63;
(b) the name, address and the occupation, if any, of the directors where insurer is a company incorporated under the Indian Companies Act, 1913 (7 of 1913), or under the Indian Companies Act, 1882 (6 of 1882), or under the Indian Companies Act, 1866 (10 of 1866), or under any Act repealed thereby, and in the case of an insurer specified in sub‑clause (a) (ii) of clause (9) of section 2 the names and addresses of the proprietors and of the manager in India, and in any other case the full address of the principal office of the insurer in India, and the names of the directors and the manager at such office and the name and address of someone or more persons resident in India, authorised to accept any notice required to be served on the insurer;
(c) a statement of the class or classes of insurance business done or to be done, and a
statement that the amount required to be deposited by section 7 or section 98 before application for registration is made has been deposited together with a certificate from the Reserve Bank of
(d) where the provisions of section 6 or section 97 apply, a declaration verified by an affidavit made by the principal officer of the insurer authorised in that behalf that the provisions of those sections as to paid-up equity capital or working capital have been complied with;
(e) in the case of an insurer having his principal place of business or domicile outside India, a statement verified by an affidavit made by the principal officer of the insurer setting forth the requirements (if any) not applicable to nationals of the country in which such insurer is constituted, incorporated or domiciled which are imposed by the laws or practice of that country upon Indian nationals as a condition of carrying on insurance business in that country;
(f) a certified copy of the published prospectus, if any, and of the standard policy forms of the insurer and statements of the assured rates, advantages, terms and conditions to be offered in connection with insurance policies together with a certificate in connection with life insurance business by an actuary that such rates, advantages, terms and conditions are workable and sound:
Provided that in the case of marine accident and miscellaneous insurance business other than workmen's compensation and motor car insurance the above requirements regarding prospectus, forms and statements shall be complied with only insofar as the prospectus, forms and statements may be available; and
(g) the receipt showing payment of fee as may be determined by the regulations which shall not exceed fifty thousand rupees for each class of business as may be specified by the regulations made by the Authority;
(h) such other documents as may be specified by the regulations made by the Authority.
(2A) If, on receipt of an application for registration and after making such inquiry as he deems fit, the Controller is satisfied that—
(a) the financial condition and the general character of management of the applicant are sound;
(b) the volume of business likely to be available to, and the capital structure and earning prospects of, the applicant will be adequate;
(c) the interest of the general public will be served if the certificate of registration is granted to the applicant in respect of the class or classes of insurance business specified in the application; and
(d) the applicant has complied with the provisions of Sections 2‑C, 5, 31A and 32 and has fulfilled all the requirements of this section applicable to him, the Authority may register the applicant as an insurer and grant him a certificate of registration.
(2AA) The Authority shall give preference to register the applicant and grant him a certificate of registration if such applicant agrees, in the form and manner as may be specified by the regulations made by the Authority, to carry on the life insurance business or general insurance business for providing health cover to individuals or group of individuals.
(2B) Where the Authority refuses registration; he shall record the reasons for such decision and shall furnish a copy thereof to the applicant.
(2C) Any person aggrieved by the decision of the Authority refusing registration may, within thirty days from the date on which a copy of the decision is received by him, appeal to the Central Government.
(2D) The decision of the Central Government on such appeal shall be final and shall not be questioned before any Court.
(3) Notwithstanding anything contained in sub‑section (2A), in the case of any insurer having his principal place of business or domicile outside India, the Authority, shall withhold registration or shall cancel a registration already made, if he is satisfied that in the country in which such insurer has his principal place of business or domicile Indian nationals are debarred by the law or practice of the country relating to, or applied to insurance from carrying on the business of insurance, or that any requirement imposed on such insurer under the provisions of section 62 is not satisfied.
(4) The Authority shall cancel the registration of an insurer either wholly or in so far as it relates to a particular class of insurance business, as the case may be, -
(a) if the insurer fails to comply with the provisions of section 7 or section 98 as to deposits, or
(aa) if the insurer fails, at any time, to comply the provisions of Sec. 64VA as to the excess of the value of his assets over the amount of his liabilities; or
(b) if the insurer is in liquidation or is adjudged an insolvent, or
(c) if the business or a class of the business of the insurer has been transferred to any person or has been transferred to or amalgamated with the business of any other insurer, or
(d) if the whole of the deposit made in respect of insurance business has been returned to the insurer under Sec. 9, or
(e) if, in the case of an insurer specified in sub‑clause (c)of clause (9) of section 2, the standing contract referred to in that sub‑clause is cancelled or is suspended and continues to be suspended for a period of six months, or
(ee) if the Central Government so directs under sub‑ section (4) of Sec. 33] and the Authority may cancel the registration of an insurer-
(f) if the insurer makes default in complying with, or acts in contravention of any requirement of this Act or of any rule or any regulation or order made or, any direction issued there under, or
(g) if the Authority has reason to believe that any claim upon the insurer arising in India under any policy of insurance remains unpaid for three months after final judgment in regular course of law, or
(h) if the insurer carries on any business other than insurance business or any prescribed business , or
(i) if the insurer makes a default in complying with any direction issued or order made, as the case may be, by the Authority under the Insurance Regulatory and Development Authority Act, 1999, or
(j) if the insurer makes a default in complying with, or acts in contravention of, any requirement of the Companies Act, 1956 (1 of 1956), or the Life Insurance Corporation Act, 1956 (31 of 1956), or the General Insurance Business (Nationalisation) Act, 1972 (57 of 1972), or the Foreign Exchange Regulation Act, 1973 (46 of 1973).
(5) When the Authority withholds or cancels any registration under sub‑section (3) or clause (a), clause (aa), clause (e), clause (ee), clause (f), clause (g) or clause (h) of sub‑section (4), he shall give notice in writing to the insurer of his decision, and the decision shall take affect on such date as he may specify in that behalf in the notice, such date not being less than one month nor more than two months from the date of the receipt of the notice in the ordinary course of transmission.
(5A) When the Authority cancels any registration under clause (b), clause (c) or clause (d) of sub‑section (4) the cancellation shall take effect on the date on which notice of the order of cancellation is served on the insurer.
(5B) When a registration is cancelled the insurer shall not, after the cancellation has taken effect, enter into any new contracts of insurance, but all rights and liabilities in respect of contracts of insurance entered into by him before such cancellation takes effect shall, subject to the provisions of sub‑section (5D), continue as if the cancellation had not taken place.
(5C) Where a registration is cancelled under clause (a), clause (aa), clause (e), clause (f), clause (g) or clause (h) or clause (i) or clause (j) of sub‑section (4), the Authority may at his discretion revive the registration, if the insurer within six months from the date on which the cancellation took effect makes the deposits required by section 7 or Section 98, or complies with the provisions of Section 64VA as to the excess of the value of his assets over the amount of his liabilities or has his standing contract restored or has had an application under sub‑section (4) of section 3A accepted, or satisfies the Authority that no claim upon him such as is referred to in clause (g) of sub‑section (4) remains unpaid or that he has complied with any requirement of this Act or the Insurance Regulatory and Development Authority Act, 1999 or of any rule or any regulation, or order made there under or any direction issued under those Acts that he has ceased to carry on any business other than insurance business or any prescribed business, as the case may be, and complies with any directions which may be given to him by the Authority.
(5D) Where lithe registration of an insurance company is cancelled under sub-section (4), the Authority may, after expiry of six months from the date on which the cancellation took effect, apply to the Court for an order to wind up the insurance company, or to wind up the affairs of the company in respect of a class of insurance business, unless the registration of the insurance company has been revived under sub‑section (5C) or an application for winding up the company has been already presented to the Court. The Court may proceed as if an application under this sub‑section were an application under sub-section (2) of section 53, or sub‑section (1) of Sec. 58, as the case may be.
(5E) The Authority may, by order, suspend or cancel any registration in such manner as may be determined by the regulations made by it:
Provided that no order under this sub-section shall be made unless the person concerned has been given a reasonable opportunity of being heard.
(6) [***]
(7) The Authority may, on payment of the prescribed fee, not exceeding five rupees, issue a duplicate certificate of registration to replace a certificate lost, destroyed or mutilated, or in any other case where he is of opinion that the issue of a duplicate certificate is necessary.
Renewal of registration
3A. (1) An insurer who has been granted a certificate of registration under section 3 shall have the registration renewed annually for each year after that ending on the 4[31st day of March, after the commencement of the Insurance Regulatory and Development Authority Act, 1999.
(2) An application for the renewal of a registration for any year shall be made by the insurer to the Authority before the 31st day of December of the preceding year, and shall be accompanied as provided in sub‑section
(3) by evidence of payment of the fee as determined by the regulations made by the Authority which may vary according to the total gross premium written direct in India, during the year preceding the year in which the application is required to be made under this section, by the insurer in the class of insurance business to which the registration relates but shall not—
(i) exceed one‑fourth of one per cent. of such premium income or rupees five crores, whichever is less;
(ii) be less, in any case, than five hundred rupees for each class of insurance business:
Provided that in the case of an insurer carrying on solely re‑insurance business, the provisions of this sub‑section shall apply with the modification that instead of the total gross premium written direct in India, the total premiums in respect of facultative re‑insurances accepted by him in India shall be‑taken into account.
(3) The fee as determined by the regulations made by the Authority for the renewal of a registration for any year shall, be paid into the Reserve Bank of India, or where there is no office of that Bank, into the Imperial Bank of India acting as the agent of that Bank, or into any Government treasury, and the receipt shall be sent along with the application for renewal of the registration.
(4) If an insurer fails to apply for renewal of registration before the date specified in sub-section (2) the Authority may, so long as an application to the Court under sub-section (5‑D) of section 3 has not been made, accept an application for renewal of the registration on receipt from the insurer of the fee payable with the application and such penalty, not exceeding the fee as determined by the regulations made by the Authority, and payable by him, as the Authority may require:
Provided that an appeal shall lie to the Central Government from an order passed by the Authority imposing a penalty on the insurer
(5) The Authority shall, on fulfillment by the insurer of the requirements of this section, renew the registration and grant him a certificate of renewal of registration.
Certification of soundness of terms of life insurance business
(3B) If, when considering an application for registration under section 3 or at any other time, it appears to the Authority that the Assured rates, advantages, terms and conditions offered or to be offered in connection with life insurance business are in any respect not workable or sound, he may require that a statement thereof shall be submitted to an actuary appointed by the insurer for the purpose and approved by the Authority, and may by order in writing further require the insurer to make within such time as may be specified in the order such modifications in the said rates, advantages, terms, or conditions, as the case may be, as the said actuary may report to be necessary to enable him to certify that the said rates, advantages, terms and conditions are workable and sound.
Minimum limits for annuities and other benefits secured by policies of life Insurance
4. (I) No insurer, not being a Co‑operative Life Insurance Society to which Part IV of this Act applies, shall pay or undertake to pay on any policy of life insurance issued after the commencement of the Insurance (Amendment) Act, 1946 (6 of 1946), an annuity of less than one hundred rupees or a gross sum of less than one thousand rupees, exclusive of any profit or bonus provided that this shall not prevent an insurer from converting any policy into a paid‑up policy of any value or payment of surrender value of any amount.
(2) Nothing contained in this section shall apply to any policy of the description known as a group policy, where the number of persons covered by the policy is not less than fifty or such smaller number as may be approved by the Authority and a standard form of the policy has bean certified in writing by the Authority to be a policy of such description or to any policy undertaking to pay a gross sum of more than five hundred rupees or an annuity of more than fifty rupee, issued-
(a) by an insurer to any person in his permanent employed respect of the life of that person, or
(b) under any scheme, approved by the Authority and complying with such conditions, if any, as he may think fit to impose, whereby premiums due from persons employed under any employer are collected by or under the supervision of the employer,
or to any policy issued by a Mutual insurance Company to which Part lV applies and which the Authority may by order in writing exempt from the provisions of this section, for so long as the company complies with such conditions, if any, as may be prescribed.
Restriction on name of insurer
5. (l) An insurer shall not be registered by a name identical with that by which an insurer in existence is already registered, or so nearly resembling that name as to be calculated to deceive except when the insurer in existence is in the course of being dissolved and signifies his consent to the Authority.
(2) If an insurer, through inadvertence or otherwise is without such consent as aforesaid registered by a name identical with that by which an insurer already in existence whether previously registered or not is carrying on business or so nearly resembling it as to be calculated to deceive, the first mentioned insurer shall, if called upon to do so by the Authority on the application of the second‑mentioned insurer, change his name within a time to be fixed by the Authority:
Provided that nothing in this section shall apply to any insurer carrying on business before the 27th‑ day of January, 1937, under the Indian Life Assurance Companies Act, 1912 (6 of 1912):
Provided further that in the application of this section to any insurer who begins to carry on insurance business after the commencement of the Insurance (Amendment) Act, 1946 (6 of 1946), the references to an insurer in existence in sub-section (1) and this sub‑section shall be construed as including references to a provident society (as defined in Part III in existence, whether or not the society is in course of being dissolved.
(3) No insurer other than a provident society as defined in Part III, who begins to carry on insurance business after the commencement of this Act, shall adopt as its name and no such insurer carrying on business before the commencement of this Act shall continue after the expiry of six months from the commencement thereof to use as its name any combination of words which includes the word "provident".
Requirements as to capital
6. No insurer carrying on the business of life insurance, general insurance or re-insurance in India on or after the commencement of the Insurance Regulatory and Development authority Act, 199, shall be registered unless he has,-
(i) a paid-up equity capital of rupees one hundred crores, in case of a person carrying on the business of life insurance or general insurance; or
(ii) a paid-up equity capital of rupees two hundred crores, in case of a person carrying on exclusively the business as a reinsurer :
Provided that in determining the paid-up equity capital specified under clause (i) or clause (ii), the deposit to be made under section 7 and any preliminary expenses incurred in the formation and registration of the company shall be excluded:
Provided further that an insurer carrying on business of life insurance, general insurance or re-insurance in India before the commencement of the Insurance Regulatory and Development Authority Act, 1999 and who is required to be registered under this Act, shall have a paid-up equity capital in accordance with clause (i) and clause (ii), as the case may be, within sex months of the commencement of that Act.
Requirements as to capital structure and voting rights and maintenance of registers of beneficial owners of shares
6A. (1) No public company limited by shares having its registered office in
(i) that the capital of the company consists only of ordinary shares each of which have a single face value;
(ii) that, except during any period not exceeding one year allowed by the company for payment of calls on shares, the paid‑up amount is the same for all shares, whether existing or new:
Provided that the conditions specified in this sub‑section shall not apply to a public company which has, before the commencement of the Insurance (Amendment) Act, 1950 (47 of 1950), issued any shares other than ordinary shares each of which has a single face value or any shares paid‑up amount whereof is not the same for all of them for a period of three years from such commencement.
(2) Notwithstanding anything to the contrary contained in any law for the time being in force or in the memorandum or articles of association but subject to the other provisions contained in this section the voting right of every shareholder of any public company as aforesaid shall in all cases be strictly proportionate to the paid‑up amount of the shares held by him.
(3) No public company as aforesaid which carries on life insurance business shall, after the commencement of the Insurance (Amendment) Act, 1950 (47 of 1950), issue any shares other than ordinary shares of the nature specified in sub-section (l).
(4) A public company as aforesaid which carries on life insurance business-
(a) shall maintain, in addition to the register of members to be maintained under the Indian Companies Act, 1913 (7 of 1913~3 a register of shares in which shall be entered the name, occupation and address of the beneficial owner of each share, and shall incorporate therein any change of beneficial owner declared to it within fourteen days from the receipt of such declaration;
(b) shall not register any transfer of its shares
(i) unless, in addition to compliance being made with the provisions of section 34 of the Indian Companies Act, 1913 (7 of 1913), the transferee furnishes a declaration in the prescribed form as to whether he proposes to hold the shares for his own benefit or as a nominee, whether jointly or severally, on behalf of others and in the latter case giving the name, occupation and address of the beneficial owner or owners, and the extent of the beneficial interest of each;
(ii) where, after the transfer, the total paid‑up holding of the transferee in the shares of the company is likely to exceed five per cent. of its paid‑up capital or where the transferee is a banking or an investment company, is likely to exceed two and a half per cent of such paid‑up capital, unless the previous 2[approval of the Authority] has been obtained to the transfer;
(iii) where, the nominal value of the shares intended to be transferred by any individual, firm, group, constituents of a group, or body corporate under the same management, jointly or severally exceeds one per cent of the paid-up equity capital of the insurer, unless the previous approval of the Authority has been obtained for the transfer.
