Securities Appellate Tribunal
Sahara India Life Insurance Company Ltd vs Insurance Regulatory Development ... on 5 December, 2025
IN THE SECURITIES APPELLATE TRIBUNAL AT
MUMBAI
DATED THIS THE 5TH DAY OF DECEMBER 2025
CORAM : Justice P. S. Dinesh Kumar, Presiding Officer
Ms. Meera Swarup, Technical Member
Dr. Dheeraj Bhatnagar, Technical Member
IRDAI Appeal No. 4 of 2022
And
IRDAI Application No. 10 of 2022
Between
Sahara India Life Insurance Co. Ltd.
Sahara India Centre,
2, Kapoorthala Complex, Aliganj,
Lucknow - 226024. .... Appellant
By Mr. J. P. Sen, Senior Advocate with Mr. Kunal Vaishnav,
Ms. Afreen Thanevala, Mr. Gautam Talukdar, Mr. Simranjeet
Singh, Mr. Yajat Gulia, Advocates i/b Vis Legis Law Practice
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. D. J. Khambata, Senior Advocate and Mr. Chetan
Kapadia, Senior Advocate with Mr. Animesh Bisht, Ms. Vidhi
Shah, Ms. Aastha Kaushal, Mr. Shreenivas Bhave, Advocates
i/b Cyril Amarchand Mangaldas for the Respondent (IRDAI).
2
With
IRDAI Appeal No. 4 of 2023
Between
Sahara India Life Insurance Co. Ltd.
Sahara India Centre,
2, Kapoorthala Complex, Aliganj,
Lucknow - 226024. .... SILIC
By Mr. J. P. Sen, Senior Advocate with Mr. Kunal Vaishnav,
Ms. Afreen Thanevala, Mr. Gautam Talukdar, Mr. Simranjeet
Singh, Mr. Yajat Gulia, Advocates i/b Vis Legis Law Practice
for the SILIC.
And
1. Insurance Regulatory &
Development Authority of India
Sy No. 115/1, Financial District,
Nanakramguda, Gachibowli,
Hyderabad, Telangana. 500 032.
2. SBI Life Insurance Co. Ltd.
Natraj. M. V. Road & Western
Express High Junction,
Andheri (East), Mumbai - 400 069. .... Respondents
By Mr. D. J. Khambata, Senior Advocate and Mr. Chetan
Kapadia, Senior Advocate with Mr. Animesh Bisht, Ms. Vidhi
Shah, Ms. Aastha Kaushal, Mr. Shreenivas Bhave, Advocates
i/b Cyril Amarchand Mangaldas for the Respondent (IRDAI).
Mr. Ashwyn Misra, Advocate with Ms. Chitra Rentala, Ms. Kriti
Srivastava, Ms. Khyati Mehrotra, Advocates i/b Trilegal for
the Respondent Nos. 2 (SBI Life Insurance).
3
THESE APPEALS ARE FILED UNDER SECTION 110 OF
THE INSURANCE ACT, 1938 TO SET ASIDE ORDERS
DATED IO-1 AND IO-2 PASSED BY THE IRDAI.
THESE APPEALS HAVING BEEN HEARD AND RESERVED
FOR ORDERS ON JULY 23, 2025 COMING ON FOR
PRONOUNCEMENT OF ORDER THIS 5TH DAY OF
DECEMBER 2025, THE TRIBUNAL MADE THE
FOLLOWING:
ORDER
[Per: Dr. Dheeraj Bhatnagar, Technical Member] The Appeal no. 4/2022 and Appeal No. 4/2023 filed by the appellant, Sahara India Life Insurance Company Limited (SILIC for short) are being disposed of through this common order, due to inter-connected issues.
Appeal 4/2022 has been filed against order dated December 30, 2020 passed by the Chairman IRDAI1 under Section 52B (2) of Insurance Act2 (hereinafter referred to as IO-1), whereby certain specific directions were issued against SILIC. SILIC seeks relief in respect of the same as also in respect of earlier orders dated June 12, 2017 for appointment of the administrator and dated June 23, 2017 for stoppage of new business, respectively.
Appeal 4/2023 has been filed against the order dated June 2, 2023 passed by the Member (Finance & investment), 1 Insurance Regulatory & Development Authority of India 2 Insurance Act, 1938 4 IRDAI under Section 52B (2) of the Insurance Act (hereinafter referred to as IO-2), whereby the SILIC's insurance business was transferred to SBI life3, another insurance company registered with the IRDAI, for alleged non-compliance with the directions contained in the IO-1.
2. The chequered history of the litigation in the matter is as follows:
2.1 Sahara India Life Insurance Company Limited, SILIC (hereinafter referred to as the 'Company') SILIC is a private Insurance company, which was incorporated on September 13, 2000. It was registered with the IRDAI on February 6, 2004 for undertaking insurance business.
2.2 The genesis of litigation with the IRDAI lies in the decision of the SILIC management to open new offices, statedly for expansion of its business. Initially, the BoD4 of SILIC resolved to open 157 new offices. As per SILIC, the proposal was approved by IRDAI on December 3, 2013, which was valid for one year, but SILIC did not take any steps.
2.3 Later, keeping in view the action taken by the SEBI5 and other judicial authorities, IRDAI issued few directions to SILIC. Penalty was imposed on the SILIC for non-compliance of Section 32C of the Insurance Act mandating Insurers to open branches in rural areas. The same was noted by the BoD6 in its meeting dated December 3, 2014, wherein it was resolved to expand the business and open 646 offices, including 489 new offices, for which an arrangement with the group entity M/s. Sahara India was considered.3
M/s SBI Life Insurance Company Ltd.
4Board of directors 5 Securities and Exchange Board of India 6 Board of directors 5 2.4 An application was made to IRDAI on January 23, 2015 for opening 64 out of 489 new offices in Tier-1 locations. After some correspondences, fresh application for opening 157 new offices was made on February 2, 2015, as the earlier approval dated December 3, 2013 had expired.
2.5 IRDAI, thereafter directed the SILIC to review its proposal for expansion. In view of the same, after the BoD approval, a detailed rationale was submitted to the IRDAI. Following up on the same, IRDAI sought certain explanations, inter alia, reason for decline in solvency margin from 6.91 to 5.65. SILIC replied on March 17, 2015. However, without awaiting the IRDAI's response, an amount of Rs. 71.25 Crore was advanced as security deposit to M/s Sahara India in terms of the arrangement approved by its BoD in the meeting dated December 3, 2014.
2.6 By their letter dated July 24, 2015, IRDAI rejected both the applications for opening new offices on the ground that the SILIC already had 141 branches and when earlier approval was granted in 2013, it had failed to open any new office.
