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REGISTERED No. D 221

The Gazette of India

EXTRAORDINARY

PART II—Section 2

PUBLISHED BY AUTHORITY

No. 22] NEW DELHI, MONDAY, APRIL 8, T968/CHAITRA 19, 1890

Separate paging is given to this Part in order that it may be filed as a separate compilation

LOK SABHA

The following Bill was introduced in Lok Sabha on the 8th April,

1968: —

BILL N O. 31 OF 1968

A Bill further to amend the Insurance Act, 1938, so as to provide for

the extension of social control over insurers carrying on gene-

ral insurance business and for matters connected therewith or

incidental thereto and also to amend the Payment of Bonus

Act, 1965.

BE it enacted by Parliament in the Nineteenth Year of the

Republic of India as follows: —

1. (1) This Act may be called the Insurance (Amendment) Act, 1968.

5

Short title and com- mence- ment.

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

(323)

56 G. of 1.-1

-1 of 19S8.

2. In section 3 of the Insurance Act, 1938 (here^x^.- referred

•to as the principal Act), in sub-section (4),—

'iniend- .-• nt of f-e tion 3,

(i) in clause (d), the words "a class of shall b3 omitted,

(ii) after clause (e), the following clause shall b? inserted,

5 namely: —

"(ee) if the Centra) Government so d'octs under sub-

section (4) of section 33;".

Amend- '.ient of foction SJS

10

J5 3. In section 3A of the principal Act, in sub-s ciion (!'), for the words "which shall net exceed one thousand rupees for each class of insurance business, but may vary according to the volume ol business done by *he insurer in India in ea^h CIJJS of insurance business to which the registrat'on relat a", +he vo^d* "'which may vary according to the total premiums during the year preceding the year in which the applicati'-ii is reyuirod f be made undar this section (including consideration for aiiM'ities. if any, less re-insur- ances), of the insurer in the class of inrmanca business in India to which the registration relates but shall not—

(i) exceed one-fourth of on" r "i c u t. of such premium

Income,

(ii) be less, in any cvs°, than five hundred rupee; for each

20 class of insurance bus !,e-\s" shall be substituted.

4. In section 6A of the piinc'pai A •{ ait°r sub-section (10). the

following sub-section shall be inserted, namely;—•

Nmend- ">">ent of section 6A

25

47 oi 1950.

"(11) The provisions ;>r this section shall, K>n and from the •commencement of the h>~ ir? ice (Amc. l ^ ^ i t; Act, 1988, also apply to insurers carryi?iff on general insurance business sub- ject to the modification that reference?, in sub ro^ior;:; (I). (3), (5), (6) and (7) to the L< i;jan o ( A ' U J -C - nO Act, 195C, shall be construed as r?f Tenets to the j-nsuit.' c < Amendment) Act, 1968.".

->o

5. in section 6B cf -the principal Act, aft >r snh-v ->t >J.\ C). Me

following sub-section shall be inserted, npmely:-

A mend- ment of section 6B.

"(4) The prov'sions of this ^-ctioi shall, on and from the commencement of the Insii'a^ce (Amendment) Act, I9fi8, also apply to insurers carrying on genera] insurance busip >

J5

6. In section 7 of the principal Act,—

-•iinen 1- ment > * section " (a) in sub-section (1),—

(i) lor the words "the amount hereafter specified'*, 'Ihe words 'a sum oi two million rupees*' shall be substi- tuted;

5

(ti) cl as'j (a) to (') shall be omitted;

(JU) m tL"> proviso, for the words "ten tlio^and rupees", the words ' one hundred thousand rupees" shah *>e substituted;

(b) after sub-section (1), the following sub-sections shail 10

be inserted, namely: —

15

20

' ( M) An insurer, who holds immediately before the commencement of the Insurance (Amendment) Act, 1968, a valid certificate of registration in respect of any class of insurance business and who has deposited and kept deposit- ed a sum which is less than the sum required to be de- posited under sub-section (2) may make deposit o^ the sum which is equal to the difference between trie sum already deposited and kept deposited and the sum required to be deposited under sub-section (1), in not more thfui foiw instalments, of which—

(a) the first shall be not less than one-fourth ci the s£id sum and shall be paid before the expiiy of one year from such commencement,

25

(b) the second shall be not less than one-third of the balance left after making the deposit under clause (a) and shall be paid before the expiry of two years from such commencement,

30

(c) the third shall be not less than one-hslf of the residue and shall be paid before the expirt- of thrau years from such commencement, and

(d) the balance shall be paid before the -xpiry of lour years from such commencement.

".5

(IB) Notwithstanding anything contained in sub- section (1), it shall be sufficient compliance with iiie provi- sions of sub-section (2) in the case of a group of insurers operating in India as a group (hereafter in this Act refer- red to as a group) if the total amount of the deposits made by all the insurers in the group is not less than the

amount which a single insurer would have been required to deposit under sub-section (1):

5 Provided that the deposit made by each insurer in the group is not less than that proportion of the total deposil required to be made under sub-section (1) as the propor- tion of his share of the risk on each policy issued by the group bears to the total risk on that policy.

IO Explanation.—For the purposes of this section, £ "group" shall be deemed to be operating as such in India if the following conditions are fulfilled, namely: —

(a) no insurer in the group has commenced car- rying on insurance business in India after the com- mencement "f the Insurance (Amendment) Act, 1968;

(b) all the insurers in the group are registered for

r5 the same class or classes of insurance business;

20 (c) there is an agreement between all the insur- ers in the group to function as a group and such agree- ment provides that the proportionate share of each in- surer in the total risk on every policy issued by the group shall be such as may be mentioned therein and that such proportion shall be the same for all policies In all the classes of insurance policies issued by the group;

(d) the agreement referred to in clause (c) has been filed with the Controller within thirty days from the date of its execution:

25

30 Provided that if the Controller is satisfied that any insurer was prevented by sufficient cause from filing such agreement within the specified time, he may, by order, allow the insurer to file such agreement within a period of thirty days from the date of his order;

(e) every policy issued by the insurers in the group mentions, on the face of the policy, the names of all the members of the group and the proportion of the risk for which each member is liable;

35 (f) the insurers in the group function with com- mon offices, common officers, not being directors or members of any Board of management, and common •taff within India;

S

{g) ail the expenses in India o£ tne Insurance busi- ness (.but excluding expenses solely relating 'to any Board of management, whether set up lor the purpose of managing the insurance business or not,) are shared by the insurers in the group in the proportion in which the risks are shared by and between themt

(1C) When t> group of insurers ceases 10 be a group,

10

15

every insurer in Lhat group who continues to carry on any class of insurance business in In'dia shall comply with the requirements of sub-section (1) as if he had not been an insurer in any group at any time and he shall pay, within a period of Mix months from the date of cessation of the group, m a lump sum, the amount of the instalments of deposit which he would have been required to make under sub-section (1A) before the date of cessation of the group had he not been an insurer in any group at any time, re- duced by the amount of deposit, if any, made by him after the commencement of the Insurance (Amendment) Act, 1968.

20

(ID) The Central Government may, at its discretion, extend the time for making any deposit or instalment of deposit required to be made by any insurer under the pro- visions of sub-sections (7), (1A), (IB) and (1C) by a period of not more than six months at a time:

25

Provided that not more than two extensions shall be given in respect cf any deposit or instalment of deposit re- quired to be made by an insurer,';

3o

(c) in sub-section (2), the words "any class of" and the words "as the deposit for that class of insurance business" shall be omitted;

(d) for sub-sections (3), (4), (5) and (6) t he following sub-sections shall be substituted, namely: —

35

"(3) Where the deposit is to be made by an insurer not carrying on insurance business in India immediately before the commencement of the Insurance (Amendment) Act, 1968, the deposit shall be made in full before the application for registration is made.

(4) An insurer shall not be registered for any class of insurance business in addition to the class or classes for

which he is alreauy registered until the full deposit re quired under sub section (I) has been made.

5

10

J5 (5) Whcic an insurer wLo intends to become a mem- ber oJ: a group, cl io3 not cany on all the classes oi' insur- ance business can i cl on by the other insurers m such group, or, wheie cut oi the several insurers who desire tc ioim hemselves into a group, any insurer does not carry on all the classes oi insurance business carried on by the other insure rs who desire to form themselves into the gioup, such insurer may be registered ior that class or those classes of insurance business which is or are carried on by all the members of the group, and where any applica- tion tor registration is made by any such insurer, the Con- troller may, notwithstanding anything contained in sub- section (1), rrybter such insuier for one or more addi- tional classes of insurance I *he following conditions are fulfilled, namely -

20 (a) the Controller is satisfied that legislation for the proposed onp JI- more additional classes of insur- ance business would qualify 1'>e insurer to become a member oi a group;

25 (b) agreements have been executed by all the in- sureis m the group or proposed group, aj the case may be, and such agreements T- ihc opinion of 'the Control- ler, satisfy the requirements r,i the Explanation to sub- section (IB); and

30 (c) iht' insurer has, aittr the commencement of the Insurance (Amendment) Act, 1968, made deposit of a sum not less than the total of all the instalments of deposit which he would have been required to make ; after such commencement till the date oL his becoming a member of the group, had he been a member of the group from such commencement.

