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REGISTERED No. D-28

The Gazette of India

EXTRAORDINARY

PUBLISHED BY AUTHORITY

NEW DELHI, TUESDAY, NOVEMBER 8, 1949

GOVERNMENT OF INDIA

CONSTITUENT ASSEMBLY OF INDIA (LEGISLATIVE)

NOTIFICATION

New Delhi, the 8th November, 1949

No. F.154-I/49-A—Under Rule 39 of the Constituent Assembly (Legisla- tive) Rules of Procedure and Conduct of Business, the Governor-General has been pleased to order the publication in the Gazette of India of the fallowing Bill, together with the Statement of Objects and Reasons relating thereto, and the Bill and the Statement of Objects and Reasons are accordingly published for general information:—

A. BILL NO. 47 OF 1949

A Bill further to amend the Insurance Act, 1938

WHEREAS it as expedient further to amend the Insurance Act, 1938 (IV of 1938), for the purposes hereinafter appearing;

It is hereby enacted as follows —

1. Short title and commencement.—(1) This Act may be called the insurance (Amendment) Act, 1949.

(2) It shall come into force on such date as the Central Government may, by notification in the official Gazette, appoint in this behalf, and different dates nay be appointed for different provisions of this Act.

2. Amendment of section 1, Act IV of 1938. —For sub-section (2) of section 1 •f the Insurance Act, 1938 (hereinafter referred to as the said Act), the follow- ing sub-section shall be substituted, namely: —

"(5) It extends to all the Provinces of India, and also to every Acced- ing State to the extent to which the Dominion Legislature has power to make laws for that State with respect to the matters dealt with in this. Act."

( 2 1 6 7)

3. Amendment of section 2, Act IV of 1938.—In section 2 of the said Act,—

(1) for olause (3), the following clause shall be substituted, namely: —

'(-9) "approved securities" means—

(i) Government securities and other securities charged on the revenues of the Central Government or of a Provincial Govern- ment, or guaranteed fully as regards principal and interest by the Central Government, any Provincial Government, the Secretary of State in Council or the Secretary of State;

(ii) debentures or other securities for money issued under the authority of any Central Act oi Act of a Legislature established in a Province by or on behalf of a port trust or municipal corpora- tion or city improvement trust in any Presidency-town;

(til) shares of u corporation established by law and guaranteed fully by the Central Government or a Provincial Government aw to the repayment of the principal and the payment of dividend;

(iv) securities issued or guaranteed fully an regards principal and interest by the Government of auy Acceding Stat© or other Indian State and specified as approved securities for the purposes of this Act by the Central Government by notification in the official Gazette; and

(v) subject to the limitations contained in the proviso hereto, securities guaranteed fully as regards principal and interest by a Provincial Government in Pakistan or charged on the revenues of any part of that Dominion, and debentures or other securities for money issued by or on behalf of the trustees of the port of Karachi:

Provided that securities or debentu es specified in item (?>) shall be recognised as approved securities only for such purposes and for such period and subject to such conditions as may be prescribed.';

(2) for clause (4), the following clause shall be substituted, namely:—•

'(4) "auditor" means a person qualified under the Chartered Accountants Act, 1949 (XXXVIII of 1949; to net as an auditor of companies;'; (,?) after clause (4), the following clause shall be inserted, namely: — '(4A) "banking company" and "company" shall have the mean- ings respectively assigned to them in clauses (c) and (d) of sub-section (1) of section 5 of the Banking Companies Act, 1949 (X of 1949);';

(4) after clause (.5), the following clauses Rhall be inserted, namely: —

'(oA) "chief agent" means n person who, not bein

(;') performs any administrative and organising functions for the insurer, and

(ii) procures life insurance business for the insurer by cra- •nlovind or causing to be employed insurance agents on behalf of the insurer. (5B) "Controller-GMiieral of Insurance" or "Controller-General" means the officer apnointnd bv the Centrnl Government to perform the duties of the Controller-General of Insurance under this Act;';

(5) after clause (6), the following clauses shall be inserted, namely: —

'(6A) "fire insurance business" means the business of eSecting) otherwise than incidentally to some other class of insurance business, contracts of insurance against loss by or incidental to fire or other occurrence customarih included among the risks insured against in fire insurance policies;

(6B) "general insurance business" means fire, marine or mis- cellaneous insurance bushiest,, whether carried on singly or in combi- nation with one or more of them;'; (6) for clause (7), the following clause shall be substituted, namely: —

'(7) "Government security" means a Government security as defined in the Public Debt Act, 1944 (XVIII of 1944);';

(7) in clause (9), for the words "but does not include an insurance flgent licensed under section 42" the words "but does not include a princi- pal ugent, chief agent, special agent, or an insurance agent" shall be sub- stituted ;

(8) in clause (10), the following words shall be added at the end, iiamely: —

"including business relating to the continuance, renewal or revival of policies of insurance";

(9) after clauso (10), the following clause shall be inserted, namely:—-

'(10A) "investment company" means a company whose principal business is the acquisition of shares, stocks, debentures or other securities;';

(10) for clause (71), the following clause shall be substituted, namely —

'(11) "life insurance business" means the business of effecting con- tracts of insurance upon human life, including any contract whereby the payment of money is assured on death (exoept death by acoident only) or the happening of any contingency dependent on human life, and any"con- tract which is subject to payment of premiums for a term dependent on human life and shall be deemed to include—

(a) the granting of disability and double or triple indemnitv accident benefits, if so provided in the contract of insurance;

(b) the granting of annuities upon human life; and

(c) the granting of superannuation allowances and annuities pny- ,ible out of any fund applicable solely to the relief and maintenance of persona engaged or who have been engaged in any particular profes- sion, trade or employment or of the dependents of such persons;';

(11) after clause (13), the following clauses shall be inserted, namely: —

'(ISA) "marine insurance business" means the business of effect- ing contracts of insurance upon vessels of any description, including car- goes, freights and other interests whioh may be legally insured, in or in relation to Mich vessels cargoes and freights, goods, wares, merchan- dise 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, ;uid in- rludeR anv other r'ske, 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 clauses (6A), (11) and (13A);'; (12) for clause (15), the following clauses shall be substituted, namely: —

'(IS) "principal agent" means a person who, not being a salaried employee of an insurer, in consideration of any commission,—

({) performs any administrative Mtid organising functions for the insurer,

(it) procures general insurance business by employing or caus- ing to be employed insurance agents on behalf of the insurer, and

("V) accopts proposals, signs and issues cover-notes, policies or renewal receipts in respect of such insurance business under authority in writing granted to him by the insurer;

(16) "private company" and "public oompany" have the mean- ings respectively assigned to them in clauses (13) and (13A) of section 2 of the Indian Companies Act, 1913 (VTI of 1918);

(17) "special agent" means ft person who, not being a salaried employee of an insurer, in consideration of any commission, procures life insurance business for tho insurer, by employing or causing to be employed insurance agents on behalf of the insurer, hufc does not include a chief agent.'

4. Amendment of certain sections In Act IV of 1938.—Tn sections other than section 2 of the said Art, for the words "Superintendent of Insurance" and "Superintendent" (occurring otherwise than in the expression "Superintendent of Insurance"), the words "Controller-General of Insurance" and "Controller- General" shall respectively be substituted

6. Insertion of new sections 2A and 2B in Fart I, Act IV of 1938.—In Part I, after section 2 of the said Act, the following sections shall be inserted" namely: —

'2A. Rule of construction in applying Act to Acceding State.—Tn the application of this Act to any Acceding State, unless there ia anything repugnant in the subject or context,—

(1) references to the Provinces or Provinces of India or to any Province of India shall be construed as references to that Acoed- ing State:

(*) references to any Provincial Government shall be construed as references to the "Government of that Acceding State; and

(3) references to any enactment in force in the Provinces of India but not in force in that Acceding State shall be construed as references to the cprresponding enactment, if any, in force in that State. 2B. Appointment and dvties of Controller-General of Insurance.—The ( Central Government may bv notification in the official Gazetto, appoint a person to be the Controller-General of Insurance, who shall perform the duties of the Controller-General of Insurance under this Act '

6. Insertion of new section 2C in Part II, Act IV of 1938.—In Part II of the naid Act, sections 2A and 21? SIIRI' hf renumbered as sections 2P and 2E, and before the sections as so renumbered, the following section shall bo in- serted, namely: —

"2C. Prohibition of transaction of insxirance business by certain per- sons.— Save as hereinafter provided, no person shall, after the commence- ment of the Insurance (Amendment) Act, J949, begin to carry on any

class of insurance business in the Provinces, and no insurer carrying on. any class of insurance business in the Provinces shall, after the expiry of one year from such commencement, continue to carry on any Such busi- ness unless he is—

(a) a public company, or

(b) a society registered under the Co-operative Societies Act, 1912 (II of 1912), or under any other law for the time being in force in any Province of India relating to co-operative societies, or

(c) u. body corporate incorporated under the law of any country or State outside the Provincos of India:

Provided that tho Central Government may, by notification in the official Gazette, exempt to such extent, for such period and subject to such conditions as it may specify, any person or insurei from the opera tion of this section for the purpose of carrying on the business of granting superannuation allowances and annuities of the nature specified in sub- clause (<) of clause (2 7) of section 2 or for the purpose of carrying on any general insurance business."

7. Amendment of section 3, Act IV ol 1938.—In section 3 of the said Aot,—

(1) in sub-section (4),—

(() for clause (/), the following clause shall be substituted, nurnelj : —

"(/) if the iiiburei makes default in complying with, or acts in contravention of, any requirement of this Act or of any rule or order made theieundcr, or";

(h) for clause (h), the following clause shall be substituted namely • —

"(h) if the insurer carries on tiny business other than in- surance business or am prescribed business,";

(2) in sub-section (5C) for the wo ds, figure and letter "or that he nae complied with the order under section 8 B" tho words "or that he has complied with any requirement of this Aot or of any rule or order made thereunder or that he lias ceased to carry on any business other than in- surance business or any prescribed business" shall be substituted;

(3) in sub-section (6), for the figures nnd word " 5, 10 and 32", the figures, letters and word "2C, 5, 6A, 10(2A), 81A and 32" shall be sub- stituted.

8. Amendment ol section 4, Act IV of 1938.—In sub-section(2) of section i of the said Act, for tho words and figures "the Insurance Act, 19B8" the words "this Act" shall be substituted

9. Insertion ol new sections 6A, 6B and 60 in Act IV of 1938.—After

sectio.i 0 of the said Acl, the following sections shall bo inserted, namely: —

"GA, Re quire in Unfa ax to capital structure and voting right** and maintenance of registers of beneficial ownerH of shares.—(1) No public oompanv limited by shares having its registered office in any Province of India, shall after the expiry of one year from the commencement of the Insurance (Amendment) Act, 1949, carry on life insurance business, un- less it satisfies all the following conditions, namely: —

(i) that the capital of the company consists only of ordinary shares each of which has a single face value;

(") 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;

(Hi) that the voting right of every shareholder of the company is strictly proportionate to the number of shores held by him.

(3) A public company as aforesaid which carries on life insuranoe

business—•

(a) shall maintain, in addition to the register of members to be maintained under the Indian Companies Act, 1913 (VII of 1918), a register of slimes in which shall be entered the name, occupation and address of the beneficial owner of each share, and shall incorpo- rate therein any change of beneficial owner declared to it within fourteen days from receipt of such declaration;

(6) Bhall 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 (VII of 1918), tli transferee furnishes a doc'amtion 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, tmd the extent of the beneficial interest of each; and

(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 sanction of the Central Government has been obtained to the transfer.

Explanation.—"For the purposes of this sub-section and of aub-section (5), the holding of a person in the shares of a company shall be deemed to include—

(t) the total paid-up holding in such shares held by "uoh person in the name of others; and

(ii) if any shares of the company arc 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

(o) 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 pe son jointly with others,

such part of the total paid-up holding of the company or firm or of the total joint holding in those shnres, as is proportionate to the con* tribution made by such person to the paid-up capital of the company, the paid-up capital of the firm or the joint holding, aa the case may be.

(3) Every person in whose name any shares are registered in the register of members of uny company referred to in sub-section (3) on. the date on which the provisions of this section beoomo applicable to the company, shall within thirty days from that date make a declaration to the company as to whether there are any beneficial owners other than him- self in any shares standing in his name, and if so, stating the name, occupation and address of tho beneficial owner of each suoh share, and notwithstanding anything contained in any other law or in any contract to the contrary, a person who fails to moke a declaration us aforesaid in res- pect of any Rhnres, shall not be entitled to any vote as a shareholder of the company in respect of those shares.

(4) Every person who has any interest in any Bhare of a company referred to in sub-section (#) which stands in the name of another person in the register of members of the company, shall, within thirty days from the date on which the provisions of this section become applicable to the company or on which he acquires such interest, whichever is later, make a declaration (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 those shares.

(.5) Tf the total paid-up holding of any person in the shares of a com- pany referred to in sub-section (2) on the date on which the provisions of this section become applicable to the oompany 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 dispose of the excess holding of shares within one year from t h at d a te or s u ch f u r t h er p p r i n rl ,m i r m -\ be a l l o w ed by t he C e n t r al G o v e r n-

m e n t, a nd s h a ll n ot be e n t i t l ed to a nv v o te as R s h a r e h o l d er of t he c o m-

p a ny in r e s p e ct of s u ch e x c e ss h o l d i ng of s h a r es •

Provided that the Centrul (government may, subject to suoh restric- tions as it may thinkfitto impose, exempt from the operation of this sub- section 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 this sub-section if the other insurance com- pany is or is to be made the subsidiary company of the insurance company.

(5B. Provision for securing compliance with requirements relating to ca-pital vtntcture.—(1) For the purpose of enabling any public company tarrying on life insurance business to briug its capital structure into con- formity with the requirements of section OA, an officer appointed in this behalf by the Central Government may, notwithstanding anything con- tained in the Indian Companies Act, 1918 (VJI of 1913),—

(a) examine any scheme proposed for the purpose aforesaid by the directo.s of the company:

Provided that—

(t) the sctierne has been plaoed before a meeting of the share- holders for their opinion and lias 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 BO

proposed; and

(c) after considering such objections and suggestions to the scheme so proposed, sanction it with such modifications a" he may consider necessary or desirable

(£) Against the decision of the officer sanctioning a scheme under sub- jection (i), any shareholder or other person aggrieved thereby may, within mneiy days of the dute of the order sanctioning the scheme, profer- an appeal to the High Court within whose jurisdiction the registered office of the in- surei' is situate

(,'?) The tlevisioii of'lhe High Court where tin appeal hus been preferred Jo it under sub-section (2), or of the officei aforesaid where no such appeal hub been preferred, shall be fini'l and binding on all the shareholders and other persons concerned.

