Securities Appellate Tribunal
Hero Insurance Broking India Private ... vs The Insurance Regulatory And ... on 8 October, 2025
IN THE SECURITIES APPELLATE TRIBUNAL AT
MUMBAI
DATED THIS THE 8TH DAY OF OCTOBER 2025
CORAM : Justice P. S. Dinesh Kumar, Presiding Officer
Ms. Meera Swarup, Technical Member
Dr. Dheeraj Bhatnagar, Technical Member
IRDAI Appeal No. 3 of 2019
Between
Hero Insurance Broking India Pvt. Ltd.
264, Okhla Industrial Estate, Phase-
III, .... Appellant
New Delhi - 110 020.
By Mr. Pesi Modi, Senior Advocate with Mr. Nihar Mody, Mr.
Gaurav Jangle, Mr. Bharath Senan, Advocates i/b I.V.
Merchant & Co. Advocate for the Appellant.
And
Insurance Regulatory & Development
Authority of India
Sy No. 115/1, Financial District,
Nanakramguda, Gachibowli,
Hyderabad, Telangana. 500 032. .... Respondent
By Mr. Kevic Setalvad, Senior Advocate with Mr. Jehan
Lalkaka, Mr. Mihir Mody, Mr. Yash Sutaria, Mr. Tushar
Bansode, Mr. Aavish Shetty, Advocates i/b. M/s. K. Ashar &
Co. for the Respondent.
With
IRDAI Appeal No. 1 of 2020
And
IRDAI Misc. Application No. 1 of 2020
2
Between
Maruti Insurance Broking Pvt. Ltd.
1, Nelson Mandela Road,
Vasant Kunj, New Delhi - 110070. .... Appellant
By Mr. Pesi Modi, Senior Advocate with Mr. Nihar Mody, Mr.
Vaibhav Singh, Ms. Shailaja Lall, Mr. Uday Opal, Ms.
Radhika Indapurkar, Mr. Dhruv Dandekar, Ms. Vaishnavi
Bansal, Ms. Vidhi Basrani, Advocates i/b Shardul Amarchand
Mangaldas & Co. for the Appellant.
And
Insurance Regulatory & Development
Authority of India
Sy No. 115/1, Financial District,
Nanakramguda, Gachibowli,
Hyderabad, Telangana. 500 032. .... Respondent
By Mr. Kevic Setalvad, Senior Advocate with Mr. Jehan
Lalkaka, Mr. Mihir Mody, Mr. Yash Sutaria, Mr. Tushar
Bansode, Mr. Aavish Shetty, Advocates i/b. M/s. K. Ashar &
Co. for the Respondent.
With
IRDAI Appeal No. 3 of 2020
Between
Edme Insurance Brokers Ltd.
(formerly known as Aditya Birla
Insurance Brokers Ltd.)
2nd Floor, Privillion, East Wing,
Sarkhej-Gandhinagar Highway,
Vikram Nagar, Bodakdev,
Ahmedabad, Gujarat - 380054. .... Appellant
By Mr. Vikram Nankani, Senior Advocate with Mr. Vaibhav
Singh, Ms. Shailaja Lall, Mr. Uday Opal, Ms. Radhika
Indapurkar, Mr. Dhruv Dandekar, Ms. Vaishnavi Bansal and
Ms. Vidhi Basrani, Advocates i/b Shardul Amarchand
Mangaldas & Co. for the Appellant.
3
And
Insurance Regulatory & Development
Authority of India
Sy No. 115/1, Financial District,
Nanakramguda, Gachibowli,
Hyderabad, Telangana. 500 032. .... Respondent
By Mr. Kevic Setalvad, Senior Advocate with Mr. Jehan
Lalkaka, Mr. Mihir Mody, Mr. Yash Sutaria, Mr. Tushar
Bansode, Mr. Aavish Shetty, Advocates i/b. M/s. K. Ashar &
Co. for the Respondent.
With
IRDAI Appeal No. 5 of 2020
And
IRDAI Misc. Application No. 3 of 2020
Between
Toyota Tsusho Insurance Broker
India Pvt. Ltd.
Unit-4B, Frontline Grandeur,
#14, Walton Road, (Off Lavelle Road),
Bangalore - 560001. .... Appellant
By Mr. Pesi Modi, Senior Advocate with Mr. Nihar Mody, Mr.
Vaibhav Singh, Ms. Shailaja Lall, Mr. Uday Opal, Ms.
Radhika Indapurkar, Mr. Dhruv Dandekar, Ms. Vaishnavi
Bansal and Ms. Vidhi Basrani, Advocates i/b Shardul
Amarchand Mangaldas & Co. for the Appellant.
And
Insurance Regulatory & Development
Authority of India
Sy No. 115/1, Financial District,
Nanakramguda, Gachibowli,
Hyderabad, Telangana. 500 032. .... Respondent
By Mr. Kevic Setalvad, Senior Advocate with Mr. Jehan
Lalkaka, Mr. Mihir Mody, Mr. Yash Sutaria, Mr. Tushar
4
Bansode, Mr. Aavish Shetty, Advocates i/b. M/s. K. Ashar &
Co. for the Respondent.
With
IRDAI Appeal No. 6 of 2020
Between
SMC Insurance Brokers Pvt. Ltd.
Parsvnath Metro Mall,
Near Pratap Nagar Metro Station
Pratap N agar,
New Delhi - 110 007. .... Appellant
By Mr. P. N. Modi, Senior Advocate with Mr. Nihar Mody, Mr.
Prakash Shah, Advocates i/b Prakash Shah & Associates for
the Appellant.
And
Insurance Regulatory & Development
Authority of India
Sy No. 115/1, Financial District,
Nanakramguda, Gachibowli,
Hyderabad, Telangana. 500 032. .... Respondent
By Mr. Kevic Setalvad, Senior Advocate with Mr. Jehan
Lalkaka, Mr. Mihir Mody, Mr. Yash Sutaria, Mr. Tushar
Bansode, Mr. Aavish Shetty, Advocates i/b. M/s. K. Ashar &
Co. for the Respondent.
THESE APPEALS ARE FILED UNDER SECTION 110 OF
THE INSURANCE ACT, 1938 AND SECTION 15T OF
SEBI ACT, 1992 TO SET ASIDE ORDERS DATED
DECEMBER 17, 2019, DECEMBER 18, 2019, DECEMBER
23, 2019 AND JANUARY 8, 2020 PASSED BY THE
IRDAI.
THESE APPEALS HAVING BEEN HEARD AND RESERVED
FOR ORDERS ON MAY 1, 2025 COMING ON FOR
5
PRONOUNCEMENT OF ORDER THIS 8TH DAY OF
OCTOBER 2025, THE TRIBUNAL MADE THE
FOLLOWING:
ORDER
[Per: Dr. Dheeraj Bhatnagar, Technical Member] These appeals are directed against orders passed by Member (Distribution), IRDAI1 levying penalty for alleged violations of the provisions of the Insurance Act, 1938, MISP Guidelines2, IRDAI (Insurance Broker) Regulations3 and deal with common issues:
Sr. Appeal No. Date of Amount of
No. Impugned Penalty
order (In Rs.)
1 Appeal No. 3 of December 18, 2,18,00,000/-
2019 2019
2 Appeal No. 5 of January 8, 3,00,00,000/-
2020 2020 Each
3 Appeal Nos. 6 of
2020
4 Appeal Nos. 1 of December 17, 3,00,00,000
2020 2019
5 Appeal No. 3 of December 23, 3,00,00,000/-
2020 2019
Further certain directions have also been issued which are also under challenge in these appeals.
