Contents ths insurance act, 1938 Arrangement of Sections




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Issue of licence to intermediary or insurance intermediary
42D. (1) The Authority or an officer authorized by it in this behalf shall, in the manner determined by the regulations made by the Authority and on payment of the fees determined by the regulations made by the Authority, issue to any person making an application in the manner determined by the regulations, and not suffering from any of the disqualifications herein mentioned, a licence to act as an intermediary or an insurance intermediary under this Act:
Provided that,-


  1. in the case of an individual, he does not suffer from any of the disqualifications mentioned in sub-section (4) of section 42, or

  2. in the case of a company or firm, any of its directors or partners does not suffer from any of the said disqualifications.

(2) A licence issued under this section shall entitle the holder thereof to act as an intermediary or insurance intermediary.


(3) A licence issued under this section shall remain in force for a period of three years only from the date of issue, but shall, if the applicant, being an individual does not, or being a company or firm any of its directors or partners does not suffer from any of the disqualifications mentioned in clauses (b), (c), (d), (e) and (f) of sub-section (4) of section 42 and the application for renewal of licence reaches the issuing authority at least thirty days before the date on which the licence ceases to remain in force, be renewed for a period of three years at any one time on payment of the fee, determined by the regulations made by the Authority and additional fee for an amount determined by the regulations, not exceeding one hundred rupees by way of penalty, if the application for renewal of the licence does not reach the issuing authority at least thirty days before the date on which the licence ceases to remain in force.
(4) No application for the renewal of a licence under this section shall be entertained if the application does not reach the issuing authority before the licence ceases to remain in force:
Provided that the Authority may, if satisfied that undue hardship would be caused otherwise, accept any application in contravention of this sub-section on payment by the application of the penalty of seven hundred and fifty rupees.
(5) The disqualifications above referred to shall be the following: -

  1. that the person is a minor;

  2. that he is found to be a unsound mind by a court of competent jurisdiction;

  3. that he has been found guilty of criminal misappropriation or criminal breach of trust or cheating or forgery or an abetment of or attempt to commit any such offence by a court of competent jurisdiction:


Provided that, where at least five years have elapsed since the completion of the sentence imposed on any person in respect of any such offence, the Authority shall ordinarily declare in respect of such person that his conviction shall cease to operate as a disqualification under this clause;

  1. that in the course of any judicial proceedings relating to any policy of insurance of the winding up of an insurance company or in the course of an investigation of the affairs of an insurer it has been found that he has been guilty of or has knowingly participated in or connived at any fraud dishonestly or misrepresentation against an insurer or an insured;

  2. that he does not possess the requisite qualifications and practical training for a period not exceeding twelve months, as may be specified by the regulations made by the Authority in this behalf;

  3. that he has not passed such examinations as may be specified by the regulations made by the Authority in this behalf;

  4. that he violates the code of conduct as may be specified by the regulations made by the Authority.

(6) If it be found that an intermediary or an insurance intermediary suffers from any of the foregoing disqualifications, without prejudice to any other penalty to which he may be liable, the Authority shall, and if the intermediary or an insurance intermediary has knowingly contravened any provisions of this Act may cancel the licence issued to the intermediary or insurance intermediary under this section.

(7) The Authority may issue a duplicate licence to replace a licence lost, destroyed or mutilated, on payment of such fee, as may be determined by the regulations made by the Authority.

(8) Any person who acts as an intermediary or an insurance intermediary without holding a licence issued under this section to act as such, shall be punishable with fine, and any insurer or any person who appoints as an intermediary or an insurance intermediary or any person not licensed to act as such or transacts any insurance business in India through any such person, shall be punishable with fine.

(9) Where the person contravening sub-section (8) 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 other officer of the company, and every partner of the firm who is knowingly a party to such contravention shall be punishable with fine.



Commission, brokerage or fee payable to intermediary or insurance intermediary

42E. (1) No intermediary or insurance intermediary shall be paid or contract to be paid by way of commission, fee or as remuneration in any form, an amount exceeding thirty per cent of the premium payable as may be specified by the regulations made by the Authority, in respect of any policy or policies effected through him:

Provided that the Authority may specify different amounts payable by way of commission, fee or as remuneration to an intermediary or insurance intermediary or different classes of business of insurance.

(2) Without prejudice to the provisions contained in this Act, the Authority may, by the regulations made in this behalf, specify the requirements of capital, form of business and other conditions to act as an intermediary or insurance intermediary.



Register of insurance agents

43. (l) Every insurer and every person who acting on behalf of an insurer employs insurance agents shall maintain a register showing the name and address of every insurance agent appointed by him and the date on which his appointment began and the date, if any, on which his appointment ceased.



Prohibition of cessation of payments of commission

44. (1) Notwithstanding anything to the contrary contained in any contract between any person and an insurance agent providing for the forfeiture or stoppage of payment of renewal commission to such insurance agent, no such person shall, in respect of life insurance business transacted in India, refuse payment to an insurance agent of commission due to him on renewal premium under the agreement by reason only of the termination of his agreement, except for fraud:

Provided that-­


  1. such agent ceases to act for the insurer concerned after the Central Government has notified in the official Gazette that it is satisfied that the circumstances in which the said insurer is placed are sucks as to justify the agent's ceasing to act for him; or




  1. such agent has served the insurer continually and exclusively in respect of life insurance business for at least five years and policies assuring a total sum of not less than fifty thousand rupees effected through him for the insurer were in force on a de to one year before his ceasing to act as such agent for the insurer, and that the commission on renewal premiums due to him does not exceed four per cent in any case; or




  1. such agent has served the insurer continually and exclusively for at least ten years and after his ceasing to act as such agent he does not directly or indirectly solicit or procure insurance business for any other person.


