Apex court issues notice to IRDA, 14 insurance companies on ULIPs

The Supreme Court on Friday issued notice to the Centre, the Insurance Regulatory and Development Authority (IRDA) and 14 insurance companies on a petition from the Securities and Exchange Board of India (SEBI), seeking transfer of cases relating to unit linked insurance products (ULIPs) pending in two High Courts. A three-judge Bench of Justice S. H. Kapadia, Justice Swatanter Kumar and Justice A. R. Dave issued notice after hearing Attorney General G.E. Vahanvati for SEBI. The Bench posted the matter for further hearing on July 8. Justice Kapadia wanted to know from the AG why the matter should be transferred to the Supreme Court. He said “SEBI is in Mumbai, insurance companies are in Mumbai, and the Life Insurance Corporation is in Mumbai. The matter could be heard by the Bombay High Court.” Mr. Vahanvati said “the issue of jurisdiction too has to be settled by the Supreme Court.” Justice Kapadia said “basically, both the regulators are fighting. Why not appoint a super regulator.'' On April 10, SEBI had banned 14 life insurance companies, including those belonging to the Tatas, SBI, ICICI Bank, HDFC Bank and Reliance Anil Ambani group, from raising funds through ULIPs without its approval. Later on April 14, SEBI came out with a second order that exempted the existing ULIP schemes of these 14 players from the ban. Following the government directive of status quo, SEBI allowed insurers to raise money from existing ULIPs, but asked them not to issue fresh ULIPs after April 9, the date when it issued the order banning 14 life insurance companies from raising funds through ULIPs. In its petition SEBI said since the two High Courts of Bombay and Allahabad were dealing with the same issue, it would be advisable to transfer both cases to the Supreme Court since both raised substantially the same issues. It said this would avoid duplication of judicial work and possible conflict of views. The transfer petition pointed out that while the one in the Bombay High Court sought reversal of the SEBI's ban on sale of ULIPs, the plea in the Allahabad High Court questioned the claims of insurance companies promising high returns on ULIPs.