6C Conversion of rompiunj hmilel i

juuianiee —(J) Where a public company limited by shares carrying on in- surance business has passed a special resolution for converting itself into a public company limited b> guarantee, it may apply to the Cential Govorn- lrjent with a scheme for putting the special resolution into effect, including uny provision for the alteration of the memorandum or articles of assooia tion in so far as it may be necessary for this purpose

(2) If the Central Government, after giving such notice to an\ person concerned us it Hiinks fit, is satisfied—

(a) that tile scheme rnnLes wuitablc provision with inspect (o tlie lepaAment conversion or liquidation of the paifl-up capital of the company,

(6) that ihe consent of the creditors to the eoiuuMon of the com- pany limitefl b\ shares into a company limited by gunianlee haw been obtained, or that suitable provisions have been made for disoliaiging, determining or securing the debts or claims of such creditors, and

(c) that" the scheme is otherwise reasonable, it may sanction the scheme und thereupon the scheme shall become binding on the com- pany and on al' the persons concerned

(.'}) Against the decision of the Central Govetnmont ^mctioinn^ \ tteberne under sub-section (2), uny person aggrieved thereby irmj, within ninety days of the date of the order sanctioning the scheme, prefer an appeal to the High Court within whose jurisdiction Ihe registered ofhee of the insurer is situate

(4) The decision of the High Court where an appeal lias been prefened to it under sub-section (,'i) or of the Central Government where no such appeal has been preferred, shall be final and binding on all the poisons con- cerned

(5) "When n scheme has been sanctioned under this section, the com- pany shall file with the Eegistrar of companies a certified copy of ihe scheme as sanctioned, and thereupon the provisions of the Indian Com- panies Act, 1013 (VT1 of 101-9), rotating to companies limited by guarantee shall become applicable to the company."

10. Amendment of section 7, Act IV of 1938.—In section 7 of the said Act,—

("') in clause (d) of sub-section (i),_fche words "that is to sa^, insuiaueo which ia not in the opinion of the Central Government principally or wholly of any kind or kinds included in clauses (a), (6) or (o)" shall be omitted,

THE UAZETTi; OF IXOI \, JATRAO11D1NARY, NOV. 8, 1949 2F76

(ii) in sub-section (4) und tho proviso to sub-section (5), the words "und not being un insurer incorporated in or domiciled in tho United King- dom" shall be omitted.

11. Amendment ol Section 10; Act IV-ot-1988\— fiv sub-section (2) of section 10 of the •said Act, for the words beginning with the vordh "ami a statement, certified by an auditor" and ending with the words in any case think fit to flllow", the following shall be substituted, namely; r~

"and every jnsurer sbal , within the time limited in tub-section (J) of heotion 15 in regard to the furnishing of the statement and accounts re- ferred to in section 11, furnish to the Controller-General a statement show- ing in detail such assets aR at the close of every calendar year duly certified by an audit or or by a person qualified to audit under the law of the insurer's country :

Provided tlmt such .statement shall,, in the cow of an insurer to whom section 11 applies, be set out us n part of tho balance-sheet mentioned in canst, (a) ol Bub-seeiiou (1) of that section:

Piovided turtliei thai an insurer may RVIOW in Mich statement all the unheth held in his life department, but at the name time showing any deductions on account of general reserves and other liabilities of Ihat de- partment:

l'rovidtrd also thai (he Controller-General ma> cull for a statement siinilmlv certified of huch assets as at any other date specified hy him to be furnished within a period of three months from the date with reference to ^hi'-h the statement is caUed for,"

12. Amendment of section 11, Act IV of 1938.— In Rub-section (-2) of section 11 of the said Act, for the words "accompanied hy a statement containing the names mid description's of the persons in charge of the management of the business' . the ivovk "accompanied by a statement coTitainiiig the names, des- criptions and occupations of, and the directorships held by, the persona in charge of the management of the b u s i n g" shall be substituted and the words "by such persons" shall be omitted.

13, Amendment of section 13, Act IV of 1938.--In section ]8 of the said Act,—

(i) in sub-section (7), and the proviso to sub-seetion (4), for the words "in every five years" the words "in every three vearfi" shall be substi- tuted ;

(ii) to sub-section (7), the following provisos shall lie added, namely: —

"Provided that for an insurer carrying on life insurance business m Tndia at the commencement of the Insurance (Amendment) Act, 1949, the last date as at which the first investigation after such com- mencement should be caused to be made b> an actuary filial be—

(a) the Slat day of December, 1950, or the date of expiration ot live years from the date as 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 than five jears before such commencement, or

(ii) after the 30th day of December, 1946, but before the 31st day of December, 1947, and had disclosed a defi- cit in the life iusuranoe fund;

2176 THE GAZETTE OF INDIA, EXTRAORDINARY, NOV. 8, 1949

(b) the 81st day of December, 1951, where the last investiga- tion by an actuary before such commencement was at a date—

(t) after the 80th day of December, 1946, but before the 81st day of December, 1947, and did not disclose •* deficit in the life insurance fund; or

(it) after the 80th day of December, 1047, but hefom the 81st day of December, 1948;

(c) the 31&t day of Decembe , 1952, where the last in- vestigation by an actuary before such commencement was as fit any date after the 30th day of December, 1948, but before such commencement:

Provided further 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."

14. Amendment of section 19, Act IV of 1938.—In section 19 of the said Act, for the words "an abstract of the proceedings of every general meeting" the words "a certified copy of the minutes of the proceedings of every general meeting, as entered in the Minutes Book of the insurer" shall be substituted.

15. Amendment of aection 21. Act IV of 1938.—In clause (rf) of sub- Roction (1) of section 21 of the said Act,—

(t) after the words "delivered to the insurer" the words "or of suoh further time as the Controller-General may specify in the requisition" sha'l be inserted;

(it) after the word and figures "section 28" the words, figures, and letter "or section 28A" shall be inserted.

16. Substitution Of new section for flection 27 Act IV of 1938.—For section 27 of the said Act, the following section shall be substituted, namely:—-

"27. Investment of aaeets.—(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 ol life insurance policies in India on account of matured claims, and

(h) the amount required to meet the liability on policies of life insurance maturing for payment in India,

'ess—

(J) 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

(it) any amount 'lue to the insurer for 'oans granted on and within the surrender values of policies of life insurance maturing for payment in Tndia issued by him or by an insurer whose business he hiis acquired and in respect of which he has assumed liability,

in the manner following, namely, twenty-five per cent, of tho 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 securi- ties and the balance in any of the approved investments specified in sub- section (1) of section 27A or, subject to the limitations, conditions and res- triction? specified In sub-section THE GAZETTE OF INDIA, EXTRAORDINARY, NOV. 8, 1949 2177

(2) For the purposes of sub-section (1),—

(a) the amount ot 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 in 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, 1949, in the manner and to the extent hereinafter specified, namely,—

(") 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 Rum;

(in) during tho third year, to the extent ot twelve and a half per cent, in value of tho said sum; and

(iv) during the fourth year, to the extent of six and a quartei- per cent in value of the said sum:

Provided that, if the Central Government so directs m any case, the securities specified in clause (b) shall be regarded OH approved securities other than Government securities for a longer period than four years, but no.t exceeding six years in all, and the manner in which and the extent to which the securities ^bnll be so regarded shall be as specified in the direction.

(3) In computing the assets referred to in sub-section (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 cur- rency, to the extent of such excess; and

(b) any investment made in the purchase of any immovable pro- perty outside India or on the security of any such property,

shall not be taken into account.

(4) Where an insurer has accepted reassurance in respect of any policies of life insurance issued by another insurer and maturing for pay- ment in India or has ceded reassurance to another insurer in respect of any such policies issued by himself, the sum refeired to in sub-section (T) shall be inoreased by the amount of the liability involved in such acceptance and decreased by the amount of th^ liability involved in such cesRion.

(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 in- surer incorporated or domioiled elsewhere than in the Provinces shall be held in India, except such foreign assets, if any, as may be held outside India, and all suoh assets shull be held in trust for the discharge of the liabilities of the nature referred to in sub-section (7) and shall be vested in trustees approved by the Central Government who are either—

(a) citizens of India, or

(b) companies, co-operative societies or other bodies registered in the Provinces,

2173- THE GAZETTE OF. INDIA, EXTRAORDINARY, NOV. 8, 1949,

and the instrument of trust under this sub-section ehal} be executed by the insurer with the approval of the Central Government 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 in the Provinces whose share-capital to the extept of one-third is owned by, or the members of whose governing body to the extent of one-third con- sists of, members domiciled elsewhere than in the Provinces."

17. Insertion ol new section 27A In Act IV of 1938.—After section 27 of ihe said Act, the following section shall be inserted, namely:—

' "27A. Further provinionn regarding investments.—(1) No insurer shall invest or keep invested any .part of his controlled fund otherwise than in nrjy of the following approved investments, namely: —

(a) approved securities;

(6) securities of, or guaranteed as to principal and interest by the Government of the United Kingdom or any British possession;

(r) debentures or other securities for money issued with the per- mission of the Provincial Government by any municipality in a Pro- vince ;

(a) debentures or other securities for money issued by any authority constituted under any housing or building scheme approved by the Central or a Provincial Government, or by any authority or body constituted by any Central Act or Act of a Legislature established in a Province;

(e) debentures secured by a charge on any immovable property, plant or equipment of any company which has paid interest in full for at least five out oh the seven years immediately preceding on such or similar debentures issued by it;

(/) debentures ot any company which has paid dividends on its ordinary shares for at least five out of the seven years immediately preceding;

(g) preference shares of any company which has paid dividonds on its ordinary shares for tit lenst fi\e out of the seven years immedi- ately preceding;

(/i) shares of any company which have been guaranteed by an- other company, si "1i other company having paid dividends on its ordi- nary shares for at least five out of the seven years immediately pre- ceding :

Provided that the amount of shares under guarantee is not in ex- cess of fifty per cent, of the amount of preference and ordinary shares of the guaranteeing company :

(/) shares of anv company on which diudends of not less than four per cent, including bonus have been paid for at least seven out ot the .nine years immediately preceding;

(j) first mortgages on immovable property in the Provinces or in any other country where the insurer is carrying on insurance business:

Provided that the property mortgaged is not lease-hold property with an outstanding term of less than thirty years and the value of the property excee/ls by one-third, or if consisting of buildings, ex- ceeds by one-half, the mortgage money;

ITHE GAZETTE OF INDIA, EXTEAotoiNAfey.'NOv.- 8, IWQ

(h) immovable property in the Provinces or in any other country where the insurer is carrying on insurance business:

Provided that the property is tree of all encumbrances;

(I) loans on reversions of life interests, or on policies of life in- surance 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;

(m) reversions and life interests;

(n) fixed deposits with banks included for the time being in the Second Schedu'e to the Eeserve Bank of India Act, 1084 (II of 1934);

(o) debentures of, shares in, or fixed deposits with, co-operative societies registered under the Indian Co-Operative Societies Act, 1912 (II of 10] 2) or under any other law for the time being in force¹ and doing banking business;

(p) such other investments as the Central Government may, by notification in the official Guzette, declare to be approved investments for the purposes of this section.

(#)-Notwithstanding anything contained in sub-soetion (1), an insurer being a company may, subject to the provisions contained in the next suc- ceeding sub-sectioiib, invest or keep invested any part of his controlled fund otherwise than in an approved investment, if—

(t) after such investment, the total amounts of all suoh invest- ments of the insurer do "not excood fifteen per cent of the sum referred to in sub-section (1) of section 27,

(ii) the investment is made, or in the caso of any investment al- ready made the continuance of such investment is with the consent of all the directors present at a meeting and eligible to voto, special notice of which has b

and all such investments, including investments in which any director is interested shall be reported without delay to the Controller-G'erieraT 'with full details of the Investments and the extent of the director's interest in any such investment.

•2180 THE GAZETTE OP INDIA, EXTBAORD1NABY, NOV. 8, 1949

(b) ten per cent, of the subscribed share capital and debentures of the joint stock company,

whichever is less:

Provided that nothing in this sub-section shall apply to any invest- ment made with the previous consent of the Central Government by an insurer, being a company, with a view to forming a subsidiary company carrying on insurance business.

(d) An insurer shill not out of his controlled fund invest or keep in- vested 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 pur- pose of computing the percentages referred to in clause (a) of sub-section (3) and clause (a) of sub-section (4).

(7) Notwithstanding anything contained in sub-sections (3) and (4), where new shares are issued to the existing shareholders by a joint stock company the existing shares of which are covered by clause (h) or clause ({) of sub-section (2) 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-General. the Central Government is satisfied that special grounds exist wurranting 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 may be specified by it in this behalf, exempt an insurer from all or nny of the provisions of sub-sections (3), (4) and (7).

(9) An insurer shall not keep more than three per cent, of the con- trolled fund in fixe-i deposit or current deposit, or partly in fixed deposit =and partly in current deposit, with any one banking company:

Provided that in applying this sub-section to the amount in deposit with a banking company on any day, all the premiums collected by that com- pany on behalf of the insurer during the preceding thirty days shall be •excluded.

(20) All assets forming the controlled fund, not being securities in- vested 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) bo held free of any encumbrance, charge, hypothecation or lien.

(22) If flt any time the Contral Government considers any one or more of the investments constituting on insurer's controlled fund to be unsuitable or undesirable, the Central Government may, after giving tha insurer an opportunity of being beard, direct him to realise the investment or investments, and the insurer shall comp'y with the direction within mich time as may be specified in this behalf by the Central Government.

(13) Every insurer in existence at the commencement of the Insurance (Amendment) Act, 1949, whose investments or any part thereof at such commencement contravene any of the provisions of this section, shall

T l lE GAZETTE OF INDIA, EXTBAOBDINABY, NOV. 8, 1949 218

submit to the Controller-General a report specifying every such investment, within thirty days from the date on whioh this section comes into force; and the provisions of this section shall not apply in relation to any suoh investment for a period of one year from the commencement of that Act or for such further period or periods as the Central Government may, by order, a'low in respect of such investment on the ground that earlier realisation thereof will not be in the interests of the insurer.

(13) 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 ni a like nature are required to be held by or under any Central Act or Ac* of a Legislature established in a Province.

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 olass of insurance business;

(it) all the funds appertaining to his life insurance business it be carries on some other olass of insurance business also; and

(b) in the case of any other insurer carrying on life insurance business,—

(i) all his funds in India, if he carries on no other class of insurance business;

(ii) nil the funds in India appertaining to his life insurance business if he carries on some other class of insurance business also,

but does not inolude any fund or portion thereof in respect of which the Controller-General 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 Controller-Genera] is satisfied that it would be impracticable to apply the provisions of this section."

