While the Insurance Regulatory and Development Authority of India (IRDAI) has classified the promoters of Sahara India Life Insurance Company Ltd as “not fit and proper”, the same criteria hold good for the Administrator appointed by the regulator couple of years back for company, said a Supreme Court advocate.
He also said the IRDAI’s order dated June 2, transferring the about two lakh life insurance policies of Sahara India Life’s to SBI Life Insurance Company Ltd apparently looks impregnable.
“The order of the Authority in regard to the immediate takeover of the life insurance business of Sahara India Life Insurance Company by SBI Life as stated in its long winding order in purported exercise of its power under section 52B (2) of the Insurance Act, 1938 apparently looks impregnable,” D.Varadarajan, a Supreme Court advocate and a Member of the KPN (K.P.Narasimhan) Committee on Provisions of the Insurance Act,1938 told IANS.
Varadarajan said the IRDAI order chronicles contemporaneously the events and circumstances adumbrating therein the various alleged acts of omissions and commissions which resulted in the passage of the order of takeover with “immediate effect”.
“Therefore, Sahara cannot complain of violation of aprinciples of natural justice’ going by the opportunities given, as stated in the Order,” he said.
“In the earlier context of the appointment of the Administrator for Sahara India Life way back in the year 2017, the Authority (IRDAI) would have also taken cognisance of the Administrator’s conduct of the management of the insurance business of Sahara India Life “with the greatest economy compatible with efficiency” as provided in section 52B (1), for any inefficiency in this behalf cannot befall the promoters/shareholders”, Varadarajan said.
“The criteria of ‘fit and proper’ is ingrained in this provision even for appointment of Administrator,” he remarked.
He hoped the IRDAI, while exercising the powers under section 52B(2), would have considered all aspects of the fall out of such a drastic order, including the transfer of the life insurance business of Sahara India Life to SBI Life on the basis of intelligible criteria, in the interests of the policyholders and not by way of any pick and choose among the existing players in the life insurance business.
In the event of challenging the decision of zeroing on SBI Life for the takeover, the Authority should be in a position to justify its decision, Varadarajan said.
Interestingly, the IRDAI had issued a similar order on July 28, 2017. But the business transfer was ordered to another private and listed player ICICI Prudential Life Insurance Company Ltd with effect from July 31, 2017.
Then the Sahara group appealed against the IRDAI’s transfer order with the Securities Appellate Tribunal (SAT). In 2018, the SAT set aside the IRDAI’s business transfer order while upholding the appointment of an administrator for Sahara India Life.
And about five years after SAT’s order, the IRDAI on June 2, 2023 issued a fresh order transferring Sahara India Life’s insurance business to SBI Life.
The IRDAI is silent as to why it did not reiterate its earlier order transferring Sahara India Life’s business to ICICI Prudential Life, and what has changed between 2017 and now is not known.
“Probably IRDAI finds SBI Life’s balance sheet stronger. Also, SBI Life was promoted by public sector bank State Bank of India (SBI),” a senior life insurance official, preferring anonymity, told IANS.
“The Authority (IRDAI) has identified SBI Life Insurance Company Ltd (SBI Life), which is one of the largest life insurers in the country with satisfactory financials, as the acquirer insurer of the life insurance business of SILIC (Sahara India Life). SBI Life shall take over the policy liabilities of around two lakh policies of SILIC, backed by the policyholders’ assets, with immediate effect,” the IRDAI on Friday said.
Does that mean the financials of SBI Life is better than ICICI Prudential Life? Or a life insurer promoted by a public sector bank is easier to direct? Answers are not available.
A retired banker told IANS: “The balance sheet of Sahara India Life may have worsened now when compared to 2016-17. Naturally a public sector bank is the option.”
Further, as the power under the section under reference is conferred only on the Authority, the decision as stated in the order under reference would no doubt have been taken by the entire Authority as an amalgam, Varadarajan said.
Under the Insurance Act, there is no delegation of power of the Authority to any one, unlike the power of delegation of the Authority of the Chairperson as stated in the Act, Varadarajan added.
(Venkatachari Jagannathan can be reached at v.jagannathan@ians.in)
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