The Securities Appellate Tribunal (SAT) has come down heavily on Insurance Regulatory & Development Authority of India (IRDAI) Member (non-life) PJ Joseph stating that the order passed by Joseph in a case relating to commission “virtually amounts to aiding and abetting corruption in the insurance business by the regulator which cannot be tolerated”, in what is seen as a rare ruling in the case of a financial sector regulator.
The appeal before SAT was filed by UK-based Atkins Special Risks Ltd (appellant) which provided international reinsurance cover to Jagson International Ltd on yearly brokerage/commission of 27.5 per cent of the premium that was paid for the cover during the years 2002 to 2012. Appeals against orders issued by capital markets regulator Sebi and the insurance regulator IRDAI are heard by SAT.
In an order issued on Friday, SAT said the order passed by the IRDAI Member on January 9, 2018 “which, in our opinion, is passed in gross abuse of the process of law and dereliction of duty”. “The impugned order passed by PJ Joseph virtually amounts to aiding and abetting corruption in the insurance business by the regulator which cannot be tolerated. In these circumstances, we set aside the impugned order and direct IRDAI to entrust the matter to a competent officer other than PJ Joseph, Member (non-life) for passing fresh order on the complaint filed by the appellant on merits and in accordance with law,” said the SAT order signed signed by Presiding Officer Justice JP Devadhar and Member CKG Nair.
When contacted, Joseph said, “our legal department will study the order and an appropriate action will be taken.”
A Marsh India 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.”
“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, if the Authority reaches out to us for any information,” Marsh said.
According to SAT, Atkins said that from the year 2010 onwards, Jagdish Gupta, Chairman of Jagson, started demanding — via email — a cut from commission earned by the appellant which Atkins declined. In the year 2012, the re-insurance business of Jagson was taken away from Atkins and given to Marsh India Insurance Brokers Pvt. Ltd.
“Suspecting that illegal means has been used for diverting the reinsurance business from the appellant to Marsh, appellant caused a detailed investigation by a globally reputed investigating firm. Reports submitted by that firm confirmed that kick-backs were given to Jagdish Gupta by Marsh for diverting the reinsurance business from the appellant to Marsh,” SAT said.
“Thereupon, the attorneys of the appellant filed a complaint on August 11, 2015 before IRDAI. In that complaint specific dates on which Jagdish Gupta had sent his emails demanding kick-backs from the appellant were set out. It was also alleged that during the telephonic conversation, Jagdish Gupta has told the appellant that Marsh had agreed to pay him $400,000 in order to obtain Jagson’s business,” SAT said.
“In the complaint, it was further stated that in view of aforesaid material evidence as also the third party evidence, it is apparent that Section 41(1) of the Indian Insurance Act, 1938 and Regulation 37(1) of the Insurance Regulatory and Development Authority (Insurance Brokers) Regulations, 2013 have been violated,” SAT said.