2.7 This was followed by a review of the performance of the SILIC by the IRDAI on November 11, 2015, during which information regarding increase in Security Deposit was sought. In response, SILIC vide letter dated March 29, 2016 informed that it was in the process of expanding business and opening 646 offices. Later, clarification was sought by the IRDAI on May 18, 2016 in the matter and the request for opening new offices was rejected by the IRDAI.
6Subsequently, through letters dated September 23, 2016 and January 4, 2017, IRDAI directed SILIC to submit action plan on compliance with legal requirement of its promoters. Thereafter, SCN7 dated March 9, 2017 was issued. On June 8, 2017, an investigation report with findings on various issues including advance of Rs. 78.14 Crore of security deposit was submitted. SILIC was called to explain the same on June 8, 2017.
2.8 After granting personal hearing, IRDAI passed an order on June 12, 2017 ("First Order") for appointing an administrator under Section 52A to supervise the business of SILIC. On June 22, 2017, the administrator submitted a report containing various findings such as unsatisfactory 'fit and proper' status of promoters, security deposit given to M/s Sahara India, non-reconciliation of bank accounts and non- submission of business plan.
Pursuant thereto, another order dated June 23, 2017 ("Second Order") was passed, restraining SILIC from carrying out new Insurance business under Section 52B(2). On July 28, 2017 another order under Section 52B(2) was passed transferring SILIC's insurance business to M/s ICICI Prudential8 ("Third Order").
2.9 All these three orders were appealed before this Tribunal. By a common order dated January 11, 2018, this Tribunal upheld the First and the Second orders, while the Third order transferring the business to ICICI Prudential was set aside for want of compliance with principles of natural justice.
7Show Cause Notice 8 ICICI Prudential Life Insurance Company 7 2.10 Following this, the IRDAI provided a copy of Administrator's report to SILIC on January 18, 2018. A detailed reply was filed by SILIC with regard to various observations made in the Administrator's report and the investigation report. SILIC also provided additional information sought by the IRDAI. Consequently, a SCN was issued to SILIC on January 15, 2019 containing 8 charges, inter-alia, transfer of funds to M/s Sahara India, corporate governance issues, inadequate powers to CEO, poor internal control, unsatisfactory response on the issue of refund of Rs. 78.15 Crore, 'fit & proper' status of promoter, absence of CFO, etc. 2.11 SILIC replied to the SCN on March 1, 2019. On December 3, 2019, hearing was granted and on December 26, 2019, information on further queries were provided by SILIC. Taking the same into consideration, IRDAI issued the following remedial directions vide IO-1 dated December 30, 2020 :-
(1) "SILIC shall take immediate steps to recover the advance of Rs.78.15 crore from M/s Sahara India. The principal amount should be recovered within a period of 3 months and the interest should be recovered fully within a further period of one month.
(2) As the promoters SIFCL, SCL, SICCL and SIHL are no longer found to be "fit and proper", the shareholding by these four entities should be transferred to any other "fit and proper" promoters within a period of six months, subject to the provisions of IRDAI (Transfer of Equity Shares of Insurance Companies) Regulations, 2015.8
(3) SICIL is directed to submit a proper Board approved "business plan" to IRDAI within 3 months.
(4) SICIL is directed to reconcile all the remaining unreconciled bank account(s) as on 31st March 2020 within a period of 2 months.
(5) SICIL is directed to strengthen its internal control systems and conduct its business in accordance with sound corporate governance practices on a continuing basis".
2.12 SILIC continued to be in the business of life insurance. The respondent thereafter followed up on the status of compliance with the directions contained in the IO-1 from time to time and there was regular exchange of information between the two sides in the matter. In May 2022, SILIC filed Appeal No. 4 of 2022 against IO-1, before this Tribunal.
2.13 On May 12, 2023, the Administrator submitted a monthly report to the IRDAI. Noticing non-compliance with various directions contained in the IO-1, IRDAI passed another order (IO-2), whereby SILIC's Insurance business was transferred to M/s. SBI Life Pvt. Ltd. After seeking liberty from this Tribunal, SILIC filed Appeal No. 4 of 2023 on June 8, 2023 challenging the IO-2.
2.14 On June 13, 2023, the matter was heard by this Tribunal and stay was granted on the operation of IO-2. On an appeal filed by IRDAI, the Hon'ble Supreme Court of India vide order dated July 17, 2023 remitted the matter to this Tribunal for reconsideration. This Tribunal thereafter, passed an order on August 3, 2023, by which, considering the facts of the case, the stay granted earlier was vacated and SBI life was impleaded as a party respondent.
93. We have heard Mr. J. P. Sen, learned senior advocate with Mr. Kunal Vaishnav, Ms. Afreen Thanevala, Mr. Gautam Talukdar, Mr. Simranjeet Singh, Mr. Yajat Gulia, learned advocates for the SILIC.
For respondent No. 1 IRDAI, Mr. D. J. Khambata, and Mr. Chetan Kapadia, learned senior advocates with Mr. Animesh Bisht, Ms. Vidhi Shah, Ms. Aastha Kaushal, Mr. Shreenivas Bhave, learned advocates represented.
Mr. Ashwyn Misra, along with Ms. Chitra Rentala, Ms. Kriti Srivastava and Ms. Khyati Mehrotra, learned advocates represented respondent No. 2 SBI Life Insurance.
Appeal No. 4 of 20224. Mr. J. P. Sen, learned senior advocate for SILIC submitted that both the orders dated June 12, 2017 and dated June 23, 2017 were not final, as they did not resolve the issues relating to the appointment of Administrator or measures taken based on his report. As per the order dated January 11, 2018 of this Tribunal, the entire matter was restored to IRDAI with the directions to proceed from the stage of seeking SILIC's response to the Administrator's report. Therefore, order dated June 23, 2017 directing stoppage of new business could not be held as final without affording SILIC an opportunity to reply.
4.1 In essence, the earlier orders got merged with the IO- 1 but are impugned herein as a precaution. Even assuming arguendo that they were final, this Tribunal's order passed in January, 2018, required IRDAI to reconsider all actions. However, the respondent while passing the IO-1, did not 10 address key issues such as Administrator's appointment and procurement of new business.
4.2 Learned senior advocate submitted that the order dated June 12, 2017, states that IRDAI had grounds to believe that SILIC was acting in a manner likely to prejudice the interests of policyholders, while the order dated June 23, 2017 stopping new business, offered no reasons at all. Furthermore, the IO-1, relied exclusively on the administrator's report without any independent findings, verification, or application of mind and the administrator happens to be the same individual who presented charges against SILIC on IRDAI's behalf.