2. Brief facts of the case as per pleadings are as under:
1Insurance Development & Development Authority of India 2 Motor Insurance Service Provider Guidelines.3
Insurance Regulatory and Development Authority of India (Insurance Broker) Regulations, 2018.6
(i) The appellant companies (insurance brokers) are licensed by IRDAI to conduct insurance broking business, in terms of IRDAI (Insurance Brokers) Regulations, 2018. These insurance broker are agents of customers.
(ii) For the purpose of distribution and servicing of motor insurance policies, insurance companies and insurance brokers enter into agreements with authorized dealers of vehicle manufacturers called as "Motor Insurance Services Providers"
("MISPs").
(iii) In order to recognize and regulate the role of the said automotive dealers in distributing and servicing motor insurance policies, IRDAI issued Motor Insurance Service Provider (MISP) Guidelines on August 31, 2017 effective from November 1, 2017.
(iv) Following this, IRDAI issued two clarificatory
circulars with regard to the above MISP
guidelines.
(v) Vide Circular dated November 1, 2017, IRDAI
clarified that the insurance intermediary can enter into Service Level Agreements (for short "SLAs) with general insurers for selling motor insurance policies.
(vi) Vide circular dated January 11, 2018, it was further clarified that neither the insurance broker nor the MISP can create a 'panel of insurers' for selling motor insurance policies and insurance companies should enter into service level 7 agreements with insurance brokers/MISPs based on transparent and objective criteria. IRDAI further clarified that no MISP or insurance intermediary can enter into an agreement with OEM4 which has an influence or bearing on the sale of motor insurance policies.
(vii) After one year of issuance of MISP guidelines, on August 31, 2018, IRDAI called upon various insurance brokers (including appellants) to provide certain information, inter-alia, 'Names of insurers empaneled' as on July 31, 2017 and July 31, 2018 and to confirm proper compliance with the MISP guidelines.
(viii) Appellants duly furnished the desired information. Thereafter, IRDAI issued separate SCNs to the appellants. Appellants filed their detailed replies. After affording an opportunity of personal hearing, the above-referred impugned orders were passed.
3. We have heard Shri P. N. Modi, learned Senior Advocate in Appeal Nos. 1 of 2020, 3 of 2019, 5 of 2020 and 6 of 2020 and Shri Vikram Nankani, learned Senior Advocate in Appeal No. 3 of 2020 for the respective appellants and Shri Kevic Setalvad, learned Senior Advocate for the respondent.
4. Since these appeals are in respect of the same charges, submissions of various appellants on same charges have been clubbed together.
4Original Equipment Manufacturers 8 Charge 1: Creation of Panel of Insurers in violation of Clause 5(f) of the MISP guidelines read with subsequent clarifications dated November 1, 2017 and January 11, 2018 4.1 Shri P N Modi and Shri Vikram Nankani submitted that IRDAI has charged all the 5 appellants for violations of Section 102 of the Insurance Act, 1938 and Clause 5(f) of MISP guidelines read with subsequent clarifications dated November 1, 2017 and January 11, 2018.
4.2 It is alleged that the appellants failed to enter into Service Level Agreements ("SLAs") with all the 25 General insurers, who were offering motor insurance business in India during the relevant time and thereby made violation of MISP guidelines. At the outset, Shri Vikram Nankani in Appeal No. 3 of 2020 and Shri P. N. Modi appearing in other 4 appeals submitted that neither the MISP guidelines nor any other regulation or circular cast any obligation on the Appellants to 'empanel' all the insurers, and on the other hand they restrict the number of Insurers for whom such MISPs can work.
It was submitted that Clause 5(g) of the said MISP guidelines provides that an MISP appointed by an Insurance intermediary may work for one or more insurers either directly or through the insurance intermediaries if it so desires. Thus, there is no obligation on an MISP to offer policies of all the insurers, and rather they have a choice in the matter.
Our attention was also drawn to clause 10(a) of the MISP guidelines, which provides that "Every MISP shall offer a choice of motor insurance policies of different insurers to 9 the prospect." the Ld. Senior advocates submitted that the para uses the word "different" and not "all".
4.3 Reference was made to para 5(f) of the MISP guidelines which states that "if an insurance intermediary appoints the MISP, then it shall work for the number of insurers as allowed under the respective regulations governing the intermediary."
Learned senior advocate submitted that para 5(f) of the MISP guidelines can only apply to the MISPs appointed by the Insurers and to the Corporate agents, as neither the Appellants (Insurance Brokers) nor its MISPs "work for" the Insurers, as they work for and represent the customers.
Explaining the scope of the MISP guideline, Mr. Modi submitted that since the Appellant is a broker, the reference in Para 5(f) of the MISP guidelines to "respective regulations governing intermediary" would in its case, refer to the Broker's Regulations, which do not stipulate any number of insurers (minimum or maximum), whose policies a Broker can or should offer. The same cannot be interpreted as creating an obligation to work for all the insurers.
4.4 Mr. Modi also submitted that the IRDAI circular dated November 1, 2017 provides that Insurance intermediary can enter into SLAs with insurers. The use of the word 'can' implies that the requirement is permissible and not mandatory. The further IRDAI circular dated January 11, 2018 casts an obligation upon the insurers to enter into SLAs with brokers/MISPs, however, such Circulars cannot override the guidelines. Further, there is no provision in any regulation, guidelines or circulars that all brokers must 10 necessarily empanel or enter into SLAs with all insurers, as alleged. Mr. Modi submitted that on one hand IRDAI, holds that there should be no panel and on the other hand, it instructs the appellants to create a panel of all insurers.
Mr. Modi referred to the respondent's letter dated August 31, 2018 and submitted that the said letter itself required the appellants to provide the "names of insurers empaneled" by it. In response, the appellant had given details of insurers and used the same language in the letter dated August 31, 2018, while furnishing the reply, stating the number and names of insurers mentioned as "empaneled" even though actually no such panel was created.
4.5 Mr. Modi also submitted that the statements of the respondent are self-contradictory. On one hand, it is contended that the appellant's MISPs have to offer the policies of all Insurers, which implies that MISPs will have to offer services of insurers even when their services might be poor, and on the other hand, it maintains that the appellant must protect the interest of its customers.
4.6 Learned senior advocate submitted that there was no basis for holding that the appellant had created a panel of insurers. Moreover, the Circulars/guidelines do not stipulate any time-frame during which all the MISPs must have completed empanelments, signed SLAs and made IT integration with all the insurers. Further, the guidelines do not clarify whether such signed MISPs should or should not start the business till SLAs are signed with each and every Insurers.
114.7 Learned senior advocate further argued that there is no explicit provision in the guidelines and circulars with regard to the alleged requirement that MISPs appointed by brokers must mandatorily offer to its customers, policies of all insurers and/or that Brokers / MISPs must "empanel" or "tie-up with" or "on-board" or have IT integration & enter into SLAs with all insurers in India, failing which the same may be construed to have a restrictive "panel". He submitted that the term "empanel" or even "tie-up with" or "on-board" is not defined in the guidelines. It is settled law that violation of vague Regulations which prescribe penalty is to be construed in favour of the subject.
To buttress this submission, he placed reliance on the decisions of this Tribunal in UBS Securities v. SEBI5, & UPSE Securities v. NSE6.
