Amendment of provisions relating to appointments of managing directors, etc., to be subject to previous approval of the Authority
34A. (1) In the case of an insurer,—
(a) no amendment made, after the commencement of the Insurance (Amendment) Act, 1968, of any provision relating to the appointment, re appointment, termination of appointment or remuneration of a managing or whole time director, or of a manager or a chief executive officer, by whatever name called, whether that provision be contained in the insurers memorandum or articles of associations, or in an agreement entered into by him, or in any resolution passed by the insurer in general meeting or by his Board of Directors shall have effect unless approved by the Authority;
(b) no appointment, re appointment or termination of appointment made after the commencement of the Insurance (Amendment) Act, 1968, of a managing or whole time director, or a manager or a chief executive officer, by whatever name called, shall have effect unless such appointment, re¬appointment or termination of appointment is made with the previous approval of the Authority.
Explanation- For the purposes of this sub section, any provision conferring any benefit or providing any amenity or perquisite, in whatever form, whether during or after the termination of the term of office of the manager or the chief executive officer, by whatever name called or a managing or whole time director, shall be deemed to be a provision relating to his remuneration.
(2) Nothing contained in Sections 268 and 269, the proviso to sub section (3) of Section 309, Sections 310 and 311, the proviso to Section 387 and Section 388 (in so far as Section 388 makes the provisions of Sections 310 and 311 apply in relation to the manager of a company) of the Companies Act, 1956 (1 of 1956), shall apply to any matter in respect of which the approval of the Authority has to be obtained under sum section (1).
(3) No act done by a person as a managing or whole time director or a director not liable to retire by rotation or a manager or a chief executive officer, by whatever name called, shall be deemed to be invalid on the ground that it is subsequently discovered that his appointment or re appointment had not taken effect by reason of any of the provisions of this Act; but nothing in this subsection shall be construed as rendering valid any act done by such person after his appointment or re appointment has been shown to the insurer not to have had effect.
Power of Authority to remove managerial persons from office
34B. (1) Where the Authority is satisfied that in the public interest or for preventing the affairs of an insurer being conducted in a manner detrimental to the interests of the policy holders or for securing the proper management of any insurer it is necessary so to do, he may, for reasons to be recorded in writing, by order, remove from office, with effect from such date as may be specified in the order, any director or the chief executive officer, by whatever name called, of the insurer.
(2) No order under sub section (1) shall be made unless the director or chief executive officer concerned has been given a reasonable opportunity of making a representation to the Authority against the proposed order:
Provided that if, in the opinion of the Controller, any delay would be detrimental to the interests of the insurer or his policy holders, he may, at the time of giving the opportunity aforesaid or at any time thereafter, by order direct that, pending the consideration of the representation aforesaid, if any, the director or, as the case may be, chief executive officer, shall not, with effect from the date of such order,¬
(a) act as such director or chief executive officer of the insurer;
(b) in any way, whether directly, indirectly, be concerned with, or take part in the management of the insurer.
(3) Where any order is made in respect of a director or chief executive officer of an insurer under sub section (1), he shall cease to be a director or as the case may be chief executive officer of the insurer and shall not, in any way, whether directly or indirectly, be concerned with, or take part in, the management of any insurer for such period not exceeding five years as may be specified in the order.
(4) If any person in respect of whom an order is made by the Authority under sub section (1) or under the proviso to sub section (2) contravenes the provisions of this section, he shall be punishable with fine which may extend to two hundred and fifty rupees for each day during which such contravention continues.
(5) Where an order under sub section (1) has been made, the Authority may, by order in writing, appoint a suitable person in place of the director or chief executive officer who has been removed from his office under that sub-section, with effect from such date as may be specified in the order.
(6) Any person appointed as director or chief executive officer under this section shall-¬
(a) hold office during the pleasure of the Controller and subject thereto for a period not exceeding three years or such further periods not exceeding three years at a time as the Authority may specify;
(b) not incur any obligation or liability by reason only of his being a director or chief executive officer or for anything done or omitted to be done in good faith in the execution of the duties of his office or in relation thereto.
(7) Notwithstanding anything contained in any law or in any contract, memorandum or articles of association, on the removal of a person from office under this section, that person shall not be entitled to claim any compensation for the loss or termination of office.
