The General Insurance Business (Nationalisation) Act, 1972
Administered Ministry: Ministry of Finance / Department of Financial Services
Section
Section 18 Functions of Corporation.
(1) The functions of the Corporation shall include--
(a) the carrying on of any part of the general insurance business, if it thinks it desirable to do so;
(b) aiding, assisting and advising the acquiring companies in the matter of setting up of standards of conduct and sound practice in general insurance business and in the matter of rendering efficient service to holders of policies of general insurance;
(c) advising the acquiring companies in the matter of controlling their expenses including the payment of commission and other expenses;
(d) advising the acquiring companies in the matter of the investment of their funds;
(e) issuing directions to acquiring companies in relation to the conduct of general insurance business:
1[Provided that all the functions of the Corporation specified in this sub-section, on and from the commencement of the General Insurance Business (Nationalisation) Amendment Act, 2002, shall be performed by the Central Government.]
(2) In issuing any directions under sub-section (1), the 2[Central Government] shall keep in mind the desirability of encouraging competition amongst the acquiring companies as far as possible in order to render their services more efficient.
(a) the carrying on of any part of the general insurance business, if it thinks it desirable to do so;
(b) aiding, assisting and advising the acquiring companies in the matter of setting up of standards of conduct and sound practice in general insurance business and in the matter of rendering efficient service to holders of policies of general insurance;
(c) advising the acquiring companies in the matter of controlling their expenses including the payment of commission and other expenses;
(d) advising the acquiring companies in the matter of the investment of their funds;
(e) issuing directions to acquiring companies in relation to the conduct of general insurance business:
1[Provided that all the functions of the Corporation specified in this sub-section, on and from the commencement of the General Insurance Business (Nationalisation) Amendment Act, 2002, shall be performed by the Central Government.]
(2) In issuing any directions under sub-section (1), the 2[Central Government] shall keep in mind the desirability of encouraging competition amongst the acquiring companies as far as possible in order to render their services more efficient.
1. Ins. by Act 40 of 2002, s. 4 (w.e.f. 21-3-2003).
2. Subs. by s. 4, ibid., for "Corporation" (w.e.f. 21-3-2003).
2. Subs. by s. 4, ibid., for "Corporation" (w.e.f. 21-3-2003).
Section 19 Functions of acquiring companies.
(1) Subject to the rules, if any, made by the Central Government in this behalf and to its memorandum and articles of association, it shall be the duty of every acquiring company to carry on general insurance business.
(2) Each acquiring company shall so function under this Act as to secure that general insurance business is developed to the best advantage of the community.
(3) In the discharge of any of its functions, each acquiring company shall act so far as may be on business principles and where any directions have been issued by the 1[ Central Government or the Insurance Regulatory and Development Authority established under sub-section (1) of section 3 of the Insurance Regulatory and Development Authority Act, 1999] (41 of 1999), shall be guided by such directions.
(4) For the removal of doubts it is hereby declared that the Corporation and any acquiring company may, subject to the rules, if any, made by the Central Government in this behalf, enter into such contracts of reinsurance or reinsurance treaties as it may think fit for the protection of its interests.
(2) Each acquiring company shall so function under this Act as to secure that general insurance business is developed to the best advantage of the community.
(3) In the discharge of any of its functions, each acquiring company shall act so far as may be on business principles and where any directions have been issued by the 1[ Central Government or the Insurance Regulatory and Development Authority established under sub-section (1) of section 3 of the Insurance Regulatory and Development Authority Act, 1999] (41 of 1999), shall be guided by such directions.
(4) For the removal of doubts it is hereby declared that the Corporation and any acquiring company may, subject to the rules, if any, made by the Central Government in this behalf, enter into such contracts of reinsurance or reinsurance treaties as it may think fit for the protection of its interests.
1. Subs. by s. 5, ibid., for "Corporation" (w.e.f. 21-3-2003).
Section 20 Balance of profit how to be utilised.
