27C. (1) Without prejudice to anything contained in sections 27, 27A and 27B, the Authority may, in the interests of the policy-holders, specify by the regulations made by it, the time, manner and other conditions of investment of assets to be held by an insurer for the purposes of this Act.
(2) The Authority may give specific directions for the time, manner and other conditions subject to which the funds of policy-holders shall be invested in the infrastructure and social sector as may be specified by regulations made by the Authority and such regulations shall apply uniformly to all the insurers carrying on the business of life insurance, general insurance, or re-insurance in India on or after the commencement of the Insurance Regulatory and Development Authority Act, 1999.
(3) The Authority may, after taking into account the nature of business and to protect the interests of the policy-holders, issue to an insurer the directions relating to the time, manner and other conditions of investment of assets to be held by him:
Provided that no direction under this sub-section shall be issued unless the insurer concerned has been given a reasonable opportunity of being heard
Statement of investment of assets
28. (1) Every insurer carrying on the business of life insurance shall every year, within thirty-one days from the beginning of the year submit to the Authority a return showing as at the 31st day of December of the preceding year the assets held invested in accordance with Section 27 and all other particulars necessary to establish that the requirements of that section have been complied with, and such return shall be certified by a principal officer of the insurer.
(2) Every such insurer shall also furnish, within fifteen days from the last day of March, June, and September, a return certified as aforesaid showing as at the end of each of the said months the assets held invested in accordance with Sec. 27.
(2A) In respect of the Government securities and other approved securities invested and kept invested in accordance with sub-section (1) of Section 27 an insurer shall submit along with the returns referred to in sub sections (1) and (2) a certificate, where such assets are in the custody of a banking company, from that company, and in any other case from the chairman, two directors and a principal officer, if the insurer is a company, or otherwise from a principal officer of the insurer to the effect that the securities are held free of any encumbrance, charge, hypothecation, or lien, and every such certificate after the first shall also state that since the date of the certificate immediately preceding all the securities have been so held.
(2B) In respect of the assets forming the controlled fund within the meaning of Section 27A, and which do not form part of the Government securities and approved securities invested and kept invested in accordance with Section 27, an insurer shall submit, along with the returns referred to in sub sections (1) and (2), a statement, where such assets are in the custody of a banking company, from that company, and, in any other case, from the chairman, two directors and a principal officer if the insurer is a company, or from a principal officer of the insurer if the insurer is not a company, specifying the assets, which are subjected to any charge and certifying that the assets, which are held free of any encumbrance, charge, hypothecation, or lien, and every such statement after the first shall also specify the charges created in respect of any of those assets since the date of the statement immediately preceding, and, if any such charges have been liquidated, the date on which they were so liquidated.
(3) The Authority may, at his discretion require any insurer to whom sub-section (1) applies to submit before the 1st day of August in each or any year a return of the nature referred to in subsection (1), certified as required by mat sub section and prepared as at the 30th day of June.
(4) In the case of an insurer having his principal place of business or domicile outside India, the Authority may, on application made by the insurer, extend the periods of fifteen and thirty one days mentioned in the foregoing sub sections to thirty days and sixty days, respectively.
(5) The Authority shall be entitled at any time to take such steps as he may consider necessary for the inspection or verification of the assets invested in compliance with Section 27 or for the purpose of securing the particulars necessary to establish that the requirements of that section have been complied with; the insurer shall comply with any requisition made in this behalf by the Authority, and if he fails to do so within two months from the receipt of the requisition he shall be deemed to have made default in complying with the requirements of this section.
Return of investments relating to controlled fund and changes therein.
28A. (1) Every insurer carrying on life insurance business, shall every year, within thirty one days from the beginning of the year submit to the Authority a return in the form specified by the regulations made by the Authority showing as at the 31st day of March of the preceding year, the investments made out of the controlled fund referred to in Section 27A, and every such return shall be certified by a principal officer of the insurer.
(2) Every insurer referred to in sub section (1) shall also submit to the Authority a return in the form specified by the regulations made by the Authority showing all the changes that occurred in the investments aforesaid during each of the quarters ending on the last day of March, June, September and December within thirty one days from the close of the quarter to which it relates, and every such return shall be certified by a principal officer of the insurers.