Explanation.—For the purpose of this sub section, service of an insurance agent under a chief agent of the insurer, whether before or after the commencement of the Insurance (Amendment) Act, 1950 (47 of 1950), shall be deemed to be service under the insurer.
(2) Any commission payable to an insurance agent under the provisions of clause (b) and (c) of the proviso to sub section (1) shall, notwithstanding the death of the agent, continue to be payable to his heirs for so long as such commission would have been payable had such insurance agent been alive.
Power to call for information
44A. For the purposes of ensuring compliance with the provisions of sections 40A, 40B, 40C, 42B and 42C the Authority may by notice,—


  1. require from an insurer, principal agent, chief agent, or special agent such information, certified if so required by an auditor or actuary, as he may consider necessary;




  1. require an insurer, principal agent, chief agent, or special agent to submit for his examination as the principal place of business of the insurer in 1India), any book of account, register or other document, or to supply any statement which may be specified in the notice;




  1. examine any officer of an insurer or a principal agent, chief agent or special agent on oath, in relation to any such information, book, register, document or statement and administer the oath accordingly;

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


Special provisions of law
Policy not to be called in question on ground of mis statement after two years
45. No policy of life insurance effected before the commencement of this Act shall after the expiry of two years from the date of commencement of this Act and no policy of life insurance effected after the coming into force of this Act shall, after the expiry calf two years from the date on which it was effected be called in question by an insurer on the ground that statement made in the proposal or in any report of a medical officer, or referee, or friend of the insured, or in any other document leading to the issue of the policy, was inaccurate or false, unless the insurer shows that such statement was on a material matter or suppressed facts which it was material to disclose and that it was fraudulently made by the policy holder and that the policy holder knew at the time of making it that the statement was false or that it suppressed facts which it was material to disclose:
Provided that nothing in this section shall prevent the insurer from calling for proof of age at any time if he is entitled to do so, and no policy shall be deemed to be called in question merely because the terms of the policy are adjusted on subsequent proof that the age of the life insured was incorrectly stated in the proposal.

Application of the law in force in India to policies issued in India
46.The holder of a policy of insurance issued by an insurer in respect of insurance business transacted in India after the commencement of this Act shall have the right, notwithstanding anything to the contrary contained in the policy or in any agreement relating thereto, receive payment in India of any sum secured thereby and to sue for any relief in respect of the policy in any court of competent jurisdiction in India; and if the suit is brought in India any question of law arising in connection with any such policy shall be determined according to the law in force in India:
Provided that nothing in this section shall apply to a policy of marine insurance
Payment of money into Court
47. (1) Where in respect of any policy of life insurance maturing for payment an insurer is of opinion that by reason of conflicting claims to or insufficiency of proof of title to the amount secured thereby or for any other adequate reason it is impossible otherwise for the insurer to obtain a satisfactory discharge for the payment of such amount, the insurer may, apply to pay the amount into the Court within the jurisdiction of which is situated the place at which such amount is payable under the terms of the policy or otherwise.
(2) A receipt granted by the Court for any such payment shall be a satisfactory discharge to the insurer for the payment of such amount.
(3) An application for permission to make a payment into Court under this section, shall be made by a petition verified by an affidavit signed by a principal officer of the insurer setting forth the following particulars, namely:


  1. the name of the insured person and his address;

  2. if the insured person is deceased, the date and place of his death;

  3. the nature of the policy and the amount secured by it;

  4. the name and address of each claimant so far as is known to the insurer with details of every notice of claim received;

  5. the reasons why in the opinion of the insurer satisfactory discharge cannot be obtained for the payment of the amount; and

  6. the address at which the insurer may be served with notice of any proceeding relating to disposal of the amount paid into Court.

(4) An application under this section shall not be entertained by the Court if the application is made before the expiry of six months from the maturing of the policy by survival, or from the date of receipt of notice by the insurer of the death of the insured, as the case may be.


(5) If it appears to the Court that a satisfactory discharge for the payment of the amount cannot otherwise be obtained by the insurer it shall allow the amount to be paid into Court and shall invest the amount in Government securities pending its disposal.
(6) The insurer shall transmit to the Court every notice of claim received after the making of the application under sub section (3), and any payment required by the Court as costs of the proceedings or otherwise in connection with the disposal of the amount paid into Court shall as to the cost of the application under sub section (3) be borne by the insurer and as to any other costs be in the discretion of the Court.

(7) The Court shall cause notice to be given to every ascertained claimant of the fact that the amount has been paid into Court, and shall cause notice at the cost of any claimant applying to withdraw the amount to be given to every other ascertained claimant.


