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CS Professional · Banking and Insurance - Laws and Practice · Life Insurance

Bharat Suraksha Life Ltd., a life insurer, has been proved to be insolvent, and a winding up petition is pending. Under Section 61 of the Insurance Act, 1938, which course is available to the Tribunal?

The Tribunal may, if it thinks fit, reduce the amount of the insurance contracts in place of making a winding up order, upon such terms and conditions as it thinks fit. Section 61(2) therefore does not require winding up first and does not authorise unconditional cancellation.

  1. AIt may reduce the amount of the insurance contracts in place of making a winding up order, on terms it thinks fitCorrect
  2. BIt must first make a winding up order and only then consider reduction
  3. CIt may cancel all policies without any terms or conditions
  4. DIt may refer the reduction to the Central Government for a scheme

Explanation

Section 61(2) says that where a life insurer is proved insolvent, the Tribunal may, if it thinks fit, reduce the contract amounts instead of making a winding up order, on terms and conditions it thinks fit. It is not obliged to wind up first, and the power is to reduce, not cancel, on terms.

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