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LIFE INSURANCE (EMERGENCY PROVISIONS) ACT, 1956 |
ACTS GOVERNING LAW OF INSURANCE The law of insurance in India is at present governed by the following Acts:
1. The Insurance Act.
2. Life Insurance Corporation of India Act.
3. The Marine Insurance Act.
Insurance Act
It deals with general insurance. The following are the important principles that govern general insurance:
1. Existence of an insurable interest: The most important aspect of insurance is that a person who takes a policy of insurance must have an insurable interest. For example, a person who wishes to get a car insured must have some kind of stake/interest in the car. The insurable interest has to be both at the time of taking the policy and at the time of making the claim under the policy.
2. Insurance is a contract of indemnity: In case of insurance, the insurance company offers to indemnify the assured (that is the person benefiting by the policy) in case of the happening of the contingency/contingencies covered by the insurance policy.
3. The Principle of Uberrima Fides: This is the principle of utmost good faith, on which all contracts of insurance are based. This principle requires that at the time of taking an insurance policy, the person shall disclose all information concerning the insurable interest. For example, in case of life insurance, in case the person is suffering from any disease, it is his/her duty to divulge this to the insurance company. In case this principle is not adhered to, it could result in the assured having to forfeit all the benefits available to him/her under the policy of insurance. Therefore in case there is a change in the nature of the subject matter, the assured shall have to disclose this to the insurance company.
4. Proximate cause: This principle is applicable mainly in case of general and marine insurance. This principle stipulates that the main cause of loss/damage should be covered by the insurance policy and should have some proximity with reasons of loss stipulated in the insurance policy.
A note on the contract of insurance
The contract of insurance is usually entered into through an agent. The initial deposit of premium is alone made through an agent. Under the law, an insurance agent is required to obtain a licence and only then can s/he act as an insurance agent. The other deposits are all made directly to the insurance company itself. Policy papers are conclusive evidence of an insurance contract.
Can the amount paid as premium be claimed back?
The amount paid as premium cannot usually be claimed back, unless the contract specially provides for such a scheme. However, in case an interest has not arisen in the subject matter of insurance, then the contract is void, and in such a case the consideration can be claimed back. For example, if X pays premium to insure an article, which s/he still has not purchased, then in case X decides not to purchase such an article, then the contract of insurance becomes void, and the premium can be returned back.
Renewal of policy:
Renewal of an insurance policy can happen in the following cases:
· By mutual consent.
· At the option of the assured (this is a very rare case).
· It can be automatically renewed unless the parties express a contrary intention.
However, it goes without saying that the principle of utmost good faith will apply. Therefore, even at the time of renewal, the parties will have to disclose all material facts to each other.
Marine Insurance:
This is an agreement where the insurer agrees to indemnify marine losses which are incidental to marine adventure. Under marine insurance, profits as well as liability arising due to marine adventure can be insured against. Therefore, in case shipment of goods is delayed, the person can claim the extra amount, which s/he may have received as profit if the goods had arrived on time. The term “profit” also includes freight charges, which the ship-owner would have received if the goods had reached on time.
Recent developments in the field of insurance
The major development in the field of insurance was that of throwing open the insurance sector to foreign companies. Several decisions have taken place in this regard, including the passing of the Insurance Regulatory Authority Bill.
The finance committee on insurance had capped equity in joint ventures at 26%. The Insurance Regulatory Authority Bill provides for a 10-member Insurance Regulatory Authority. The committee had suggested that the regulatory authority be given the opportunity to express its views on any change in the rules governing foreign companies that sell insurance in India.
The committee recommended that health insurance be brought under the domain of life business, and legislation amended accordingly.
The committee recommended that a time limit should be set for the regulatory authority to issue licences after it receives applications.
The Insurance Regulatory and Development Authority Bill 1999 provides for the establishment of an authority to protect the interests of holders of insurance policies, to regulate, promote and ensure orderly growth of the insurance industry. It also provides for the amendment of the Insurance Act, 1938, the Life Insurance Corporation of India Act 1956 and the General Insurance Business (Nationalisation) Act 1972.
Tariff Advisory panel to be delinked from GIC
The government has decided to delink the Tariff Advisory Committee from General Insurance Corporation (GIC) and establish it as an independent entity under the Insurance Regulatory Authority (IRA). This is another step toward the deregulation of the insurance sector, as tariffs for general insurance products will now be fixed by an independent entity, i.e. the Tariff Advisory Committee without GIC’s influence.
It is also a step toward the government’s plan to end GIC’s monopoly and allow private competition in general insurance. The only major one left is the one to issue licences to companies for operations. This is expected to be transferred to the regulator only after it receives statutory status when the IRA Bill is passed in Parliament.
