Like any other contract, insurance contract are also governed by the provisions of the law of contract as laid down in The Indian Contract Act, 1872. Therefore they have to fulfill the essential features of a valid contract
The essentials of a valid contract have been discussed earlier.
LIFE INSURANCE CORPORATION ACT, 1956
The life insurance corporation Act, 1956 is an act
(I) to provide for the nationalisation of life insurance business in India
(II) to provide for the regulation and control of the business of the Corporation.
As per the act, 245 private insurance companies, provident societies, etc., were amalgamated and the life insurance corporation of India was formed and has since then grown up to be the largest insurance company in India.
Some of the important provisions are as follows —
Short title and commencement —
(1) This Act maybe called the Life Insurance Corporation Act, 1956
(2) It shall come into force on such date as the Central Government may, by Notifications in the Official Gazette, appoint.
Important Definitions: Sec 2 of the act contains the definitions adopted under the act. Some of the important definitions in this act, unless the context otherwise requires are:
(1) "Appointed day,” means the date on which the Corporation is established
under Section 3;
(2) "Composite insurer "means an insurer carrying on in addition to controlled business any other kind of insurance business;
(3) "Controlled business" means—
(i) In the case of any insurer specified in sub-clause (a) or sub-clause (b) of clause (9) of section 2 of the 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 any other class of 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 19th day of January, 1956.
(ii) in the case of any other insurer specified in clause (9) ofsection2 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;
(b) all the business appertaining to his life insurance business in India, if he carries on any other class of insurance business also in India;
(c) all his business in India if he certificate of registration under the Insurance Act in respect of general insurance business in India stands wholly cancelled for a period of more than six months on the 19th day of January, 1956.
(4) "Corporation" means the Life Insurance Corporation of India established under section 3;
(5) "Insurance Act” means the Insurance Act, 1938(4of1938);
(6) "Insurer" means an insurer as defined in the Insurance Act who carries on life insurance business in India and includes the Government and a provident society as defined in section65 of the Insurance Act;
(7) "Member" means a member of the Corporation;
(8) "Prescribed" means prescribed by rules made under this Act;
(9) "Tribunal" means a Tribunal constituted under section17 and having jurisdiction in respect of any matter under the rules made under this Act;
(10) All other words and expressions used herein but not defined and defined in the Insurance Act shall have the meanings respectively assigned to them in that Act.
Establishment and incorporation of Life Insurance Corporation of India —
Sec 3 of the act provides that
(1) With effect from such date as the Central Government may, by notification in the Official Gazette, appoint, there shall be established a Corporation called the Life Insurance Corporation of India.
(2) The Corporation shall be a body corporate having perpetual succession and a common seal with power subject to the provisions of this Act, to acquire, hold and dispose of property, and may by its name sue and be sued.
Constitution of the Corporation—
According to sec 4 of the Act:
(1) The Corporation shall consist of such number of persons not exceeding 2 as the Central Government may think fit to appoint thereto and one of them shall be appointed by the Central Government to be the Chairman there of.
(2) Before appointing a person to be a member, the Central Government shall satisfy itself that person will have no such financial or other interest as is likely to affect prejudicially the exercise or performance by him of his functions as a member, and the Central Government shall also satisfy itself from time to time with respect to every member that he has no such interest; and any person who is, or whom the Central Government proposes to appoint and who has consented to be, a member shall, whenever required by the Central Government so to do, furnish to it such information as the Central Government considers necessary for the performance of its duties under this sub-section.
(3) A member who is in anyway directly or indirectly interested in a contract made or proposed to be made by the Corporation shall as soon as possible after the relevant circumstances have come to his knowledge, disclose the nature of his interest to the Corporation and the member shall not take part in any deliberation or discussion of the Corporation with respect to that contact.
Capital of the Corporation—
(1) The original capital of the Corporation shall be five crores of rupees provided by the Central Government after due appropriation made by Parliament bylaw for the purpose, and the terms and conditions relating to the provision of such capital shall be such as maybe determined by the Central Government.
(2) The Central Government may, on the recommendation of the Corporation, reduce the capital of the Corporation to such extent and in such manner as the Central Government may determine
Functions of the Corporation—
These are as follows:
1) Subject, to the rules, if any, made by the Central Government in this behalf, it shall be the general duty of the Corporation to carry on life insurance business, whether in or outside India, and the Corporation shall so exercise its powers under this Act as to secure that life insurance business is developed to the best advantage of the community.
2) Without prejudice to the generality of the provisions contained in sub-section (1) but subject to the other provisions contained in this Act, the Corporation shall have power —
(a) To carryon capital redemption business, annuity certain business or reinsurance business in so far as such re insurance business appertains to life insurance business;
(b) Subject to the rules, if any, made by the Central Government in this behalf, to invest the funds of the Corporation in such manner as the Corporation may think fit and to take all such steps as may be necessary or expedient for the protection or realization of any investment; including the taking over of and administering any property offered as security for the investment until a suitable opportunity arises for its disposal;
(c) To acquire, hold and dispose of any property for the purpose of its business;
(d) To transfer the whole or any part of the life insurance business carries on outside India to any other person or persons, if in the interest of the Corporation it is expedient so to do;
(e) To advance or lend money upon the security of any movable property or otherwise;
(f) To borrow or raise any money in such manner and upon such security as the Corporation may think fit;
(g) To carry on either by itself or through any subsidiary any other business in any case where such other business was being carried on by a subsidiary of an insurer whose controlled business has been transferred to and invested in the Corporation under this Act;
(h) to carry on any other business which may seen to the Corporation to be capable of being conveniently carried on in connection with its business and calculated directly or indirectly to render profitable the business of the corporation;
(i) to do all such things as maybe incidental or conducive to the proper exercise of any of the powers of the Corporation. In the discharge of any of its functions the Corporation shall act so far as maybe on business principles.
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