Mumbai: The Insurance Regulatory and Development Authority of India (IRDA) said its order directing the shotgun marriage of Sahara India Life Insurance Co. Ltd and ICICI Prudential Life Insurance Co. Ltd was the culmination of a two-year process.
The regulator was replying to Sahara’s appeal in the Securities Appellate Tribunal (SAT) challenging the merger on the grounds that IRDA did not follow the principles of natural justice. Mint has reviewed a copy of IRDA’s reply to SAT.
In its 29 July order, IRDA said that Sahara was not interested in reviving its business.
Every relevant part in the two-year quasi-judicial process was made known to Sahara and the company was served two show-cause notices in the past two years, IRDA said.
“The appellant (Sahara) chose not to reply or to provide vague and evasive replies. Well after the Administrator was appointed, the appellant provided a vague, belated and unimpressive reply to the first show-cause notice—a case of too little too late," IRDA said in its reply.
IRDA also added that it observed two risks at play at Sahara—financial and governance.
Financial risks were in the form of siphoning of funds from the books of the company and governance due to lack of a chairman for four years.
It further alleged that Rs78 crore was siphoned off from the books of the firm in 2014-15 and transferred to the parent company Sahara India on the pretext of opening 650 new offices, in violation of the Insurance Act.
“At the core of the risk posed to the interests of policyholders of the appellant is the siphoning of Rs78 crore from the appellant to a partnership firm titled ‘Sahara India’, of which, I understand, the said Subrata Roy (former chairman of the appellant and the chairman of the “Sahara Group") and OP Srivastava (now chairman of the appellant) are themselves partners," the IRDA affidavit said.
The proposal to take 650 new offices on rent was without any commercial, logical or economic rationale when the company had 141 branch offices in its 10 years of existence, and when renewal of existing insurance contracts was dwindling, and no new insurance contracts were being booked, the regulator added.
“Since the case is sub judice in SAT, we can not comment on the matter. We have already cleared our stand on the matter. Everything is correct (at Sahara Life) however if there is any minor anomaly, we will correct it as per the regulators satisfaction," a spokesperson for Sahara said in an emailed statement.
Referring to group chairman Subrata Roy as “truant", IRDA pointed that the company was working for the past four years without a chairman and investment committee.
The insurance regulator added that Roy had not attended any of the meetings of the board and investment committee during the four years ended March 2015.
To be sure, Roy was jailed in March 2014 by the Supreme Court (in a dispute between the Sahara Group and another regulator, the Securities and Exchange Board of India) and granted parole on 6 May 2016.
Later, Sahara informed IRDA that it was finding it difficult to fill key managerial posts due to Roy’s prolonged incarceration.
“The prolonged inattention to the core role of governance and the blatant disregard to propriety in the running of the appellant, has necessitated the need to de-link and cut the umbilical cord between the Sahara group and the appellant’s policyholders," said IRDA’s affidavit.
Sahara has filed a defamation case in a Patna court against Mint’s editor and some reporters over the newspaper’s coverage of the company’s dispute with the Securities and Exchange Board of India. Mint is contesting the case.