Power of Controller to appoint additional directors
34C. (l) If the Authority is of opinion that in the public interest or in the interests of an insurer or his policy holders it is necessary so to do, he may, from time to time, by order in writing, appoint, with effect from such date as may be specified in the order, one or more persons to hold office as additional directors of the insurer:
Provided that the number of additional directors so appointed shall not, at any time, exceed five or one third of the maximum strength fixed for the Board by the articles of association of the insurer, whichever is less.
(2) Any person appointed as additional director in pursuance of this section,—
(a) shall hold office during the pleasure of the Authority, and subject thereto for a period not exceeding three years or such further periods not exceeding three years at a time as the Authority may specify;
(b) shall 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 execution of the duties of his office or in relation thereto; and
(c) shall not be required to hold qualification shares of the insurer.
(3) For the purpose of reckoning any preparation of the total number of directors of the insurer, any additional director appointed under this section shall not be taken into account.
Sections 34B and 34C to override other laws
34 D. Any appointment or removal of a director or chief executive officer in pursuance of Section 34B or Section 34C shall have effect notwithstanding anything to the contrary contained in the Companies Act, 1956 (1 of 1956), or any other law for the time being in force or in any contract or any other instrument.
Further powers
34E. The Controller may,—
(a) caution or prohibit insurers generally or any insurer in particular against entering into any particular transaction or class of transactions, and generally give advice to any insurer;
(b) at any time, if he is satisfied that in the public interest or in the interests of the insurer or for preventing the affairs of the insurer being conducted in a manner detrimental to the interests of the insurer or his policy holders, it is necessary so to do, by order in writing and on such terms and conditions as may be specified therein,—
(i) require the insurer to call a meeting of his directors for the purpose of considering any matter relating to or arising out of the affairs of the insurer;
(ii) depute one or more of his officers to watch the proceedings at any meeting of the Board of Directors of the insurer or of any committee or of any other body constituted by it; require the insurer to give an opportunity to the officers so deputed to be heard at such meetings and also require such officers to send a report of such proceedings to the Authority;
(iii) require the Board of Directors of the insurer or any committee or any other body constituted by it to give in writing to any officer specified by the Authority in this behalf at his usual address all notices of, and other communications relating to, any meeting of the Board, committee or other body constituted by it;
(iv) appoint one or more of his officers to observe the manner in which the affairs of the insurer or of his offices or branches are being conducted and make a report thereon;
(v) require the insurer to make, within such time as may be specified in the order, such changes in the management as the Authority may consider necessary.
Power of Authority to issue directions regarding re insurance treaties, etc
34F. (1) Without prejudice to the generality of the powers conferred by sub-section (1) of Section 34, the Authority may, if he is of opinion that the terms or conditions of any re insurance treaty or other re insurance contract entered into by an insurer are not favourable to the insurer or are detrimental to the public interest, he may, by order, require, the insurer to make, at the time when the renewal of such treaty or contract becomes next due, such modifications in the terms and conditions of such treaty or contract as he may specify in the order or not to renew such treaty or contract, and, if the insurer fails to comply with such order, he shall be deemed to have failed to comply with the provisions of this Act.
(2) The Authority may, if he has reason to believe that an insurer is entering into or is likely to enter into re insurance treaties or other re insurance contracts which are not favourable to the insurer or are detrimental to the public interest, he may, by order, direct that the insurer shall not enter into such re insurance treaty or other re insurance contract unless a copy of such treaty or contract has been furnished to him in advance and the terms and conditions thereof have been approved by him and if the insurer fails to comply with such order he shall be deemed to have failed to comply with the requirements of this Act.
Power of Authority to order closure of foreign branches
34G. Without prejudice to the generality of the powers conferred by sub section (1) of Section 34 the Controller may, if he has reason to believe that the working of any branch outside India of an insurer being an insurer specified in sub clause (b) of clause (9) of Section 2, is generally resulting in a loss or that the affairs of that branch are being conducted in a manner prejudicial to the interests of the policy holders or the public interest, he may, after giving an opportunity to the insurer of being heard, direct that the insurer shall cease, within such period not being less than one year, as may be specified in the order, to carry on insurance business in the country in which such branch is situated and if the insurer fails to comply with such order he shall be deemed to have failed to comply with the provisions of this Act.
