Powers of IRDA with reference to control of management of insurance companies, takeover of management, mergers, acquisitions and winding up :

Section 52A empowers IRDA to make a report to Central Government if the affairs of a Life insurance Company are carried on in any manner prejudicial to the interests of policyholders. Based on the Report, the Central Government is empowered to appoint an Administrator to manage the affairs of the life insurance company. A report shall be filed by such Administrator to the Central Government giving his recommendations on the way forward, including the options of transfer of business to an existing insurer or winding up, as he deems fit. Central Government is empowered to take such action as it deems fit based on the Report of the Administrator.

Section 52H empowers Central Government to acquire the undertaking of any insurer based on a report from IRDA on failure to comply with directions or if the insurance company is being managed in a manner detrimental to the public interest or in the interests of public or policyholders it is appropriate to do so. Central Government may make a scheme for transfer of undertaking of the insurer to another insurer in such cases and decide the appropriate compensation in such cases. The Central Government may constitute a Tribunal comprising of a Chairman ( a person who is or has been a Judge of the Supreme Court or a High Court) and two other members (one of whom has experience in insurance and the other a Chartered Accountant) for this purpose.

Section 53 empowers the Tribunal to order for winding up in accordance with the Companies Act, 1956, if based on a petition presented by shareholders holding not less than one-tenth of the whole body of shareholders and holding not less than one-tenth of the whole share capital or by not less than fifty policyholders holding life insurance policies in force for not less than three years of total value of not less than `50,000, the Tribunal is satisfied to do so.

In addition, IRDA may also apply to the Tribunal for winding up on the following grounds:

(a) That the insurance company failed to deposit or keep deposited with Reserve Bank of India, the amount required to be deposited under Section 7 or Section 98

(b) That the insurance company has failed to comply with any requirement of the Insurance Act or has continued contravention for a period of three months after notice of such failure or contravention has been conveyed to the Company by IRDA

(c) That it appears from returns or statements filed by the Company or from the results of the Company that the company is deemed to be insolvent

(d) That the continuance of the company is prejudicial to the interests of the policyholders or to the public interest generally

It may be noted that Section 54 of the Act prohibits voluntary winding up of insurance companies, except for the purpose of effecting an amalgamation or reconstruction of the company or on the ground that by reason of its liabilities it cannot continue its business. This provision overrides the provisions of the Companies Act, 1956 on this point.

An appeal against the Tribunal formed under the Insurance Act shall lie with the National Company Law Appellate Tribunal