4.3 Ld. Senior advocate submitted that as a result, SILIC continued to remain under Administrator's control and restrained to conduct new business for over seven years, which prevented any chance of recovery or revival of its business. It has resulted in loss of goodwill and market share, erosion of customer base and shareholders' surplus, and attrition of critical manpower, causing difficulty in servicing existing policyholders.
4.4 Mr. Sen drew our attention to the following directions contained in IO-1.
4.4.1 With regard to the 1st direction to recover security deposit of Rs. 78.15 Crore from Sahara India, Mr. Sen submitted that funds advanced to Sahara India were to upgrade the offices. It was a bona-fide, cost-effective business expenditure approved by SILIC's Board. IRDAI had approved SILIC's proposal to make the deposit to Sahara India for opening 646 offices on May 28, 2015. Further, IRDAI's objection for openings new branches, particularly 425 11 offices in Tier-2 and below cities, violated the spirit of the IRDAI (Place of Business) Regulations 2013, as the amended section 64-VC did not require any permission to be taken in respect of the same.
4.4.2 Regarding the 2nd direction to transfer promoter's shareholding to any other 'fit and proper' promoter on the premise that SILIC's promoters allegedly did not satisfy the 'fit and proper' criteria, Mr. Sen submitted that the 2016 Corporate Governance Guidelines (Guideline 5.3) govern only directors of an insurer company, requiring their integrity, judgment, and financial soundness. Further, Regulations 7(2)(i) and (ii) of the IRDAI (Insurance Registration) Regulations, 2016 apply only to the registration, whereas no suspension or cancellation of SILIC's registration was initiated.
4.4.2.1 It was submitted that with regard to ascertaining the promoter's 'fit and proper' status, no separate notices were issued to its promoters nor hearings provided, which violates principles of natural justice. With regard to the main promoter SIFCL (an NBFC), the SEBI and IRDAI lack jurisdiction in holding it as not 'fit and proper'. Also, the cancellation of NBFC registration of SIFCL was due to withdrawal of NBFC scheme and not due to any financial indiscipline. Further, the action by RBI to wind up SIFCL is sub-judice with status quo ordered by Hon'ble Supreme Court of India.
Both promoters namely SIFCL and Sahara Care Ltd. have positive net worth of Rs. 1746.20 Crores and Rs. 140.25 Crores (FY 2019-20), respectively which supports their capacity to meet future capital needs of SILIC. Mr. Subrata Roy Sahara's control over SILIC, noted in the impugned 12 order, is a moot point, post his death in 2023, which now requires fresh assessment.
4.4.3 With regard to the direction to submit business plans, it was submitted that SILIC's performance is far better than the industry average in terms of a high solvency margin, persistency ratio, claim performance, complaint resolution, and regulatory compliance. An insurance company's capacity to operate is evidenced by its high solvency margin, which in SILIC's case, is much higher than the minimum solvency ratio of 150 percent required under Section 64VA of the Insurance Act. This is despite the restraint on new business since 2017.
4.4.4. With regard to the 3rd direction for carrying out reconciliation of all bank accounts, learned senior advocate submitted that all bank accounts were got reconciled up to date and provided on December 26, 2019 but no finding in this regard has been given in the IO-1.
4.4.5 Regarding the 4th direction for taking corrective steps for improving internal controls, Mr. Sen submitted that SILIC has strengthened its internal controls and is now fully compliant with all recommendations. Further, with regard to alleged inadequate powers with the CEO, Mr. Sen submitted that SILIC is compliant and its CEO retains full authority.
4.5 Ld. Senior Advocate submitted that IRDAI's impugned order fails to acknowledge that SILIC has never defaulted on policyholder's claim for repayments since inception, with no complaints in respect of re-payments or claim settlements. Further, unlike in the case of SILIC, IRDAI has not issued such directions in the past against any other insurer based on the 'fitness' of promoters.
134.6 He submitted that no evidence is brought on record by IRDAI to demonstrate that SILIC had compromised with policyholders' interests. On the other hand, as a result of IRDAI's actions, SILIC has lost valuable years in acquiring new business. Its policyholders have suffered losses, its marketing force has been deprived of their livelihood and its expansion into rural areas has been impeded.
Appeal No. 4 of 20235. Learned senior advocate for the SILIC alleged violation of principles of natural justice in passing the IO-2. IRDAI's claim of rendering natural justice to the SILIC by providing the Administrator's report on January 18, 2018 in pursuance of this Tribunal's direction and affording hearing on December 3, 2019, is farcical and an afterthought, since the IO-2 is not based on the recommendations of 2017 report. On the other hand, it relies on new reasons which were absent in the SCN dated January 15, 2019 and the IO-1; and rather takes into consideration post-2020 events, including alleged non- compliance with remedial directions contained in IO-1, which is also under challenge and pending before this Tribunal.
5.1 Mr. Sen contended that the hearing on December 3, 2019 was chaired by Dr. Subhash C. Khuntia (since retired on May 6, 2021), who had signed the IO-1, whereas the IO-2, is issued by Shri Rakesh Joshi, who was appointed as member on March 22, 2022, and was absent during the 2019 hearing, which violates the principle that "he who hears must decide". To support this, he relied on Union of India v. Shiv Raj9 and Amir Singh v. Government of India10, and submitted that the order is void for breach of natural justice. The 9 (2014) 6 SCC 564 10 (ILR 1964 Vol.2 P&H 784) 14 January 15, 2019, SCN was exhausted by the IO-1, while the IO-2, was issued without a fresh notice or hearing.
5.2 Reliance was also placed on Kirtibhai Chaturbhai Patel vs. District Appropriate Authority11, alleging violation of natural justice principles, since admittedly the IO- 2 was based on post-2020 non-compliance, unaddressed in prior proceedings, which makes the IO-2 illegal.
5.3 The Ld. Senior advocate drew our attention to the alleged non-compliance with the directions contained in the IO-1 and submitted that sufficient compliance has been made by the SILIC. He submitted that the administrator's monthly report dated May 12, 2023 was not provided to the SILIC, based on which business was transferred to SBI Life.
5.4 Mr. Sen submitted that no SCN was issued and no opportunity of hearing was extended to the SILIC before passing the drastic order (IO-2) and thus, there is gross violation of natural justice principles. Further, the IO-2 attempts to render the pending Appeal No. 4 of 2022 infructuous.
5.5 Mr. Sen submitted that SILIC has consistently maintained its solvency ratio above the statutory minimum of 1.5 as required under Section 64VA of the Insurance Act. According to IRDAI's 2021 annual report, SILIC's solvency ratio stood at 9.1, much higher than its peers and required level of 1.5, reflecting its continued financial strength as on December 26, 2019 and hence, transfer of its business was and is wholly unwarranted.
