Taking a dig at the wrangling between market regulator Securities and Exchange Board of India (SEBI) and Insurance Regulatory and Development Authority (IRDA) over Unit Linked Insurance Plans (ULIPs), the Supreme Court on Friday wondered if the industry needed a super regulator.
“Why not appoint a super regulator?” a bench headed by Chief Justice of India-in waiting SH Kapadia remarked after Attorney General GE Vahanvati mentioned SEBI’s petition seeking clubbing of cases pending in various high courts on the ULIP controversy.
Explaining the controversy, Vahanvati said the insurance companies have collected
Rs 90,000 crore under ULIPs and they are investing the money in mutual funds, which fall in the jurisdiction of SEBI.
SEBI and IRDA have been at loggerheads over regulating ULIPs and the market regulator approached the apex court after the two regulators failed to resolve their differences. While IRDA allowed insurers to continue selling ULIPs, SEBI sought to stop them asserting that they fell in its jurisdiction.
Acting on SEBI’s petition, the court issued notices to the Centre, IRDA and 14 insurance companies, asking them to respond by July 8, the next date of hearing.
It also issued notices to two petitioners — Dhruv Kumar and Rak Thackeray — who have filed PILs in Allahabad and Bombay high courts. Raj has questioned SEBI’s decision while Dhruv has complained that the insurers were charging high commissions.
However, the court posed certain questions to the attorney general before issuing notices to the various parties.
“SEBI is in Mumbai… insurance companies are in Mumbai… LIC is in Mumbai,” the bench said suggesting that the issue could be resolved at the Bombay High Court.
Stating that IRDA’s head office was in Hyderabad, the attorney general said the issue of jurisdiction has to be settled by the SC and that it could be heard by the SC or any high court.
The dispute started after SEBI banned 14 life insurers, including those belonging to SBI and Anil Ambani Group from raising further money through ULIPs without registration with the market regulator.
The finance ministry was forced to intervene after IRDA asked insurance companies to simply ignore the SEBI order. The ministry asked them to jointly seek a legally binding order from an "appropriate" court over jurisdiction.
Following the ministry’s intervention, SEBI allowed insurers to raise money from existing ULIPs, but asked them not to issue fresh ULIPs after April 9, the date when it issued the order banning 14 life insurance companies from raising funds through ULIPs.