Explanation.- For the purposes of this sub-clause, the expressions “group” and “same management” shall have the same meanings respectively assigned to them in the Monopolies and Restrictive Trade Practices Act, 1969 (54 of 1969);
(5) Every person who has any interest in any share of a company referred to in sub-section (4) which stands in the name of another person in the register of members of the company, shall, within thirty days from the commencement of the Insurance (Amendment) Act, 1950 (47 of l950), or from the date on which he acquires such interest, whichever is later, make a declaration in the prescribed form (which shall be countersigned by the person in whose name the share is registered) to the company declaring his interest in such share, and notwithstanding anything contained in any other law or in any contract to the contrary, a person who fails to make a declaration as aforesaid in respect of any share shall be deemed to have no right or title whatsoever in that share:
Provided that nothing in this sub-section shall affect the right of a person who has an interest in any such share to establish in a court his right thereto, if the person, in whose name the share is registered, refuses to countersign the declaration as required by this sub‑section:
Provided further that where any share, belonging to an individual who has made any such declaration as is referred to in this sub‑section, is held by a company in its name in pursuance of any trust or for the purpose of safe custody or collection or realization of dividend, such individual shall, notwithstanding anything contained in the Indian Companies Act, 1913 (7 of 1913), or in the memorandum or articles of association of the company which has issued the share, be deemed to be the holder of the said share for the purpose of exercising any voting rights under this section to the exclusion of any other person.
(6) If the total paid‑up holding of any person in the shares of a company referred to in sub‑section (1) on the commencement of the Insurance (Amendment) Act 1950 (47 of 1950), exceeds two and a half per cent of its paid-up capital where that person is a banking company or an investment company, or five per cent of its paid‑up capital in any other case, he shall not be entitled to any vote as a shareholder of the company in respect of such excess holding of shares.
(7) Where the total paid‑up holding of any person in the shares of a company referred to sub‑section (1) on the date of the commencement of the Insurance (Amendment) Act, 1950 (47 of 1950), exceeds five per cent of its paid‑up capital where that person is a banking company or an investment company, or ten per cent of its paid‑up capital in any other case, he shall dispose of the excess holding of shares within three years from such commencement or such further period not exceeding two years as may be allowed to him by the Central Government.
(8) If, after the expiry of three years or of such further period as may be allowed to any person under sub‑section (7), the total paid up holding of any such person has not been reduced to the limits specified in that sub-section, any shares in excess of the limits specified in that sub‑section shall vest in the Administrator‑General of the State in which the registered office of the company concerned is situate and the Administrator‑General shall take such steps as may be necessary for taking charge of any property which has so vested in him and shall dispose of the said shares and the proceeds thereof in such manner as may be prescribed.
(9) Subject to the other provisions contained in this section, but notwithstanding anything contained in the Indian Companies Act, 1913 (7 of 1913), or in the memorandum or articles of association of any such company as is referred to in sub‑section (1), no such company shall refuse to register the transfer of any shares where the transfer is for the purpose of securing compliance with the provisions of sub‑sections (7) and (8).
(10) The Central Government may, subject to such restrictions as it may think fit to impose, exempt from the operation of sub‑sections (6), (7) and (8) any insurance company, in any case where the total paid‑up holding of such insurance company in the shares of any other insurance company exceeds the limits specified in the said sub‑sections, if the other insurance company is or is to be made a subsidiary company of the insurance company.
(11) The provisions of this section, except those of sub‑sections (7), (8) and (9), shall, on and from the commencement of the Insurance (Amendment) Act, 1968, also apply to insurers carrying on general insurance business subject to the following notifications, namely:-
(i) that references in sub‑sections (1), (3), (5) and (6) to the Insurance (Amendment)
Act, 1950, (47 of 1950), shall be construed as reference to the Insurance (Amendment) Act, 1968; and
(ii) references in sub‑section (10) to sub‑sections (7) and (8) shall be omitted.
Explanation -For the purposes of this section, the holding of a person in the shares of a company shall be deemed to include‑
(i) the total paid‑up holding in such shares held by such person in the name of others; and
(ii) if any shares of the company are held -
(a) by a public limited company, of which such person is a member holding more than ten per cent. of the paid‑up capital, or
(b) by a private limited company, of which such person is a member, or
(c) by a company, of which such person is a managing director, manager, managing agent or in which he has a controlling interest, or
(d) by a firm in which such person is a partner, or
(e) by such person jointly with others,
such part of the total paid‑up holding of the company or firm or of the total joint holding in those shares, as is proportionate to the contribution made by such person to the paid‑up capital of the company, the paid‑up capital of the firm or the joint holding, as the case may be.
Manner of divesting excess shareholding by promoter in certain cases
6AA. (1) No promoter shall at any time hold more than twenty-six per cent or such other percentage as may be prescribed, of the paid-up equity capital in an Indian insurance company:
Provided that in a case where an Indian insurance company begins the business of life insurance, general insurance or re-insurance in which the promoters hold more than twenty-six per cent of the paid-up equity capital or such other excess percentage as may be prescribed, the promoters shall divest in a phased manner the share capital in excess of the twenty-six per cent of the paid-up equity capital or such excess paid-up equity capital as may be prescribed, after a period of ten years from the date of the commencement of the said business by such Indian insurance company or with such period as may be prescribed by the Central Government.
Explanation.- For the removal of doubts, it is hereby declared that nothing contained in the proviso shall apply to the promoters being foreign company, referred to in sub-clause (b) of clause (7A) of section 2.
(2) The manner and procedure for divesting the excess share capital under sub-section (1) shall be specified by the regulations made by the Authority.
Provision for securing compliance with requirements relating to capital structure
6B.(1) For the purpose of enabling any public company carrying on life insurance business to bring its capital structure into conformity with the requirements of section 6A, an officer appointed in this behalf by the Central Government may, notwithstanding anything contained in the Indian Companies Act, 1913 (7 of 1913),—
(a) examine any scheme proposed for the purpose aforesaid by the directors of the company:
Provided that—
(i) the scheme has been placed before a meeting of the shareholders for their opinion and has been forwarded to the officer together with the opinion of the shareholders thereon, and
(ii) the scheme does not involve any diminution of the liability of the shareholders in respect of unpaid‑up share capital;
(b) invite objections and suggestions in respect of the scheme so proposed; and
(c) after considering such objections and suggestions to the scheme so proposed,
sanction it with such modifications as he may consider necessary or desirable.
(2) Any shareholder or other person aggrieved by the decision of the officer sanctioning a scheme under sub‑section (1) may, within ninety days of the date of the order sanctioning the scheme, prefer an appeal to the High Court within whose jurisdiction the registered office of the insurer is situate for the purpose of modifying or correcting any such scheme for the purpose specified in sub‑section (1).
(3) The decision of the High Court where an appeal has been preferred to it under sub‑section (2), or of the officer aforesaid where no such appeal has been preferred, shall be final and binding on all the shareholders and other persons concerned.
(4) The provisions of this section shall, on and from the commencement of the Insurance (Amendment) Act, 1968, also apply to insurers carrying on general insurance business.
Conversion of company limited by shares into company limited by guarantee
6C. (1) Where a public company limited by shares carrying on insurance business has passed a special resolution for converting itself into a public company limited by guarantee, it may apply to the Central Government with a scheme for putting the special resolution into effect, including any provision for the alteration of the memorandum or articles of association insofar as it may be necessary for this purpose.
(2) If the Central Government, after giving such notice to any person concerned as it thinks fit, is satisfied-
(a) that the scheme makes suitable provision with respect to the repayment, conversion or liquidation of the paid‑up capital of the company,
(b) that the consent of the creditors to the conversion of the company limited by shares into a company limited by guarantee has been obtained, or that suitable provisions have been made for discharging, determining or securing the debts or claims of such creditors, and
(c) that the scheme is otherwise reasonable, it may sanction the scheme and thereupon the scheme shall become binding on the company and on all the persons concerned.
(3) Against the decision of the Central Government, sanctioning a scheme under sub‑section (2), any person aggrieved thereby may, within ninety days of the date of the order sanctioning the scheme, prefer an appeal to the High Court within whose jurisdiction the registered office of the insurer is situate.
(4) The decision of the High Court where an appeal has been preferred to it under sub‑section (3) or of the Central Government where no such appeal has been preferred, shall be final and binding on all the persons concerned.
(5) Where a scheme has been sanctioned under this section, the company shall file with the Registrar of Companies a certified copy of the scheme as sanctioned, and thereupon the provisions of the Indian Companies Act, 1913 (7 of 1913), relating to companies limited by guarantee shall become applicable to the company.
Deposits
7. (1) Every insurer shall, in respect of the insurance business carried on by him in India, deposit and keep deposited with the Reserve Bank of India in one of the offices in India of the Bank for and on behalf of the Central Government the amount hereafter specified, either in cash or in approved securities estimated at the market value of the securities on the day of deposit, or partly in cash and partly in approved securities so estimated:-
(a) in the case of life insurance business, a sum equivalent to one per cent of his total gross premium written direct in India in any financial year commencing after the 31st day of March, 2000, not exceeding rupees ten crores;
(b) in the case of general insurance business, a sum equivalent to three per cent of his total gross premium written in India, in any financial year commencing after the 31st day of March, 2000, not exceeding rupees ten crores;
(c) in the case of re-insurance business, a sum of rupees twenty crores
Provided that, where the business done or to be done is marine insurance only and relates exclusively to country craft or its cargo or both, the amount to be deposited under this sub-section shall be one hundred thousand rupees only:
Provided further that in respect of an insurer not having a share capital and carrying on only such insurance business as in the opinion of the Central Government is not carried on ordinarily by insurers under separate policies, the Central Government may, by notification under Official Gazette, order that the provisions of this sub‑section shall apply to such insurer with the modification that instead of sum of rupees twenty lakhs or rupees ten lakhs, as the case may be, the deposit to be made by such insurer shall be such amount, being not less than one hundred and fifty thousand rupees, as may be specified in the said order.
(2) Where the insurer is an insurer specified in sub‑clause (c) of clause (9) of Section 2, he shall be deemed to have complied with the provisions of this section as to deposits, if in respect of insurance business carried on by him in India under a standing contract of the nature referred to in sub-clause (c) of clause (9) of section 2 a deposit of an amount one-and-a‑half times that specified in sub-section (1) has been made in the Reserve Bank of India in one of the offices in India of the Bank for and on behalf of the Central Government in cash or approved securities estimated at the market value of the securities on the day of deposit by or on behalf of the underwriters who are members of the Society of Lloyd's with whom he has his standing contract.
(3) Where the deposit to be made by an insurer not carrying on insurance business in India immediately before the commencement of the Insurance (Amendment) Act, 1968, a deposit of rupees ten lakhs shall be made before the application for registration is made, and the provision of clause (ii) of sub‑section (1A) shall apply to such insurer after his registration as they apply to an insurer specified in clause (a) of sub-section (1).
(4) An insurer shall not be registered for any class of insurance business in addition to the class or classes for which is already registered until the full deposit required under sub-section (1) has been made.
(5) Where an insurer who intends to become a member of a group, does not carry on all the classes of insurance business carried on by the other insurers in such group, or, where out of the several insurers who desire to form themselves into a group, any insurer does not carry on all the classes of insurance business carried on by the other insurers who desire to form themselves into the group, such insurer may be registered for that class or those classes of insurance business which is or are carried on by the other insurers of the group or the proposed group, as the case may be, and where any application for registration is made by any such insurer, the Authority may, notwithstanding anything contained in sub‑section (2A) of Section 3 or sub‑section (4), register such insurer for one or more additional classes of insurance, if the following conditions are fulfilled, namely:-
(a) the Authority is satisfied that registration for the proposed one or more additional classes of insurance‑business would qualify the insurer to become number of a group;
(b) agreements have been executed by all the insurers in the group or proposed group, as the case may be, and such agreements in the opinion of the Authority, satisfy the requirements of the Explanation to sub-section (1B); and
(c) the insurer has, after the commencement of the Insurance (Amendment) Act, 1968, made deposit of a sum not less than the total of all the instalments of deposit which he would have been required to make after such commencement till the date of his becoming a member of the group, had he been a member of the group from such commencement.
(6) The Authority shall cancel the registration made in pursuance of the provisions of sub‑section (5), if the insurer referred to therein fails to become, within a period of three months from the date of such registration' a member of the group or proposed group, as the case may be, and, where such registration has been cancelled, the provisions of this Act shall apply to the insurer as if he had not been registered for the class or classes of insurance business in relation to which his registration has been cancelled.
(7) Securities already deposited with the Controller of Currency in compliance with the Indian Life Assurance Companies Act, 1912 (6 of 1912), shall be transferred by him to the Reserve Bank of India and shall, to the extent of their market value as at the date of the commencement of this Act, be deemed to be deposited under this Act, as the instalment or as part of this instalment to be made under the foregoing provisions of this section before the application for registration is made whether any such application is or is not in fact made.
(8) A deposit made in cash shall be held by the Reserve Bank of India to the credit of the insurer and shall except to the extent, if any, to which the cash has been invested in securities under sub‑section (9A), be returnable to the insurer in cash in any case in which under the provisions of this Act a deposit is to be returned; and any interest accruing due and collected on securities deposited under sub‑section (1) or sub‑section (2) shall be paid to the insurer, subject only to deduction of the normal commission chargeable for the realization of interest.
(9) The insurer may at any time replace any securities deposited by him under this section with the Reserve Bank of India either by cash or by other approved securities or partly by cash and partly by other approved securities, provided that such cash, or the value of such other approved securities estimated at the market rates prevailing at the time of replacement, or such cash together with such value, as the case may be, is not less than the value of the securities replaced estimated at the market rates prevailing when they were deposited.
(9A) The Reserve Bank of
(a) sell any securities deposited by him with the Bank under this section and hold the cash realized by such sale as deposit, or
(b) invest in approved securities specified by the insurer the whole or any part of a deposit held by it in cash or the whole or any part of cash received by it on the sale of or on the maturing of securities deposited by the insurer, and hold the securities in which investment is so made as deposit.
and may charge the normal commission on such sale or on such investment.
(9B) where sub-section (9A) applies ‑
(a) if the cash realized by the sale of or on the maturing of the securities (excluding in the former case the interest accrued) falls short of the market value of the securities at the date on which they were deposited with the Bank, the insurer shall make good the deficiency by a further deposit either in cash or in approved securities estimated at the market value of the securities, on the day on which they are deposited, or partly in cash and partly in approved securities so estimated, within a period of two months from the date on which the securities matured or were sold or where the securities matured or were sold before the 21st day of March, 1940, within a period of four months from the commencement of the Insurance (Amendment) Act, 1940 (20 of 1940); and unless he does so the insurer shall be deemed to have failed to comply with the requirements of this section as to deposits; and
(b) if the cash realized by the sale of or on the maturing of the securities (excluding in the former case the interest accrued) exceeds the market value of the securities at the date on which they were deposited with the Bank, the Central Government may, if satisfied that the full amount required to be deposited under sub‑section (1) is in deposit, direct the Reserve Bank to return the excess.
(10) If any part of a deposit made under this section is used in the discharge of any liability of the insurer, the insurer shall deposit such additional sum in cash or approved securities estimated at the market value of the securities on the day of deposit, or partly in cash and partly in such securities, as will make up the amount so used. The insurer shall be deemed to have failed to comply with the requirements of sub‑section (1), unless the deficiency is supplied within a period of two months from the date when the deposit or any part thereof is so used for discharge of liabilities.
Reservation of deposits
8. (1) Any deposit made under section 7 or section 98 shall be deemed to be part of the assets of the insurer but shall not be susceptible of any assignment or charge; nor shall it be available for the discharge of any liability of the insurer other than liabilities arising out of policies of insurance issued by the insurer so long as any such liabilities remain undischarged; nor shall it be liable to attachment in execution of any decree except a decree obtained by a policy‑holder of the insurer in respect of a debt due upon a policy which debt the policy‑holder has failed to realise in any other way.
(2) Where a deposit is made in respect of life insurance business the deposit made in respect thereof shall not be available for discharge of any liability of the insurer other than liabilities arising out of policies of life insurance issued by the insurer.
Refund of deposit
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 under this Act.
Separation of accounts and funds
10. (1) Where the insurer carries on business of more than one of the following classes, namely, life insurance, fire insurance, marine insurance or miscellaneous insurance, he shall keep a separate account of all receipts and payments in respect of each such class of insurances business and where the insurer carries on business of miscellaneous insurance whether alone or in conjunction with business of another class, he shall, unless the Authority waives this requirement in writing, keep a separate account of all receipts and payments in respect of each of such sub‑classes of miscellaneous insurance business as may be prescribed in this behalf:
Provided that no sub‑class of miscellaneous insurance business shall be prescribed under this sub‑section if the insurance business comprised in the sub‑clause consist of insurance contracts which are terminable by the insurer at intervals not exceeding twelve months and under which, if a claim arises, the insurer's liability to pay benefit ceases within one year of the date on which the claim arose.