11(MANU/GJ/1445/2018) 15 5.6 It was alleged that IRDAI is not acting in the best interests of the policyholders and has taken steps with a view to destroy SILIC's business. On June 2, 2023, when IRDAI issued IO-2 to transfer SILIC's business, it issued instructions to transfer Rs. 1,325 Crores, published public notices, and on the very next day, the Administrator transferred the confidential data and attempted to move physical records, hindering SILIC's ability to protect its rights and serve policyholders. Despite Administrator's six-year control over SILIC, IRDAI's abrupt action, without ensuring a smooth transition for policyholders, lacks any justification.
5.7 Learned senior advocate submitted that there are no complaints from any policyholders and SILIC is best suited to continue to service its existing policyholders and prayed for granting status quo ante and directing SBI Life not to process the claims and deal with policyholders.
6. In response, Mr. D J Khambata, learned senior advocate for the IRDAI submitted a consolidated reply on both Appeal Nos. 4 of 2022 and 4 of 2023 as under:
6.1 The two orders passed in June 2017, which were challenged in the 2022 Appeal, have already been decided by this Tribunal vide order dated January 11, 2018 and attained finality, as SILIC did not choose to challenge those orders.
Further, remedial directions contained in the IO-1 were issued in response to SILIC's request, much before IRDAI passed the order to transfer its business (IO-2). These directions addressed SILIC's submissions in response to the Administrator's report. Since SILIC has accepted the IO-1 and its Remedial Directions, it precludes any challenge to IO- 1 now. SILIC's board acknowledged this order and planned compliance with each Remedial Direction. SILIC accepted the 16 first remedial direction, proposing an arrangement to recover the advance amount from Sahara India vide its letter dated February 12, 2021. In order to comply with the second remedial direction, SILIC proposed transferring SICCL and SIHL's 8.09% shareholding to other Sahara group companies vide on September 7, 2021. Further, in compliance with the IO-2 by which insurance business of the SILIC was transferred, the Acquiring Insurer M/s SBI Life transferred an amount of Rs. 49.59 Crores (net of taxes) to SILIC, being the difference of surplus assets over policy liabilities of SILIC as on the date of the order, as valued by an Independent Actuary. SILIC received and accepted the said amount without any objection. Consequently, SILIC's acceptance of the IO-2 estops it from challenging the same. It is an established law that a party accepting and benefiting from an order cannot subsequently challenge it, and relied on State of Punjab v. Dhanjit Singh Sandhu12.
6.2 He also submitted that in compliance with the SAT order of January 2018, quashing IRDAI's July 28, 2017 order for transferring SILIC's business to ICICI Prudential, IRDAI shared the Administrator's Report dated June 22, 2017, with SILIC on January 18, 2018, which incorporated findings from the Investigator's Report dated June 8, 2017, highlighting the following issues of concern:
(i) unapproved security deposit of Rs. 78.15 Crore to M/s Sahara India;
(ii) questionable financial soundness of promoters including Mr. Subrata Roy Sahara facing legal issues over Rs. 24,000 Crore refunds;
(iii) lack of internal controls, excessive
management expenses, negative CAGR
12
(2014) 15 SCC 144
17
growth, recycling of policies misrepresenting business growth;
(iv) not meeting "fit and proper" status of promoters (SIFCL and SCL) declared unfit by RBI and SEBI;
(v) Board member's role (including Mr. O.P. Srivastava) in siphoning off Rs. 78 Crores;
(vi) pending bank reconciliation since September
2016; and
(vii) non-submission of business plans.
6.3 SILIC responded with a detailed reply on February 19,
2018, followed by a detailed 381-page reply on March 15, 2018 to the Investigator's Report, and further submissions were made on June 30, 2018, regarding bank reconciliation and promoter' fitness.
6.4 IRDAI then issued a SCN on January 15, 2019, on unresolved issues. SILIC replied on March 1, 2019, availed a personal hearing on December 3, 2019 attended by Mr. O.P. Srivastava, and provided additional submissions on December 26, 2019. After considering these, IRDAI passed the IO-1 under Section 52B(2), issuing Remedial Directions as a proportionate step to avoid immediate transfer of business, empowering further action on non-compliance. This clearly shows that IRDAI has followed the principles of natural justice before passing the impugned orders.
6.5 Mr. Khambata also submitted that despite multiple opportunities for SILIC to address Administrator's recommendations through written representations and the December 3, 2019 hearing, SILIC admittedly remained non- compliant with the said Remedial Directions for over two and half years, and instead continued to seek concessions via 18 correspondence from February 1, 2021 to IO-2, and re- agitated issues in a meeting on February 16, 2021, and furnished no response to IRDAI's July 7, 2021 compliance query. IRDAI reiterated compliance requirements and warned on December 2, 2021 of regulatory action on failure.
Consequently, IRDAI passed the IO-2 transferring SILIC's business to SBI Life in order to protect policyholders, and thereby implementing the Administrator's recommendations, which was in continuation of prior proceedings. Given SILIC's awareness about the issues through various query letters and reminders and its repeated representations, issuing a fresh SCN would have been a futile formality, and caused no prejudice since SILIC showed no additional material or changed circumstances.
6.6 Mr. Khambata, while relying on Keshav Mills v. UOI13 and Aligarh Muslim University v. Mansoor Ali Khan14, submitted that when a party knows the case and receives reasonable chances to respond, absence of formal notice or hearing does not invalidate the order. He submitted that these principles need not be followed when it would be an empty formality or when they have already been adhered to before imposing punishment, as any further opportunity would not improve complainant's position and placed reliance on Karnataka SRTC v. S.G. Kotturappa15 and Biecco Lawrie Limited v. State of WB16.
6.7 Responding to the key issue of security deposit to M/s Sahara India, he submitted that SILIC transferred Rs. 78.15 Crore in 29 transactions in late 2014 and early 2015 as 13 (1973) 1 SCC 380 14 (2000) 7 SCC 529 15 (2005) 3 SCC 409 16 (2009) 10 SCC 32 19 security deposit for lease agreements to open new offices, which contravened Section 29 of the Insurance Act, as it was advancing funds to a partnership firm in which directors and ultimate beneficiaries, Mr. Subrata Roy and Mr. O.P. Srivastava (also SILIC directors, shareholders, and Sahara promoters) were partners. The second irregularity was transferring an amount of Rs. 72.74 Crores before making applications to IRDAI, despite the express need for prior approval. Thirdly, out of that amount, Rs. 31.25 Crore was advanced even before SILIC's board approval on December 3, 2014. Lastly, it included advancing Rs. 3.43 Crores, post- denial of permission by IRDAI on July 24, 2015. Further, leases were renewed after expiration on October 31, 2015 despite IRDAI's rejection. SILIC accepted IRDAI's recovery direction but showed no genuine intent to recover funds, as evidenced by its failure to respond to or approve Sahara's December 30, 2019 proposal for allowing 36 monthly instalments from April 2020 or to its February 6, 2021 offer to pay Rs. 8 Crores immediately and the balance with interest in four quarterly instalments.
