Companies & Sectors
L&T Construction bags orders worth Rs1,002 crore

Of this, orders worth Rs846 crore are from the domestic market and new orders worth Rs156 crore are from the Middle East


New Delhi: Larsen & Toubro (L&T) today said it has bagged orders worth over Rs1,002 crore across different categories from both domestic and overseas market during the current month, reports PTI.

“The Power Transmission & Distribution IC of L&T Construction has won orders valued over Rs1,002 crore across various business segments in June 2012,” the company said in a statement.

The company said it bagged order worth Rs846 crore from West Bengal Electricity Distribution Company for rural electricity infrastructure in the villages of West Bengal.

As far as international market is concerned, the company said it has bagged “new orders worth Rs156 crore... from reputed customers in Qatar for electrical network power quality improvement work including additional orders in ongoing projects in Middle East.”


GAAR to be finalised after approval of PM: Government

The finance ministry last evening had issued draft guidelines on GAAR but the PM, who now holds the finance portfolio, is yet to see the guidelines. They will be finalised only after the PM’s approval, the PMO said

New Delhi: Within 24 hours of the finance ministry issuing the draft guidelines on controversial General Anti-Avoidance Tax Rules (GAAR), the PMO appears to have distanced itself from the proposal saying that were not seen by prime minister Manmohan Singh and would be finalised only after his approval, reports PTI.

"These (draft guidelines) have not been seen by the prime minister and will be finalised with the approval of the prime minister, who holds the finance portfolio, only after considering the feedback received", the Prime Minister's Office (PMO) said in a release.

The finance ministry last evening had issued draft guidelines on GAAR-a budgetary proposal to check tax evasion-to seek feed back of the stake holders.

The draft guidelines seek to address the concerns of the investors over misuse of the tax proposal. Besides other things, it said that there would be a threshold limit for invocation of GAAR and it would apply on income accruing after 1 April 2013.

In view of the widespread protest against the proposal, former finance minister Pranab Mukherjee postponed its implementation by a year to April 2013.


IRDA’s record penalties on HDFC Life, ICICI Pru Life signal a change

IRDA’s action in slapping stringent penalties on two of the biggest names in the sector has gladdened the hearts of consumers battling misselling and escalating costs. Record penalties should deter insurers straying from their responsibilities

The Insurance Regulatory and Development Authority (IRDA) order against HDFC Life makes it the highest penalty of Rs1.47 crore imposed on any insurnace company and is significantly higher than the Rs1.18 crore fine imposed on ICICI Pru Life a few weeks ago. Both are substantially higher than the penalties in the past, which used to be in the range of Rs5 lakh to Rs20 lakh, which were not even a slap on the wrist for large companies.

On 28th June, IRDA imposed a penalty of Rs1.05 crore on HDFC Life for unfairly rejecting 21 death claims based on a 90 day waiting period clause. The regulator has imposed a penalty of Rs5 lakh for each of the 21 death claims that had been wrongly rejected on the grounds of it having occurred in the 90 day waiting period.  IRDA has pointed out that the clause had no business to exist as per its directive for "file and use" clearances of insurance products.  

The IRDA action signals that high penalties will be a significant deterrant to companies that have been ignoring consumer complaints about wrongful rejection of claims. IRDA's policy of considering each death claim or each corporate agent related violation as separate case and make the insurer pay for each has allowed it to aggregate the fines to a significant number. And this may be just the beginning.

At Moneylife Foundation's seminar in May 2012, IRDA chairman J Hari Narayan had stated that "The malpractice is reducing and penalties are increasing. The level of penalty IRDA can levy is minimal and, hence, there is need for amendment to arm us with sharper teeth." Moneylife itself has forwarded several glaring examples to the regulator, some of them have even featured as our cover stories (How you can get ripped off by the staff of insurance company themselves!).

In HDFC Life's case, another breach for which it paid dearly was the heavy payment to corporate agents like HDFC Bank and HDFC Securities in the name of "skill building programme" and 'training'. This infraction resulted in penalty of Rs5 lakh per incidence amounting to a total of Rs35 lakhs. IRDA order states-"As could be noticed that the actual expenses on advertisement and publicity, etc incurred by those entities, is far less than the marketing expenses paid by insurer in case of HDFC Bank in all the years and HDFC Securities for the years 2009-10 and 2010-11. The submission of the insurer that taking into account only the marketing expenses incurred by these four corporate agents may not be a correct comparison and that the expenses under various other heads like printing and stationery, postage and telegram shall also be considered as these entities book the costs of acquisition under different heads is considered totally untenable."

A fine of Rs5 lakh was levied for availing services of individuals and corporate which were not licensed by IRDA for solicitation or procuring insurance business. Many charges were let-off with or without warning after hearing the insurer side.

Insurance customers know that this is only a way of rewarding their parent entities in order to hard-sell products to bank customers. In many case, it leads to mis-selling of products that are neither needed nor beneficial for customers, only so that the bank earns a high fee.

In fact, Moneylife Foundation, at an interaction with the IRDA chairman had recommended that the regulator should consider a ban on sale of insurance through banks and their relationship managers. While Mr Narayan was unwilling to consider such an extreme step, he did assure the Foundation that stringent deterrent penalties would certainly be considered. It is heartening to see that Mr Narayan has followed this up with a steep increase in penalties on two of the biggest names in the industry - there cannot be a bigger detterent than this.

Incidentally, Mr Narayan has also been the rare regulator who agreed to interact with consumers and listen to their issues, as well as those of insurance agents, first hand. This positive beginning promises better days for insurance customers in India.


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