UBS Securities v. SEBI "109. On 16/06/2005 Citigroup has also written a letter. From the above correspondence it is quite evident that there is some vagueness about the KYC requirement under Regulation 15A of the FII Regulations which persists even today and in view of the established legal position that if a violation of such vague regulation occurs which can place the consequence of penalty, it could not be visited in favour of the accused. The Supreme Court in its judgment in the case of Tolaram Relumal and Anr. Vs. The State of Bombay , also held a similar view, which reads as under:
"8. ... It may be here observed that the provisions of Section 18(1) are penal in nature and it is a well settled rule of construction of penal statutes that if two possible and reasonable constructions can be put upon a penal provision, the court must lean towards that construction which exempts the subject from penalty rather 5 2005 SCC Online SAT 98 6 2012 SCC Online SAT 103 12 than the one which imposes penalty. It is not competent to the court to stretch the meaning of an expression used by the Legislature in order to carry out the intention of the Legislature"
"9. ...If the Legislature intended to punish persons receiving pugree on merely executory contracts it should have made its intention clear by use of clear and unambiguous language"
UPSE Securities v. NSE "5. ...... keeping in view the ambiguity in the existing regulation, we are of the view that penalty of Rs. 25,000 imposed on this count is uncalled for."
4.8 Learned senior advocate submitted that it is only by the Impugned Order that the respondent for the first time has required the appellant to "empanel" or "tie-up with" or "on-board" all Insurers. If the same were the respondent's essential requirements, the same ought to have been clearly provided in the Guidelines or Circulars. He submitted that the appellant did not furnish incorrect information to IRDAI in response to their query with respect to the number of insurers 'empaneled'. With regard to the denial of empanelment as alleged by some insurers, it was submitted that IRDAI did not provide inspection of the correspondence relating to complaints even after having been specifically requested by the appellant.
Submission specific to individual appeals 4.9 Regarding the alleged complaints made by some insurers against the appellants that they refused their request for empanelment, it was submitted that the SCN in Appeal No. 3 of 2019 does not mention any such complaints. Further denying the allegation, he submitted that the appellants had not refused to tie up or work with 13 any insurer. In fact, appellant did not even receive any such request for empanelment from any insurers.
4.10 In Appeal No. 1 of 2020 (Maruti Insurance Broking Private Limited) Shri. P N Modi submitted that in violation of principles of natural justice, the respondent has not provided to the appellant a copy of the documents relied upon in SCN or the copy of complaint filed by General Insurers alleging refusal to enter into Service Level Agreement (SLA) with them.
4.11 With regard to the Charge No. 1, Mr. Vikram Nankani, Senior Advocate, in the Appeal No. 3 of 2020 (Edme Insurance Brokers Ltd, formerly known as Aditya Birla Insurance Brokers Ltd.), broadly adopting the submissions of Mr. Modi submitted that the respondent IRDAI despite multiple requests has not furnished the copies of the complaints regarding non-empanelment allegedly received from several insurers.
4.11.1 In appeal No. 6 of 2020 (SMC Insurance Broking Pvt. Ltd)- Mr. Modi submitted that the appellant had specifically instructed its MISPs to offer policies of all insurers to its customers and a copy of the appellant's MISP training Manual was forwarded to IRDAI via letter dated February 27, 2019. However, the Impugned order failed to consider the same. He drew our attention to Chapter 11 of the said manual that inter-alia, deals with the Choice of Insurers and Intermediaries for Customers.
5. Refuting appellant's submission on Charge No. 1, Shri Kevic Setalvad, Ld Senior advocate for IRDAI submitted that the MISP guidelines are clear and unambiguous. The appellant in Appeal No. 3 of 2019 has admitted the 14 regulatory obligation to empanel 'all insurers' by way of reply to the SCN dated June 4, 2019. Likewise, in other appeals, the appellants have made similar admissions. He further referred to various clauses of the MISP guidelines and circulars issued by IRDAI and submitted that the intent behind these guidelines/circulars is to offer the prospective customers a choice of all the insurers without any restriction.
5.1 Further, with regard to the appellant's contention that use of the word 'can' in November 2017 circular implies that it is not mandatory for an insurance intermediary (appellant) to have SLAs with all the insurers, Mr. Setalvad submitted that the MISP guidelines are unambiguous and if at all there was any ambiguity, the same has been clarified by the January 11, 2018 circular. He submitted that the MISP guidelines have been issued inter-alia, under Section 14 of the IRDA Act, 19997, which is a beneficial legislation. It is a well-established principle of interpretation that beneficial legislations are to be interpreted liberally, else the very objective of legislation would be defeated.
5.2 Countering the appellant's submissions that circulars cannot override the guidelines, he submitted that the circulars merely clarify what is already set out in the MISP guidelines. Further, it was submitted that Clause 17(c) of the MISP guidelines empowers IRDAI to issue clarifications from time to time "to remove any difficulties in respect of the application or interpretation of any of the provisions of the MISP Guidelines". If the appellant's contentions were to be accepted, it would allow the appellants to form a cartel with select few insurers.
7Insurance Regulatory and Development Authority Act, 1999 15 5.3 Refuting the appellants' submission that under Regulation 3(b) of the erstwhile IRDA (Registration of Corporate Agents) Regulation, 2015, a 'Corporate agent' can represent maximum 3 insurers and under the respective regulations an insurance marketing firm can offer policies of two and an insurance agent can offer policies of one insurer respectively, Mr. Setalvad submitted that the said regulations are only applicable to the Corporate Agents, insurance marketing firms & insurance agents, respectively and has no applicability in the case of Insurance brokers or their MISP.
5.4 With regard to the allegation that IRDAI has passed an arbitrary and discriminatory order only against the appellants and not against insurers, Mr. Setalvad submitted that under Clause 9(d) of the MISP guidelines, IRDAI has a right to inspect any of the MISP at any time and the impugned order was passed accordingly.
5.5 He submitted that the appellant cannot contend that they are being discriminated merely because some other entities were not prosecuted. To buttress this submission, he placed reliance on M. R. Pillai Vs. M/s Motilal Vrijbhukhandas and Ors8.
5.6 Refuting the contentions of the appellants that through the MISP guidelines, the respondent is trying to compel the appellants to offer service of even sub-standard insurers, Mr. Setalvad submitted that it is the function of IRDAI and not appellants to decide the quality of insurers.
5.7 With respect to non-furnishing of the copies of alleged complaints against appellants made by the insurers, Mr. 8 AIR 1970 BOM 324 16 Setalvad submitted that the impugned order has not been passed only on the basis of the said complaints. He further submitted that where a document is not used against the party, the ground of violation of natural justice cannot be raised. To support his submissions, he relied on Chadrama Tewari Vs Union of India9.
Charge- 2 inducing customers by offering discount and Cashless service, in violation of paragraph No. 2 of the Code of Conduct of MISP Guidelines.
Submissions relating to Hero Insurance Broking Pvt. Limited (Appeal No. 3 of 2019)
6. Mr. P N Modi submitted that neither the SCN nor the impugned order alleges any basis to substantiate that the appellant or its MISPs offered any discount, nor identifies any provision that prohibits offering of such discount.
6.1 Elaborating the facts, he submitted that this charge has two legs; (i) inducing customers by offering discounts on labour and interior cleaning; and (ii) entering into agreement with OEM for the sale of insurance policies under its 'Hero Connect' campaign.
6.2 With regard to the 'Hero connect' campaign, Mr. Modi submitted that the campaign was to increase retail sales of two-wheelers and it was introduced by Hero OEM with its Authorized Dealers. He further submitted that there was no agreement between the appellant (an Insurance broker) and Hero Moto Corp (OEM). Further, appellant was not a party to the said campaign. He submitted that even during campaign, the customers were free to obtain insurance from any other insurers or intermediaries of their choice. He 9 1987 Supp. SCC 518 17 submitted that the terms of this campaign nowhere mentions about any discount offered on labour and interior cleaning.