6.8 SILIC's claim that IRDAI had granted approval is baseless as neither the approval was sought nor granted by the May 28, 2015 letter. IRDAI merely directed the SILIC to collect interest from Sahara India. Further, its claim that funds came solely from shareholders' funds is inconsistent with its March 17, 2015 letter stating that only Rs. 69.35 Crores of Rs. 71.25 crores were from such sources, leaving Rs. 1.9 Crores unexplained. While shareholders' funds are regulated as "controlled funds" under explanation to Section 27A(1) of Insurance Act and as "investment assets" per Regulation 2(i) of the Investment Regulations17, impacting 17 IRDAI (Investment) Regulations, 2016 20 solvency margins (reduced from 6.9 to 5.65 due to payment) and policyholder interests under relevant solvency rules.
6.9 SILIC's denial of siphoning of funds is untenable in view of Hon'ble Supreme Court's order (Contempt Petition) in Sahara India Real Estate Corp.18, noting SIFCL (SILIC's promoter) diverting Rs. 484.67 Crores to Sahara India instead of a SEBI refund account, indicating a pattern within the group. Despite assurances and follow-up by IRDAI, SILIC could recover only Rs. 8 Crores as on August 12, 2021, leaving approximately Rs. 70 Crores plus interest outstanding after nearly 10 years.
6.10 Mr. Khambata also submitted that IRDAI is required to ensure the ongoing 'fit and proper' status of an insurer's promoters under Section 3(2A) of the Insurance Act and Regulations 7 and 16 of the Registration of Insurance Companies Regulations19, which requires assessing promoters' financial soundness, conduct, and performance, as well as the management's character at the time of registration and continuously thereafter to prevent detrimental conduct under Section 34, which authorizes IRDAI to issue directions in public interest or to secure proper insurer management.
6.11 SILIC accepted the directions in IO-1 to address promoter' fitness by proposing on September 7, 2021 and January 4, 2022 to transfer only 8.09% of its shareholding (held by SICCL and SIHL) to other Sahara entities, but IRDAI found SILIC's promoters unfit due to ongoing regulatory issues, feeble financial health, and inability to meet capital 18 SEBI V. Sahara India Real Estate Corp. [Contempt Petition (C) 412/2012] dated February 24, 2015 19 IRDA (Registration of Indian Insurance Companies) Regulations, 2000 (amended 2015) 21 needs, with shareholding fully controlled by Mr. Subrata Roy Sahara, Mrs. Swapna Roy, Mr. J.B. Roy, and Mr. O.P. Srivastava, who faced multiple judicial and regulatory orders for mishandling public funds. SEBI's October 31, 2018 order directs SICCL and its directors (including Mr. Subrata Roy and Mr. O.P. Srivastava) to refund Rs. 14,106 Crores with interest for illegal debenture issuance and bars them from securities market for four years.
6.12 He submitted that the order of the Hon'ble Supreme Court in Sahara India Real Estate Corporation Ltd. v. SEBI20 mandated refunds with 15% interest, leading to contempt proceedings for non-compliance, with the order passed on November 21, 2013 prohibiting property transfers, and orders dated June 4, 2014 and July 11, 2016 allowing limited sales with transfer of proceeds to SEBI's refund account, and February 24, 2015 noting SIFCL's (SILIC's 50% shareholder) wrongful transfer of Rs. 484.67 Crores to M/s Sahara India, which mirrors SILIC's transfer of Rs. 78 Crore security deposit. SILIC has not yet transferred promoter's shareholding to a "fit and proper" entity.
6.13 Regarding non-submission of business plan, IRDAI persistently followed up with SILIC, requesting a detailed Three-year plan on November 26, 2015, to which SILIC responded on March 29, 2016, promising submission by April 15, 2016 after board's approval, but submitted it on July 11, 2017 (only when it came under the supervision of the administrator in June, 2017), leaving SILIC without a plan for over 14 months. On December 26, 2019, SILIC provided a roadmap with projections for business expansion and agency recruitment, but IO-1 found it non-viable, being lacking in 20 Civil Appeal No. 9813 of 2011, order dated August 31, 2012 22 critical components like premium, expense, and capital requirement projections for the next three years. SILIC submitted another plan on February 12, 2021, which IRDAI rejected, being unsatisfactory since it relied on new business and additional capital infusion over three years, risking business strain and solvency erosion. No revised plan has been submitted to date.
6.14 Responding to reconciliation of accounts and internal controls, he submitted that IRDAI noted that SILIC's bank accounts including two PNB accounts with a defalcation of Rs. 8.71 Crores, remained unreconciled as of February 12, 2021. Additionally, on four occasions, board meetings each lasting only 15 to 30 minutes, were held simultaneously with critical board committee meetings (Audit, Investment, Risk and ALM, Policyholders Protection, Nomination and Remuneration) with overlapping members, which indicates inadequate oversight. The IO-1's Remedial Directions aimed to allow SILIC to rectify these issues, but SILIC failed to comply, underscoring serious operational and governance deficiencies compelling the IRDAI to issue IO-2.
6.15 Learned senior advocate submitted that SILIC's solvency margin, though high for not accepting new business and only servicing existing policyholders, does not reflect sound governance, profitability, or financial health. The June 2017 orders, the IO-1 and the IO-2 were not based on solvency margin, which fails to assure SILIC's ability to meet claims, contingencies, or support business growth.
7. Pursuant to the order dated August 3, 2023 of this Tribunal, SBI life was added as second respondent in Appeal No. 4 of 2023. The learned advocate for the second respondent denying all the contentions raised in the appeal, 23 submitted that SBI Life is regulated by the first respondent and the order passed by the IRDAI is imperative upon it under the Insurance act and accordingly necessary proactive steps were taken by it. Also, there is no stay on the IO-2 and the same is binding upon the parties. Since third party rights have been created and great prejudice will be caused to the policyholders and the second respondent, therefore, it would not be appropriate to interfere with the IO-2 at this stage.
7.1 The learned advocate further submitted that all the allegations of incompetence leveled by the SILIC are vague and baseless as SBI Life is well-equipped to efficiently cater to the needs of the SILIC's policyholders. It has also contacted policyholders without any privacy or data protection breach. It also possesses an adequate workforce, infrastructure and reach to effectively serve policyholders.
