CS Professional · Banking and Insurance - Laws and Practice · Functions in Insurance and Compliance related thereto (Part III)
Suresh Mehta, a director of Bharat Shield Insurance Ltd, is removed from office by the insurance regulator under section 34B of the Insurance Act, 1938 for conducting the insurer's affairs in a manner detrimental to policy-holders. He demands compensation from the insurer for loss of office, citing his service contract. Under the Act, what is the position?
He cannot claim any compensation. Section 34B(7) provides that, despite any law, contract, memorandum or articles of association, a person removed from office under the section has no entitlement to compensation for loss or termination of office, so his service contract gives him no claim.
- AHe can claim compensation only if his contract expressly provides for it
- BHe is not entitled to claim any compensation for loss or termination of office, notwithstanding any contract or articlesCorrect
- CHe can claim compensation limited to one year's remuneration
- DHe can claim compensation if the removal order was made without a prior hearing
Explanation
Section 34B(7) says that, notwithstanding any law, contract, memorandum or articles, a person removed under the section cannot claim compensation for loss or termination of office. The contract clause therefore does not help. Option A is wrong because the contract is overridden by the non-obstante wording.
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