 the life insurance (emer- gency provisions) bill, 1956(asintroduced in lok sab:i\)  the life insurance (emergency provisions) bill, 1956 (as introduced in lok sabha) a billto provide for the taking over, in the public interest, of the management of life insurance businebs pending naticnalisation thereof be it enacted by parliament in the seventh year of the republic of india as follows:-1 this act may be called the life insurance (emergency provi- short tide sions) act, 1956 s 2 in this act, unless the context otherwise requires,-definitions (1) "appointed day" means the 19th day of january, 1956; (2) "controlled business" means-(i)in the case of an insurer specified in sub-clause (a) (ii) or sub-clause (b) of clause (9) of section 2 of the 10 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 some other class of is 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 appointed day; i (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; s (b) all the business appertaining to his life insurance business in india, if he carries on some other class of insurance business also in india; (c) all his business in india, if his certificate of registration und~r the insurance act in respect of 10 general insurance business in india stands wholly cancelled for a period of more than six months on the appointed day; (iii) in the case of a provident society, as defined in section 65 of the insurance act, all its business; is explanation-an insurer is said to carryon 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" 20 shall be construed accordingly; (3)· "custodian" means the person appointed under section 4 to take over the management of any controlled business; (4,> "insurance act" means the insurance act, 1938;  of 1938 (5) "insurer" means an insurer as defined in the insurance 2s act who carries on life insurance business in india, and includes a provident soci<!ty as defined in section 65 of the insurance a~; (6) "notified order" means an order notified in the official gazette; 30 (7) all other words and expressions used herein but not defined, and defined in the insurance act, shall have the meanings respactively assigned to them in that act management 3 (1) on and from the appointed day, the management of the b!'=~ed controlled business of all insurers shall vest in the central gov- 3s vest in gov- emment, and, pending the appointment of a custodian for the con-:ar:ne!: trolled business of any insurer, the persons in charge of the management of m~nt of such business immediately before the appointed day shan, act em and from the appointed day, be in charl'e of the management of tile business for and on behalf of the central government; and the 40 controlled business of the insurer shall be carriefl od by them subject to the provisions contained in sl1b-section (3) and (5) and to w:h further directions, if any, as the central govemment may give· to-1thern  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 controlled business of an insurer made before 5 the appointed day betwe~n the insurer and any person in charge of the management of such business immediately before the appointed day shall be deemed to have terminat~d on the appointed day (3~ no insurer shall, without the previous approval of the person i specified by the central government in this behalf in resp~ct of 10 that insurer (hereinafter referred to as the authorised person),-(4) make any payment or grant any loan in respect of a policy of life insurance otherwise than in accordance with the normal practice observed by him in respect of such matters immediately before the appointed day; 15 (b) incur any expenditure from the assets appertaining to the controlled business otherwise than for the purpose of making routine payments of salaries or commissions to employees, insurance agents, special agents or chief agents or for the purpose of meeting the routine day to day expenditure; 20 (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; 2s (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 controlled business or vary the terms and con-30 ditions of any such contract subsisting on the appoint1!d day; (g) enter into any other transaction relating to controlled business other than a contract relating to the issue of a new policy of life insurance or vary the terms and conditions of any agreement relating to any such transaction subsistirtg at the 3s 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 r~lation to any of his transactions (5) every insuter shall deposit all securities and documents of 40 title to any assets appertaining to the controlled business in any scheduled bank in which the il'l~urer 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 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 :;hall apply to any security or document of title kept with approved trustees by reason of the provisions contained in sub-section (6) of section 27 10 of the insurance act, or 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 is being in the second schedule to the reserve bank of india act, 1934; :i of 1934 (b) 'state bank' means the state bank of india constituted under the state bank of india act, 1955 13 of 19s5 (6) every insurer shall deliver forthwith at the place and to the ao person specified in this behalf by the central government in respect of that insurer the following documents, namely:-(i) 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 controlled business before the appoint- :is ed day; (ii) the current cheque books relating to 'the ·controlled business which are at the head office or the principal office of the insurer; (iii) all registers or other books containing particulars re- 3t lating to the investment of any moneys appertaining to the controlled business including investments on mortgaged properties and all loans granted and advances made otherwise than on policies; (iv) all brokers' notes or certificates in the possession of the 3' insurer in respect of any orders for the investment of any moneys appertaining to the controlled business: provided that if any document specifted in this sub-section is relevant for the purpose of any business other than the controlled business carried on by the insurer, the person specifted in the notified 40 order shall be bound to return it to the persons in charge of the management of such other business with the least possible delay, but shall have power to place identification marks on such document or to take