(1) After making provision for bad and doubtful debts, depreciation in assets, provident, superannuation, welfare and other funds, debts due to Government and all other matters for which provision is necessary under any law or which are usually provided for by insurance companies, every acquiring company shall distribute the balance of profit as dividends.
(2) Any profit made by the Corporation and any sums received by the Corporation by way of dividends or otherwise shall be dealt with by it in such manner as may be prescribed.
(2) Any profit made by the Corporation and any sums received by the Corporation by way of dividends or otherwise shall be dealt with by it in such manner as may be prescribed.
Section 21 Interim provisions for management of Indian insurance companies.
(1) Notwithstanding anything contained in the Companies Act or in the memorandum and articles of association of any Indian insurance company, on and from the appointed day and until a new board of directors of the Indian insurance company is duly constituted, the management of the company shall continue to vest in the Custodian in charge of the management of the undertaking of that company immediately before the appointed day by virtue of the provisions contained in the General Insurance (Emergency Provisions) Act, 1971 (17 of 1971), and the Custodian shall be entitled, subject to such directions as the Central Government may issue in this behalf, to exercise all the powers and do all acts and things as may be exercised or done by the company or by its board of directors.
(2) Nothing contained in sub-section (1) shall be deemed to prevent the Central Government from appointing any other person to take charge of the management of the undertaking of any Indian insurance company during the period referred to in that sub-section if for any reason it becomes necessary so to do, and any person so appointed may exercise all the powers and do all acts and things which a Custodian may exercise or do under sub-section (1).
(3) The Custodian referred to in sub-section (1) and the person appointed under sub-section (2) shall be entitled to such salaries and other allowances as the Central Government may specify in this behalf and shall hold office during the pleasure of the Central Government.
(2) Nothing contained in sub-section (1) shall be deemed to prevent the Central Government from appointing any other person to take charge of the management of the undertaking of any Indian insurance company during the period referred to in that sub-section if for any reason it becomes necessary so to do, and any person so appointed may exercise all the powers and do all acts and things which a Custodian may exercise or do under sub-section (1).
(3) The Custodian referred to in sub-section (1) and the person appointed under sub-section (2) shall be entitled to such salaries and other allowances as the Central Government may specify in this behalf and shall hold office during the pleasure of the Central Government.
Section 22 Power of Central Government to transfer employees.
1[The Central Government or any person authorised by it may at any time transfer any officer] or employee from an acquiring company or the Corporation to any other acquiring company or the Corporation, as the case may be, and the officer or employee so transferred, shall continue to have the same terms and conditions of service as were applicable to him immediately before such transfer.
1. Subs. by Act 40 of 2002, s. 6, for "The Corporation may at any time transfer any officer" (w.e.f. 21-3-2003).
Section 23 Power of Central Government to issue directions.
The Corporation and every acquiring company shall, in the discharge of its functions, be guided by such directions in regard to matters of policy involving public interest as the Central Government may give.
Section 24 Acquiring companies to have the exclusive privilege of carrying on general insurance business.
(1) Except to the extent expressly provided in this Act, on and from the appointed day, the Corporation and the acquiring companies shall have the exclusive privilege of carrying on general insurance business in India.
(2) Subject to the provisions of section 36, any certificate of registration granted under the Insurance Act to any insurer other than an insurer referred to in sub-section (1) shall, on and from the appointed day, cease to have effect:
Provided that nothing in this sub-section shall apply to the carrying on by the Life Insurance Corporation of life insurance business and capital redemption and annuity certain business.
(2) Subject to the provisions of section 36, any certificate of registration granted under the Insurance Act to any insurer other than an insurer referred to in sub-section (1) shall, on and from the appointed day, cease to have effect:
Provided that nothing in this sub-section shall apply to the carrying on by the Life Insurance Corporation of life insurance business and capital redemption and annuity certain business.
Section 24A Exclusive privilege of Corporation and acquiring companies to cease.