Returns of investments relating to the assets and changes therein
28B. (1) Every insurer carrying on general insurance business, shall, every year, within thirty one days from the beginning of the year, submit to the Authority a return in the form specified by the regulations made by the Authority form showing as at the 31st day of March of the preceding year the investments made out of his assets referred to in Section 27B, and every such return shall be certified by a principal officer of the insurer.
(2) Every insurer referred to in sub section (1) shall also submit to the Authority a return in the form specified by the regulations made by the Authority showing all the changes that occurred in the investment aforesaid during each of the quarters ending on the last day of March, June, September and December within thirty one days from the close of the quarter to which it relates, and every such return shall be certified by a principal officer of the insurer.
(3) Every insurer shall submit, along with the returns referred to in sub¬-sections (1) and (2), a statement, where any part of the assets are in the custody of a banking company, from that company, and in any other case, from the chairman, two directors and a principal officer, if the insurer is a company, or from a principal officer of the insurer, if the insurer, is not a company, specifying the assets, which are subject to charge and certifying that the other assets are held free of any encumbrance, charge, hypothecation or lien, and every such statement after the first shall also specify the charges created in respect of any of those assets since the date of the statement immediately preceding, and, if any such charges have been liquidated, the date on which they were so liquidated.
Prohibition of loans
29. (1) No insurer shall grant loans or temporary advances either on hypothecation of property or on personal security or otherwise, except loans on life policies issued by him within their surrender value, to any director, manager, managing agent, actuary, auditor or officer of the insurer if a company, or where the insurer is a firm, to any partner therein, or to any other company or firm in which any such director, manager, managing agent, actuary, officer or partner holds the position of a director, manager, managing agent' actuary, officer or partner:
Provided that nothing contained in this sub section shall apply to loans made by an insurer to a banking company:
Provided further that nothing in this section shall prohibit a company from granting such loans or advances to subsidiary company or to any other company of which the company granting the loan or advance is a subsidiary company eland where any such loan or advance is made out of any life insurance fund the matter shall be reported within thirty days of the making of such loan or advance to the Authority.
(2) The provisions of Section 86D of the Indian Companies Act, 1913 (7 of 1913), shall not apply to a loan granted to a director of an insurer being a company, if the loan is one granted on the security of a policy on which the insurer bears the risk and the policy was issued to the director on his own life, and the loan is within the surrender value of the policy.
(3) Subject to the provisions of sub section (1), no insurer carrying on life insurance business shall grant—
(a) any loans or temporary advances either on hypothecation of property or on personal security or otherwise, except such loans as are specified in sub section (1) of Section 27A;
(b) temporary advances to any chief, special or insurance agent to facilitate the carrying out of his functions as such except in cases where such advances do not exceed in the aggregate—
(i) in the case of a chief agent, the overriding renewal commission earned by him during the year immediately preceding,
(ii) in the case of special agent, the renewal commission earned by him during the year immediately preceding,
(iii) in the case of an insurance agent, the renewal commission earned by him during the year immediately preceding.
Explanation. The temporary advance referred to in clause (b) of this sub¬-section shall also be admissible in the case of any special agent or insurance agent newly appointed, but such advance—
(a) shall be repayable within two years from the date on which such special agent or insurance agent was first appointed, and
(b) shall not exceed, in the case of the special agent, five hundred rupees, and, in the case of the insurance agent, one hundred rupees,
and the total amount of all advances so made shall not exceed ten thousand rupees in the case of any insurer whose business in force is one crore of rupees or more and five thousand rupees in any other case.
(4) Every loan or advance existing at the commencement of the Insurance (Amendment) Act, 1950 (47 of 1950), which contravenes the provisions of sub¬section (3) shall be notified by the insurer to the Authority within thirty days of such commencement and shall notwithstanding any contract to the contrary be repaid within one year from commencement.
(5) Where any event occurs giving rise to circumstances, the existence of which at the time of the grant of any subsisting loan or advance would have made such grant a contravention of this section, such loan or advance shall, notwithstanding anything in any contract to the contrary, be repaid within three months from the occurrence of such event.
(6) In case of default in complying with the provisions of sub section (4) or subsection (5) the director, manager, auditor, actuary, officer or partner, or the chief, special or insurance agent concerned shall, without prejudice to any other penalty which he may incur, cease to hold office under, or to act for, the insurer granting the loan on the expiry of the said period of one year or three months, as the case may be.