(2) Where the insurer carries on the business of life insurance all receipts due in respect of such business, shall be carried to and shall form a separate tuna to be called the life insurance fund the assets of which shall, after the expiry of six months from the commencement of the Insurance (Amendment) Act, 1946 (6 of 1946), be kept distinct and separate from all other assets of the insurer and the deposit made by the insurer in respect of life insurance business shall be deemed to be part of the assets of such fund; and every insurer shall, within the time limited in sub‑section (1) of section 15 in regard to the furnishing of the statements and accounts referred to in section 11, furnish to the Authority a statement showing in detail such assets as at the close of every calendar year duly certified by an auditor or by a person qualified to audit under the law of the insurer's country:
Provided that such statement shall, in the case of an insurer to whom section 11 applies, be set out as a part of the balance‑sheet mentioned in clause (a) of sub-section (1) of that section:
Provided further that an insurer may show in such statement all the assets held in his life department, but at the same time showing any deductions on account of general reserves and other liabilities of that department:
Provided also that the Authority may call for a statement similarly certified of such assets as at any other date specified by him to be furnished within a period of three months from the date with reference to which the statement is called for
(2A) No insurer carrying on life insurance business shall be entitled to be registered for any class of insurance business in addition to the class or classes for which he has been already registered unless the Authority is satisfied that the assets of the life insurance fund of the insurer are adequate to meet all his liabilities on policies of life insurance maturing for payment.
(3) The life insurance fund shall be as absolutely the security of the life policy‑holders as though it belonged to an insurer carrying on no other business than life insurance business and shall not be liable for any contracts of the insurer for which it would not have been liable had the business of the insurer been only that of life insurance and shall not be applied directly or indirectly for any purposes other than those of the life insurance business of the insurer.
Accounts and balance‑sheet
11. (1) Every insurer, in the case of an insurer specified in sub-clause (a) (ii) or sub‑clause (b) of clause (9) of section 2 in respect of all insurance business transacted by him, and in the case of any other insurer in respect of the insurance business transacted by him in India, shall at the expiration of each financial year prepare with reference to that year,—
(a) in accordance with regulations contained in part I of the First Schedule, a balance‑sheet in the form set forth in Part II of that Schedule;
(b) in accordance with the regulations contained in part I of the Second Schedule, a profit and loss account in the forms set forth in Part II of that Schedule, except where the insurer carries on business of one class only of the following classes, namely, life insurance, fire insurance or marine insurance and no other business;
(c) in respect of each class or sub‑class of insurance business for which he is required under sub‑section (1) of section 10 to keep a separate account of receipts and payments, a revenue account in accordance with the Regulations, and in the form or forms, set forth in the Third Schedule applicable to that class or sub‑class of insurance business.
(1A) Notwithstanding anything contained in sub-section (1), every insurer, on or after the commencement of the Insurance Regulatory and Development Authority Act, 1999, in respect of insurance business transacted by him and in respect of his shareholders’ funds, shall, at the expiration of each financial year, prepare with reference to that year, a balance-sheet, a profit and loss account, a separate account of receipts and payments, a revenue account in accordance with the regulations made by the Authority.
(1B) Every insurer shall keep separate accounts relating to funds of shareholders and policy-holders.
(2) Unless the insurer is a company, as defined in clause (2) of sub‑section (1) of Section 2 of the Indian Companies Act, 1913 (7 of 1913), the accounts and statements referred to in sub‑section (1) shall be signed by the insurer, or in the case of a company by the chairman, if any, and two directors and the principal officer of the company, or in the case of a firm by two partners of the firm, and shall be accompanied by a statement containing the names, descriptions and occupations of, and the directorships held by, the persons in charge of the management of business during the period to which such accounts and statements refer and by a report on the affairs of the business during that period.
(3) Where an insurer carrying on the business of insurance at the commencement of this Act has prepared the balance‑sheet and accounts required by the Indian Life Assurance Companies Act, 1912 (6 of 1912), or has based his accounts upon the financial and not the calendar year, the provisions of this section shall, if the Central Government so directs in any case, apply until the 31st day of December, 1939, as if in sub‑section (1) references to the calendar year were references to the financial year.
Audit
12. The balance‑sheet, profit and loss account, revenue account and profit and loss appropriation account of every insurer, in the case of an insurer specified in sub‑clause (a)(ii) or sub‑clause (b) of clause (9) of section 2 in respect of all insurance business transacted by him, and in the case of any other insurer in respect of the insurance business transacted by him in India, shall, unless they are subject to audit under the Indian Companies Act, 1913 (7 of 1913), be audited annually by an auditor, and the auditor shall in the audit of all such accounts have the powers of, exercise the functions vested in, and discharge the duties and be subject to the liabilities and penalties imposed on, auditors of companies by section 145 of the Indian Companies Act, 1913.
Actuarial report and abstract
13.(1) Every insurer carrying on life insurance business shall, in respect of the life‑insurance business transacted by him in India, and also in the case of an insurer specified in sub‑clause (a) (ii) or sub‑clause (b) of clause (9) of section 2 in respect of all life insurance business transacted by him, every year cause an investigation to be made by an actuary into the financial condition of the life insurance business carried on by him, including a valuation of his liabilities in respect thereto and shall cause an abstract of the report of such actuary to be made in accordance with the regulations contained in Part I of the Fourth Schedule and in conformity with the requirements of Part II of that Schedule:
Provided that the Authority may, having regard to the circumstances any particular insurer, allow him to have the investigation made as at a date not later than two years from the date as at which the previous investigation was made:
Provided further that for an insurer carrying on life insurance business in
(a) the 31st day of December, 1950, or the date of expiration of five years from the date at which the last investigation was made by an actuary before such commencement, whichever is earlier, where the said last investigation was at a date-
(i) before the 31st day of December, 1946, but not more man five years before such commencement, or
(ii) after the 30th day of December, 1946, but before the 31st day of December, 1947, and had disclosed a deficit in the life insurance fund;
(b) the 31st day of December, 1951, where the last investigation by an actuary before such commencement was at a date-
(i) after the 30th day of December, 1946, but before the 31st day of December, 1947, and did not disclose a deficit in the life insurance fund; or
(ii) after the 30th day of December, 1947, but before the 31st day of December, 1948;
(c) the 31st day of December, 1952, where the last investigation by an actuary before such commencement was as at any date after the 30th day of December, 1948, but before the 1st day of January, 1950:
Provided also that for an insurer carrying on life insurance business in
Provided also that, in the case of an insurer who has not caused an investigation to be made by an actuary as at any date prior to such commencement, the date of commencement of life insurance business in India shall, for the purpose of the preceding proviso, be deemed to be the date as at which the last investigation was made by an actuary before such commencement and such investigation shall be deemed to have disclosed no deficit in the life insurance fund:
Provided also that every insurer on or after the commencement of the Insurance Regulatory and Development Authority Act, 1999, shall cause an abstract of the report of the actuary to be made in the manner specified by the regulations made by the Authority.
(2) The provisions of sub‑section (1) regarding the making of an abstract shall apply whenever at any other time an investigation into the financial condition of the insurer is made with a view to the distribution of profits or an investigation is made of which the results are made public.
(3) There shall be appended to every such abstract as is referred to in sub-section (1) or sub‑section (2) a certificate signed by the principal officer of the insurer that full and accurate particulars of every policy under which there is a liability either actual or contingent have been furnished to the actuary for the purpose of the investigation.
(4) There shall be appended to every such abstract a statement, in conformity with their requirements of a Part II of the Fifth Schedule and prepared in accordance with the regulations contained in Part I of that Schedule, of the life insurance business in force at the date to which the accounts of the insurer are made up for the purposes of such abstract:
Provided that, if the investigation referred to in sub‑sections (1) and (2) is made annually by any insurer, the statement need not be appended every year but shall be appended at least once in every three years:
Provided further that the statement referred to in sub-section (4) shall be appended in the form and in the manner specified by the regulations made by the Authority
(5) Where an investigation into the financial conditions of an insurer is made as at a date other than the expiration of the year of account, the accounts for the period since the expiration of the last year of account and the balance sheet as at the date at which the investigation is made shall be prepared and audited in the manner provided by this Act.
(6) The provisions of this section relating to the life insurance business shall apply also to any such sub‑class of insurance business included in the class "Miscellaneous Insurance" as may be prescribed under sub-section (1) of section 10; and the Authority may authorize such modifications and variations of the regulations contained in Part I of the Fourth and Fifth Schedules and of the requirements of Part II of those Schedules as may be necessary to facilitate their application to any such sub‑class of insurance business:
Provided that, if the Authority is satisfied that the number and amount of the transactions carried out by an insurer in any such sub‑class of insurance business is so small as to render periodic investigation and valuation unnecessary, he may exempt that insurer from the operation of this sub‑section in respect of that sub‑class of insurance business.
Register of policies and register of claims
14. Every insurer, in the case of an insurer specified in sub‑clause (a)(ii) or sub‑clause (b) of clause (9) of section 2 in respect of all business transacted by him, and in the case of any other insurer in respect of the insurance business transacted by him in India, shall maintain-
(a) a register or record of policies, in which shall be entered, in respect of every policy issued by the insurer, the name and address of the policy-holder, the date when the policy was effected and a record of any transfer, assignment or nomination of which the insurer has notice, and
(b) a register or record of claims, in which shall be entered every claim made together with the date of the claim, the name and address of the claimant and the date on which the claim was discharged, or, in the case of a claim which is rejected, the date of rejection and the grounds there for.
Submission of retunes
15. (1) The audited accounts and statements referred to in section 11 or sub‑section (5) of section 13 and the abstract and statement referred to in section 13 shall be printed, and four copies thereof shall be furnished as returns to the Authority within six months from the end of the period to which they refer:
Provided that the said period of six months shall in the case of insurers having their principal place of business or domicile outside India and in the case of insurers constituted, incorporated or domiciled in India but also carrying on business outside India be extended by three months, and provided further that the Central Government may in any case extend the time allowed by this sub‑section for the furnishing of such returns by a further period not exceeding three months.
(2) Of the four copies so furnished one shall be signed in the case of a company by the chairman and two directors and by the principle officers of the company and, if the company has a managing director or managing agent, by that director or managing agent, in the case of a firm, by two partners of the firm, and, in the case of an insurer being an individual, by the Insurer himself and one shall be signed by the auditor who made the audit or the actuary who made the valuation, as the case may be.
(3) Where the insurer's principal place of business or domicile is outside India, he shall forward to the Authority, along with the documents referred to in section 11, the balance‑sheet, profit and loss account and revenue account and the valuation reports and valuation statements, if any, which the insurer is required to file with the public authority of the country in which the insurer is constituted, incorporated or domiciled, or, where such documents are not required to be filed, a certified statement showing the total assets and liabilities of the insurer at the close of the period covered by the said documents and his total income and expenditure during that period.
Returns by insurers established outside India.
16. (1) Where, by the law of the country in which an insurer, not being an insurer specified in sub‑clause (a)(ii) or sub‑clause (b) of clause (9) of section 2, is constituted, incorporated or domiciled, the insurer is required to prepare and to furnish to a public authority of that country documents of substantially the same nature as the documents required to be furnished as returns in accordance with provisions of section 15, the provisions of sub‑section (2) of this section shall apply to such insurer in lieu of the provisions of sections 11, 12, 13 and 15.
(2) The insurer shall, within the time specified in sub‑section (1) of Section 15, furnish to the Authority four certified copies in the English language of every balance‑sheet, account, abstract, report and statement supplied to the public authority referred to in sub‑section (1) of this section, and in addition thereto, four certified copies in the English language of each of the following statements, namely:-
(a) a statement audited by an auditor or by a person duly qualified under the law of the insurer’s country showing the assets held by insurer in India as at the date of any balance-sheet so furnished;
(b) for each class or sub‑class of insurance business for which he is required under sub‑section (1) of section 10 to keep a separate account of receipts and payments, a revenue account for the period covered by any account so furnished, prepared in accordance with the regulations, and in the form or forms, set forth in the Third Schedule applicable to that class or subclass of insurance business and similarly audited, showing separately with respect to business transacted by the insurer in India the details required to be supplied in a revenue account furnished under this clause of this subsection;
(c) a separate abstract of the valuation report in respect of all business transacted in India in each class or sub‑class of insurance business to which section 13 refers, prepared in the manner required by that section; and
(d) a declaration in the prescribed form stating that all amounts received by the insurer directly or indirectly whether from his head office or from any other source outside
Exemption from certain provisions of the Indian Companies Act, 1913
17. Where an insurer, being a company incorporated under the Indian Companies Act, 1913 (7 of 1913), or under the Indian Companies Act, 1882 (6 of 1882), or under the Indian Companies Acts, 1866 (10 of 1866), or under any Act repealed thereby, in any year furnishes his balance‑sheet and accounts, in accordance with the provisions of section 15, he may at the same time send to the Registrar of Companies copies of such balance‑sheet and accounts; and where such copies are so sent it shall not be necessary for the Company to file copies of the balance-sheet and accounts with the Registrar as required by sub‑section (1) of section 134 of the first mentioned Act and such copies so sent shall be chargeable with the same fees and shall be dealt within all respects as if they were filed in accordance with that section.
This Act not to apply to preparation of account, etc., for periods prior to this Act coming into force.
17 A. Nothing in this Act shall apply to the preparation of accounts by an insurer and the audit and submission thereof in respect of any accounting year which has expired prior to the commencement of this Act, and notwithstanding the other provisions of this Act, such accounts shall be prepared, audited and submitted in accordance with the law in force immediately before the commencement of this Act.
Furnishing reports
18. Every insurer shall furnish to the Authority a certified copy of every report on the affairs of the concern which is submitted to the members or policy‑holders of the insurer immediately after its submission to the members or policy‑holders, as the case may be.
Abstract of proceedings of general meetings
19. Every insurer, being a company or body incorporated under any law for the time being in force in India, shall furnish to the Authority a certified copy of the minutes of the proceedings of every general meeting, as entered in the Minutes Book of the insurer within thirty days from the holding of the meeting to which it relates.
Custody and inspection of documents and supply of copies
20. (1) Every return furnished to the Authority or certified copy thereof shall be kept by the Authority and shall be open to inspection; and any person may procure a copy of any such return, or of any part thereof, on payment of a fee of six annas for every hundred words or fractional part thereof required to be copied, any five figures being deemed equivalent to one word.
(2) A printed or certified copy of the accounts, statements and abstract furnished in accordance with the provisions of section 15 or section 16 shall, on the application of any shareholder or policy‑holder made at any time within two years from the date on which the document was so furnished, be supplied to him by the insurer within fourteen days when the insurer is constituted, incorporated or domiciled in India and in any other case within one month of such application.
(3) A copy of the memorandum and articles of association of the insurer, if a company shall on the application of any policy‑holder, be supplied to him by the Insurer on payment of one rupee.
Powers of Controller regarding returns
21. (1) If it appears to the Authority that any return furnished to him under the provisions of this Act is inaccurate or defective in any respect, he may—
(a) require from the insurer such further information, certified if he so directs by an auditor or actuary, as he may consider necessary to correct or supplement such return;
(b) call upon the insurer to submit for his examination at the principal place of business of the insurer in India any book of account, register or other document or to supply any statement which he may specify in a notice served on the insurer for the purpose;
(c) examine any officer of the insurer on oath in relation to the return;
(d) decline to accept any such return unless the inaccuracy has been corrected or the deficiency has been supplied before the expiry of one month from the date on which the requisition asking for correction of the inaccuracy or supply of the deficiency was delivered to the insurer or of such further time as the Authority may specify in the requisition and if he declines to accept any such return, the insurer shall be deemed to have failed to comply with the provisions of section 15 or section 16 or section 28 or section 28A or section 28B or section 64V relating to the furnishing of returns.
(2) The Court may on the application of an insurer and after hearing the Authority cancel any order made by the Authority under clause (`a), (b) or(c) of sub‑section (1) or may direct the acceptance of any return which the Authority has declined to accept, if the insurer satisfies the Court that action of the Authority was in the circumstances unreasonable:
Provided that no application under this subsection shall be entertained unless it is made before the expiration of four months from the time when the Authority made the order or declined to accept the return.
Powers of Authority to order revaluation
22. (1) If it appears to the Authority that an investigation or valuation to which section 13 refers or an abstract of a valuation report furnished under clause (c) of sub‑section (2) of section 16 does not properly indicate the condition of the affairs of the insurer by reason of the faulty basis adopted in the valuation, he may, after giving notice to the insurer and giving him an opportunity to be heard, cause an investigation and valuation alas at such date as the Authority may specify to be made at the expense of the insurer by an actuary appointed by the insurer for this purpose and approved by the Authority and the insurer shall place at the disposal of the Actuary so appointed and approved all the material required by the Actuary for the purposes of the investigation and valuation within such period, not being less than three months, as the Authority may specify.
(2) The provisions of subsections (1) and (4) of section 13, and of sub-sections (1) and (2) of section 15 or, as the case may be, of sub-section (2) of section 16, shall apply in relation to an investigation and valuation under this section:
Provided that the abstract and statement prepared as the result of such investigation and valuation shall be furnished by such date as the Authority may specify.
