Mumbai: The Securities Appellate Tribunal (SAT) on Thursday quashed insurance regulator IRDAI's direction asking ICICI Prudential to take over life insurance business of the embattled Sahara group and asked it to pass a fresh order after hearing the company.
But the tribunal upheld the insurance watchdog (Insurance Regulatory Development Authority) decision to appoint an administrator to run the affairs of Sahara Life. IRDAI on July 28, 2017 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 the policyholders of the embattled life insurer.
The tribunal on Thursday quashed this order and asked the regulator to hear the matter afresh and complete the process within three months.
The order was held void as the tribunal felt that IRDAI did not provide a copy of the report of the administrator which had suggested sale of Sahara Life's assets to another player.
"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 in a 43-page order.
"This action (of IRDAI) is clearly in breach of the principles of natural justice...the impugned July 28 order therefore, deserves to be quashed," the SAT said on Thursday. The tribunal accordingly asked IRDAI to issue a fresh direction on the matter after hearing the appellant in consonance with the principles of natural justice. However, the tribunal upheld IRDAI order appointing an administrator to manage the affairs of Sahara Life.
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 upheld appointment of the administrator and dismissed Sahara's claim that it violated the principles of natural justice.
Among others, 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".
The report had found the Sahara Life promoters were not 'fit and proper' to run the company and that they had siphoned off Rs 78 crore in the name of security deposits, among other serious management lapses.
Reacting to the SAT order, IRDAI counsel Somasekhar Sundaresan said the regulator will study the order and take the next course of action.
"A view will be taken on larger policy issues, as for IRDAI this is not just a situation in one case but a stance that will have implications in all future cases," he added.
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