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CS Professional · Banking and Insurance - Laws and Practice · Concept of Insurance

Himalaya General Insurance Co. runs fire, marine and motor classes. Its board finds the marine class unviable and wants to wind up only that class while continuing the others. Under Section 58 of the Insurance Act, 1938, what is the route?

The insurer should prepare a scheme for partial winding up of the marine class and submit it to the Tribunal for confirmation. Section 58 expressly allows one class to be wound up while other classes continue or are transferred, so neither a board resolution alone nor full liquidation is required.

  1. AA scheme for partial winding up is prepared and submitted for confirmation of the TribunalCorrect
  2. BThe insurer may close the marine class by a board resolution alone
  3. CThe whole company must be wound up, since partial winding up is not allowed
  4. DThe Authority may order closure without any scheme

Explanation

Section 58(1) allows a scheme where the affairs in respect of one class should be wound up while other classes continue or are transferred, and the scheme is submitted for confirmation of the Tribunal. A board resolution alone is insufficient, and partial winding up is expressly permitted.

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