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GENERAL INSURANCE (EMERGENCY PROVISIONS) ACT, 1971 [REPEALED]

Ministry of Law and Justice

Act nº 17 of 1971


  • Act nº 17 of 1971

Preamble

1[GENERAL INSURANCE (EMERGENCY PROVISIONS) ACT, 1971

[Act, No. 17 of 1971]

[13th MAY, 1971]

1. Repealed by The Insurance Laws (Transfer of Business and Emergency Provisions) Repeal Act, 2001 (11 of 2001) w.e.f. 09.05.2001


Section 1. Short title and commencement

(1) This Act may be called the General Insurance (Emergency Provisions) Act, 1971.

(2) It shall be deemed to have come into force on the 13th day of May 1971.

Section 2. Definitions

In this Act, unless the context otherwise requires, -

(a) "appointed day" means the 13th day of May, 1971;

(b) 'Custodian' means the person appointed under Section 4 to take Over the management of the undertaking of any insurer;

(c) "general insurance business" means fire, marine or miscellaneous insurance business, whether carried on singly or in combination with one or more of them, but does not include capital redemption business and annuity certain business;

(d) "Insurance Act" means the Insurance Act, 1938;

(e) "insurer" means an insurer, as defined in the Insurance Act, who carries on general insurance business in India, and includes an insurer whose registration under that Act has not remained wholly cancelled for a period of six months immediately before the appointed day, but does not include the Life Insurance Corporation of India established under the Life Insurance Corporation Act, 1956, or any State Government which carries on general insurance business;

(f) "notified order" means an order notified in the Official Gazette;

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

(h) "undertaking", in relation to an insurer incorporated outside India, means the undertaking of that insurer in India;

(i) words and expressions used herein but not defined, and defined in the Insurance Act-, have the meanings respectively aligned to them in that Act.

Section 3. Management of undertakings to vest in Government on commencement of this Act

(1) On and from the appointed day, management of the undertakings of all insurers shall vest in the Central Government, and, pending the appointment of a Custodian for the undertaking of any insurer, the persons in charge of the management of such undertaking immediately before the appointed day shall, on and from the appointed day, be in charge of the management of the undertaking for and on behalf of the Central Government; and the management of the undertaking 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 undertaking of an insurer, made before the appointed day between the insurer and any person in charge of the management of such undertaking 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 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 undertaking otherwise than for the purpose of making routine payments of salaries or commissions to employees, insurance 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 undertaking or vary the terms and conditions of any such contract subsisting on the appointed day;

(g) enter into any other transaction relating to the undertaking of the insurer other than a contract relating to the transaction of general insurance business 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 appertaining to the undertaking in any Scheduled Bank or Nationalised 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 document shall be withdrawn from the Scheduled Bank, the Nationalised Bank or the State Bank, as the case may be, except with the permission of the authorised person:

Provided that nothing contained in this sub-section shall apply to any security or document of title 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;

(b) "State Bank" means the State Bank of India constituted under the State Bank of India Act, 1955;

(c) "Nationalised Bank" means a corresponding new bank as defined in the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970.

(6) Every insurer shall deliver forthwith to the person specified in this behalf by the Central Government in respect of that insurer the following documents, namely: -

(a) the minutes book or any other book in India containing all resolutions up to the appointed day of the persons in charge of the management of the undertaking before the appointed day;

(b) the current cheque books relating to the undertaking which are at the head office or the principal office of the insurer;

(c) all registers or other books containing particulars relating to the investment of any moneys appertaining to the undertaking including investments on mortgaged properties and all loans granted and advances made;

(d) 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 undertaking.

(7) Without prejudice to the generality of the powers conferred by sub-section (1) and to the provisions contained in sub-sections (3), (5) and (6), any direction issued under sub-section (1) may require the persons in charge of the management of the undertaking 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 undertaking as may be mentioned in the direction.

(8) The persons in charge of the management of the undertaking of an insurer under this, Act shall be entitled to such remuneration, whether by way of allowance or salary or perquisites as the Central Government may fix; and any such person may, by giving one month's notice in writing to the Central Government of his intention so to do, relinquish charge of the management of the undertaking.

Section 4. Power of Central Government to appoint Custodian to take over the management of the undertaking of the insurer

(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 undertaking of an insurer and the person so appointed shall carry on the management of the Undertaking of the insurer for and on behalf of the Central Government.