extracts or copies therefrom (7) without pr:judice to the generality of the powers conferred by sub-section (1) and to the provisions contained in sub-sections (3), 5 (5) and (6), any directions issued under sub-section (1) may require the persons in charge of the management of the controlled business 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 controlled business as may be mentioned in 10 the direction (8) the persons in charge of the management e' the controlled business of an insurer under this act shall be entitled to such remuneration, whether by way of allowance or salary as the central government may fix; and any such person may, by giving a month's 15 notice in writing to the central government of his intention so to de, relinquish charge of the management of the controlled business 4 (1) the central government may, as soon as it is convenient power of administratively so to do, appoint any person as custodian for the ~::t~~v­purpose of taking over the management of the controlled business appoint of  custodians to 20 an msurer take over management of controlled business (2) on the appointment of a custodian under sub-section (1), all persons in charge of the management of the controlled business of the insurer for and on behalf of the central government immediately before such appointment shall cease to be in charge of 25 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 controlled business of the insurer (3) nothing contained in sub-sections (3), (5) and (6) of section 3- shall apply to any insurer the management of whose con-30 trolled business 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 35 conduct the management of the controlled business of the insurer or in relation to any matter arising in the course of such management (4) the custodian shall re«:eive such remuneration as the central government may fix; and the central government may at any time cancel the appointment of any "rson as custodian and appoidt 40 some other person id his stead = of s the custodian may, in relation to the controlled business of illltltut!an to any insurer the management of which has been taken over by him, ~ft8i, exercise all or any of the powers which the controller of insurance or an administrator appointed under section 52a of the insurance act may exercise under section 106 or section 107 of that act s comz:--6 the amount of compensation payable in respect of the =:~ vesting in the central government of the management of the con-:a=~~ncd trolled business of an insurer shall, for every month during which veatina in the management thereof remains vested in the central government, =~t~ov- be a sum which is equivalent to one-twelfth of the annual average 10 of the share of the surplul' allocated to shareholders as disclosed in the abstracts prepared in accordance with part ii of the fourth schedule to the insurance act in respect of the last two actuarial investigations relating to the controlled business as at dates earlier than the first day of january, 1956: is provided that, if in respect of the controlled business of an insurer no such surplus as is referred to in this sub-section has been allocated to shareholders either because there are no shareholders or for any other reason, the compensation shall be payable at the rate of one rupee per month for every two thousand rupees or part thereof 20 of the premium income of the insurer relating to his controlled business during the year 1954 compcnm-don, bow to be paid and distributed 7 (1) the amount of compensation payable under section 6 shall in the fint idatance be payable out of the seven and a half pflr cellt of the surplus referred to in sub-section (1) of section 49 of the 25 insurance act earned by the insurer durin, the period the idbnaarement of the controlled business of the insurer vests in the celltral government, and where such compensation or any part thereof cunot be so paid out the central government shall make due provision for the payment of such compensation or part thereof as 30 the case may be (2) the compensation payable under section 6 shall be distributed among the persons entitled thereto by the central government in such manner as may be prescribed by rules made in this behalf: 3s provided that in the case of an insurer who is a company the central government shall have due regard to the wishes of the members expressed by them at any general meeting convened for the purpose pcaalticl 8 if' any person-40 (el' fails to deliver to the custodian any books of accoddt, registen or any other documents in his custody relating to the' eoatrolled buainees of en insurer in respect of the maaagement of which the custodian has been appointed; or (b) retains any property of such insurer appertaining to the controlled business of the insurer; or (c) fails to comply with the provisions contained in subsection (3) or sub-section (5) or sub-section (6) of section 3; or (d) fails to comply with any directions issued under subsection (1) or sub-section (7) of section 3; he shall be punishable with imprisonment which may extend to six 10 months, or with fine which may extend to one thousand rupees, or with both 9 no proceeding for the winding up of an insurer the manage- insurer not ment of whose controlled business has vested in the central govern- ~p bebywountl court ment under this act or for the appointment of a receiver in respect 15 of such business shall lie in any court 10 in computing the period of limitation prescribed by any law exclusion of for the time being ill force for any suit or application against any ~c of person by an insurer in respect of any matter arising ou«t of his for ~ut­controlled business, the time during which the  life insurance ~i~r~~on 20 (emergency provisions) ordinance, 1956 and this act have been in force shall be excluded 11 the provisions of this act shall have effect notwithstanding effect of anything inconsistent therewith in any other law or in any instru- on act th o er ment having effect by virtue of any other law jaws 25 12 the central government may, by notified order, direct that delegation all or any of the powers exercisable by it under this act may also of powcn be exercised by any such person as may be specified in the order 13 (1) no suit, prosecution or other legal proceeding shall lie protection against any custodian or authorised person in respect of anything ~ ~der 30 which is in good faith done or intended to be done under this