18. Amendment of section 28, Act IV of 1938.—In section 28 of the said Act,—

(i) in sub-section (7), the words "registered under this Act" shall be omitted,

(ii) after sub-section (2), the fo'lowing sub-sections shall be inserted, nomeh • —

"(2A) In respect of the Government securities and other approved securities invested and kept invested in accordance with sub-section (l)ot sect-'on 27 an insurer shall submit along with the returns referred to in sub-seotions (1) and (2) a certificate, where such assets are in the custodv 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 comnnny, or otherwise from a principal officer' of the insurer, to the effect that the securities nre held free of any encum- brance, chartre, hvpothecation, or lien, and every such certificate after the first shall also state that since the date of the certificate imme- diately preceding nil the securities have been so held.

4tt2 tfftE GA^feTTE <>F INDIA, EXTEAOBDINARY, NOV. 6, 1940

(&B) In respeofc of' the assets forming the oontrolled fund within* the meaning of section 27A, and which do not form part of the Government securities and approved securities invested and kepb inves- ted in accordance with section 27, an insurer sha 1 submit, along with the returns referred to in sub-section (7) and (2), a statement, where such assets are in the oustody of a banking com- pany, from that company, and, in any other case, from the chairman, two directors and a princi- pal 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 "re ^'bjected to a 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 imme- diately preceding, and, if any such charges have been liquidated, the date on which they wero so liqirdfted "

19 Insert/on of new section 28A In Act IV of 1988 —After section 28 of the said Act, the following section shall be inserted, namely: —

"28A Return showinq changes in investment—Everv msiner carrying on life insurance business shall furnish to the Controller-General a return in the prescribed form showing the changes in tho mveHtmentH constituting his controlled fund, referred to in section 27A during each of the quarters ending on the last day of March, June, September and December, within thirty days from the close of the quarter to whiob it relates, and every such return shall be certified ltv ft principal officer of the insurer."

20. Amendment of section 29, Act IV ol 1938.—In section 2fl of the said Act,—

(i) in the first proviso to sub-section (7), for the words "nothing herein contained'" the- words "nothing contained in this sub-section" shall be substituted;

¹ (0) the second and third provisos to sub-section (7) shall be omitted; (Hi) to the fourth proviso the following words shall be added, namely; —

"and where any such loan or advance is made out of unv life insurance fund the matter shall be reported without delnv to ilie Controller-General.";

(iv) after sub-section (£), the following sub-section shall be added, namely • —

"(3) Subject to the provisions of sub-section (1), no insurer carrying on life insuranoe 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 subjection (7) 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 base's wheret such ad-Vance's do hot Exceed in the aggregate—

(i) in the case of a chief agent, overriding renewal com- mission earned by him,

- (ii) in the case of a -specials agent, one-half of the over- -'riding commission earned by him.

/THE GAZETTE OJU¹ INDIA, EXT#AO.KD1NAE\\ NOV. 8, 1949 2188

{Hi) in the ca^e of an insurance ageut, the renewal com- mission earned by him,

during the two years immediately preceding.

(4) Rvery loan or advance existing at the commencement ot the Insurance (Amendment) Act, 1949, wbich contravene* the provisions of sub-section (5) shull be notified by the insurer to the ('ontio)ler- General within thirty days of such commencement and "lull notwith- btnnding any contract to the contrary be repaid, within OTIC \ear trom Burh commencement.

(5) Where any event occurs giving nhe to circumstances, the existence of which at the time of the grunt 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) Tn case <>t detank in i-oinplyng with ihe pro\isioiih of aub- aeotion (4) or sub-aection (/>), the director, manager auditor, actuary, officer or partner, or the chief, special or inburancc agent concerned shall, without prejudice to any other penalty which he may inour, cease to hold office under, or to act for, the insurer granting tht loan en the expiry of the said period of one war or three months, an the case may bo."

21. Amendment ol Bectlon 30, Act IV of 1938.—In section 80 of the said Act, nfter the word and figures "section 27" the word figures and tetter "flection 27A" shall be inserted.

22. Amendment of leotlon 31, Act IV of 1988.—In section 31 of the said 'Act, lifter sub-section (2), the • following itib-seotion shall he inserted, > namely: —

"(.9) Nothing contained in this .section ,shall be deemed to prohibit the endorsement in favour of a banking cornpany of any security or other document solely for the purpose of collection or for realisation of interest, bonus or dividend."

23. Insertion of new sections 81A and 31B in Act IV of 1988.—After section 81 of the said Act, the following sections Bhall be inserted, namely: —

"B1A. Provisions relating to managers, etc—(1) Notw-'thstand'ng anything to the contrarv contained in the Indian Companies Act, 1918 (V1T of lftlB), or in the articles of association of the insurer, if a company or in any oontract or agreement, no insurer shall nfter the expiry of three months from the commencement of t.he Insurance (Amendment) Act 1949,—

'

(a) be managed b> a company or a firm, or

_ (b) be directed or managed bv, or employ as manager or officer or in any capacity, any person whose remuneration or any part thereof tftkeB the form of commission or bonus or a share in the valuation surplus in respect of h;R life insurance business, or

(c) be directed or managed by, or employ as manager or officer or in any enrmcitv, any person whose r e m u n e r a te or anv part thereof takes the form of commission or bonus in respect of his insurance business other than life insurance business

21M THE GAZETTE OF INDIA, J^XTilAOltJJiJNA±ti, JSOV. 8, 1949

Provided that nothing in this sub-section shall be deemed f" prohibit—

(i) the payment ot commission to a chief agent), apeoial agent or an insurance agent, in respect of life insurance busineit procured by or through him;

(ii) the payment of commission to a prinoipal agent or an insurance agent in respect of general insurance business procured ' by or through him;

(iii) the payment of commission, for such period Kb the Central Government may determine, to a person not being an officer of an insurer who was, on the 1st day ol November, 1944, em- ploying on behalf of an insurer chief agents or special agents and continues so to do in respect of insurance business prooured by or. through him:

(ii>) the employment of any individual otherwise than as ,m officer who, in his capacity an an insurance agent, reoeivsn commission in respect of insurance business prooured by him;

(v) the employment as an offioer of any individual who receives renewal commission in respect of life insurance business prooured by him as an insurance agent before such employment, of before the commencement of the Insurance (Amendment) Act, 1949, whichever in later;

(ui) the payment of a share m the profite of insurance business othe- than life 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 remune- ration, such bonus, in the oaae of any amplorM, not exceeding in amount the equivalent of his salary for a period which, in the opinion of the Central Government, is reanonnble having regard to the ciroum- stances of the ease.

(3) Notwithstanding anything to the contrary contained in the Indian Companies Act, 191B, or in Uie articles of association of the insurer, being a company, or in any contract or agreement, rio manager, managiug director or any other person concerned in the management of an insurer's business ^hall be entitled to nominate a suc- cessor to his office, imd no person so nominated, whether before or after the commencement of the Insurance (Amendment) Act, 1049, ahpll be en- liUed to hold or to continue in such office

(3) Tf in Ihe case of any insurance company provision is made by ihe m-Heies of association of the company or by an agree- ment entered into between any person und the company for empower- ing n director or manager or other officer of the company to assign his office *"o unv other person, anv Rssiprmicnt of office made in pursuance of the RfnV3 provision, shall, notwithstanding anvthing to the contrary con- tained in Mie said provision or in section 86TC of the Indian Companies Act, UWB be void

(4) N" parson shall have am right, whether in contract or otherwise, to j"ny lompe-niAtion for mv IOBR incurred by reason of the operation of any proviaJou of this section.

THE GAZETTE OF INDIA, EXTRAORDINARY, NO"V. 8, 194G 21"ft

31B. Power to restrict payment of excessive remuneration.—(1) The Central Government may, if it is satisfied that any insurer is paying any person in res- pect of iusu ance business transacted in India remuneration, whether by way of commission or otherwise, on u scale disproportionate, aocording to the normal standards prevailing in insurance business, to the resour- ce of the insurer, call upon tin. insurer to comply within six month* with such directions as it rutty think fit to issue in the matter, and if compliance with the directions eo issued requires the alteration of any of the terms of the contract entered into by the insurer with such pernon, no compensation shall be. payable to auch person by the insure* by reason only of such alteiation or of the resignation of such person if the altored terms are not acceptable to him and no payment bv WBT of renewal eomiriwsioii or otherwise shall be made to such person by tho insure i in te-p'-ct ot nm premiums paid after the date of sn<>h resignation.

\!i) ETMV innuiei shull. lii-toie rho elo-e >.1 the monili following every yoar,¹ submit to the Controller-* leneral a statement in the prescribed form showing the remuneration paid whether In win of commission or otherwise, to nny person in cases where JIH'}I teunmeriHion exceeds the sum of five thou- sand rupoes in thftt year

(At) Where am person HOI being u chiei :iyent, principal agoin oi ^.peoial agent is in ireeipt of remuneration exc-eurlmn the sum of five thousand rupees in any your, the Controller (rener.il may by notice in vwiting require the insurer to submit cortified oopieb of the n^reement euiered into between the insurer und miy suob person, and the iiminei ^mll '"mph witli nny mi oh requisition wHhin the time specified in the no+iiT

24. Insertion of new section 32A In Act IV oi 1938.—After section 82 of the snid \ct, the following action shall be inserted, namely:—

J186 THE GAZETTE OF INDIA EXTRAORDINARY, NOV y, 1949

(b) the manager, managing director or other officer oi an insurer, exclusively carrying on life insurance business, being the munager, managing director or other officer of an insurer not carrying on life insurance business:

(c) an officer in the employment of an insurer trom giving pro- fessional advioe. Explanation.—In this section the expression 'officer doea not include a director."

25. Insertion of new section 34A in Act IV of 1938.—After aeotion 34 of the said Act, the following section shall be inserted, namely: —

"84A. Power of investigation.—•(!) The Central Government may at nny time, by order in writing, direct the Controller-General or any other person specified in the order to investigate the affairs of any insurer audi to report to the Central Government on any investigation made by him

Provided that the Controller General or the other person may, wherever necessary, employ an auditor or actuary or both for the purpose of assist- ing him in any investigation under this section.

(8) It shall be the duty of every manager, managing director oi other officer of the insurer to produce before the person directed to mnko the in- vestigation under sub-section (2) all such books of account, registers ani other documents in his custody or power and to furnish him with any state- ments and Information relating to the affaire of the insurer as the said per- aon may require of him within such time as the said person may specify

(3) Any person, directed to make an investigation under sub-section (7), may examine on oath, any manager, managing director or other officer of th&vlnsurer in relation to biw business nnd may administer oaths accord- ingly.

(4) On receipt of any report under eub-section (1), the Central Gov- ernment may, after giving such opportunity to the insurer to make a repre- sentation in connection with the report as, in the opinion of the Central Government, seems reasonable, by order in writing,—••

(a) require the insurer to take such action in respect of any mutter BS the Central Government may think fit, or

(b)t direct the Controller-Oeneral to oanoel the registration of the • insurer and to apply to the Court for the winding up of the insurer, if a company.

(5) No order made under this section shall be oullftd in question in arn Court.

<6) All expenses of, and incidental to, any investigation made under - this section shall be defrayed by the insurer, shtill have priority over other debts due from the insurer and shall be recoverable iw nn nrroar of \nnA- revenue."

26. Amendment of section 35, Act IV of 1938.—Tn section 85 ^f th, "aW

Aot,—

(A in sub-section (1), for the word.s "Court having jurisdiction over out or other of the parties concerned", the word "Contrbller-G^neral" shflll be fiubstituted ;

(ii) in sub-section (3), for the word "Court" and the words "Central (lovemment", wherever they occur, -the word "ControHer-Oooeral" shall be substituted;

THE GAZETTE OP INDIA EXTEAORD1NAEY, NOV. 8, 1949 2187

(iii) sub-section (4) shall be omitted.

27. Amendment ol section 36, Act IV of 1938,—Section 86 of i,he uftid Act shall be renumbered as sub-section (1) of that section, and

(a) in that sub-section as so renumbered,—

(i) for the words '"Court" and "it", wherever they occur, the words "Controller-General" and " h e '' shall respectively bo substituted;

(ii) the words "or in a uon-aoceding State" shall be omitted; and

(b) after sub-section (I) m so renumbered, the following sub-section •hall be inserted, namely: —

"(#) If th0 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 Controller-General may sanction the arrangement, reducing the amount of such contracts upon such terms and subject to such conditions as he may think pro- per, and the reduction of contracts as sanctioned by the Controller General shall be valid and binding on all the partios concerned."

28. Amendment of section 37, Act IV of 1938.—In section 87 of the said Act, for the word "Court", in both the places where it occurs, and for the wordd "Central Government", the word "Controller-General" shall be sub- stituted

29. Amendment of section 39, Act IV of 1938.—In section 89 of the said Act, to sub-section (1) the following proviso shall be added, namely —

"Provided that, where any nominee is a minor, it shall bo lawful for the polioy-holder to appoint in the prescribed manner any person to receive the money scoured hy the policy m the event of his death during the minority of the nominee "

30. Amendment of section 40, Act IV of 1938.—In section 40 of the said Aot —

(i) in sub-Section (1A), after the words "nnd sections" the figures and letter "40A" shall be inserted.

(ii) to evib-iection (#) the following further proviso shall be added, namely • —

"Provided further that nothing in this sub-section shall apply in respect of any policy of insurance issued after the 91st day of December, 1949.";

(iii) in the proviso to sub-aoction (2 A), after the words "notice in •writing to the insurance agent through whom the policy was effected", the words "if such apent continues to be au agent of the insurer" shall be inserted

31. Inaertlon ol new sections 40A to 400 in Act IV of 1938.—After section 4Gv

"40A. Limitation of expenditure on oommiasion.—(1) No person shall pay oi¹ 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 81st day of December, 1049, and effected through an insurance agent, an amount exceeding—

2188 THE (IAZETTE OF INDIA, EXTRAORDINARY, NOV. 8, 1949

(a) wheie the policy grants an immediate annuity or a deferred annuity in consideration of a single premium, or where only one pre- mium is payable on the polioy, two per cent, of that premium

(b) where the policy grants a deferred annuity iti consideration of more than one premium, seven and a half per oent. of the first year's premium, and Wo per cent, of each renewal premium, payable on the policy, and

(o) in any other ease, thirty-five pur cent, of the first year's pre- mium, seven and a half per cent, of the second and third year's rene- wal premium, and thereafter five per cent, of each renewal premium, payable on the pollcj:

Provided that in a case refenod to in olause (c), an insurer, during the first ten years of his business, may pay to an insurance agent, and an insu- rance agent may receive from such an int-mrer, forty per eeut. of the first year's premium payable on the polioy.

(£) No payment made by the insurer lor the benefit of an inauranoe agent to a contributor? provident fund maintained by the insurer under a scheme approved by the Controller-General shall be taken into flocount in computing any amount specified in sub-Reotion (1).