8. We have carefully considered the facts of the case and perused the rival submissions and documents placed on record.
8.1 In nutshell, SILIC is aggrieved by a series of actions taken by the IRDAI against SILIC, resulting in eventual transfer of its Insurance business to SBI Life, -an unrelated insurance company. Appeal No. 4 of 2022 is against such actions/ directions while Appeal No. 4 of 2023 is against transfer of Insurance business to SBI Life vide IO-2. Being interconnected, both appeals are being decided together by this common order.
Appeal No. 4 of 20228.2 The SILIC has challenged the IO-1 and in addition, made prayer to set aside the other two orders, namely; order 24 dated June 17, 2017 appointing the administrator under Section 52A of the Insurance Act and the order dated June 23, 2017 stopping new business. Further, a prayer is made to declare administrator's report as null and void. We find that both 2017 orders were challenged in Appeal No. 4 of 2017 before this Tribunal and they were upheld by this Tribunal vide a common order dated January 11, 2018. Since these orders have attained finality, and the issues contested therein have been resolved, no further appeal survives against the same. The administrator's report cannot be termed as an order, therefore, observations to that effect are not required.
8.3 A third order dated July 28, 2017 passed by the IRDAI transferring SILIC's insurance business to M/s. ICICI Prudential, was also decided by the Tribunal through the same order dated January 11, 2018. This order was set aside on the ground of denial of the natural justice with directions to the IRDAI to (i) proceed from the stage of providing a copy of the administrator's report to SILIC seeking a representation from SICIL; and (ii) to provide SILIC with an opportunity of being heard in consonance with the principles of natural justice.
8.4 Under the circumstances, we are deciding this appeal with respect to directions issued under Section 52B (2), vide IO-1 only.
8.5 We find that the SILIC has primarily taken the plea of violation of principles of natural justice in support of the appeal. We note that the Tribunal's order dated January 11, 2018 was not challenged by the SILIC. We also note that in pursuance of the directions issued by this Tribunal by setting aside the order dated July 28, 2017, the IRDAI provided administrator's report to SILIC within 7 days, and SILIC filed 25 a detailed reply thereon on February 19, 2018 and a further reply was furnished on the investigation report on March 15, 2018. In response, the SCN was issued on January 15, 2019; SILIC filed a detailed reply on March 1, 2019; and thereafter, on December 3, 2019, personal hearing was granted and, thereafter on December 26, 2019, the SILIC filed a detailed clarification.
Based on the above, the IRDAI thereafter issued specific directions in IO-1 to SILIC. These facts evidently suggest that sufficient opportunity was given to the SILIC before the IO-1 was passed. In view of the same, there is no merit in the allegation of denial of natural justice.
9. Vide the said IO-1, the IRDAI issued certain directions. SILIC has challenged the 1st direction i.e., to recover an amount of Rs. 78.15 Crore given to M/s. Sahara India as security deposit for opening of new offices under a lease agreement. This issue has been Achillis' heel for SILIC since 2014. As the proposal of the SILIC to open 157 new offices approved by IRDAI, was not executed within the proposed period of one year, IRDAI took up the matter with the SILIC from time to time. IRDAI vide letter dated July 8, 2015 rejected further proposal resolved by the Board of directors to open 646 offices under which 489 new offices were to be opened through an arrangement with M/s. Sahara India, another group entity. Clarification was sought in this regard by IRDAI on several dates during 2016 and 2017 and on getting no satisfactory response, SCN was issued on March 9, 2017. The investigation report recorded a finding that an amount of Rs. 78.14 Crore was given to related entity M/s. Sahara India as security deposit.
269.1 In our considered view, since the IRDAI order dated June 23, 2017 prohibiting the SILIC to undertake new insurance business was upheld by SEBI on January 11, 2018 and it has attained finality, there was no justification for continuing with the security deposit for opening of new offices for expanding the business. Therefore, the said direction by IRDAI is justified and does not call for interference.
9.2 It is also seen that despite initial payment of Rs. 8 Crore by the said Sahara India, no quarterly payment of Principal and interest was made, as per the proposal. In our view, IRDAI's concerns for the policyholders in the matter were justified considering that Sahara India had allegedly illegally sold shares worth Rs. 484.67 Crore in the contempt case of Sahara Real Estate Corporation (Supra). In view of this, IRDAI's apprehension about possibility of refund of security deposit of Rs. 78.15 Crore given to Sahara India by SILIC in late 2014 and early 2015 is bona fide and well founded.
9.3 There were further irregularities in furnishing this advance at every stage; an amount of Rs. 31.25 Crore was already transferred to Sahara India even before the Board's approval on December 3, 2014 and further amount of Rs 3.43 Crore was transferred and leases were renewed even after IRDAI's express rejection of the proposal and reminders. Further, though the said lease agreement with Sahara India was terminated by a letter on December 3, 2019, SILIC made no sincere efforts to bring back the full amount of security deposit. In view of this, we hold that said direction is justified keeping in view larger interest of the policy-holders of SILIC.
10. The 2nd direction to transfer the shareholding of its four promoter entities to any other 'fit and proper' promoters within a period of six months is challenged on the ground of 27 denial of principles of natural justice. In the assessment of IRDAI, SILIC's promoters, namely, SIFCL, SCL, SICCI and SIHL were no longer found to be 'fit and proper'. But in the SILIC's view, before holding so, an opportunity of being heard should have been given to the said promoters.
10.1 We find that even though the requirement of promoters to be 'fit and proper' is not provided in the relevant regulations in such clear terms, but in essence, it finds place in relevant legal provisions. The process for grant of certificate of registration by IRDAI effectively requires the 'fit and proper' status of the promoters in view of IRDAI Registration of the Indian Insurance Companies Regulations, 2000. Further, in terms of Section 3(2A) of the Insurance Act, 1938, IRDAI has to satisfy about the financial condition and the general character of the management at the time of registration of the insurer. In terms of IRDAI (Registration of the Indian Insurance Companies) Regulations, 2000, IRDAI has to consider general track record of the conduct and performance of the promoters in the field of business/profession they are engaged in and similarly, the record of their directors and persons in the business in management of the promoter entities and the insurers.
10.2 We note the promoter's shareholding in SILIC as under :-
Shareholder Percentage
Sahara India Financial Corporation Ltd. 50%
(i.e., SIFCL)
Sahara Care Ltd. (i.e. SCL) 40%
Sahara India Commercial Corporation Ltd. 4.27%
(i.e., SICCL)
Sahara Infrastructure & Housing Ltd. (i.e., 3.82%
SIHL)
Sahara Prime City Ltd. 1.27%
28
Sahara One Media & Entertainment Ltd. 0.48%
Master Chemicals Ltd. 0.16%
The majority shares of SILIC (50%) are held by SIFCL, one of the group company of SILIC, which is an NBFC. As submitted by IRDAI, SIFCL's registration as a RNBFC was cancelled by the RBI on September 3, 2015. Following this, RBI filed a Winding-up Petition against SIFCL which is sub- judice.