(8) The Court shall decide all questions relating to the disposal of claims to the amount paid into Court.
Claims on small life insurance policies
47A (1) In the event of any dispute relating to the settlement of a claim on a policy of life insurance assuring a sum not exceeding two thousand rupees (exclusive of any profit or bonus not being a guaranteed profit or bonus) issued by an insurer in respect of insurance business transacted in India, arising between a claimant under the policy and the insurer who issued the policy or has otherwise assumed liability in respect thereof, the dispute may at the option of the claimant be referred to the Authority for decision and the Authority may, after giving an opportunity to the parties to be heard and after making such further inquires as he may think fit, decide the matter.
(2) The decision of the Authority under this sub section shall be final and shall not be called in question in any Court, and may be executed by the Court which would have been competent to decide the dispute if it had not been referred to the Authority as if it wore a decree passed by that Court.
(3) There shall be charged and collected in respect of the duties of the Authority under this section such fees whether by way of percentage or otherwise as may be prescribed.
Directors of insurers being companies
48. (1) Where the insurer is a company incorporated under the Indian Companies Act, 1913 (7 of 1913), or under the Indian Companies Act, 1882 (6 of 1882), or under the Indian Companies Act, 1866 (10 of 1866), or under any Act repealed thereby, and carries on the business of life insurance, not less than one fourth of the whole number of the directors of the company the number to be elected not being less than two in any case shall notwithstanding anything to the contrary in the Articles of Association of the company be elected in the prescribed manner by the holders of policies of life insurance issued by the company.
(2) Only and all persons holding otherwise than as assignees policies of life insurance issued by the company of such minimum amount and having been in force for such minimum period as may be prescribed shall unless disqualified under sub section (2A) be eligible for election as directors under sub section (1), and only and all persons holding policies of life insurance issued by the company and having been in force at the time of the election for not less than six months shall be eligible to vote at such elections:
Provided that the assignment of a policy to the persons who took out the policy shall not disqualify that person for being eligible for election as a director under sub section (1)
(2A) A person shall be ineligible for election as a director, under sub­section (1) of any company if he is a director, officer, employee, or legal or technical adviser of that company, or any other insurer, and shall cease to be a director under sub section (1) if after election he acquires any disqualification specified in this sub section or no longer holds the qualifications required by sub section (2):
Provided that nothing in this sub section shall disqualify a person who is an elected director under sub section (1) and is not otherwise disqualified under this sub section, from being re elected:
Provided further that the Authority may exempt any director of a subsidiary company of the insurer from any disqualification imposed by this sub-section
(3) The Central Government may, for such period, or to such extent and subject to such conditions as may be specified by it in this behalf, exempt from the operation of this section—


  1. any mutual Insurance Company as defined in clause (a) of sub section (1) of section 95 in respect of which the Authority certifies that in his opinion owing to conditions governing membership of the company or to the nature of the insurance contracts undertaken by it the application of the provisions of this section to the company is practicable, or

  2. any company in respect of which the Authority certifies that in opinion the company, have taken all reasonable steps to achieve compliance with the provisions of this section, has been unable to obtain the required number of directors with the required qualifications.

(4) This section shall not take effect, in respect of any company in existence at the commencement of this Act, until the expiry of one year there from, and in respect of any company incorporated after the commencement of this Act, until the expiry of two years from the date of registration to carry on life insurance business.


Life Insurance agents not to be directors of life insurance companies
48A. No insurance agent who solicits or procures life insurance business, and no chief agent or special agent shall be eligible to be or remain a director of any insurance company carrying on life insurance business:
Provided that any director holding office at the commencement of the Insurance (Amendment) Act, 1946 (6 of 1946), shall not become ineligible to remain a director by reason of this section until the expiry of six months from the commencement of that Act.
Further provision regarding directors
48B. (1) An insurer specified in sub-clause (b) of clause (9) of section 2 and carrying on life insurance business shall not have a common director with another such insurer.
(2) The Authority may, for such period, to such extent and subject to such conditions as it may specify, exempt from the operation of this I section—

(a) any insurer, who is a subsidiary company of another insurer, or



(b) two or more insurers, for the purpose of facilitating their amalgamation or the transfer of business of       one insurer to the other.

Appointment of additional directors

48C. [Repealed by the Insurance (Amendment) Act, 1968(62 of 1968).]