Search and seizure
34H. (1) Where the Chairperson of the Authority in consequence of information in his possession, has reason to believe that—
(a ) any person who has been required under sub section (2) of Sec. 33 to produce, or cause to be produced, any books, accounts or other documents in his custody or power has omitted or failed to produce, or cause to be produced, such books, accounts or other documents, or
(b) any person to whom a requisition to produce any books, accounts or other documents as aforesaid has been or might be issued will not, or would not, produce or cause to be produced, any books, accounts or other documents which will be useful for, or relevant to an investigation under sub section (1) of Section 33 or an inspection under sub section (1A) of that section, or
(c) a contravention of any provision of this Act has been committed or is likely to be committed by an insurer, or
(d) any claim which is due to be settled by an insurer, has been or is likely to be settled at a figure higher than a reasonable amount, or
(e) any claim which is due to be settled by an insurer, has been or is likely to be rejected or settled at a figure lower than a reasonable amount,
(f) any illegal rebate or commission has been paid or is likely to be paid by an insurer, or
(g) any books, accounts, receipts, vouchers, survey reports or other documents, belonging to an insurer are likely to be tampered with, falsified or manufactured, he may authorise any subordinate officer of his, not lower in rank than an officer authorized by the Authority (hereafter referred to as the authorised officer) to¬-
(i) enter and search any building or place where he has reason to suspect that such books, accounts or other documents, or any books or papers relating to any claim, rebate or commission or any receipts, vouchers, reports or other documents are kept;
(ii) break open the lock of any door, box, locker, safe, almirah or other receptacle for exercising the powers conferred by C1ause (i) where the keys thereof are not available;
(iii) seize all or any such books, accounts or other documents found as a result of such search;
(iv) place marks of identification on such books, accounts or other documents or make or cause to be made extracts or copies there from.
(2) The authorised officer may requisition the services of any police officer or of any officer of the Central Government, or of both, to assist him for all or any of the purposes specified in sub section (1) and it shall be the duty of every such officer to comply with such requisition.
(3) The authorised officer may, where it is not practicable to seize any such book, account or other document, specified in sub-section (1), serve an order on the person who is in immediate possession or control thereof that he shall not remove, part with or otherwise deal with it except with the previous permission of such officer and such officer may take such steps as may be necessary for ensuring compliance with this sub section.
(4) The authonsed officer may, during the course of the search or seizure, examine on oath any person who is found to be in possession or control of any books, accounts or other documents, and any statement made by such person during such examination may thereafter be used in evidence in any proceeding under this Act.
(5) The books, accounts, papers, receipts, vouchers, reports, or other documents seized under subsection (1) shall not be retained by the authorised officer for a period exceeding one hundred and eighty days from the date of the seizure unless the reasons for retaining the same recorded by him in writing and the approval of the Chairperson of the Authority for such retention is obtained:
Provided that the Chairperson of the Authority shall not authorise the retention of the books, accounts, papers, receipts, vouchers, reports, or other documents for a period exceeding thirty days after all the proceedings under this Act for which the books, accounts, papers, receipts, vouchers, or other documents are relevant are completed.
(6) The person from whose custody any books, accounts, papers, receipts, vouchers, reports, or other documents are seized under sub-section (1) may make copies thereof, or take extracts there from, in the presence of the authorised officer or any other person empowered by him in this behalf at such place and Idle as the authorised officer may appoint in this behalf.
(7) If a person legally entitled to the books, accounts, papers, receipts, vouchers, reports, or other documents seized under sub section (1) objects for any reason to the approval given by the Chairperson of the Authority under sub section (5), he may make an application to the Central Government stating therein the reasons for such objection and requesting for the return of the books, accounts, papers, receipts, vouchers, reports, or other documents.
(8) On receipt of the application under sub section (7) the Central Government may, after giving the applicant an opportunity of being heard, pass such orders as it thinks fit.
(9) The provisions of the Code of Criminal Procedure, 1898 (5 of 1898), relating to searchers and seizures shall apply, so far as may be, to every search and seizure made under sub section (1).
(10) The Central Government may, by notification in the official Gazette, make rules in relation to any search or seizure under this section; in particular, and without prejudice to the generality of the foregoing power, such rules may provide for the procedure to be followed by the authorised officer,—
(i) for obtaining ingress into such building or place to be searched where free ingress thereto is not available;
(ii) for ensuring safe custody of any books, accounts, papers, receipts, vouchers, reports, or other documents seized under this section.
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