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LIFE INSURANCE CORPORATION ACT

Ministry of Law and Justice

Act nº 31 of 1956


  • Chapter 1
  • Chapter 2
  • Chapter 3
  • Chapter 4
  • Chapter 5
  • Chapter 6
  • Chapter 7
  • Schedules
  • Act nº 31 of 1956

Preamble

THE LIFE INSURANCE CORPORATION ACT, 1956

[Act No. 31 of 1956]

[18th June, 1956]

PREAMBLE

An Act to provide for the nationalisation of life insurance business in India by transferring all such business to a Corporation established for the purpose and to provide for the regulation and control of the business of the Corporation and for matters connected therewith or incidental thereto.

Be it enacted by Parliament in the Seventh Year of the Republic of India as follows:-

Chapter 1

Section 1. Short title and commencement

(1) This Act may be called the Life Insurance Corporation Act, 1956.

(2) It shall come into force on such date 1as the Central Government may, by notifications in the Official Gazette, appoint.

1. Came into force on Ist July, 1956, see Gazette of India, 1956, Extra. Pt. II, Sec. 3, p. 1531


Section 2. Definitions

In this Act, unless the context otherwise requires,-

(1) "appointed day' means the date on which the Corporation is established under section 3;

(2) "composite insurer" means an insurer carrying on in addition to controlled business any other kind of insurance business;

(3) "controlled business" means-

(i) in the case of any 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 the business appertaining to his life insurance business, if he carries on any 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 of more than six months on the 19th day of January, 1956;

(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 any other class of insurance business also in India;.

(c) all his business in India if he 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 19th day of January, 1956.

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" in sub-clause (i) and (ii) shall be construed accordingly;

(iii) in the case of a provident society, as defined in section 65 of the Insurance Act, all its business;

(iv) in the case of the Central Government or a State Government, all life insurance business carried on by it, subject to the exceptions specified in section 44;

(4) "Corporation" means the Life Insurance Corporation of India established under section 3;

(5) "Insurance Act" means the Insurance Act, 1938 (4 of 1938);

(6) "insurer" means an insurer as defined in the Insurance Act who carries on life insurance business in India and includes the Government and a provident society as defined in section 65 of the Insurance Act;

(7) "member" means a member of the Corporation;

(8) "prescribed" means prescribed by rules made under this Act;

(9) "Tribunal" means a Tribunal constituted under section 17 and having jurisdiction in respect of any matter under the rules made under this Act;

(10) 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.

Chapter 2

Section 3. Establishment and incorporation of Life Insurance Corporation of India

(1) With effect from such date 1as the Central Government may, by notification in the Official Gazette, appoint, there shall be established a Corporation called the Life Insurance Corporation of India.

(2) The Corporation shall be a body corporate having perpetual succession and a common seal with power subject to the provisions of this Act, to acquire, hold and dispose of property, and may by its name sue and be sued.

1. Ist September, 1956, see Gazette of India, 1956, Extra. Pt. II, Section 3, pg. 1799.


Section 4. Constitution of the Corporation

(1) The Corporation shall consist of such number of persons not exceeding 1[sixteen] as the Central Government may think fit to appoint thereto and one of them shall be appointed by the Central Government to be the Chairman thereof.

(2) Before appointing a person to be a member, the Central Government shall satisfy itself that that person will have no such financial or other interest as is likely to affect prejudicially the exercise or performance by him of his functions as a member, and the Central Government shall also satisfy itself from time to time with respect to every member that he has no such interest; and any person who is, or whom the Central Government proposes to appoint and who has consented to be, a member shall, whenever required by the Central Government so to do, furnish to it such information as the Central Government considers necessary for the performance of its duties under this sub-section.

(3) A member who is in any way directly or indirectly interested in a contract made or proposed to be made by the Corporation shall as soon as possible after the relevant circumstances have come to his knowledge, disclose the nature of his interest to the Corporation and the member shall not take part in any deliberation or discussion of the Corporation with respect to that contact.

1. Substituted by Act 52 of 1975, section 40.


Section 5. Capital of the Corporation

(1) The original capital of the Corporation shall be five crores of rupees provided by the Central Government after due appropriation made by Parliament by law for the purpose, and the terms and conditions relating to the provision of such capital shall be such as may be determined by the Central Government.

(2) The Central Government may, on the recommendation of the Corporation, reduce the capital of the Corporation to such extent and in such manner as the Central Government may determine.

Chapter 3

Section 6. Functions of the Corporation

(1) Subject, to the rules, if any, made by the Central Government in this behalf, it shall be the general duty of the Corporation to carry on life insurance business, whether in or outside India, and the Corporation shall so exercise its powers under this Act as to secure that life insurance business is developed to the best advantage of the community.