act act (2) no suit or other legal proceeding shall lie against the central gov~rnment or any custodian or authorised person for any damage caused or likely to be caused by anything which is ill good 3' faith done or intended to be done under this act 14 nothing contained in this act shall apply to-(a) any insurer in respect of the management of whose aftairs an administrator has been appointed under section 52a df the insurance act; -~o (b) any insurer whose business is being voluntarily wound up or is being wound up under the orders of a court; (c) any insur~r to whom the insurance act does not apply by reason of the provisions con~ained in section 2e thereof; (d) any approved superannuation fund as defined in clause (a) of section 58n of the indian income-tax act, 1922; or 11 of 19%1~ (e) any insurance business carried on by the government s power to make rules 15 (1) the central government may, by notified order, make rules to carry out the purposes of this act (2) in particular, and without prejudice to the generality of the foregoing power, rules made under sub-section (1) may provide for--10 (a) the form and manner in which books of accounts appertaining to controlled business shall be maintained by insurers; (b) the manner in which any compensation payable under this act may be paid to the persons entitled thereto; (c) the circumstances in which the remuneration payable to persons in charge of the management of the controlled business of an insurer under this act or to custodians shall be met by the central government, whether wholly or in part repeal of ordinance 16 (1) the life insurance (emergency provisions) ordinance, 20' i of 1956 and savings 1956, is hereby repealed (2) anything done or any action taken (including any directions given and orders cmd rules made) under the said ordinance shall be deemed to have been done or taken under this act as if ,this act were in force on the day on which such thing· was done or 25' action was taken   statement of objects and reasonsgovernment have during the last few months been studying the problems facing the insurance industry in its role as an effective instrument of mobilising people's so:vings and putting them to use in a constructive manner as a result of such study the present management of the industry has been found wanting in several respects by the amendment of the insurance act, which was effected in 1950, government took powers to appoint administrators to manage' companies where the interests of the policy holders were in grave jeopardy in the short period that has elapsed since then a number of companies had to be put under administrators as investigation into their affairs revealed gr('ss mismanagement~ven embezzlement -very often resulting in insolvency it has been observed that with a few exceptions, the indian life insurers are virtually controlled by individuals who are prone to utilise the funds of these companies to subsidise or prop up their investments in other ventures to the! detriment of the industry and the policy holder who is its back-bone tightening up the provisions of the insurance act is no remedy since it is only of a negative character government have therefore decided to nationalise the life insurance business a bill to give effect to this decision will shortly be placed before parliament it was essential, however, to save the interests of the policy holders from damage, till legislation for this purpose was passed and put into effect it was, therefore, necessary to issue an ordinance styled the life insurance (emergency provisions) ordinance, 1956, vesting the management of all life insurance business in indie, including the business now managed by foreign insurers, in the government and for appointment of custodians to manage tthe business on behalf of government the ordinance slso provided for the payment on a reasonable basis, of compensation to the persons entitled thereto in respect of the government taking over the man£gement of the business the present bill seeks to convert that ordinance into an act c d deshmukh new delhi; the 7th february, 1956  uader clause 7 (1), the central government has to make due f)j'oviiicm for payment of a part or the whole of the compensation kecltuader elause 6 in cases where seven and a half per cent of ~e ·8lirplus e&r'qed by the concerned insurer during the period his ~ment vests in the government is not sufficient to pay the compensation, or where there is no such surplus during such period it is not possible to anticipate in what cases payment by government· wm arise and to what extent it is, therefore, not possible to make any atimate of this liability at this stage; but it is not likely te· ejlceedrs "21,000 per month clauses 3 (8) and 4 (4), read with clause 15 (2) (c), contempla'te payment, wholly or in part, by the government, of the remuneration payable to persons in charge of management by virtue of clause 3(1) or to custodians appointed under clause 4 while the circumstances in -whichsucb payment has to be made by government have yet to be prescribed by rules, it is expected that such a contingency will arise only in· ule case of insurers having meagre funds though it iaj1ot poaeible to make any estimate of the likely liability of govern-iredt gn this account, it is expected thalt the question of government payment will arise only in asmall number of cases, and that the liability will not exceed rs 5,000 per month clause 15 authorises the central government to make rules providing for the form and manner in which books of accounts are to be maintained by insurers in respect of their business the mana~ ment of which vests in the government; regulating the manner in which compensation payable under clauses 6 and 7 will 'be paid to the persons entitled thereto; and specifying the circumstanees in which the government will bear the whole or a pa~ of the remuneration payable to persons in charge of management for and on behalf of government by virtue of clause 3(1) or to custodians appointed in exercise of the powers under clause 4 the rule-maleiill power is of a normal character  a billto provide for the taking over, in the public interest, of the management of life insurance business pending nationalisation thereof the presi~ent has, in pursuance of clause (3) of article 117 of the constitution of india, recommended to lok sabhs the consideration of the bill m n kaul, secretary (shri c d deshmukh» minister of finance) 