Restriction on dividends and bonuses
49.(1) No insurer, being an insurer specified in sub clause (a) (ii) or sub-clause (b) of clause (9) of section 2, who I carries on the business of life insurance or any other class or subclass of insurance business to which Sec. 13 applies, shall, for the purpose of declaring or paying any dividend to shareholders or any bonus to policy holders or of making any payment in services of any debentures, utilize directly or indirectly any portion of the life insurance fund or of the fund of such other class or sub­-class of insurance business, as the case may be, except a surplus shown in the valuation balance sheet in such form as may be specified by the regulations made by the Authority submitted to the Authority as part of the abstract referred to in Section 15 as a result of an actuarial valuation assets and liabilities of the insurer; nor shall he increase such surplus by contributions out of any reserve fund or otherwise unless such contributions have been brought in as revenue account applicable to that class or sub class of insurance business on or before the date of the valuation aforesaid, except when the reserve fund is made up solely of transfers from similar surpluses disclosed by valuations in respect of which returns have been submitted to the Authority under Section 15 of this Act or to the Central Government under Section 11 of the Indian Life Assurance Companies Act, 1912 (6 of 1912):
Provided that payments made out of any such surplus in service of any debentures shall not exceed fifty per cent. of such surplus including any payment by way of interest on the debentures, and interest paid on the debentures shall not exceed ten per cent of any such surplus except where the interest paid on the debentures is offset against the interest credited to the fund or funds concerned in deciding the interest basis adopted in the valuation disclosing the aforesaid surplus:
Provided further that the share of any such surplus allocated to or reserved for the shareholders (including any amount for the payment of dividends guaranteed to them, whether by way of first charge or otherwise) shall not exceed such sums as may be specified by the Authority and such share shall in no case exceed ten percent of such surplus in case of participating policies and in other cases the whole thereof.
(2) For the purposes of sub section (1) the actual amount of income tax deducted at source during the period following the date as at which the last preceding valuation was made and preceding the date as at which the valuation in question is made may be added to such surplus after deducting an estimated amount for income tax on such surplus, such addition and deduction being shown in an abstract of the report of the actuary referred to in sub-section (1) of section 13.
Notice of options available to the assured on the lapsing of a policy
50. An insurer shall, before the expiry of three months from the date on which the premiums in respect of a policy of life insurance were payable but not paid, give notice to the policy holder informing him of the options available to him unless these are set forth in the policy.
Supply of copies of proposals and medical reports
51. Every insurer shall, on application by a policy holder and on payment of a fee not exceeding one rupee, supply to the policy holder certified copies of the questions put to him and his answers thereto contained in his proposal for insurance and in the medical report supplied in connection therewith.
Prohibition of business on dividing principle
52. (l) No insurer shall after the commencement of this Act begin, or after three years from that date continue to carry on, any business upon the dividing principle, that is to say, on the principle that the benefit secured by a policy is not fixed but depends either wholly or party on the results of a distribution of certain sums amongst policies becoming claims within certain time limits, or on the principle that the premiums payable by a policy holder depend wholly or partly on the number of policies becoming claims within certain time limits:
Provided that nothing in this section shall be deemed to prevent an insurer from allocating bonuses to holders of policies of life insurance as a result of a periodical actuarial valuation either as reversionary additions to the sums insured or as immediate cash bonuses or otherwise:
Provided further that an insurer who continues to carry on insurance business on the dividing principle after the commencement of this Act shall withhold from distribution a sum of not less than forty per cent of the premiums received during each year after the commencement of this Act in which such business is continued so as to make up the amount required for investment under Section 27.
(2) On the expiry of the period of three years referred to in sub section (1), or on the insurer's ceasing before such expiry but at any time after the commencement of the Insurance (Amendment) Act, 1941 (13 of 1941), to carry on business on the dividing principle, the insurer shall forthwith cause an investigation to be made by an actuary, who shall determine the amount accumulated out of the contributions received from the holders of all policies to which the dividing principle applies and the extent of the claims of those policy holders against the realisable assets of the insurer, and shall, before the expiration of six months from the date on which he is entrusted with the investigation, make recommendations regarding the distribution, whether by cash payment or by the allocation of paid up policies or by a combination of both methods, of such assets as he finds to appertain to such policy holder; and the insurer shall, before the expiry of six months from the date on which the actuary make his recommendations, distribute such assets in accordance with those recommendations.
(3) Where at any time prior to the commencement of the Insurance (Amendment) Act, 1941 (13 of 1941), an insurer has to carry on business on the dividing principle, the insurer shall before the expiration of two months from the commencement of that Act, report to the Authority the measures taken or proposed by him for the distribution among holders of policies to which the dividing principle applies of the assets due to them; and the Authority may either sanction such measures or refuse his sanction, and, if he refuses his sanction or if the insurer does not report to him as required by this sub section, the provisions of sub section (2) shall apply to the insurer forthwith.
Mismanagement by Administrator
When Administrator for management of insurance business may be appointed
52A (1) If at any time the Authority has reason to believe that an insurer carrying on life insurance business is acting in a manner likely to be prejudicial to the interests of holders of life insurance policies, he may, after giving such opportunity to the insurer to be heard as he thinks fit, make a report thereon to the Central Government.
(2) The Central Government, if it is of opinion after considering the report that it is necessary or proper to do so, may appoint an Administrator to manage the affairs of the insurer under the direction and control of the Authority.
(3) The Administrator shall receive such remuneration as the Central Government may direct and the Central Government may at any time cancel the appointment and appoint some other person as Administrator.
(4) The management of the business of the insurer shall as on and after the date of appointment of the Administrator vest in such Administrator, but except with the leave of the Authority the Administrator shall not issue any further policies.
(5) As on and after the date of appointment of the Administrator any person vested with any such management immediately prior to that date shall be divested of that management.
(6) The Authority may issue such directions to the Administrator as to his powers and duties as he deems desirable in the circumstances of the case, and the Administrator may apply to the Authority at any time for instructions as to the manner in which he shall conduct the management of the business of the insurer or in relation to any matter arising in the course of such management.
Powers and duties of the Administrator
52B (1) The Administrator shall conduct the management of the business of the insurer with the greatest economy compatible with efficiency and shall, as soon as may be possible, file with the Authority a report stating which of the following courses is in the circumstances most advantageous to the general interests of the holders of life insurance policies, namely:-
(a) the transfer of the business of the insurer to some other insurer:
(b) the carrying on of its business by the insurer (whether with the

      policies of the business continued for the original sum insured with the

      addition of bonuses that attach to the policies or for reduced amounts);
(c) the winding up of the insurer; and
(d) such other course as he deems advisable.
(2) On the filing of the report with the Authority, the Authority may take such action as he thinks fit for promoting the interests of the holders of life insurance policies in general.
(3) Any order passed by the Authority under sub section (2), shall be binding on all persons concerned, and shall have effect notwithstanding anything in the memorandum or articles of association of the insurer, or a company.
Powers of Administrator respecting property liable to attachment under Section 106

52BB. (1) If the Administrator is satisfied that any person has rendered himself liable to be proceeded against under Section 106, he may, pending the institution of proceedings against such person under that section, by order in writing, prohibit him or any other person from transferring or otherwise disposing of any property which, in the opinion of the Administrator, would be liable to attachment in proceedings under that section.


