Banking and Insurance - Laws and Practice · Inspection, Investigation, Penalty and Appellate Procedure

Inspection Reports and Action by the Authority

Updated 11 October 2026 · Fact-checked

Under Section 33(6) of the Insurance Act, 1938, once the Authority receives an investigation or inspection report, it gives the insurer or intermediary a reasonable chance to make a representation. It then passes a written order: require action, cancel registration, or direct a winding-up application. Appeal lies to the Securities Appellate Tribunal.

Understand Inspection Reports and Action by the Authority

An investigation or inspection is only a fact-finding step. The real consequences come after the report reaches the Authority. Section 33 sets out what happens next.

First, the report. The Authority orders an Investigating Officer to investigate the affairs of an insurer, intermediary or insurance intermediary (Section 33(1)). The Investigating Officer may also cause an inspection of the books of account, and must supply the entity a copy of the inspection report (Section 33(2)). If the Authority directed the inspection, the officer must report to the Authority (Section 33(5)).

Second, the hearing. On receiving a report under Section 33(1) or 33(5), the Authority may act only after giving the entity such opportunity to make a representation as, in its opinion, seems reasonable. This is the natural-justice step. Your answer should always mention it.

Third, the order. The Authority acts by order in writing. Under Section 33(6) it may do one of three things:

(a) require the insurer to take such action on any matter arising out of the report as it thinks fit;
(b) cancel the registration of the insurer, intermediary or insurance intermediary;
(c) direct any person to apply to the court for winding up, if the entity is a company. This can be done whether or not registration has been cancelled under (b).

Note that clause (a) speaks of the insurer only, while (b) and (c) cover intermediaries too.

Fourth, the follow-up. Any aggrieved insurer or intermediary may appeal to the Securities Appellate Tribunal (Section 33(8)). All expenses of the investigation are borne by the entity, have priority over the debts due from the insurer, and are recoverable as an arrear of land revenue (Section 33(9)). Separately, Section 102 provides a penalty for failure to comply with directions.

Key rules to remember

Action after report: Report received (S.33(1) or 33(5)) → reasonable opportunity to represent → written order under S.33(6); The hearing comes before the order. The order must be in writing.
Three powers under Section 33(6): (a) require action by insurer; (b) cancel registration; (c) direct application to court for winding up; Clause (c) applies only if the entity is a company, and works whether or not registration was cancelled.
Appeal: Aggrieved insurer/intermediary/insurance intermediary → Securities Appellate Tribunal (S.33(8)); Applies to any order made under Section 33.
Expenses of investigation: Borne by the entity; priority over debts due from insurer; recoverable as arrear of land revenue (S.33(9)); The Authority does not bear the cost.
Penalty for non-compliance with directions: Section 102: ₹1,00,000 per day of continuing failure or ₹1 crore, whichever is less; Covers failure to comply with directions, furnish returns, maintain solvency margin or comply with treaty directions.

How to solve Inspection Reports and Action by the Authority questions

Use this order for any case question on action after an inspection or investigation report.

1Identify who is involved: insurer, intermediary or insurance intermediary, and whether it is a company.
2Identify the source of the report: investigation under Section 33(1) or inspection under Section 33(2) and 33(5).
3State that the Authority must first give a reasonable opportunity to make a representation.
4Match the facts to the power in Section 33(6): action, cancellation or winding-up direction.
5Check that the order is in writing and that the right clause applies to the entity (clause (a) is for insurers).
6State the remedy: appeal to the Securities Appellate Tribunal under Section 33(8).
7Add the cost point under Section 33(9) and, if directions are ignored, the Section 102 penalty.
8Close with a one-line conclusion answering the question asked.

Quickest way: Report, Hearing, Order, Appeal

When to use it: Short-answer questions and the conclusion part of case questions.

Write: report received by the Authority.
Write: reasonable opportunity to make representation.
List the three powers (a), (b), (c) in one line each.
Add: appeal to SAT; expenses borne by the entity.
Apply to the facts in two lines.