Evidence of documents
23. (1) Every return furnished to the Authority which has been certified by the Authority to be a return so furnished, shall be deemed to be a return so furnished.
(2) Every document, purporting to be certified by the Authority to be a copy of a return so furnished, shall be deemed to be a copy of that return and shall be received in evidence as if it were the original return, unless some variation between it and the original return is proved.
Summary of returns to be published
24. [Repealed by the Insurance (Amendment) Act, 1941 ]
Returns to be published in statutory forms
25. No insurer shall publish in India any return in a form other than that in which it has been furnished to the Authority.
Provided that nothing contained in this section shall prevent an insurer from publishing a true and accurate abstract from such returns for the purposes of publicity.
Alterations in the particulars furnished with application for registration to be reported.
26. Whenever any alteration occurs or is made which affects any of the matters which are required under the provisions of sub-section (2) of section 3 to accompany an application by an insurer for registration, the insurer shall forthwith furnish to the Authority full particulars of such alteration. All such particulars shall be authenticated in the manner required by that sub‑section for the authentication of the matters therein referred to, and where the alteration affects the assured rates, advantages, terms and conditions offered in connection with life insurance policies, the actuarial certificate referred to in clause (f) of the said sub‑section shall accompany the particulars of the alteration.
Investment, Loans and Management
Investment of assets
27. (1) Every insurer shall invest and at all times keep invested assets equivalent to not less than the sum of-
(a) the amount of his liabilities to holders of life insurance policies in
(b) the amount required to meet the liability on policies of life insurance maturing for payment in
less-
(i) the amount of premiums which have fallen due to the insurer on such policies but have not been paid and the days of grace for payment of which have not expired, and
(ii) any amount due to the insurer for loans granted on and within the surrender values of policies of life insurance maturing for payment in India issued by him or by an insurer whose business he has acquired and in respect of which he has assumed liability,
in the manner following, namely, twenty‑five per cent of the said sum in Government securities, a further sum equal to not less than twenty‑five per cent of the said sum in Government securities or other approved securities and the balance in any of the approved investments specified in sub-section (1) of section 27A or, subject to the limitations, conditions and restrictions specified in sub-section (2) of that section, in any over investment.
(2) For the purposes of subsection (1),—
(a) the amount of any deposit made under section 7 or section 98 by the insurer in respect of his life insurance business shall be deemed to be assets invested or kept invested Government securities;
(b) the securities of, or guaranteed as to principal and interest by, the Government of the United Kingdom shall be regarded as approved securities other than Government securities for a period of four years from the commencement of the Insurance (Amendment) Act, 1950 (47 of 1950), in the manner and to the extent hereinafter specified, namely:—
(i) during the first year, to the extent of twenty-five per cent in value of the sum referred to in sub-section (1);
(ii) during the second year, to the extent of eighteen and three fourths per cent in value of the said sum;
(iii) during the third year, to the extent of twelve and a half per cent in value of the said sum; and
(iv) during the fourth year, to the extent of six and a quarter per cent in value of the said sum:
Provided that, if the Authority so directs in any case, the securities specified in clause (b) shall be regarded as approved securities other than Government securities for a longer period than four years, but not exceeding six years in all and the manner in which and the extent to which the securities shall be so regarded shall be as specified in the direction;
(c) any prescribed assets shall, subject to such conditions, if any, as may be prescribed, be deemed to be assets invested or kept invested in approved investments specified in sub‑section (1) of section 27A.
(3) In computing the assets referred to in subsection (1),—
(a) any investment made with reference to any currency other than the Indian rupee which is in excess of the amount required to meet the liabilities of the insurer in India with reference to that currency, to the extent of such excess; and
(b) any investment made in the purchase of any immoveable property outside
shall not be taken into account:
Provided that nothing contained in this sub‑section shall affect the operation of sub-section (2):
Provided further that the Authority may, either generally or in any particular case, direct that any investment, whether made before or after the commencement of the Insurance (Amendment) Act, 1950 (47 of 1950), and whether made in or outside India, shall, subject to such conditions as may be imposed, be taken into account, in such manner as may be specified in computing the assets referred to in sub-section (1) and where any direction has been issued under this proviso copies thereof shall be laid before Parliament as soon as may be after it is issued.
(4) Where an insurer has accepted reassurance in respect of any policies of life insurance issued by another insurer and maturing for payment in India or has ceded reassurance to another insurer in respect of any such policies issued by himself, the sum referred to in subsection (1) shall be increased by the amount of the liability involved in such acceptance and decreased by the amount of the liability involved in such cession.
(5) The Government securities and other approved securities in which assets are under sub-section (1) to be invested and kept invested shall be held by the insurer free of any encumbrance, charge, hypothecation or lien.
(6) The assets required by this section to be held invested by an insurer incorporated or domiciled outside India shall, except to the extent of any part thereof which consists of foreign assets held outside India, be held in India and all such assets shall be held in trust for the discharge of the liabilities of the nature referred to in sub‑section (1) and shall be vested in trustees resident in India and approved by the Authority, and the instrument of trust under this sub‑section shall be executed by the insurer with the approval of the Authority and shall define the manner in which alone the subject‑matter of the trust shall be dealt with.
Explanation.—This sub‑section shall apply to an insurer incorporated
Further provisions regarding investments
27A. (1) No insurer shall invest or keep invested any part of his controlled fund otherwise than in any of the following approved investments, namely:
(a) approved securities;
(b) securities of, or guaranteed as to principal and interest by, the Government of the
(c) debentures or other securities for money issued with the permission of the State Government by any municipality in a State;
(d) debentures or other securities for money issued by any authority constituted under any housing or building scheme approved by the Central or a State Government, or by any authority or body constituted by any Central Act or Act of a State Legislature;
(e) first mortgages on immoveable property situated in
(f) debentures secured by a first charge on any immoveable property plant or equipment of any company which has paid interest in full for the five years immediately preceding or for at least five out of the six or seven years immediately preceding on such or similar debentures issued by it;
(g) debentures secured by a first charge on any immovable property, plant or equipment of any company where either the book value or the market value, whichever is less, of such property, plant or equipment is more than three times the value of such debentures;
(h) first debentures secured by a floating charge on all its assets of any company which has paid dividends on its ordinary shares for the five years immediately preceding or for at least five out of the six or seven years immediately preceding;
(i) preference shares of any company which has paid dividends on its ordinary shares for the five years immediately preceding or for at least five out of the six or seven years immediately preceding;
(j) preference shares of any company on which dividends have been paid for the five years immediately preceding or for at least five out of the six or seven years immediately preceding and which have priority in payment over all the ordinary shares of the company in winding up;
(k) shares of any company which have been guaranteed by another company, such other company having paid dividends on its ordinary shares for the five years immediately preceding or for at least five out of the six or seven years immediately preceding:
Provided that the total amount of shares of all the companies under guarantee by the guaranteeing company is not in excess of fifty per cent of the paid up amount of preference and ordinary shares of the guaranteeing company;
(l) shares of any company on which dividends of not less than four per cent including bonus have been paid for the seven years immediately preceding or for at least seven out of the eight or nine years immediately preceding;
(m) first mortgages on immovable property situated in
Provided that the property mortgaged is not leasehold property with an outstanding term of less than thirty years and the value of the property exceeding by one-third, or if it consists of buildings, exceeds by one-half, the mortgage money;
(n) immovable property situated in
Provided that the property is free of all encumbrances;
(o) loans on life interests, or on policies of life insurance within their surrender values issued by him or by an insurer whose business he has acquired and in respect of which business he has assumed liability;
(p) life interests;
(q) fixed deposits with banks included for the time being in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934) or with co-operative societies registered under the Indian Co-operative Societies Act, 1912 (6 of 1912), or under any other law for the time being in force, the primary object of which is to finance other co-operative societies similarly registered;
(r) debentures of, or shares in co-operative societies registered under the Indian Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force;
(s) such other investments as the Authority may, by notification in the Official Gazette, declare to be approved investments for the purposes of this section.
(2) Notwithstanding anything contained in sub-section (1), an insurer being a company or a co-operative life insurance society as defined in clause (b) of sub-section (1) of section 95, may, subject to the provisions contained in the next succeeding sub-sections, invest or keep invested any part of his controlled fund otherwise than in an approved investment, if-
(i) after such investment, the total amounts of all such investments of the insurer do not exceed fifteen per cent of the sum referred to in sub-section (1) of section 27,
(ii) the investment is made, or, in the case of any investment already made, the continuance of such investment is with the consent of all the directors present at a meeting and eligible to vote, special notice of which has been given to all the directors then in India, and all such investments, including investments in which any director is interested, are reported without delay to the Authority with full details of the investments and the extent of the director’s interest in any such investment.
(3) An insurer shall not out of his controlled fund invest or keep invested in the shares of any one banking company or investment company more than—
(a) two and a quarter per cent of the sum referred to in sub-section (1) of section 27, or
(b) two per cent of the subscribed share capital and debentures of the banking company or investment company concerned,
whichever is less.
(4) An insurer shall not out of the controlled fund invest or keep invested in the shares or debentures of any one company other than a banking company or investment company more than-
(a) two and a quarter per cent of the sum referred to in sub-section (1) of section 27, or
(b) ten per cent. of the subscribed share capital and debentures of the company,
Whichever is less:
Provided that nothing in this sub‑section shall apply to any investment made with the previous consent of the Authority by an insurer, being a company with a view to forming a subsidiary company carrying on insurance business.
(5) An insurer shall not out of his controlled fund invest or keep invest any sum in the shares or debentures of any private limited company.
(6) Where an investment is in partly paid‑up shares, the uncalled liability on such shares shall be added to the amount invested for the purpose of computing the percentages referred to in clause (a) of sub section (3) and clause (a) of subjection (4).
(7) Notwithstanding anything contained in subsections (3) and (4), where new shares are issued to the existing shareholders by a company the existing shares of which are covered by Clause (i) or CIause (k) or Clause (l) of subjection (1) and of which an insurer is already a shareholder, the insurer may subscribe to such new shares:
Provided that the proportion of new shares subscribed by him does not exceed the proportion which the paid‑up amount on the shares held by him immediately before such subscription bears to the total paid‑up capital of the company at the time of such subscription
(8) If, on an application submitted through the Controller the Central Government is satisfied that special grounds exist warranting such exemption, the Central Government may for such period, to such extent and in relation to such particular investments and subject to such conditions as maybe specified by it in this behalf, exempt an insurer from all or any of the provisions of sub-sections (3), (4) and (7).
(9) An insurer shall not keep more than three per cent. of the controlled fund in fixed deposit or current deposit, or partly in fixed deposit and partly in current deposit, with any one banking company or with any one comparative society registered under the Insurance Cooperative Societies Act, 1912 (2 of 1912), or under any other law for the time being us force and doing banking business:
Provided that in applying this sub‑section to the amount in deposit with banking on any day all the premiums collected by that company on behalf of the insurer during the preceding thirty days shall be excluded:
Provided further that the Authority may permit a co‑operative life insurance society as defined in C1ause (b) of sub‑section (1) of Section 95 to keep more than three per cent. of its controlled fund in fixed deposit with any cooperative society referred to in this subsection, if the fixed deposit is secured by a first mortgage on any immoveable property.
(10) All assets forming the controlled fund, not being Government securities or other approved securities in which assets are to be invested or held invested in accordance with Section 27, shall (except for a part thereof not exceeding one‑tenth of the controlled fund in value which may, subject to such conditions and restrictions as may be prescribed, be offered as security for any loan taken for purposes of any investment), be held free of any encumbrance, charge, hypothecation or lien.
(11) If at any time the Authority considers any one or more of the investments constituting an insurer's controlled fund to be unsuitable or undesirable, the Authority may, after giving the insurer an opportunity of being heard, direct him to realise the investment or investments, and the insurer shall comply with the direction within such time as may be specified by the Authority.
(12) Every insurer in existence at the ‘commencement of the Insurance (Amendment) Act, 1950 (47 of 1950), whose investments or any part thereof at such commencement contravene or contravenes any of the provisions of this section, shall, within ninety days from such commencement, submit to the Authority a report specifying in all such investments, and if the Authority is satisfied that it will not be in the interests of the insurer or any class of insurers generally to realise any such investments, it may, by order direct that the provisions of this section [other than the provisions contained in sub-section (11) shall not apply in relation to any such investments or to any class of investments generally for such period or periods as may be specified in the order.
(13) Without prejudice to the powers given to the Authority by subsection (11), nothing contained in this section shall be deemed to require any insurer to realise any investment made in conformity with the provisions of subsection (1) after the commencement of this Act which after the making thereof, has ceased to be an approved investment within the meaning of this section.
(14) Nothing contained in this section shall be deemed to affect in any way the manner in which any moneys relating to the provident fund of any employee or to any security taken from any employee or over moneys of a like nature are required ‑to be held by or under any Central Act, or Act of a State Legislature.
Explanation.- In this section "controlled fund" means-
(a) in the case of any insurer specified in sub-clause (a) (ii) or sub-clause (b) of Clause (9) of section 2 and carrying on life insurance business-
(i) all his funds, if he carries on no other class of insurance business;
(ii) all the funds appertaining to his life insurance business if he carries on some other class of insurance business also; and
(b) in the case of any other insurer carrying on life insurance business,-
(i) all his funds in
(ii) all the funds in
but does not include any fund or portion thereof in respect of which the Authority is satisfied that such fund or portion thereof, as the case may be, is regulated by the law of any country outside India or in respect of which the Authority is satisfied that it would not be in the interest of the insurer to apply the provisions of this section.
Further provisions regarding investments.
27‑B. (1) No insurer carrying on general insurance business shall, after the commencement of the Insurance (Amendment) Act, 1968 (62 of 1968), invest or keep invested any part of his asset otherwise than in any of the following approved investments, namely:
(a) the investment specified in clauses (a) to (e), (n), (q) and (r) of sub-section (1) of Sec. 27A;
(b) debentures secured by a first charge on any immoveable property, plant or equipment of any company which has paid interest in full for the three years immediately preceding or for at least three out of the four or five years immediately preceding on such or similar debentures issued by it;
(c) debentures secured by a first charge on any immoveable property, plant or equipment of any company where either the book value or the market value, whichever is less, of such property, plant or equipment is more than twice the value of such debentures;
(d) first debentures secured by a floating charge on all its assets or by a fixed charge on fixed assets and floating charge on all other assets of any company which has paid dividends on its equity shares for the three years immediately preceding or for at least three out of the four or five years immediately preceding the date of the investment;
(e) preference shares of any company which has paid dividends on its equity shares for the three years immediately preceding or for at least three out of the four or five years immediately preceding;
(f) preference shares of any company on which dividends have been paid for the three years immediately preceding or for at least three out of the four or five years immediately preceding and which have priority in payment over all the equity shares of the company in winding up;
(g) shares of any company which have been guaranteed by another company, such other company having paid dividends on its equity shares for the three years immediately preceding or for at least three out of the four or five years immediately preceding:
Provided that the total amount of shares of all the companies under ‑ that guarantee by the guaranteeing company is not in excess of fifty percent. of the paid‑up amount of preference and equity shares of the guaranteeing company;
(h) shares of any company on which dividends of not less than four per cent including bonus have been paid for the three years immediately preceding or for at least three out of the four or five years immediately preceding;
(i) first mortgages on immoveable proper situated in
Provided that the property mortgaged is not lease‑hold property with an outstanding term of less than fifteen years and the value of the property exceeds by one‑third, or if it consists of buildings, exceeds by on-half, the mortgage money;
(j) such other investments as the Authority may, by notification in the Official Gazette, declare to be approved investments for the purposes of this section.
(2) Any prescribed assets shall, subject to such conditions, if any, as may by prescribed be deemed to be assets invested or kept invested in approved investments specified in sub-section (1).
(3) Notwithstanding anything contained in sub‑section (1), an insurer may, subject to the provisions contained in the next succeeding sub-sections, invest or keep invested any part of his assets otherwise than in an approved investment specified in subsection (1), if-
(i) after such investment, the fatal amounts of all such investments of the insurer do not exceed twenty‑five per cent of his assets, and
(ii) the investment is made or in the case of any investment already made, the continuance of such investment is with the consent of all the directors, other than the directors appointed under Section 34‑C, present at a meeting and eligible to vote, special notice of which has been given to ‑all the directors then in India, and all such investments, including investments in which any director is interested, are reported without delay to the Authority with full details of investments and the extent of the director's interest in any such investment:
Provided that the making, or the continuance, of such investment is not objected to by any director appointed under Section 34‑C
(4) An insurer shall not invest or keep invested any part of his assets in the shares of any one banking company or investment company more than-
(a) ten per cent of his assets, or
(b) two per cent of the subscribed share capital and Dentures of the banking company
or investment company concerned,
whichever is less.