The Controller of Insurance’s powers to examine audit, reinsurance treaties and contracts, monitor management expenses, and caution the public against dubious insurance policies was transferred to the IRA.
This was done through the transfer of Sections 34, 34 E, 34 H and 101C of the Indian Insurance Act, 1938, to the Insurance Regulatory Authority.
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Veena Krishnan |
THE LIFE INSURANCE (EMERGENCY PROVISIONS) ACT, 1956 ACT NO.9 OF 1956
An Act provide for the taking over, in the public interest, of the management of life insurance business pending nationalisation thereof.
[21st March, 1956]
Be it enacted by Parliament in the Seventh Year of the Republic of India as follows:—
1.Short title.- This Act may be called the Life Insurance (Emergency Provisions) Act, 1956.
2.Definitions.- In this Act, unless the context otherwise requires,—
(1) “appointed day” means the 19th day of January, 1956;
(2) “controlled business” means—
(i) in the case of an insurer specified in sub-clause (a) (ii) or sub-clause (b) of clause (9) of section 2 of the Insurance Act and carrying on life insurance business—
(a) all his business, if he carries on no other class of insurance business;
(b) all his business appertaining to his life insurance business, if he carries on some other class of insurance business also;
(c) all his business, if his certificate of registration under the Insurance Act in respect of general insurance business stands wholly cancelled for a period or more than six months on the appointed day;
(ii) in the case of any other insurer specified in clause (9) of section 2 of the Insurance Act and carrying on life insurance business—
(a) all his business in India, if he carries on no other class of insurance business in India;
(b) all the business appertaining to his life insurance business in India, if he carries on some other class of insurance business also in India;
(c) all his business in India, if his certificate of registration under the Insurance Act in respect of general insurance business in India stands wholly cancelled for a period of more than six months on the appointed day;
(iii) in the case of a provident society, as defined in section 65 of the Insurance Act, all its business;
Explanation.—An insurer is said to carry on no class of insurance business other than life insurance business if, in addition to life insurance business he carries on only capital redemption business or annuity certain business or both; and the expression “business appertaining to his life insurance business” shall be construed accordingly;
(3) “Custodian” means the person appointed under section 4 to take over the management of any controlled business;
(4) “Insurance Act” means the Insurance Act, 1938 (4 of 1938);
(5) “insurer” means an insurer as defined in the Insurance Act, who carries on life insurance business in India, and includes a provident society as defined in section 65 of the Insurance Act;
(6) “notified order” means an order notified in the Official Gazette”
(7) all other words and expressions used herein but not defined, and defined in the Insurance Act, shall have the meanings respectively assigned to them in that Act.
3.Management of controlled business to vest in Government on commencement of Act.- (1) On and from the appointed day, the management of the controlled business of all insurers shall vest in the Central Government, and, pending the appointment of a Custodian for the controlled business by any insurer, the persons in charge of the management of such business immediately before the appointed day shall, on any from the appointed day, be in charge of the management of the business for and on behalf of the Central Government; and the controlled business of the insurer shall be carried on by them subject to the provisions contained in sub-sections (3) and (5) and to such further directions, if any, as the Central Government may give to them by notice addressed and sent to the principal officer of the insurer.
(2) Any contract, whether express or implied, providing for the management of the controlled business of an insurer made before the appointed any between the insurer and any person in charge of the management of such business immediately before the appointed day shall be deemed to have terminated on the appointed day.
(3)No insurer shall, without the previous approval of the person specified by the Central Government in this behalf in respect of that insurer (hereinafter referred to as the authorised person),—
(a) make any payment or grant any loan in respect of a policy of life insurance otherwise than in accordance with the normal practice observed by him in respect of such matters immediately before the appointed day;
(b) incur any expenditure from the assets appertaining to the controlled business otherwise than for the purpose of making routine payments of salaries or commissions to employees, insurance agents, special agents or chief agents or for the purpose of meeting the routine day to day expenditure;
(c) transfer, or otherwise dispose of any such assets or create any charge, hypothecation, lien or other encumbrance thereon;
(d) invest in any manner any moneys forming part of such assets;
(e) acquire any immovable property out of any moneys forming part of such assets;
(f) enter into any contract of service or agency, whether expressly or by implication, for purposes connected wholly or partly with the controlled business or vary the terms and conditions of any such contract subsisting on the appointed day;
(g) enter into any other transaction relating to controlled business other than a contract relating to the issue of controlled policy of life insurance or vary the terms and conditions of any agreement relating to any such transaction subsisting at the commencement of this Act.
(4) The approval of the authorised person may be given either generally in relation to certain classes of transactions of the insurer or specially in relation to any of his transactions.