(3) No person shall pay or contract to pay to a Hpocial agent, and no special agent shall receive or contract to receive, by way of commission or as remuneration in any form, in respeot ot any policy of life insurance issued in India by an insurer aftor the 31st day of December, 1949, and effected through n special agent, an amount exceeding—

(a) in a caso referred to in olnuso (a) of sub-section (1), one hali per oent. of the premium,

(t>) in a case rderred to in clause (b) of sub-scotion (2), two per v'ent. of the first yenr'h premium payable on the policy, and

(o) in a case referred to in clause (c) of sub-seotion (1) fifteen per cent, of the first year's premium payable on the polioy

.Provided that in a case referred to in clause (o), an insurer, during the first ten yonrs of his business, may pay to u> special agent, and a special agent may receive from such an insurer, seventeen mid H half per cent, of the first year's premium payable ori the polioy.

(4) No person shall pay or contract to pay t,o an insurance ngem, and no insurance agent shall receive or contract to receive, by way of commie- "jon or remuneration in any formi in respect of any policy of insurance (nof being a policy of life insurance) issued in India by an insurer after the 81st day of December. 19d0, and effected through an insurance agent, an amount exceeding—

(a) wh^re the policy relates to fire or miscellaneous insurance, fifteen per cent, of the premium payable on the policy, and

(b) where the |>olic,\ relates (o marine insurance, ten per cent, of the premium payable on the policy

(5) No person shall ptiy or contract to pay to a principal agent, and no principal agent shnl] receive Or contract to receive, by wny of commission OT remuneration in anv form, in respect of any policy of insurance (not be- ing a policy of life insurance} issued in India by an insurer after the 81st day of December. 1949, and effected through a principal agent, an amount exceeding—

THE GAZETTE OF JJNDIA EXTKAOKDINAEV, NOV. 8, 1949 2180

(a) in the ease referred to in clause {a) ok sub-Bection (4), twenty per cent, of the premium payable on the. polioy, and

(b) in the case referred to in olause (b) of that sub-section, Qfteen per cient. of the policy, less any commission payable to any insurance agent in respect of the said policy.

(6) Without prejudice to the provisions ot section 102 in respect ot a contravention of any of the provisions of the preceding sub-sections by an insurer, any insurance agent who contravenes the provisions of sub-seotion (1) or sub-seotion (4) and any special agent who contravenes the provi- sions of sub-section (3) shall be punishable with line which unay extend to one hundred rupees.

40B. Limitation of expenses of management in life insurance businest. —(I) Every insurer transacting life insuranoe business in India shall furnish i" the Controller-General, within such time as may be prescribed,—

(a) siatementb certified bj uti actuary of the bases ot premiums currently used by him in regard to new business in respect of morta- lity, rate of interest, expenses and bonus loading;

(b) similar statements in respect of all premiums received by him:

Provided that an insurer may elect to submit on or before the 8lBt day of March every year a certificate from an actuary, in lieu of the state- ments specified in clause (6), giving the average provision for expenses ol management provided in the premiums received by him during the preced- ing calendar year in rewpeet of the life insurance business tranRacted by him in India

(2) After the 81 st da,v of December, 1949, no insurer shall in respect of the life insurance business transacted by him in India spend as expenses of management in any calendar year an amount in excess of the provision for expenses of management contained in the premiums received by him in that year as is based on the statements or tlic certificate specified iu sub- Be ction (2):

Provided that where an insurer has spent ug 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 seotion M the excess amount so spent is within the limits, fixed in respeot of the year by the Executive Committee of the Life Insurance Council under section 64K by which the actual expenses incurred mn\ exceed the provision tor expenses of management,

(3) In respect of any statement mentioned in =nib-section (1) the Controller-General may require that it shall be submitted to another actuary appointed by the insurer for the purpose and approved bv the Con- troller-General, for certification by him, whether with or without modifi- cations, and the provision for expenses of management shall be modified If necessary, according to the certificate furnished hy the other actuary appointed under this sub-section.

'

(4) Every insurer shall, in respect of the life insurance business trans- acted by him m India, submit along with his annual returns furnished un- der section 15 or section 16, as the case may be, a statement certified t>T the principal officer of the insurer and by the auditor or an actuary of tho total provision for expenses of management contained in the premium! taken credit for In the revenue account for the preceding calendar year and Ihe total expenses of management aa stated in the revenue account

2190 THE GAZETTE OF INDIA EXTRAOHDINAHY, NOV. 8, 1049

(5) Every insurer transacting life insurance business in India shall in- oorporate in the revenue account.— '

(a) a certificate signed by a principal officer m India, and an auditor's certificate, certifying that all expenses of management in res- pect of life insurance business transacted by the insurer in India hav" been tully debited in the revenue account as expenses; arid

(b) it the insurer is carrying on any other class of insurance business in addition to liftt 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 aocountB. Explanation.-—In this section,—

(a) ''calendar year'¹ or "year ' moans, in relation to an insurer who is required to furnish returns in accordance with sub-section (#) of section 16, the period covered by the revenue account furnished by such insurer under olnuse (b) of that sub-section;

(6) "expenses of management" means all obargei wherever in- curred whether directly oi indirectly, and inoiuden

(j) commission payments of all kinds, (it) any amount oi expense* capitalised,

(iii) in the case of an insurer having bin principal place of business outfeide 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 reinsurances) received during the year in res- pect of life insuranoe business transacted by him iu India.

4Q(_. Limitation of cxpenaex of management hi General insurance business,—(I) After the 81st day of Deoernber, 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 fot procuring business, au amount in excess of the limits fixed by the Executive Committee of the Generni Insuranoe Council under sub-section (7) of section 64M:

Provided that where an insurer has spent as such expenses iu any year an amount in excess of the amount permissible under this sub-section, ho shall not be deemed to have contravened the provisions of this section, if the excess amount so spent is within the limits, fixed in respect of the year by the Executive Committee of the General Insurance Council under sub- section (2) of seotion 04M, by which the actual expenses incurred may exceed tihe expenses permissible under sub-section (I).

(2\ Every insurer as aforesaid shnll incorporate in the revenue account a certificate signed by the principal officer of the insurer in India and by an auditor certifying that all expenses of management wherever inourred, whether directly or indirectly, in respect of the business referred to in this section, have been fully debited in the revenue account ap expenses.

Explanation.—In this seotion,—

fa) "calendar year" shall have the meaning assigned to it in seotiba 40B:

(b) "expenses of management' means all charges', wherever "In- curred whether directly or indirectly, including commission payment*

THE GAZETTE 0 1' INDIA EXTliAOliDlNAltY. NOV. 8, 1949 21&

ot all kinds and, in the case oi an insurer having his principal place of business outside India, a proper &haie ot head ofhoe expenses, which shall not bo lese tJian such percentage

(C) 'insurance business tiuiitiacted in India includes inBuranoe business, wherever effected, relating to any property "ituata in In din or to a ny vessel or a i r c r a ft r e g i t d c r ed in 1itdi,i

32. Amendment ot section 42, Act IV of 1938.—In section 42 of Lh© said Act,-—

[a) n. subjection (2), for the words "three rupees", the words ' ton lupoes" shall bo substituted,

(h) ir. nub-section (2), the word "registered" shall b% omitted;

(c) {("•> -iih section (;•]), ihb lollowmn nhall he substituted, namely: —

' (3j A licence issued nndei thin HOI tion, IIUBI the commencement ot the Insurance (Amendment) Act, 1949 whull remain in force for a period of three years only from the date of iBBue, but shall, if the applicant does not suffer fmm an,y vi the dib^ualifioationH mentioned in items (b), (c) and (d) of auli-section (4) und the application for renew- al of the licence reaches the issuing .inthoiitv at least thhty days be- fore Ihe duie on which tho licence caaROrs to l-emein ni force, be enewed foi .i. peril id of th toe yeuis id .\n\ OIK linn oil ]> ivtneiii oi the pres- cribed fee which shall riot be iru>i-e rhiin ton mpees, And nn additional fee of a preumbed ainounl, not exceeding three rupees bv way of penalty, if the application for renown! of the licence do6s not reach the issuing authority at leasi thirls dft"v" before the date on which the lioeTK'P feilseK to remnin in foice

Provided That no application to Ihn ICIIPW il of H licence shall be entertained if the ''i)pli('rt1ion does not reanh tbc ishnin^ mithority be- fore ihe licence ceases to remain in force

88. Insertion of new sections 42A, 42B and 420 in Act IV of 1938.—After section 42 of ihr *pid Act the following sections shall be inserted, namely: —

"42A RegtRtiution of principal ayeulx, chief aqenin and npenid agents.— (1) The ("'on(roller-General or an officer authorised by him in this behalf shall, iii the prescribr-d manner and on pnyment of the prescribed fee, which shall not he more than twenty-five rupees for a principal afi;ent or a chief "#ent, and ten rupees for a special agent, register any person who makes ati application to him in the prescribed mannar If,™

(a)_ m 1,1 u rnho of H11 individual, he do.-, not sutfoi from anv of t he dipqijHlnVnlions, mcniioncd in "u1)-neftioTi (/) of section 42 or

(?)) in t,he case of a eompnm or firm uny of its directors or part- wrd does ni-il suffer from any of the said disqualifications,

jUft2 THE (iAZJUTTK Oi)¹ INDIA .EXT-KAOKDINAHY, JNOV. ", 1949

(3) A certificate issued under this beotion shall remain Lu force for a period of twelve months only from the date oi issue, hut hhall, on applica- tion made in this behalf, be renewed from year to year on production of k certificate from the insurer oonoerned that the provisions of clausoe 2 and 3 of Part A of the Sixth Schedule in the case of a principal agent, the provisions of clauses 2 and 4 of Part J3 of the said Soheduie in the oase of u chief agent, and the provisions of clause* 2 and 8 of Part C of the sam Schedule in the case of a special agent, have boen complied with, and no payment of the proscribed fee, whioh shall not be more than twenty-five rupees, in the case of a principal agent or a chiei agent, and ten rupees in the case of a special agent, and au additional fee of the prescribed amount not exceeding five rupoee by way of penalty, in caset where the application for renewal of the certificate does not reach the isbuiug authority before the date on which the certificate ceases to remain in force:

Provided that, where the applicant is an individual, he does not sutiei from any of the disqualifications mentioned in clauses (b) to (d) of sub-seo- tion (4) of section 12, and, where the applicant is a company or u firm) any of its directors or partners does uol suffer From an\ of the -aid disqualifi- cations

(4) Where it in luutid that

(5) The authority which isHued any certificate under this section may issue a duplicate certificate io replace H certificate lost, destroyed or muti- lated on payment of tho prcm-i iberl Pee. whioh shall not be more than two rupees

(6) Anj person who acts us a principaJ ngent. chief agent or special agent, without holding a oertificate issued under this section to act as such, shall bp punishable with fine, which may extend to five hundred rupees, and any insurer or any person acting on behalf of an insurer, who appoints as a principal agent, chief Hfjent or special agent any person not entitled to net as such or transacts any insurance business in India through any such person, shall bo pnniRhablp with fine which mav extend to one thousand rupees

(7) "Where the person contravening nub-section (6) is a company or a firm, then, without prejudice to any other proceedings which may be taken against the company or firm, every director, manager, secretary or any other officer of the company, and every partner of the firm who is'knowing- ly a party to such contravention shrill V punishable with fine which may extend to five hundred rupees.

(S)_The provisions of snb-sectiotiF. (6) and (7) shall not take effect until the expiry of six months from the commencement of the Insurance (Amend- ment) Act, 1049.

42B. Reqvlation of employment of prinoipal agent*.—(1) Every con- tract between an insurer carrying on general insurance business In India and a principal apant Rha.ll be in writing"and shall speojfy the area for whtoh the principal agent is appointed, and the terms contained in Part A of tha Sixth Schedule shall bp deernprl f0 be incorporated in and form part of *vorv such oontrnct

IHJ3 GAZETTE OJ)' INDIA EXTHA0RD1NABY, NOV 8, 1946 JliW*

(#) No principal agent shall, either directly or through insurance agents, procure any general insurance business for the insurer in any are* outibide the area for which he has been appointed, 01 in any area for which another principal agent has been appointed, or in any area in whioh the head office or any branch o i ce of the insurer ib opeifttmg, and neither the head office nor any branch office of the insurer shall operate in an> area tor which a principal agent has been appointed

{3) "Within sixty days of the coinmeiiuemient of thu lubiirance (Amend- ment) Act, 1949, eveiy principal agent shall file with the insurer concerned' a full list of insurance agents employed by lain indicating the terms of the contract between thu principal agent and each oi such insurance agents, and, if any principal agent fails to file such a list within the period specified, any commission payable to such principal agent on premiums received from the date of expirv of the said period of sixty days until thi> date of the tiling of the said list shall, notwithstanding anything in any contract to the contrary, cease to be so payable.

(4) A certified copy of every contract as is referred to in sub-section (1) shall be furnished by the insurer to the Controller-General within thirty days of his entering into such contract and intimation of any ohange in any such contract shall be furnished by the insurer with full particulars thereof to the Controller-General witfiin tbirtv day* of the making of any such change.

(5) If the commission dut. to iiny mbinunce a ^ ut m respect of any general insurance business procured by such agent IF? not paid by the prin cipal agent for any reason, the insurer may ptiv the insurance agent the commission so due and recover the amount BO paid from the principal wgent concerned.

(ff) Every contract as is referred to in sub-section (1). subsisting at the commencement of the Insurance (Amendment) Act, 1949, shall, with respect to terms regs ding remuneration, be deemed to have been BO altered as to be in accordance with the provisions of sub-section (5) of section 40A.

(7) If any dispute arises as to whether a person is oi was a principal agent, the matter shal] he re faired to the Controller-Genernl vhohc deoision shall be final.

(8) Every insurer shall maintain a registei m which the name and -address, of every principal agent appointed by him the date of such appointment nnd tbe drttc if nnv rn which rhe appointment ceased shall be entered.

42C Bequlatiow of employment of ohief agonift and Rpecial aqentx — (1) Every contract between an insurer carrying on b"fe insurance business in India and n, chief ngent shall be in writing, and shall specify tbe area (not being less in extent than a district or the equivalent thereof) for which the chief agent is appointed, and the terms contained in Part B of the Sixth Schedule shall be deemed to be incorporated in and form port of every such contract.