(5) An insurer shall not invest or keep invested any part of his assets in the shares or debentures of any one company other than a banking company or investment company more than
(a) ten per cent of his assets, or
(b) ten per cent of the subscribed share capital and debentures of the company,
whichever is less:
Provided that nothing in this sub-section shall apply to any investment made by an insurer in the shares of any other insurer if such other insurer is a company within the meaning of Section 3 of the Companies Act, 1956 (1 of 1956) and carries on insurance or re‑insurance business in India.
(6) An insurer shall not invest or keep invested any part of his assets in the shares or debentures of any private company.
(7) Where an investment is in partly paid‑up shares, the uncalled liability on such shares shall be added to the amount invested for the purpose of computing the percentages referred to in Clause (a) of sub-section (4) and Clause (a) of sub‑section (5).
(8) Notwithstanding anything contained in sub‑sections (4) and (5) where new shares are issued to the existing shareholders by a company, the existing shares of which are covered by Clause (e) or clause (g) or Clause (h) of sub‑section (1) and of which an insurer is already a share‑holder, the insurer may subscribe to such new shares:
Provided that the proportion of new snares subscribed by him does not exceed the proportion which the paid‑up amount on the shares held by him immediately before such subscription bears to the total paid‑up capital of the company at the time of such subscription
(9) If, on an application submitted to the Authority, he has satisfied that special grounds exist warranting such exemption, he may, for such period, to such extent and in relation to such particular investments and subject to such conditions as may be specified by him in this behalf, exempt an insurer from all or any of the provisions of sub‑sections (4), (5) and (8).
(10) An insurer shall not keep more than ten per cent. of his assets in fixed deposit or current deposit, or partly in fixed deposit and partly in current deposit, with any one banking company or with any co‑operative society registered under the Co‑operative Societies Act, 1912 ( 2 of 1912), or under any other law for the time being in force and doing banking business:
Provided that in applying this sub‑section to the amount in deposit with a banking company on any day, all the premiums credited during the preceding sixty days, to the account of the insurer with such banking company and the amounts deposited, during the preceding thirty days, by such insurer with that banking company for payment of claims or out of re‑insurance recoveries, shall be excluded.
(11) All assets shall (except for a part thereof not exceeding one‑tenth of the total assets in value which may, subject to such conditions and restriction as may be prescribed, be offered as security for any loan taken for purposes of any investment or for payment of claims, or which may be kept as security deposit with the banks for acceptance of policies) be held free of any encumbrance, charge, hypothecation or lien.
(12) If at any time the Authority considers any one or more of the investments constituting an insurer's assets to be unsuitable or undesirable, he may, after giving the insurer an opportunity of being heard, direct the insurer to realize the investment or investments, and the insurer shall comply with the direction within such time as may be specified in this behalf by the Authority.
(13) Every insurer in existence at the commencement of the insurance (Amendment) Act, 1968, whose investments or any part thereof at such commencement do or does not fulfill the requirements of this section, shall, within ninety days from such commencement, submit to the Authority a report specifying all such investments, and, if the Authority is satisfied that it will not be in the interest of the insurer or any class of insurers generally to realise any such investments, he may, by order direct that the provisions of this section, other than the provisions contained in sub-section (12), shall not apply in relation to any such investments or to any class of investments generally for such period or periods as may be specified in the order.
(14) Without prejudice to the powers conferred on the Authority by subsection (12), nothing contained in this section shall be deemed to require any insurer to realise any investment made in conformity with the provisions of sub‑section (1) after the commencement of the Insurance (Amendment) Act, 1968(62 of 1968), which, after the making thereof, has ceased to be an approved investment within the meaning of this section.
(15) Nothing contained in this section shall be deemed to affect in any way the manner in which any moneys relating to the provident fund of any employee or to any security taken from any employee or other moneys of a like nature are required to be held by or under any Central, Provincial or State Act.
(16) In this section, unless the context otherwise requires, "assets" means-
(a) in the case of an insurer carrying on life insurance business in India, all his assets required to be shown under the column "Other Classes of Business" in the balance‑sheet in Form A, in Part II of the First Schedule, but excluding any items against the head "Other Accounts (to be specified)";
(b) in the case of an insurer specified in sub-clause (a) (ii) or sub-clause (b) of C1ause (9) of Sec. 2, who is not carrying on life insurance business in India, all his assets required to be shown in the balance‑sheet in Form A in Part II of the First Schedule but excluding any items against the head "Other Accounts (to be specified)"; and
(c) in the case of any other insurer, the assets required to be shown in the statement in Form AA, in Part II of the First Schedule, but excluding office furniture,
but does not include any assets specifically held against any fund or portion thereof in respect of which the Authority is satisfied that such funds or portion thereof, as the case may be, is regulated by the law of any country outside India or in respect of enrich the Authority is satisfied that it would not be in the interest of the insurer to apply the provisions of this section.
Prohibition of investment of funds outside India
27C. (1) Without prejudice to anything contained in sections 27, 27A and 27B, the Authority may, in the interests of the policy-holders, specify by the regulations made by it, the time, manner and other conditions of investment of assets to be held by an insurer for the purposes of this Act.
(2) The Authority may give specific directions for the time, manner and other conditions subject to which the funds of policy-holders shall be invested in the infrastructure and social sector as may be specified by regulations made by the Authority and such regulations shall apply uniformly to all the insurers carrying on the business of life insurance, general insurance, or re-insurance in India on or after the commencement of the Insurance Regulatory and Development Authority Act, 1999.
(3) The Authority may, after taking into account the nature of business and to protect the interests of the policy-holders, issue to an insurer the directions relating to the time, manner and other conditions of investment of assets to be held by him:
Provided that no direction under this sub-section shall be issued unless the insurer concerned has been given a reasonable opportunity of being heard
Statement of investment of assets
28. (1) Every insurer carrying on the business of life insurance shall every year, within thirty-one days from the beginning of the year submit to the Authority a return showing as at the 31st day of December of the preceding year the assets held invested in accordance with Section 27 and all other particulars necessary to establish that the requirements of that section have been complied with, and such return shall be certified by a principal officer of the insurer.
(2) Every such insurer shall also furnish, within fifteen days from the last day of March, June, and September, a return certified as aforesaid showing as at the end of each of the said months the assets held invested in accordance with Sec. 27.
(2A) In respect of the Government securities and other approved securities invested and kept invested in accordance with sub-section (1) of Section 27 an insurer shall submit along with the returns referred to in sub‑sections (1) and (2) a certificate, where such assets are in the custody of a banking company, from that company, and in any other case from the chairman, two directors and a principal officer, if the insurer is a company, or otherwise from a principal officer of the insurer to the effect that the securities are held free of any encumbrance, charge, hypothecation, or lien, and every such certificate after the first shall also state that since the date of the certificate immediately preceding all the securities have been so held.
(2B) In respect of the assets forming the controlled fund within the meaning of Section 27A, and which do not form part of the Government securities and approved securities invested and kept invested in accordance with Section 27, an insurer shall submit, along with the returns referred to in sub‑sections (1) and (2), a statement, where such assets are in the custody of a banking company, from that company, and, in any other case, from the chairman, two directors and a principal officer if the insurer is a company, or from a principal officer of the insurer if the insurer is not a company, specifying the assets, which are subjected to any charge and certifying that the assets, which are held free of any encumbrance, charge, hypothecation, or lien, and every such statement after the first shall also specify the charges created in respect of any of those assets since the date of the statement immediately preceding, and, if any such charges have been liquidated, the date on which they were so liquidated.
(3) The Authority may, at his discretion require any insurer to whom sub-section (1) applies to submit before the 1st day of August in each or any year a return of the nature referred to in subsection (1), certified as required by mat sub‑section and prepared as at the 30th day of June.
(4) In the case of an insurer having his principal place of business or domicile outside
(5) The Authority shall be entitled at any time to take such steps as he may consider necessary for the inspection or verification of the assets invested in compliance with Section 27 or for the purpose of securing the particulars necessary to establish that the requirements of that section have been complied with; the insurer shall comply with any requisition made in this behalf by the Authority, and if he fails to do so within two months from the receipt of the requisition he shall be deemed to have made default in complying with the requirements of this section.
Return of investments relating to controlled fund and changes therein.
28A. (1) Every insurer carrying on life insurance business, shall every year, within thirty‑one days from the beginning of the year submit to the Authority a return in the form specified by the regulations made by the Authority showing as at the 31st day of March of the preceding year, the investments made out of the controlled fund referred to in Section 27A, and every such return shall be certified by a principal officer of the insurer.
(2) Every insurer referred to in sub‑section (1) shall also submit to the Authority a return in the form specified by the regulations made by the Authority showing all the changes that occurred in the investments aforesaid during each of the quarters ending on the last day of March, June, September and December within thirty‑one days from the close of the quarter to which it relates, and every such return shall be certified by a principal officer of the insurers.
Returns of investments relating to the assets and changes therein
28B. (1) Every insurer carrying on general insurance business, shall, every year, within thirty‑one days from the beginning of the year, submit to the Authority a return in the form specified by the regulations made by the Authority form showing as at the 31st day of March of the preceding year the investments made out of his assets referred to in Section 27B, and every such return shall be certified by a principal officer of the insurer.
(2) Every insurer referred to in sub‑section (1) shall also submit to the Authority a return in the form specified by the regulations made by the Authority showing all the changes that occurred in the investment aforesaid during each of the quarters ending on the last day of March, June, September and December within thirty‑one days from the close of the quarter to which it relates, and every such return shall be certified by a principal officer of the insurer.
(3) Every insurer shall submit, along with the returns referred to in sub-sections (1) and (2), a statement, where any part of the assets are in the custody of a banking company, from that company, and in any other case, from the chairman, two directors and a principal officer, if the insurer is a company, or from a principal officer of the insurer, if the insurer, is not a company, specifying the assets, which are subject to charge and certifying that the other assets are held free of any encumbrance, charge, hypothecation or lien, and every such statement after the first shall also specify the charges created in respect of any of those assets since the date of the statement immediately preceding, and, if any such charges have been liquidated, the date on which they were so liquidated.
Prohibition of loans
29. (1) No insurer shall grant loans or temporary advances either on hypothecation of property or on personal security or otherwise, except loans on life policies issued by him within their surrender value, to any director, manager, managing agent, actuary, auditor or officer of the insurer if a company, or where the insurer is a firm, to any partner therein, or to any‑other company or firm in which any such director, manager, managing agent, actuary, officer or partner holds the position of a director, manager, managing agent' actuary, officer or partner:
Provided that nothing contained in this sub‑section shall apply to loans made by an insurer to a banking company:
Provided further that nothing in this section shall prohibit a company from granting such loans or advances to subsidiary company or to any other company of which the company granting the loan or advance is a subsidiary company eland where any such loan or advance is made out of any life insurance fund the matter shall be reported within thirty days of the making of such loan or advance to the Authority.
(2) The provisions of Section 86D of the Indian Companies Act, 1913 (7 of 1913), shall not apply to a loan granted to a director of an insurer being a company, if the loan is one granted on the security of a policy on which the insurer bears the risk and the policy was issued to the director on his own life, and the loan is within the surrender value of the policy.
(3) Subject to the provisions of sub‑section (1), no insurer carrying on life insurance business shall grant—
(a) any loans or temporary advances either on hypothecation of property or on personal security or otherwise, except such loans as are specified in sub‑section (1) of Section 27A;
(b) temporary advances to any chief, special or insurance agent to facilitate the carrying out of his functions as such except in cases where such advances do not exceed in the aggregate—
(i) in the case of a chief agent, the overriding renewal commission earned by him during the year immediately preceding,
(ii) in the case of special agent, the renewal commission earned by him during the year immediately preceding,
(iii) in the case of an insurance agent, the renewal commission earned by him during the year immediately preceding.
Explanation. The temporary advance referred to in clause (b) of this sub-section shall also be admissible in the case of any special agent or insurance agent newly appointed, but such advance—
(a) shall be repayable within two years from the date on which such special agent or insurance agent was first appointed, and
(b) shall not exceed, in the case of the special agent, five hundred rupees, and, in the case of the insurance agent, one hundred rupees,
and the total amount of all advances so made shall not exceed ten thousand rupees in the case of any insurer whose business in force is one crore of rupees or more and five thousand rupees in any other case.
(4) Every loan or advance existing at the commencement of the Insurance (Amendment) Act, 1950 (47 of 1950), which contravenes the provisions of subsection (3) shall be notified by the insurer to the Authority within thirty days of such commencement and shall notwithstanding any contract to the contrary be repaid within one year from commencement.
(5) Where any event occurs giving rise to circumstances, the existence of which at the time of the grant of any subsisting loan or advance would have made such grant a contravention of this section, such loan or advance shall, notwithstanding anything in any contract to the contrary, be repaid within three months from the occurrence of such event.
(6) In case of default in complying with the provisions of sub‑section (4) or subsection (5) the director, manager, auditor, actuary, officer or partner, or the chief, special or insurance agent concerned shall, without prejudice to any other penalty which he may incur, cease to hold office under, or to act for, the insurer granting the loan on the expiry of the said period of one year or three months, as the case may be.
Liability of directors, etc. for loss due to contraventions of Sections 27, 27A and 29
30. If by reason of a contravention of any of the provisions of Section 27, Section 27A, Section 27B or Section 29, any loss is sustained by the insurer or by the policy‑holders, every director, manager, managing agent, officer or partner who is knowingly a party to such contravention shall, without prejudice to any other penalty to which he may be liable under this Act, be jointly and severally liable to make goal the amount of such loss.
Assets of insurer how to be kept
31. (1) None of the assets in India of any insurer shall, except in the case of deposits made with the Reserve Bank of India under Section 7 or Section 98 or in so far as assets are required to be vested in trustees by sub-section (4) of Section 27, be kept otherwise than in the name of a public officer approved by the Authority, or in the corporate name of the undertaking, if a company, or in the name of the partners, if a firm, or in the name of the proprietor, if an individual.
(2) Nothing contained in this section shall be deemed to prohibit the endorsement in favour of a banking company of any security or other document solely for the purpose of collection or for realization of interest, bonus or dividend.
Provisions relating to managers, etc
(31)A. (1 ) Notwithstanding anything to the contrary contained in the Indian Companies Act, 1913 (7 of 1913), or in the articles of association of the insurer, if a company, or in any contract or agreement, no insurer shall after expiry of one year from the commencement of the Insurance (Amendment) Act, 1950 (47 of 1950),
(a) be managed by a company or a firm, or
(b) be directed or managed by, or employ as manager, or officer or in any capacity, any person whose remuneration or any part thereof takes the form of commission or bonus or a share in the valuation surplus in respect of the life insurance business of the insurer, or
(c) be directed or managed by, or employ as manager or officer or in any capacity, any person whose remuneration or any part thereof takes the form of commission or bonus in respect of the general insurance business of the insurer:
Provided that nothing in this sub‑section shall be deemed to prohibit-
(i) the payment of commission to a chief agent, special agent or an insurance agent, in respect of life insurance business procured by or through him;
(ii) the payment of commission to a principal agent or an insurance agent in respect of general insurance business procured by or through him;
(iii) the payment of commission, with the approval of the Central Government and for such period as it may determine, to a person not being an officer of an insurer who was, on the 1st November, 1944, employing on behalf of an insurer, chief agents or special agents and continues so to do in respect of insurance business procured by or through him;
(iv) the employment of any individual in a clerical or other subordinate capacity who, as an insurance agent, receives commission In respect of insurance business procured by him;
(v) the employment as an officer of any individual who receives renewal commission in respect of life insurance business procured by him in his capacity as an insurance agent or as an employer of agents before such employment, or before the commencement of the Insurance (Amendment) Act, 1950 (47 of 1950), whichever is later;
(vi) the payment of a share in the profits of general insurance business;
(vii) the payment of bonus in any year on a uniform basis to all salaried employees or any class of them by way of additional remuneration.
(2) Notwithstanding anything to the contrary contained in the Indian Companies Act, 1913 (7 of 1913), or in the articles of association of the insurer, being a company, or in any contract or agreement, no manager, managing director or any other person concerned in the management of an insurer's business shall be entitled to nominate a successor to his office, and no person so nominated, whether before or after the commencement of the Insurance (Amendment) Act, 1950 (47 of 1950), shall be entitled to hold or to continue in such office.
(3) If in the case of any insurance company provision is made by the articles of association of the company
or by an agreement entered into between any person and the company for empowering a director or manager or other officer of the company to assign his office to any other person, any assignment of office made in pursuance of the said provision, shall, notwithstanding anything to the contrary contained in the said provisions or in Section 86B of the Indian Companies Act, 1913 (7 of 1913), be void.
(4) No person shall have any right, whether in contract or otherwise, to any compensation for any loss incurred by reason of the operation of any provision of this section.