(2) Any person aggrieved by an order made by the Administrator under sub section (1) may, within fourteen days from the date on which the order is served on him, appeal against such order to the Central Government, and the Central Government may pass such order thereon as it thinks fit.
(3) An order made by the Administrator under sub section (1) shall, subject to any order made by the Central Government on appeal, be in force for a period of three months from the date of the order unless, before the expiry of the said period, an application is made under sub section (1) of Sec. 106 to the Court competent to exercise jurisdiction under that sub section, and when such an application is made, the order shall, subject to any order made by that Court, continue in force as if it were an order of attachment made by that Court in proceedings under that section.
(4) An order made by the Administrator under this section shall,—
(a) in the case of an order affecting a corporation or firm, be served in

      the manner provided for the service of summons in rule 2 of Order XXIX or

      rule 3 of Order XXX, as the case may be, in the First Schedule to the Code of

     Civil Procedure, 1908 (5 of 1908), and


(b) in the case of an order affecting a person not being a corporation or

     firm, be served on such person­ -




  1. personally, by delivering or tendering to him the order, or

(ii)         by post, or
(iii) where the person cannot be found, by leaving a copy of the order with some adult male member of his family or by affixing such copy to some conspicuous part of the premises in which he is known to have last resided or carried on business or personally worked for gain.
and every such order shall also be published in the official Gazette.
(5) If any question arises whether a person was duly served with an order under sub section (4), the publication of the order in the official Gazette shall be conclusive proof that the order was so served, and a failure to comply with the provisions of Clause (a) or Clause (b) of sub section (4) shall not affect the validity of the order.
(6) Notwithstanding anything contained In this sections any property in respect of which an order has been made by the Administrator may, with the previous permission of the Administrator and subject to such terms and conditions as he may impose, be transferred or otherwise disposed of.
(7) Notwithstanding anything contained in any other law for the time being in force, the transfer or other disposition of any property in contravention of any order made by the Administrator under this section or of any terms and conditions imposed by him shall be void.
(8) For the purpose of enabling him to form an opinion as to whether any property would be liable to attachment in proceedings under Sec. 106 or for the purpose of enabling him to institute proceedings under that section, the Administrator may require any person to furnish information on such points or matters as, in the opinion of the Administrator, may be relevant for the purpose, and any person so required shall be deemed to be legally bound to furnish such information within the meaning of Sec. 176 of the Indian Penal Code (45 of 1860).
(9) The Administrator shall have all the powers of a civil court under the Code of Civil Procedure, 1908 (5 of 1908), while trying a suit in respect of the following matters, namely:
(a) summoning and enforcing the attendance of witnesses and examining them on oath;
(b) requiring the production of documents; and
     (c) receiving evidence on affidavits,
and any proceeding before the Administrator under this section shall be deemed to be a judicial proceeding within the meaning of Sections 193 and 228 of the Indian Penal Code (45 of 1860).
(10) Save as provided in this section or in Section 106, and notwithstanding anything contained in any other law for the time being in force,—
(a) no suit or other legal proceeding shall lie in any Court to set aside or modify any order of the            Administrator or the Central Government made under this section, and
(b) no Court shall pass any decree, grant any injunction or make any other order which shall have the            effect of nullifying or affecting in any way any such order.
Cancellation of contracts and agreements
52C. The Administrator may, at any time during the continuance of his appointment with respect to an insurer and after giving an opportunity to the persons concerned to be heard, cancel or vary (either unconditionally or subject to such conditions as he thinks fit to impose) any contract or agreement (other than a policy) between the insurer and any other person which the Administrator is satisfied is prejudicial to the interest of holders of life insurance policies.
Termination of appointment of Administrator
52D. If at any time, on a report made by the Authority in this behalf, it appears to the Central Government that the purpose of the order appointing the Administrator has been fulfilled or that for any reason it is undesirable that the order of appointment should remain in force, the Central Government may cancel the order and thereupon the Administrator shall be divested of the management of the insurance business which shall, unless otherwise directed by the Central Government, again vest in the person in whom it was vested immediately prior to the date of appointment of the Administrator.
Finality of decision appointing Administrator
52E. Any order or decision of the Central Government made in pursuance of Section 52 A or Section 52 D shad be final and shall not be called in question in any Court.
Penalty for withholding documents of property from Administrator
52 F If any director or officer of the insurer or any other person fails to deliver to the Administrator any books of account, registers, or any other documents in his custody relating to the business of the insurer the management of which has 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.
Protection of action taken under Sections 52 A to 52 D
52G No suit, prosecution or other legal proceeding shall lie against an Administrator for anything which is in good faith done or intended to be done in pursuance of Section 52 A, Section 52 B, Section 52 BB or Section 52 C.
(2) No suit or other legal proceeding shall lie against the Central Government or the Authority for any damage caused  or likely to be caused by anything which is in good faith done or intended to be done under Section 52 A, Section 52 B, or Section 52 D.
Acquisition of the Undertakings of Insurers in Certain Cases
Power of Central Government to acquire undertakings of insurers in certain cases

52H (1) If, upon receipt of a report from the Authority, the Central Government is satisfied that an insurer,­


(a) has persistently failed to comply with—
(i) any direction given to him under Section 34, Section 34 F or Section 34G,or
(ii) any order made under Sec. 34 E; or
(b) is being managed in a manner detrimental to the public interest or to the interests of his policy holders, or share holders,
and that­


  1. in the public interest, or

  2. in the interest of the policy holders or share holders of such insurer,

it is necessary to acquire the undertaking of such insurer, the Central Government may, by notified order, acquire the undertaking of such insurer (hereafter in this section and in Sections 52 I, 52 J and 52 N and in the Eighth Schedule referred to as the acquired insurer) with effect from such date as maybe specified in the order (hereinafter in this section and in Sections 52 1 and 52J and in the Eighth Schedule referred to as the appointed day):


