ACT NO. 57 OF 1972
[ 20th September, 1972.]
An Act to provide for the acquisition and transfer of shares of Indian
insurance companies and undertakings of other existing insurers in
order to serve better the needs of the economy by securing the
development of general insurance business in the best interests of the
community and to ensure that the operation of the economic system does
not result in the concentration of wealth to the common detriment, for
the regulation and control of such business and for matters connected
therewith or incidental thereto.
Short title. This Act may be called the General Insurance Business (Nationalisation) Act, 1972 .
Declaration as to the Policy of the State. It is hereby declared that this Act is for giving effect to the policy of the State towards securing the principles specified in clause (c) of article 39 of the Constitution. Explanation.-- In this section," State" has the same meaning as in article 12 of the Constitution.
Definitions. In this Act, unless the context otherwise requires,--
" acquiring company" means any Indian insurance company and, where a scheme has been framed involving the merger of one Indian insurance company in another or the amalgamation of two or more such companies, means the Indian insurance company in which any other company has been merged or the company which has been formed as a result of the amalgamation;
" appointed day" means such day 1[ , not being a day later than the 2nd day of January, 1973 , as the Central Government may, by notification, appoint;
" Companies Act" means the Companies Act, 1956 (1 of 1956 );
" Corporation" means the General Insurance Corporation of India formed under section 9;
" existing insurer" means every insurer the management of whose undertaking has vested in the Central Government under section 3 of the General insurance (Emergency Provisions) Act, 1971 (17 of 1971 ), and includes the undertaking of the Life Insurance Corporation in so far as it relates to the general insurance business carried on by it;
" foreign insurer" means an existing insurer incorporated under the law of any country outside India;
" 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;
" Government company" means a Government company as defined in section 617 of the Companies Act;
" Indian insurance company" means an existing insurer having a share capital who is a company within the meaning of the Companies Act;
" Insurance Act" means the Insurance Act, 1938 (4 of 1938 );
" Life Insurance Corporation" means the Life Insurance Corporation of India established under the Life Insurance Corporation Act, 1956 (31 of 1956 );
" notification" means a notification published in the Official Gazette;
" prescribed" means prescribed by rules made under this Act;
" Schedule" means the Schedule to this Act;
" scheme" means the scheme framed under section 16 2[ and also includes a scheme framed under section 17A];
words and expressions used in this Act but not defined herein and defined in the Insurance Act, shall have the meanings respectively assigned to them in that Act;
words and expressions used in this Act but not defined herein or in the Insurance Act and defined in the Companies Act, shall have the meanings respectively assigned to them in the Companies Act. CHAP TRANSFER TO PUBLIC OWNERSHIP OF GENERAL INSURANCE BUSINESS CHAPTER II TRANSFER TO PUBLIC OWNERSHIP OF GENERAL INSURANCE BUSINESS
Transfer of shares of Indian insurance companies.
On the appointed day all the shares in the capital of every Indian insurance company shall, by virtue of this Act, stand transferred to and vested in the Central Government free of all trusts, liabilities and encumbrances affecting them.
Out of the shares so transferred and vested, the Central Government shall, immediately thereafter, by notification, provide for the transfer of not less than ten shares of every such company to such persons as may be specified in the notification to enable the Indian insurance company to function as a Government company.
Every notification made under sub- section (2) shall specify the names and description of the persons to whom the shares are transferred and the particulars of the shares which are transferred to each such person.
A copy of every notification made under sub- section (2) shall, as soon as may be after it is made, be sent by the Central Government to the concerned Indian insurance company, who shall, on receipt of such copy, and notwithstanding anything contained in the Companies Act or in its articles of association, forthwith rectify its register of members by including therein the persons mentioned in the notification as the holders of the shares specified therein.
For the removal of doubts it is hereby declared that the transfer and vesting of shares effected under sub- section (1) shall not be deemed to affect any right of the Indian insurance company subsisting immediately before the appointed day against any shareholder to recover from him any sum of money on the ground that shareholder has not paid or credited to the insurer the whole or any part of the value of the shares held by him or on any other ground whatsoever.
