IRDAI has issued orders bearing reference no. Ref. No. IRDA/F&A/ORD/FA/ 214 /10/2022 & Ref. No. IRDA/F&A/ORD/FA/ 215 /10/2022 dated October 14, 2022 in the matter of M/s. Max Life Insurance Co. Ltd (Max Life / Insurer) and M/s. Axis Bank Ltd. (Corporate Agent) respectively basis the show cause notices and submissions made during the personal hearing.
Background:
IRDAI observed that M/s. Max Life Insurance Co. Ltd (Max Life / insurer) had allowed M/s Axis Bank Ltd (Shareholder and Corporate Agent of Insurer), and its group companies viz., Axis Securities Ltd and Axis Capital Ltd to make undue profits/gains from purchase and sale of equity shares of Max Life on differential pricings by violating the directions of the Authority, thereby misusing the dual relationship of the bank as a shareholder and corporate agent.
Case Facts:
- The promoters of Insurer i.e. Max Financial Service Limited (MFSL) & Mitsui Sumitomo International (MSI) have been engaging in transfer of shares of the Insurer to Axis Bank at a price which is substantially lower than the fair market value (submitted by the Insurer while applying for approval) and subsequently buying the same shares from Axis Bank at a substantially high price.
- Basis for determination or calculation of fair market value for transaction of these shares was not uniform despite specific directions of the Authority.
Decision of the Authority:
The summary of charges levied against each party and consequent decision of the Authority is tabulated below for reference:
Charges
Violations
Defaulting party
Amount
The Insurer and Corporate Agent have not complied with the directions issued by the Authority vide Letters dated. February 5, 2016_and January, 28. 2021
Directions of the Authority while granting approval
Both – Insurer and Corporate Agent
Rs 1 crore each
Misrepresentation by the Insurer while obtaining approval of the Authority for transfer of shares in terms of Section 6A of the Insurance Act, 1938
Declaration submitted by the Insurer
Insurer
Rs 1 crore
Registering transfer of shares in violation of the directions of the Authority resulting in passing of undue monetary consideration of substantial amounts to Corporate Agent
IRDAI (Payment of Commission or Remuneration or Reward to insurance Agents and Insurance Intermediaries) Regulations, 2016 read with Regulation 18(1) of IRDAI (Registration of Corporate Agents) Regulations, 2015
Both – Insurer and Corporate Agent
Rs 1 crore each
The Authority has issued following directions to the Insurer and Corporate Agent:
- To remit the penalty of Rs 5,00,00,000 (Rs. 3,00,00,000/- by Insurer and Rs. 2,00,00,000/ by Corporate agent) within a period of 21 days from the date of receipt of the order.
- To place the Order before the Board in next Board meeting and submit a copy of the minutes of discussion.
- To approach the Securities Appellate Tribunal if the Insurer/ Corporate Agent feels aggrieved by this Order.
Source category: IRDAI
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