Liability of directors, etc. for loss due to contraventions of Sections 27, 27¬A and 29
30. If by reason of a contravention of any of the provisions of Section 27, Section 27A, Section 27B or Section 29, any loss is sustained by the insurer or by the policy holders, every director, manager, managing agent, officer or partner who is knowingly a party to such contravention shall, without prejudice to any other penalty to which he may be liable under this Act, be jointly and severally liable to make goal the amount of such loss.
Assets of insurer how to be kept
31. (1) None of the assets in India of any insurer shall, except in the case of deposits made with the Reserve Bank of India under Section 7 or Section 98 or in so far as assets are required to be vested in trustees by sub-section (4) of Section 27, be kept otherwise than in the name of a public officer approved by the Authority, or in the corporate name of the undertaking, if a company, or in the name of the partners, if a firm, or in the name of the proprietor, if an individual.
(2) Nothing contained in this section shall be deemed to prohibit the endorsement in favour of a banking company of any security or other document solely for the purpose of collection or for realization of interest, bonus or dividend.
Provisions relating to managers, etc
(31)A. (1 ) Notwithstanding anything to the contrary contained in the Indian Companies Act, 1913 (7 of 1913), or in the articles of association of the insurer, if a company, or in any contract or agreement, no insurer shall after expiry of one year from the commencement of the Insurance (Amendment) Act, 1950 (47 of 1950),
(a) be managed by a company or a firm, or
(b) be directed or managed by, or employ as manager, or officer or in any capacity, any person whose remuneration or any part thereof takes the form of commission or bonus or a share in the valuation surplus in respect of the life insurance business of the insurer, or
(c) be directed or managed by, or employ as manager or officer or in any capacity, any person whose remuneration or any part thereof takes the form of commission or bonus in respect of the general insurance business of the insurer:
Provided that nothing in this sub section shall be deemed to prohibit-¬
(i) the payment of commission to a chief agent, special agent or an insurance agent, in respect of life insurance business procured by or through him;
(ii) the payment of commission to a principal agent or an insurance agent in respect of general insurance business procured by or through him;
(iii) the payment of commission, with the approval of the Central Government and for such period as it may determine, to a person not being an officer of an insurer who was, on the 1st November, 1944, employing on behalf of an insurer, chief agents or special agents and continues so to do in respect of insurance business procured by or through him;
(iv) the employment of any individual in a clerical or other subordinate capacity who, as an insurance agent, receives commission In respect of insurance business procured by him;
(v) the employment as an officer of any individual who receives renewal commission in respect of life insurance business procured by him in his capacity as an insurance agent or as an employer of agents before such employment, or before the commencement of the Insurance (Amendment) Act, 1950 (47 of 1950), whichever is later;
(vi) the payment of a share in the profits of general insurance business;
(vii) the payment of bonus in any year on a uniform basis to all salaried employees or any class of them by way of additional remuneration.
(2) Notwithstanding anything to the contrary contained in the Indian Companies Act, 1913 (7 of 1913), or in the articles of association of the insurer, being a company, or in any contract or agreement, no manager, managing director or any other person concerned in the management of an insurer's business shall be entitled to nominate a successor to his office, and no person so nominated, whether before or after the commencement of the Insurance (Amendment) Act, 1950 (47 of 1950), shall be entitled to hold or to continue in such office.
(3) If in the case of any insurance company provision is made by the articles of association of the company
or by an agreement entered into between any person and the company for empowering a director or manager or other officer of the company to assign his office to any other person, any assignment of office made in pursuance of the said provision, shall, notwithstanding anything to the contrary contained in the said provisions or in Section 86B of the Indian Companies Act, 1913 (7 of 1913), be void.
(4) No person shall have any right, whether in contract or otherwise, to any compensation for any loss incurred by reason of the operation of any provision of this section.