Transfer of undertakings of other existing insurers.
On the appointed day, the undertaking of every existing insurer who is not an Indian insurance company shall stand transferred to and vested in the Central Government and the Central Government shall immediately thereafter provide, by notification, for the transfer to and vesting in such Indian insurance company, as it may specify in the notification, of that undertaking.
Any notification made under sub- section (1) may provide that any of the undertakings aforesaid may be transferred to and vested in more than one Indian insurance company in such manner and subject to such conditions as may be specified in the notification.
Effect of transfer of undertakings.
The undertaking of every such existing insurer as is referred to in section 5 shall be deemed to include all assets, rights, powers, authorities and privileges and all property, movable and immovable, cash balances, reserve funds, investments and all other rights and interests in, or arising out of, such property as were immediately before the appointed day in the ownership, possession, power or control of such existing insurer in relation to the undertaking, whether within or without India, and all books of accounts, registers, records and all other documents of whatever nature relating thereto, and shall also be deemed to include all borrowings, liabilities and obligations of whatever kind then subsisting of the existing insurer in relation to the undertaking.
Unless otherwise expressly provided by this Act, all deeds, bonds, agreements, powers of attorney, grants of legal representation and other instruments of whatever nature subsisting or having effect immediately before the appointed day and to which any such insurer as is referred to in section 5 is a party or which are in favour of such existing insurer shall be of as full force and effect against or in favour of the Indian insurance company in which the undertaking or the part to which the instrument relates has vested and may be enforced or acted upon as fully and effectually as if, in the place of the existing insurer referred to in section 5, the Indian insurance company in which the undertaking or any part thereof has vested had been a party thereto, or as if they had been issued in its favour.
If, on the appointed day, any suit, appeal or other proceeding of whatever nature in relation to any business of the undertaking which has been transferred under section 5 is pending by or against any such existing insurer as is referred to in that section, the same shall not abate, be discontinued or be in any way prejudicially affected
by reason of the transfer of the undertaking or of anything contained in this Act, but the suit, appeal or other proceeding may be continued, prosecuted and enforced by or against the Indian insurance company in which the undertaking or the part to which the proceeding relates has vested.
For the removal of doubts it is hereby declared that in the case of a foreign insurer or, as the case may be, the Life Insurance Corporation, the provisions of section 5 and of the preceding sub- sections shall only apply to the extent to which any property appertains, in the former case, to the general insurance business carried on in India and, in the latter case, to the general insurance business carried on, whether within or without India, and to rights and powers acquired, and to debts, liabilities and obligations incurred and to contracts, agreements and other instruments made by the foreign insurer or the Life Insurance Corporation, as the case may be, for the purpose of such general insurance business and to legal proceedings relating to those purposes, and the said provisions shall be construed accordingly.
If any question arises as to whether any property appertains to any such general insurance business as is referred to in this section or whether any rights, powers, liabilities or obligations were acquired or incurred or any contract, agreement or other instrument was made by the foreign insurer or the Life Insurance Corporation, as the case may be, for the purposes of any such business or whether any documents relate to those purposes, the question shall be referred to the Central Government which shall, after giving an opportunity of being heard to the persons interested in the matter, decide it in such manner as it thinks fit.
Transfer of service of existing employees in certain cases.
Every whole- time officer or other employee of an existing insurer other than an Indian insurance company who was employed by that insurer wholly or mainly in connection with his general insurance business immediately before the appointed day shall, on the appointed day, become an officer or other employee, as the case may be, of the Indian insurance company in which the undertaking of that insurer or that part of the undertaking to which the service of the officer or other employee relates has vested, and shall hold his office or service under the Indian insurance company on the same terms and conditions and with the same rights to pension, gratuity and other matters as would have been admissible to him if there
had been no such vesting, and shall continue to do so unless and until his employment in the Indian insurance company in which the undertaking or part has vested is terminated or until his remuneration, terms and conditions are duly altered by that Indian insurance company: Provided that nothing in this sub- section shall apply to any such officer or other employee who has given, in writing, notice to the Central Government or to any person nominated in this behalf by that Government before the appointed day intimating his intention of not becoming an officer or employee of the Indian insurance company in whom the undertaking or part thereof to which his service relates has vested.