(2) On the appointment of a Custodian under sub-section (1), the charge of management of the undertaking of the insurer shall vest in him and all persons in charge of the management of such undertaking 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 undertaking of the insurer.

(3) Nothing contained in sub-sections (3), (5) and (6) of section 3 shall apply to any insurer the charge of management of whose undertaking 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 undertaking of the insurer or in relation to any matter arising in the course of such management.

(4) The Custodian shall receive from the funds of the undertaking for the charge of management of which he is appointed under sub-section (1) such remuneration as the Central Government may fix.

(5) The Custodian shall hold office during the pleasure of the Central Government.

Section 4A. Application of Act 1 of 1956

(1) Notwithstanding anything contained in the Companies Act, 1956, or in the memorandum or articles of association of any insurer or in any other instrument, no resolution passed at any meeting of the Board of directors or of the members of an insurer shall be given effect to unless approved by the Central Government.

(2) Subject to the other provisions contained in this Act and subject to such exceptions, restrictions and limitations, if any, as the Central Government may, by notification in the Official Gazette, specify in this behalf, the Companies Act, 1956 and the Insurance Act shall continue to apply to every insurer in the same manner as they applied to him before the appointed day.

(3) Every notification made by the Central Government under sub-section (2) shall be laid, as soon as may be after it is made, before each House of Parliament while it is in session for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the sessions immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the notification, or both Houses agree that the notification should not have been made, the notification shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that notification.

Section 4B. Custodian or other person to be in charge of the management of the undertaking of the insurer

Subject to such directions and instructions as the Central Government may give under this Act, the Custodian, or, where no Custodian has been appointed in relation to the undertaking of any insurer, the person in charge, under section 3, of the management of the undertaking of the insurer, shall alone be entitled to exercise all the powers of management in connection with, or incidental to, the carrying on or otherwise of the general insurance business of the insurer, whether such powers are derived from the Companies Act, 1956-, or from the memorandum or articles of association of the insurer or from any other source.

Section 5. Power of Custodian to institute proceedings, etc.

The Custodian may, in relation to the undertaking of any insurer the charge of management of which has been taken over by him, exercise -

(a) all or any of the powers which the Controller of Insurance may exercise under section 106 or section 107 of the Insurance Act-;

(b) all or any of the powers under section 52B,section 52BB,section 52C or section 52D of the Insurance Act-which an Administrator appointed under section 52A of that Act could have exercised in relation to life insurance business of an insurer.

Section 6. Payment of compensation

(1) Every insurer shall be given by the Central Government compensation for the vesting in it, under section 3, of the management of the undertaking of the insurer.

(2) For every month during which the management of the undertaking of the insurer remains vested in the Central Government, the amount of compensation referred to in sub-section (1) shall be-

(A) in the case of an insurer referred to in clause (b) of sub-section (9) of section 2 of the Insurance Act-,- .

(i) where the insurer has declared a1[dividend for at least one] of the three calendar years 1967, 1968 and 1969,-

(a) a sum equal to one-twelfth of the annual average (for the three years) of the amount distributed to shareholders as dividend; or

(b) a sum equal to two-and-a-half rupees for every thousand rupees or part thereof of the net premium income of the undertaking of insurer during the year 1969, whichever is greater;

(ii) in any other case, a sum equal to two-and-half rupees for every thousand rupees or part thereof of the net premium income of the undertaking of the insurer during the year 1969;

(B) in the case of an insurer referred to in clause (a) of sub-section (9) of section 2 of the Insurance Act-, a sum equal to two-and-a-half rupees for every thousand rupee or part thereof of the1[net premium income of the undertaking of the insurer so far as it relates to business effected in India] during the year 1969

1. Substituted by Act 27 of 1972,w.r.e.f. 13.05.1971.


Section 7. Compensation how to be paid

(1) The compensation referred to in section 6 shall be paid by the Central Government in cash to every insurer.

(2) The compensation received by an insurer under section 6 shall be dealt with by him in such manner as may be prescribed

Section 8. Penalties

If any person-

(a) fails to deliver to the Custodian any books of account registers or any other documents in his custody relating to the undertaking 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 undertaking 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 sections) 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 for a term which may extend to six months, or with fine which may extend to one thousand rupees, or with both.

Section 9. Insurer not to be wound up by Court

No proceeding for the winding up of an insurer the management of whose undertaking 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.

Section 10. 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 undertaking the time during which this Act is in force shall be excluded.

Section 11. Effect of Act on other laws

The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act.

Section 12. 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.