On 25th October, the Washington Post (WaPo) published an explosive investigation alleging that Indian government had drawn up a plan to channel nearly US$3.9bn (billion) of Life Insurance Corporation (LIC) funds into Gautam Adani’s debt-laden conglomerate. The proposal, allegedly coordinated by the finance ministry (through the department of financial services) and NITI Aayog, had wanted LIC buy Adani group’s bonds and raise its equity stake in several group firms just months after US regulators accused Adani companies of stock manipulation and fraud.
The WaPo report, which is largely based on anonymous sources, itself acknowledges that it is unclear how much of the DFS-recommended plan was actually executed beyond a Rs5,000-crore Adani Ports’ bond purchase in May 2025. (Read: India’s US$3.9bn Plan To Support Adani Using LIC’s Funds: Washington Post)
LIC denied the existence of any such plan, asserting that its investments were guided solely by its board-approved policies, internal due diligence and regulatory compliance. It accused the newspaper of trying to ‘tarnish the reputation and image of LIC’. The Adani group also dismissed the claims as ‘baseless and politically motivated’. All this is now routine. Interestingly, the WaPo report did not trigger the kind upheaval in LIC or Adani stocks that the more detailed, Hindenburg Research report had done in January 2023.
However, its revelations reignited concerns about political favouritism and misuse of public savings, given that LIC manages the hard-earned premiums of millions of small investors, the storm seems to have blown over. The reason is simple.
The Hindenburg allegations had attracted global regulatory attention and created a political storm. India’s Supreme Court (SC) had even constituted an ‘expert’ committee to check if the regulator was doing its job. Yet, it ended in a clean-chit to the Adani group by the Securities and Exchange Board of India (SEBI) even while investigations in other jurisdictions remain open. The overt message to the market was that neither LIC nor the Adani group would face any negative outcome.(Adani Group Gets Clean Chit in Hindenburg Case, SEBI Says No Evidence of Concealed Related-party Deals).
Controversies have a strange way of resurfacing. LIC, after all, has a chequered history of yielding to the whims of government. What is troubling today is its apparent loss of institutional memory, especially about a scandal that remains one of the best-documented examples of transparency and accountability in India’s financial history. The Haridas Mundhra case not only led to a probe into the roles of the finance secretary and LIC chairman but also forced the resignation of the finance minister, while casting doubts on the credibility of the Reserve Bank of India (RBI) governor’s testimony (read: From Mundhra to Mundra: Recounting a 7-decades-old Tale that Still Sounds Current).
At the heart of the scandal was a controversial decision by LIC to rescue the Kolkata-based businessman by purchasing Rs1.26 crore worth of shares in six obscure companies that he controlled. The move, reportedly made under pressure from the finance ministry to ‘remove a drag on the market’, became a defining moment in India’s financial history.
The episode offers striking parallels and in contrast with today’s times. In 1957, LIC was freshly nationalised and Jawaharlal Nehru was prime minister (PM), at the height of his popularity. Yet, it was his own son-in-law, Feroze Gandhi, an Opposition MP, who exposed the scandal in Parliament.
After initial attempts at deflection, the PM responded to public outrage by ordering a public inquiry under justice MC Chagla, then chief justice of the Bombay High Court, who conducted open hearings that were widely reported and attended by hundreds of citizens, including the legendary JRD Tata.
Justice Chagla produced a scathing report which concluded that LIC had, indeed, acted under ‘extraneous influence’. He described the investment as a ‘grave dereliction of duty’ and criticised the government for allowing interference in LIC’s operations. This was the first and last time that any government has allowed this level of transparency. All joint parliamentary committee (JPC) hearings are done behind closed doors and their final reports represent political negotiation more than hard investigation.
The 70-year Decline in Transparency
The key to justice Chagla’s conclusions was the quality of testimony from those associated with the stock market and LIC’s investment committee.
HT Parekh, founder of the housing finance business in India and a member of LIC’s investment committee, had objected to the purchase of Mundhra shares in writing.
KRP Shroff, president of the Bombay Stock Exchange (BSE), who was also on the committee, deposed that had LIC consulted them, he would have advised it not to touch the shares.
Bhagwandas Govardhandas, a leading broker on the LIC committee, pointed out that, in 1956 itself, BSE had put up a notice warning investors that ‘some of the shares, being hawked by Mundhra, were forged’. Left to himself, he said, he would not touch the shares ‘with a pair of tongs’.