1[24A. Exclusive privilege of Corporation and acquiring companies to cease.-- Notwithstanding anything contained in this Act, the exclusive privilege of the Corporation and the acquiring companies of carrying on general insurance business in India shall cease on and from the commencement of the Insurance Regulatory and Development Authority Act, 1999 and the Corporation and the acquiring companies shall, thereafter, carry on general insurance business in India in accordance with the provisions of the Insurance Act, 1938 (4 of 1938):
2[Provided that the Corporation shall, on and from the commencement of the General Insurance Business (Nationalisation) Amendment Act, 2002, cease to carry on general insurance business].]
2[Provided that the Corporation shall, on and from the commencement of the General Insurance Business (Nationalisation) Amendment Act, 2002, cease to carry on general insurance business].]
1. Ins. by Act 41 of 1999, s. 32 and the Third Schedule (w.e.f. 19-4-2000).
2. Ins. by Act 40 of 2002, s. 7 (w.e.f. 21-3-2003).
2. Ins. by Act 40 of 2002, s. 7 (w.e.f. 21-3-2003).
Section 24B Cessation of application of Act.
1[24B. Cessation of application of Act.--(1) On and from the date on which the Central Government ceases to control any specified insurer, after the commencement of the General Insurance Business (Nationalisation) Amendment Act, 2021, the provisions of this Act shall cease to apply in respect of that specified insurer.
(2) Notwithstanding anything contained in sub-section (1), on the date of cessation of applicability referred to in sub-section (1),--
(a) any scheme framed by the Central Government under sub-section (1) of section 17A in respect of the specified insurer referred to in sub-section (1) shall be deemed to have been adopted by the board of directors of such specified insurer:
Provided that the board of directors may make such additions, amendments or variations thereto, or frame new policy in place of such scheme, as it may deem appropriate;
(b) without prejudice to the generality of the power of the board of directors of the specified insurer under clause (a), all powers exercisable by the Central Government under a scheme framed by it in sub-section (1) of section 17A shall be exercisable by that board of directors.
Explanation 1.--For the purposes of this section, the expression control means the right of the Central Government, in relation to a specified insurer,
(i) to appoint a majority of its directors; or
(ii) to have power over its management or policy decisions,
by virtue of its shareholding rights or management rights under its articles of association or shareholders agreements or voting agreements or any other agreements executed with the specified insurer or any other person in relation to the specified insurer.
Explanation 2.--For the removal of doubts, it is hereby clarified that--
(i) the provisions of this section shall also apply to any rule, scheme, direction or notification made under this Act before the cessation of applicability;
(ii) the cessation of applicability shall not revive anything that was not already in force or in existence under this Act or affect anything previously done or suffered under this Act;
(iii) the board of directors of the specified insurer shall exercise the powers referred to in sub-section (2), subject to any requirement under any law for the time being in force.]
(2) Notwithstanding anything contained in sub-section (1), on the date of cessation of applicability referred to in sub-section (1),--
(a) any scheme framed by the Central Government under sub-section (1) of section 17A in respect of the specified insurer referred to in sub-section (1) shall be deemed to have been adopted by the board of directors of such specified insurer:
Provided that the board of directors may make such additions, amendments or variations thereto, or frame new policy in place of such scheme, as it may deem appropriate;
(b) without prejudice to the generality of the power of the board of directors of the specified insurer under clause (a), all powers exercisable by the Central Government under a scheme framed by it in sub-section (1) of section 17A shall be exercisable by that board of directors.
Explanation 1.--For the purposes of this section, the expression control means the right of the Central Government, in relation to a specified insurer,
(i) to appoint a majority of its directors; or
(ii) to have power over its management or policy decisions,
by virtue of its shareholding rights or management rights under its articles of association or shareholders agreements or voting agreements or any other agreements executed with the specified insurer or any other person in relation to the specified insurer.
