Sahara Life Insurance caught for multiple violations; penalised for a mere Rs12 lakh

Sahara Life Insurance has been caught for several violations which resulted in a Rs12 lakh penalty. There were 23 issues raised by IRDA, for which Sahara was let off leniently. Did Sahara Life Insurance get away too easily?

The Insurance Regulatory and Development Authority (IRDA) has slapped Sahara Life Insurance, promoted by Subrata Roy’s Sahara Group, with a Rs12 lakh penalty. While there were 23 issues discussed in the meeting with IRDA officials, the insurance company got away without much dent in its pocket. The violations for which a penalty was awarded are:  

  •   Delay in death claim payments and settling the delayed claims without penal interest. IRDA found that 30 of the 220 outstanding claims are pending beyond six months. The authority imposed a penalty of Rs2 lakh for this violation.
  • Allowing unlicensed entities to solicit business through dummy codes and paying commission to them—penalty of Rs5 lakh.
  •  The insurer is licensing ineligible entities as corporate agents—penalty of Rs5 lakh.

 The violations for which a penalty was not slapped are:  

  • The insurer is not maintaining separate trust for funding Gratuity, PF, Pension, etc, of the employees of Sahara India Life Insurance Co (SLIC)—violation prudent accounting practices.
  •   SILIC is not functioning as an independent accounting and legal entity. Stationery of group companies was used. Officials of group companies authorizing payments of SILIC—violation of prudent accounting norms.
  •   Rent payment to group companies without formal agreements. Other payments such as electricity, courier, and mobile expenses made to group companies—violation of accounting practices.
  •   There was heavy expenditure on publicity in 2008-09. Payments made to vendors through corporate communications department of Sahara group—violation of prudent accounting practices.
  •   Expenses on meetings/conferences went up from Rs20 lakh in 2008-09 to Rs1.04 crore in 2009-10. There were monthly payments to Sahara Care on this account while the agreement is available with Sahara Services for arranging conferences. Expenses were not shown in related party’s accounts—violation of prudent accounting norms.
  •  Short-fall in new business (NB) premium during year end collected from agents—violation of Section 41 of the Insurance Act (IA), 1938.
  •   Issuance of premium receipts based on oral information without actual receipt of premium by the company—violation of Section 64 VB of IA, 1938
  •  Original minutes of board meetings, audit and investment committee meetings were not submitted in the inspection period. They were submitted later—violation of Section 33 (3) of Insurance Act, 1938

In the next article we will give the investment related violations which were not penalised for some reasons.




5 years ago

IRDAI is investigating TNT India P Ltd. which is a transport company, they are collecting insurance amt with out being registered with IRDAI.

This is a Criminal offence, this is a first time case.

Vikas Gupta

5 years ago

Sahara name is meant for Unethical Practices Whether it is Sahara Life or Sahara Financial, Whether it is Branch Staff or Higher Management, most of them are the most corrupt persons. I have experienced Mr. Pandey, Branch Manager of Sahara India Financial, Rohtak myself, A corrupt person. Even his Regional Manager & Kartaya Council Members all are in the same Viscious Nexus. All group Companies of Sahara should be heavily penalised & banned for their Anti Customers Attitudes.

Nagesh Kini FCA

5 years ago

The IRDA ought to come out with an explanation for not slapping heavier penalties for the offenses. Those let off are no less serious. Are they running an insurance co. or a family run business? At this rate it is totally risky to place funds at disposal hoping to get them at maturity.
Another Kingfisher or Satyam in the making?
The penalities ought to be stiffer a la US SEC in addition to the Co. those at the helm of affairs also should be penalized. Allowing them to go scot free with mere rap on the knuckles is allowing them to go with blue murder. These white collar crimes are serious as peoples' savings are involved.

Harsh Shah

5 years ago

When will IRDA impose penalties to General Insurance Companies for repudiating the Mediclaim policy claims on flimsy grounds and delay in settlement of claims which is paid with unreasonable deductions . When will IRDA announce TO IMPLEMENT claim settlement time and penalty for late settlement of claim. Come on IRDA. Tiger can still bite with some tooth left .