(2) Without prejudice to the generality of the provisions contained in sub-section (1) but subject to the other provisions contained in this Act, the Corporation shall have power-

(a) to carry on capital redemption business, annuity certain business or reinsurance business in so far as such re insurance business appertains to life insurance business;

(b) subject to the rules, if any, made by the Central Government in this behalf, to invest the funds of the Corporation in such manner as the Corporation may think fit and to take all such steps as may be necessary or expedient for the protection or realisation of any investment; including the taking over of and administering any property offered as security for the investment until a suitable opportunity arises for its disposal;

(c) to acquire, hold and dispose of any property for the purpose of its business;

(d) to transfer the whole or any part of the life insurance business carried on outside India to any other person or persons, if in the interest of the Corporation it is expedient so to do;

(e) to advance or lend money upon the security of any movable property or otherwise;

(f) to borrow or raise any money in such manner and upon such security as the Corporation may think fit;

(g) to carry on either by itself or through any subsidiary any other business in any case where such other business was being carried on by a subsidiary of an insurer whose controlled business has been transferred to an vested in the Corporation under this Act;

(h) to carry on any other business which may seen to the Corporation to be capable of being conveniently carried on in connection with its business and calculated directly or indirectly to render profitable the business of the Corporation;

(i) to do all such things as may be incidental or conducive to the proper exercise of any of the powers of the Corporation.

(3) In the discharge of any of its functions the Corporation shall act so far as may be on business principles.

Section 6A. Power to impose conditions, etc

1[6A. Power to impose conditions, etc.-

(1) In entering into any arrangement, under section 6, with any concern, the Corporation may impose such conditions as it may think necessary or expedient for protecting the interest of the Corporation and for securing that the accommodation granted by it is put to the best use by the concern.

(2) Where any arrangement entered into by the Corporation under section 6 with any concern provides for the appointment by the Corporation of one or more directors of such concern, such provision and any appointment of directors made in pursuance thereof shall be valid and effective notwithstanding anything to the contrary contained in the Companies Act, 1956 (1 of 1956), or in any other law for the time being in force or in the memorandum, articles of association or any other instrument relating to the concern, and any provision regarding share, qualification, age limit, number of directorships, removal from office of directors and such like conditions contained in any such law or instrument aforesaid, shall not apply to any director appointed by the Corporation in pursuance of the arrangement as aforesaid.

(3) Any director appointed as aforesaid shall-

(a) hold office during the pleasure of the Corporation any may be removed or substituted by any person by order in writing by the Corporation;

(b).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 discharge of his duties as a director or anything in relation thereto;

(c).not be liable to retirement by rotation and shall not be taken into account for computing the number of directors liable to such retirement.]

1. Inserted by Act 52 of 1975, section 41.


Chapter 4

Section 7. Transfer of assets and liabilities of existing insurers carrying on controlled business

(1) On the appointed day 1there shall be transferred to and vested in the Corporation all the assets and liabilities appertaining to the controlled business of all insurers.

(2) The assets appertaining to the controlled business of an insurer shall be deemed to include all rights and powers, and all property, whether movable or immovable, appertaining to his controlled business, 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 the insurer and all books of account or documents relating to the controlled business of the insurer; and liabilities shall be deemed to include all debts, liabilities and obligations of whatever kind then existing and appertaining to the controlled business of the insurer.

Explanation.-The expression "assets appertaining" to the controlled business of an insurer"-

(a) in relation to a composite insurer, includes that part of the paid-up capital of the insurer or assets representing such part which has or have been allocated to the controlled business of the insurer in accordance with the rules made in this behalf;

(b) in relation to a Government, means the amount lying to the credit of that business on the appointed day.

(3) Where any such assets are subject to any trust referred to in sub-section (6) of section 27 of the Insurance Act or to any other trust for the benefit of policy-holders, the assets shall be deemed to have vested in the Corporation free from any such trust.

1. Ist September, 1956


Section 8. Provident, superannuation and other like funds

(1) Where an insurer whose controlled business is to be transferred to and vested in the Corporation under section 7, has established a provident or superannuation fund or any other like fund for the benefit of his employees and constituted a trust in respect thereof (hereinafter in this section referred to as an existing trust), the moneys standing to the credit of any such fund on the appointed day, together with any other assets belonging to such fund, shall, subject to the provisions of sub-section (2) stand transferred to and vest in the Corporation on the appointed day free from any such trust.

(2) Where all the employees of any such insurer do not become employees of the Corporation under section 11, the moneys and other assets belonging to any such fund as it referred to in sub-section (1), shall be apportioned between the trustees of the fund and the Corporation in the prescribed manner; and in case of any dispute regarding such apportionment, the decision of the Central Government thereon shall be final.

(3) The Corporation shall, as soon as may be after the appointed day, constitute in respect of the moneys and other assets which are transferred to and vested in it under this section, one or more trusts having objects as similar to the objects of the existing trusts as in the circumstances may be practicable.

(4) Where all the moneys and other assets belonging to an existing trust are transferred to and vested in the Corporation under this section, the trustees of such trust, except as respects things done or omitted to be done before the appointed day.

Section 9. General effect of vesting of controlled business

(1) Unless otherwise expressly provided by or under this Act, all contracts, agreements and other instruments of whatever nature subsisting or having effect immediately before the appointed day and to which an insurer whose controlled business has been transferred to and vested in the Corporation is a party or which are in favour of such insurer shall in so far as they relate to the controlled business of the insurer be of as full force and affect against or in favour of the Corporation, as the case may be, and may be enforced or acted upon as fully and effectually as if, instead of the insurer, the Corporation had been a party thereto or as if they had been entered into or issued in favour of the Corporation.

(2) If on the appointed day any suit, appeal or other legal proceeding of whatever nature is pending by or against an insurer, then, in so far as it relates to his controlled business, it shall not abate, be discontinued or be in any way prejudicially affected by reason of the transfer to the Corporation of the business of the insurer or anything done under this Act, but the suit, appeal or other proceeding may be continued prosecuted and enforced by or against the Corporation.