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

The Authority ordered an investigation of Kaveri General Insurance Ltd, and the officer employed an actuary to assist. Total expenses of the investigation were ₹12,00,000. Kaveri later became insolvent with other creditors unpaid. Which statement is correct under Section 33?

The insurer must bear all investigation expenses, including those of an auditor or actuary employed to assist. These expenses have priority over the insurer's debts and are recoverable as an arrear of land revenue, so insolvency does not displace this priority.

  1. AThe Authority bears the expenses, as it ordered the investigation
  2. BThe expenses are defrayed by the insurer, rank after other debts, and are recoverable through a civil suit only
  3. CThe expenses are defrayed by the insurer, have priority over its debts, and are recoverable as an arrear of land revenueCorrect
  4. DThe expenses are shared equally between the Authority and the insurer

Explanation

Section 33(9) says all investigation expenses are defrayed by the insurer, have priority over debts due from the insurer, and are recoverable as an arrear of land revenue. The proviso also permits the officer to employ an actuary or auditor, whose cost is part of the expenses.

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