Contents ths insurance act, 1938 Arrangement of Sections




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Power of Authority to remove managerial persons from office
34B. (1) Where the Authority is satisfied that in the public interest or for preventing the affairs of an insurer being conducted in a manner detrimental to the interests of the policy holders or for securing the proper management of any insurer it is necessary so to do, he may, for reasons to be recorded in writing, by order, remove from office, with effect from such date as may be specified in the order, any director or the chief executive officer, by whatever name called, of the insurer.
(2) No order under sub section (1) shall be made unless the director or chief executive officer concerned has been given a reasonable opportunity of making a representation to the Authority against the proposed order:
Provided that if, in the opinion of the Controller, any delay would be detrimental to the interests of the insurer or his policy holders, he may, at the time of giving the opportunity aforesaid or at any time thereafter, by order direct that, pending the consideration of the representation aforesaid, if any, the director or, as the case may be, chief executive officer, shall not, with effect from the date of such order,­
(a) act as such director or chief executive officer of the insurer;

(b) in any way, whether directly, indirectly, be concerned with, or take part in the management of                      the insurer.
(3) Where any order is made in respect of a director or chief executive officer of an insurer under sub section (1), he shall cease to be a director or as the case may be chief executive officer of the insurer and shall not, in any way, whether directly or indirectly, be concerned with, or take part in, the management of any insurer for such period not exceeding five years as may be specified in the order.
(4) If any person in respect of whom an order is made by the Authority under sub section (1) or under the proviso to sub section (2) contravenes the provisions of this section, he shall be punishable with fine which may extend to two hundred and fifty rupees for each day during which such contravention continues.
(5) Where an order under sub section (1) has been made, the Authority may, by order in writing, appoint a suitable person in place of the director or chief executive officer who has been removed from his office under that sub-section, with effect from such date as may be specified in the order.
(6) Any person appointed as director or chief executive officer under this section shall-­

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


(b)   not incur any obligation or liability by reason only of his being a director or chief executive officer or for anything done or omitted to be done in good faith in the execution of the duties of his office or in relation thereto.
(7) Notwithstanding anything contained in any law or in any contract, memorandum or articles of association, on the removal of a person from office under this section, that person shall not be entitled to claim any compensation for the loss or termination of office.
Power of Controller to appoint additional directors
34C. (l) If the Authority is of opinion that in the public interest or in the interests of an insurer or his policy holders it is necessary so to do, he may, from time to time, by order in writing, appoint, with effect from such date as may be specified in the order, one or more persons to hold office as additional directors of the insurer:
Provided that the number of additional directors so appointed shall not, at any time, exceed five or one third of the maximum strength fixed for the Board by the articles of association of the insurer, whichever is less.
(2) Any person appointed as additional director in pursuance of this section,—
(a)   shall hold office during the pleasure of the Authority, and subject thereto for a period not exceeding three years or such further periods not exceeding three years at a time as the Authority may specify;
(b) shall not incur any obligation or liability by reason only of his being a director or for anything done                or omitted to be done in good faith in the execution of the duties of his office or in relation thereto;                and
(c)    shall not be required to hold qualification shares of the insurer.
(3) For the purpose of reckoning any preparation of the total number of directors of the insurer, any additional director appointed under this section shall not be taken into account.
Sections 34B and 34C to override other laws
34 D. Any appointment or removal of a director or chief executive officer in pursuance of Section 34B or Section 34C shall have effect notwithstanding anything to the contrary contained in the Companies Act, 1956 (1 of 1956), or any other law for the time being in force or in any contract or any other instrument.
Further powers
34E. The Controller may,—

(a) caution or prohibit insurers generally or any insurer in particular against entering into any particular transaction or class of transactions, and generally give advice to any insurer;