Provided that no undertaking off an insurer shall be so acquired unless such insurer has been given a reasonable opportunity of showing cause against the proposed action
Explanation~.—For the purposes of this section and of Sections 52 1 to 52N—
(a) "notified order" means an order published in the official Gazette;
(b) "undertaking", in relation to an insurer incorporated outside India, means the undertaking of the insurer        in India,
(2) Subject to the other provisions contained in this section and in Sections 52­-I to 52M, on the appointed day, all the assets and liabilities of the undertaking of the acquired insurer shall stand transferred to, and vest in, the Central Government.
(3) The assets and liabilities of the undertaking of the acquired insurer shall be deemed to include all rights, powers, authorities and privileges and all property, whether movable or immovable, including, in particular, cash balances, reserve funds, investments, deposits and all other interests and rights in, or arising out of, such property' as may be in the possession of or held by, the acquired insurer immediately before the appointed day and all books, accounts and documents relating thereto, and shall also be deemed to include all debts, liabilities and obligations of whatever kind, then existing of the acquired insurer.
(4) Notwithstanding anything contained in sub section (2), the Central Government may, if it is satisfied that all the assets and liabilities of the undertaking of the acquired insurer should, instead of vesting in the Central Government, or continuing to so vest, vest in a corporation or company, whether established under the scheme made under Sec. 52 I or not (hereafter In this section and in Section 52 1 to 52 N and in the Eighth Schedule referred to as the acquired insurer), by order, direct that the assets and liabilities of the said undertaking, shall vest in the acquiring insurer, either on the publication of the notified order or no such other date as may be specified in this behalf in the direction.
(5) Where the undertaking of the acquired insurer vests 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 acquiring insurer.
(6) Unless otherwise expressly provided by or under this section or Sections 52 I to 52M, all contracts, deeds, bonds, agreements, powers of attorney, grants of legal representation and other instruments of whatever nature subsisting, 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 be of as full force and effect against or in favour, of the Central Government or, as the case may be, the acquiring insurer, and may be enforced or acted upon as fully and effectually as of in the place of the acquired insurer the Central Government or the acquiring insurer had been a party thereto or as if they had been issued in favour of the Central Government or the acquiring insurer, as the case may be.
(7) If, on the appointed day, any suit, appeal or other proceeding, of whatever nature, is pending by or against the acquired 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 52 I 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, as the case may be.
Power of Central Government to make scheme
52-I (1) The Central Government may make a scheme for carrying out the purposes of Sections 52 H and 52J to 52 M (both inclusive) in relation to the acquired insurer.
(2) In particular, and without prejudice to the generality of the foregoing power, the said 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 officer of the acquiring insurer;
(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;
(c) the continuance of the services of all the employees of the acquired insurer (excepting such of them as not being workmen within the meaning of the Industrial Disputes 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 section (2) of Sec. 37A so far as they may apply;

(d) the continuance of the rights of any person who, on the appointed day, is entitled to, or is in receipt of, a pension 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 provident, 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 he determined by the Central Government and the decision of the Central Government thereon shall be final;