(6) The Com roller shall cancel the registration made

35

40 in pursuance of the provisions of sub-section (5), if the : insurer referred to therein fails to become, within a period of three months from the date of such registration, a member of the group or proposed group, as the case may be, and, where such registration has been cancelled, the provisions of this Act shall apply to the insurer as if he A had nnt been registered for the class or classes of insurance business in relation to which 1ii SEC. 2J THE GAZFTTE OF INDIA EXTRAOBDINAKY 329

7. For section 9 of the principal Act, the following section shall

be substituted, namely:—

Substi- tution of new section for section "9.

Hefund of

5

"9. Where an insurer has erased to carry on in India, all classes of insurance business, and his liabilities in India in res- pect of .'i¹! classes o!.' PI '.nance business have been satisfied 01 are otherwise provided .or, the court may, on Lhe applicatior of the insurer, order the return lo the insurer of the deposil made by him under this Act.".

8. In section 10 of the piine pal Act, in sub-section (1),—

Amend- ment of section 10.

10

, (!) In- [}h words, brackcK letters and figures "classes specified m clau "s (a), (b). (c) and (d) of sub-section (1) of F°cfon 7", tr : words "following classes, namely, life insur- ance, fire insurarc", m a i i t" :nsui'nce or miscellaneous insur- ance"' shall hs_ *M^ '.luted;

'5

(v) for the words brackets and letter "the class specified in clau, 0 (d) fil tint • ib-section", the words "miscellaneous in- surance" shall be substituted;

(iii) for the words, brackets and letter "each such sub-class of the class specified in clause (d)"; the words "each of such .sub- classes of miscellaneous insurance business" shall be substituted.

20

(iv) in the proviso, fni lhe words, brackets, letter and figure-.., "thy class oi .nsui a.ice business specified in clause (d!) of sub-section (7) of set 1 mi 7", the words '"miscellaneous, in- surance buynes:," .shall be substituted.

25

Amend- ment of section 11.

3o

11. After section 27A of the principal Act. the following section shall be inserted, namely: —

5 '27B. (1) No insurer carrying on general insurance business shall, after the commencement of the Insurance (Amendment) Act, 1968, invest or keep invested any part of his assets other- wise than in any of the following approved investments, namely: —

Insertion ot new section 27B. Further provi- sions re- garding invest- ments.

(a) the investments specified in clauses (a) to (/), (?) to (n), (q) and (s) of sub-section (1) of section 27A;

(b) debentures secured by a first charge on any 1m- : to movable property, plant or equipment of any company where either the book value or the market value, whichever is less, of such property, plant or equipment is more than twice the value of such debentures;

i5

20 (c) first debentures secured by a floating charge on all its assets or by a fixed charge on fixed assets and floating charge on ail other assets of any company which has paid dividends on its equity shares for the five years immediate- ly preceding or for at least five out of the six or seven years immediately preceding the date of the investment;

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

25 (2) Any prescribed assets shall, subject to such conditions. If any, as may be prescribed, be deemed to be assets invested or kept invested in approved investments specified in sub- section (2).

30 (3) Notwithstanding anything contained in sub-section (1), an insurer being a company may, subject to the provisions con- tained in the next succeeding sub-sections, invest or keep in- vested any part of his assets otherwise than in an approved in- vestment, if,—

(i) after such investment, the total amounts of all su-ch investments of the insurer do not exceed twenty-five per cent, of his assets, and

35

(II) the investment is made, or, in the case of any in- vestment already made, the continuance of such Investment is with the consent of all the directors present at a meeting iiH* eligible to vote, special notice of which has been given

to all the directors then in India, and all such investments, including investments in which any director is interested, are reported without delay to the Controller with full de- tails of the investments and the extent of the director's in- terest in any such investment.

5

(4) An insurer shall not invest or keep invested any part of his assets in the shares of any one banking company or in- vestment company more than—•

(a) ten per cent, of his assets, or

10

(b) two per cent, of the subscribed share capital and debentures of the banking company or investment company concerned,

whichever Is less.

i5

(5) An insurer shall not invest or keep invested any part of his assets in the shares or debentures of any one company other than a banking company or investment company more than—

(a) ten per cent, of his assets, or

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

20

whichever Is less:

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

35

(6) An Insurer shall not invest or keep invested any part of his assets in the shares or debentures of any private com- pany.

30

(7) Where an investment is in partly paid-up shares, the uncalled liability on such shares shall be added to the amount invested for the purpose of computing the percentages referred to in clause (a) of sub-section (4) and clause (a) of sub- section (5).

35

(8) Notwithstanding anything contained in sub-sections (4) and (5), where new shares are issued to the existing sharehol- ders by a company, the existing shares of which are covered by clause (i) or clause (k) or clause (1) of sub-section (!) and of which an insurer is already a shareholder, the insurer may subscribe to such new"shares:

36 G, of I.—2.

5 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.

10 (9) If, on an application submitted to the Controller, he is Satisfied that special grounds exist warranting such exemption, he may, for such period, to such extent and in relation to such particular investments and subject to such conditions as may be specified by him in this behalf, exempt an insurer from all ; or any of the provisions of sub-sections (4), (5) and (8).

i5 2oflBl" (JO) An insurer shall not keep more than ten per cent, of his assets in fixed deposit or current deposit, or partly in fixed de- posit and partly in current deposit, with any one banking com- pany or with any co-operative society registered under the Co- operative Societies Act, 1912 or under any other law for the time bein# in force and doing banking business:

20 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 company on behalf of the insurer during the preceding thirty days shall be excluded.

zS (11) All assets shall (except for a part thereof not exceed- ing one-tenth of the total assets in value which may, subject to such conditions and restrictions as may be prescribed, be offer- ed as security for any loan taken for purposes of any invest- ment) be held free of any encumbrance, charge, hypothecation "r lien.

3o (12) If at any time the Controller considers any one or mor" of the investments constituting an insurer's assets to -be unsuit- able or undesirable, he may, after giving the insurer an oppor- tunity of being heard, direct the insurer to realise the invest- ment or investments, and the insurer shall comply with the direction within such time as may be specified in this behalf by the Controller.

35 (13) Every insurer in existence at the comlmencement of the Insurance (Amendment) Act, 1968, whose investments or any part thereof at such commencement do or does not fulfil the require- ments of this section, shall, within "inety days from such com-

5

mencemetit, submlit to the Controller a report specifying all such investments, and, if the Controller is satisfied that it will not be in the interest of the insurer or any class of insurers generally to realise any such investments, he may, by order, direct that the provisions of this section, other than the provi- sions contained in sub-section (12), shall not apply in relation to any such investments or to any class of investments generally for such period or periods as may be specified in the order.

10

(14) Wiihout prejudice to the powers conferred on the Con- troller by sub-section (12), nothing contained in this section shall be deemed to require any insurer to realise any investment made In conformity with the provisions of sub-section (1) after the commencement of the Insurance (Amendment) Act, 1968, which, after the making thereof, has ceased to be an approved investment within the meaning of this section.

i5

(15) Nothing contained in this section shall be deemed to affect in any way the manner in which any moneys relating to the provident fund of any employee or to any security taken from any employee or other moneys of a like nature are requi- red to be held by or under any Central, Provincial or State Act. 20

(16) In this section, unless the context otherwise requires, "assets" means—

25

(a) in the case of an insurer carrying on life insurance business in India, all his assets required to be Bhown under the column "Other Classes of Business" in the balance-sheet in Form A, in Part II of the First Schedule, but excluding any items against the head "Other Accounts (to be speci- fied)";

(b) in the case of an insurer specified in sub-clause "(a'7

30

(ii) or sub-clause (b) of clause (9) of section 2, who ia nor carrying on life insurance business in India, all his assets re* quired to be shown in the balance-sheet in Form A in Part II of the First Schedule but excluding any items against the head "Other Accounts (to be specified)"; and

35

(c) in the case of any other insurer, the assets required to be shown in the statement in Form AA, in Part II of the First Schedule, but excluding office furniture;

but does not include any assets specifically held against any fund pr portion thereof in reepect of which the Controller is satisfied

that such fund or portion thereof, as the case may be, is regula- ted by the law of any country outside India or in respect of which the Controller is satisfied that it would not be in the In- terest of the insurer to apply the provisions of this section.'.