Deepak R Khemani

5 years ago

Private Insurance companies will always get away with anything, IRDA the toothless tiger can only roar and not take any credible action, recently Reliance General Insurance got away with meager penalty for marketing a mediclaim policy with conditions different than those that were approved by IRDA. Look at the number and type of violations and the amount of penalty imposed.
IRDA approves highest NAV guarantee policies and then says they are not good, single premium policies are approved and then they say they are not good, Variable Insurance policies are approved and then the same thing, Ulips which had high loading were tinkered around with have changed avatar many times, there is no clarity at all on pension policies.

FII inflows into Indian stocks cross $7 billion for 2012

During February, FIIs were gross buyers of shares worth Rs79,898.6 crore, while they sold equities amounting to Rs54,686.6 crore, translating into a net investment of Rs25,212 crore ($5.12 billion), as per data available with market regulator SEBI

New Delhi: The investment by overseas investors into Indian stock market since the beginning of 2012 has crossed the $7 billion level, out of which more than $5 billion were pumped in the month of February, reports PTI.

Foreign Institutional Investors (FIIs) infused a net amount of $5.12 billion (about Rs25,212 crore) during February, taking the total for 2012 so far to $7.16 billion for the Indian stocks.

Market analysts attributed strong FII inflows to signs of a reversal in the Reserve Bank of India’s (RBI) monetary policy and the subsequent impact of improved liquidity position. They expect the positive trend to continue further, given that the liquidity conditions remain strong.

During February, FIIs were gross buyers of shares worth Rs79,898.6 crore, while they sold equities amounting to Rs54,686.6 crore, translating into a net investment of Rs25,212 crore ($5.12 billion), as per data available with market regulator Securities and Exchange Board of India (SEBI).

This is the highest monthly net investment by FIIs in equities since October 2010, where they had infused Rs28,563 crore.

The foreign fund houses also infused Rs1,0016 crore ($2.03 billion) in the debt market last month. This takes the overall net investments by FIIs into debt markets to Rs25,987 crore ($5.08 billion) so far this year.

“FIIs have been infusing money into the Indian market due to change in RBI’s monetary policy that has added liquidity to the system. This liquidity will help in growth of the country,” Wellindia executive director Hemant Mamtani said.

“Indian market will continue to witness inflows in the whole year, if the liquidity conditions remain strong,” he added.

Strong surge in FII inflows in 2012 so far has helped boost the equity markets, as also the rupee.

The stock market barometer Sensex has gained 15% in 2012, despite a fall of about 3.25% last month. The index finished at 17,752.68 on 29th February.

FIIs had mostly stayed away from Indian equities in 2011. They flocked towards the debt market last year with a net investment of Rs20,293 crore, while pulling out Rs2,812 crore from equities.


Sistema Shyam blames SEBI, BSE and NSE for not listing the company

The mobile operator, in which Russian government has a stake, was quick to invoke its right under BIT signed between India and Russia after its licence got cancelled by the apex court. However, for over 42 months it has sidelined a high court decision and is blaming the regulators for non-listing

Sistema Shyam TeleServices (SSTL), which operates under the MTS brand in India, has said that the failure of its listing is a consequence of differences in perception on part of the statutory agencies—the Securities and Exchange Board of India (SEBI), National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). The company was asked by the Rajasthan High Court to initiate listing process within 18 months starting from 8 August 2008. It is now over 42 months and the company has yet to fulfil the condition.

Surprisingly, earlier this week, SSTL’s parent Sistema JSFC sent a formal notice to the Government of India for honouring the ‘Bilateral Investment Treaty’ (BIT) to protect its investments in the company. This follows a judgement by the Supreme Court to cancel 122 telecom licenses, including 21 licenses of SSTL.

Sistema is the majority shareholder with 56.68% stake while Shyam Group and the Russian government hold 23.98% and 17.14% stake, respectively, in SSTL. Minority shareholders, who have allegedly been sidelined and not given appropriate valuation for their investment as well as an exit option by SSTL have 2.2% stake in company.

In an email reply, SSTL said, “...the company had made every possible effort to get the shares of the company listed in terms of the scheme and the failure of listing was a consequence of differences in perception on part of the statutory agencies, namely, SEBI, NSE and BSE. On account of disinclination expressed by SEBI; for allowing listing via the automatic route despite the in-principle approval granted by BSE, listing became a virtual possibility and to that extent implementation of the said clause (i.e. Clause 3.7) became impossible.”