Further, SIFCL is also a sponsor of Sahara Mutual Fund. It is noticeable that in its order dated July 28, 2015, SEBI cancelled its registration as a mutual fund on the basis of a finding that SIFCL was no longer 'fit and proper' to carry on the business of a mutual fund. This order21 was upheld by this Tribunal upholding SEBI's finding that 'Mr. Subrata Roy Sahara was holding almost 80% of the total share capital and enjoyed controlling interest and was the directing mind and will of Sahara sponsor and, therefore, the Sahara sponsor is nothing but an alter ego of Mr. Subrata Roy Sahara'. In the said order, this Tribunal has taken note of the finding of the Hon'ble Supreme Court of India in Subrata Roy Shara v. UOI22, that "in the affairs of the Sahara group Mr. Subrata Roy Sahara is the only person that matters."
The said order of SAT was challenged before the Hon'ble Supreme Court of India, which upheld the order23 by dismissing the appeal on October 23, 2017.
10.3 The second largest shareholder Sahara Care Ltd. (SCL) (40% of the shareholder) was also promoted by Mr. Subrata Roy Sahara, and does not have sound financial condition.
21Appeal No. 428 of 2015, decided on July 28,2017 22 Writ Petition (Criminal) 57 of 2014 decided on May 6, 2014 23 Sahara Asset Management Company v. SEBI, (2014) 8 SCC 470 29 Keeping in view the same, it is evident that SILIC's major shareholders, namely, SIFCI does not have track record of conduct and performance in the field of its business of a registered NBFC. Further, keeping in view the findings of the Hon'ble Supreme Court of India in the case of Subrata Roy Sahara, it is writ large that the directors/persons in the management of the promoters are not 'fit and proper'. Evidently, considering the same position of Mr Subrata Roy Sahara in SCL, it cannot be held that the directors/persons in the management of the promoter SCL are 'fit and proper'.
10.4 In view of the above, we find merit in the direction issued by IRDAI to SILIC to transfer shareholding of its promoters to any other 'fit and proper' promoters. Admittedly, SILIC had accepted this direction and offered to transfer 8.09% of the promoter's shareholding to other Sahara group entities. However, since this offer has not ultimately resulted in bringing in new promoters, who are 'fit and proper', the said proposal cannot be deemed as a genuine proposal.
11. With regard to the 3rd direction to submit board approved business plan, it is noted that SILIC has failed to submit the same despite persistent follow up by IRDAI. We note that SILIC defaulted in providing detailed three years' business plan following IRDAI's directions dated November 26, 2015 and it was eventually furnished on July 11, 2017, after the administrator was appointed to supervise. However, it did not cover a period of one year and two months. It furnished a road-map on December 26, 2019 with projections of expansion of business, however new business was already prohibited by the IRDAI vide order dated June 23, 2017. IRDAI has noted in the IO-1 that the said business plan did not deal with key component of business plans such as 30 projections of premium, expenses etc. In view of this, since SILIC could not furnish a viable business plan in terms of IRDAI Regulation, in our view, the direction to furnish an appropriate board-approved business plan within a period of 3 months was required for the larger interest of the policy- holders of SILIC and it was rightly issued.
12. The 4th direction issued to SILIC vide the IO-2 is to make reconciliation of all remaining unreconciled bank accounts (as on March 31, 2020), within a period of two months. IRDAI took note of the fact that some of the bank accounts SILIC were pending reconciliation. In view of the same, these directions were issued to SILIC to carry out reconciliation for proper accounting purposes. It was submitted on behalf of IRDAI that subsequent to the impugned order, reconciliation of two bank accounts was still pending and a minimum of Rs. 8.74 Crore may have been defalcated in its accounts due to lacklustre manner of financial accounting by SILIC. Keeping in view the same, we hold that the respondent was fully justified in issuing this direction.
13. The 5th direction issued in the IO-1 is to strengthen internal control system and conduct business in accordance with law and sound governance practices on a continuous basis. In our view, this can hardly be called as adverse order, as the same was in the nature of an advisory for betterment of the business practices and corporate governance on a continuous basis.
14. It is seen that SILIC had accepted IRDAI's order by following up on various directions but it was not sufficient to comply with the framework specified by the IRDAI in the IO-
1. We are in agreement with Mr. Khambata's contention that 31 it is an established law that a party accepting and benefiting from an order cannot subsequently challenge it, as held in Dhanjit Singh Sandhu, the relevant para reads thus:
"23. It is settled position of law that once an order has been passed, it is complied with, accepted by the other party and derived benefit out of it, he cannot challenge it on any ground. (Vide Maharashtra SRTC v. Balwant Regular Motor Service [AIR 1969 SC 329])"
It is notable that SILIC has not sought any stay on the operation of these directions. Keeping in view the above, in our considered view, there is no merit in the appeal filed by the SILIC against the IO-1 containing five directions, which in our view, are remedial in nature to streamline conducting the sensitive business of insurance in the interest of large number of policy-holders in the most proficient and responsible manner. The respondent IRDAI is duly bound in this regard. Hence, this appeal fails.
Appeal No. 4 of 202315. SILIC has challenged the IO-2, whereby its insurance business was transferred to another company M/s. SBI Life on the ground of denial of natural justice.
16. We note that earlier too, SILIC's business was transferred under section 52B(2) to ICICI Prudential on July 28, 2017 based on the administrator's report dated June 22, 2017 in which contained adverse observations, inter alia siphoning off Rs. 78.14 Crore in the name of security deposits, deficient 'fit and proper' status of the promoter, etc. The said order was set aside by this Tribunal on the ground of violation of principles natural justice. In view of the same, the whole matter was restored to the file of the IRDAI with 32 the direction to proceed from the stage seeking a representation/response from SILIC on the Administrator's report as well as providing an opportunity of hearing. This process was to be completed within three months.
16.1 We note that, thereafter, IRDAI provided a copy of the administrator's report dated June 22, 2017 to SILIC on January 18, 2018 and a detailed reply was filed on February 19, 2018; further a detailed reply was furnished on March 15, 2018 with regard to the report of the investigator. SILIC filed further details on June 30, 2018 and thereafter a SCN was issued to SILIC on January 15, 2019. SILIC replied to SCN on March 1, 2019 and it was given an opportunity of personal hearing on December 3, 2019. There was regular exchange of information between the two sides but yet there were major shortcomings noted by IRDAI in respect of key issues. As IRDAI was not satisfied with SILIC's explanations to the shortcomings pointed out in the Administrator's report, specific directions were issued vide IO-1.