12. After section 28A of the principal Act, the following section 5

nhall be inserted, namely: —

Insertion of new- section 28B.

10 Returns of Invest- ment* relating to the assets and changes therein.

"28B. (1) Every insurer carrying on general insurance business, shall every year, within thirty-one days from the be- ginning of the year, submit to the Controller a return In the prescribed form showing as at the 3lst day of December of the preceding year the investments made out of his assets referred to in section 27B, and every such return shall be certified by a principal officer of the insurer.

15

2O (2) Every insurer referred to in sub-section (1) shall also submit to the Controller a return In the prescribed form showing all the changes that occurred in the investments aforesaid dur- ing each of the quarters ending on the last day of March, June, September and December within thirty-one days from the close of the quarter to which it relates, and every such return shall te certified by a principal officer of the Insurer.

*5

3° fj) Every insurer shall submit, along with the returns re- ferred -to in sub-sections (1) and (2), a statement, where any part of the assets are in the custody of a banking company, from that company, and In any other case, from the Chairman, two directors and a principal officer, if the insurer Is a company, or from a principal officer of the insurer, if the insurer is not a company, specifying the assets, which are subjected to a charge and certifying that the other assets are held free of any encum- brance, 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 liquidat- ed, the date on which they were so liquidated.".

35 Amend- ment of section 30

13. In section 30 of the principal Act, after the word, figures and letter "section 27A", the word, figures and letter ", section 27B" shall be Inserted.

Amend- ment of Section 3XA.

14. In section 31A of the principal Act, in clause (vii) of the proviso to sub-section (j(), the words ", such bonus, in the case of any employee, not exceeding in amount the equivalent of his salary for a period which, in the opinion of the Central Government, is reason- able having regard to the circumstances of the case" shall be omit- ted.

15. In section 33 of the principal Act,—

(i) after sub-section (1), the following sub-section shall be

Amend- ment of section 33.

inserted, namely: —

10

"(1A) Notwithstanding anything to the contrary i of 1956.

contained in section 235 of the Companies Act. 1956 the! Controller may, at any time, and shall, on being directed¹ so to do by the Central Government, cause an inspection tec be made by one or more of his officers of any Insurer and his books and accounts; and the Controller shall supply to 15

the insurer a copy of his report on such inspection.";

(ii) in sub-section (2). after the words, brackets and figure "under sub-section (1)'\ the words, brackets, figure and letter ", or inspection under sub-section (1A)," shall be inserted;

10

(Hi) in sub-section (3), after the words, brackets and figure "under sub-section (1)", the words, brackets, figure and letter "or inspection under sub-section (1A)" shall be inserted;

(iv) after sub-section (3), the following sub-section shall be inserted, namely: —

25

"(3A) The Controller shall, if he has been directed by th© Central Government to cans© an inspection to be made, and may, in any other case, rej>ort to thd Central Governs ment on any inspection made under this section.";

30

(u) in sub-section (4), after the words, brackets and figure "under sub-section (2)", the words, brackets, figure and letter "or under sub-section (3.A)" shall be inserted;

(wi) after sub-section (4), the following sub-sections shall be Inserted, namely:—

35

'(4A) The Central Government mav, after giving reacon- able notice to the insurer, publish the report submitted by the Controller under sub-section (3A) or such portion there- of as may appear tr> it to be necessary.

5 (4B) The Central Government may prescribe the mini- mum information to be maintained by insurers in their books, the manner in which such information should be maintained, the checks and other verifications to be adopted by Insurers in that connection and all other m'atters inciden- tal thereto as are, in its opinion, necessary to enable the Controller to discharge satisfactorily his functions under this section.

Explanation.—For the purposes of this section, the expression

10 "Insurer" shall include—

(i) in the case of an insurer incorporated outside India, all

his branches in India, and

(ii) in the case of an insurer incorporated in India—

15 (a) all his subsidiaries formed for the purpose of carry- ing on the business of insurance exclusively outside India; and

(b) all his branches whether situated in India or out-

side India.'.

16. After section 33 of the principal Act, the following headings

2O and sections shall be inserted: —

tnser. tion of new sec- tions 34, 34A, 34B, 34C, 34D, 34E, 34F, 34G and 34H.

"POWEH TO ISSUE DIRECTIONS

Power of              34.  (1)  Where  the  Controller  is  satisfied  that—
the Con-
troller  to                (a)  in  the  public  interest;  or
Issue  dir-
ections.                   (b)  to  prevent  the  affairs  of  any  insurer  being  conduc-
                      ted  in  a  manner  detrimental  to  the  interests  of  the  poliqy- 25

holders or in a manner prejudicial to the interests of tht insurer; or

(c) generally to secure the proper management of any

insurer,

5

it is necessary to issue directions to insurers generally or to any insurer in particular, he may, from time td time, issue such directions as he deems fit, and the insurers or the insurer, as the case may be, shall be bound to comply with such directions.

10

(2) The Controller may, on representation made to him or on his own motion, modify or cancel any direction issued under sub-section (1), and in so modifying or cancelling any direction, may impose such conditions as he thinks fit, subject to which the modification or cancellation shall have effect.

CONTHOL OVER MANAGEMENT

34A. (1) In the case of an insurer,—

15

20

?5

Amend- ment erf provi- sions rela- ting to appoint- ments of managing directors, etc,, to be subject to previous approval of the Control- ler.

(a) no amendment made after the commencement of the Insurance (Amendment) Act, 1&68, of any provision re- lating to the appointment, re-appointment, termination of appointment or remuneration of a managing director or any other director, whole-time or otherwise, or of a manager or a chief executive officer, by whatever name called, or secretary, accountant or underwriter, whether that provision be contained in the insurer's memorandum or articles of association, or in an agreement entered into by him, or in any resolution passed by the insurer in general meeting or by his Board of directors shall have effect unless approved by the Controller;

30

35

(b) no appointment, re-appointment or termination of appointment, made after the commencement of the Insin> ance (Amendment) Act, 1968, of a managing director or any other director, whole-time or otherwise, or of a manager or a chief executive officer, by whatever name called, or secre- tary, accountant or underwriter shall have effect unless such appointment, re-appointment or termination of ap- pointment is made with the previous approval of the Con- troller.

Explanation.—For the purposes of this sub-section, any pro- vision conferring any benefit or providing any amenity or per- quisite, in whatever form, whether during or after the termina- tion of the term of office of the manager or the chief executive

officer, by whatever name called, or secretary, accountant or underwriter or 'the managing director, or any other director, whole-time or otherwise, shall be deemed to be a provision re- lating to his remuneration.

5

lof l&M

TO (2) Nothing contained in sections 268 and 269, the proviso to sub-section (3) of section 309, sections 310 and 311, the pro- viso to section 387, and section 388 (in so fart as section 388 makes the provisions of sections 310 and 311 apply in relation to the manager of a company) of the Companies Act, 1956, shall apply to any matter in respect of which the approval of the Con- troller has to be obtained under sub-section (1).

(3) No act done by a person as a managing or whole-time

15

2O director or a director not liable to retire by rotation or a manager or a chief executive officer, by whatever name called, or by a secretary, accountant or underwriter shall be deemed to be invalid on the ground that it is subsequently discovered that his appointment had not taken effect by reason of any of the provi- sions of this Act; but nothing in this sub-section shall be cons- irued as rendering valid any act done by such person after his appointment has been shown to the insurer not to have had effect.

25 Power of Control- ler to remove manage- rial end other persons rro

30 34B. (1) Where the Controller is satisfied that in the public interest or for preventing the affairs of an insurer being conduct- ed in a manner detrimental to the interests of the policy-holders or for securing the proper management of any insurer it is necessary so to do, he may, for reasons to be recorded in writ- ing, by order, remove from office, with effect from such date as may be specified in the order, any director, chief executive officer, by whatever name called, or other officer or employee of the insurer.

(2) No order under sub-section (1) shall be made unless the director or chief executive officer or other officer or em- ployee concerned has been given a reasonable opportunity of making a representation to the Controller against the proposed order:

35

Provided that if, in the opinion of the Controller, any delay would be detrimental to the interests of the insurer or his policy- holders, he may, at the time of giving the opportunity aforesaid or at any time thereafter, by order direct that, pending the con- sideration of the representation aforesaid, if any, the director 40

or, as the case may be, chief executive officer or other officer or employee, shall not, with effect from the date of such, order,—

(a) act as such director or chief executive officer or other officer or employee of the insurer;

5

(b) m any way, whetner directly or indirectly, be con- cerned with, or take part in, the management of the insu- rer.