(S)^No cbiof asjent shall either dircotlv or through insurance agentfl or special agents employed by or through him procure life insurance busi- ness for tbe Insurer in anv area outside the area for which be has been appointed or in anv area for which another chief a MM THE GAZETTE OE INDIA EXTHAOfiJDINAItY, NOV. 8, 1040

Provided that nothing in this sub-section shall be deemed to prohibit the head office of an insurer which had been operating at the commence- ment of the Insurance (Amendment) Act, J041), lor a peiiod of not less thou ten years before such commencement within the municipal limits of any town where the head office is situate, and a ehiei ugeut who, in pursu- ance of an agreement in writing, had been operating for a similar period within Riicli limits, from continuing to operate within the unid limits:

Provided iurther that nothing m thin nub-section STIM.11 be deemed to prohibit itn insurance agent from procuring life insurance business in or from any area and submitting the proposals direct to the principal office of the insurer in India

(3) Within sixty days of the commencement of the Insurance (Amend- ment) Aot, 1949, every chief agent shall file with the insurer concerned a full list of the insurance agents employed by him, indicating the terms' of the contract between the chief agent and each of such insurance agents and the business secured by each of such agents which is still in force, and if ariy ohief agent fails to file such a list within the period specified, any com- mission payable to suoh chief agent on premiums received from the date of the expiry of the said period of sixty days until the date of the filing of the said list shall, notwithstanding anything in any contract to t he con- trary, cease to be BO payable

(4) On the death or insolvency of the chief agent or the termination of the contract, with him, the insurance agents working under him shall be deemed to have been direotly appointed as agents of the insurer, and the renewal commission in respect of all future premiums on policies effected through niich agents shall be paid to them direct by the insurer.

(5) Every contract between au insurer carrying on life insurance busi- ness in India and n special agent, or between a chief agent of suoh insurer and a special agent, shall be in writiug and the terms contained in Part 0 of the Sixth Sohedule ah nil bo deemed to be incorporated in, and form part of, every such contract

(6) A certified copy of every contract as is referred to in sub-section (1) or sub-section (,5) shall be furnished by the insurer to the Controller- General within thirty days of his entering into suoh contract, and intima- tion of any change in any suoh contract shall be furnished by th^ insurer with full particulars thereof to the Controller-General within thirty day" of tho making of any such change.

(7) No such contract as is referred to in sub-section (1) or sub-section (6) Rhall be entered into or renewed for a period exceeding ten years at any one time, and, notwithstanding the terms of any oontraot to the contrary, no option to renew any such contract given to any of the parties shall be enforceable without the consent of the other.

(S) Every such contract as is referred to in sub-section (1) or sub- seefcion (5) subsisting at the commencement of the Insuranoe (Amend- ment) Aot, 1949, shall terminate on the 31st day of December, 1949, if ib has not terminated earlier:

Provided that if any party to a contract, which has been prematurely tertninfated by the operation of this sub-aeotion, so requires, the other party shall enter into H fresh contract with him for the unexpired period, not ex-

, TWE GAZETTE OF INDIA EXTKAOKDINAKY, NOV. 8, 1949 2198

ceeding ten years, of tho terminated contract nnd the tenns ot wuoh fresh con true t sha I—

(i) as respects rcmuneriition, whether in respect OJ buhinees al- ready procured or in respect of business to be procured thereafter, b" such as may be mutually agreed upon between the parties;

(ii) be 'Teemed to include all the- terms specified in Part B or Part C of the Sixth Schedule, as the case maj be,

(Hi) os respects any other matter for which no provision is made either in this section or in the Sixth Schedule, be the terms of the terminated contract modified only to suoh extent, if iny, as may b* mutually agreed upon between the parties'.

Provided further that in the event of any dispute m-. to the temis of the fresh contract, the matter film II be referred to xrbitration.

(9) Nothing in this section shall be deemed to prevent any special agent from receiving any renewal commission on policies effected through him "" an insurance agent at any time before his appointment us such special nflent.

(10) R uny dispute arises ati to whether a person is oi was H duel agent . or ft special agent for the purposes of this Aot, the matter slirtll be referred to the Controller-General whose decision shall be final,

(11) Every insurer shall mnintain a register in which t-lu¹ jume and ad- dress of every chief agent appointed by him, the date on which the appoint- ment was made and the date, if uny, on which the appointment oe^s- ed shall be entered, and a separate register in which sirnjjai particuars relating to every speoial agent Khali be entered, and every ojiief a^jent ehflll maintnin a register in which similar particulars reldin" to every special agent appointed by him shall be entered."

34. Amendment of section 44, Act IV of 1988.—For the provinos to *e"tiori 44 jfCi the Bail Act, the following proviso Rhnll be substituted, nmnely —

"Providod tbat^—

(a) such agent ceauen to act for the insurer coiicoj-ue-.l uitw the Central Government has notified in the official Gazette thai it is eatJR- fied that t}ie circumstances in which the said insurer j", plucd are wrh as to justify the agents ceasing to aot for him; or

(b) Buoh agent haf, served the insurer continually -uid exolutjiveh for at least seven years, aud policies ussuring a total --uni of not les^ than one hundred nnd fifty thousand rupees effectoi through him for the insurer were in- force on n date one year before his ^ea-sing to act as such aownt for the insurer, and that the renewal preniiiim Income on po'icies BO effected has not fallen at uny time after hiw (teasing to act as such below forty oer cent, of the premiums due on policies effected •through him nnd in force at the time of his ceasing to aot as such agent, but excluding mieh of thow> policies nw may have become claims by maturity; or

(c) such agent has served the insurer continually and exclusively for at least ten years, and niter his ceasjng to act a& suoh agent he does not directlv or indirectly solicit or procure insurance byninaae tor any other person."

3106 THE (GAZETTE Of 1NDU EXTBA0KD1NAKY, NOV. 8, 1940

35, Insertion oi new section 44A In Act IV of 1938.—After section 44 of the oaid Aot and before the heading "Special Provisions of Law ', the following, aeotlon shall be inserted, namely: —

"44A. Power to caU for information. —-For the purposes of ensuring compliance with the provisions of sections 40A, 40B, 40C, 4^B and 420 rbe Controller-General may by notice—

(a) require from tin insurer, prinoipal agent, chief agent or special agent such informatiou, certified if so required by an auditor or ncRiary, as he may consider necessary;

(b) iequire an insurei, principal agent, chief agent or special agent to Nubruit, for hiH examination at the prinoipal place of business in the Provinces, any book of nooount, register or other document, or to Bup- ply any statement which may be specified in the notice;

(c) e\HiuiiiL any omctir of an insurer or a principal agent, ohiof agunl or special agent on oath, in relation to any such information, book, register, document oi statement nnd administer the oath accord- ingly;

and an insure* principal agent, chief agent or special agent shall comply with any such requirement within such time as may be specified in the notice ''

36. Amendment of section 47, Act IV of 1938.—In bub-wection (I) of section 47 of the suid ACT, i\u- words "before the expiry of nine months from the date of the maturing oi tlip policy oi, where the circumstances are such that the insurer cannot Ix jnimfliateb, aware of such maturing, from the date on which •otkte of such maturing is given to the insurer" shall be omitted.

37. Insertion of new section 47A in Act IV of 1938.—After section 47 of tbo said Act, the following section shall be inserted, namely; —

"47A. (!laini<> mi xrnall lift insvranop policies.—(1) In the event of any dispute relating to ihe settlement of a claim on a policy of life insurance assuring a nuni not exceeding two thoufland rupeew exclusive of any profit OT bonus not being a guarantee 1 profit or bonus issued by an insurer in respect of insurance business tmusaeted in the Provinces, arising between the holder of such policy and the insurer who issued the policy or has otherwise assumed liability in respect thereof, the dispute may, at the option of the policy-holder hi referred to the Oontroller-G-eneral for deoi- sion, and the Controller-General shall, after giving an opportunity to the parties to be hoard and nfter making snoh further inquiries as he may think fit, decide the matter.

(2) The decis'i.n nt tht Controller-Gcner.il under this sub-section shall be final an-1 shall noi In c-illod in question in anv Court, and may be exe- euted by tho Cmm which wou'd have been competent to decide the dispute if it had not be"n referred to the Controller-O-eneral a* if it weiv a decree passed by that Court "

38. Amendment of section 48, Act IV ol 1938.—In section 4R of the said Aot,—

(*) in sub-section (7) aftei the words "directory of the company" the words "the number to be fleeted not being lees than two in any oase" shall be {Diverted:

THE GAZETTE OF INDIA EXTHAOBDINABY, NOV. 8, 1040 210T

(it) for sub-seotion (8A), the following sub-seotion shall be substituted^ namely; —

"(2A) A peiuon shall be ineligible for election as a director under sub-section (1) of any company—

(o) if he in a director, officer, employee or legal or technical rtdviser of that company or of any other insurer, or

(b) in the case ot any person who had been in the employ ol the insurer in any capacity other than as chief executive officer thereof, if five years have not elapsed from the date of his leaving the service of the inmirer,

•tnd -ihall ceast. TO be a director under sub-section (J^), if after eleotjon he becomes subject to any disqualification specified m thin sub-section ir i>o longer holds tbo qualifications required by sub-sertiou (#):

Provided thai nothing in this sub-section shall disqualify a person who ib an elected direotoi under sub-section (1) and is not otherwise disqualified under this sub-section from being re-elected:";

(Hi) in clause (a) of sub-section (3), for the words "provisions of thi" sub-section" the words "provisions of this seotion" shall be substituted

39. Amendment of section 48A, Act IV of 1938.—In seotion 48A of the said Aoi, for the words "xio person acting on behalf of an insurer who, for the purpose of life insurance business employs insurance agents", the words "no cJnVt apent or special agent" shell be substituted.

40. Insertion of new section 48B In Aot IV of 1938.—Aftei section 48A of the iniil \ct. flic following section shall be inserted, namely:—

''48)i. Further provision regarding directors.—An insurer specified in sub-clause (b) of clause (9) of section 2 and carrying on life inaurajioe busi- ness shall not have a common director with another such insurer:

Provided that thip section shall not apply—

(i) in any (-use whi'iv one insurer is a subsidiary oompany of the other: or

(ii) in any case where, h>r the purpose of facilitating the amalga- mation of two or more insurers or the transfer of t he business of one insurer to another, the Central Government has, for such period, to Much extent and subject lo such conditions tib may be specified,' ex- empted any such insurer or insurers from the operation of this flection."

41. Amendment of section 49, Aqt IV of 1938.—(7) Section 49 of the said Act shall be renumbered as sub-section (1) thereof, and after the proviso to that sur-section, ns w renumbered, (.he following further proviso shall be added namoly •—

'

'"Provided further that the share of any such surplus allocated to or reserved for the shareholder (including any amount for the payment of dividends sjuaranteerf to them, whether by way of first charge or otherwise) shall not flYewd ten per pent, of such surplus."

'•!) After sub-section (J). nw io renumbered, the following sub-seotion shall bf 'isfited, namely: —

"(t?) *'or the purpose* of sub-section (2), the actual amount of income- i.a\ deduotel at source during the period following the date as at which tnr lust preceding valuation was made and preceding the date as at whloh

8 TL-IK GAZKCTK Oh LM)IA, UXTKAOllDlNARY NOV S, 194fi

the valuation in question ib made inay be added to such .surplus after do- ducting an estimated amount (or income-lax on such surplus, such addition and deduction being Rtiown m paragraph 8(1) of the abstract prepured in accordance with Putt [I ol the Fourth Schedule to thit Act "

42. InBertioa oi nfcw sections Q2A to 62F in Act IV of 1938 Aitei section 53 sf the said \ct, the following heading and sections ahull be inserted, uumeh

"MANAOEMHWI UV. ADMINISTRATOR.

.52A. When *idminixtrator joi matmyoment of muuianoe bunutetiH rna,y

be appointed.—(1) It at anj time the Controller-General has reason to believe thai an insurer carrying on life insurance business TH uotmg in n manner lively to be prejudicial to the interests of holrtcip >i life insurance policies, he may, after giving such opportunity to the insurer to be lie.ird as he thinks fit, make a report thereon to the Central Government

{H) The Central Government, if it is of opinion nfte • ''onsidering the report that it it, necessary or proper to do so, may appoint an Administrator to manage the affairs of the insurer under the direction HTH control of tb> Controller- General.

(3) The Administrator shall receive such remuneration as the Central Government may direct and the Central Government may at any time can oel the appointment and appoint some other person a* Adminiskatoi

(4) The management of the business of the insurer shall as on and after the date of appointment of the Administrator vest in such Adminis- trator, but except with the leave of the Controller-Genera I the Vdministrft- tor shall not lHwue any further, policies.

(,5) As on and after the datt* of appointment of the Administrator anr person vested with any HUCIL management immeliately prior to that dat* shall be divested of that management,

(6) The Controller-* ieueial maj issue mich directions to the Adminis- trator as to bib poweiw and duties as he deems desirable in the cirourri- Btanoes of the case, and the Administrator may apply to the Controller- General at any time for instructions as to the manner in 'ffhioh he s>haJQ •conduct the management of the business of the insurer or in relation to any matter arising in the course of such management.

52B, Powers am] (lutieii of the Administrator.—(1) The Administrator shall conduct the management of the business of the insurer with the great- est economy compatible with efficiency and shall, ag soon as may be possible file with the Controller-General a report stating which of +he following couitses is in the ciroumntances most advantageouH to the general iutewmt* .of the holders of life insurance policies, namely: —

(a) the transfer ot the business of the insurer to some other mMimr

(fa) the carrying on of L!K business by the insurer (whether witli the policies of the business continued for the original sum insured with the addition of bonuses that attach to the policies or for mlm t-f* amounts);

(r) the winding up of the insurer; or (d) Ruch other courts as he deems advisable

(2) On the filing ot the report with the Controller-General, the Connoi- ler-General may take such action as he thinks fit for promoting the inter ,ents of the holders of life insurance policies in general

THE GAZETTE OF INDIA, EXTKAORD1NAB1⁷, NOV. 8, 1949 2199

(3) Any order passed by tho Contioller-General under sub-section "ft8)- shall be binding on nil persons concerned, and shall have effect notwith- standing anything in the memorandum or articles of association of the insurer, if a company.

520. Cancellation of contracts and agreement)!.— The Administrator may, at any time during the continuance of his appointment with respect to an insurer and after giving an opportunity to the persona concerned, to be heard, cancel or vary (either unconditionally or subject to such con- ditions? as h© thinks fit to impose) tiny contract or agreement (other than o policy) between the insurer and any other person which the Administra- lor_ is satisfied is prejudicial to the interests of holders of life insurance policies.

52D Termination of appointment of Administrator..—If at any time, on a report made by the Controller-General in this behalf, it appears to the ^"'entral Government thnt the purpose of the order appointing the Adminis- trator has been fulfilled or thai for any reason it is undesirable that th& order of appointment should remain in force, the Central Government may cancel the order and thoreupon the Administrator shall be divested of the management of the insurance business which shall, unless otherwise direct- ed by the Central Government, again vest in the person in wlrom it was vested immediately prior to the data of appointment of the Administrator.

52E. Finality of decision appointing Administrator.—Any order or decision of the Central Government made in pursuance of section 52A or section 521) shall be final and shall not be called In question in any Court. 52F. Penalty for withholding documents or property from Adminis- trator.—-If any director or officer of the insurer or any other person fails to deliver to the Administrator any books of account, legisters or any other documents in Ms custody relating to the business of the insurer the manage- ment of which bus vested in the Administrator, or retains any property of such insurer, he shall be punishable with imprisonment which may extend to six months, or with fine which may extend to one thousand rupees or •with both.