6.3 Refuting appellant's argument, Shri Kevic Setalvad, for IRDAI submitted that, in its response to SCN, the appellant has admitted offering discount by MISP on labour and interior cleaning. The argument that the impugned order does not identify any specific provision is untenable as the appellant has admitted the violation.
With regard to appellant's contention that there was no agreement between the appellant and the OEM, Mr. Setalvad submitted that the offer was facilitated through the appellant and the retail discount was to be based on the data provided by the Appellant and the reimbursement of premium was to be made through the appellant's portal only.
6.3.1 He further submitted that the scheme states that "all sales need to be tagged to the Hero Connect Campaign and shall be cross-checked from the data that will be made available by the appellant; all dealers were to transfer the premium to the insurance companies through the portal of the appellant within 24 hours of issuance of policy".
The appellant by offering free insurance through 'Hero 5 years OD insurance free' scheme, enticed prospective policyholders into buying free of cost insurance from its MISPs, which is not in the best interests of orderly growth of the insurance industry.
Submissions relating to Maruti Insurance Broking Pvt. Ltd. (Appeal No. 1 of 2020) 18 6.4 Mr. Modi referred to his submissions made in Appeal No. 3 of 2019 (Hero Insurance) and contended that offering of discounts and services does not amount to inducement, or offering rebate or in the nature of Unfair Trade Practice (UTP) under para 12 of Code of Conduct of MISP guidelines. As per these guidelines, an MISP may offer repairs and services as long as it does not amount to Unfair Trade Practice or restricts the choice of customer in buying insurance from a particular insurer/broker.
He further submitted that even Section 41 of the Insurance Act only prohibits rebate of the whole or part of the commission payable or rebate on the premium shown on the policy. It is not even alleged that there was any such offer of rebate.
6.4.1 In this case, the charge No. 2 involves three allegations; (I) offering discounts to customers for renewing the policy through the appellant's MISP, (II) denial of cashless claims to customers insured by other insurers; and (III) inclusion of insurance policy renewal as one of the point of evaluation in the Dealer evaluation program of Maruti car Company.
6.4.2 With respect to the allegation (I) regarding offering discounts for renewing policies through MISPs, learned senior advocate submitted that the allegation is based on one complaint against one of its MISPs, and pleaded that the appellant cannot be penalized on the basis of the same. The appellant admitted that the dealer/MISP was offering discounts to promote his car servicing and repair business, but had expressly denied that the same was a rebate in respect of any insurance premium as claimed by the respondent. Further, even under Section 41 of Insurance 19 Act, the maximum fine that can be imposed for offering rebate in brokerage or commission is Rs. 10 lakhs, but for the alleged default by one of its MISPs, IRDAI preferred to impose penalty of Rs. 1 crore.
6.4.3 With regard to the allegation (II) of denying cashless claim of other insurers, Mr. Modi submitted that the same is based on complaint received from customers of a web-aggregator, alleging that motor insurance policies purchased through the web aggregator's website were denied cashless claim settlement facility. Mr. Modi submitted that no such complaints have been disclosed by IRDAI. In personal hearing, appellant had produced copies of invoices of MISPs showing cashless facility provided to all customers, even those who had not purchased policies through appellant's MISPs.
In any case, the appellant is not under any obligation to ensure that its MISPs (who are also authorized dealers of OEMs) offer cashless repair facility to all policyholders. Agreeing to vehicle cashless services for repairing vehicles is the dealer's decision, since for a garage, repairs are a major source of income. In substance, he submitted that the appellant never instructed any MISP to deny cashless settlement to any customers.
6.4.4 With regard to the allegation (III), regarding inclusion of 'insurance policy renewal' as an evaluation parameter in the Dealer evaluation program of Maruti Car Company (OEM), Mr. Modi submitted that Car manufacturing company (OEM) appoints car dealers to sell its cars and the appellant subsequently appoints these car dealers as MISPs. Dealer evaluation program is not an agreement between the OEM and MISP or appellant. It is 20 only an information reporting format by which the OEM keeps watch over and improves the performance of the dealers.
6.5 Refuting these submissions, Mr. Kevic Setalvad contended that the appellant's "Maruti Suzuki Balanced score card 2019-20" (Dealer evaluation program) is in violation of the 2018 circular which mandates no MISP/Insurance Intermediary can enter into agreement with OEM which has an influence on the sale of motor insurance policies.
Learned senior advocate submitted that under the said Maruti's dealer evaluation system "Maruti Suzuki Balanced scorecard 2019-20", substantial weightage (around 31%) in "Customer Retention" segment is reserved for "Maruti Insurance Retention", which indicates that the OEM (Maruti Suzuki) is rewarding its MISPs for issuance/renewal of its insurance policies in contravention of the 2018 circular.
In view of this, it cannot be said that there was no inducement by appellant while renewing the policies. In this regard, he referred to an e-mail dated November 1, 2018 by one Mr. Mhatre, and appellant's email dated December 7, 2018 and letter dated January 1, 2019 wherein appellant has admitted that there was a violation of Section 41 of the Insurance Act. Further, the email also mentioned that some of the appellant's dealers were offering inducement, freebies and discounts. The email nowhere claims that the offers were not rebates.
6.5.1 He also submitted that the contention of the appellant that no opportunity was provided to the appellant to cross-examine the complainant Mr. Mhatre is an after-
21thought. The appellant never asked to cross-examine Mr. Mhatre, and moreover the right to cross-examine is not absolute.
6.5.2 Mr. Setalvad further submitted that vide its letter dated June 4, 2019 to IRDAI, the appellant has expressly admitted that some of its MISP may not be offering cashless services to certain insurers on the basis of their poor claim settlement experience with such insurers. He submitted that if at all there was 'poor claim settlement' by insurers, the appellant should have filed a complaint with the respondent, however, no such complaint was received by the respondent.
6.5.3 Mr. Setalvad also argued that the contention of the appellant that they had no role to play in the actions of its MISP in the matter is not tenable in the light of Clause 6(a) of the MISP guidelines. Moreover, the Appellant is an associate company of Maruti Suzuki India Limited.
Submissions in Appeal No. 5 of 2020-(Toyota Tsusho Insurance Broker India Private Ltd.) and Appeal No. 6 of 2020 (SMC Insurance Brokers Pvt. Ltd.) 6.6 The crux of the charge is that that dealer Evaluation Programme of Toyota Kirloskar Motors (OEM) viz. "Dealers Expectation Standards India 2019" (DESI) includes a para on insurance policy retention and there is a similar provision in the Dealer Evaluation Programme of Honda Cars (OEM). Since this charge is similar to the charge in Maruti Insurance matter, Mr. Modi and Mr. Setalvad relied on their respective earlier submissions.
22Submissions in Appeal No. 3 of 2020 [(Edme Insurance Brokers Ltd.) (formerly "Aditya Birla Insurance Brokers Ltd."] 6.7 The Ld. senior advocate for the appellant, Mr. Vikram Nankani adopted the submissions made by Mr. Modi on Charge No. 2 in other appeals. He further submitted that a "Dealer Qualitative Growth KPI programme" was introduced by Hyundai Motor India Limited (HMIL) (OEM) to assess the performance of its dealers/MISPs, which was issued by the HMIL unilaterally without the knowledge and permission of the appellant. Further, the appellant had already shared with HMIL copies of the MISP guidelines which shows its bona- fide in the matter.