(b) at any time, if he is satisfied that in the public interest or in the interests of the insurer or for preventing the affairs of the insurer being conducted in a manner detrimental to the interests of the insurer or his policy holders, it is necessary so to do, by order in writing and on such terms and conditions as may be specified therein,—
(i) require the insurer to call a meeting of his directors for the purpose of considering any  matter relating to or arising out of the affairs of the insurer;

(ii) depute one or more of his officers to watch the proceedings at any meeting of the Board of Directors of the insurer or of any committee or of any other body constituted by it; require the insurer to give an opportunity to the officers so deputed to be heard at such meetings and also require such officers to send a report of such proceedings to the Authority;

(iii) require the Board of Directors of the insurer or any committee or any other body constituted by it to give in writing to any officer specified by the Authority in this behalf at his usual address all notices of, and other communications relating to, any meeting of the Board, committee or other body constituted by it;

(iv) appoint one or more of his officers to observe the manner in which the affairs of the insurer or of his offices or branches are being conducted and make a report thereon;



(v) require the insurer to make, within such time as may be specified in the order, such changes in the management as the Authority may consider necessary.
Power of Authority to issue directions regarding re insurance treaties, etc
34F. (1) Without prejudice to the generality of the powers conferred by sub-section (1) of Section 34, the Authority may, if he is of opinion that the terms or conditions of any re insurance treaty or other re insurance contract entered into by an insurer are not favourable to the insurer or are detrimental to the public interest, he may, by order, require, the insurer to make, at the time when the renewal of such treaty or contract becomes next due, such modifications in the terms and conditions of such treaty or contract as he may specify in the order or not to renew such treaty or contract, and, if the insurer fails to comply with such order, he shall be deemed to have failed to comply with the provisions of this Act.
(2) The Authority may, if he has reason to believe that an insurer is entering into or is likely to enter into re insurance treaties or other re insurance contracts which are not favourable to the insurer or are detrimental to the public interest, he may, by order, direct that the insurer shall not enter into such re insurance treaty or other re insurance contract unless a copy of such treaty or contract has been furnished to him in advance and the terms and conditions thereof have been approved by him and if the insurer fails to comply with such order he shall be deemed to have failed to comply with the requirements of this Act.
Power of Authority to order closure of foreign branches
34G. Without prejudice to the generality of the powers conferred by sub section (1) of Section 34 the Controller may, if he has reason to believe that the working of any branch outside India of an insurer being an insurer specified in sub clause (b) of clause (9) of Section 2, is generally resulting in a loss or that the affairs of that branch are being conducted in a manner prejudicial to the interests of the policy holders or the public interest, he may, after giving an opportunity to the insurer of being heard, direct that the insurer shall cease, within such period not being less than one year, as may be specified in the order, to carry on insurance business in the country in which such branch is situated and if the insurer fails to comply with such order he shall be deemed to have failed to comply with the provisions of this Act.
Search and seizure
34H. (1) Where the Chairperson of the Authority in consequence of information in his possession, has reason to believe that—
(a ) any person who has been required under sub section (2) of Sec. 33 to produce, or cause to be produced, any books, accounts or other documents in his custody or power has omitted or failed to produce, or cause to be produced, such books, accounts or other documents, or
(b) any person to whom a requisition to produce any books, accounts or other documents as aforesaid has been or might be issued will not, or would not, produce or cause to be produced, any books, accounts or other documents which will be useful for, or relevant to an investigation under sub section (1) of Section 33 or an inspection under sub section (1A) of that section, or
(c) a contravention of any provision of this Act has been committed or is likely to be committed by an insurer, or
(d) any claim which is due to be settled by an insurer, has been or is likely to be settled at a figure higher than a reasonable amount, or
(e) any claim which is due to be settled by an insurer, has been or is likely to be rejected or settled at a figure lower than a reasonable amount,
(f) any illegal rebate or commission has been paid or is likely to be paid by an insurer, or
(g) any books, accounts, receipts, vouchers, survey reports or other documents, belonging to an insurer are likely to be tampered with, falsified or manufactured, he may authorise any subordinate officer of his, not lower in rank than an officer authorized by the Authority (hereafter referred to as the authorised officer) to­-
(i) enter and search any building or place where he has reason to suspect that such books, accounts or other documents, or any books or papers relating to any claim, rebate or commission or any receipts, vouchers, reports or other documents are kept;
