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Banking and Insurance - Laws and Practice · Life Insurance

Establishment and Incorporation of LIC under Section 3

Updated 11 October 2026 · Fact-checked

Section 3 of the Life Insurance Corporation Act, 1956 establishes the Life Insurance Corporation of India from a date the Central Government appoints by notification. The Corporation is a body corporate with perpetual succession and a common seal. It can hold property and can sue and be sued in its own name.

Understand Establishment and Incorporation of LIC

LIC is a statutory corporation. It does not come from the Companies Act. It exists because Parliament passed a special Act, the Life Insurance Corporation Act, 1956, and Section 3 of that Act creates it.

Section 3 has two parts. Sub-section (1) deals with establishment. The Corporation is established with effect from such date as the Central Government appoints by notification in the Official Gazette. So the Act alone does not create LIC. The Government's notification fixes the day it comes into being.

Sub-section (2) deals with incorporation. The Corporation is a body corporate. That means it is a legal person, separate from the people who run it. It has perpetual succession, so it continues even when its officers change. It has a common seal, which is its official signature. It can acquire, hold and dispose of property, subject to the Act. It may sue and be sued by its name.

The key point for answers is that these features give LIC a separate legal identity. It owns property in its own name. It enters contracts in its own name. Courts treat it as one continuing entity.

The official text supplied here covers only Section 3. Do not quote details of capital, constitution or management with section numbers unless you are sure of them. In an answer, tie them to the Corporation's status as a body corporate and name the Act.

Key rules to remember

Establishment rule
LIC is established from the date the Central Government appoints by notification in the Official Gazette
Section 3(1). The date is fixed by notification, not by the Act itself.
Name of the body
Life Insurance Corporation of India
Section 3(1) says the Corporation is 'called' this.
Incorporation features
Body corporate + perpetual succession + common seal
Section 3(2). Learn all three together.
Powers of the Corporation
Acquire, hold and dispose of property; sue and be sued by its name
Section 3(2). These powers are subject to the provisions of the Act.

How to solve Establishment and Incorporation of LIC questions

Use this method for any question on how LIC was established or what its legal status is.

  1. 1Name the Act and the section: Section 3 of the Life Insurance Corporation Act, 1956.
  2. 2State how establishment happens: the Central Government appoints a date by notification in the Official Gazette.
  3. 3State the name: Life Insurance Corporation of India.
  4. 4Say it is a body corporate and list perpetual succession and common seal.
  5. 5List its powers: to acquire, hold and dispose of property, subject to the Act, and to sue and be sued by its name.
  6. 6If facts are given, apply them. For example, a change of officers does not affect LIC, and a claim is filed against LIC by name.
  7. 7Conclude in one line on its separate legal identity.

Quickest way: Four-word recall for Section 3

When to use it: Use it when you have little time or need a short answer.

  1. Recall E-I: Establishment under sub-section (1), Incorporation under sub-section (2).
  2. For (1) write: notification, Official Gazette, Central Government date, name.
  3. For (2) write: body corporate, perpetual succession, common seal.
  4. Add the powers: property and suing by name.
  5. Close with the separate legal entity point.

Common mistakes in Establishment and Incorporation of LIC

  • Saying LIC was incorporated under the Companies Act.

    Students link all 'incorporation' to companies.

    Fix: Say LIC is a statutory corporation created by the LIC Act, 1956.

  • Saying the Act itself fixes the date LIC starts.

    Students skip the words 'such date as the Central Government may appoint'.

    Fix: Write that the date is appointed by Central Government notification in the Official Gazette.

  • Leaving out perpetual succession or common seal.

    Students remember only 'body corporate'.

    Fix: Always write the three features together.

  • Saying LIC can deal with property freely.

    Students ignore the qualifier.

    Fix: Add that the power is subject to the provisions of the Act.

  • Quoting section numbers or figures for capital that you are not sure of.

    Students try to show extra detail.

    Fix: Quote only what you know. Describe the rest in plain words without a number.

Worked examples

Example 1

Explain how the Life Insurance Corporation of India was established under the LIC Act, 1956 and state its legal status.

Show the solution
  1. Source: Section 3 of the Life Insurance Corporation Act, 1956.
  2. Establishment: under Section 3(1), a Corporation called the Life Insurance Corporation of India is established with effect from such date as the Central Government appoints by notification in the Official Gazette.
  3. Status: under Section 3(2), it is a body corporate with perpetual succession and a common seal.
  4. Powers: it can acquire, hold and dispose of property, subject to the Act, and can sue and be sued by its name.
  5. Meaning: it is a legal person separate from its officers.

Answer: LIC was established by Section 3(1) from a date notified by the Central Government in the Official Gazette. It is a body corporate with perpetual succession and a common seal. It holds property and sues or is sued in its own name.

Example 2

A policyholder wants to file a suit about a disputed claim. The Chairman of LIC has just retired and a new Chairman has joined. Against whom is the suit filed and does the change of Chairman affect it?

Show the solution
  1. Rule: under Section 3(2), LIC is a body corporate that may sue and be sued by its name.
  2. Application: the suit is filed against the Life Insurance Corporation of India by name, not against the Chairman personally.
  3. Perpetual succession: the Corporation continues despite changes in its officers.
  4. Conclusion: the change of Chairman does not affect the suit.

Answer: The suit is filed against the Life Insurance Corporation of India by its name. Because of perpetual succession under Section 3(2), the change of Chairman does not affect the suit.

Exam tips

  • Write the Act name and 'Section 3' in the first line. Examiners look for the provision first.
  • Split your answer into sub-section (1) and sub-section (2). It keeps the answer neat.
  • In case-based questions, use the order provision, facts, conclusion.
  • Use the exact terms: body corporate, perpetual succession, common seal.
  • Do not add section numbers or figures you are not sure of.

Practice questions from Life Insurance

Establishment and Incorporation of LIC in other exams

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

Establishment and Incorporation of LIC: frequently asked questions

What does Section 3 of the LIC Act, 1956 provide?

It establishes the Life Insurance Corporation of India from a date appointed by the Central Government by notification. It also makes the Corporation a body corporate with perpetual succession and a common seal.

What is perpetual succession in the case of LIC?

It means the Corporation continues to exist regardless of changes in its officers or members. Its existence does not depend on any individual.

Can LIC be sued in its own name?

Yes. Section 3(2) says the Corporation may by its name sue and be sued.

Is LIC a company under the Companies Act?

No. It is a statutory body corporate created by the Life Insurance Corporation Act, 1956.