Regulator Abetting Corruption In Insurance Business Can’t Be Tolerated, Says SAT; Directs IRDAI To Look Into Complaint Of UK Broker Firm [Read Order]

IRDAI member guilty of abetting corruption, dereliction of duty, says SAT

Holding a non-life member of Insurance Regulatory and Development Authority of India (IRDAI) responsible for aiding and abetting corruption in the insurance business, the Securities Appellate Tribunal has directed the regulator to relook into the complaint of a United Kingdom-based broker firm alleging demand and receipt of kickbacks for diversion of reinsurance business from it.

SAT’s presiding officer Justice JP Devadhar and member Dr C KG Nair also held IRDAI’s non-life member PJ Joseph of abusing the process of law and dereliction of duty in disposing of the complaint made the company named M/s Atkins Special Risks Ltd by simply citing lack of documentary proof despite there being enough evidence on record.

The SAT’s order emanates from an appeal filed by Atkins challenging the order passed by Joseph on January 9 which SAT held to be “passed in gross abuse of the process of law and dereliction of duty”.

In the instant case, Atkins, a company incorporated in the United Kingdom and specialized in broking special risk insurance and re-insurance with core competency in Marine and Energy insurance provided international re-insurance cover to Jagson International Ltd from 2002 to 2012 on yearly brokerage / commission of 27.5% of the premium that was paid for the cover.

Atkins alleged that from the year 2010 onwards, Jagdish Gupta, chairman of Jagson, started raising demands in his e-mails a cut from commission earned by Atkins which it declined.

In 2012, the re-insurance business of Jagson was taken away from Atkins and given to Marsh India Insurance Brokers Pvt. Ltd.

Suspecting that illegal means have been used for diverting the reinsurance business from the appellant to Marsh, Atkins caused a detailed investigation by a globally reputed investigating firm. Reports submitted by that firm, says the complaint filed by Atkins, confirmed that kickbacks were given to Jagdish Gupta by Marsh for diverting the reinsurance business.

Atkins preferred a complaint on August 11, 2015, before the IRDAI stating specific dates on which Gupta had sent his emails demanding kickbacks from the appellant. It was also alleged that during the telephonic conversation, Gupta had told Atkins that Marsh had agreed to pay him US$ 4,00,000 in order to obtain Jagson’s business.

Atkins claimed there was the violation of Section 41(1) of the Indian Insurance Act, 1938 and Regulation 37(1) of the Insurance Regulatory and Development Authority (Insurance Brokers) Regulations, 2013.

Since no action was taken on its complaint, the company moved the Telangana and Andhra Pradesh High Court, which on September 19, 2017 directed IRDAI to consider the complaint filed by it.

Thereafter, PJ Joseph heard the company on November 16, 2017, and vide his order dated January 9, 2018, disposed of the complaint stating that the appellant has not submitted any documentary proof, material information or evidence in support of its contention.

“Perusal of the complaint filed by the appellant clearly shows that the appellant had relied on documentary evidence in support of the contention that Jagdish Gupta, Chairman of Jagson had sought bribe and was bribed by the officers of Marsh for diverting the reinsurance business from the appellant to Marsh. In such a case, to hold that the appellant has not submitted any documentary proof would be totally false,” said SAT.

“We fail to understand as to how Member (non-life) could make such false statement in the impugned order. In our opinion, the impugned order passed by Mr. P. J. Joseph (non-life) virtually amounts to aiding and abetting corruption in the insurance business by the regulator which cannot be tolerated,” it added.

The tribunal then set aside the order and directed IRDAI to entrust the matter to a competent officer other than PJ Joseph, member (non-life), for passing a fresh order on the complaint filed by the appellant on merits and in accordance with law.