6.8 In response, Mr. Setalvad submitted in the said KPI programme, out of total 40 marks for the "sales parameter category", 10 marks were for "insurance penetration" and hence evidently, the OEM is rewarding its MISPs for issuance and renewal of insurance policies in violation of Part II of the 2018 circular.
He refuted the contention of the appellant that the OEM unilaterally issued the KPI programme without informing the appellant and submitted that Clause 6(a) of the MISP guidelines expressly provides that sponsoring entity (appellant) shall be responsible for all the acts and omission of the MISPs.
Charge- 3 (Charging Uniform Premia from different insurers) Submissions in Appeal Nos. 3 of 2019 (Hero Insurance) and 1 of 2020 (Maruti Insurance) 23
7. Mr. P N Modi, Ld. Senior advocate submitted that the appellants have been held in violation of Regulation 4 of IRDAI (Insurance Broker) Regulations, 2018 on the basis of the finding that they have not performed the functions of a direct broker. Further, allegedly, the appellant has not explained to the customers about the choice of products on offer, nor provided them with a comparison in terms of price, cover or service, benefits and coverages, etc. In view of this, it is held that the appellant has not conducted its dealings with clients with utmost good faith and integrity, nor acted with care and diligence. This tantamount to violation of the code of conduct relating to client relationship under Sch. I - Form H under Regulations 30 & Reg. 8(2) of the IRDAI (Insurance Brokers) Regulations, 2018 read with Section 42D(5)(g) and 42D(6) of the Insurance Act.
7.1 Refuting this, Mr. Modi submitted that the Appellant's MISPs are dealers of Hero OEM, which only manufactures 2- wheelers. Therefore, the insurance policies were issued predominantly for 2-wheelers. Policies for 4-wheeler were minimal, and were only for dealers who were also dealers for 4-wheeler OEMs. In fact, there was only one insurer for 4-wheelers (being NICL, a PSU insurance company). He also denied the allegation that same amount of premium was being quoted by all insurers, as the premia quoted by four insurers for 2-wheelers were different. He submitted that the impugned order gives no reasons for reaching to this finding.
7.1.1 He further contended that in terms of Clause 14(a) and 15(d) of the MISP guidelines, Premium for the policy is fixed by the Insurers concerned, in consultation with 24 respondent IRDAI only and the appellant has no role to play in the matter.
He also submitted that under Clause 11(d) of the MISP guidelines, MISPs are rather prohibited from controlling or interfering determination of premium policies.
Further, under Clause 10(b) of the MISP guidelines, the obligation is not to negotiate the premium with each insurer but to rather inform the customers about the premium fixed by various insurers.
Therefore, the contention of the respondent that the appellant ought to have negotiated the premium with the insurers for the benefit of customers, is without any basis.
7.2 Mr. Modi submitted that the appellant had acted in good faith and had performed all its duty towards customers by ensuring that its customers get the best terms, benefits and coverage. The appellant's MISPs informed customers of the rates quoted by each Insurer and explained respective terms and conditions along with choice of products and provided them a comparison in terms of price, cover and service.
7.3 Mr. Modi requested to consider the same submissions in Appeal No. 5 of 2020 (Toyota Insurance Broker India Private Limited), Appeal No. 3 of 2020 [Edme Insurance Brokers Ltd., and in Appeal No. 6 of 2020 (SMC Insurance Brokers Private Limited) as well.
7.4 In response, Mr. Kevic Setalvad for the IRDAI submitted that there are 25 general insurers, who offer motor insurance policies. Each such insurance company differs in terms of their strength, reach, infrastructure, 25 number of policies, size and number of claims, liabilities, etc. Therefore, it is impossible to believe that all insurers associated with the appellant would offer same premium rates.
7.4.1 He further submitted that the basis of arriving at the premium is the information, which is especially within the knowledge of the appellants. Thus, as per Section 106 of the Evidence Act read with illustration (g) of Section 114, the onus is on the appellants to explain as to how and why all the insurers have provided the same premium rates.
7.4.2 He further submitted that the contention of the appellants that it is only insurers who decide the Premium and Appellant has no role to play, cannot be accepted as the insurers who wish to get listed in the appellant's portal are required to agree with the demands of the appellant.
Moreover, the appellant in Appeal No. 3 of 2019 has admitted in its reply that it was involved in fixaion of insurance premium. The fact that no customer has lodged any complaint against the appellant does not mean that there is no violation of the regulations.
Directions passed in the Impugned orders
8. Mr. P N Modi and Mr. Vikram Nankani, Ld. Senior Advocates for the appellants drew our attention to the following directions issued against the Appellants in these Appeals:
"(i)(a) To dismantle the panel of insurers and empanel all insurers on platform, have full integration with insurers' computer systems, to ensure that the premium quoted to customers directly 26 come from the insurer's systems without any intervention by the broker. Compliance in this regard is to be made in two months. In case any insurer does not wish to be part of the panel, the CEO of the general insurance company shall confirm the same in writing to the broker.
(b) To redesign the current system of seeking customer consent for purchasing the motor insurance policy in such a manner that the customer exercises choice of selecting the insurer through an OTP based system at the time of issuance of a new motor insurance policy and its renewal. The broker company is to complete the task in six months and report compliance.
(c) To submit a quarterly audit report from a qualified person having Diploma in Information Systems (DISA) and a Certified Information Systems Auditor (CISA)-certified auditor that the electronic platform portal is compliant with the requirements of the MISP guidelines and in no way interferes or places restrictions in the premium to be charged by insurers or in any way restricts/influences the choice of the customer.
(d) To ensure compliance of Guideline 5(f) of the MISP guidelines and circular dated November 1, 2017 and January 11, 2018 and to report compliance.27
(ii) In case of SMC, keeping in view the finding that the affidavit submitted by the Principal Officer of SMC is factually incorrect, under the Guidelines 15(d)(1) of MISP Guidelines SMC is directed not to release performance incentives to the Principal Officer for one year and to submit compliance in this regard."
8.1 With regard to the direction no. (i)(a), it was submitted by the Ld. Senior advocates for the appellants that there is no panel in existence and there is nothing to "dismantle". On one hand, the impugned order holds that the Appellant cannot have a panel, on the other hand, it directs the Appellants to empanel all the insurers. This is self-contradictory. No other line of insurance business has any such requirement.
8.2 With regard to the direction no. (i)(b), it was submitted that Clause 10(c) of the MISP Guidelines only requires customer's express consent to be obtained before issuing the policy. It does not state that OTP based method will be the only mode of acquiring consent.
Para-7 of the 2017 Circular states that "..consent can be considered based on OTP...". Therefore, SMS OTP is only one option for obtaining consent and is not mandatory. Also, there is no such requirement in any law, rule, regulation, guideline, circular etc. for consent to be exclusively through SMS OTP. The Respondent cannot arbitrarily impose such directions in a disciplinary proceeding. Further, such a condition cannot be arbitrarily imposed only on the Appellants.
8.3 With regard to the direction No. (i)(c), it was submitted that the direction to submit quarterly report will 28 put additional compliance burden on the appellants, moreso, when there is no regulation mandating the same. Further, the respondent has cherry-picked and passed the direction against the appellants only.
8.4 As regards the direction No. (i)(d) requiring the appellants to comply with the guideline 5(f) of the MISP Guidelines and circulars by empaneling all 25 insurers, it was submitted that it is based on ambiguous interpretation of the guidelines.
