Section 136 - Substitution of section 24. - Finance Act, 2021

Substitution of section 24. 136. For section 24 of the principal Act, the following sections shall be substituted, namely:- Funds of the Corporation. 24. (1) The Corporation shall have its own fund or funds, and all receipts of the Corporation shall be credited thereto and all payments of the Corporation shall be made therefrom: Provided that the Board may, in relation to any of the funds of the Corporation or otherwise, establish reserves which may or may not be allocated for a specific purpose, and such sums as the Board may determine, may be transferred to or from such reserves. (2) The Board shall, for every financial year after the financial year in which the provisions of section 136 of the Finance Act, 2021 come into force, cause to be maintained- (a) a participating policy-holders fund, to which all receipts from participating policy-holders shall be credited and from which all payments to such policy-holders shall be made; and (b) a non-participating policy-holders fund, to which all receipts from non-participating policy-holders shall be credited and from which all payments to such policy-holders shall be made: Provided that the members, by resolution in a general meeting, may exempt maintenance of such funds for one financial year at a time up to two financial years. Books of account, etc. 24A. (1) The Corporation shall prepare and keep at its central office books of account and other relevant books and records and financial statement for every financial year which give a true and fair view of the state of its affairs, including that of its zonal offices, and which explain the transactions effected both at the central office and at its zonal offices. (2) The Corporation shall prepare and keep at each zonal office of the Corporation, books of account and other relevant books and records and financial statement for every financial year which give a true and fair view of the state of affairs of every divisional office established in the zone corresponding to such zonal office and which explain the transactions effected thereat. (3) The Corporation shall prepare and keep at each divisional office of the Corporation, books of account and other relevant books and records and financial statement for every financial year which give a true and fair view of the state of affairs of every branch established under such divisional office and which explain the transactions effected thereat. (4) All or any of the books of account and other relevant books and records referred to in sub-section (1) or sub-section (2) or sub-section (3) may be kept at such other place or places in India as the Board may decide. (5) The Corporation shall be deemed to have complied with the provisions of sub-section (1) or sub-section (2) or sub-section (3), in respect of a zonal office or a divisional office, other than the central office, or a branch of the Corporation, whether within or outside India, if proper books of account relating to the transactions effected at such office or branch, are kept thereat and proper summarised returns are sent periodically to the central office or the corresponding zonal office or the corresponding divisional office, or to the other place referred to in sub-section (4). (6) The books of account and other relevant books and records referred to in sub-section (1) or sub-section (2) or sub-section (3) may be kept in electronic form, in such manner as the Board may determine. (7) The books of account of the Corporation relating to a period of not less than ten financial years immediately preceding a financial year, together with the vouchers relevant to any entry in such books of account, shall be kept in good order: Provided that where the Central Government has appointed a special auditor under section 25D or is of the opinion that circumstances exist which render it necessary so to do, it may direct the Corporation that the books of account be kept for such longer period as the Central Government may specify. Financial statements. 24B. (1) The financial statements of the Corporation shall give a true and fair view of the state of affairs of the Corporation and shall be in conformity with applicable accounting requirements as may be applicable for such financial statements: Provided that the financial statements shall not be treated as not disclosing a true and fair view of the state of affairs of the Corporation, merely by reason of the fact that they do not disclose any matters which are not required to be disclosed by this Act or by the Insurance Act or by the Insurance Regulatory and Development Authority Act, 1999 (42 of 1999.) or by any other law for the time being in force. (2) At every annual general meeting, the Board shall place before such meeting financial statements for the preceding financial year. (3) The Corporation shall, in addition to financial statements provided under sub-section (2), prepare a consolidated financial statement of the Corporation in conformity with the requirements referred to in sub-section (1), and shall place the same before the annual general meeting, along with the placing of its financial statements under sub-section (2): Provided that the Corporation shall also attach along with its financial statements, a separate statement containing the salient features of the consolidated financial statement. (4) The provisions of this Act applicable to financial statements under sub-section (1) and under section 24C, the inquiry by the auditor into matters referred to in and making of the auditor s report on accounts under section 25B, and adoption of financial statements under section 23A at the annual general meeting, shall, mutatis mutandis, apply to the consolidated financial statement referred to in sub-section (3). (5) Without prejudice to anything contained in sub-section (1) or sub-section (3), where the financial statements are not in conformity with the standards applicable thereto, the Corporation shall disclose in the financial statements the deviation from applicable standards, the reasons therefor and the financial effects, if any, arising out of such deviation. (6) Financial statements including consolidated financial statement, if any, shall be approved by the Board before they are signed on behalf of the Board by two whole-time directors, one director other than a whole-time director, the heads of the finance and secretarial functions of the Corporation and its Appointed Actuary, for submission to the auditor for his report thereon. (7) The auditor s report shall be attached to every financial statement. (8) A signed copy of every financial statement, including consolidated financial statement, if any, shall be issued, circulated or published, along with a copy each of- (a) any notes annexed to or forming part of such financial statement; (b) the auditor s report; and (c) the Board s report referred to in sub-section (1) of section 24C. Board s report. 24C. (1) There shall be attached to financial statements placed before general meeting, a report by the Board, which shall include- (a) number of meetings of the Board; (b) a Directors Responsibility Statement; (c) details in respect of frauds reported by auditors; (d) a statement on declarations given by independent directors under the second proviso to sub-section (3) of section 4; (e) the Corporation s policy on directors appointment, including the criteria for determining qualifications, positive attributes and independence of a director, which are referred to in section 19B; (f) explanations or comments by the Board on every qualification, reservation or adverse remark or disclaimer made in the auditor s report; (g) particulars in respect of investments in terms of the provisions of section 27A of the Insurance Act as made applicable to the Corporation by notification issued under sub-section (2) of section 43; (h) particulars of contracts or arrangements with related parties, referred to in sub-section (1) of section 4C; (i) the state of the Corporation s affairs; (j) the amounts, if any, which are carried to any reserves; (k) the amount, if any, which it recommends should be paid by way of dividend; (l) material changes and commitments, if any, affecting the financial position of the Corporation, which have occurred between the end of the financial year to which the financial statements relate and the date of the report; (m) a statement indicating the manner in which annual evaluation of the performance of individual directors has been made under section 19B; (n) such other matters as may be prescribed: Provided that where disclosures referred to in this sub-section have been included in the financial statements, such disclosures may be referred to instead of being repeated in the Board s report: Provided further that where the policy referred to in clause (e) is made available on the Corporation s website, it shall be sufficient compliance of the requirement under the said clause if the salient features of the policy and any changes therein are specified in brief in the Board s report and the web-address at which the policy is available is indicated therein. (2) The Directors Responsibility Statement referred to in clause (b) of sub-section (1) shall state that- (a) in the preparation of the annual accounts, the requirements referred to in section 24B were followed, along with proper explanation relating to material departures; (b) accounting policies were selected and applied consistently and the judgments made and estimates were reasonable and prudent, so as to give a true and fair view of the state of affairs of the Corporation at the end of the financial year and of the profit and loss of the Corporation for that period; (c) proper and sufficient care for the maintenance of adequate accounting records was taken in accordance with the provisions of this Act for safeguarding the assets of the Corporation and for preventing and detecting fraud and other irregularities; (d) the annual accounts were prepared on a going concern basis; (e) the vigilance administration referred to in clause (h) of sub-section (1) of section 8 of the Central Vigilance Commission Act, 2003 (45 of 2003.) was in operation in the Corporation under the superintendence of the Central Vigilance Commission, and in addition, internal financial controls to be followed by the Corporation had been laid down and were operating effectively; and (f) proper systems were devised to ensure compliance with the provisions of applicable laws and were operating effectively. Explanation .-For the purposes of this sub-section, the expression internal financial controls means the policies and procedures adopted for ensuring the orderly and efficient conduct of the Corporation s business, including adherence to its policies, safeguarding of its assets, prevention and detection of errors, accuracy and completeness of accounting records, and timely preparation of reliable financial information. (3) The Board s report and any annexures thereto under sub-section (1) shall be signed on behalf of the Board by two whole-time directors and one director other than a whole-time director. Penalties. 24D . If the Chief Executive or the Managing Director in charge of finance or the head of the finance function of the Corporation or any other person of the Corporation charged by the Board with the duty of complying with the provisions of section 24A or section 24B or section 24C contravenes any of the said provisions, such Chief Executive or Managing Director or head of finance function or other person shall, for each section whose provisions have been contravened, be liable to pay penalty of a sum which shall not be less than fifty thousand rupees but which may extend to five lakh rupees. .