(e) the manner of payment to the acquired insurer in full satisfaction of his claim in relation to the compensation payable in accordance with the provisions of Section 52J;
(f) the provision, if any, completing the effectual transfer to the Central Government or the acquiring insurer of any asset or liability which forms part of the undertaking of the acquired insurer in any country outside India;
(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 acquired 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 this section.
(4) Every scheme made under this section shall be published 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.
(6) The provisions of Sections 52H and 52J to 52M and of any scheme made under this section shall have effect notwithstanding anything to the contrary contained in any other provision of this Act or in any other law or any agreement, award or other instrument for the time being in force.
Compensation to be given to the acquired insurer
52J (1) 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 is determined in accordance with the principles contained in the Eighth Schedule.
(2) 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 Authority, and shall be offered by it to the acquired insurer, in full satisfaction thereof.
(3) If the amount of compensation offered in terms of sub section (2) is not acceptable to the acquired insurer, he may, before such date as may be notified 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.
(4) If before the date notified under sub section (3) the Central Government does not receive request as provided in that sub section, the amount of compensation offered under sub section (2), or where a reference has been made to the Tribunal, the amount determined by it, shall be the compensation payable under sub section (l) and shall be final and binding on all the parties concerned.
(5) Where the Central Government does not receive request as provided In sub section (3), the compensation payable in pursuance of the provisions of this section shall become due for payment on the expiry of one year from the appointed day, and where a reference has been made to the Tribunal under sub­section (3), the amount determined by the Tribunal as compensation 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.
(6) If between the appointed day and the date on which the compensation becomes due in pursuance of sub section (5), 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 compensation so determined shall be the compensation payable in pursuance of sub section (1).
(7) There shall also be paid simple interest at the rate of three per cent per annum on the amount of the compensation for the period from the appointed day to the date on which payment of the compensation becomes due.
Constitution of the Tribunal
52K (1) The Central Government may, for the purposes of Sections 52 H to 52J, constitute a tribunal which shall consist of a Chairman and two other members.
(2) The Chairman shall be 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).
(3) If, for any reason, a vacancy occurs in the office of the Chairman or any other member of the Tribunal, the Central Government may fill the vacancy by appointing another person thereto in accordance with the provisions of sub­section (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 Sec. 52J, choose one or more persons having special knowledge or experience of any relevant matter to assist it in the determination of such compensation.
Tribunal to have powers of Civil Court
52L (1) The Tribunal shall have the powers of a Civil Court, while trying a suit, under the Code of Civil Procedure, 1908 (5 of 1908), in respect of the following matters, namely:-
(a) summoning and enforcing the attendance of any person and examining him on oath;
(b) requiring the discovery and production of documents;
(c) receiving evidence on affidavits;
(d) issuing commission for the examination of witnesses 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 Authority-
(a)  to produce any books of account, or other documents which the Central Government       or the        Authority claims to be of a confidential nature;
(b)  to make any such books or documents a part of the record of the proceedings before        the        Tribunal;
(c) to give inspection of any such books or documents to any party before it and to any other       person.
(3) Any proceeding before the Tribunal shall be deemed to be a judicial proceeding within the meaning of Sections 193 and 228 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).
Procedure of the Tribunal
52M (1) The Tribunal shall have power to regulate its own procedure.
         (2) The Tribunal may hold the whole or any part of its inquiry in camera.
   (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.
Special provisions for the dissolution of acquired insurers
52N Where any acquired insurer, being a company, has in accordance with the provisions of this Act, collected and distributed any monies paid to him by the Central Government or the acquiring insurer, as the case may be, by way of compensation or otherwise, and has also complied with any directions given to him by the Central Government or the acquiring insurer, as the case may be, by way of compensation or otherwise, and has also complied with any directions given to him by the Central Government or the acquiring insurer, as the case may be, for the purpose of securing that the ownership of any property or any right is effectively transferred to the Central Government or the acquiring insurer, as the case may be, the Central Government may, on application being made to it in this behalf by such insurer, grant a certificate to be the insurer that there is no reason for the continued existence of the insurer, and upon the publication of such certificate, the insurer shall be dissolved.
Winding up
Winding up by the Court
53. (1) The Court may order the winding up in accordance with the Indian Companies Act, 1913 (7 of 1913), of any insurance company and the provisions of that Act shall, subject to the provisions of this Act apply accordingly.
(2) In additional to the grounds on which such an order may be based, the Court may order the winding up of an insurance company
(a) if with the sanction of the Court previously obtained a petition in this behalf is presented by shareholders not less in number than one tenth of the whole body of shareholders and holding not less than one tenth of the whole share capital or by not less than fifty policy holders holding policies of life insurance that have been in force for not less than three years and are of the total value of not less than fifty thousand rupees; or
(b) if the Authority, who is hereby authorised to do so, applies in this behalf to the Court on any of the following grounds, namely­
(i) that the company has failed to deposit or to keep deposited with the Reserve Bank of India the amounts required by Section 7 or Section 98;
(ii) that the company having failed to comply with any requirement of this Act has continued such failure Nor having contravened any provision of this Act has continued such contravention for a period of three months after notice of such failure Nor contravention has been conveyed to the company by the Authority.
(iii) that it appears from Many returns or statements furnished under the provisions of this Act or from the results of any investigation made there under that the company is, or is deemed to be, insolvent, or
(iv) that the continuance of the company is prejudicial to the interest if the policy holders or to the public interest generally
Unpaid up share capital
53A Notwithstanding anything contained in any other law, in ascertaining for any purpose of this Act the solvency or otherwise of an insurer no account shall be taken of any assets of the insurer consisting of unpaid up share capital.
Voluntary winding up
54. Notwithstanding anything contained in the Indian Companies Act, 1913 (7 of 1913), an insurance company shall not be wound up voluntarily except for the purpose of effecting an amalgamation or a re construction of the company, or on the ground that by reason of its liabilities it cannot continue its business.
Valuation of liabilities
55. (1) In the winding up of an insurance company or in the insolvency of any other insurer the value of the assets and the liabilities of the insurer shall be ascertained in such manner and upon such basis as the liquidator or receiver in insolvency thinks fit, subject, so far as applicable, to the rule contained in the Seventh Schedule and to any directions which may be given by the Court.
(2) For the purposes of any reduction by the Court of the amount of the contracts of any insurance company the value of the assets and liabilities of the company and all claims in respect of policies issued by it shall be ascertained in such manner and upon such basis as the Court thinks proper having regard to the rule aforesaid.
(3) The rule in the Seventh Schedule shall be of the same force and may be repealed, altered or amended as if it were a rule made in pursuance of section 246 of the Indian Companies Act, 1913 (7 of 1913) and rules may be made under that section for the purpose of carrying into effect the provisions of this Act with respect to the winding up of insurance companies.
Application of surplus assets of life insurance fund in liquidation or insolvency
56 (1) In the winding up of an insurance company and in the insolvency of any other insurer the value of the assets and the liabilities of the insurer in respect of life insurance business shall be ascertained separately from the value of any other assets or any other liabilities of the insurer and no such assets shall be applied to the discharge of any liabilities other than those in respect of life insurance business except in so far as those assets exceed the liabilities in respect of life insurance business.
(2) In the winding up of an insurance company carrying on the business of life insurance or in the insolvency of any other insurer carrying on such business where any proportion of the profits of the insurer was before the commencement of the winding up or insolvency allocated to policy holders, if, when the assets and liabilities of the insurer have been ascertained, there is found to be a surplus of assets over liabilities (hereinafter referred to as a prima facie surplus) there shall be added to the liabilities of the insurer in respect of the life insurance business an amount equal to such proportion of the prima facie surplus as is equivalent to such proportion of the profits allocated to share­holders and policy holders as was allocated to policy holders during the ten years immediately preceding the commencement of the winding up and the assets of the insurer shall be deemed to exceed his liabilities only in so far as those assets exceed those liabilities after such addition:
Provided that­-
(a) if in any case there has been no such allocation or if it appears to the Court that by reason of special circumstances it would be inequitable that the amount to be added to the liabilities of the insurer in respect of the life insurance business should be an amount equal to such proportion as aforesaid, the amount to be so added shall be such amount as the Court may direct, and
(b) for the purpose of the application of this sub section to any case where before the commencement of the winding up or insolvency a proportion of such profits as aforesaid of a branch only of the life insurance business in question has been allocated to policy holders, the value of the assets and liabilities of the insurer in respect of that branch shall be separately ascertained in like manner as the value of his assets and liabilities in respect to the life insurance business was ascertained, and the surplus so found, if any, of assets over liabilities shall, for the purpose of determining the amount to be added to :the liabilities of the insurer in respect of the life insurance business be deemed to be the prima facie surplus..­
Winding up of secondary companies
57 (l) Where the insurance business or any part of the insurance business of an insurance company has been transferred to another insurance company under an arrangement in pursuance of which the first mentioned company (in this section referred to as the secondary company) or the creditors thereof has or have claims against the company to which such transfer was made (in this section referred to as the principal company) then, if the principal company is being wound up by or under the supervision of the Court, the Court shall (subject as hereinafter mentioned) order the secondary company to be wound up in conjunction with the principal company and may, by the same or any subsequent order appoint the same person to be liquidator for the two companies and make provision for such other matters as may seem to the Court necessary with a view to the companies being wound up as if they were one company.
(2) The commencement of the winding up of the principal company shall, save as otherwise ordered by the Court, be the commencement of the winding up of the secondary company.
(3) In adjusting the rights and liabilities of the members of the several companies among themselves the Court shall have regard to the constitution of the companies and to the arrangements entered into between the companies in the same manner as the Court has regard to the rights and liabilities of different classes of contributories in the case of the winding up of a single company or as near thereto as circumstances admit. I
(4) Where any company alleged to be secondary is not in process of being wound up at the same time as the principal company to which it is alleged to be secondary, the Court shall not direct the secondary company to be wound up, unless, after hearing all objections (if any) that may be urged by or on behalf of the company against its being wound up, the Court is of opinion that the company is secondary to the principal company and that the winding up of the company in conjunction with the principal company is just and equitable.
(5) An application may be made in relation to the winding up of any secondary company in conjunction with the principal company by any creditor of, or person interested in, the principal or secondary company.
(6) Where a company stands in the relation of a principal company to one insurance company and in the relation of a secondary company to some other insurance company or where there are several insurance companies standing in the relation of secondary companies to one principal company, the court may deal with any number of such companies together or in separate groups as it thinks most expedient upon the principles laid down in this section.
Schemes for partial winding up of insurance companies
58. (1) If at any time it appears expedient that the affairs of an insurance company in respect of any class of business comprised in the undertaking of the Company should be wound up but that any other class of business comprised in the undertaking should continue to be carried on by the company or be transferred to another insurer, a scheme for such purposes may be prepared and submitted for confirmation of the Court in accordance with the provisions of this Act.
(2) Any scheme prepared under this section shall provide for the allocation and distribution of the assets and liabilities of the company between any classes of business affected (including the allocation of any surplus assets which may arise on the proposed winding up) for any future rights of every class of policy holders in respect of their policies and for the manner of winding up any of the affairs of the company which are proposed to be wound up and may contain provisions for altering the memorandum of the company with respect to its objects and such further provisions as may be expedient for giving effect to the scheme.
(3) The provisions of this Act relating to the valuation of liabilities of insurers in liquidation and insolvency and to the application of surplus assets of the life insurance fund in liquidation or insolvency shall apply to the winding up of any part of the affairs of a company in accordance with the scheme under this section in like manner as they apply in the winding up of an insurance company, and any scheme under this section may apply with the necessary modifications any of the provisions of the Indian Companies Act, 1913 (7 of 1913), relating to the winding up of companies.
(4) An order of the Court confirming a scheme under this section whereby the memorandum of a company is altered with respect to its objects shall as respects the alteration have effect as if it where an order confirmed under Sec. 12 of the Indian Companies Act, 1913 (7 of 1913), and the provisions of Sections 15 and 16 of that Act shall apply accordingly.
Return of deposits
59. In the winding up of an insurance company (otherwise than in a case to which Section 58 applies) and in the insolvency of any other insurer the liquidator or assignee as the case may be shall apply to the Court for an order for the return of the redeposit made by the company or the insurer, as the case may be, under Section 7 or Section 98 and the Court shall on such application order a return of the deposit subject to such terms and conditions as it shall direct.