5?G Piotertion of arh'oti talPn under sections fi2\ to 521). (1) No suit, prosecution or other legal proceeding shall lie against an Vlmmislrntor for aiwihing which k in good faith done or intended to bo done m pursuance of serf ions 52A to 52C inclusive

(?) Vo suit or other legal proceeding shall hV against the Central .overnmerif or the Controller-General for any damage caused or likelv to b"> caused by nnvthmg which is in good faith done or intended to be done under section fi2A, section f52B, or section 52D."

A W A

+Tn ( i !Tt. < of S ⁶ C t t o rl ⁵⁵" A ct W Of ¹⁹38—Tn section 55 of the said

44 A m e ^ m c rt of secVtm 64, Act IV of 1938.-To action 64 of the said Act, the following words shall be added, nnmely

"and shn¹! furnish to the Coritroller-Gcneral on or before the las! day of -lanunrv m everv calendar venr a certificate from nn audiior to the effect thai the said books of •,c(.m,7,t, register and documents are being kept OR rennred at the principal office of the insurer."

n n d ^ w X i T T V tT ⁶⁴A ^ iD ACt IV °f ¹⁹³⁸-After section 64 namely^ followmg Part and sections shall be inserted,

2200 THE GAZETTE OF INDIA, EXTRAOBDINAKY, NOV. 8, 1949

"PAET IIA.

INSURANCE ASSOCIATION OF INDIA, COUNCILS OF THE ASSOCIATION AND

COMMITTEES THEREOF.

64A, Incorporation of tfie Insurance Association of India.—(1) All insurers holding certificates of registration under thin Act at the commence- ment of the Insurance (Amendment) Act, 1049, all insurers who may thereafter be granted certificates of registration under this Act, and, if the Central Government by notification In the official Gazette so declares, all provident sooietiee holding certificates of registration under this Act or under the Provident Insurance Societies Act, 1912 (VI of 1912), on tha date of such notification and all provident societies which, may be granted certificates of registration under this Act after such date, are hereby constituted a body corporate by the name of the Insurance Association of India, and all suoh insurers and provident societies shall be known as members of that Association.

(£) The Insurance Association of India shall have perpetual succession and a common seal and shall have power to acquire, hold and dispose of all property, both movable and immovable, and shall by the Said name sue and be sued.

64B. Entry of names of members in the register.—(2) The Controller- General shall take or cause to be taken through much agency as he think* fit such steps as may be necessary to have the names of all Insurers and provident societies, who or which are entitled to have their names entered in the register of members of the Insurance Association of India maintained for this purpose entered therein.

(#) Where any insurer or provident sooiety has ceased to oarry on business as suoh, the Controller-General shall cause suoh steps to be taken as may be necessary to have the name of suoh Insurer or provident society,. as the case may be, removed from the register of members.

64C. Councils of the Insurance Association of India.—There shall be two Councils of the Insurance Association of India, namely: —

(a) the Life Insurance Council consisting of all the members of the Association who carry on life Insurance business in India, and

(b) the General Insurance Council consisting of all the members of the Association who carry on general insurance business in India.

64D. Authority of members of Association to act through agents.

It "hall be lawful for any member of the Life Insurance Council or the General Insurance Counoil to authorise any individual, whether an offloer of the insurer or not, to act as the representative of suoh member at any meeting of the Counoil concerned or to stand as a candidate for any election held by that Counoil.

64E. Authorities of the Life Insurance Council and the General Insurance Council—(1) The authorities of the Life Insurance Council and the General Insuranoe Council shall be the Executive Committees, the Tariff Committee and the other Committees thereof constituted in the manner provided In this Part.

64F. Executive Committee* of the Life Insuranoe Counoil and the

General Insurance Council.—(1) The Executive Committee of the Life Insurance Council shall consist of the following persons, namely:

(a) two officials nominated by the Central Government, one as the Chairman and the other as a member;

THE GAZETTE OF INDIA, EXTEAOBDINAEY, NOV. 8, 1949 2201

(b) eight representatives of insurers carrying on life insurance business elected in their individual capacity by the said insurers in such manner, from such groups of insurers and from such areas as may be specified by the Central Government;

(o) one non-official not connected with any insurance business, nominated by the Central Government; and

(d) four persons connected with insurance business, nominated by the Central Government for the purpose of representing such groups of insurers carrying on life insurance business or such areas as have not been able to eeoure adequate representation on the Executive Committee of the Life Insurance Council or tor any other purpose.

(#) The Executive Committee of the General Insurance Council shall consist of the following persons, namely:—.

(a) two officials nominated by the Central Government, one as the Chairman and the other as a member;

(b) nine representatives of insurers carrying on general insuranoo business elected in their individual capaoity by the said insurers in such manner, from such groups and from such areas as may be specified by the Central Government;

(c) one non-official not connected with any insurance business, nominated by the Central Government; and

- (d) three persons conneoted with insurance business, nominated by the Centra] Government for the purpose of representing such groups of insurers carrying on general insurance business or such areas as have not been able to secure adequate representation on the- Executive Committee of the General Insurance Council or for any other purpose. (3) If any body of persons specified in sub-Bections (1) and (2) fails to elect any of the members of the Executive Committees of the Life Insurance Council or the General Insurance Council, the Central Govern- ment may nominate any pevson to fill the vacancy, and any person so nominated shall be deemed to be a member of the Executive Committee of the Life Insurance Council or the General Insurance Council, ag thfr case may be, as if he had been duly elected thereto.

(4) Each of the Executive Committees of the Life Insuranoe Council and the General Insurance Council may, with the approval of the Central Government, make bye-laws for the transaction of any business at any meeting of the said Committee, and any such bye-law may provide that any member of the Committee who is interested in any matter for the time being before that Committee may not be present at, or tako part in, any meeting thereof.

(5) Any decision of the Executive Committee of the Life Insurance Council or of the General Insurance Council shall be subject to the approval of the Controller-General, and on such approval shall be final and shall not be questioned in any manner.

(6) The Life Insurance Council or the General Insurance Council may form such other committees consisting of such persons as it may think fit to discharge such functions as may be delegated thereto:

Provided that any action taken by any of the said Councils under this sub-section shall be with the previous consent of the Central Government, and nothing in this sub-section shall derogate from any of the powers vested in the Executive Committees.

2202 THE GAZETTE OF INDIA, EXTBAOEDINABY, NOV. 8, 1949

(7) The Secretary of the Executive Committee of the Life Insurance Council mid of the Executive Committee the General Insurance Counoil shall in each case be an officin] nominated by the Central Government.

G4G. hi tig nation and piling up of casual vacancies.—(1) Any meinbei of the Executive Committee of the Life Insurance Council or of the General Insurance Council may resign his membership of the Committee "by notice in writing addressed to the Chairman of the Committee to that effect

(2) Casual vacancies ai the Executive Committee of the Life Insu- rance Council or of the General Insurance Council, whether caused by resignation, death or otherwiso, shall be filled by nomination by the Central Government, and any person so nominated to fill the vacancy shall hold office until the dissolution of the Committee to which he has been nominated.

(<3) No act of the Executive Committee of the Life Insurance Counoil-- or of the General Insurance Council shall be called in question on the ground merely of the existence of any vacancy in, or defect in the constitution of, the Committee concerned.

64H. Duration and dissolution of Executive Committees.—(J) The duration of the Executive Committee of the Life Insurance Counoil or the General Insurance Council shall be three years from the date of its first meeting on the expiry of which it shall stand dissolved and a new Executive Committee constituted.

(2) Notwithstanding the dissolution of the Executive Committee of the Life Insurance Counoil or the General Insurance Council, the out- going members thereof sholl continue to hold office and discharge such administrative and other duties as may he prescribed until such time as a now Executive Committee of the Life Insurance Council or the General Insurance Counoil, us the oaso may be, shall have been constituted.

641. Power of Executive Committee of Life Insurance Council to hold examinations for insurance agents —The Life Insurance Council may, with the approval of the Central Governmeut, authorise its Executive Committee to hold examinations for individuals wishing to qualify them- selves as insurance agents tor the purpose of procuring life insurance business, and, if the Central Government, by notification in the official Gazette, so declares, then, notwithstanding anything contained in section 42, only individuals who have passed any such examination shall be eligible to opply for a licence under section 42:

Provided that nothing in this sub-section shall affect the right oi tiny individual, who has been licensed to act as an insurance agent under section 42 before the date of such notification, to act as such, or to have his license renewed from time to tune.

64J. Functions of Executive Committee of Life Insurance Council.— (X) The functions of the Executive Committee of the Life Insurance Council shaJl bo—

(a) to aid, advise and assist insurers carrying on life insurance business in the matter of setting up standards of conduct and sound practice and in the matter of rendering- efficient service to holders of life insurance policies;

/

(b) to control the expenses of insurers carrying on life insurance business in respect of their life insurance business in India;

(c) to bring to the notice of the Controller-General the case of tiny insurer acting in a manner prejudicial to the interests of holders of life insurance policies;

THE GAZETTE OF INDIA, EXTEAO11DINABY, NOV. 8, 1949 2203

(d) to Hot in any matter incidental or ancillary to any of the matterw specified in clauses (a) to (c) as, with the approval oi the Central Government, may be notified by tho Life Insurance Council in the Gazette of India

(9) For the purpose of enabling it effectively to discharge its functions, the Executive Commutes of the -Lite Insurance Council may collect such biiiJfis of mone\, whether by OTJ of fees or otherwise, as may be prescribed from .ill members of the Insuianuo Association ot India who carry on lile insurance business.

64TC I'owet of Executive Conimittee of Life Insurance Council io control ciptiti^cu —(7) Thf Executive Conimittee of the Life Insurance Council shall meet at least once before the 81st day of March every year and fix, with the approval o[ ihe Controller-General, the limits by which the mtiu'l expenses IIUUTLII by in insurer carrymy on life insurance business in lcspect of such business in the preeedng 3 ear may exceed the pnn is:on for expends conti iiul in the premiums received '>\ him during such preceding \etu.

(2) In fi\mg any limit's under sub-section (1), the Executive Com- mittee of the L'fL Ijismuncv ( ouucii shall have diiu lvgmJ to thi condi- tions obtaining n life insnr-mce business generally during that \ear and different limits mtiv ne uxed tor different groups of insurers.

(.3) Where an mburei is guilly of contravening the provisions of sect on 40U with jespect to the expenses oi management, th Executive Comniittee t-t (lie Lite 1 .uwranee Council may, after giv ng him an opporfunit\ ot being heard, report the matter lo the Controller-General lor such action as is specified in sub-sections (4) to (6).

(4) On receipt of any report under Rub-seotion (3), the Controller- General may administer a warning or warnings to the insurer.

(5) Where within a period of ^eveu .ypirs two warnings have been given to an insuier undei ,ub-se< (inn (i) and they have been disregarded by him, the Controller-di nei'nl may cause on investigation and valuation, as at such date as the Controller-General ma} specify, to be made at the expense of the iusurcr by an actuary appointed by tho insurer for this pur- pose and approved by the Controller-General, and the insurer shall place af the disposal oi the said actuary all the materials required by hhn for the purpose of such investigation and valuation, within such period, not being less¹ than three months, as the Cotitroller-Goneral may specify.

(6) The provisions of sub-sections (J) and (4) of section 13 and of sub- sections (2) and (2) of section 15, or, as the case may be, of sub-section (2) of section 10 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 tho Controller-General may specify

(7) There shall be appended \o every such abstract a statement signed by tho actuary giving such information as may be prescribed.

(5) On receipt of the abstract and statement furnished in accordance with sub-section (6), th0 Controller-General may take such action as may be prescribed.

64L. Functions nf Executive Committee of General Insurance Council. —(1) The functions of the Executive Committee of the General Insurance Council shall be—

2204 THE GAZETTE OF INDIA, EXTEAORDINABY, NOV. 8, 1949

(a) to aid and advise insurers, not exclusively carrying on life in- surance business, in the matter of setting up standards of oonduot and sound practice and in the matter of rendering efficient service to holders of policies other than policies of life insurance;

(b) to control the expenses of such insurers carrying on business in India in the matter of commission and other expenses;

(c) to bring to the uotioe of the Controller-General the case of any such insurer acting in a manner prejudicial to the interests of holdern of insurance policies (other than policies of life insurance);

(d) to act in any matter incidental or ancillary to any of the matters specified in clauses (a) to (o) as with the approval of the Cen- tral Government may be notified by the General Insurance Council in the Gazette of India.

(8) For the purpose of enabling it efieotively to discharge its functions, the Executive Committee of the General Insuranoe Council may colleofc such fees as may be prescribed from all insurers carrying on general insur- ance business.

64M. Power of Executive Committee of General Insurance Council to control expenses.—(I) The Executive Committee of the General Insuranoe Council shall meet aa soon as may be after it has been constituted under seotion 64F and fix, with the approval of the Controller-General, the limits of expenses of management^ including expenses on commission, in respect of the general insurance business carried on by insurers, and any limits BO fixed shall have effect from, the 1st day of January, 1950.

(2) The Executive Committee of the General Insurance Council shall meet at least onoe before the 81st day of March every year and may, hav- ing due regard to the conditions obtaining in the insuranoe business in the preceding year, fix with the approval of the Controller-General the limits by which the actual expenses of management incurred by an insurer carry- ing on general insurance business in respect of his general insurance busi- ness in the preceding year may exceed the expenses permissible under sub- section (1) and different limits may be fixed for different insurers.

(3) Where an insurer is guilty of contravening the provisions of seotion 40C with respeot to the expenses of management, the Executive Committee of the General Insurance Council may, after giving him an opportunity of being heard, report the matter to the Controller-General for such action as is specified in sub-sections (4) and (5).

(4) On receipt of any report under sub-section (3), the Controller- General may administer a warning or warnings to the insurer.

(5) Where in any case two warnings given to an insurer under sub- section (1) hnvo bi on disregarded by him, the Controller-General may take such action against the insurer as may be prescribed,

64N. Pover of General Insurance Council to regulate rates of insur- ance, etc—(l\ The (tenprHl Insurance Counoil may, by regulations made in this behalf and approved bv the Central Government, control and regu- late the rates, "d vantages, terms and conditions that may be offered by ita members in respect of genera ''•wrunrfi business, and all such regulations shall be binding on all its members.

(5) Any regulations made under sub-section (1) may delegate to a Tariff Committee, appointed for such period and consisting of such persons

THE GAZETTE OF INDIA, EXTBAOBDINAEY, NOV. 8, 1949 2205

as may be specified in such regulations, any power of control and regulation vested in the General Insurance Council.

