Section 24B of The General Insurance Business (Nationalisation) Act, 1972
1[24B. Cessation of application of Act.--(1) On and from the date on which the Central Government ceases to control any specified insurer, after the commencement of the General Insurance Business (Nationalisation) Amendment Act, 2021, the provisions of this Act shall cease to apply in respect of that specified insurer.
- (2)Notwithstanding anything contained in sub-section (1), on the date of cessation of applicability referred to in sub-section (1),--
- (a)any scheme framed by the Central Government under sub-section (1) of section 17A in respect of the specified insurer referred to in sub-section (1) shall be deemed to have been adopted by the board of directors of such specified insurer: Provided that the board of directors may make such additions, amendments or variations thereto, or frame new policy in place of such scheme, as it may deem appropriate;
- (b)without prejudice to the generality of the power of the board of directors of the specified insurer under clause (a), all powers exercisable by the Central Government under a scheme framed by it in sub-section (1) of section 17A shall be exercisable by that board of directors. Explanation 1.--For the purposes of this section, the expression control means the right of the Central Government, in relation to a specified insurer,
- (i)to appoint a majority of its directors; or
- (ii)to have power over its management or policy decisions, by virtue of its shareholding rights or management rights under its articles of association or shareholders agreements or voting agreements or any other agreements executed with the specified insurer or any other person in relation to the specified insurer. Explanation 2.--For the removal of doubts, it is hereby clarified that--
- (i)the provisions of this section shall also apply to any rule, scheme, direction or notification made under this Act before the cessation of applicability;
- (ii)the cessation of applicability shall not revive anything that was not already in force or in existence under this Act or affect anything previously done or suffered under this Act;
- (iii)the board of directors of the specified insurer shall exercise the powers referred to in sub-section (2), subject to any requirement under any law for the time being in force.]
Summary
- The Act stops applying to a specified insurer from the date the Central Government ceases to have control over it.
- Control means the right of the government to appoint a majority of the directors, or having power over management or policy decisions through shares or agreements.
- When the Act stops applying, any schemes regulating employee pay and terms created by the government under Section 17A are automatically deemed to be adopted by the insurer's board of directors.
- The board of directors takes over all the powers the Central Government used to have under those Section 17A schemes.
- The board can make additions, amendments, variations to the schemes, or frame entirely new policies.
- Stopping the application of the Act does not revive old laws, nor does it undo things that were already done under the Act.
Practical examples
FAQ
1. What exactly does it mean for the government to lose "control"?
Losing control means the Central Government no longer has the right to appoint a majority of the directors, nor does it hold power over management or policy decisions via shareholding or agreements.
2. Does losing government control mean all employee service rules disappear?
No. The rules and schemes created by the government under Section 17A are automatically adopted by the company's board of directors.
3. Can the newly independent board of directors change employee pay scales?
Yes. The board inherits all the powers the Central Government had under those schemes and can amend them or create new policies, subject to other normal laws.
4. Does the cessation of the Act bring back laws that existed before 1972?
No. The Act clarifies that cessation does not revive anything that was not already in force.
Test yourself
Q1.Under Section 24B of The General Insurance Business (Nationalisation) Act, 1972, what specific event triggers the cessation of the Act's application to a specified insurer?
Q2.Under Section 24B of The General Insurance Business (Nationalisation) Act, 1972, how is government "control" defined?
Q3.Under Section 24B of The General Insurance Business (Nationalisation) Act, 1972, read with Section 17A, what power does the board of directors gain upon the cessation of the Act?
Q4.Under Section 24B of The General Insurance Business (Nationalisation) Act, 1972, what happens to the schemes framed under Section 17A immediately when the Act ceases to apply?
Q5.Under Section 24B of The General Insurance Business (Nationalisation) Act, 1972, does the cessation of the Act undo past actions taken under the Act?