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

An insurer incorporated in India has a subsidiary formed solely to carry on insurance business outside India, and a branch in Dubai. IRDAI orders an investigation of the insurer, and the insurer argues that the subsidiary and the foreign branch are beyond the Investigating Officer's reach. Under Section 33 of the Insurance Act, 1938, what is the position on scope and on the cost of the investigation?

The subsidiary and the Dubai branch are within the investigation's scope, because the Explanation to Section 33 includes exclusively overseas insurance subsidiaries and all branches in India or abroad. Under Section 33(9) the insurer must bear the expenses, which have priority over its debts.

  1. AThe insurer includes such a subsidiary and all branches in or outside India, and the investigation expenses are defrayed by the insurerCorrect
  2. BThe insurer excludes foreign branches, and IRDAI bears the expenses
  3. CThe subsidiary is included but foreign branches are not, and expenses are shared equally with IRDAI
  4. DNeither is included, and the expenses are recovered from policyholders

Explanation

The Explanation to Section 33 says that, for an Indian-incorporated insurer, 'insurer' includes subsidiaries formed exclusively to carry on insurance business outside India and all branches in India or abroad. Section 33(9) makes the insurer bear all investigation expenses, with priority over its debts and recoverable as an arrear of land revenue.

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