10

(3) (a) Any person against whom an order of removal has been made under sub-section (1) may, within thirty days from the date of communication to him of the order, prefer an appeal •to the Central Government.

(fa) The decision of the Central Government on such ap- peal, and subject thereto, the order made by the Controller under sub-section (1), shall be final and shall not be called into question in any court,

15

20

(4) Where any order is made in respect of a director or chief executive officer or other officer or employee of an insurer under sub-section (1), he shall cease to be a director or, as the case may be, chief executive officer or other officer or employee of the insurer and shall not, in any way, whether directly or indirectly, be concerned with, or take part in, the management of, any insurer for such period not exceeding five years as may be specified in the order.

²5

(5) If any person in respect of whom an order is made by the Controller under sub-seel ion (1) or under the proviso to sub- section (2) contravenes the provisions of this section, he shall be punishable with fine which may extend to two hundred and fifty rupees for each day during which such contravention con- tinues.

3°

(6') Where an order under sub-section (1) has been made, the Controller may, by order in writing, appoint a suitable per- son in place of the director or chief executive officer or other officer or employee who has been removed from his office under that sub-section, with effect from such date as may be specified in the order.

35

(7) Any person appointed as diiector or chief executive offi- cer or other officer or employee under this section shall,—

(a) hold office during trie pleasure of the Controller and subject thereto foi a. period not exceeding three years or 56 G Of I.—3.

such further periods not exceeding three years at a time as the Controller may specify;

(b) not incur any obligation or liability by reason only

5 of his being a director or chief executive officer or other offi- cer or employee or for anything done or omitted to be done in good faith in the execution of the duties of his office or in relation thereto.

10 (8) Notwithstanding anything contained in any law or in any contract, memorandum or articles of association, on the re- moval of a person from office under this section, that person shall not be entitled to claim any compensation for the loss or termi- nation of office.

i5 34C. (2) If the Controller is of opinion that in the interests of an insurer, or his policy-holders it is necessary so to do, he may, from time 'to time, by order in writing, appoint, with effect from such date as may be specified in the order, one or more persons to hold office as additional directors of the insurer:

Power of Controller to appoint addi- tional direc- tors,

20 Provided that the number of additional directors so appoint- ed shall not, at any time, exceed five or one-third of the maxi- mum strength fixed for the Board by the articles of associa- tion of the insurer, whichever is less.

(2) Any peTson appointed as additional director in pursu- ance of this section,—

25 (a) shall hold office during the pleasure of the Control- ler, and subject thereto for a period not exceeding three years or such further periods not exceeding three years at a time as the Controller may specify;

30 (b) shall not incur any obligation or liability by reason only of his being a director or for anything done or omitted to be done in good faith in the execution of the duties of his office or in relation thereto; and

(c) shall not be required to hold qualification shares of the insurer.

35 (3) For the purpose of reckoning any proportion of the total number of directors of the insurer, any additional director ap- pointed under this section shall not be taken into account.

1 of 1956.

Section* B4B and S4Cto over-rid* other laws.

5

34D. Any appointment or removal of a director, chief exe- cutive officer or other officer or employee in pursuance of section 34B or section* 34C shall have effect notwithstanding anything to the contrary contained in the Companies Act, 1956, or any other law for the time being in force or in any contract or any other instrument.

34E. (1) The Controller may,—

Further powers of Con. troller and Cent- ral Govern- nent.

10

(a) caution or prohibit insurers generally or any insu- rer in particular against entering into any partictilar transac- tion or class of transactions, and generally give advice to any insurer;

*5

(b) at any time, if he is satisfied 'that in the public interest or in the interests of the insurer or for preventing the affairs of the insurer being conducted in a manner detrimental to the interests of 'the insurer or his policy- holders, it is necessary y.o to do7 by order in writing and on such terms and conditiorvs as may be specified therein,—

(i) require the insurer to call a meeting of his directors for the purpose of considering any matter rela- ting to or arising out of the affairs of the insurer;

20

25

(H) depute one or more of his officers to watch the proceedings at any meeting of the Board of directors of the insurer or of "any committee or of any other body constituted by it; require the insurer to give an oppor- tunity to the officers so deputed to be heard at such meet- ings and also require such officers to send a report of such proceedings to the Controller;

30

(in) require the Board of directors of the insurer or any committee or any other body constituted by it is give in writing to any officer specified by the Controller in this behalf at his usual address all notices of, and other com- munications relating to, any meeting of the Board, com- mittee or other body constituted by it;

(iv) appoint one or more of his officers to observe the manner in wh.ipH.the affairs of tho insurer or of his offices 35

or branches arc being conducted and make a report there- on;

(v) require the insurer to make, within such time¹ aa may be specified in the order, such changes in the manage- ment as the Controller may consider necessary.

5

to (2) The Central Government or the Controller may appoint such staff and at such ploces as i't or he may consider iwcossary for the scrutiny of the returns, statements and information fur- nished by insurers under this Act, and generally to ensure the efficient performance of the functions of the Controller under this Act.

[5 Power of Controll- er to issue direc- tions re- garding iG-insur- ance trea- ties, etc.

30 34F. (1) Without prejudice to the generality of the powers conferred by sub-section (1) of section 34, the Controller may, if he is of opinion that the terms or conditions of any re-insurance treaty or other re-insurance contract entered into by an insurer are not favourable to the insurer or are detrimental to the public interest, he may, by order, require the insurer to make, at the time when the renewal of such treaty or contract becomes next due, such modifications in the terms and conditions of such treaty or contract as he may specify in the order or not to renew such treaty or contract, and, if the insurer fails to comply with such order, he shall be deemed to have failed to comply with the provisions of this Act.

25

30 (2) The Controller may, if he has reason to believe that an Insurer is entering into or is likely to enter into re-insurance treaties or other re-insurance contracts which are not favour- able to the insurer or are detrimental to the public interest, he may, by order, direct that the insurer shall not enter Into such re-insurance treaty or other re-insurance contract unless a copy of such treaty or contract has been furnished to him in advance and the terms and conditions thereof have been approved by him and If the insurer /ails to comply with such order he shall be deemed to have failed to comply with the requirements of this Act.

Power of

35 34Q, (/) Without prejudice to the generality of the powers conferred by sub-section (1) of section 34, the ontroller mav, if he has reason to believe that the working of any branch outside India of an insurer being an insurer specified in sub-clause (b) of clause (9) of section 2, is generally resulting in a loss or that the Control- ler to order closure of foreign branches.

5

affairs of that branch are being conducted in a manner prejudicial to the interests of the policy-holders or the public interest, he may, after giving an opportunity to the insurer of being heard, direct that the insurer shall cease, within such period, not being less than one year, as may be specified in the order, to carry on in- surance business in the country in which such branch is situated and if the insurer fails to comply with such order he shall be deemed to have failed to comply with the provisions of this Act.

10

(2) Any insurer aggrieved by an order made by the Con- troller under sub-section (1) may, within a period of two months from the date of receipt by him of the order, prefer an appeal to the Central Government and the decision of the Central Gov- ernment thereon shall be final.

IS

34H. (/) Where the Controller, in consequence of informa- tion in his possession, has reason to believe that,—•

Search and seizure

20

(a) any person who has been required under sub-sec- tion (2) of section 33 to produce, or cause to be produced, any books, accounts or other documents in his custody or power has omitted or failed to produce, or cause to be pro- duced, such books, accounts or other documents, or

25

(b) any person to whom a requisition to produce any books, accounts or other documents as aforesaid has been or might be issued will not, or would not, produce or cause to be produced, any books, accounts or other documents which will be useful for, or relevant to, an inspection under that sub-section, or

(c) a contravention of any provision of this Act has been committed or is likely to be committed by an insurer, or

30

(d) any claim which, is due to be settled by an insur- er, has been or is likely to be settled at a figure higher than a reasonable amount, or

35

(e) any claim which is due to be settled by an insur- er, has been or is likely to be rejected or settled at a figure lower than a reasonable amount, or

(f) any illegal rebate or commission has been paid or Is likely to be paid by an insurer, or

40

(g) any books, accounts, receipts, vouchers, survey re- ports or other documents, belonging to an insurer are likely to be tampered with, falsified or manufactured,

he may authorise any subordinate officer of his, not lower in rank than an Assistant Controller of Insurance (here- after referred to as the authorised officer) to—•

5 (i) enter and search any building or place where he has reason to suspect that puch books, accounts or other documents, or any books or papers relating to any claim, rebate or commission or any receipts, vou- chers, reports or other documents are kept;

io (zi) break open the lock of any door, box, locker, safe, almirah or other receptacle for exercising the powers conferred by clause (i) where the keys thereof are not available;

(Hi) seize all or any such books, accounts or other documents, found as a result of such search;

i5 (iv) place marks of identification on such books, accounts or other documents or make or cause to be made extracts or copies therefrom.