Power to restrict payment of excessive remuneration
31B. (1) The Authority may if it is satisfied that any insurer, in the case of an insurer specified in sub clause (a) (ii) or sub clause (b) of C1ause (9) of Section 2 in respect of all insurance business transacted by him, and in the case of any other insurer in respect of the insurance business transacted by him in India, is paying any person remuneration, whether by way of commission or otherwise on a scale disproportionate, according to the normal standards prevailing in insurance business, to the resources of the insurer, call upon the insurer to comply within six months with such directions as it may think fit to issue in the matter, and if compliance with the directions so issued requires the alteration of any of the terms of the contract entered into by the insurer with such person, no compensation shall be payable to such person by the insurer by reason only of such alteration or of the resignation of such person if the altered terms are not acceptable to him and no payment by way of renewal commission or otherwise shall be made to such person by the insurer in respect of any premiums paid after the date of such resignation except at such rate as may be approved by the Central Government in this behalf.
(2) Every insurer shall, before the close of the month following every year, submit to the Authority a statement in the form specified by the regulations made by the Authority showing the remuneration paid whether by way of commission or otherwise, to any person in cases where such remuneration exceeds such sum as may be specified by the regulations made by the Authority.
(3) Where any person not being a chief agent, principal agent or special agent is in respect of remuneration exceeding the sum of five thousand rupees in any year, the Authority may, by notice in writing, require the insurer to submit certified copies of the agreement entered into between the insurer and any such person, and the insurer shall comply with any such requisition within the time specified in the notice.
(4) Every direction under this section shall be issued by an order made by the Authority:
Provided that no order under this section shall be made unless the person concerned has been given an opportunity of being heard
Limitation on employment of managing agents and on the remuneration payable to them
32. (1) No insurer shall after the commencement of this Act, appoint a managing agent for the conduct of business.
(2) Where any insurer engaged in the business of insurance before the commencement of this Act employs a managing agent for the conduct of his business, then notwithstanding anything to the contrary contained in the Indian Companies Act, 1913 (7 of 1913) and notwithstanding anything to the contrary contained in the articles of the insurer, if a company, or in any agreement entered into by the insurer, such managing agent shall cease to hold office on the expiry of three years from the commencement of this Act and no compensation shall be payable to him by the insurer by reason only of the premature termination of his employment as managing agent.
(3) After the commencement of this Act, notwithstanding anything contained in the Indian Companies Act, 1913 (7 of 1913), and notwithstanding anything to the contrary contained in any agreement entered into by an insurer or in the articles of association of an insurer being a company, no insurer shall pay to a managing agent and no managing agent shall accept from an insurer as remuneration for his services as managing agent more than two thousand rupees per month in all, including salary and commission and other remuneration payable to and receivable by him, for his services as managing agent.
Prohibition of common officers and requirement as to whole time officers
32A. (1) A managing director or other officer of an insurer specified in sub¬-clause (b) of clause (9) of Section 2 and carrying on life insurance business shall not be a managing director or other officer of any other insurer carrying on life insurance business or of a banking company or of an investment company:
Provided that the Authority may permit such managing director or other officer to be a managing director or other officer of any other insurer carrying on life insurance business for the purpose of amalgamating the business of the two insurers or transferring the business of one insurer to the other.
(2) Where an insurer specified in sub clause (b) of Clause (9) of Section 2 has a life insurance fund of more than twenty five lakhs of rupees or insurance funds totaling more than fifty lakhs of rupees, the manager, managing director or either officer of the insurer shall be a whole time employee of the insurer:
Provided that the Authority may, for such period as it thinks fit, permit the employment of any specified person as a part time manager, managing director or other officer of such insurer.
(3) Nothing in this section, shall prevent—
(a) the manager, managing director or other officer of a insurer being the manager, managing director or other officer of a subsidiary company of the insurer with the previous approval of the Authority;
(b) the manager, managing director or other officer of an insurer, exclusively carrying on life insurance business being the manager, managing director or other officer of an insurer not carrying on life insurance business;
(c) any officer of a branch of one insurer carrying on general insurance business from being any officer of a branch in the same town of another insurer carrying on general insurance business;
(d) an officer in the employment of an insurer for giving professional advice;
Explanation: In this section the expression "officer" does not include a director.
Insurance business in rural or social sector
32B. Every insurer shall, after the commencement of the Insurance Regulatory and Development Authority Act, 1999, undertake such percentages of life insurance business and general insurance business in the rural or social sector, as may be specified, in the Official Gazette by the Authority, in this behalf.
