For the fist time in its inception, the Securities Appellate Tribunal (SAT) on Tuesday admitted a petition filed by an insurer SBI life against the insurance regulator, Insurance Regulatory and Development Authority of India (IRDA). SBI life has dragged IRDA to the SAT, challenging the Rs275-crore penalty imposed on it by the regulator. The SAT has also fixed the next hearing on this matter on July 9, 2015.
In order to help 7.5 lakh borrowers of the SBI Group, the insurance regulator had asked SBI life to refund Rs 275 crore of premium collected from policyholders in an order, which came in March, 2014 from the regulator. The life insurer, which was earlier fined for mis-selling in Dhanraksha Plus policy through SBI and its associate banks, has been asked to refund excess commission that it has paid out of premium collected under this particular policy.
The SAT has been, so far, hearing appeals against orders passed by the capital markets regulator Securities and Exchange Board of India (Sebi), but the new insurance laws have made provision for the tribunal to hear the cases against the insurance regulator as well. SBI life had filed the petition on April 6, which was admitted by the SAT presiding officer, JP Devadhar, even though any separate bench has not been created for insurance related matters as yet.
As per the then existing Insurance Act, 1938, the insurer was allowed to make its representation before the regulator within 45 days of IRDA’s order. Complying with the Act, SBI life made its representation before IRDA itself in the same month. However, IRDA took 10 months for replying to the representation and it issued its final order on February 20 this year without bringing any change in its stance. By that time, new Insurance Act was implemented, which allows insurers to approach SAT against regulator’s order.
However, the new Insurance Act allows insurers to approach the SAT against the regulator’s arbitrary orders. The Act also says that there must be an additional bench at SAT and a separate judge must be appointed at the tribunal to look after insurance related cases. It is, however, learnt that no such appointment has taken place there as of now.
“We have taken up the question of jurisdiction in respect of both appeals filed by the SBI life under sections 34 (1) and 34 (2) of the new Insurance Act and we will file our reply against both the appeals on July 9,” IRDA counsel Kumar Desai said after the proceedings.
(With inputs from agencies)