Notice of policy values
60. In the winding up of an insurance company for the purposes of a cash distribution of the assets and in the insolvency of any other insurer the liquidator or assignee, as the case may be, in the case of all persons appearing by the books of the company or other insurer to be entitled to or interested in the policies granted by the company or other insurer shall ascertain the value of the liability of the company or other insurer to each such person and shall give notice of such value to those persons in such manner as the Court may direct and any person to whom notice is so given shall be bound by the value so ascertained unless he gives notice of his intention to dispute such value in such manner and within such time as may be specified by a rule or order of the Court.
Power of Court to reduce contracts of insurance
61. (1) where an insurance company is in liquidation or any other insurer is insolvent, the Court may make an order reducing the amount of the insurance contracts of the company or other insurer upon such terms and subject to such conditions as the Court thinks Just.
(2) Where a company carrying on the business of life insurance has been proved to be insolvent, the Court may if it thinks fit in place of making a winding up order reduce the amount of the insurance contracts of the company upon such terms and subject to such conditions as the Court thinks fit.
(3) Application for an order under this section may be made either by the liquidator or by or on behalf of the company or by a policy holder, or by the Authority and the Authority and any person whom the Court thinks likely to be affected shall be entitled to be heard on any such application.
Special Provisions Relating to External Companies
Power of Central Government to impose reciprocal disabilities on non-­Indian companies
62. Where by the law or practice of any country outside India in which an insurer carrying on insurance business in India is constituted, incorporated or domiciled, insurance companies incorporated in India are required as a condition of carrying on insurance business in that country to comply with any special requirement whether as to the keeping of deposits or assets in that country or otherwise which is not imposed upon insurers of that country under this Act, the Central Government shall, if satisfied of the existence of such special requirement, by notification in the official Gazette, direct that the same requirement or requirements, as similar thereto as may be, shall be imposed upon insurers of that country as a condition of carrying on the business of insurance in India.
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