Obligations of insurer in respect of rural or unorganized sector and backward classes
32C. Every insurer shall, after the commencement of the Insurance Regulatory and Development Authority act, 1999 discharge the obligations specified under section 32B to provide life insurance or general insurance policies to the persons residing in the rural sector, workers in the unorganized or informal sector or for economically vulnerable or backward classes of the society and other categories of persons as may be specified by regulations made by the Authority and such insurance policies shall include insurance for crops.
Investigation
Power of investigation and inspection by Authority
(33). (1) The Authority may at any time, by order in writing, direct any person (hereinafter in this section referred to as “Investigating Authority”) specified in the order to investigate the affairs of any insurer and to report to the Authority on any investigation made by such Investigating Authority:
Provided that the Investigating Authority may, wherever necessary, employ an auditor or actuary or both for the purpose of assisting him in any investigation under this section.
(2) Notwithstanding anything to the contrary contained in Section 235 of the Companies Act, 1956 (1 of 1956), the Investigating Authority may, at any time, and shall, on being directed so to do by the Authority, cause an inspection to be made by one or more of his officers of any insurer and his books and accounts; and the Investigating Authority shall supply to the insurer a copy of his report on such inspection.
(3) It shall be the duty of eatery manager, managing director or other officer of the insurer to produce before the Investigating Authority directed to make the investigation under sub section (1) or inspection under sub section (2), all such books of account, registers and other documents in his custody or power and to furnish him with any statements and information relating to the affairs of the insurer as the said Investigating Authority may require of him within such time as the said Investigating Authority may specify.
(4) Any Investigating Authority, directed to make an investigation under sub section (1), or inspection under sub section (2) may examine on oath, any manager, managing director, or other officer of the insurer in relation to his bossiness and may administer oaths accordingly.
(5) The Investigating Authority shall, if he has been directed by the Authority to cause an inspection to be made, and may, in any other case, report to the Authority on any inspection made under this section.
(4) On receipt of any report under sub section (1) or under sub section (5), the Authority may, after giving such opportunity to the insurer to make a representation in connection with the report as in the opinion of the Authority, seems reasonable by order in writing,—
(a) require the insurer to take such action in respect of any matter arising out of the report as the Authority may think fit; or
(b) cancel the registration of the insurer; or
(c) direct any person to apply to the Court for the winding up of the insurer, if a company, whether the registration of the insurer has been cancelled under C1ause (b) or not.
(7) The Authority may, after giving reasonable notice to the insurer publish the report submitted by the Investigating Authority under sub-section (5) or such portion thereof as may appear to it to be necessary.
(8) The Authority may prescribe the minimum information to tee maintained by insurers in their books, the manner in which such information should be maintained, the checks and other verifications to be adopted by insurer, necessary to enable the Investigating Authority to discharge satisfactorily his functions under this section.
Explanation.—for the purposes of this section, the expression "insurer" shall include in the case of an insurer incorporated in India—
(a) all his subsidiaries formed for the purpose of carrying on the business of insurance exclusively outside India; and
(b) all his branches whether situated in India or outside India.
(9) No order made under this section other than an order made under Clause (b) of sub section (6) shall be capable of being called in question in any Court.
(10) All expenses of, and incidental to, any investigation made under this section shall be defrayed by the insurer, shall have priority over other debts due from the insurer and shall be recoverable as an arrear of land revenue.
Power to appoint staff
33A.The Authority may appoint such staff, and at such places as it or he may consider necessary, for the scrutiny of the returns, statements and information furnished by insurers under this Act and generally to ensure the efficient performance of the functions of the Authority under this Act.
Power of the Authority to issue directions
34. (1) where the Authority is satisfied that¬
(a) in the public interest; or
(b) to prevent the affairs of any insurer being conducted in a marina detrimental to the interests of the policy holders or in a manner prejudicial to the interests of the insurer; or
(c) generally to secure the proper management of any insurer, it is necessary to issue directions to insurers generally or to any insurer In particular, he may, from time to time, issue such directions as he deems fit, and the insurers or the insurer, as the case may be, shall be bound to comply with such directions:
Provided that no such directions shall be issued to any insurer in particular unless such insurer has been given a reasonable opportunity of being heard
(2) The Authority may, on representation made to him or on his own motion, modify or cancel any direction issued under sub section (1), and in so modifying or canceling any directions, may impose such conditions as he thinks fit, subject to which the modification or cancellation shall have effect.
Control over Management
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