8.5 As regards the direction No. (ii), directing M/s SMC not to pay performance incentives to the Principal Officer for a period of One year, it was submitted that the SCN did not show cause the Principal Officer, which is in violation of the principles of natural justice. Further, under the Clause 15(15) of the MISP guidelines, which was alleged to have been violated, no such penalty can be imposed and the same is ultra-vires of the principal legislation i.e. the Insurance Act and IRDA Act.
9. Refuting appellant's submissions with regard to these directions, Mr. Kevic Setalvad, Ld. Senior advocate for the respondent submitted that the direction no. (i) (a) to the appellant to "have full integration with insurer's computer systems" is merely a consequential direction to ensure compliance with the MISP guidelines.
Further, rebutting on appellant's submissions on direction (i)(b), Mr. Setalvad contended that an OTP ensures that a customer exercises his choice before selecting the insurance policy. However, the Appellant's system was designed in such a way that the customer 29 would receive the OTP after the insurance policy was issued. This effectively curtails customer's choice.
Mr. Setalvad also submitted that the direction No. 2 with respect to the "Principal Officer" stems from Clause 15(15)(d)(i) of the MISP Guidelines. He submitted that it is not required to send a separate SCN to the Principal Officer as alleged by the appellants. Mr. Setalvad also submitted that the SCN was issued to the Principal Officer of the company and the principal officer has as well signed the reply to the SCN and was also present during the oral hearing before IRDAI.
In view of the above, he submitted that the above directions may be upheld.
10. We have carefully considered the rival submissions and perused documents submitted before us.
10.1 In order to appreciate the conspectus of the matter, it is desirable to define the roles of different stakeholders in the motor insurance business as under :-
(A) Motor vehicle manufacturer / Original Equipment Manufacturers (OEM)- They manufacture vehicles / their spare parts and appoint Authorized dealers for vehicle spare part sale. There could be internal arrangement between them in the form of agreements for regulating their terms & conditions, including incentivizing/promoting vehicle/spare part sale and for providing After-
sales service to customers. Likewise, there could be monitoring mechanisms in the form of internal guidelines and feedback systems to assess the performance of authorized dealers. This 30 relationship is primarily for core business of vehicle / spare parts sales and has no direct bearing on motor insurance business.
(B) Authorized dealers- are appointed by the OEM. Till 2017, authorized dealers had no formal role in motor insurance business at the touch point level, for which purpose, insurance brokers used to set up counters in the offices of Authorised dealers and the latter were compensated by the brokers. Post-2017, with the issue of the MISP guidelines, their insurance service functions were got regulated by MISP guidelines. (were termed as "MISPs" for the purpose of these functions).
(C) Insurers- These companies are licensed by the regulator IRDAI to act as general insurers. Many of the OEMs have their own associate companies working as insurance brokers.
(D) Corporate Agents - are brokers of insurers. These appeals do not involve any Corporate agents.
(E) Insurance Brokers - They act as agents of the customers qua the insurers and for this purpose appoint authorized dealers of OEMs as MISPs. MISP guidelines, 2017 assign a regulatory role to them and bind them for the defaults committed by MISPs.
10.2 Insurance Act, 1938 lays down the legal framework of insurance law. IRDAI Act, 1999 defines the powers and functions of the new regulator. IRDAI (Insurance Brokers Regulations), 2018 define the role of insurance brokers. The powers to issue directions emanate from Section 34 of the 31 Insurance Act, 1938. The Insurance intermediaries in the nature of MISPs have not been provided for in the Insurance Act, 1938 or in the said Broker regulations, nor their duties and responsibilities defined therein.
10.3 The regulator (IRDAI) constituted a committee in 2015 to inter-alia, define the role and responsibilities of authorized dealers of car manufacturers for their role as MISPs in the vehicle insurance chain at touching point level. Based on the report of the committee, the Guidelines were issued on August 31, 2017. The preface of the guidelines states as under:
"Attention is drawn to Authority's order ref no. IRDA/ NL/ ORD/ CMT/ 199/ 11/ 2015 dated 13.11.2015 constituting a committee on motor dealer payouts on motor insurance business. The committee submitted its report to the Authority dated 31.5.2016. Based on the examination of the report of the committee and the interaction held with insurers and other stakeholders the Authority frames the following guidelines on Motor Insurance Service Provider.
1. Short title and commencement: (1) These guidelines are issued under Section 34 of the Insurance Act, 1938 and Section 14 of the IRDA Act, 1999 and are known as Guidelines on Motor Insurance Service provider......."
10.4 the appellant companies are general insurance brokers, and though some of them are companies of the same group to which some of the Car manufacturer companies (Maruti, Honda, Hyundai, Toyota), and insurer companies belong to, they can sell insurance products of other companies as well. The MISP guidelines specifically place onus on appellants and the MISPs appointed by them to provide wide choice of insurance products to customers and explain differences in premium and services, etc. These 32 guidelines also make them accountable for the defaults committed by such MISPs. The impugned orders found them in violation of their supervisory roles, hence the penalty.
11. On careful consideration of the facts on record, we find that the guidelines for MISPs were issued for the first time on August 31, 2017, which came into force with effect from November 1, 2017. As per the preface of the aforesaid guidelines dated August 31, 2017, the guidelines are issued under Section 34 of the Insurance Act, 1938 and Section 14 of the IRDAI Act, 1999.
The provisions of Section 14 (1) of IRDAI Act, mandate the IRDAI to 'regulate, promote and ensure orderly growth of insurance business.......', however, this mandate is subject to any other law for time being in force, including Insurance Act, 1938. The provisions of Section 34 (1) of the Insurance Act empower the authority to issue directions, general or in particular, to insurers and not to Motor Insurance Service Providers (MISPs). Thus through the MISP guidelines, MISPs have been covered within the ambit of Insurance Act, 1938 whereas, the Insurance Act, 1938 does not specifically covers MISPs.
11.1 Section 26 of the IRDAI Act, 1999 empowers IRDAI to make regulations in consultation with Insurance Advisory Committee. In terms of Section 27, such rules and regulations are to be laid before the Parliament. The MISP guidelines have not been laid before the parliament.
11.2 In Toubro Infortech Industries Ltd. and Another VS SEBI10, this Tribunal had the occasion to decide, 10 2004 SCC OnLine SAT 47 33 Whether the SEBI had the power to issue Guidelines, without those Guidelines being laid before Parliament as required under Section 31 of the SEBI Act? Keeping rest of the issues open, it was held that the guidelines can be binding in nature but cannot lead to any punitive action unlike violation of a regulation. The relevant paras 16 and 65 reads as under:
"16.(2) Whether the SEBI had the power to issue Guidelines without those Guidelines being laid before Parliament as required under section 31 of the Securities and Exchange Board of India Act, hereinafter referred to as "the Act" ?
...
65. "Circulars" as stated earlier, are clarificatory in nature and are usually contemporaneous and they are within the purview of the Act and are binding on the Revenue. In so far as Guidelines are concerned, it is necessary to state that they are not regulations and "Guidelines" cannot mandate a procedure, the violation of which is punitive in nature. In that respect, they take the form of a regulation. In the absence of any such power in the Act, the violation of a guideline, it appears to us, cannot lead to any punitive action unlike violation of a regulation since "Guideline" is not defined in the Act."
The observation of this Tribunal are applicable to the present case since, the powers to make regulations in both the SEBI Act and the IRDAI Act are pari materia.