20 (2) The authorised officer may requisition the services of nny police-officer or of any officer of the Central Government, or of both, to assist him for all ox any of the purposes specified in sub-section (1) and it shall be the duty of every such officer to comply with such requisition.

i5 (3) The authorised officer may, where it is not practicable "lo seize any such book, account or other document, specified in sub-section (1), serve an order on the per- son who Is in immediate possession or control thereof that he shall not remove, part with or otherwise deal with it except with the previous permission of such officer and such offi- cer may take such steps as may be necessary for ensuring com- pliance with this sub-section.

3o

35 (4) The authorised officer may, during the course of the search or seizure, examine on oath any person who Js found to be in possession or control of any books, accounts or other docu- ments, and any statement made by such person during such exa- mination may thereafter be used in evidence in any proceeding under this Act.

(5) The books, accounts, papers, receipts, vouchers, reports, or other documents seized under sub-section (1) shall not be retained by the authorised officer for a period exceeding one hundred and eighty days from the date of the seizure unless the 40

reasons for retaining the same arc recorded by him in writing and the approval of the Controller for such retention is obtained:

5

Provided that the Controller shall not authorise the reten- tion of the books, accounts, papers, receipts, vouchers, reports, or other documents for a period exceeding thirty days after all tho proceedings under this Act for which the books, accounts, papers, receipts, vouchers, reports, or other documents are relevant arc completed.

10

(6) The person from whose custody any books, accounts, papers, receipts, vouchers, reports, or other documents are seized under sub-section (1) may make copies thereof, or take extracts therefrom, in the presence of the authorised officer or any other person empowered by him in this behalf at such place and time as the authorised officer may appoint in this behalf.

15

20

(7) It a person legally entitled to the books, accounts, papers, receipts, vouchers, reports, or other documents seized under sub- section (J) objects for any reason to the approval given by the Controller under sub-section (5), he may make an application to the Central Government stating therein the reasons for such ob- jection and requesting for the return of the books, accounts, papers, receipts, vouchers, reports, or other documents.

(8) On receipt of the application under sub-section (7), the Central Government may, after giving the applicant an oppor- tunity of being heard, pass such orders as it thinks fit,

5 of 1898, 25

(9) The provisions of the Code of Criminal Procedure, 1890, relating to searches and seizures shall apply, so far as may be, to every search and seizure made under sub-section (1).

30

(70) The Central Government may make rules in relation to any search or seizure under this section; in particular, and without prejudice to the generality of the foregoing power, such rules may provide for the procedure to be followed by the autho- rised officer,—

(i) for obtaining ingress into such building or place to be searched where free ingress thereto is not available;

35

(ii) for ensuring safe custody of any books, accounts, papers, receipts, vouchers, reports, or other documents seized under this section."

J7. After section 37 of the principal Act, the following section shall be inserted, namely: —

"37A. (1) If the Controller is satisfied that—

(i) in the public interest; or

(li) in the interests of the policy-holders; or

5 Inser- tion of new pection 37A. power of Control- ler to prepare iChOTTlK? of amalga- mation.

(in) in order to secure the proper management of an insurer; or

(iv) in the interests of the insurance business of the country as a whole,

10 it is necessary so to do, he may prepare a scheme for the amal- gamation of that insurer with any other insurer (hereafter referred to in this section as the transferee insurer).

(2) The scheme aforesaid may contain provisions lor all or any of the following matters, namely: —

15 (a) the constitution, name and registered office, the capital, assets, powers, rights, interests, authorities and privi- leges, and the liabilities, duties and obligations of the trans- feree insurer;

20 (b) the transfer to the transferee insurer of the business, properties, assets and liabilities of the insurer on such terms and conditions as may be specified in the scheme;

2S (c) any change in the Board of directors, or the appoint- ment of a new Board of directors of the transferee insurer and the authority by whom, the manner in which, and the other terms and conditions on which, such change or appoint- ment shall be made and, in the case of appointment of a new Board of directors or of any director, the period for which such appointment shall be made;

30 (d) the alteration of the memorandum and articles of association of the transferee insurer for the purpose of alter- ing the capital thereof or for such other purposes as may be necessary to give effect to the amalgamation;

(e) subject to the provisions of the scheme, the conti- nuation by or against the transferee insurer, of any actions or proceedings pending against the insurer;

35

(f) the reduction of the interest or rights which the shareholders, policy-holders atvd" other creditors have in or

•gainst the Insurer before the amalgamation to such extent as the Controller considers necessary in the public interest or in the interests of the shareholders, policy-holders and other creditors or for the maintenance of the business of the Insurer;

3

(g) the payment In cash or otherwise to policy-holders and other creditors in full satisfaction of their claim,—

(1) in respect of their interest or rights in or against the Insurer before the amalgamation; or

io

(ii) where their interest or rights aforesaid In oi against the Insurer has or have been reduced under clause (f), in respect of such interest or rights as ,so reduced;

15

20

(h) the allotment to the shareholders of the insurer for shares held by them therein before the amalgamation [whether their interest in such shares has been reduced under clause (f) or not] of shares in the transferee insurer and where any shareholders claim payment in cash and not allotment of shares, or where it is not possible to allot shares to any shareholders the payment in cash to those share- holders in full satisfaction of their claim—

(i) in respect of their interest in shares in the in- surer before the amalgamation; or

25

(ii) where such interest has been reduced under clause (/) in respect of their interest in shares as so re- duced;

14 of 11)47,

30

(i) the continuance of the services of all the employees of the insurer (excepting such of them as not being work- men within the meaning of the Industrial Disputes Act, 1M7, are specifically mentioned in the scheme) in ifche transferee insurer at the same remuneration and on the same terms and conditions of service, which they were getting or, as the c ue may be, by which they were being governed, immediately before the date of the amalgamation:

35

40

Provided that the scheme shall contain a provision that the transferee insurer shall pay or grant not later than the expiry of the period of three years, from the date of the amalgamation, to the said employees the same remune- ration and the same terms and conditions of service as are applicable to the oth/r employees of corresponding rank or status of the transferee insurer subject to the qualification*

36 G. of I.—4.

and experience of the said employees being the name as OJ equivalent to those of such other employees of the transferee insurer:

5 Provided further that If In any case any doubt or differ- ence arises as to whether the qualification and experience of any of the said employees are the same aa or are equiva- lent to th© qualifications and experience of the other em- ployees 01 corresponding rank or status of the transferee insurer, the doubt or difference shall be referred to the Con- troller whose decision thereon shall be final;

10

H of 1M7.

15

ao

*5 0") notwithstanding anything contained in clause (i), Where any of the employees of the Insurer not being work- men within the meaning of the Industrial Disputes Act, 1947, are specifically mentioned in the scheme under clause (i) or where any employees of the insurer have by notice in writing given to the insurer or, as the case may be, the transferee insurer at any time before the expiry of one month next following the date on which the scheme is sanc- tioned by the Central Government, Intimated their intention of not becoming employees of the transferee insurer, the payment to such employees of compensation, if any, to which they are entitled under the Industrial Disputes Act, 1947, and such pension, gratuity, provident fund or other retirement benefits ordinarily admissible to them under the rules or authorisations of the insurer immediately before the date of the amalgamation;

(k) any other terma and conditions for the amalgama- tion of the insurer;

30 (I) such incidental, consequential and supplemental matters as are necessary to secure that the amalgamation shall be fully and effectively carried out.

(3) (a) A copy of the scheme prepared by the Controller

35 ihall be sent In draft to the insurer and also to the transferee insurer and any other Insurer concerned in the amalgamation, for suggestions and objections, if any, within such period as the • Controller may specify for this purpose.

40 (b) The Controller may make such modifications, If any, In the draft scheme as he may consider necessary in the light of the suggestions and objections received from the insurer and also from the transferee insurer, and anyother insurer concerned in {he amalgamation and from any •harehold"r, polioy-holder or

other creditor of each of those insurers and the transferee in- surer.