Power to restrict payment of excessive remuneration
31B. (1) The Authority may if it is satisfied that any insurer, in the case of an insurer specified in sub‑clause (a) (ii) or sub‑clause (b) of C1ause (9) of Section 2 in respect of all insurance business transacted by him, and in the case of any other insurer in respect of the insurance business transacted by him in India, is paying any person remuneration, whether by way of commission or otherwise on a scale disproportionate, according to the normal standards prevailing in insurance business, to the resources of the insurer, call upon the insurer to comply within six months with such directions as it may think fit to issue in the matter, and if compliance with the directions so issued requires the alteration of any of the terms of the contract entered into by the insurer with such person, no compensation shall be payable to such person by the insurer by reason only of such alteration or of the resignation of such person if the altered terms are not acceptable to him and no payment by way of renewal commission or otherwise shall be made to such person by the insurer in respect of any premiums paid after the date of such resignation except at such rate as may be approved by the Central Government in this behalf.
(2) Every insurer shall, before the close of the month following every year, submit to the Authority a statement in the form specified by the regulations made by the Authority showing the remuneration paid whether by way of commission or otherwise, to any person in cases where such remuneration exceeds such sum as may be specified by the regulations made by the Authority.
(3) Where any person not being a chief agent, principal agent or special agent is in respect of remuneration exceeding the sum of five thousand rupees in any year, the Authority may, by notice in writing, require the insurer to submit certified copies of the agreement entered into between the insurer and any such person, and the insurer shall comply with any such requisition within the time specified in the notice.
(4) Every direction under this section shall be issued by an order made by the Authority:
Provided that no order under this section shall be made unless the person concerned has been given an opportunity of being heard
Limitation on employment of managing agents and on the remuneration payable to them
32. (1) No insurer shall after the commencement of this Act, appoint a managing agent for the conduct of business.
(2) Where any insurer engaged in the business of insurance before the commencement of this Act employs a managing agent for the conduct of his business, then notwithstanding anything to the contrary contained in the Indian Companies Act, 1913 (7 of 1913) and notwithstanding anything to the contrary contained in the articles of the insurer, if a company, or in any agreement entered into by the insurer, such managing agent shall cease to hold office on the expiry of three years from the commencement of this Act and no compensation shall be payable to him by the insurer by reason only of the premature termination of his employment as managing agent.
(3) After the commencement of this Act, notwithstanding anything contained in the Indian Companies Act, 1913 (7 of 1913), and notwithstanding anything to the contrary contained in any agreement entered into by an insurer or in the articles of association of an insurer being a company, no insurer shall pay to a managing agent and no managing agent shall accept from an insurer as remuneration for his services as managing agent more than two thousand rupees per month in all, including salary and commission and other remuneration payable to and receivable by him, for his services as managing agent.
Prohibition of common officers and requirement as to whole time officers
32A. (1) A managing director or other officer of an insurer specified in sub-clause (b) of clause (9) of Section 2 and carrying on life insurance business shall not be a managing director or other officer of any other insurer carrying on life insurance business or of a banking company or of an investment company:
Provided that the Authority may permit such managing director or other officer to be a managing director or other officer of any other insurer carrying on life insurance business for the purpose of amalgamating the business of the two insurers or transferring the business of one insurer to the other.
(2) Where an insurer specified in sub‑clause (b) of Clause (9) of Section 2 has a life insurance fund of more than twenty‑five lakhs of rupees or insurance funds totaling more than fifty lakhs of rupees, the manager, managing director or either officer of the insurer shall be a whole time employee of the insurer:
Provided that the Authority may, for such period as it thinks fit, permit the employment of any specified person as a part‑time manager, managing director or other officer of such insurer.
(3) Nothing in this section, shall prevent—
(a) the manager, managing director or other officer of a insurer being the manager, managing director or other officer of a subsidiary company of the insurer with the previous approval of the Authority;
(b) the manager, managing director or other officer of an insurer, exclusively carrying on life insurance business being the manager, managing director or other officer of an insurer not carrying on life insurance business;
(c) any officer of a branch of one insurer carrying on general insurance business from being any officer of a branch in the same town of another insurer carrying on general insurance business;
(d) an officer in the employment of an insurer for giving professional advice;
Explanation: In this section the expression "officer" does not include a director.
Insurance business in rural or social sector
32B. Every insurer shall, after the commencement of the Insurance Regulatory and Development Authority Act, 1999, undertake such percentages of life insurance business and general insurance business in the rural or social sector, as may be specified, in the Official Gazette by the Authority, in this behalf.
Obligations of insurer in respect of rural or unorganized sector and backward classes
32C. Every insurer shall, after the commencement of the Insurance Regulatory and Development Authority act, 1999 discharge the obligations specified under section 32B to provide life insurance or general insurance policies to the persons residing in the rural sector, workers in the unorganized or informal sector or for economically vulnerable or backward classes of the society and other categories of persons as may be specified by regulations made by the Authority and such insurance policies shall include insurance for crops.
Investigation
Power of investigation and inspection by Authority
(33). (1) The Authority may at any time, by order in writing, direct any person (hereinafter in this section referred to as “Investigating Authority”) specified in the order to investigate the affairs of any insurer and to report to the Authority on any investigation made by such Investigating Authority:
Provided that the Investigating Authority may, wherever necessary, employ an auditor or actuary or both for the purpose of assisting him in any investigation under this section.
(2) Notwithstanding anything to the contrary contained in Section 235 of the Companies Act, 1956 (1 of 1956), the Investigating Authority may, at any time, and shall, on being directed so to do by the Authority, cause an inspection to be made by one or more of his officers of any insurer and his books and accounts; and the Investigating Authority shall supply to the insurer a copy of his report on such inspection.
(3) It shall be the duty of eatery manager, managing director or other officer of the insurer to produce before the Investigating Authority directed to make the investigation under sub‑section (1) or inspection under sub‑section (2), all such books of account, registers and other documents in his custody or power and to furnish him with any statements and information relating to the affairs of the insurer as the said Investigating Authority may require of him within such time as the said Investigating Authority may specify.
(4) Any Investigating Authority, directed to make an investigation under sub‑section (1), or inspection under sub‑section (2) may examine on oath, any manager, managing director, or other officer of the insurer in relation to his bossiness and may administer oaths accordingly.
(5) The Investigating Authority shall, if he has been directed by the Authority to cause an inspection to be made, and may, in any other case, report to the Authority on any inspection made under this section.
(4) On receipt of any report under sub‑section (1) or under sub‑section (5), the Authority may, after giving such opportunity to the insurer to make a representation in connection with the report as in the opinion of the Authority, seems reasonable by order in writing,—
(a) require the insurer to take such action in respect of any matter arising out of the report as the Authority may think fit; or
(b) cancel the registration of the insurer; or
(c) direct any person to apply to the Court for the winding up of the insurer, if a company, whether the registration of the insurer has been cancelled under C1ause (b) or not.
(7) The Authority may, after giving reasonable notice to the insurer publish the report submitted by the Investigating Authority under sub-section (5) or such portion thereof as may appear to it to be necessary.
(8) The Authority may prescribe the minimum information to tee maintained by insurers in their books, the manner in which such information should be maintained, the checks and other verifications to be adopted by insurer, necessary to enable the Investigating Authority to discharge satisfactorily his functions under this section.
Explanation.—for the purposes of this section, the expression "insurer" shall include in the case of an insurer incorporated in
(a) all his subsidiaries formed for the purpose of carrying on the business of insurance exclusively outside
(b) all his branches whether situated in
(9) No order made under this section other than an order made under Clause (b) of sub‑section (6) shall be capable of being called in question in any Court.
(10) All expenses of, and incidental to, any investigation made under this section shall be defrayed by the insurer, shall have priority over other debts due from the insurer and shall be recoverable as an arrear of land revenue.
Power to appoint staff
33A.The Authority may appoint such staff, and at such places as it or he may consider necessary, for the scrutiny of the returns, statements and information furnished by insurers under this Act and generally to ensure the efficient performance of the functions of the Authority under this Act.
Power of the Authority to issue directions
34. (1) where the Authority is satisfied that
(a) in the public interest; or
(b) to prevent the affairs of any insurer being conducted in a marina detrimental to the interests of the policy‑holders or in a manner prejudicial to the interests of the insurer; or
(c) generally to secure the proper management of any insurer, it is necessary to issue directions to insurers generally or to any insurer In particular, he may, from time to time, issue such directions as he deems fit, and the insurers or the insurer, as the case may be, shall be bound to comply with such directions:
Provided that no such directions shall be issued to any insurer in particular unless such insurer has been given a reasonable opportunity of being heard
(2) The Authority may, on representation made to him or on his own motion, modify or cancel any direction issued under sub‑section (1), and in so modifying or canceling any directions, may impose such conditions as he thinks fit, subject to which the modification or cancellation shall have effect.
Control over Management
Amendment of provisions relating to appointments of managing directors, etc., to be subject to previous approval of the Authority
34A. (1) In the case of an insurer,—
(a) no amendment made, after the commencement of the Insurance (Amendment) Act, 1968, of any provision relating to the appointment, re‑appointment, termination of appointment or remuneration of a managing or whole‑time director, or of a manager or a chief executive officer, by whatever name called, whether that provision be contained in the insurers memorandum or articles of associations, or in an agreement entered into by him, or in any resolution passed by the insurer in general meeting or by his Board of Directors shall have effect unless approved by the Authority;
(b) no appointment, re‑appointment or termination of appointment made after the commencement of the Insurance (Amendment) Act, 1968, of a managing or whole‑time director, or a manager or a chief executive officer, by whatever name called, shall have effect unless such appointment, reappointment or termination of appointment is made with the previous approval of the Authority.
Explanation- For the purposes of this sub‑section, any provision conferring any benefit or providing any amenity or perquisite, in whatever form, whether during or after the termination of the term of office of the manager or the chief executive officer, by whatever name called or a managing or whole‑time director, shall be deemed to be a provision relating to his remuneration.
(2) Nothing contained in Sections 268 and 269, the proviso to sub‑section (3) of Section 309, Sections 310 and 311, the proviso to Section 387 and Section 388 (in so far as Section 388 makes the provisions of Sections 310 and 311 apply in relation to the manager of a company) of the Companies Act, 1956 (1 of 1956), shall apply to any matter in respect of which the approval of the Authority has to be obtained under sum section (1).
(3) No act done by a person as a managing or whole‑time director or a director not liable to retire by rotation or a manager or a chief executive officer, by whatever name called, shall be deemed to be invalid on the ground that it is subsequently discovered that his appointment or re‑appointment had not taken effect by reason of any of the provisions of this Act; but nothing in this subsection shall be construed as rendering valid any act done by such person after his appointment or re‑appointment has been shown to the insurer not to have had effect.
Power of Authority to remove managerial persons from office
34B. (1) Where the Authority is satisfied that in the public interest or for preventing the affairs of an insurer being conducted in a manner detrimental to the interests of the policy‑holders or for securing the proper management of any insurer it is necessary so to do, he may, for reasons to be recorded in writing, by order, remove from office, with effect from such date as may be specified in the order, any director or the chief executive officer, by whatever name called, of the insurer.
(2) No order under sub‑section (1) shall be made unless the director or chief executive officer concerned has been given a reasonable opportunity of making a representation to the Authority against the proposed order:
Provided that if, in the opinion of the Controller, any delay would be detrimental to the interests of the insurer or his policy‑holders, he may, at the time of giving the opportunity aforesaid or at any time thereafter, by order direct that, pending the consideration of the representation aforesaid, if any, the director or, as the case may be, chief executive officer, shall not, with effect from the date of such order,
(a) act as such director or chief executive officer of the insurer;
(b) in any way, whether directly, indirectly, be concerned with, or take part in the management of the insurer.
(3) Where any order is made in respect of a director or chief executive officer of an insurer under sub‑section (1), he shall cease to be a director or as the case may be chief executive officer of the insurer and shall not, in any way, whether directly or indirectly, be concerned with, or take part in, the management of any insurer for such period not exceeding five years as may be specified in the order.
(4) If any person in respect of whom an order is made by the Authority under sub‑section (1) or under the proviso to sub‑section (2) contravenes the provisions of this section, he shall be punishable with fine which may extend to two hundred and fifty rupees for each day during which such contravention continues.
(5) Where an order under sub‑section (1) has been made, the Authority may, by order in writing, appoint a suitable person in place of the director or chief executive officer who has been removed from his office under that sub-section, with effect from such date as may be specified in the order.
(6) Any person appointed as director or chief executive officer under this section shall-
(a) hold office during the pleasure of the Controller and subject thereto for a period not exceeding three years or such further periods not exceeding three years at a time as the Authority may specify;
(b) not incur any obligation or liability by reason only of his being a director or chief executive officer or for anything done or omitted to be done in good faith in the execution of the duties of his office or in relation thereto.
(7) Notwithstanding anything contained in any law or in any contract, memorandum or articles of association, on the removal of a person from office under this section, that person shall not be entitled to claim any compensation for the loss or termination of office.
Power of Controller to appoint additional directors
34C. (l) If the Authority is of opinion that in the public interest or in the interests of an insurer or his policy‑holders it is necessary so to do, he may, from time to time, by order in writing, appoint, with effect from such date as may be specified in the order, one or more persons to hold office as additional directors of the insurer:
Provided that the number of additional directors so appointed shall not, at any time, exceed five or one‑third of the maximum strength fixed for the Board by the articles of association of the insurer, whichever is less.
(2) Any person appointed as additional director in pursuance of this section,—
(a) shall hold office during the pleasure of the Authority, and subject thereto for a period not exceeding three years or such further periods not exceeding three years at a time as the Authority may specify;
(b) shall not incur any obligation or liability by reason only of his being a director or for anything done or omitted to be done in good faith in the execution of the duties of his office or in relation thereto; and
(c) shall not be required to hold qualification shares of the insurer.
(3) For the purpose of reckoning any preparation of the total number of directors of the insurer, any additional director appointed under this section shall not be taken into account.
Sections 34B and 34C to override other laws
34‑D. Any appointment or removal of a director or chief executive officer in pursuance of Section 34B or Section 34C shall have effect notwithstanding anything to the contrary contained in the Companies Act, 1956 (1 of 1956), or any other law for the time being in force or in any contract or any other instrument.
Further powers
34E. The Controller may,—
(a) caution or prohibit insurers generally or any insurer in particular against entering into any particular transaction or class of transactions, and generally give advice to any insurer;
(b) at any time, if he is satisfied that in the public interest or in the interests of the insurer or for preventing the affairs of the insurer being conducted in a manner detrimental to the interests of the insurer or his policy‑holders, it is necessary so to do, by order in writing and on such terms and conditions as may be specified therein,—
(i) require the insurer to call a meeting of his directors for the purpose of considering any matter relating to or arising out of the affairs of the insurer;
(ii) depute one or more of his officers to watch the proceedings at any meeting of the Board of Directors of the insurer or of any committee or of any other body constituted by it; require the insurer to give an opportunity to the officers so deputed to be heard at such meetings and also require such officers to send a report of such proceedings to the Authority;
(iii) require the Board of Directors of the insurer or any committee or any other body constituted by it to give in writing to any officer specified by the Authority in this behalf at his usual address all notices of, and other communications relating to, any meeting of the Board, committee or other body constituted by it;
(iv) appoint one or more of his officers to observe the manner in which the affairs of the insurer or of his offices or branches are being conducted and make a report thereon;
(v) require the insurer to make, within such time as may be specified in the order, such changes in the management as the Authority may consider necessary.
Power of Authority to issue directions regarding re‑insurance treaties, etc
34F. (1) Without prejudice to the generality of the powers conferred by sub-section (1) of Section 34, the Authority may, if he is of opinion that the terms or conditions of any re‑insurance treaty or other re‑insurance contract entered into by an insurer are not favourable to the insurer or are detrimental to the public interest, he may, by order, require, the insurer to make, at the time when the renewal of such treaty or contract becomes next due, such modifications in the terms and conditions of such treaty or contract as he may specify in the order or not to renew such treaty or contract, and, if the insurer fails to comply with such order, he shall be deemed to have failed to comply with the provisions of this Act.
(2) The Authority may, if he has reason to believe that an insurer is entering into or is likely to enter into re‑insurance treaties or other re‑insurance contracts which are not favourable to the insurer or are detrimental to the public interest, he may, by order, direct that the insurer shall not enter into such re‑insurance treaty or other re‑insurance contract unless a copy of such treaty or contract has been furnished to him in advance and the terms and conditions thereof have been approved by him and if the insurer fails to comply with such order he shall be deemed to have failed to comply with the requirements of this Act.
Power of Authority to order closure of foreign branches
34G. Without prejudice to the generality of the powers conferred by sub‑section (1) of Section 34 the Controller may, if he has reason to believe that the working of any branch outside India of an insurer being an insurer specified in sub‑clause (b) of clause (9) of Section 2, is generally resulting in a loss or that the affairs of that branch are being conducted in a manner prejudicial to the interests of the policy‑holders or the public interest, he may, after giving an opportunity to the insurer of being heard, direct that the insurer shall cease, within such period not being less than one year, as may be specified in the order, to carry on insurance business in the country in which such branch is situated and if the insurer fails to comply with such order he shall be deemed to have failed to comply with the provisions of this Act.