If any question arises as to whether any person was a whole- time officer or employee, or as to whether any officer or employee, was employed wholly or mainly in connection with the general insurance business of the existing insurer referred to in sub- section (1), immediately before the appointed day, the question shall be referred within a period of two years from the appointed day and not thereafter, to the Central Government which shall, after giving an opportunity of being heard to the person concerned in the matter, decide it in such manner as it thinks fit and such decision shall be final.
Notwithstanding anything contained in the Industrial Disputes Act, 1947 (14 of 1947 ) or in any other law for the time being in force, the transfer of the services of any officer or other employee under sub- section (1) shall not entitle any such officer or other employee to any compensation under that Act or such other law, and no such claim shall be entertained by any court, tribunal or other authority.
Provident, superannuation, welfare and other funds.
Where an existing insurer has established a provident, superannuation, welfare or any other fund for the benefit of his employees and constituted a trust in respect thereof (hereafter in this section referred to as an existing trust), the moneys standing to the credit of such fund on the appointed day, together with any other assets belonging to such fund, shall stand transferred to and vested in the Indian insurance company on the appointed day free from any such trust.
Where all the employees of the Life Insurance Corporation or any other existing insurer do not become employees of an Indian insurance company, the monies and other assets belonging to any such fund as is referred to in sub- section (1), shall be apportioned
between the trustees of the fund and the Indian insurance company in the prescribed manner; and in case of any dispute about such apportionment the decision of the Central Government thereon shall be final.
Where the undertaking of an existing insurer has vested in more than one Indian insurance company, the Central Government may, by order, provide for the apportionment among such Indian insurance companies of monies and other assets belonging to any existing trust relating to that undertaking in such manner as in its opinion may be appropriate.
The Indian insurance company 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.
Where all the moneys and other assets belonging to an existing trust are transferred to and vested in an Indian insurance company under this section, the trustees of such trust shall, as from the appointed day, stand discharged from the trust, except as respects things done or omitted to be done before the appointed day. CHAP GENERAL INSURANCE CORPORATION OF INDIA CHAPTER III GENERAL INSURANCE CORPORATION OF INDIA
Formation of General Insurance Corporation of India.
As soon as may be after the commencement of this Act, the Central Government shall form a Government company in accordance with the provisions of the Companies Act, to be known as the General Insurance Corporation of India for the purpose of superintending, controlling and carrying on the business of general insurance.
The authorised capital of the Corporation shall be 1[ rupees two hundred and fifty crores, divided into two hundred and fifty lakhs fully paid- up shares] of one hundred rupees each, out of which rupees five crores shall be the initial subscribed capital of the Corporation.
Notwithstanding anything contained in the Companies Act, 1956 (1 of 1956 ), it shall not be necessary to add the word" Limited" as the last word of the name of the Corporation.
Transfer to Corporation of shares vested in Central Government. All the shares in the capital of every Indian insurance company which stand transferred to and vested in the Central Government by virtue of section 4[ with the exception of the shares transferred to any person under sub- section (2) of that section] shall, immediately after such vesting, stand transferred to and vested in the Corporation and every Indian insurance company shall forthwith give effect to such transfer of shares and rectify its register of members by including therein the Corporation as the holder of such shares. CHAP AMOUNTS TO BE PAID FOR ACQUISITIONS CHAPTER IV AMOUNTS TO BE PAID FOR ACQUISITIONS
Amounts to be paid for transfer and vesting of shares or undertakings.
For the transfer of the shares of each Indian insurance company to, and vesting in, the Central Government, under section 4, there shall be paid by the Central Government to the Corporation, for distribution to the shareholders of each such company, the amount specified against such company in the corresponding entry under column (3) of Part A of the Schedule.