(3) "Where an insurer is guilty of contravening any regulation made under sub-seotion (1) by whioh he is bound, the TariS Committee, if any, appointed under sub-section {2) may take such disciplinary aotion again"$ him as may be prescribed.

(4) The Central Government may prescribe the oaBea in which an appeal shall lie m respect of any action taken under sub-section (3), and any such appeal shall be preferred to the Central Government within thirty days of the dat© on whioh Buch aotion was taken.

(6) The General Insurance Council shall meet at least once a year to review the work done by the TariS Committee appointed under sub-section (S).

(6) For the purpose of enabling the Tariff Committee to effectively -discharge its functions under this section, the General Insurance Council may, by regulations made in this behalf and approved by the Central Gov- ernment, fix the amount of fees payable by insurers carrying on general insurance business, and the TariS Committee appointed under sub-section (2) may collect such fees either direotly or through Eegional Councils con- stituted as hereinafter provided.

Explanation,—For the purposes of section 64N, section 640 and sec- tion 64P, the Central Government may, by notification in the official •Gazette, specify that any insurer or class of insurers, shall not be deemed to be included amongst insurers carrying on general insurance business^ and any insurer so specified shall not take part in any meeting of the Gen- eral Insurance Council in which any disoussion of any matter dealt with in the said sections takes place.

640. Begional Council*.—(1) The General Insurance Counoil may •constitute such Begional Councils as and when it deems fit for one or more of the prescribed regions.

(£) Each Begional Council shall consist of seven persons elected by such groups of insurers carrying on general insurance business in the region as may be prescribed.

64P. Functions of the Regional Councils.—(2) The Begional Councils shall perform such functions as may be delegated to them by the General Insurance Counoil.

(3) For the purpose of enabling it effectively to discharge its duties, any Eogional Council may in the prescribed manner constitute such Com- mittees thereof as it may think fit, whether consisting of members of tho Regional Counoil or otherwise.

(3) Where in the exercise of auy functions delegated to it under thin section, any Bcgionul Council or any Committee thereof restrains a princi- pal ugent or an insurance ngent from procuring or causing to be procured general insurnnce business from any nreu, any such principal agent or insur- ance agent may appeal to the Central Government within such time as may be prescribed and the Central Government may pass such orders thereon as it thinks fit.

G4Q. General powers of Life Insurance Council and Genaral Insurance Council,~(1) For the efficient performance of its duties, the Life Insur- ance Council or the General Insurance Council, as the case may be, may— (a) appoint such officers; and servants as may bo necessary and fix the conditions of their service;

2206 THE GAZETTE OP ISDIA, EXTKAOEDINAEY, NOV. 8, 1949

(6) determine the manner in wirch any prescribed ice may be collected;

(o) keep and main(tinn up to elate it cop} oi the list oi all insurers who jire members of the Insurance Association oi India,

(d) with the previous approval oi the Central Government, make regulations for—

(?) the holding of elections other than (he first elections;

(u) (be summoning and holding of nieetmgb, the o miuct of business, thereat and the number ot members necessary to form Q quorum,

(iii) (he submission by insurers to the Kwcuthe Committee of the Life Insurance Council or the Genera] Insurance Council of RUr-h statements or information as may be i eijuired ot them and the submission of copies thereof by the insurers to (he Controller- General ,

(iv) the levy and collection of any fees;

(?;) the regulation of any other matter which may be necessary tor the purpose of embling it to carry out its duties under tbifj Act.

(2) The Life Insurance Council or the General Insurance Council may authorise the Executive Committee concerned or (he T iriflf Committee appointed under section (MNT to exercise any of the powers conferred on the Life Insurance Council or the General Insurance Council, as I ho cuse may be, under clause (a), clause (b) or CIRUBO (O) of sub-section (1).

64ft. PfUieiT nf Central Government to removQ difficulties,—The Cen- tral Government may exercise such powors us may he, -necessary for bring- ing the Life Insurance Council, the General Insurance Council or tho Exe- cutive Committee of any of the said councils, as the case may be, into effec- tive existence for (be purposes of this Part, and any such powers shall include—

(a) the power to hold, in such manner aa may he directed by the Central Government, (he first elections to the Executive Committees of the Life Insurance Council and the General Insurance Council;

(b) whore a notification under sub-section (7) of section 04A has been issued declaring provident societies to be members of tho Insur- ance Association of India, the powor 1o associa(e provident, societies effectively in the exercise of all powers and the discharge of all func- tions of the Life Insurance Council and the Executive Committee thereof ;

(o) the power to make the provisions of section 40B applicable to the provident societies specified in clause (b) in the same manner as they apply to insurers.

648. Power to exempt —The Central Government may, subject to such conditions and restrictions as it may think fit to impose, exempt any insurer specified in sub-clause (c) of clause (,9) of section 2 from the opera- tion of all or any of the provisions of this P a r t ."

46. Amendment of section 65, Act IV of 1988.—Tn sub-section (1) of section 0J5 of the said Aot, for the words "nine hundred" the words "one thousand" shall be substituted.

THE GAZETTE OF INDIA, EXTHAORDINAEY, NOV. 8, 1949 2207

47. m o t i on ol new sectn.ii 6bA in Act IV of x938.—After bootiou 05 of the Baitl Act tLiG iollovving section shall be inberted, namely •—-

"05A. Prohibition nf transaction o) nsurante busmeufi ()// -provident*, noritti'j otlier than puoln < ompamex or o optrutivt societies.—>No person shall, alter the commencement of thi. Invmmcfc (Amendment) Ait, 1949, begin to carry oti anv (pusiiics¹- speeiAtd in bub-seeiion (1) of section 65, aid uo provident bocch canning on any buch business in the Provinces shall, alter the e\rpn\ of out >enr from such commencement, continue to cairy on any such business, unless he or it is—

(a) ft publi< companv, or (b) ft saeiet) regibtered un ler the Co-operative Booieties Act, 1912 (IT of 1912) ot under nny otb Jr law tor ihe trrne being m toice in any Pvovmce ol India rebiling to co-operative societies, or

(fi) n bod\ corpoinie iroo.porated under ibe luw of any country or tiiniie outsnk the Provinces of Tndia "

48. OiniS^lon of section 88 Act IV ci 1938.—Section 68 of the said Act shall be ojniUed

49. Amendment of section 70, Act XV of 1938 In section 70 of tbe said Act,—

(J) in Hub-eeetion (3), for the figuies ~'Q7 ' the figureb and letter "65A, 67" Rhall be substituted,

(2) in sub-fcoction (4),~

(i) at Ihe end ot sub-clruise (it) ol olaune (a), the woid ''or" shall be insorted;

(u) clause (b) shall be omitted; and (id) utUr clause (a) of the hccoud proviso, the following clause shall be insertod, namely:—-

" (aa) cancel the registration of a provident society if any deposit required by section 73, lias not been made, or" DO. Amendment ol section 71, Act TV ol 1938.—In section 71 of the said Act.—

2208 T HE G A Z E T TE OF I N D I A, E X T E A O E D I N A B Y, NOV. 8, 1949

54. Amendment oi section 92, Act IV of 1938.—In section 92 of t he said Act,—

(1) In sub-eeotion (4)—•

(i) for the words " t he Superintendent of Insurance shall appoint a suitable peraon", the words " t he Controller-General may, if he thinks fit, appoint a suitable p e r s o n" shall be substituted; and

(ii) for the words " a nd if so desired, shall also appoint a oommH)- tee of inspection", the words " a nd if he considers it desirable, m ay also appoint a oommittee of inspection shall be substituted.

(2) In sub-section (21) after the words "forwarded by the liquidator" t he words " w i t h in one week after the m e e t i n g" shall be inserted.

55. A m e n d m e nt of section 94, Act IV of 1938.—In section 94 of the naid Act, sub-section (2) shall be omitted.

56. Amendment of Section 98A, Act IV of 1938.—In section 98A of t he ••aid Act, the words, figures- and brackets " so however t h at in suoh application 1>he references in the second proviso to sub-seotion (1) of the said section to the commencement of this Act shall be construed as references to the commenoe- m e nt of the Insurance (Amendment) Act, 1946" shall be omitted.

57. A m e n d m e nt of section 100, Act IV of 1938.—In section 100 of the i s id Act, for the words "publish such notices or d o c u m e n t s" the words "publish such notice together with a summary in the prescribed form of t he balanoe- ••beet and revenue a c c o u n t" shall be substituted.

08. A m e n d m e nt of section 102, Act IV of 1938.—Jn section 102 of t he said A c t—

(i) for the word " d e f a u l t ", wherever it occurs except for the first time, the words "default or contravention" shall be substituted;

(0) after sub-section (1), the following sub-section shall be inserted, n a m e l y: —

"(1A) The provisions of sub-section (1) shall apply in respect of prinoipal agents, chief agents and special agents as they apply in res- pect of an I n s u r e r ."

ti9. Insertion of new section 1100 In Act IV of 1988.—After section HOB¹ -of the said Act, the following section shall be inserted, n a m e l y: —

" H O C. Power to call for information.—(1) The Controller-General m a y, by notice in writing, require any insurer to supply him with any informa- tion relating to his Insurance business, and t he insurer shall oornply with suoh requirement within such period after receipt of the notice as may be speoified therein.

(S) IShy Information supnliVd mirW fViip; section shall be certified by ft principal officer of t hc inRurer p.nd if the notice so requires also by an audi- t o r ."

60. Amendment of section 116, Act TV of 1938.—In sub-section (1) of section 116 of the, "ail Act,—

THE GAZETTE OF INDIA, EXTEAORDINABY, NOV. 8, 1949 220"

62. Amendment of flection 118, Act IV of 1988.—In section 118 of the said Act, at the end of clause (fa), the word "or" Bhall be inserted and after thafl clause, the following clause shall be added, namely: —

"(c) any approved superannuation fund aa denned in olause (a) of sec- tion 68N of the Indian Income-tax Act, 1922 (XI of 1922)."

63. Amendment of the Flint Schedule, Act IV ol 1038.^In the First Schedule to the said Act,—

(t) in Part I, in clause (c) of regulation 7, for the words "a certificate signed by" and the words 'parts of the assets", the words "where the balance sheet relates either wholly or in part to life insurance business, a certificate signed by" and the words "part of the assets" shall respectively be substituted;

(j'i) in Form A, in the first column, for the item "Life Insurance Fund" the following shall be substituted, namely: —

"Life Insurance Fund— (i) Business in India, (ii) Business outside India".

64. Amendment of tha Third Schedule, Act IV of 1988.—In the Third

Schedule to the said A.ct,—

(1) in Part I, after regulation 7, the following regulation shall be in- serted, namely: —

"7A. In addition to the revenue account, information shall also be supplied of the gross claims payable directly by the insurer in India (that is to say, the claims without taking into account claims on rein- surance ceded or accepted) separately for fire, marine and miscellane- ous insurance business and the provisions of sections 20 and H6A shall not apply to any information so supplied." (0) In Part II, in Form F,-

(a) in the first column, for the item "Commission" the following items shall be substituted, namely:

"Commission on direct Business Commission on Reinsurances accepted." (b) in the third column, before the item "Other Inoome (to be specified)", the following item shall be inserted, namely:

"Commission on Reinsurances ceded "

S c h e d u le to A ct IV¹ of 1938.-In the said Act, the "K^Hi, ^ ' 5 °? •?* uT l

Blxth bonedule shall be re-numbered as the "Seventh Schedule" and be- fore that Schedule as BO renumbered, the following Schedule shall be ' inserted ' muneJy:—

"THE SIXTH SCHEDULE

PAET A

[See section 42B(I)]

Term* deemed to be included in every contract between an insurer carrying on

general insurance business and a principal agent

_ 1. All payments of commission to insurance agents shall be made bv the principal agent on behalf of the insurer.

2210 THE GAZETTE OF 1NDI1, .EXTBAOEDINAEY, NOV. a, 1949

2. The principal agent shall procure or cause to bo procured through insur- ance agents such an amount of general insurance business of any class for the procurement uf which he has been appointed, as will yield a gross premium in- corao of not less than twenty thoUFiaud rupees, in each calendar year.

8. Jn the event of (lie principal auont tui'ing in any calendar year to comply with the requirements of clause 2, he shall forfeit to the insurer—

(i) one-quarter of the total renmneiation payable to him by the insurer for that year, if the class of business for the proeinemcnt of which he has been appointed is fire or miscellaneous insurance business, of

(ii) one-third of the total remuneration pajnble to him b\ the insurer for that year, if the class of business for the procurement of which he has been appointed is marine insuranco business.

4. In the event of the principal agent failing to comply with the requirements of clause 2 in any two successive calendar yea^s, the contract shall, without prejudice to the provisions of clause 3, terminate on the !5Lst day of March immediately following the second calendar year,

5. A principal agent shall not by himself procure any class of general insur- ance business without utilising the services of an insurance agent

PAET "B.

[See section 42C (1).]

Terms deemed to be included in ever]) contract between an insiner carrying on

life insurance bupini'isx and a chief agent.

1. All payments of commission to iasurfiiuL¹ a^enis shuJl be rn\diJ 1>\ the insurer direct or by the chief agent, who m:.iy moke the payment either directly or through a special agent on behalf of the insurer.

2, The chief agent shall employ or cause to be employed for and on behalf of the insurer either directly or thmugh special agents at least twelve insurance agents in cases where the business in force of the insurer is less than one erore of rupees or in any other caso at least twenty-four agents each of whom will procure in each calendar year new business arnouni ing to not less than ten thousand rupees.

8. Save as provided in respect of cases specified hi c'auso 7 of this Purt, the remuneration payable to the chief agent in respect of life insurance busi- ness effected through him for the insurer shall only be in the form of an over- riding commission.

4. In the event of the chief agent failing in any calendar year to Comply with the requirements of clause 2, he shall forfeit to the insurer one-half of the total remuneration payable to him by the insurer for that year.

5. In tho event of the chief agent failing to comply with the requirements of cuause 2 in two successive calendar years, the contract shall, without prejudice to the provisions of clause 4, terminate on the 31st day of March immediately following the second calendar year.

6. Not more than one intermediary to be remunerated by the insurer con- cerned, whether on a salary basis or by way of commission, shall be employed between the chief agent and the insurance agent, but the chief agent may em- ploy as many persons as he thinl's fit on a salary basis, provided such salaries are paid out of his overriding commifision.

7. In cases where the commission payable on a policv of life insurance effected through an insurance agent working under a chief agent is stopped by

THE GAZETTE OF INDIA, EXTltAOEiQlNABY, NOV. 8, 1949 2211

the insurer and not paid to the insurance agent, an amount not e\ceeding one- quarter oi such commission payable to the insurance agent concerned may also be payable k> the chief agent, it lie continues to render service in connection "with that policy.