AD Shroff (AD), a 'financial wizard' from the house of Tatas, described as a ‘cock and bull story’ the claim that LIC bought Mundhra’s shares to remove a drag on the market. He pointed out that a majority of the shares were pledged with various banks and the rest were held by brokers, while the general public was uninterested in them. (The more things change…)
Parallels and Contrasts
Can we expect LIC’s investment committee today to display the same courage and integrity as justice Chagla’s panel once did? Do its members possess comparable expertise and are their names publicly known?
In March 2023, RTI (right to information) activist Atul Modani sought this basic information: the names of LIC’s investment committee members. LIC flatly refused, saying that the information was ‘sensitive and confidential’. It cited Section 8(1)(d) of the RTI Act — a clause meant to protect “commercial confidence, trade secrets, or intellectual property.” The insurer treated the identities of its decision-makers as if they were part of a corporate secret.
If it is so, why did you not share the investment details transparently in my ITR ? pic.twitter.com/Zw3tpjPENb
This defiance is astounding. LIC was nationalised in 1957 to protect policyholders’ savings. It is now doubly accountable -- both as a government-controlled institution and as a listed company bound by higher disclosure standards. To hide even the names of those responsible for its investment decisions betrays either a deep institutional insecurity or an arrogance born of political protection.
Since the ruling party and its supporters routinely invoke the Nehru era for comparison, the government’s muted reaction to The Washington Post’s revelations about LIC’s Adani investments is particularly revealing when contrasted with the Mundhra scandal.
First, the Chagla inquiry was initiated by the government itself to restore public confidence. Justice Chagla’s report enunciated seven principles that have been ignored by LIC in its haste to deny and stonewall using irrelevant clauses of the RTI Act.
Second, in the 70 years since the Mundhra report, all governments, including various coalitions, have institutionalised opacity and allowed regulators and public institutions to behave like private corporations. Every political party has supported closed door parliamentary hearings with selective media briefings and leaks. The once-powerful RTI Act has also been defanged, with active support from across the political spectrum.
Justice Chagla had laid down seven guiding principles that today read like relics of a more idealistic era. Some dealt with appointments and ethical conduct at LIC, but several addressed the government itself. He warned that the State must not interfere with autonomous statutory bodies — and if it did, it must take full responsibility for its directions. In a parliamentary democracy, he said, Parliament should be informed “at the earliest stage to avoid embarrassment from other sources of information.” Most importantly, he believed public inquiries should serve as a moral check on administrators, reminding them that their actions could always face public scrutiny.
That vision has vanished long since. Successive governments have embraced opacity and wielded discretionary power over public institutions with impunity. Even politicians who thunder against corruption rarely demand the kind of open investigation that Justice Chagla led. No joint parliamentary committee or fact-finding mission since 1958 has been completed in time, matched its rigour or transparency or led to significant action. The Chagla commission remains India’s first — and last — true public trial of a financial scandal.
LIC’s journey from the Chagla commission to the WaPo exposé mirrors India’s broader decline in institutional independence. Transparency and accountability—once demanded by Parliament and enforced by inquiry—have been replaced by managed disclosures and bureaucratic stonewalling. Reclaiming institutional integrity will require a need a return to Justice Chagla’s forgotten principles of public scrutiny and moral courage in governance.
LIC was & has become a money pot for raiders to loot. LIC is run for politicians, their friends, employees and finally whatever is left over is given to hapless policy hoder. I actively discourage my friends from investing in LIC, unforunately I did so 20yrs back, I got pathetic returns. I could have easily taken term insurance for less than half the premium and avoided LICs honey traps.
It is indeed extremely shocking that SEBI has failed to act swiftly and firmly against Washington Post and it's reporters who gave clearly lied in this blatant market manipulation article.
Moneylife should take the lead to ensure that at least the Press Council of India acts swiftly against the journalists who wrote the article
I am highly disappointed reading the story which talks more of Mundhra which happened in 1957 and talks less of how the Washington Post findings are correct. It would have been batter if Sucheta would have some data and analysis to prove that LIC lost heavily by investing in Adani and the poor policyholders have lost their hard earned money. She couldn’t because actually LIC made decent money by investing in Adani at right time.
Does she expect LIC to consult her before buying any stocks ? It has a well laid down procedure for making investments in market.
