The Securities Appellate Tribunal (SAT) has quashed the direction of the Insurance Regulatory and Development Authority of India (IRDAI) asking ICICI Prudential to take over the life insurance business of the Sahara group and asked the regulator to pass a fresh order after hearing the company.
However, the tribunal, in a 43-page order, upheld the IRDAI’s decision to appoint an administrator to run Sahara Life in the interim period. On July 28, 2017, IRDAI had ordered the transfer of the life insurance portfolio of Sahara India Life to ICICI Prudential Life with a view to protect the interests of policyholders of the embattled life insurer.
The tribunal quashed this order and asked IRDAI to hear the matter afresh as it observed that the regulator did not provide a copy of the report of the administrator which recommended sale/ transfer of Sahara Life’s assets to another player. Accordingly, the tribunal has asked IRDAI to complete the process and pass an order within three months of the receipt of the company’s reply to the administrator’s report.
“The report and its outcome have potentially and adversely affected Sahara Life. IRDAI should have supplied a copy of the report to the appellant before passing the July 28, 2017 order transferring its businesses to ICICI Prudential Life, so as to enable it to make a representation on the report,” SAT said.
“This IRDAI action is clearly in breach of the principles of natural justice… the impugned July 28 order therefore, deserves to be quashed,” the SAT said.
Stating the SAT order as a “major respite” for the company, Sahara Life said, “it was contended by Sahara Life in the said appeal that the insurance authority had illegally and with malafide intent transferred its business to an outside insurer, namely ICICI Prudential Life Insurance Co Ltd, without affording any opportunity of hearing to it.” The company statement also alleged that the IRDAI-appointed administrator “was acting in concert for the benefit of a third-party and unilaterally recommended transfer of our business though other options were available”. In June 2017, IRDAI had appointed an administrator, citing failure of corporate governance at Sahara Life. Based on the administrator’s report on June 22, 2017, IRDAI had on July 28 ordered transfer of Sahara Life’s business to ICICI Prudential Life.
SAT also observed that “appointment of an administrator is purely a temporary measure by IRDAI, primarily to bring the affairs of the insurer back on right track and thereby protect the interests of the policyholders”.