(ii) break open the lock of any door, box, locker, safe, almirah or other receptacle for exercising the powers conferred by C1ause (i) where the keys thereof are not available;
(iii)     seize all or any such books, accounts or other documents found as a result of such search;
(iv)     place marks of identification on such books, accounts or other documents or make or cause to be made extracts or copies there from.
(2) The authorised officer may requisition the services of any police officer or of any officer of the Central Government, or of both, to assist him for all or any of the purposes specified in sub section (1) and it shall be the duty of every such officer to comply with such requisition.
(3) The authorised officer may, where it is not practicable to seize any such book, account or other document, specified in sub-section (1), serve an order on the person who is in immediate possession or control thereof that he shall not remove, part with or otherwise deal with it except with the previous permission of such officer and such officer may take such steps as may be necessary for ensuring compliance with this sub section.
(4) The authonsed officer may, during the course of the search or seizure, examine on oath any person who is found to be in possession or control of any books, accounts or other documents, and any statement made by such person during such examination may thereafter be used in evidence in any proceeding under this Act.
(5) The books, accounts, papers, receipts, vouchers, reports, or other documents seized under subsection (1) shall not be retained by the authorised officer for a period exceeding one hundred and eighty days from the date of the seizure unless the reasons for retaining the same recorded by him in writing and the approval of the Chairperson of the Authority for such retention is obtained:
Provided that the Chairperson of the Authority shall not authorise the retention of the books, accounts, papers, receipts, vouchers, reports, or other documents for a period exceeding thirty days after all the proceedings under this Act for which the books, accounts, papers, receipts, vouchers, or other documents are relevant are completed.
(6) The person from whose custody any books, accounts, papers, receipts, vouchers, reports, or other documents are seized under sub-section (1) may make copies thereof, or take extracts there from, in the presence of the authorised officer or any other person empowered by him in this behalf at such place and Idle as the authorised officer may appoint in this behalf.
(7) If a person legally entitled to the books, accounts, papers, receipts, vouchers, reports, or other documents seized under sub section (1) objects for any reason to the approval given by the Chairperson of the Authority under sub section (5), he may make an application to the Central Government stating therein the reasons for such objection and requesting for the return of the books, accounts, papers, receipts, vouchers, reports, or other documents.
(8) On receipt of the application under sub section (7) the Central Government may, after giving the applicant an opportunity of being heard, pass such orders as it thinks fit.
(9) The provisions of the Code of Criminal Procedure, 1898 (5 of 1898), relating to searchers and seizures shall apply, so far as may be, to every search and seizure made under sub section (1).
(10) The Central Government may, by notification in the official Gazette, make rules in relation to any search or seizure under this section; in particular, and without prejudice to the generality of the foregoing power, such rules may provide for the procedure to be followed by the authorised officer,—
(i) for obtaining ingress into such building or place to be searched where free ingress thereto is not available;
(ii) for ensuring safe custody of any books, accounts, papers, receipts, vouchers, reports, or other documents seized under this section.
Amalgamation and Transfer of Insurance Business
Amalgamation and transfer of insurance business
35. (1) No life insurance business of an insurer specified in sub-clause (a) (ii) or sub-clause (b) of C1ause (9) of Section 2 shall be transferred to any person or transferred to or amalgamated with the life insurance business of any other insurer except in accordance with a scheme prepared under this section and approved by the Authority.
(2) Any scheme prepared under this section shall set out the agreement under which the transfer or amalgamation is proposed to be effected, and shall contain such further provisions as may be necessary for giving effect to the scheme.
(3) Before an application is made to the Authority to approve any such scheme, notices of the intention to make the application together with a statement of the nature of the amalgamation or transfer, as the case may be, and of the reason there for shall, at least two months before the application is made, be sent to the Authority and certified copies four in number, of each of the following documents shall be furnished to the Authority, and other such copies shall during the two months aforesaid be kept open for the inspection of the members and policy holders at the principal and branch offices and chief agencies of the insurers concerned, namely:-
(a) a draft of the agreement or deed under which it is proposed to effect the amalgamation or transfer;
(b) balance sheets in respect of the insurance business of each of the insurers concerned in such amalgamation of transfer, prepared in the form set forth in Part II of the First Schedule and in accordance with the regulations contained in Part I of the Schedule;
