“It is observed that there has been an inordinate delay in filing the particulars of JV Amendment Agreement, which among other things contains details of change in conversion ratio and total number of CCPS(convertible preference shares ) as 78,00,000 as against 63,00,000 CCPS authorised by JV agreement dated 30 May.2017,’’ said the IRDAI
Hyderabad:
The Indian insurance regulator IRDAI has imposed a fine of Rs 1 crore against Indian born Canadian billionaire Prem Watsa promoted Digit Insurance for violation of its regulations.
The general insurance joint venture between Prem Watsa’s Canadian company Fairfax and a former senior official of Allianz Kamesh Goyal was found to have erred in changing the shareholding pattern of the promoters in the joint venture agreement without prior permission of the IRDAI, said an order of the IRDAI signed by RK Sinha, member, Finance and Thomas Devasia, member, Non-life on May 2.
Fairfax currently owns 45.3 per cent of the holding company Go Digit Infoworks, which has 83 per cent stake in Digit Insurance.
The IRDAI could detect the wrong doing of the company when Digit Insurance submitted its Draft Red Herring Prospectus (DRHP) filed by the insurer with the SEBI.
After detecting, the IRDAI had asked Digit Insurance to submit details of the new shareholding of Digit Insurance. The insurer had delayed providing such information to the IRDAI and thereby had violated section 26 of the Insurance Act, 1938, said the IRDAI.
Further, the information, that was submitted by Digit Insurance to the IRDAI, showed that the shareholding pattern of the insurer was not in accordance with the original JV agreement as approved by the IRDAI dated 30 May, 2017.
“It is observed that there has been an inordinate delay in filing the particulars of JV Amendment Agreement, which among other things contains details of change in conversion ratio and total number of CCPS(convertible preference shares ) as 78,00,000 as against 63,00,000 CCPS authorised by JV agreement dated 30 May.2017,’’ said the IRDAI.
However, admitting its fault, Digit Insurance had clarified to the IRDAI that such lapses were purely inadvertent and unintentional.
“It is established that the insurer has failed to comply with section 26 of the Act. Accordingly, in exercise of powers vested with the IRDAI under section 102 of the Act, a penalty of Rs.1 crore is imposed on the insurer,’’ said the IRDAI in its final order.
Earlier, the IRDAI had disallowed a move by Fairfax, that would have led the Toronto based company to increase its stake to 74 per cent (from 49 per cent) in its existing Indian insurance joint venture Go Digit General Insurance.
In June 2022, Digit Insurance and Fairfax had applied to the IRDAI for approval to convert the latters’s holdings in compulsory convertible preferred shares(CCPS) issued by Go Digit Infoworks (“Digit CCPS”) into equity shares of Go Digit Infoworks (“Digit”)
The IRDAI had said the application cannot be considered in its current form as conversion of the Digit CCPS would result in Digit (currently classified as an Indian promoter of Digit Insurance) becoming a subsidiary of the company, which is currently prohibited for Indian promoters, notwithstanding that the foreign direct investment rules have been amended to allow foreign investors to own up to 74 per cent in an Indian insurance company.
In March, Go Digit General Insurer has already received final approvals from the Securities and Exchange Board of India (Sebi) and the IRDAI for its initial public offering (IPO) that plans to raise 1,250 crore.