PAUT C

[See section 42C (5).\

Terms deemed to be included in every contract, betueen an insurer carrying on

life insurance business and a special agent or betvjeen a chief agent and a

special agent,

1. All payments of commission to insurance agents shall be made by the insurer direct or, on behalf of the insurer, either by the chief agent under whom the special agent is working or by the special agent

2. The Rpecial agent shall employ at least four insurance agents in casea where ihe business in force oi! tne insurer is less thnn one jrore of rupees, or in any other ease, at least eight msuiance agents each of whom will procure in each calendar year new business amounting to not less than ten thousand rupees assured.

3 In the event of the special agent failing in any calendar year to comply with the requirements of clause 2, ho shall forfeit to the insurer fifty per cent, of the total remuneration payable to him by the insurer, or, as t h e' case may be, by the chief agent, for that yenr

4 In ihe^ event of the special agent failing to comply with the requirements of clause 2 in two successive calendar years, the contract shall, without pre- judice to the provisions of clause 8 of this Part terminate on the 31st day of March immediately following the second calendar year

5 The remuneration pajable to (he special agent in respect of policies of life insurance effected through him shall ouly be in the form of an overriding commission.

Hspl anal ion.~ln this Sohedule "business in force" means the total Bum assured with bonuses, without taking into account reinsurances, ceded or ac- cepted, by an insurer in respect of the whole of the life insurance business on the last working day of the calendar year or the period covered by the revenue account furnished by such insurer under clause (b) of iub-soction (2) of section 16, as the case may be, preceding tlip calendar year in question.

2212 THE GAZETTE OF INDIA, EXTEAOBDINABY, NOV. 8, 1949

STATEMENT OF OBJECTS AND EEASON8

A Bill to amend the Insurance Act, 1988, was pending in the Constituent Assembly (Legislative) and it was with the permission of the House withdrawn in January 1948, in order to enable reconsideration of the provisions thereof in the light of the changed conditions arising out of the Partition and the changed constitutional position. That Bill contained provisions designed to implement the main recommendations made in 1940 by a Committee constituted under the Chairmanship of Sir Cowasjee Jehangir. That Committee, it may be re- called, went into the question of frequent changes in the management of Insurance Companies and other undesirable features in the administration of Insurance Companies. There were also, in the Bill, other provisions limiting the commission method of payment of remuneration and placing a limitation on the expenses of insurers, and was in the form in which tbe Select Com- mittee of the old Legislative Assembly had altered it in March 1947.

2. The Government appointed an Informal Committee of persons knowledge- able in insurance matters to examine the provisions of the above Bill and also to review all the provision* of the Insurance Aot with a view to suggesting suit- able amendments having regard to the changed circumstances. The report of this Committee was further considered by the Insurance Advisory Committee and the present Bill aims to incorporate in the law provisions which Govern- ment, in the light of all this further examination, consider desirable.

8. This Bill incorporates the main provisions in the old Bill which aim at: (i) making it difficult for designing financiers to get control of insurance com- panies or to use Insurance funds for speculative purposes, and (it) preventing¹ interlocking of interests between insurance companies and banks. In the matter of limitation of over-all expenses, however, present opinion ie that it would be inadvisable to follow the somewhat rigid lines of the provisions in the old Bill. Instead, it is proposed that a etatutorily recognised association of insurers should be formed with two exeoutive committees—one for the life business and the other for tbe general business—to determine annually the reasonable limits for expenses of insurers having regard to all the circumstances relevant thereto during the year and to recommend to Government action in respect of those that exceed the reasonable limit.

NEW DELHI;

THE GAZETTE OF INDIA, EXTEAORDINAEY, NOV. 8, 1949 2213"

NOTEB ON GLAUSES Clause 2 seeks to extend the Insurance Act to the States for which the Dominion Legislature oan legislate on the subject of insurance.

Clause 3, among other matters, enlarges the scope of "approved securities'' by including shares of any Corporation whose principal and dividend are guaran- teed by tb" Central or a Provincial Government and. to the extent that such securities were held prior to partition, securities which have now become Pakis- tan Government securities and Karachi Port Trust securities:

brings. the definitions of "auditor" and "Government security" upto date;

adds definitions of "banking company" "ohief agent", "investment company", "principal agent", "private company", "public company" and "special agent"; and

defines the classes of fire, life, marine and miscellaneous insurance business.

Clause 4 changes the designation of the Superintendent of Insurance. Clause 6 clarifies the rule of construction in applying the Act to the Acceding States and provides for the appointment of the Controller-General of Insurance. Clauses 6 and 47 provide that only a public company or a Co-operative so- ciety shall carry on insurance business. Power to grant exemption to cover oases such as superannuation funds is retained.

Clause % provides for cancellation of the registration of an insurer who carries on any business other than insurance or business incidental thereto and for reviving the cancellation under certain circumstances.

Clause 8 rectifies a small drafting defect. Clause 9 provides that a life insurance company should have only ordinary BhareB with voting rights proportionate to the paid-up capital and should main- tain a register showing the beneficial owners of its shares and further makes provision for altering the existing capital structure suitably with the sanction of the Central Government. It also provides for the conversion of a proprie- tary company into a mutual company through a scheme sanctioned by the Central Government.

Clause 10. Sub-clause (?) is merely consequential; sub-clause (it) places United Kingdom Insurers on a par with other non-Indian insurers in the matter of instalment towards deposits.

Clause 11 extends the time allowed for the submission of the statement of life assets and prescribes the manner of preparing such statement.

Clause 12 requires details as to the occupation and other directorships of the directors, managers and others to be furnished.

Clause 13 provides for an actuarial valuation every three years instead of every five years.

Clauses 14 and 15 are clarificatory.

Clause 16 reduces by 5 per cent the quantum of compulsory investments to be held in Government and approved securities, prescribes the proportions to be held in these and provides that investments shall be held free of any encum- brance. United Kingdom Government securities will also oease to be authorised investments for this purpose and time is allowed for the change over. Non-Indian insurers should bold their compulsory investments in India.

Clause 17 institutes a class of "Approved Investments" and places certain restrictions on the investment of life insurance fund and certain other funds

214 TEE GAZETTE OF INDTA, EXTRAORDINARY, NOV. 8, 1949

of an insurer including restrictions on the amount that can be kept by an in- surer in the shares of any one banking, investment or joint stock company and on the amount that can be kept in deposit with any one banking company. It also provides for requiring an undesirable or unsuitable investment to be vacated.

Clau.se -76'. Sub-clause (/) js formal. Sub-clause (") provides for the furnish- ing of periodical certificates to the eSect that investments constituting the controlled funds are generally held free of any encumbrance.

Clause 19 provides for the reporting of changes in the investments constitut- ing the life insurance fund and certain other funds quarterly to the Controller- General of Insurance.

Clause 20 places further restrictions on loans that may be granted by a life insurance company.

Olautie 21 makes tho management of an insurance company as distinct from the company itself liable for losses resulting from unappjroved investments.

Clause 22 is clarificatory. Clause 23 seeks to restrict commission-method of remuneration to chief, principal, special and insurance agents, to prohibit nomination of a successor or assignment of office by a manager, managing director, or other officer and to check payment of excessive remuneration to insurance executives.

Clause 24s seeks to prohibit insurers and banks from having common officers and requires insurers of more- than a certain size to have only whole-time officers.

Clause 25 authorises the Central Government to order investigation of the affairs of an insurer and after investigation to secure appropriate action being taken.

Clauses 26, 27 and 28 provide for the Controller-General sanctioning schemes for the transfer and amalgamation of the business of insurers.

Clause 29 provides for the appointment of a guardian to receive policy monies on behalf of a minor nominee

Clause 30 contains amendments consequential to the provisions in clause 81.

Clavsat 31 and 45 provide for Ihc control of over-a¹] expenses of all insurers through the medium of a statutory association Of insurers and two Counoils operating through two Executive Committees with Government representation, one being for life and the other for general insurance. The General Insurance Council is also to regulate the tariff rates and conditions. Maximum rates of commission tc insurance agents tin 1 special iinenta ir life insurance business and to insurance agents and principal agents in genera] insurance busi- ness are prescribed.

Clause, 32 provides for triennial licences instead of annual licences for in- surance agents.

Clauses 33 and 65 provide for the licensing of principal, chief and special agents and the cancellation of such licences and nlso regulate the terms of em- ployment, activities and contracts of principal, chief and special agents.

Clause 34 liberalises the conditions for compulsory continuance of payment of renewal commission to on insurance agent.

Clause 35 provides authority to call for information regarding matters speol- fW in clauses 81 and 3(1.

Claine 36 omits the time-limit within policy-monies enn be pnid into Court.

TILE GAZETTE GJ? I I N D I A, L AI ifAOUDINAltY, NOV, 8, 1049 2215

Clause 37 provide Jor loienmg disputes relating to claims on small Ufe in- surance pohcus to the ConuoUei-G-eneral of Insurant;*.;.

Clause 38 provides th.u a nio jiibuumoe conipoary Jiould have at least two policy-holders' directors and disqualifies ts.t-ernplo.y eea ioi a period of Jive years Ironi suun directorships, with an exception in tnc ca&o ol the chief executive.

Clause 39 is formal. Clause 40 prohibits Indian life insurance coinpaiik u Irom having common directorg except under certain limited circumstances.

Clause 41 limits the part o£ surplus allocated to the shareholders. Clause 42 provides for the appointment of an Administrator to manage the ailiairs of an insurer under certain circumstances and for the Controller-. General to take necessary action with regard to the future of the insurer, after getting a report from the Administrator.

Clause 43 is consequential. Clause 44 provides for an annual certificate that section 64 is being com- plied with.

Clause 46 raises tho upper limit for policies issued by provident societies* from Us. 000 to Es. 1,000.,

Clauses 48 and 65 omit ocitoin provisions thus plucing provident societies on a par with insurers in this respect.

Clause 4'J. Sub-clause (1) is consequential. Sub-clause (£) provides -for can- cellation of registration of a provident society, for non-payment of deposit, without going to Court.

Clauses 60 and 62 apply to provident societies certain provisions applicable $0 insurers.

Clause 61 provides for an extension of time for furnishing valuation returns and for a clarification.

Clause 53 clarifies the power of the liquidator of a provident society to sell its property.

Clause 64 authorises the exercise by the Controller-General of some discretion in appointing a liquidator or committee of inspection and prescribes a time-limii for liquidators' report.

Clause 66 makes a consequential change. Clause 57, makes some formal changes. Clause 58 (i) corrects a drafting flaw

("i) makes principal, chief and special agents liable to be prose- cuted for any contravention of the Aot.

Clause 69 requires an insurer to supply any information relating to njs busi- ness required by the Controller-General.

Clause 60 extends the scope for granting exemptions where neoesaary from the provisions of the Act.,

"

Clause 61 is consequential.

_ Clause 62 permits the grant of exemptions' from the necessity of complying with the provisions of the Act to an approved Superannuation fund. • Clauses 63 and 64 are formal and clarificatory^

M. N. KAUL^

Secy, lo the Govt. of IndiaL

PUBLISHED In 'IIIH MANAOBB OV PUBLIOAMONB, D " L H I, INDIA,

tmNTBD BY THK MANAOKE, GOVERNMENT or INDIA P B I S S, NOW D I L K I, INPIA.

---

1. of any one banking company or investment company more than— (a) two and a quarter per oent. of the sum referred to in sub- section (J) of section 27, or (6) two per cent, of the subscribed share capital and debentures of the banking company or investment company concerned, whichever is less: Provided that nothing in this sub-section shall' apply to investments in the shares of the Imperial Bank of India. (4) An insurer shall not out of the controlled fund invest dr 'keep in- vested in the shares or debentures of any" one jdint Mock CoiMpany other than a banking company or investment company more than— (a) two and a" qu^rter'-pe^'cent: 6i thfe"suml referreS' tff hi sub. section (1) of section 27, or ↩
2. of an insurer specified in •iub^olniiKe (b) of clause (.9) of section '2 ;md earrving mi life insurance busi- ness shall not be a managing dirtcto or other offieor of any other insurer carrying on life insurance business ot ot t< hdnldnp i ompinn or ol nn invest- ment company; Providcil thut thi < omral Government may permit such managing director or other officer to bo a managing director or other officer of any other insurer carrying on life insurance business for the purpose 'if amalgamating the business of the two insurers or transferring the busi- ness of one insurer to the other. (9) Whe?v an insurer specified in sub-clause (b) of clause (0) of section 2 has a life insurance fund of more than twenty-five lakhp of rupees or insurance funds totalling more than fifty lakhs of rupees, ^be manaerer, managing director or other officer of the inRiirer shall be ti wholo-limp employe^ of the insurer. Provided that the Central Government may, for wuoh period ns it thinks fit, permit the employment of any specified person as a part-time manager rnflTHigfng director or other offloer of such insurer. (31 Nothing in this section shall prevent.— (a) the manager, managing director or other officer of an insurer being the manager, managing director or other officer.of a subsidiary ?ompany of the inwirer: ↩
3. ' b e' f or t he PurPOse of procuring iniuranoe bminess shall be (8) A certiflcnte issuer! under this section shall entitle tho holder there- of to act as n principal npent chief a^ent or ryecm] npent RS the case wiftv be. for anv insurer ↩
4. ^ ↩
5. , figuies and lettei "sections 20, 82, 46 and 53A" the words, figures, brackets and letters "sub-sections (3) and (3) of Section 10, section 20, sub-section (I) of section 27, sections 27A, 28, 29, 31A, 31B, 32, 4fi and 53A" shall be substituted; (u) after the words "members of a provident society" the words and figures "and references to section 7 or section 98 shall be construed as references to section 73'' shall be inserted. 51. Amendment ol section 82, Act TV of 1938.—To sub-section (2) of section 82 of the said Act, the following proviso sbnll be added, namely — "Provided that the Central Government may in any case extend the timo allowed by this sub-section for the furnishing of such return by a period not exceeding three months." 52. Amendment ol section 85, Act IV ol 1938.—In section 85 of the raid Act, sub-section (7) hhall be omitted. 53. Amendment of section 91, Aot IV ol 1938.—In sub-section (1) of soction 91 of tho Kuifl Vet,— (i) the word " a n d" at tbe end of clause (/) shall be omitted; and (w) after clause (<:/) the following clause shall be inserted, namely — "(h) to sell tbe immovable and movable property of the society by public auction or private contract, with power to transfer the whole thereof to any persou or society or to sell the same in parcels." ↩
6. ; and (it) the Droviso shall be omitted. 61. Amendment 0* pe^ion 116A, Act IV of 1938,—To the proviso to section 116A of t he said Aci. niter the words and figures "of section 2 8 ", the word, figures, brackets nnd letters "or section 28A, or the statements referred to in sub-section (5) of ee-Hlon 31B or section 4 0 B" shall be added. ↩
7. 'Approved Investments. 5. Brief explanatory notes on the clauses of the Amending Bill are given in the annexed Notes on Clauses. K, C. NTCOGY. The 1th November, 1049. ↩