16.2 We note that after issuing directions in IO-1, there have been regular follow-ups by IRDAI with regard to the progress in respect of the said 5 directions. Evidently, SILIC did not comply with the remedial measures desired by the IRDAI and hence IO-2 was passed in order to protect the interest of the policy-holders. These facts make it clear that principles of natural justice were duly compiled with before passing the IO-2.
16.3 In our considered view, while setting aside the third order dated July 28, 2017, the directions of this Tribunal to the IRDAI to proceed from the stage of the seeking the representation from SILIC on the administrator's report in question were also duly complied with. IRDAI provided the 33 said administrator's report within 7 days and called upon SILIC to furnish reply within 21 days. SILIC furnished the reply on the 31st day, i.e. 19th February 2018 and pleaded to withdraw the order appointing the administrator without adverting and addressing the deficiencies pointed out by the administrator. This is despite the fact that the IRDAI order for appointment of the administrator had already reached finality as on January 11, 2018. Therefore, in our view there is no violation of principles of natural justice on the part of the IRDAI. We note that since there was no progress on the key points of observations by the administrator, IRDAI decided to issue remedial directions only and not ordered transfer of business.
16.4 Thus, after making all efforts to regulate SILIC to conduct the business in the best interest of the policyholders, and SILIC reaming deficient, the IRDAI has issued the IO-2, after a period of more than 5 years from the date the administrator's report was furnished to SILIC on February 19, 2018. Thus, IRDAI did its best in safeguarding the interest of the policyholders and gave a long rope to SILIC before ordering transfer of its business to SBI Life, after affording an opportunity of hearing in compliance with this Tribunal's order dated January 11, 2018.
16.5 With regard to the argument that no fresh SCN was issued before passing the IO-2, we are in agreement with Mr. Khambata's argument that when a party knows the case and receives reasonable chances to respond, absence of formal notice or hearing does not invalidate the order. Reliance on Keshav Mills (supra) and Mansoor Ali Khan (supra) is well placed. We also find force in his submission, relying on S.G. Kotturappa (supra) and Biecco Lawrie Limited 34 (supra) that these principles need not be followed when it would be an empty formality or when they have already been adhered to before passing consequential remedial orders because any further opportunity would not improve complainant's position. Keeping in view the principle, we find no merit in the allegation of denial of natural justice.
17. SILIC's arguments with regard to the second ground viz. security deposit to the group entity Sahara India are: in 2014 IRDAI had approved the same; approval from the IRDAI in respect of Tier-2 cities or below was not needed in view of the amended Section 64 VC of Insurance Act; no funds were siphoned of as deposits were made from shareholders' funds and not policyholders funds; and the solvency margin of SILIC was far above the desired ratio of 1.5 (or 150%).
17.1 In our considered view, SILIC's explanation based on section 64-VC and high solvency ratio is hyper-technical and does not address IRDAI's real concerns of protection of policy holders' interests. IRDAI's apprehension that advance of Rs. 78.14 Crores given to M/s. Sahara India, a group company, was full of risk was not unfounded, keeping in view the chequered history of Sahara group in dealing with public funds. Further, there were allegations of redemption of deposits amounting of Rs.484.67 Crores in the contempt case of Sahara Real Estate Corporation (Supra). Another Sahara company M/s. SICCL had received deposits of Rs. 14,106 Crore, in respect to which, SEBI had issued directions for refunding the same to the depositors. All these companies were effectively controlled by Mr. Subrata Roy Sahara and he was the only person who mattered in the affairs of Sahara group as held by the Hon'ble Supreme Court of India in Subrata Roy Sahara (Supra). Mr. Roy was required to 35 refund Rs. 24,000 Crore to the depositors and was lacking in financial soundness.
17.2 Hence, there was substantial risk in the possibility of refund of the advance given to Sahara India by SILIC, which itself was in spite of express rejection IRDAI on July 24, 2015. It is conspicuous that despite of remedial directions issued in IO-1, till the IO-2 was issued, only an amount of Rs. 8 Crore was refunded to SILIC even though Sahara India had agreed to return the entire amount along with interest in four instalments.
17.3 The high solvency ratio argument is also untenable because though there could be high solvency margin due to not accepting the new business and servicing only the existing policyholders, it does not reflect sound governance, profitability, or financial health. Eventually Siphoning of funds impacts the solvency ratio and thereby adversely affects policyholder's interest. In any case, the high solvency ratio argument does not guarantee refund of deposit by Sahara India.
18. Another ground of the appeal is that powers of Administrator appointed under Section 52A of Insurance Act were in the nature of temporary measures to protect policy- holders' interest whereas in this case, the administrator was in-charge of the business since 2017. In our considered view, this ground is also devoid of merit as in terms of Section 52A and 52B, the Administrator was only supervising the affairs of the insurance company. We note that unlike an Interim Resolution Professional (IRP) appointed under Section 17 of 36 IBC Code24, the powers of the board of an insurance company does not stand suspended with the appointment of an Administrator and the business of insurance company is carried on by the BoD only under the supervision of the Administrator. As rightly pointed out by the learned Senior Advocate for the IRDAI, even subsequent decisions have been taken by the Board of Directors of SILIC and not by the Administrator. In any case, this Tribunal has already upheld the appointment of Administrator, which has attained finality.
19. We are also of the view that there were grave risks involved if the existing insurance business had continued in the hands of SILIC with the same set of promoters, who have been held as not "fit and proper" and in the absence of desired course correction in the conduct of business and persistent non-compliance with IRDAI's remedial directions. Under the circumstances, it was justified on the part of the IRDAI to transfer the business to another insurance company to safeguard the interest of the policy-holders, after giving due opportunity to SILIC.
20. In view of the above, we find no legal infirmity in the IO-2 as IRDAI allowed SILIC to take remedial measures over a sufficiently long period of time and it was compelled to pass the impugned order after having failed to elicit satisfactory course corrections with regard to the specific directions issued vide IO-1. Under the circumstances, this appeal also fails.
24Insolvency & Bankruptcy Code, 2016 37
21. Hence, the following order:
ORDER
1. Appeal Nos. 4 of 2022 and 4 of 2023 are dismissed.
2. Pending interlocutory application(s) stands disposed of.
3. No costs.
Justice P. S. Dinesh Kumar Presiding Officer Ms. Meera Swarup Technical Member Dr. Dheeraj Bhatnagar Technical Member 05.12.2025 MRS Digitally signed by MRS PRAMILA PTM PRAMILA Date: 2025.12.10 10:19:25 +05'30'