Common mistakes in Inspection Reports and Action by the Authority

Saying the Authority can pass the order immediately on receiving the report.
Students focus on the powers and forget the hearing step.
Fix: Always write that a reasonable opportunity to make a representation comes first.
Saying the Authority can order winding up itself.
The word 'winding up' is read as the Authority's own power.
Fix: The Authority directs a person to apply to the court. The court winds up.
Thinking winding-up direction needs prior cancellation of registration.
The clauses are read as a sequence.
Fix: Clause (c) applies whether or not registration was cancelled under clause (b).
Naming the High Court or the Central Government as the appellate forum.
Confusing with other statutes.
Fix: Section 33(8) names the Securities Appellate Tribunal.
Applying a winding-up direction to a non-company intermediary.
Missing the words 'if it is a company'.
Fix: Check the entity's form before using clause (c).
Forgetting who pays for the investigation.
Assuming a regulator funds its own inquiries.
Fix: Quote Section 33(9): the entity pays, with priority over debts, recoverable as land revenue arrears.

Worked examples

Example 1

The Authority receives an Investigating Officer's report showing serious irregularities in the books of Sagar Life Insurance Ltd. Explain the steps open to the Authority and the rights of the insurer.

Show the solution

The report is received under Section 33(1) or 33(5).
Before any order, the Authority must give Sagar Life a reasonable opportunity to make a representation on the report.
After considering it, the Authority may, by written order, require the insurer to take such action on matters arising from the report as it thinks fit.
If the matter is grave, it may cancel the registration, or direct a person to apply to the court for winding up since the insurer is a company.
Sagar Life may appeal to the Securities Appellate Tribunal under Section 33(8).
The investigation expenses are payable by Sagar Life under Section 33(9).

Answer: The Authority must hear Sagar Life, then may order corrective action, cancel registration or direct a winding-up application, by written order. The insurer can appeal to the SAT and must bear the investigation costs.

Example 2

After an inspection, the Authority directs Meera Insurance Brokers Pvt Ltd, an insurance intermediary, to rectify certain lapses. It ignores the direction. Can the Authority act under Section 33(6)(a)? What else can follow?

Show the solution

Section 33(6)(a) allows the Authority to require action only from 'the insurer'.
Meera is an intermediary, so clause (a) does not directly fit.
Clauses (b) and (c) cover intermediaries: cancellation of registration, and a direction to apply for winding up because Meera is a company.
A hearing opportunity must precede either order.
Failure to comply with directions also attracts a Section 102 penalty of ₹1,00,000 for each day of continuing failure or ₹1 crore, whichever is less.
Meera may appeal to the SAT against any order under Section 33.

Answer: Clause (a) is not available against an intermediary. The Authority may cancel registration or direct a winding-up application after a hearing, and may impose the Section 102 penalty. Meera can appeal to the SAT.

Exam tips

Write the sequence in order: report, representation, written order, appeal. Marks follow the sequence.
Quote Section 33(6)(a), (b), (c) separately; examiners look for all three powers.
In case questions, check whether the entity is an insurer or an intermediary and whether it is a company.
Mention Section 33(9) on costs and Section 102 on penalty to show full coverage.
Finish with a clear conclusion on what the Authority can do and what remedy the entity has.

Practice questions from Inspection, Investigation, Penalty and Appellate Procedure

Inspection Reports and Action by the Authority in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

CMA FinalReport on Inspection and Follow-up Action

Inspection Reports and Action by the Authority: frequently asked questions

What can IRDAI do after receiving an investigation report?

Under Section 33(6), after giving a reasonable opportunity to make a representation, it can by written order require the insurer to take action, cancel registration, or direct a person to apply to the court for winding up a company.

Can the insurer challenge the Authority's order under Section 33?

Yes. Section 33(8) lets an aggrieved insurer, intermediary or insurance intermediary appeal to the Securities Appellate Tribunal.

Who pays for the investigation?

The insurer or intermediary pays. Under Section 33(9), the expenses have priority over the debts due from the insurer and are recoverable as an arrear of land revenue.

Does the insurer get a copy of the inspection report?

Yes. Section 33(2) requires the Investigating Officer to supply the insurer or intermediary a copy of the inspection report.