5

(4) The scheme shall thereafter be placed before the Central Government for its sanction and the Central Government mav sanction the scheme without any modification or with such modi- fications as it may consider necessary; and the scheme as "ane- tioned by the Central Government shall come into force on such date aa the Central Government may specify in this behalf:

Provided that different dates may be specified for different provisions of the scheme.

!•

15

(5) The sanction accorded by the Central Government under subjection (4) shall be conclusive evidence that all the requirements of this section relating to amalgamation have been complied with and a copy of the sanctioned scheme certi- fied in writing by an officer of the Central Government to be a true copy thereof, shall, In all legal proceedings (whether In ap- peal or otherwise) be admitted as evidence to the same extent as the original scheme.

(6) The Controller may, in like manner, add to, amend or vary any scheme made under this section.

20

35

(7) On and from the date of the coming into operation of the scheme or any provision thereof, the scheme or such provi- sion shall be binding on the insurer or, as the case may be. on the transferee insurer and any other insurer concerned In the amalgamation and also on all the shareholders, policy-holders and other creditors and employees of each of those insurers and of the transferee insurer, and on any other person having tny right or liability In relation to any of those insurers or the trans- feree Insurer.

30

35

(8) On and from such date as may be specified by the Cen- tral Government in this behalf, the properties and assets ot the Insurer shall, by virtue of and to the extent provided in the scheme, stand transferred to, and vest In, and the liabilities of the insurer shall, by virtue of and to the extent provided In the scheme, stand transferred to and become the liabilities of, the transferee Insurer.

40

(9) If any difficulty arises in giving effect to the provisions of the scheme the Central Government may by order do any- thing not Inconsistent with such provisions which apneari to It necessary or expedient for the purpose of removing the diffi- culty.

5 (10) Copies of every scheme made under this section and of every order made under aub-section (9) shall be laid before each House of Parliament, as soon as may be, after the scheme has been sanctioned by the Central Government, or, as the case may be, the order has been made.

(11) Nothing In this section shall be deemed to prevent the amalgamation with an insurer by a single scheme of several in- surers.

(12) The provisions of this section and of any scheme made

10 under It shall have effect notwithstanding anything to the i contrary contained in any otHer provisions of this Act or in any other law or any agreement, award or other instrument for the time being in force*

(23) The provisions of section 37 shall not apply to an

15 amalgamation given effect to under the provisions of this eec- ] tion.".

18. In section 40A of the principal Act,—

(i) in subHsection (3) —

Amend-

ment of

tectlon

40 A.

20 47 of 1950

(1) for the words, brackets and figures "Insurance (Amendment) Act, 1980", the words, brackets and figures "Jmurance (Amendment) Act, 1988" shall be substituted;

(2) for clauses (a) and (b), the following clauses shall bo substituted, namely:—

M(a) where the policy relates to fire insurance—

*5

(i) if the policy relates to a period of a year, ten per cent, of the first fifty thousand rupees, five per cent, of the next one hundred thousand rupees and nil thereafter of the premium payable on the policy;

30

(ii) if the policy (hereafter in this clause referred to as the relevant policy) relates to a period other than a y"ar, such percentage of the premiuir. payable on the relevant policy as the commission

5

computed in accordance with sub-clause (i) on a corresponding annual policy would bear to the premium on such annual policy (the premium on the annual policy being taken as the same pro- portion of the premium on the relevant policy as the period of one year bears to the period of the relevant policy);

it>

(b) where the policy relates to miscellaneous in- surance, fifteen per cent, of the premium payable on the policy, and

(c) where the policy relates to marine Insurance, ten per cent, of the premium payable on the policy.";

(it) after sub-section (3), the following sub-sections and Explanation shall be inserted, namely:—

15

20

" (3A) Where any person applies for a policy relating to fire insurance in respect of any property, he shall dec- lare In the proposal form whether any other policy has been taken by him in respect of such property or any part thereof in relation to any part of the period to which the proposal relates, and if he has taken out any such policy, he shall state the particulars thereof in the proposal form.

25

30

(3B) Where it appears from the proposal form that there Is already in existence one or more policies relating to fire Insurance in respect of the property, or any part thereof, the insurer shall take into account the total amount of the premium relating to all such policies for the period or any part thereof for which the proposal has been made for the purpose of determining the amount of commission on the premium payable on the policy proposed to be taken out from him.

.35

Explanation.—For the purposes of clause (o) of sub- section (3), all the policies relating to a single property comprising building, machinery, goods and contents therein and to all other buildings and goods appertaining to that pro- perty and under the same ownership shall be deemed to be a single policy notwithstanding that such property might

be insured in parts under more than on" policy or Insured with different insurers.".

Amend- ment of section

5 19. In section 40C of the principal Act, in clause (b) of the Explanation, after the words "in India during the year", the follow- ing shall be inserted, namely:—

40C.

".but In computing the expenses of management in India the following, and only the following, expenses may b" exclud- ed, namely:—

10 (i) in the case of an insurer having hia principal place of business in India, a share of head office expenses in respect of general insurance business transacted by him outside India not exceeding such percentage of his gross direct premium written outside India as may be prescribed,

i5 (it) any expenses debited to profit and loss account relating exclusively to the management of capital, and deal- ings with shareholders and a proper share of managerial expenses calculated in such manner as may be prescribed, and

(Hi) any expenses debited to claims in the revenue

20 account in Form F of Part II of the Third Schedul*".

20. In section 42 of the principal Act,—

(a) in sub-section (2), for the words "ten rupees", the words Amend- ment of section 42.

"twenty-five rupees" shall be substituted;

25 (b) in sub-section (3), for the words "ten rupees", the words "twenty-five rupees" and for the words "three rup""i", the words "ten rupees" shall be substituted;

(c) in the proviso to sub-section (3A), for th* words "thirty

rupees", the words "seventy-five rupees" shall b" subsMtu*ed.

21. Section 48C of the principal Act shall be omittsd.

Omis- sion of section 48C.

skc. i] t t ti dAfcsyrra or INDIA E X * R A O E D I N A BY 353

22. Aftcif section KG of the principal Act, the following heading ]

1 lid ••cti"n" shall be inserted, namely:—

Inser- tion of new sec- tion* 02H, D2I, 62J.02K, S2L*nd 52M.

'ACQUISITION Or THE UNDERTAKINGS OF INSURERS IN CERTAIN CASKS

52H, {1) It, upon receipt of a report from the Controller, the

5

Central Government Is satisfied that an insurer,—

(a) has persistently failed to comply with—

(i) any direction given to htm under section 34,

section 34F or section 34G, or

(ii) any order made under section 34E; or

10

Power of Cen- tral Govern- ment to acquire under- takings of In- surers in cer- tain casei.

(b) is baing managed in a manner detrimental to the

public interest or to the interests of his policy-holders, or

shareholders,

and that—

(i) in th" public interest, or

15

(ii) in the interests of the policy-holoers, or shareholders

of such insurer,

ao

it is accessary to acquire the undertaking of such insurer, the

Central Government may, by notified order, acquire the under-

taking of such insurer (hereafter in this section and In sec-

tions 521 and 52J and in the Eighth Schedule referred to as the

acquired insurer) with effect from| such date as may be specified

in the order (hereafter in this section and in sections 521 and

52J and in the English Schedule referred to as the appointed

day):

"5

Provided that no undertaking of an insurer shall be so

acquired unless such insurer has been given a reasonable oppor-

tunity of showing cause against the proposed action.

Explanation.-— For the purposes of this section and of sec-

tions 521 to 52M—

30

(a) "notified order" means an order published in the

Official Gazette,

(b) "undertaking", in relation to an insurer incorporat-

ed outside India, means tht undertaking of the Insurer in

India,

(2) Subject to the other provisions contained in this sectio and in sections 521 to 52M, on the appointed day, the undertal ing of the acquired insurer and all the assets and liabilities ( the acquired insurer shall stand transferred to, and vest in, th Central Government,

10 (3) The undertaking of the acquired insurer and its asset and liabilities shall be deemed to include all rights, powers authorities and privileges and all property, whether movable o immovable, including, in particular, cash balances, reserve funds investments, deposits and all other interests and rights in, oi arising out of, such property, as may be in the possession of, o: held by, the acquired insurer immediately before the appointee day and all books, accounts and documents relating thereto, am shall also be deemed to include all debts, liabilities and obliga tions, of whatever kind, then existing of the acquired insurer.

i5

20

2.5 (4) Notwithstanding anything contained in sub-section (2) the Central Government may, if it is satisfied that the under- taking of the acquired insurer and all his assets and liabilities should, instead of vesting in the Central Government, or conti- nuing to so vest, vest in a corporation or company, whether established under the scheme or not (hereafter in this section and in sections 521 to 52M and in the Eighth Schedule referred to as the acquiring insurer), that Government may, by order, direct that the said undertaking, including the assets and liabi- lities thereof shall vest in the acquiring insurer, either on the publication of the notified order or on such other date as may be specified in this behalf in the direction.

