Sebi’s Supreme Court petition drags loath insurers to court

Life insurance companies, who were trying to avoid a legal face-off with the Securities and Exchange Board of India (Sebi), have now been dragged to court, thanks to Sebi’s move seeking a clubbing of all cases related to the unit-linked insurance plans (Ulips) controversy from the Supreme Court.

After hearing Sebi’s request to transfer all the public interest litigations (PILs) to the Supreme Court or one of the high courts, the apex court has sent notices to all those involved in the matter.
“Supreme Court has issued notices to all the respondents in the case —- 14 life insurance companies, Insurance and Regulatory Development Authority (Irda) and the two people who filed PILs in Bombay and Allahabad high courts,” said a source.

The finance ministry too has been sent the notice as it is made a party in the case.

All these entities will have to respond as to why the PILs should not be transferred to one single court.

“We still haven’t got the notice. It will come to us in the next 2-3 days. We were avoiding all the litigations. Now we will have to represent in the court,” said the chief of a leading private insurer.

During the hearing, which was disposed of in five minutes on Friday, the bench comprising Justices S H Kapadia, Swatanter Kumar and A R Dave questioned Sebi as to why the case should not be heard in Mumbai, where the offices of Sebi, insurance companies as well as Life Insurance Corporation of India, the biggest life insurance company in the country, are located.

Sebi’s counsel, Attorney General G E Vahanvati, replied, “Various high courts will have different views on the matter and hence to avoid a conflict it is better if the Supreme Court heard the matter.”
“Why not have a super regulator?” the bench asked in a lighter vein. It later posted the matter for hearing on July 8.

When contacted, Irda chairman J Harinarayan said the PILs do not deal with the issues relating to dispute about jurisdiction, but about mis-selling. “Sebi and our problem is of jurisdiction. Does Sebi have right to regulate Ulips? That is the question. That is not the question in the PIL. PIL is another matter.”

Ulips are investment plans which come with a dash of insurance.
Sebi had in an order on April 9, 2010 banned 14 life insurance companies from selling Ulips. As a compromise, the finance ministry on April 12 suggested that Sebi and Irda file a joint petition to decide once for all who should regulate Ulips.
But legally speaking, there is no means by which a joint petition can be filed, experts had told DNA earlier.

Some feel this problem has been addressed by Sebi moving the Supreme Court asking for clubbing of all PILs.

“Now the Supreme Court will either ask all the cases to be clubbed or determine which court will hear it. This is the matter. If multiple courts hear the case, then there might be conflicting outcomes and hence one court needs to hear it,” Soma Sekhar Sundaresan, partner at law firm J Sagar & Associates, said.

Not everyone would agree though. “One really doesn’t know whether the issue (of not being able to file a joint petition) has been overcome. The matter so far is only on the PIL,” said another Mumbai-based senior lawyer.

(With PTI inputs)