Explanation 2.--For the removal of doubts, it is hereby clarified that--
(i) the provisions of this section shall also apply to any rule, scheme, direction or notification made under this Act before the cessation of applicability;
(ii) the cessation of applicability shall not revive anything that was not already in force or in existence under this Act or affect anything previously done or suffered under this Act;
(iii) the board of directors of the specified insurer shall exercise the powers referred to in sub-section (2), subject to any requirement under any law for the time being in force.]
1.Ins. by Act 37 of 2021, s. 5 (w.e.f. 27-8-2021).
Section 25 Omitted.
[Properties in India not to be insured with foreign insurers except with permission of Central Government.] Omitted by the Insurance Laws (Amendment) Act, 2015 (5 of 2015), s. 104 (w.e.f. 26-12-2014).
Section 26 Acquiring companies and income-tax.
For the purposes of the Income-tax Act, 1961 (43 of 1961), every acquiring company shall be deemed to be an Indian company and a company in which the public are substantially interested.
Section 27 Power to reduce amounts of insurance in certain eases
An acquiring company may, having regard to its financial condition on the 13th day of May, 1971 or the financial condition on the said date of any existing insurer whose undertaking has been transferred to and vested in it under this Act reduce the liabilities which have arisen under contracts of general insurance entered into before the said date in such manner and subject to such conditions as it thinks fit:
Provided that no such reduction shall be made except in accordance with specific proposals made by the acquiring company in this behalf and approved by the Central Government.
Provided that no such reduction shall be made except in accordance with specific proposals made by the acquiring company in this behalf and approved by the Central Government.
Section 28 Right of acquiring company to seek relief in respect of certain transactions.
(1) Where an existing insurer has at any time within five years before the 13th day of May, 1971--
(a) made any payment to any person without consideration,
(b) sold or disposed of any property of the insurer without consideration or for an inadequate consideration,
(c) acquired any property or rights for an excessive consideration,
(d) entered into or varied any agreement so as to require an excessive consideration to be paid or given by the insurer,
(e) entered into any other transaction of such an onerous nature as to cause a loss to, or impose a liability on, the insurer exceeding any benefit accruing to the insurer,
and the payment, sale, disposal, acquisition, agreement or variation thereof or other transaction was not reasonably necessary for the purpose of the general insurance business of the insurer or was made with an unreasonable lack of prudence on the part of the insurer, regard being had in either case to the circumstances at the time, the acquiring company may apply for relief to the court in respect of such transaction, and all parties to the transaction shall, unless the court otherwise directs, be made parties to the application.
(2) The court may make such order against any of the parties to the application as it thinks just having regard to the extent to which those parties were respectively responsible for the transaction or benefited from it and all the circumstances of the case.
(3) Where an application is made to the court under this section in respect of any transaction and the application is determined in favour of the acquiring company, the court shall have exclusive jurisdiction to determine any claim outstanding in respect of the transaction.
(a) made any payment to any person without consideration,
(b) sold or disposed of any property of the insurer without consideration or for an inadequate consideration,
(c) acquired any property or rights for an excessive consideration,
(d) entered into or varied any agreement so as to require an excessive consideration to be paid or given by the insurer,
(e) entered into any other transaction of such an onerous nature as to cause a loss to, or impose a liability on, the insurer exceeding any benefit accruing to the insurer,
and the payment, sale, disposal, acquisition, agreement or variation thereof or other transaction was not reasonably necessary for the purpose of the general insurance business of the insurer or was made with an unreasonable lack of prudence on the part of the insurer, regard being had in either case to the circumstances at the time, the acquiring company may apply for relief to the court in respect of such transaction, and all parties to the transaction shall, unless the court otherwise directs, be made parties to the application.
(2) The court may make such order against any of the parties to the application as it thinks just having regard to the extent to which those parties were respectively responsible for the transaction or benefited from it and all the circumstances of the case.
(3) Where an application is made to the court under this section in respect of any transaction and the application is determined in favour of the acquiring company, the court shall have exclusive jurisdiction to determine any claim outstanding in respect of the transaction.
