Mumbai:
Setting aside an earlier order by the IRDAI,.the Securities Appellate Tribunal (SAT) has asked the insurance regulator to pass a fresh order on a case involving alleged financial irregularities in awarding insurance broking contract to Marsh Insurance Brokers, the Indian outfit of the largset global broker, Marsh.
The SAT is a statutory body for hearing and dispose of appeals against orders passed by the capital market regulator Sebi, the insurance regulator IRDAI and pension fund regulator, PFRDA..
The order was passed by Justice JP Devadhar, Presiding Officer, SAT, who while disposing of case filed by a UK based broker, directed that the earlier order by PJ Joseph, member, IRDAI, on disposing the complaint be looked at by another IRDAI official.
"We set aside the impugned order and direct IRDAI to entrust the matter to a competent officer other than P J Joseph, Member (non-life) for passing fresh order on the complaint filed by the appellant on merits and in accordance with law," the Justice Devadhar's order.
UK bases Atkins Special Risks(appellant), a specialised re/insurance broker with core competency in Marine and Energy insurance, had alleged that Jagson International- with whom they had buisiness relationship sinnce 2002- in 2012 had shifted a broking contract awarded to them to Marsh Insurance Brokers because of non-paymentof bribe in form of taking a cut in commission, which is an illegal act..
From 2010 onwards, Jagdish Gupta, Chairman of Jagson started demanding -via email written to the Atkins-, a cut from commission of 27.5 per cenr earned by the Atkins, which the UK based broker declined..
The appellant, in its complaint wirth SAT, has alleged that detailed investigation by a globally reputed investigating firm showed some alleged kickbacks given to the company(Jagson International) by the Marsh Insurance Brokers.
Atkins Special Risks in its complain to SAT has said it had filed a complaint with IRDAi in August 2015 on the issue, but as no action was taken, it had filed a writ petition in the Telangana and Andhra Pradesh High Court, which disposed of the case on September 2017 by directing IRDAI to consider the complaint filed by them.
In that complaint, specific dates on which Gupta had sent his emails demanding kickbacks were set out. It was also alleged that during the telephonic conversation, Gupta has told the Atkins that Marsh had agreed to pay him US$ 4,00,000 in order to obtain Jagson’s business.
However, after hearing the appellant, Joseph, took a decision to dispose of the complaint by stating that the appellant has not submitted any documentary proof, material information or evidence in support of its contention.
The complaint argued that in view of evidence gathered, as also the third party evidence regarding kickbacks, 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.
But IRDAI took no action.
Rejecting Joseph's decision on the case, the SAT says, “Perusal of the complaint filed by the appellant clearly shows that the appellant had relied on documentary evidence in support of the contention that Jagdish Gupta, Chairman of Jagson had sought bribe and was bribed by the officers of Marsh for diverting the reinsurance business from the appellant to Marsh.’’
The SAT order further says“In such a case, to hold that the appellant has not submitted any documentary proof would be totally false. We fail to understand as to how Member (non-life) could make such false statement in the impugned order. In our opinion, the impugned order passed by Mr. P.J. Joseph (non-life) virtually amounts to aiding and abetting corruption in the insurance business by the regulator which cannot be tolerated.’’
The appellate tribunal, however, said that the said judgment made it clear that the SAT has not expressed any opinion on the merit of the complaint filed by appellant.
Sources at IRDAI said that they are yet to go through the SAT order and would decide the course of action after that..
Industry sources point out that either IRDAI follows what SAT has asked it to do or moves the Supreme Court(SC) to challenge the entire or modify the SAT order.