3o (5) Where the undertaking of the acquired insurer and the assets and liabilities thereof vest in an acquiring insurer under sub-section (4), the acquiring insurer shall, on and from the date of such vesting, be deemed to have become the transferee of the acquired insurer and all the rights and liabilities in relation to the acquired insurer shall, on and from the date of such vesting, be deemed to have been the rights and liabilities of such acquir- ing insurer.

J5

40 (6) Unless otherwise expressly provided by or under this section or sections 521 to 52M, all contracts, deeds, bonds, agree- ments, powers of attorney, grants of legal representation and other instruments of whatever nature subsisting or having effect immediately before the appointed day and to which the acquired , insurer is a party or which are in favour of the acquired insurer shall b* of as full force and effect against or in favour of the

5

Central Government or, as the case may be, of the acquirinj insurer, and may bo enforced or acted upon as fully and effec- tually as if in the place of the acquired insurer the Central Gov- ernment or the acquiring insurer had been a party thereto or as if they had been issued in invour of the Central Government or the acquiring insurer, as the case may be.

IO

(7) If, on the appointed day, any suit, appeal or other pro- ceeding, of whatever nature, is pending by or against the acquir- ed insurer, the same shall not abate, be discontinued or be, In any way, prejudicially affected by reason of the transfer of the undertaking of the acquired insurer or of anything contained in this section or in sections 521 to 52M, but the suit, appeal or other proceeding may be continued, prosecuted and enforced by or against the Central Government or the acquiring insurer, us th" case may be.

15

521. (1) The Central Government may make a scheme for carrying out the purposes of Eoctions 52H and 52J to 52M (both inclusive) in relation to the acquired insurer.

Power of Cen- tral Govern- ment to make scheme.

2O

(2) In particular, and without prejudice to the generality of the foregoing power, the Raid scheme may provide for all or any of the following matters, namely:—

(a) transfer of the undertaking, including the property, assets and liabilities of the acquired insurer to an acquiring insurer, and the capital, constitution, name and office of the acquiring insurer;

25

(b) the constitution of the first Board of management (by whatever name called) of the acquiring insurer and all such matters in connection therewith or incidental thereto as the Central Government may consider to be necessary or expedient;

30

14 of 1947.

35

(c) the continuance of the sei~vices of all the employees of the acquired insurer (excepting such of them as, not being workmen within the meaning of the Industrial Dis- putes Act, 1947, are specifically mentioned in the scheme) in the Central Government or in the acquiring insurer, as the case may be, on the same terms and conditions, so far as may be, as are specified in clauses (i) and (j) of sub-sectlo" (2) of section 37A SQ far as they may apply;

5 35'J THE GAZETTE OF INDIA EXTRAORDINARY [PAKT II

5

io (d) the continuance of the rights of any person who, or the appointed day, is entitled to, or is in receipt of, a pen- sion or other superannuation or compassionate allowance or benefit from the acquired insurer or any provident, pension or other fund or any authority administering such fund to be paid by, and to receive from the Central Government or the acquiring insurer, as the case may be, or any provi- dent, pension or other fund or any authority administering such fund, the same pension, allowance or benefit so long as he observes the conditions on which the pension, allowance or benefit was granted, and if any question arises whether he has so observed such conditions, the question shall be deter- mined by the Central Government and the decision of the Central Government thereon shall be final;

i5 (e) the manner of payment to the shareholders of the acquired insurer in full satisfaction of their claim of the compensation payable in accordance with the provisions of section 52J;

20 (f) the provision, if any, for completing the effectual transfer to the Central Government or the acquiring insurer of nny asset or liability which forms part of the undertak- ing of the acquired insurer in any country outside Tndia;

2,5 (g) such incidental, consequential and supplemental matters as may be necessary to secure that the transfer of the undertaking, property, assets and liabilities of the acquir- ed insurer to the Central Government or the acquiring insurer, as the case may be, is effectual and complete.

(3) The Central Government may, by notification in the Official Gazette, add to, amend or vary any scheme made under Jhis section.

3o

(4) Every scheme made* under this section shall be publish- ed in the Official Gazette.

(5) Copies of every scheme made under this section shall be laid before each House of Parliament as soon as may be after it is made,

35

(6) The provisions of sections 52H and 52J to 52M and of anv scheme made under this section shall have effect notwith- standing anything to the contrary contained In any other provi- sions of this Act or In any other law or any agreement, awprd Oj- other instrument for ^he time being^ in force,

fa

5

52J. (1) Every person who, Immediately before the appointed day, is registered as a holder of shares in the acquired insurer shall be given by the Central Government or the acquiring insurer, as the case may be, such compensation in respect of the transfer of the undertaking of the acquired insurer as ia determined in accordance with the principles contained in the Eighth Schedule.

Com-

pensa-

tion to

be givan

to the

share-

holders

of th"

acquir-

ed insur-

er.

10

(2) Nothing contained in sub-section (2) shall affect the rights inter se between the holder of any snares in the acquired insurer and any other person who may have any interest in such shares and such other person shall be entitled to enforce his in- terest against the compensation awarded to the holder of such shares, but not against the Central Government or the acquiring insurer.

15

20

(3) The amount of compensation to be given in accordance with the principles contained in the Eighth Schedule shall be determined, in the first instance, by the Central Government or the acquiring insurer, as the case may be, in consultation with the Controller, and shall be offered by it to all those to whom compensation is payable under sub-section (1) in full satisfaction thereof.

25

(4) If the amount of compensation offered in terms of sub- section (3) is not acceptable to any shareholder of the acquired insurer, such shareholder may, before such date as may be noti- fied by the Central Government in the Official Gazette, request the Central Government in writing to have the matter referred to the Tribunal constituted under section 52K.

30

(5) If before the date notified under sub-section (4) the Cen- tral Government receives requests in terms of that sub-section from not less than one-fourth in number of all shareholders, being shareholders holding not less than one-fourth in value of the paid-up share capital of the acquired insurer, the Central Government shall have the matter referred to the Tribunal for decision.

55

(6) If before the date notified under subjection (4) the Central Government does not receive requests as provided in sub-section (5), the amount of compensation offered under sub- section (3), or where a reference has been made to the Tribunal, the amount determined by it, shall be the compensation payable

under sub-section (I) and shall be final and binding on all the parties concerned.

5

10 (7) Where the Central Government does not receive re- quests as provided in sub-section (5), the compensation payable in pursuance of the provisions of this section shall become due (or payment on the expiry of one year from the appointed day, and where a reference has been made to the Tribunal under sub- section (5), the amount determined by the Tribunal as compen- sation shall become due for payment on the expiry of one year from the appointed day or on the date of decision of the Tribunal, whichever is earlier.

i5 (8) If between the appointed day and the date on which the compensation becomes due in pursuance of sub-section (7), any facts come to light which call for revision of the amount of the compensation, the necessary modification of the amount of the compensation shall be made and the amount of the com- pensation so determined shall be the compensation payable in pursuance of sub-section ( I ).

20 (9) There shall also be paid simple interest at the rate of three per cent, per annum on the amount of the compensation lor the period from the appointed day to the date on which pay- ment of the compensation becomes due.

52K- (1) The Central Government may, for the purposes of sections 52H to 52J, constitute a Tribunal which shall consist of a Chairman and two other members.

25 Consti- tution hi th" Tribu- nal*

3o (2) The Chairman shall bo a person who is, or has been, a Judge of a High Court or of the Supreme Court and of the two other members, one shall be a person who, in the opinion of the Central Government, has had experience of matters connected with general insurance and the other shall be a person who is a chartered accountant within the meaning of the Chartered Accountants Act, 1949.

38 of 1949.

35 (3) If, for any reason, a vacancy occurs in the office of the Chairman or any other member of the Tribunal, the Central Gov- ernment may fill the vacancy by appointing another person there- to in accordance with the provisions of sub-section (2), and any proceeding may be continued before the Tribunal so constituted from the stage at which the vacancy occurred.

(4) The Tribunal may, for the purpose of determining any compensation payable under section 52J, choose one or more

40

persons having special knowledge or experience of any relevant matter to assist it in the determination ot such compensation.

5 of 1008.