Search and seizure
34H. (1) Where the Chairperson of the Authority in consequence of information in his possession, has reason to believe that—
(a ) any person who has been required under sub‑section (2) of Sec. 33 to produce, or cause to be produced, any books, accounts or other documents in his custody or power has omitted or failed to produce, or cause to be produced, such books, accounts or other documents, or
(b) any person to whom a requisition to produce any books, accounts or other documents as aforesaid has been or might be issued will not, or would not, produce or cause to be produced, any books, accounts or other documents which will be useful for, or relevant to an investigation under sub‑section (1) of Section 33 or an inspection under sub‑section (1A) of that section, or
(c) a contravention of any provision of this Act has been committed or is likely to be committed by an insurer, or
(d) any claim which is due to be settled by an insurer, has been or is likely to be settled at a figure higher than a reasonable amount, or
(e) any claim which is due to be settled by an insurer, has been or is likely to be rejected or settled at a figure lower than a reasonable amount,
(f) any illegal rebate or commission has been paid or is likely to be paid by an insurer, or
(g) any books, accounts, receipts, vouchers, survey reports or other documents, belonging to an insurer are likely to be tampered with, falsified or manufactured, he may authorise any subordinate officer of his, not lower in rank than an officer authorized by the Authority (hereafter referred to as the authorised officer) to-
(i) enter and search any building or place where he has reason to suspect that such books, accounts or other documents, or any books or papers relating to any claim, rebate or commission or any receipts, vouchers, reports or other documents are kept;
(ii) break open the lock of any door, box, locker, safe, almirah or other receptacle for exercising the powers conferred by C1ause (i) where the keys thereof are not available;
(iii) seize all or any such books, accounts or other documents found as a result of such search;
(iv) place marks of identification on such books, accounts or other documents or make or cause to be made extracts or copies there from.
(2) The authorised officer may requisition the services of any police officer or of any officer of the Central Government, or of both, to assist him for all or any of the purposes specified in sub‑section (1) and it shall be the duty of every such officer to comply with such requisition.
(3) The authorised officer may, where it is not practicable to seize any such book, account or other document, specified in sub-section (1), serve an order on the person who is in immediate possession or control thereof that he shall not remove, part with or otherwise deal with it except with the previous permission of such officer and such officer may take such steps as may be necessary for ensuring compliance with this sub‑section.
(4) The authonsed officer may, during the course of the search or seizure, examine on oath any person who is found to be in possession or control of any books, accounts or other documents, and any statement made by such person during such examination may thereafter be used in evidence in any proceeding under this Act.
(5) The books, accounts, papers, receipts, vouchers, reports, or other documents seized under subsection (1) shall not be retained by the authorised officer for a period exceeding one hundred and eighty days from the date of the seizure unless the reasons for retaining the same recorded by him in writing and the approval of the Chairperson of the Authority for such retention is obtained:
Provided that the Chairperson of the Authority shall not authorise the retention of the books, accounts, papers, receipts, vouchers, reports, or other documents for a period exceeding thirty days after all the proceedings under this Act for which the books, accounts, papers, receipts, vouchers, or other documents are relevant are completed.
(6) The person from whose custody any books, accounts, papers, receipts, vouchers, reports, or other documents are seized under sub-section (1) may make copies thereof, or take extracts there from, in the presence of the authorised officer or any other person empowered by him in this behalf at such place and Idle as the authorised officer may appoint in this behalf.
(7) If a person legally entitled to the books, accounts, papers, receipts, vouchers, reports, or other documents seized under sub‑section (1) objects for any reason to the approval given by the Chairperson of the Authority under sub‑section (5), he may make an application to the Central Government stating therein the reasons for such objection and requesting for the return of the books, accounts, papers, receipts, vouchers, reports, or other documents.
(8) On receipt of the application under sub‑section (7) the Central Government may, after giving the applicant an opportunity of being heard, pass such orders as it thinks fit.
(9) The provisions of the Code of Criminal Procedure, 1898 (5 of 1898), relating to searchers and seizures shall apply, so far as may be, to every search and seizure made under sub‑section (1).
(10) The Central Government may, by notification in the official Gazette, make rules in relation to any search or seizure under this section; in particular, and without prejudice to the generality of the foregoing power, such rules may provide for the procedure to be followed by the authorised officer,—
(i) for obtaining ingress into such building or place to be searched where free ingress thereto is not available;
(ii) for ensuring safe custody of any books, accounts, papers, receipts, vouchers, reports, or other documents seized under this section.
Amalgamation and Transfer of Insurance Business
Amalgamation and transfer of insurance business
35. (1) No life insurance business of an insurer specified in sub-clause (a) (ii) or sub-clause (b) of C1ause (9) of Section 2 shall be transferred to any person or transferred to or amalgamated with the life insurance business of any other insurer except in accordance with a scheme prepared under this section and approved by the Authority.
(2) Any scheme prepared under this section shall set out the agreement under which the transfer or amalgamation is proposed to be effected, and shall contain such further provisions as may be necessary for giving effect to the scheme.
(3) Before an application is made to the Authority to approve any such scheme, notices of the intention to make the application together with a statement of the nature of the amalgamation or transfer, as the case may be, and of the reason there for shall, at least two months before the application is made, be sent to the Authority and certified copies four in number, of each of the following documents shall be furnished to the Authority, and other such copies shall during the two months aforesaid be kept open for the inspection of the members and policy‑holders at the principal and branch offices and chief agencies of the insurers concerned, namely:-
(a) a draft of the agreement or deed under which it is proposed to effect the amalgamation or transfer;
(b) balance‑sheets in respect of the insurance business of each of the insurers concerned in such amalgamation of transfer, prepared in the form set forth in Part II of the First Schedule and in accordance with the regulations contained in Part I of the Schedule;
(c) actuarial reports and abstracts in respect of the life insurance business of each of the insurers so concerned, prepared in conformity with the requirements of Part II of the Fourth and Fifth Schedules and in accordance with the regulations contained in Part I of the Schedule concerned ;
(d) a report on the proposed amalgamation or transfer, prepared by an independent actuary who has never been, professionally connected; with any of the parties concerned in the amalgamation or transfer at any time in the five years preceding the date on which he signs his report;
(e) any other reports on which the scheme of amalgamation or transfer was founded.
The balance‑sheets, reports and abstracts referred to in Clauses (b), (c) and (d) shall all be prepared as at the date at which the amalgamation or transfer if approved by the Authority is to take effect, which date shall not be more than twelve months before the date on which the application to the Authority is made under this section:
Provided that if the Authority so directs in the case of any particular insurer there may be substituted respectively for the balance‑sheet, report and abstract referred to in Clauses. (b) and (c) prepared in accordance with this sub‑section certified copies of the last balance‑sheet and last report and abstract prepared in accordance with Sections 11 and 13 of this Act or Sections 7 and 8 of the Indian Life Assurance Companies Act, 1912 (6 of 1912), if that balance‑sheet is prepared as at a date not more than twelve months, and that report and abstract as at a date not more than five years, before the date on which the application to the Authority is made under this section.
Sanction of amalgamation and transfer by Authority.
36. (1) When any application, such as, is referred to in sub‑section (3) of Section 35 is made to the Authority, the Authority shall cause, if for special reasons he so directs, notice of the application to be sent to every person resident in India who is the holder of a life policy of any insurer concerned and shall cause a statement of the nature and terms of the amalgamation or transfer, as the case may be, to be published in such manner and for such period as he may direct, and, after hearing the directors and such policy‑holders as apply to be heard and other persons whom he considers entitled to be heard, may approve the arrangement, he is satisfied no sufficient objection to the arrangement has been established 4 lend shall make such consequential orders as are necessary to give effect to the arrangement, including orders as to the disposal of any deposit made under Section 7 or Section 98:
Provided that
(a ) no part of the deposit made by any party to the amalgamation or transfer shall be returned except where, after effect is given to the arrangement, the whole of the deposit to be made by the insurer carrying on the amalgamated business or the person to whom the business is transferred is completed,
(b) only so much shall be returned as is no longer required to complete the deposit last mentioned in C1ause (a), and
(c) while the deposit last mentioned in Clause (a) remains uncompleted, on accession, resulting from the arrangement, to the amount already deposited by the insurer carrying on the amalgamated business or the person to whom the business is transferred shall be appropriated as payment or part‑payment of any instalment of deposit subsequently due from him under Section 7 or Section 98.
(2) If the arrangement involves a reduction of the amount of the insurance and other contracts of the transferor insurer or of any or all of the insurers concerned in the amalgamation, the Authority may approve the arrangement, reducing the amount of such contracts upon such terms and subject to such conditions as he may think proper, and the reduction of contracts as approved by the Authority shall be valid end binding on all the parties concerned.
Statements required after amalgamation and transfer
37. Where an amalgamation takes place between any two or more insurers, or where any business of an insurer is transferred, whether in accordance with a scheme confirmed by the Authority or otherwise, the insurer carrying on the amalgamated business or the person to whom the business is transferred, as the case may be, shall, within three months from the date of the completion of the amalgamation or transfer, furnish in duplicate to the Authority-
(a) a certified copy of the scheme, agreement or deed under which the amalgamation or transfer has been effected, and
(b) a declaration signed by every party concerned or in the case of a company by the chairman and the principal officer that to the best of their belief every payment made or to be made to any person whatsoever on account of the amalgamation or transfer is therein fully set forth and that no other payments beyond those set forth have been made or are to be made either in money, policies, bonds, valuable securities or other property by or with the knowledge of any parties to the amalgamation or transfer, and
(c) where the amalgamation or transfer has not been made in accordance with a scheme sanctioned by the Authority under Section 36-
(i) balance‑sheet in respect of the insurance business of each of the insurers concerned in such amalgamation or transfer, prepared in the Form set forth in Part II of the First Schedule and in accordance with the regulations contained in Part I of that Schedule, and
(ii) certified copies of any other reports on which the scheme of amalgamation or transfer was founded.
Power of the Authority to prepare scheme of Amalgamation
(37A). (1) If the Authority is satisfied that-
(i) in the public interest; or
(ii) in the interests of the policy‑holders; or
(iii) in order to secure the proper management of an insurer; or
(iv) in the interests of insurance business of the country as a whole;
it is necessary so to do, he may prepare a scheme for the amalgamation of that insurer with any other insurer (hereinafter referred to in this section as the transferee insurer):
Provided that no such scheme shall be prepared unless the other insurer has given his written consent to the proposal for such amalgamation
(2) The scheme aforesaid may contain provisions for all or any of the following matters, namely:
(a) the constitution, name and registered office, the capital, assets, powers, rights, interests, authorities and privileges, and the liabilities, duties and obligations of the transferee insurer;
(b)the transfer to the transferee insurer the business, properties, assets and liabilities of the insurer on such terms and conditions as may be specified in the scheme;
(c) any change in the Board of Directors, or the appointment of a new Board of directors of the transferee‑insurer and the authority by whom, the manner in which, and the other terms and conditions on which such change or appointment shall be made, and in the case of appointment of a new Board of Director or of any director, the period for which such appointment shall be made;
(d) the alteration of the memorandum and articles of association of the transferee insurer for the purpose of altering the capital thereof or for such other purposes as may be necessary to give effect to the amalgamation;
(e} subject to the provisions of the scheme, the continuation by or against the transferee insurer, of any actions or proceedings pending against the insurer;
(f) the reduction of the interest or rights which the shareholders, policy holders and other creditors have in or against the insurer before the amalgamation to such extent as the Authority considers necessary in the public interest or in the interests of the shareholders, policy‑holders and other creditors or for the maintenance of the business of the insurer;
(g) the payment in cash or otherwise to policy‑holders, and other creditors in full satisfaction of their claim,-
(i) in respect of their interest or rights in or against the insurer before the amalgamation; or
(ii) where their interest or rights aforesaid in or against the insurer has or have been reduced under clause (f), in respect of such interest or rights as so reduced;
(h) the allotment to the shareholders of the insurer for shares held by them therein before the amalgamation Whether their interest in such shares has been reduced under clause (f) or not] of shares in the transferee insurer and where any shareholders claim payment in cash and not allotment of shares, or where it is not possible to allot shares to any sharp holders the payment in cash to those shareholders in full satisfaction of their claim—
(i) in respect of their interest in shares in the insurer before the amalgamation; or
(ii) where such interest has been reduced under clause (f) in respect of their interest in shares as so reduced;
(i) the continuance of their services of all the employees of the insurer (excepting such of them as not being workmen within the meaning of the Industrial Disputes Act, 1947 (14 of 1947), are specifically mentioned in the scheme) in the transferee insurer at the same remuneration and on the same terms and conditions of service, which they were getting or, as the case may be, which they were being governed, immediately before the date of the amalgamation:
Provided that the scheme shall contain a provision that the transferee insurer shall pay or grant not later than the expiry of the period of three years, front the date of the amalgamation, to the said employees the same remuneration and the same terms and conditions of service as are applicable to the other employees of corresponding rank on status of the transferee insurer subject to the qualifications and experience of the said employees being the same as or equivalent to those of such other employees of the transferee insurer:
Provided further that if in any case any doubt or difference arises as to whether the qualification and experience of any of me said employees are the same as or are equivalent to the qualifications and experience of the other employees of corresponding rank or status of the transferee insurer, the doubt or difference shall be referred to the Authority whose decision thereon shall be final;
(j) notwithstanding anything contained in clause (i), where any of the employee, of the insurer not being workmen within the meaning of the Industrial Disputes Act, 1947 (14 of 1947), are specifically mentioned in the scheme under clause (i) or where any employees of the insurer have by notice in writing given to the insurer or, as the case may be, the transferee insurer at any time before the expiry of one month next following the date on which the scheme is sanctioned by the Central Government, intimated their intention of not becoming employees of the transferee insurer, the payment to such employees of compensation, if any, to which they are entitled under the Industrial Disputes Act, 1947, and such pension, gratuity, provident fund, or other retirement benefits ordinarily admissible to them under the rules or authorizations of the insurer immediately before the date of the amalgamation;
(k) any other terms and conditions for the amalgamation of the insurer;
(l) such incidental, consequential and supplemental matters as are necessary to secure that the amalgamation shall be fully and effectively carried out.
(3) (a) A copy of the scheme prepared by the Authority shall be sent in draft to the insurer and also to the transferee insurer and any other insurer concerned in the amalgamation, for suggestions and objections, if any, within such period as the Authority may specify for this purpose.
(b) The Authority may make such modifications, if any, in the draft scheme as he may consider necessary in the light of suggestions and objections received from the insurer and also from the transferee insurer, and any other insurer concerned in the amalgamation and from any shareholder, policyholder or other creditor of each of those insurers and the transferee insurer.
(4) The scheme shall thereafter be placed before the Central Government for its sanction and the Central Government may sanction the scheme without any modification or with such modifications as it may consider necessary; and the scheme as sanctioned by the Central Government shall come into force on such date as the Central Government may specify in this behalf:
Provided that different dates may be specified for different provisions of the scheme
(5) The sanction accorded by the Central Government under sub‑section (4) shall be conclusive evidence that all the requirements of this section relating to amalgamation have been complied with and a copy of the sanctioned scheme certified in writing by an officer of the Central Government to be a true copy thereof, shall, in all legal proceedings (whether in appeal or otherwise) be admitted as evidence to the same extent as the original scheme.
(6) The Authority may, in like‑manner, add to, amend or vary any scheme made under this section.
(7) On and from the date of the coming into operation of the scheme or any provision thereof; the scheme or such provision shall be binding on the insurer or, as the case may be, on the transferee‑insurer and any other insurer concerned in the amalgamation and also on all the shareholders, policy‑holders and other creditors and employees of each of those insurers and of the transferee insurer, and on any other person having any right or liability in relation to any of those insurers or the transferee insurer.
(8) On and from such date as may be specified by the Central Government in this behalf, their properties and assets of the insurer shall, by virtue of and to the extent provided in the scheme, stand transferred to, and vest in, and the liabilities of the insurer shall, by virtue of and to the extent provided in the scheme, stand transferred to and become the liabilities of, the transferee insurer.
(9) If any difficulty arises in giving effect to the provisions of the scheme the Central Government may by order do anything not inconsistent with such provisions which appears to it necessary or expedient for the purpose of removing the difficulty.
(10) Copies of every scheme made under this section and of every order made under sub‑section (9) shall be laid before each House of Parliament, as soon as may be, after the scheme has been sanctioned by the Central Government or, as the case may be, the order has been made.
(11) Nothing in this section shall be deemed to prevent the amalgamation with an insurer by a single scheme of several insurers.
