The Securities Appellate Tribunal (SAT) on Thursday set aside an order passed by Insurance Regulatory and Development Authority of India (Irdai), directing transfer of insurance business of Sahara India Life Insurance Company to ICICI Prudential Life Insurance Company.
The tribunal asked the insurance regulator to once again give a hearing opportunity to Sahara Life Insurance and pass a fresh order in the matter within three months.
The SAT, however, upheld Irdai’s June 2017 order, directing appointment of an administrator to run the affairs of Sahara Life Insurance. Later that month, the insurance regulator had directed Sahara Life Insurance to stop underwriting new business. In July 2017, Irdai passed another order seeking transfer of the insurance business of Sahara to ICICI Prudential Life Insurance.
The SAT said the action taken by Irdai in July 2017 was in breach of the principles of natural justice as a report prepared by the administrator was not submitted to Sahara India Life Insurance. This order was passed following a report submitted by the administrator to Irdai on June 22.
The administrator’s order was not submitted to Sahara Life Insurance, which according to the SAT, was a breach of natural justice.
“In any event, the report and its outcome have potentially and adversely affected the appellant (Sahara India Life), therefore, the Irdai must have supplied a copy of the report to the appellant before passing the impugned order dated July 28, 2017,”the SAT order stated. “The impugned order dated July 28, 2017, therefore, deserves to be quashed and set aside.”
The tribunal, which hears appeals by entitles aggrieved by orders passed by Irdai, criticised the process followed by the insurance regulator while handling the Sahara India Life Insurance matter.
“As hereinabove noted, the Irdai must apply the principles of proportionality before resorting to such extreme measures of transfer, merger or winding up of an insurance business altogether. The action must commensurate with the nature of the violation in a given case. Irdai is obligated to look into as to whether the violation is technical, venial in nature or is a serious violation which would gravely jeopardize the interest of policyholders of the said Insurance Company,” said the SAT.
In June 2017, Irdai had appointed administrator stating that, “Sahara India Life Insurance is acting in a manner likely to be prejudicial to the interests of holders of life insurance policies."
In an email response to Business Standard's queries, a Marsh India spokesperson said that SAT had not passed any order against the firm. The spokesperson said: "Marsh India conducts its business with honesty, integrity and in accordance with the law. We strongly deny any wrongdoing and find the complaint, filed by the competing broker who lost the business to Marsh India, as baseless and without merit." He also added that as a responsible corporate, Marsh India has fully assisted the regulatory authorities with relevant information at our disposal, whenever required and we will continue to do so."