The company is now citing adverse market conditions, especially after the judgement from the apex court for keeping its decision on hold for listing on Indian bourses. “The company has faithfully and scrupulously initiated the process of listing with the active involvement of internal committees of highest levels and with the advice of the merchant banker of international repute. But everyone would agree that in the current situation after the judgment of SC on licenses, all such big strategic issues cannot be processed further and are bound to be kept on hold till attaining the matter legal and regulatory finality from the government,” it said.

According to the scheme of arrangement passed by the Rajasthan High Court in 2008, the shareholders of Shyam Telecom (STL), a listed company, were allotted shares of Shyam Telelinks (STLL). At that time Shyam Telelinks was valued at Rs455 crore with 85% stake hold by promoters and rest by minority shareholders. As per the high court ruling STLL was asked to initiate listing process within 18 months starting from August 2008.

In September 2007, Sistema bought 10% stake in STLL for about $11.4 million and said that it would increase the stake to 74% following an approval from the Foreign Investment Promotion Board (FIPB). Following the stake sale, STLL, which used to operate CDMA and wireline services only in Rajasthan circle at that time, changed its name to Sistema Shyam TeleServices (SSTL).

STLL applied for licenses in 21 circles on 25 September 2007 (the date on which the first cut off date for 2G licenses was announced and subsequently this date was announced as revised cut off date). On the very next day (26th September) Sistema announced that it bought a 10% stake in STLL. As per the requirement of getting the licenses, the applicant should have a net worth of Rs11,380 crore and paid-up capital of Rs1,138 crore. Shyam Telelinks, at that time, had a net worth of Rs1,156.58 crore only. However, following stake sale to Sistema, the company was able to include the Russian conglomerate’s net worth (about Rs158,856 crore) as well, to fulfil the license condition.

While the high court was approving the scheme of arrangement for STLL, the company become the first new mobile operator to get a pan-India start-up spectrum for starting its mobile services. In January 2008, Sistema provided guarantee of $520 million of total $630 million (82.5% of total amount) to be paid for obtaining the licences by STLL despite having a shareholding of 10%. Subsequently, on 18 January 2008, Sistema increased its shareholding in SSTL to 51% from 10% for which it had signed a share purchase agreement in October 2007.

When Sistema first bought 10% stake in STLL for $11.4 million, the mobile operator was valued at around Rs1,450 crore. In January 2008, SSTL paid Rs1,653 crore for 2G licenses in 21 circles. A week later, Sistema increased its stake in SSTL to 51% by paying $46.7 million that shows there was not much change in SSTL's valuation.

According to a petition filed in December 2011 by Prashant Bhushan in the Supreme Court in March 2011, Rosimushestvo, the Russian Federal Agency for State Property Management, paid Rs12,669 crore for a 17.14% stake in SSTL. This deal increased the valuation of SSTL to Rs73,914.8 crore, several times higher than its original valuation when Sistema first brought stake in the company. However, SSTL has been left out of the 2G investigation because of the government’s intervention, Mr Bhushan had said in his petition.

In all the hype around stake sale, purchase and valuation, minority shareholders, who held about 15% in STL were left high and dry. Following stake sale by STL and to Sistema, minority shareholders’ stake got reduced to a mere 2.5%. Sistema, in a filing to the London Stock Exchange, said that on 23 May 2008 it bought additional 21% stake at minimum of Rs156 per share from the Indian promoters with an option of upping this amount if the fair value in September in 2009 was even more. However, when the Russian Federal Agency bought the stake in SSTL, the company had said that it would issue fresh equity shares at Rs49.31 per share for an investment of about $676 million. Both the times, minority shareholders were not provided any exit option at that value.

“In view of the changed conditions after SC judgment, the management has begun its initiatives to meet the minority shareholders and discuss the company’s current status, significant and serious legal and financial challenges before the company and also any alternate to the listing including exit option. This process will continue simultaneously along with the company’s fight for licenses and at the appropriate time, the whole matter will be placed before the board for a reasonable decision/direction in the matter,” SSTL said in the email reply.

However, Association of Minority Shareholder of SSTL, in an email clarified that they have not recieved any offer/ initiative for exit option from the company.



chander shekhar

5 years ago

Dear sir,
I have 780 shares of sistema.
Please confirm date of coming in nse/bse on my e-mail Id or SMS
At Mobile no.9711824273.


5 years ago

We are the shareholder association of SSTL. We deny any move by the company to enagage with us post SC order in reference to the exit option that the Company has to mandatorily provide to the minority as per HC ruling of AUg 2008.

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