(12) The provisions of this section and of any scheme made under it shall have effect notwithstanding anything to the contrary contained in any other provisions of this Act or in any other law or any agreement, award or other instrument for the time being in force.
(13) The provisions of section 37 shall not apply to an amalgamation given effect to under provisions of this section.
Assignment or transfer of policies and nominations
Assignment and transfer of insurance policies
38. (1) A transfer or assignment of a policy of life insurance, whether with or without consideration, may be made only by an endorsement upon the policy itself or by a separate instrument, signed in either case by the transferor or by the assignor or his duly authorised agent and attested by at least one witness, specifically setting forth the fact of transfer or assignment.
(2) The transfer or assignment shall be complete and effectual upon the execution of such endorsement or instrument duly attested but except where the transfer or assignment is in favour of the insurer shall not be operative as against an Insurer and shall not confer upon the transferee or assignee, or his legal representative, any right to sue for the amount of such policy or the moneys secured thereby until a notice in writing of the transfer or assignment if and either the said endorsement or instrument itself or a copy thereof certified to be correct by both transferor and transferee or their duly authorised agents have been delivered to the insurer:
Provided that where the insurer maintains one or more places of business in
(3) The date on which the notice referred to in sub‑section (2) is delivered to the insurer shall regulate the priority of all claims under a transfer or assignment as between persons interested in the policy: and where there is more then one instrument of transfer or assignment, the priority of the claims under such instruments shall be governed by the order in which the notices referred to in sub‑section (2) are delivered.
(4) Upon the receipt of the notice referred to in sub‑section (2), the insurer shall record the fact of such transfer or assignment together with the date thereof and the name of the transferee or the assignee and shall, on the request of the person by whom the notice was given, or of the transferee or assignee, on payment of a fee not exceeding one rupee, grant a written acknowledgment of the receipt of such notice; and any such acknowledgment shall be conclusive evidence against the insurer that he has duly received the notice to which such acknowledgment relates.
(5) Subject to the terms and conditions of the transfer or assignment, the insurer shall, from the date of the receipt of the notice referred to in subsection (2), recognise the transferee or assignee named in the notice as the only person entitled to benefit under the policy, and such person shall subject to all liabilities and equities to which the transferor or assignor was subject at the date of the transfer or assignment and may institute any proceedings in relation to the policy without obtaining the consent of the transferor or assignor or making him a party to such proceedings.
(6) Any rights and remedies of an assignee or transferee of a policy of life insurance under an assignment or transfer affected prior to the commencement of this Act shall not be affected by the provisions of this section.
(7) Notwithstanding any law or custom having the force of law to the contrary, and assignment in favour of a person made with the condition that it shall be inoperative or that the interest shall pass to some other person on the happening of a specified event during the lifetime of the person whose life is insured, and an assignment in favour of the survivor or survivors of a number of persons shall be valid.
Nomination by policy‑holder
39. (1) The holder of a policy of life insurance on his own life, may, when effecting the policy or at any time before the policy matures for payment, nominate the person or persons to whom the money secured by the policy shall be paid in the event of his death:
Provided that, where any nominee is a minor, it shall be lawful for the policy holder to appoint in the prescribed manner any person to receive the money secured by the policy in the event of his death during the minority of the nominee.
(2) Any such nomination in order to be effectual shall, unless it is incorporated in the text of the policy itself, be made by an endorsement on the policy communicated to the insurer and registered by him in the records relating to the policy and any such nomination may at any time before the policy matures for payment be cancelled or changed by an endorsement or a further endorsement or a will, as the case may be, but unless notice in writing of any such cancellation or change has been delivered to the insurer, the insurer shall not be liable for any payment under the policy made bona fide by him to a nominee mentioned in the text of the policy or registered in records of the insurer.
(3) The insurer shall furnish to the policy‑holder a written acknowledgment of having registered a nomination or a cancellation change thereof, and may charge a fee not exceeding one rupee for registering such cancellation or change.
(4) A transfer or assignment of a policy made in accordance with section 38 shall automatically cancel a nomination:
Provided that the assignment of a policy to the insurer who bears the rats on the policy at the time of the assignment, in consideration of a loan granted by that insurer on the security of the policy within its surrender value, or its reassignment on repayment of the loan shall not cancel a nomination, but shall affect the rights of the nominee only to the extent of the insurer's interest in the policy.
(5) Where the policy matures for payment during the lifetime of the person whose life is insured or where the nominee or, if there are more nominees than one, all the nominees die before the policy-holder or his heirs or legal representatives or the holder of a succession certificate, as the case may be.
(6) Where the nominee or, if there are more nominees than one, a nominee or nominees survive the person whose life is insured, the amount secured by the policy shall be payable to such survivor or survivors.
(7) The provisions of this section shall not apply to any policy of life insurance to which section 6 of the Married Women's Property Act, 1874 (3 of 1874), applies or has at any time applied:
Provided that where a nomination made whether before or after the commencement of the Insurance (Amendment) Act, 1946 (VII of 1946), in favour of the wife of the person who has insured his life or of his wife and children or any of them is expressed, whether or not on the face of the policy as being made under this section, the said section 6 shall be deemed not to apply or not to have applied to the policy.
Commission and Rebates and Licensing of Agents
Prohibition of payment by way of commission or otherwise for procuring business
40. (1) No person shall after the expiry of six months from the commencement of this Act, pay or contract to pay any remuneration or reward whether by way of commission or otherwise for soliciting or procuring insurance business in India to any person except an insurance agent or an intermediary or insurance intermediary.
(1A) In this section and section 40A, 41 and 43 references to an insurance agent shell be construed as including references to an individual soliciting or procuring insurance business exclusively in the territories which Immediately before the 1st November, 1956 were comprised in a Part B State notified in this behalf by the Central Government in the Official Gazette and holding a valid licence as an insurance agent under the law of that Part B State.
(2) No insurance agent shall be paid or contract to be paid by way of commission or as remuneration in any form an amount exceeding, in the case of life insurance business, forty per cent of the first year’s premium payable on any policy or policies effected through him and five per cent of a renewal premium, payable on such a policy, or, in the case of business of any other class, fifteen per cent of the premium:
Provided that insurers in respect of life insurance business only may pay during the first ten years of their business to their insurance agents fifty‑five per cent of the first years premium payable on any policy or policies effected through them and six per cent of the renewal premiums payable on such policies:
Provided further that nothing in this sub‑section shall apply in respect of any policy of life insurance issued after the 31st day of December, 1950, or in respect of any policy of general insurance issued after the commencement of the Insurance (Amendment) Act, 1950 (47 of 1950).
(2A) Save as hereinafter provided, no insurance agent or intermediary or insurance intermediary shall be paid or contract to be paid by way of commission or as remuneration in any form any amount in respect of any policy not effected through him:
Provided that where a policy of life insurance has lapsed and it cannot under the terms and conditions applicable to it be revived without further medical examination of the person whose life was insured thereby, an insurer, after giving by notice in writing to the insurance agent through whom the policy was effected if such agent continues to be an agent of the insist an opportunity to effect the revival of the policy within a time specified in the notice, being not less than one month from the date of the receipt by him of the notice, may pay to another insurance agent who effects the revival of the policy an amount calculated at a rate not exceeding half the rate of commission at which the agent through whom the policy was effected would have been paid had the policy not lapsed, on the sum payable on revival of the policy on account of arrear premiums (excluding any interest on such arrear premiums) and also on the subsequent renewal premiums payable on the policy.
(3) Nothing in this section shall prevent the payment under any contract existing prior to the 27th day of January, 1937, of gratuities or renewal commission to Many person, whether an insurance agent within the meaning of this Act or not, or to his representatives after his decease in respect of insurance business effected through him before the said date.
Limitation of expenditure on commission
40A. (l) No person shall pay or contract to pay to an insurance agent, and no insurance agent shall receive or contract to receive by way of commission or remuneration in any form in respect of any policy of life insurance issued in India by an insurer after the 31st day of December, 1950, and effected through an insurance agent, an amount exceeding-
(a) where the policy grants an immediate annuity or a deferred annuity in consideration of a single premium, or where only one premium is payable on the policy, two per cent of that premium,
(b) where the policy grants a deferred annuity in consideration or more than one premium, seven and a half per cent of the first year's premium, and two per cent of each renewal premium payable on the policy, and
(c) in any other case, thirty‑five per cent of the first year's premium, seven and a half per cent of the second and third year's renewal premium, and thereafter five per cent of each renewal premium payable on the policy:
Provided that in a case referred to in clause (c), an insurer, during the first ten years of his business may pay to an insurance agent and an insurance agent may receive from such an insurer, forty per cent of the first year's premium payable on the policy:
Provided further that in case referred to in clause (c) where the rate of commission payable on the first year’s premium is equal to or less than twenty-one per cent thereof, and the rate on the fourth and fifth year’s premiums does not exceed sis per cent thereof, the Life Insurance Corporation of India may pay to an insurance agent, and the insurance agent may receive from it, commission on the sixth and subsequent year’s renewal premiums payable on the policy at a rate not exceeding six per cent of each renewal premium.
(2) No person shall pay or contract to pay to a special agent, and no special agent, shall receive or contract to receive, by way of commission or as remuneration in any form, in respect of any policy of life insurance issued in India by an insurer after the 31st day of December, 1950, and effected through a special agent, an amount exceeding—
(a) in a case referred to in clause (a) of sub‑section (1), one‑half per cent of the premium,
(b) in a case referred to in clause (b) of sub‑section (1), two per cent of the first year's premium payable on the policy and
(c) in a case referred to in clause (c) of sub‑section (1), fifteen per cent of the first year's premium payable on the policy:
Provided that in a case referred to in clause (c), an insurer, during the first ten years of his business, may pay to a special agent, and a special agent may receive from such an insurer, seventeen and a half per cent of the first year's premium payable on the policy:
Provided further that in a case referred to in clause (c), where the rate of commission payable on the first year’s premium is equal to or less than twenty-one per cent thereof, and the rate on the fourth and fifty year’s premiums does not exceed six per cent thereof, the Life Insurance Corporation of India may pay to an insurance agent, and the insurance agent may receive from it, commission on the sixth and subsequent year’s renewal premiums payable on the policy at a rate not exceeding six per cent of each renewal premium.
(3) No person shall pay or contract to pay to a special agent, and no special agent, shall receive or contract to receive, by way of commission or remuneration in any form in respect of any policy of general insurance issued in India by an insurer after the COMMENCEMENT OF Insurance (Amendment Act, 1968, and effected through an insurance agent, an amount not exceeding fifteen per cent of the premium payable on the policy where the policy relates to fire or marine insurance or miscellaneous insurance.
(4) No person shall pay or contract to pay to a principal agent, and no principal agent shall receive or contract to receive, by way of commission or remuneration in any form, in respect of any policy of general insurance issued in India by an insurer after the commencement of the Insurance (Amendment) Act, l950, and effected through a principal agent, an amount exceeding
(a) in the case referred to in clause (a) of sub‑section (3), twenty per cent of the premium payable on the policy, and
(b) in the case referred to in clause (b) of that sub‑section, fifteen per cent of the policy,
less any commission payable to any insurance agent in respect of the said policy:
Provided that the Authority may, in such circumstances and to such extent and for such period as may be specified, authorise the payment of commission or remuneration exceeding the limits specified in this sub‑section to a principal agent of an insurer incorporated or domiciled elsewhere than in India, if such agent carries out and has continuously carried out in his own office duties on behalf of the insurer which would otherwise have been performed by the insurer.
(5) Without prejudice to the provisions of section 102 in respect of a contravention of any of the provisions of the preceding sub‑sections by an insurer, any insurance agent who contravenes the provisions of sub‑section (1) or sub-section (3) shall be punishable with fine which may extend to one hundred rupees.
Limitation of expenses of management in life insurance business
40B. (l) Every insurer transacting life insurance business in
(2) After the 31st day of December, 1950, no insurer shall, in respect of life insurance business transacted by him in India, spend as expenses of management in any calendar year an amount in excess of the prescribed limits and in prescribing any such limits regard shall be had to the size and age of the insurer and the provision generally Made for expenses of management in the premium rates of insurers:
Provided that where an insurer has spent as such expenses in any year an amount in excess of the amount permissible under this sub‑section, he shall not be deemed to have contravened the provisions of this section, if the excess amount so spent is within such limits as may be fixed in respect of the year by the Authority after consultation with the Executive Committee of the Life Insurance Council constituted under section 64‑F, by which the actual expenses incurred may exceed the expenses permissible under this sub-section.
(3) In respect of any statement mentioned in subsection (1), the Authority may require that it shall be submitted to another actuary, appointed by the insurer for the purpose and approved by the Authority, for certification by him, whether with or without modifications.
(4) Every insurer transacting life insurance business in
(a) a certificate signed by the chairman and two directors and by the principal officer of the insurer, and an auditor's certificate, certifying that all expenses of management in respect of life insurance business transacted by the insurer in India have been fully debited in the revenue account as expenses, and
(b) if the insurer in carrying on any other class of insurance business in addition to life insurance business an auditor's certificate certifying that all charges incurred in respect of his life insurance business and in respect of his business other than life insurance business have been fully debited in the respective revenue accounts.
Explanation.—in this section.-
(a) "calendar year" or "year" means, in relation to an insurer who is required to furnish returns in accordance with sub‑section (2) of section 16, the period covered by the revenue account furnished by such insurer under clause (b) of that sub‑section;
(b) "expenses of management" means all charges wherever incurred whether directly or indirectly, and includes-
(i) commission payments of all kinds,
(ii) any amount of expenses capitalized,
(iii) in the case of an insurer having his principal place of business outside India, a proper share of head office expenses which shall not be less than such percentage as may be prescribed of the total premiums (less re‑insurance) received during the year in respect of life insurance business transacted by him in India,
but does not include in the case of an insurer having his principal place of business in
Limitation of expenses of management in general insurance business
40C. (1) After the 31st day of December, 1949, no insurer shall, in respect of any class of general insurance business transacted by him in India, spend in any calendar year as expenses of management including commission or remuneration for procuring business an amount in excess of the prescribed limits arid in prescribing any such limits regard shall be had to the size and age of the insurer:
Provided that where an insurer has spend as such expenses in any year an amount in excess of the amount permissible under this subsection, he shall not be deemed to have contravened the provisions of this section, if the excess amount so spent is within such limits as may be fixed in respect of the year by the Authority after consultation with the Executive Committee of the General Insurance. Council constituted under section 64F, by which the actual expenses incurred may exceed the expenses permissible under this sub-section.
(2) Every insurer as aforesaid shall incorporate in‑the revenue account a certificate signed by the chairman and two directors and by the principal officer of the insurer, and by an auditor certifying that all expenses of management wherever incurred, whether directly or indirectly, in respect of the business referred to in this section have been fully debited in the revenue account as expenses.
Explanation.—In this section,—
(a) "calendar year" shall have the meaning assigned to it in section 40B;
(b) "expenses of management" means all charges, wherever insured whether directly or indirectly, including commission payments of all kinds and, in the case of an insurer having his principal place of business outside India, a proper share of head office expenses, which shall not be less than such percentage as may be prescribed, of his gross premium income (that is to say, the premium income without taking into account premiums or reinsurance ceded or accepted) written direct in India during the year, but in computing the expenses of management in India the following, and only the following expenses may be excluded, namely
(i) in the case of an insurer having his principal place of business in India, a share of head office expenses in respect of general insurance business transacted by him outside India not exceeding such percentage of his gross direct premium written outside India as may be prescribed;
(ii) in the case of an insurer having his principal place of business outside India, a share of the expenses of his office in India in respect of general insurance business transacted by him outside India through his office in India, not exceeding such percentage of his gross direct premium written outside India through his office in India, as may be prescribed;
(iii) any expenses debited to profit and loss account relating exclusively to the management of capital, and dealings with share holders and a proper share of managerial expenses calculated in such manner as may be prescribed; and
(iv) any expenses debited to claims in the revenue account in Form F of Part II of the Third Schedule;
(c) "insurance business transacted in
Prohibition of rebates
41. (1) No person shall allow or offer to allow, either directly or indirectly, as an inducement to any person to take or renew or continue an insurance in respect of any kind of risk relating to lives or property in India, any rebate of the whole or part of the commission payable or any rebate of the premium shown on the policy, nor shall any person taking out or renewing or continuing a policy accept any rebate, except such rebate as may be allowed in accordance with the published prospectuses or tables of the insurer:
Provided that acceptance by an insurance agent of commission in connection with a policy of life insurance taken out by himself on his own life shall not be deemed to be acceptance of a rebate of premium within the meaning of this sub‑section if at the time of such acceptance the insurance agent satisfies the prescribed conditions establishing that he is a bona fide insurance agent employed by the insurer.
(2) Any person making default in complying with the provisions of this section shall be punishable with fine which may extend to five hundred rupees.
