National

‘Took LS 10 minutes to undo historic law’

Poornima Joshi / AM Jigeesh New Delhi | Updated on August 13, 2021

The way the original Act was passed and the manner in which the latest Bill was piloted present a picture of contrast, laments NK Premachandran, an RSP MP

Parliament records reveal a sharp contrast in due diligence in the passage of the historical General Insurance Business (Nationalisation) Amendment Bill that was passed amid din on August 2 and the principal Act that nationalised the insurance sector in 1972.

According to records perused by BusinessLine, the principal act to nationalise the insurance sector was introduced in the Lok Sabha by the then Finance Minister Yeshwant Rao Chavan on May 29, 1972 and the House debated it for a day before sending it to the Joint Committee of Parliament. The Joint Committee held a series of meetings and submitted its report to Parliament on August 21, 1972.

The Bill was then taken up for debate in the Lok Sabha on August 28, 1972. The Lok Sabha devoted four hours and thirty four minutes to debate the Bill and pass it.

Subsequently, in the Rajya Sabha, two sittings were held – on August 30 and September 2 – to debate the Bill before the General Insurance Business (Nationalisation) Bill was passed.

But in stark contrast, the Parliament spent less than ten minutes in passing the historical amendments. According to NK Premachandran of the Revolutionary Socialist Party, the only MP who tried to move amendments in the Bill, the passage of such a critical legislation amidst the din is a “travesty”.

“This reverses the process of nationalisation that started in 1972. We are making historical changes and not even ten minutes were spared,” Premachandran told BusinessLine.

When the insurance business was nationalised, 107 insurers were amalgamated and grouped into four companies: National Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd and the United India Insurance Company Ltd. The General Insurance Corporation of India was incorporated as a company on January 1, 1973.

In this principal Act, Section 10B provides that the shareholding of the Central Government shall not be less than 51 per cent at any time.

Following the constitution of the Insurance Regulatory and Development Authority (IRDA) in April, 2000, India has seen opening up of the insurance market. Foreign companies were allowed ownership of up to 26 per cent. Today there are 34 general insurance companies including the ECGC and Agriculture Insurance Corporation of India and 24 life insurance companies operating in the country.

To this extent, the latest Amendment in the principal Act of 1972 which Parliament passed on August 2 is the most far-reaching reform in the insurance sector in the last four decades. The Amendment removes the requirement that the Central Government holds not less than fifty-one per cent of the equity capital in a specified insurer.

It inserts new sections 24B providing for cessation of application of the Act to such specified insurer on and from the date on which the Central Government ceases to have control over it and section 31A providing for liability of a director of specified insurer, who is not a whole-time director.

Published on August 13, 2021

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