The stock didn’t crash on the market is the sign that the shareholders of LIC have thrown the WP report and your report too in dustbin.
Dear Mr Sathe. Your disappointment -- or rather high disappointment - is understandable. You clearly dont read MoneyLife regularly, nor understand the purpose of a media column, which is an opinion piece about a specific issue. So what you expect or think it was 'batter' for me to do is a separate article that was written immediately after the WAPO article. As for the rest of what you expect -- well, I cannot oblige you by writing what you want to hear, especially when you have deliberately chosen to ignore facts in the article. As for claims you make on behalf of LIC or LIC's investment committee -- unless you are an insider-- we don't know how you have this 'sensitive' information that LIC denied under RTI!
You should be aware that anything and everything asked for under RTI Act (which is not applicable to Private sector Insurance companies) cannot be disclosed. LIC has made a declaration under the RTI Act as what will not be disclosed. Moreover you have a right to make first appeal to appellate authority and if not satisfied, you can make second appeal to Chief Information Commissioner under the Act.
Sec 19 of LIC Act specifies that there will be Investment Committee. Insider information is not required for the same.
Sec 19A. Investment Committee.—The Board may, for such functions relating to investment of the
funds of the Corporation as the Board may entrust, constitute an Investment Committee of the Board,
consisting of the Chief Executive and not more than seven other directors, of which a minimum two shall
be directors other than directors appointed under clause (a) or clause (b) of sub-section (2) of section 4:
Provided that the officers of the Corporation heading the functions dealing with finance, risk,
investment and law as well as its Appointed Actuary shall be invited to every meeting of the Committee
and shall have a right to be heard at the meeting.
Many Private Insurance Companies and Mutual Funds have also made huge investment in Adani stocks and have made decent gains too. It would have been better if the article had a mention of that too. Public sector is doing a great service to the nation, why keep demoralising the sector by highlighting a report which is biased and written with ulterior motive ?
Incidentally, I am a regular reader of MoneyLife. I have appreciated some of the articles in the past which you might have missed.
Nice article and even nicer headline "From Haridas Mundhra to (Gautam) Adani".
Institutional transparency and accountability should be of top priority for this government.
it's well known that cash rich LIC, flush with cash OF policy holders is a govt pawn for financial rescue operations and is biggest stock investor and dividend earner. now that it is a listed company, it should be less reckless and more responsible to shareholders interest.
You will be amazed to see their RTI replies to its own employees.Investment is still based upon various factors but denial of policyholders bonuses violating irdai circulars is one thing and continuing /supporting the wrongdoing is another thing.One thing is for sure,there will be repercussions .Good going Moneylife,let PMO respond to my matter,I will share the details thence.
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Fiercely independent and pro-consumer information on personal finance.
30-day online access to the magazine articles published during the subscription period.
Access is given for all articles published during the week (starting Monday) your subscription starts. For example, if you subscribe on Wednesday, you will have access to articles uploaded from Monday of that week.
This means access to other articles (outside the subscription period) are not included.
Articles outside the subscription period can be bought separately for a small price per article.
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Moneylife should take the lead to ensure that at least the Press Council of India acts swiftly against the journalists who wrote the article
Does she expect LIC to consult her before buying any stocks ? It has a well laid down procedure for making investments in market.
The stock didn’t crash on the market is the sign that the shareholders of LIC have thrown the WP report and your report too in dustbin.
Sec 19 of LIC Act specifies that there will be Investment Committee. Insider information is not required for the same.
Sec 19A. Investment Committee.—The Board may, for such functions relating to investment of the
funds of the Corporation as the Board may entrust, constitute an Investment Committee of the Board,
consisting of the Chief Executive and not more than seven other directors, of which a minimum two shall
be directors other than directors appointed under clause (a) or clause (b) of sub-section (2) of section 4:
Provided that the officers of the Corporation heading the functions dealing with finance, risk,
investment and law as well as its Appointed Actuary shall be invited to every meeting of the Committee
and shall have a right to be heard at the meeting.
Many Private Insurance Companies and Mutual Funds have also made huge investment in Adani stocks and have made decent gains too. It would have been better if the article had a mention of that too. Public sector is doing a great service to the nation, why keep demoralising the sector by highlighting a report which is biased and written with ulterior motive ?
Incidentally, I am a regular reader of MoneyLife. I have appreciated some of the articles in the past which you might have missed.
Institutional transparency and accountability should be of top priority for this government.