For the transfer to, and vesting in, the Central Government, under section 5, of the undertaking of each existing insurer, who is not an Indian insurance company, there shall be paid by the Central Government to the Corporation, for payment to each such existing insurer, the amount specified against such insurer in the corresponding entry under column (3) of Part B of the Schedule.
Disbursement of amounts by Corporation.
The total amount paid by the Central Government under section 11 shall be treated as additional contribution to the subscribed capital of the Corporation and such additional subscribed capital shall stand allotted to, and vested in, the Central Government.
The Corporation shall distribute the amount paid to it under section 11, to the shareholders of each Indian insurance company and to each existing insurer, who is not an Indian insurance company, in accordance with their rights and interests, and, if there is any doubt or dispute as to the right, or extent of the right, of any person to receive the whole or any part of such amount, refer such doubt or dispute to the Central Government for determination and thereafter act in accordance with the determination made by that Government.
Save as otherwise provided in sub- section (2), the amount referred to in section 11 shall be given in accordance with the provisions of section 13, section 14 or section 15, as the case may be.
Mode of payment.
Where the amount referred to in section 11 is to be given--
to the members of an Indian insurance company, the amount due to each such member shall be paid in full, where it does not exceed twenty- five thousand rupees, and where it exceeds twenty- five thousand rupees, each such member shall be paid twenty- five thousand rupees and the balance of the amount due to such member shall be paid to him in three equal annual instalments, the first of which shall fall due on the appointed day;
to a foreign insurer, it shall be given to him in cash within three months from the appointed day;
to the Life Insurance Corporation, it shall be given to it in three equal annual instalments, the first of which shall fall due on the appointed day;
to an existing insurer who is a co- operative society, it shall be distributed as soon as may be after the appointed day in accordance with the rules of the society which will apply in case of dissolution of the society;
to an existing insurer not falling within any of the foregoing provisions, it shall be apportioned by the acquiring company among the individual policy- holders of the insurer whose policies with that insurer were in force on the appointed day and were comprised in the undertaking of such insurer in proportion to the premiums paid by the policy- holders under such policies and every such payment shall be made either--
in cash, to be sent by postal money order, or
at the option of the policy- holder, as a deduction in the premium due at the time of the renewal of the policy and such option shall be exercised by the policyholder before the expiry of three months from the appointed day (or within such further time not exceeding three months as the Central Government may, on the application of the policy- holder, allow); and the option so exercised shall be final and shall not be altered or rescinded after it has been exercised: Provided that if any policy- holder fails to exercise his option within the time allowed, he shall be deemed
to have exercised his option in favour of payment in cash by postal money order.
Where any amount is payable whether in instalments or otherwise under the provisions of this section, the unpaid amount, where its payment has become due, shall carry interest at the rate of four per cent. per annum from the appointed day.
Amount payable to shareholders may be paid to named persons instead in certain cases.
Notwithstanding anything contained elsewhere in this Act, if a majority in number of the persons, who, immediately before the appointed day, were registered in the books of an Indian insurance company as the members thereof, and representing two- thirds in value of the amount payable to the Indian insurance company, agree either in person or by proxy at a meeting specially convened for the purpose that the amount so payable instead of being distributed among the members, shall be given to any such person or body of persons as the members may nominate either at that meeting or subsequently for the purpose of carrying on any business, and the Central Government is satisfied that due provision has been or will be made for the payment of the value of their respective shares to persons who have dissented from the reasolution, the amount may be given to the person or body of persons so nominated in such manner and subject to such conditions as the Central Government may think fit.
No resolution passed at any such meeting as is referred to in sub- section (1) held after the appointed day shall have any effect unless the meeting has been convened after obtaining the approval of the Central Government.
Payment into court in case of rival claims. Where a claim to the amount payable under section 11 is made by two or more persons adversely to one another, the corporation may cause the amount to be deposited in any civil court having jurisdiction in that behalf and the court shall decide as to whom the payment shall be made.