the said countries to Indians intending to visit the two countries and collect insurance premiums from intending visitors. Radiant, after getting permission from the Reserve Bank of India (RBI) and Ministry of Finance, Govt. of India, was issuing certificates for emergency medical aid to the intending visitors to Ukraine and Belarus and the premium so collected was remitted to the Government of Ukraine and Belarus respectively. Meanwhile, IRDA - the statutory regulatory authority in the Insurance sector in India passed an order dated 30 April 2010 restraining Radiant from selling insurance policies, collecting money towards insurance premium or carrying on any activity related to and connected with the business of insurance. It held Radiant ought to have obtained a permission or licence from IRDA, as mandated under proviso to Section 2C read with Section 3 of the Insurance Act, 1938 thereby authorizing such person to carry on insurance business or to function as an agent or a broker of an insurance company in India. Radiant challenged the said order of the IRDA before the Delhi High Court (Single Judge) on the ground that the certificate of medi-claim being issued by Radiant had no effect on the territory of India and was active only in the territory of Ukraine or Belarus; that the provisions of Insurance Regulatory and Development Authority Act, 1999 were not applicable to foreign insurance companies and that the activity undertaken by the appellant was not governed by the IRDA Act as it pertained to selling of foreign insurance for risks incurred outside India. The Single Judge of the Delhi High Court dismissed the writ petition holding that the collection of premium and the delivery of the certificate in India by the petitioner (i.e. Radiant) amounted to carrying on the business of insurance in India. It further held that the petitioner was carrying on insurance business in India on behalf of foreign insurance companies and that the petitioner could not claim that its business fell outside the purview of the Insurance Act and that it did not require licence from IRDA. Radiant appealed against the said order of dismissal of the Single Judge before the Division Bench of the Delhi High Court presided by the Acting Chief Justice. The key issues for consideration before the Division 17
Bench were: a. Whether insurance laws of India have extra-territorial application? b.
Whether laws and regulations governing Insurance business in India can govern the business of insurance outside India and if not, can it govern the business of buying in India of such foreign insurance?
c.
Whether provisions of the Insurance Act and IRDA Act were applicable to foreign insurance companies and would mere selling of insurance (to cover risks incurred outside India) in India amount to doing 'insurance business in India'? d. Whether an Indian company acting in India, as an agent of the foreign insurance company to sell insurance for risks incurred outside India, is engaged in the business of insurance in India and is therefore required to carry a valid license / registration from IRDA?
The Division Bench, after detailed discussion on the law and legislative intent of the insurance legislations in India, held that there is no extra-territorial operation to insurance laws of India. It further observed that the business of foreign insurance companies of covering risks incurred outside India cannot be said to be insurance business in India (within the meaning of Insurance Act), even if the premium for such insurance is paid in / from India and insurance policy is issued India. The essence of the business / contract of insurance is the coverage of risk and if the policies issued by the foreign insurer do not cover the risk as long as the insurer remains in India, mere issuance thereof cannot be said to be carrying on insurance business in India. Accordingly, the Division Bench was of the view that there cannot be said to be an insurance business only in effecting a contract which is contingent and is to be operative and enforceable not in India but only outside India. The court observed that without the contract being operative and enforceable in India, mere ministerial act of issuance of the contract in India cannot be said to be amounting to carrying on insurance business in India. There are 27 life and 27 non-life insurers in India, many of these formed in partnerships with foreign insurers. Reliance General Insurance Co. Ltd is one of the few private non-life insurers
November, 2012
Life Insurance Today