(5) Every insurer shall deposit all securities and documents of title to any assets ascertaining to the controlled business in any Scheduled Bank in which the insurer had an account immediately before the appointed day or in any branch of the State Bank in the place where the head office or the principal office of the insurer is situated or, where there is no branch of the State Bank in such place, the nearest branch of the State Bank; and no such security or documents shall be withdrawn from the Scheduled Bank or the State Bank, as the case may be, except with the permission of the authorised person;
Provided that nothing in this contained in this sub-section shall apply to any security or document of title kept with approved trustees by reason of the provisions contained in sub-section (6) of section 27 of the Insurance Act, or kept in trust with an Official Trustee in pursuance of the articles of association of an insurer unless the Central Government, by notified order, otherwise directs.
Explanation.—In this sub-section,—
(a) “Scheduled Bank’ means a bank included for the time being in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934);
(b) ‘State Bank’ means the State Bank of India constituted under the State Bank of India Act, 1955 (23 of 1955).
(6) Every insurer shall deliver forthwith at the place and to the person specified in this behalf by the Central Government in respect of that insurer the following documents, namely:—
(i) the minutes book or other book in India containing all resolutions up to the appointed day of the persons in charge of the management of the controlled business before the appointed day;
(ii) the current cheque books relating to the controlled business which are at the head office or the principal office of the insurer;
(iii)all registers or other books containing particulars relating to the investment of any moneys appertaining to the controlled business including investments on mortgaged properties and all loans granted and advances made otherwise than on policies;
(iv) all brokers’ notes or certificates in the possession of the insurer in respect of any orders for the investment of any moneys appertaining to the controlled business:
Provided that if any document specified in this sub-section is relevant for the purpose of any business other than the controlled business carried on by the insurer, the person specified in the notified order shall be bound to return it to the persons in charge of the management of such officer business with the least possible delay, but shall have power to place identification marks on such document or to take extracts or copies therefrom.
(7) Without prejudice to the generality of the powers conferred by sub-section (1) and to the provisions contained in sub-section (3), (5) and (6), any directions issued under sub-section (1) may require the persons in charge of the management of the controlled business of an insurer under this Act to furnish to the Central Government or to the authorised person such returns, statements and other information relating to the controlled business as may be mentioned in the direction.
(8) The persons in charge of the management of the controlled business of an insurer under this Act shall be entitled to such remuneration, whether by way of allowance or salary as the Central Government may fix; any such person may, by giving a month’s notice in writing to the Central Government of his intention so to do, relinquish charge of the management of the controlled business.
4.Power of Central Government to appoint Custodians to take over management of controlled business.- (1) The Central Government may, as soon as it is convenient administratively so to do, appoint any person as Custodian for the purpose of taking over the management of the Controlled business of an insurer.
(2) On the appointment of a Custodian under sub-section (1), all persons in charge of the management of the controlled business of the insurer for and on behalf of the Central Government immediately before such appointment shall cease to be in charge of such management and shall be bound to deliver to the Custodian all books of account, registers or other documents in their custody relating to the controlled business of the insurer.
(3) Nothing contained in sub-sections (3), (5) and (6) of section 3 shall apply to any insurer the management of whose controlled business has been taken over by the custodian, but the Central Government may issue such directions to the Custodian as to his powers and duties as it deems desirable in the Circumstances of the case, and the Custodian may apply to the Central Government at any time for instructions as to the manner in which he shall conduct the management of the controlled business of the insurer or in relation to any matter arising in the course of such management.
(4) The Custodian shall receive such remuneration as the Central Government may fix; and the Central Government may at any time cancel the appointment of any persons as Custodian and appoint some other person in his stead.
5.Refund of deposits made under Insurance Act.- The Central Government may, by order, direct that the whole or any part of the deposit appertaining to his controlled business made by an insurer under section 7, section 73 or section 98 of the Insurance Act, as the case may be, shall be returned to the Custodian who has been appointed to take over the management of the controlled business of the insurer, and every such order shall have effect notwithstanding anything contained in the Insurance Act.
6.Powers of custodian to institute proceedings, etc.- The Custodian may, in relation to the controlled business of any insurer the management of which has been taken over by him, exercise all or any of the powers which the Controller of Insurance or an Administrator appointed under section 52A of the Insurance Act may exercise under section 52BB, section 106 or section 107 of that Act.