11.3 The same principle has been adopted by the Hon'ble Delhi High Court in Usha Arya vs. SPS International Ltd.11, by holding that the Company Law Board had erred in holding 1992 guidelines of SEBI as regulations (Para 14) and by the Division Bench of Hon'ble Delhi High Court in 11 2005 SCC OnLine Del 892 34 Gail (India) Limited v. Petroleum and Natural gas Regulatory Board.12 11.4 Bearing in mind the above mentioned position, it would be difficult for us to persuade ourselves to accept that the MISP Guidelines were in the nature of Regulation and would attract penal consequences/ actions. In view of this, we observe that penalty levied upon the appellants under Section 102 of the Insurance Act, 1938 cannot be sustained as there is no contravention of Insurance Act or any rules or regulations made thereunder.
11.5 We note that in levying penalty on the appellants, being the sponsor of MISP, the respondent has drawn powers from para 15(15)(a) of the MISP guidelines, which makes an insurer or insurance intermediary, who acts as the sponsoring entity of MISP, liable for penalty under the Insurance Act and regulations for any omission and commission of the MISPs in violation of these guidelines.
Since MISPs per se are not liable for penalty under the Insurance Act, 1938, Insurance brokers/Insurers cannot be held responsible for the violations by the MISPs of MISP guidelines, as this will expand the scope of Insurance Act, 1938 through the said guidelines.
11.6 Be that as it may, keeping all the above mentioned lacuna open, we shall decide the appeal on specific charges, as under :-
122014 SCC OnLine Del 4682 35 11.6.1 Charge - 1 against all five appellants is with regard to violation of Clause 5(f) of MISP guidelines. The said provision reads as under:-
"5. Appointment of MISP
(f) If an insurance intermediary appoints the MISP, then it shall work for the number of insurers as allowed under the respective regulations governing the intermediary."
Undisputedly, under the Insurance Brokers Regulations, 2018, there is no limitation on the part of the insurers that the insurers intermediary should work for a certain number of insurers nor does it provide that until the MISP empanels all the insurers, it cannot work with others. Keeping in view the perceived ambiguity, subsequently on receipt of communication from various stakeholders seeking clarification, the MISP guidelines issued by IRDAI on August 31, 2017 were further clarified vide the first circular dated November 1, 2017. With regard to paragraph No. 5(f), the clarification was sought from Authority as under:-
"Guideline 5(f) - If an insurance intermediary appoints, MISP, then it shall work for the number of insurers as allowed under the respective regulations governing the insurance intermediary. Can an insurance intermediary create a panel of insurance companies for selling motor insurance policies?"
In response, the authority gave the following explanation :-
"An insurance intermediary based on an objective and transparent criteria can enter into service level agreements with general insurers for selling motor insurance policies."36
11.6.2 It is evident that the clarification was silent on the specific question about the number of intermediaries to be empaneled qua the company and it only provided that "an insurance intermediary can enter into SLA, with general Insurers.....". Since the ambiguity continued, the Authority received further representations from the insurance companies in the matter. In response, the Authority issued the following clarification in the matter vide circular dated January 11, 2018 :-
"The Authority is in receipt of representations, from insurance companies that they are not included in the panel of Insurance brokers/MISP's as it is not compulsory for Insurance broker/MISP to empanel all insurance companies for selling motor insurance policies through MISP even if they are willing to enter into Service Level Agreements (SLA).
Hereto attention to guidelines 5(f) of Guidelines on MISP issued on 31.08.17 and point no. 4, of IRDA circular date 01.11.2017, stating that an insurance intermediary based on an objective and transparent criteria can enter into service level agreement with general insurers for selling motor insurance policies. The Authority is of the view that with the commission/remuneration levels for the insurance intermediaries and MISP being stipulated, the creation of a panel of insurers is restrictive, which can lead to undesirable market practices. Therefore, to remove misgivings in the minds of the stakeholders it is clarified that neither the insurance broker nor the MISP can create such a panel of insurer for selling motor insurance policies. However, the insurance companies should enter into service level agreements with insurance brokers/MISPs based on transparent and objective criteria."
(Emphasis supplied) 37 It is, thus, evident that even after issue of circular dated November 1, 2017, the respondent could not give clarity in the matter, as to whether in the absence of any specific provision in the MISP guidelines, can a MISP work or not work till all the Insurers are on-boarded. Moreover, it does not provide for a situation where the insurer is not ready with objective and transparent criteria for entering into SLAs with MISPs.
11.6.3 The respondent made a submission that under paragraph No. 10(a) of the guidelines, every MISPs shall offer a choice of motor vehicle policies of different insurers to the prospect. As per paragraph No. 10(b) of the Regulations, every MISP shall inform the prospect of the premium rates of different insurers. In our considered view, if a MISP is not restricting the choice for the customers, it cannot be held to be in violation of Para No. 5(f) of the MISPs Guidelines. Under the Insurance Brokers Regulations, 2018, there is no provision requiring the intermediary to work for ALL insurers and even the provisions of MISP guidelines require MISPs to offer a "choice" to customers.
11.6.4 The guidelines certainly had ambiguity, hence the Respondent issued a clarification on November 1, 2017, however, the same too does not provide that the MISP have to necessarily offer insurance policies of all insurers. It only requires for an insurance intermediary to follow objective and transparent criteria for entering into Service Level Agreements with general insurers for selling motor vehicle policies.
11.7 The authority itself vide letter dated August 31, 2018 sought information about 'names of Insurers empaneled' as on July 31, 2017 and July 31, 2018. This 38 implies that the respondent recognized the mechanism of empanelment. In some of the cases, while replying to this letter, the appellants have followed the language of the said letter as such even if they may not have created a panel of insurers restrictive or otherwise, which we have already held, was not prohibited by the said guidelines.
12. Keeping in view the ambiguity in the guidelines, we are in agreement with the proposition laid down in para No. 109 of UBS Securities Asia Ltd. (supra) that in case of violation of a vague regulation, there should not be penalty on accused. If two constructions are possible, court must lean towards the construction which exempts subject from penalty. Legislature should have made its intent clear by use of clear and unambiguous language.
Further, we also reiterate the proposition laid down by this Tribunal in paragraph No. 5 of the UPSE Securitas Ltd. (supra) held as under :-
"5. ...... keeping in view the ambiguity in the existing regulation, we are of the view that penalty of Rs. 25,000 imposed on this count is uncalled for."
12.1 Moreover, in the case of Hero Insurance Brokers Ltd., the insurance broker firm was issued a license as insurance brokers with effect from July 26, 2018 under the Insurance Brokers Regulations, 2018. In view thereof, in our view, there could not have been any possible violation as on July 31, 2018.
12.2 With regard to the specific grounds of denial of natural justice by not providing the copies of complaints in Appeal Nos. 1 of 2020 and 3 of 2020 respectively, the 39 appellants have taken the grounds of denial of natural justice. In Appeal No. 6 of 2020, it was submitted that the appellant had duly instructed the MISPs to offer policies of all insurers and a copy of MISP training manual was shared with such MISPs. A copy of the same was shared with the respondent however no cognizance of the same is taken in the impugned order.
12.3 In view of the above, we find no merit in the charge No. 1. Appeals are allowed on this ground.
Charge No. 213. The charge No. 2 alleges violation of the provisions of the circular dated December 7, 2018 which prohibits an insurance intermediary/MISPs to enter into agreement with OEM, which has an influence on the sale of motor insurance policies. We find that in all these five appeals, the respective vehicle manufacture / OEM have shared certain booklets, for capturing information in the prescribed proforma from their authorized dealers for the purpose of assessment of their performance in the form of dealer evaluation programme.