52L. (1) The Tribunal shall have the powers of a Civil Court, while trying a t>uit, unuer the Code of Civil Procedure, 1908, in respect ol tne lollowing matters, namely:—

5

(a) summoning and enforcing the attendance of any

person and examining him on oath;

Tribu- nal to have power* of Civil Court, (b) requiring the discovery and production of docu-

ments;

(c) receiving evidence on affidavits;

io

(d) issuing commissions for the examination of witnes-

ses or documents.

(2) Notwithstanding anything contained in sub-section (1) or in any other law for the time being in force, the Tribunal shall not compel the Central Government or the Controller—

15

(a) to- produce any books of account, or other documents

which the Central Government or the Controller claims to be of a confidential nature;

(b) to make any such books or document3 a part of the

record of the proceedings before the Tribunal;

2*

(c) to give inspection of any such books or documents

to any party before it and to any other person.

45 of 1860. ZS

(3) Any proceeding before the Tribunal shall be deemed to be a judicial proceeding within the meaning of sections 193 and 22& of the Indian Penal Code and the Tribunal shall be deemed to be a civil court for 'the purposes of section 195 and Chapter XXXV of the Code of Criminal Procedure, 1898.

5 of 1898.

52M- (1) The Tribunal shall have power to regulate its own

procedure.

(2) The Tribunal may hold the whole or any part "f its 30

inquiry in camera.

Proce- dure at the Tribu- nal

(3) Any clerical or arithmetical error in any order of the Tribunal or any error arising therein from any accidental slip or omission may, at any time, be corrected by the Tribunal either of its own motion or on the application of any of the parties.'.

35

23. In section 53 of the principal Act, in sub-section (2),—

(a) in sub-clause (Hi) of clause (b) —

Amend- ment of section 5).

(i) for the words "the returns", the words "any re-

turns or statements!' shall be substituted;

(it) for t he w o r ds "company is insolvent", t he w o r ds "company is, or is deemed to be, insolvent" shall be substi- tuted;

5 (b) in sub-clause (iw) of clause (b), after the words "in- terests of the policy-holders", the words "or to public interest generally" shall be inserted.

24. In section 58 of the principal Act, sub-section (5) shall be

omitted,

Amend- ment of section 58.

25. In section 64E of the principal Act, the words ", the Tariff

Committee and the other Committee thereof" shall be omitted.

10

26. In section 64L of the principal Actf to sub-section (2), the following proviso shall be, and shall be deemed always to have been, added, namely:—

Amend- ment of sec- tion 64E. Amend- ment of sec- tion 64L.

15 "Provided that if the General Insurance Council thinks fit, it may, by a resolution passed by it, waive the collection of the prescribed fees for any year and where any such resolution has been approved by the Central Government, the Executive Com- mittee of the General Insurance Council shall not collect any fees in relation to that year.".

27. Sections 64O to 64Q of the principal Act shall be omitted. zo Omis- sion of fac- tions MO to 64Q.

28. In section 64R of the principal Act, in sub-section (2), the words "or the Tariff Committee appointed under section 640" shall be omitted.

Amend- ment of sec- tion 64R.

29. After Part IIA of the principal Act, the following Parts shall

be inserted, namely;—

35 Inser- tion of new P"rti IIB and IIC.

'PART IIB

TABOT* ADVISORY COMMITTEE] AND CONTROL OF TARIFF RATES

3<> 64TJ. (2) With effect from the commencement of the Insur* ance (Amendment) Act, 1968, there shall be established a Com- mittee, to be called the Tariff Advisory Committee (hereafter In this Part referred to as the Advisory Committee) to control and regulate the rates, advantages, terms and conditions that Establish- ment of Tariff Advisory Com- mittee.

may be offered by insurers in respect of general insurance busi- ness.

5

(2) The Advisory Committee shall be a body corporate hav- ing perpetual succession and a common seal, with power, sub- ject to the provisions of this Act, to acquire, hold and dispose of property, both movable and immovable, and to contract, and "lay* by the said name, sue and lie sued.

64UA. (2) The Advisory Committee shall consist of the

following members, namely: —

(a) the Controller of Insurance, eX'Officio, who shall be 10

the Chairman;

(b) a senior officer of the office of the Controller nomi-

Com-

position

of the

Advi-

sory

Com-

mittee.

nated by the Controller, who shall be the Vice-Chairman;

15

(c) not more than eight representatives of Indian insu- rers, elected (in their individual capacities) by such insurers in such manner, from such areas and from among such in- surers or groups of insurers as may be prescribed;

20

(d) not more than six representatives of Insurers Incor- porated or domiciled elsewhere than in India but registered in India, elected (in their individual capacities) by such in- surers in such manner, and from among such insurers or groups of insurers as may be prescribed.

(2) The Secretary to the Advisory Committee shall be an officer of the Central Government, nominated by that Govern- ment.

25

64UB. (1) The Central Government may make rules to carry

out of the purposes of this Part.

(2) In particular, and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters, namely: —

30

Power

to

make

rules in

respect

of mat-

ters In

this

(a) the functions to be discharged by the Advisory Com-

Part.

mittee;

(b) the term of office of the members of the Advisory

Committee, the procedure for their election and the manner of filling casual vacancies in the Advisory Committee;

35

(c) the travelling and other allowances payable to the

members of the Advisory Committee;

(d) the procedure for holding the meetings of the Ad- visory Committee and for transaction of business thereat.

(3) The Advisory Committee may, with the previous appro- val of the Central Government, make regulations for all or any of the following matters, namely: —

(a) the constitution, powers and dirties of Regional Com- mittees and of sub-committees constituted thereunder; 5

(b) the method of election of candidates for Regional Committees and sub-committees thereunder, their eligibility, term of office and method of filling casual vacancies;

10 (c) the procedure for convening meetings and transac- tion of business by Regional Committees and sub-committees thereunder;

15 (d) the appointment of officers and other employees of the Advisory Committee and of Regional Committees or sub-committees constituted by or under the Advisory Com- mittee or any Regional Committee and the terms and con- ditions of their service including travelling and other allow- ances;

(e) such other matters pertaining to procedure as are not inconsistent with the provisions of this Act or of rules made thereunder,

20

and may, from time to time, with the previous approval of the Central Government, add to, amend or vary any such regula- tions.

25

30 (4) The regulations made by the Tariff Committee of the General Insurance Council under section 64O as they were in force immediately before the commencement of the Insurance (Amendment) Act, 1968, shall, after such commencement, con- tinue to be in force until rules are made by the Central Gov- ernment under sub-section (1) and immediately after such rules have come into effect, the regulations aforesaid shall cease to be valid.

(5) The Controller of Insurance shall be in direct charge of the establishment of the Advisory Committee and the Secretary of the Advisory Committee shall work under his direction and control.

35

64UC. (1) The Advisory Committee may, from time to time and to the extent it deems expedient, control and regulate the rates, advantages, terms and conditions that may be offered by Power of the Advi- lory Com- mittee to

Sfec. 2] fm GAZETTE OF iNMA feJCrfUOttofoASY 3tf3

r**ul"t* rate*, vd-

etc. Insurers in respect of any risk or of any class or category erf risks, the rates, advantages, terms and conditions of which, In Its opinion, it is proper to control and regulate, and any such rates, advantages, terms and conditions shall be binding on all insurers:

5

10

Provided that the Advisory Committee may, with th* previous approval of the Central Government, permit any insurer to offer, during such period (being not more than two years but which may be extended by periods of not more than two years at a time) and subject to such condition? as may b" specified by that Committee, rates of premium different from those fixed by it in respect of any particular category of risks, if it is satisfied that such insurer generally issuesl policies only to a restricted class of the public or under a restricted categury of risks.

* 5

20

(2) In fixing, amending or modifying any rates, advantage^ terms or conditions, relating to any risk, the Advisory Commit- tee shall try to ensure, as far as possible, that there 13 no unfair discrimination between risks of essentially the same hazard* and also that consideration ia given to past and prospective loss experience:

25

Provided that the Advisory Committee may, at its discretion, make suitable allowances for the degree of credibility to be assigned to the past experience, including allowances for random fluctuations and may also, at its discretion, make suitable allow- ances for future fluctuations and unforeseen future contingen- cies, including hazards of conflagration or catastrophe or both*

30

(3) Every decision of the Advisory Committee shall be valid only after and to the extent it JS ratified by the Controller, and every such decision shall take effect from the date on which It is so ratified by the Controller, or, if the Controller so orders In any case, from such earlier date as he may specify in the order.

(4) The decisions of the Advisory Committee In purswmc* of the provisions of this section shall be final.

35

(5) Where an insurer is guiKy of breach of any rate, ad- vantage, term or condition fixed by the Advisory Committee, he shall be deemed to have .contravened the provisions of this A'Ct

58 Q. of I.—8.