(c) actuarial reports and abstracts in respect of the life insurance business of each of the insurers so concerned, prepared in conformity with the requirements of Part II of the Fourth and Fifth Schedules and in accordance with the regulations contained in Part I of the Schedule concerned ;
(d) a report on the proposed amalgamation or transfer, prepared by an independent actuary who has never been, professionally connected; with any of the parties concerned in the amalgamation or transfer at any time in the five years preceding the date on which he signs his report;
(e) any other reports on which the scheme of amalgamation or transfer was founded.
The balance sheets, reports and abstracts referred to in Clauses (b), (c) and (d) shall all be prepared as at the date at which the amalgamation or transfer if approved by the Authority is to take effect, which date shall not be more than twelve months before the date on which the application to the Authority is made under this section:
Provided that if the Authority so directs in the case of any particular insurer there may be substituted respectively for the balance sheet, report and abstract referred to in Clauses. (b) and (c) prepared in accordance with this sub section certified copies of the last balance sheet and last report and abstract prepared in accordance with Sections 11 and 13 of this Act or Sections 7 and 8 of the Indian Life Assurance Companies Act, 1912 (6 of 1912), if that balance sheet is prepared as at a date not more than twelve months, and that report and abstract as at a date not more than five years, before the date on which the application to the Authority is made under this section.
Sanction of amalgamation and transfer by Authority.
36. (1) When any application, such as, is referred to in sub section (3) of Section 35 is made to the Authority, the Authority shall cause, if for special reasons he so directs, notice of the application to be sent to every person resident in India who is the holder of a life policy of any insurer concerned and shall cause a statement of the nature and terms of the amalgamation or transfer, as the case may be, to be published in such manner and for such period as he may direct, and, after hearing the directors and such policy holders as apply to be heard and other persons whom he considers entitled to be heard, may approve the arrangement, he is satisfied no sufficient objection to the arrangement has been established 4 lend shall make such consequential orders as are necessary to give effect to the arrangement, including orders as to the disposal of any deposit made under Section 7 or Section 98:
Provided that­
(a ) no part of the deposit made by any party to the amalgamation or transfer shall be returned except where, after effect is given to the arrangement, the whole of the deposit to be made by the insurer carrying on the amalgamated business or the person to whom the business is transferred is completed,
(b) only so much shall be returned as is no longer required to complete the deposit last mentioned in C1ause (a), and
(c) while the deposit last mentioned in Clause (a) remains uncompleted, on accession, resulting from the arrangement, to the amount already deposited by the insurer carrying on the amalgamated business or the person to whom the business is transferred shall be appropriated as payment or part payment of any instalment of deposit subsequently due from him under Section 7 or Section 98.
(2) If the arrangement involves a reduction of the amount of the insurance and other contracts of the transferor insurer or of any or all of the insurers concerned in the amalgamation, the Authority may approve the arrangement, reducing the amount of such contracts upon such terms and subject to such conditions as he may think proper, and the reduction of contracts as approved by the Authority shall be valid end binding on all the parties concerned.
Statements required after amalgamation and transfer
37. Where an amalgamation takes place between any two or more insurers, or where any business of an insurer is transferred, whether in accordance with a scheme confirmed by the Authority or otherwise, the insurer carrying on the amalgamated business or the person to whom the business is transferred, as the case may be, shall, within three months from the date of the completion of the amalgamation or transfer, furnish in duplicate to the Authority-
(a) a certified copy of the scheme, agreement or deed under which the amalgamation or transfer has been effected, and
(b) a declaration signed by every party concerned or in the case of a company by the chairman and the principal officer that to the best of their belief every payment made or to be made to any person whatsoever on account of the amalgamation or transfer is therein fully set forth and that no other payments beyond those set forth have been made or are to be made either in money, policies, bonds, valuable securities or other property by or with the knowledge of any parties to the amalgamation or transfer, and
(c) where the amalgamation or transfer has not been made in accordance with a scheme sanctioned by the Authority under Section 36-
(i) balance sheet in respect of the insurance business of each of the insurers concerned in such amalgamation or transfer, prepared in the Form set forth in Part II of the First Schedule and in accordance with the regulations contained in Part I of that Schedule, and
(ii) certified copies of any other reports on which the scheme of amalgamation or transfer was founded.
Power of the Authority to prepare scheme of Amalgamation
(37A). (1) If the Authority is satisfied that-
(i) in the public interest; or