Section 29 Duty to deliver possession of property and documents relating thereto.
(1) Where any property appertaining to an existing insurer has been transferred to and vested in an Indian insurance company under section 5,--
(a) every person in whose possession, custody or control any such property may be, shall deliver the property to the Indian insurance company forthwith,
(b) any person who immediately before such vesting has in his possession, custody or control any books, documents or other papers relating to an existing insurer shall be liable to account for the said books, documents and papers to the Indian insurance company, and shall deliver them to that company or to such person as that company may direct.
(2) In particular, all the assets of an existing insurer appertaining to the undertaking held in deposit by the Reserve Bank of India under the Insurance Act or by trustees in trust shall be delivered to the Indian insurance company.
(3) Without prejudice to the other provisions contained in this section, it shall be lawful for each Indian Insurance company to take all necessary steps for taking possession of all properties which have been transferred to and vested in it under this Act.
(a) every person in whose possession, custody or control any such property may be, shall deliver the property to the Indian insurance company forthwith,
(b) any person who immediately before such vesting has in his possession, custody or control any books, documents or other papers relating to an existing insurer shall be liable to account for the said books, documents and papers to the Indian insurance company, and shall deliver them to that company or to such person as that company may direct.
(2) In particular, all the assets of an existing insurer appertaining to the undertaking held in deposit by the Reserve Bank of India under the Insurance Act or by trustees in trust shall be delivered to the Indian insurance company.
(3) Without prejudice to the other provisions contained in this section, it shall be lawful for each Indian Insurance company to take all necessary steps for taking possession of all properties which have been transferred to and vested in it under this Act.
Section 30 Penalty for withholding property, etc.
If any person wilfully withholds or fails to deliver to an Indian insurance company as required by section 29 any property or any books, documents or other papers which may be in his possession or unlawfully retains possession of any property of an existing insurer which has been transferred to and vested in an Indian insurance company under section 5 or wilfully applies any such property to purposes other than those expressed in or authorised by this Act, he shall, on the complaint of the Indian insurance company, be 1[liable to penalty which may extend to fifty lakh rupees or the value of the property, whichever is higher, in respect of each contravention, and if he persists in such contravention, to a further penalty which may extend to fifty thousand rupees for every day during which the contravention continues].
1. Subs.by Act 8 of 2026, s. 2 and Sch., for certain words (w.e.f. 23-6-2026).
Section 31 Officers and employees of Corporation or of acquiring companies to be public servants.
Every officer or other employee of the Corporation or of an acquiring company shall be deemed to be a public servant for the purposes of Chapter IX of the Indian Penal Code (45 of 1860).
Section 31A Liability of director of specified insurer.
1[31A. Liability of director of specified insurer.--A director of a specified insurer who is not its whole-time director shall be held liable only in respect of such acts of omission or commission of the specified insurer which had been committed with his knowledge, attributable through board processes, and with his consent or connivance or where he had not acted diligently.
Explanation.--For the purposes of this section, the reference to board shall include committees of the board.]
Explanation.--For the purposes of this section, the reference to board shall include committees of the board.]
1 Ins. by Act 37 of 2021, s. 6 (w.e.f. 27-8-2021).
Section 32 Indemnity
Every officer of the Central Government and every officer or other employee of the Corporation and of any acquiring company shall be indemnified by the Central Government or the Corporation or the acquiring company, as the case may be, against all losses and expenses incurred by him in, or in relation to, the discharge of his duties under this Act except such as have been caused by his own wilful act or default.
Section 33 Dissolution of Corporation and acquiring companies
No provision of law relating to the winding up of companies shall apply to the Corporation or to an acquiring company, and neither the Corporation nor any such company shall be placed in liquidation save by order of the Central Government and in such manner as it may direct.
Section 34 Reference to existing insurer in other laws
Any reference to an existing insurer in any law other than this Act or any contract or other instrument shall, in so far as it relates to an acquiring company, be construed as a reference to that company.