13.1 In some of the cases, one of the parameters of such evaluation booklets pertains to capturing information with regard to 'insurance retention' (in respect of insurance policies of the insurer belonging to the same group). For example, in case of Maruti Insurance Broking Pvt. Ltd., the OEM circulated a Maruti Suzuki balanced scorecard 2019-20 which has one of the component, 'customer retention' out of which 31% weightage is given to Maruti Insurance retention. Similarly, in case of Hyundai Motor India Ltd. for a similar assessment parameter out of 10 40 marks given for same parameter 10 marks were reserved for 'insurance penetration'. In case of dealer evaluation program of Toyota Kirloskar Motors also there is a para on Insurance policy retention.
14. MISPs are primarily in the nature of authorized dealers of vehicle manufactures/OEM and such manufactures routinely monitor the performance of their dealers through some mechanism. It is not the case of respondent that by meeting the desired level of performance in case of 'insurance retention', the MISPs were essentially to be rewarded nor it has alleged the manner/basis for reward. These evaluation programs are primarily for the purpose of improving sales of their vehicles. OEMs assess the authorized dealer on sales, after- sales performance, ease of business, etc. The fact that one of the parameters captured 'insurance retention' as one of the parameters of monitoring does not ipso facto imply that the same is going to be used as a reward/punishment tool against the authorized dealers. Moreover, insurance brokers are not in a position to influence the business strategy/methodology of car manufacturers.
14.1 In our considered view, the said scorecards issued by the vehicle manufactures to the authorized dealers are only performance monitoring tools and cannot be construed as a contract between the two in terms of Contract Act, 1872, as it lacks the essential elements of a valid contract in the absence of any proposal or any acceptance. Ostensibly, appellants as merely insurers broker, do not have locus standi in determining the scope of monitoring of authorized dealers by their respective OEMs. In view of this, we do not find merit in the allegation that such scorecards were in the 41 nature of an agreement for rewarding MISPs and inducing them for insurance retention.
14.2 Another allegation in the case of Appeal No. 3 of 2019 is that appellant was inducing customers by offering discount on labour and interior cleaning. In our view, the same cannot be held as providing rebate as such a discount on labour and interior cleaning was available to all policy holders.
In our view, such a practice is a common practice for authorized dealers to increase their repair/maintenance and service business. It does not imply that where such MISPs do also pertain to a group, which also have an insurance company, such discounts were intended to provide rebate on the insurance policy premium.
14.3 We find that in the impugned order in the case of Maruti Insurance (Appeal No. 1 of 2020), heavy reliance was placed on just one complaint dated November 1, 2018 by one Mr. Mhatre. Allegedly, copy of this complaint was not provided to the appellant. We do not find any force in the argument of the respondent that there was no denial of the natural justice by not providing the copy of the sole complaint.
14.4 Another limb of the allegation is that the appellant's MISPs were not extending cashless facility to all customers. We find that this complaint did not come from any insurance company but was from a web-aggregator (policybazar) who also offers insurance policies of several insurers similar to any direct broker. The complainant too does not allege differential treatment for a particular insurer. The said web- aggregator is rather a direct competitor of the insurance 42 brokers (appellants), and both are primarily in the nature of insurance brokers only. While the web aggregator provides insurance policies through its IT portal, the same business is done by the appellant companies in a physical mode at their MISPs dealership. Respondent could not establish that the said MISPs of the appellant were providing cashless facility to those insurers who had policies of other insurers as against the policies of the insurance companies of the appellant group. Evidently, the MISPs are essentially authorized dealers with their repair garage for whom repairs are major source of income. There is a possibility that some of the MISPs may not have been comfortable in cashless settlement through web aggregator's portal. However, there is no evidence that such MISPs were denying cashless settlement for certain insurers.
14.5 Keeping in view the above, we find no force in the charge No. 2. In view of the same, we find no merit that there was any violation of Section 41(3) of the Insurance Act which specifically prohibits rebate of the whole of the part of the commission payable or rebate on the part of the premium shown in the policy. There is no evidence that there was any such offer of rebate from premium. In view of this, appeal on this ground also deserves to be allowed.
Charge No. 315. We find that this allegation with regard to providing the same premium rates by different insurers is based on the allegation that the onus on determination of premium by various insurers is on the appellant brokers. The respondent started with the suspicion as to how could all insurers provide same premium rates and in its view, this was made possible only due to the fact that in order to be listed on the 43 appellant's portal, insurers had to agree with the demands of the appellant. Respondent has also held that in terms of Section 106 of the Evidence Act, the onus is on the appellants to explain as to how and why all insurers provided the same premium rates.
15.1 On careful consideration, we are in agreement with Mr. Modi that in terms of para 14(a) and 15(d) of the MISP guidelines, premium for the insurance policy is fixed by the concerned insurer in consultation with the respondent IRDAI and appellant brokers could not have influenced the same. Further, in terms of specific provision of para 11(d) of the said guidelines, MISPs are rather prohibited from controlling or interfering in determination of premium of insurance policies. In view of the same, the finding that the appellant ought to have negotiated the premium rates with the insurers is without any basis.
15.2 On the other hand, in terms of para 10(b) of the MISP guidelines, the only obligation on the appellant is to inform the customers about the premium rates fixed by various insurers. None of the provisions of Insurance Act or MISP guidelines require/empower the MISP to negotiate with insurers the premium rates being charged by them and to ensure that they are different qua each other. Moreover, in the open market economy, prices are dynamically affected by supply and demand and affected by the force of competition. It is a common observation that the range of prices in a highly competitive sector tend to narrow down. The respondent cannot shift the onus under Section 106 of Evidence Act to the appellants to prove as to how same premium rates were charged by different insurers, as the same is impossible to be performed by appellants. In view of this and in the absence of any statutory basis, we do not 44 find any merit and all appeals deserve to be allowed on this ground. Hence, penalty cannot be sustained on any of the charges.
15.3 In addition to penalty levied on above grounds, certain specific directions against the Appellants were issued, which are also challenged in these appeals.
15.4 With regard to direction No. (i)(a), (b), (c) and (d), in our view, the regulator may, if it so requires, issue general guidelines in clear terms keeping in view the best interest of customers, however, these are to be made applicable to all stake-holders and not against appellants only.
16. With regard to direction No. (ii), we find that the respondent has taken certain penal actions against the principal officer of M/s. SMC alleging violation of para 15(15)(d)(i) of the MISP guidelines, without having given any opportunity of hearing to him. In our considered view, the same is not sustainable being in violation of the principles of the natural justice. Further, we have already held that there is no violation of para 15(15)(d)(i) of MISP guidelines. In view of this, the penalty imposed upon the said principal officer deserves to be quashed. We have already allowed appeal of M/s. SMC on all grounds for which the Principal Officer was additionally charged. All other directions issued against him also deserve to be set aside 45
17. In view of the above, the following:
ORDER i. The Appeal Nos. 3 of 2019, 1 of 2020, 3 of 2020, 5 of 2020 and 6 of 2020 are allowed.
ii. Orders dated December 18, 2019, December 17, 2019, December 23, 2019, January 8, 2020 are set aside.
iii. All interlocutory applications stand disposed of.
iv. No cost.
Justice P. S. Dinesh Kumar Presiding Officer Ms. Meera Swarup Technical Member Dr. Dheeraj Bhatnagar Technical Member 08.10.2025 MRS Digitally signed by MRS PRAMILA PRAMILA Date: 2025.10.08 PTM 17:33:34 +05'30'