(ii) in the interests of the policy holders; or

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

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

it is necessary so to do, he may prepare a scheme for the amalgamation of that insurer with any other insurer (hereinafter referred to in this section as the transferee insurer):
Provided that no such scheme shall be prepared unless the other insurer has given his written consent to the proposal for such amalgamation
(2) The scheme aforesaid may contain provisions for all or any of the following matters, namely:
(a) the constitution, name and registered office, the capital, assets, powers, rights, interests, authorities and privileges, and the liabilities, duties and obligations of the transferee insurer;
(b)the transfer to the transferee insurer the business, properties, assets and liabilities of the insurer on such terms and conditions as may be specified in the scheme;
(c) any change in the Board of Directors, or the appointment of a new Board of directors of the transferee insurer and the authority by whom, the manner in which, and the other terms and conditions on which such change or appointment shall be made, and in the case of appointment of a new Board of Director or of any director, the period for which such appointment shall be made;
(d) the alteration of the memorandum and articles of association of the transferee insurer for the purpose of altering the capital thereof or for such other purposes as may be necessary to give effect to the amalgamation;
(e} subject to the provisions of the scheme, the continuation by or against the transferee insurer, of any actions or proceedings pending against the insurer;
(f) the reduction of the interest or rights which the shareholders, policy holders and other creditors have in or against the insurer before the amalgamation to such extent as the Authority considers necessary in the public interest or in the interests of the shareholders, policy holders and other creditors or for the maintenance of the business of the insurer;
(g) the payment in cash or otherwise to policy holders, and other creditors in full satisfaction of their claim,­-


  1. in respect of their interest or rights in or against the insurer before the amalgamation; or

  2. where their interest or rights aforesaid in or against the insurer has or have been reduced under clause (f), in respect of such interest or rights as so reduced;

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


(i) in respect of their interest in shares in the insurer before the amalgamation; or
(ii) where such interest has been reduced under clause (f) in respect of their interest in shares as so reduced;
(i) the continuance of their services of all the employees of the insurer (excepting such of them as not being workmen within the meaning of the Industrial Disputes Act, 1947 (14 of 1947), are specifically mentioned in the scheme) in the transferee insurer at the same remuneration and on the same terms and conditions of service, which they were getting or, as the case may be, which they were being governed, immediately before the date of the amalgamation:
     Provided that the scheme shall contain a provision that the transferee insurer shall pay or grant not later than the expiry of the period of three years, front the date of the amalgamation, to the said employees the same remuneration and the same terms and conditions of service as are applicable to the other employees of corresponding rank on status of the transferee insurer subject to the qualifications and experience of the said employees being the same as or equivalent to those of such other employees of the transferee insurer:
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