7.Compensation for management of controlled business vesting in Central Government.- The amount of compensation payable in respect of the vesting in the Central Government of the management of the controlled business thereof remains vested in the Central Government, be a sum which is equivalent to one-twelfth of the annual average of the share of the surplus allocated to shareholders as disclosed in the abstracts prepared in accordance with Part II of the Fourth Schedule to the Insurance Act in respect of the Last two actuarial investigations relating to the controlled business as at dates earlier than the first day of January, 1956:
Provided that, if in respect of the controlled business of an insurer no such surplus as is referred to in this sub-section has been allocated to shareholders either because there are no shareholders or for any other person, the compensation shall be payable at the rate of one rupee per month for every two thousand rupees or part thereof the premium income of the insurer relating to his controlled business during the year 1954.
8.Compensation, how to be paid and distributed.- (1) The amount of compensation payable under section 7 shall in the first instance be payable out of the seven and a half per cent.of the surplus referred to in sub-section (1) of section 49 of the Insurance Act earned by the insurer during the period the management of the controlled business of the insurer vests in the Central Government, and where such compensation or any part thereof cannot be so paid out the Central Government shall make due provision for the payment of such compensation or part thereof as the case may be.
(2) The Compensation payable under section 7 shall be distributed among the persons entitled by the Central Government in such manner as may be prescribed by rules made in this behalf:
Provided that in the case of an insurer who is a company the Central Government shall have due regard to the wishes of the members expressed by them at any general meeting convened for the purpose.
9.Penalties.- If any person—
(a) fails to deliver to the custodian and books of account, registers or any other documents in his custody relating to the controlled business of an insurer in respect of the management of which the Custodian has been appointed; or
(b) retains any property of such insurer appertaining to the controlled business of the insurer; or
(c) fails to comply with the provisions contained in sub-section (3) or sub-section (5) or sub-section (6) of section 3; or
(d) fails to comply with any directions issued under sub-section (1) or sub-section (7) of section 3;
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.
10.Insurer not to be wound up by court.- No proceeding for the winding up of an insurer the management of whose controlled business has vested in the Central Government under this Act or for the appointment of a Receiver in respect of such business shall lie in any Court.
11.Exclusion of time of Act for computing period of limitation.- In computing the period of limitation prescribed by any law for the time being in force for any suit or application against any person by an insurer in respect of any matter arising out of his controlled business, the time during which the Life Insurance (Emergency Provisions) Ordinance, 1956, and this Act have been in force shall be excluded.
12.Effect of Act on other laws.- The provisions of this Act shall have effect notwithstanding anything inconsistent therewith in any other law or in any instrument having effect by virtue of any other law.
13.Delegation of powers.- The Central Government may, by notified order, direct that all or any of the powers exercisable by it under this Act may also be exercised by any such person as may be specified in the order.
14.Protection of action taken under Act.- (1) No suit, prosecution or other legal proceeding shall lie against any Custodian or authorised person in respect of anything which is in good faith done or intended to be done under this Act.
(2) No suit or other legal proceeding shall lie against the Central Government or any Custodian or authorised person for any damage caused or likely to be caused by anything which is in good faith done or intended to be done under this Act.
15.Prevention of disqualification for membership Parliament.- It is hereby declared that no person who holds any office of profit under an insurer the management of whose controlled business has vested in the Central Government under this Act shall be disqualified, or ever to have been disqualified, for being chosen as, or for being, a member of either House of Parliament.
16.Exemptions.- Nothing contained in this Act shall apply to—
(a) any insurer in respect of the management of whose affairs an Administrator has been appointed under section 52A of the Insurance Act;
(b) any insurer whose business is being voluntarily wound up or is being wound up under the orders of a court;
(c) any insurer to whom the Insurance Act does not apply by reason of the provisions contained in section 2E thereof;
(d) any approved superannuation fund as defined in clause (a) of section 58N of the Indian Income-tax Act, 1922 (11 of 1922);
(e) any insurance business carried on by the government.
17.Power to make rules.- (1) The Central Government may, by notified order, make rules to carry out the purposes of this Act.
(2) In particular, and without prejudice to the generality of the forgoing power, rules made under sub-section (1) may provide for—
(a) the form and manner in which books of accounts appertaining to controlled business shall be maintained by insurers;
(b) the manner in which any compensation payable under this Act may be paid to the persons entitled thereto;
(c) the circumstances in which the remuneration payable to persons in charge of the management of the controlled business of an insurer under this Act or to Custodians shall be met by the Central Government, whether wholly or in part.
18.Repeal of Ordinance I of 1956 and savings.- (1) The Life Insurance (Emergency Provisions) Ordinance, 1956, is hereby repealed.
(2) Anything done or any action taken (including any direction given and order and rules made) under the said Ordinance shall be deemed to have been done or taken under this Act as if this Act were in force on the day on which such thing was done or action was taken.
URL:http://www.indianrailways.gov.in/RPF/Files/law/BareActs/lifeinsurance1956.htm#a