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NEW DELHI : The Delhi high court on Wednesday deferred hearing in a plea that sought to probe alleged fraudulent practices by Axis Bank in the sale and purchase of shares in Max Life Insurance Co Ltd.
Counsels for the private sector lender and Max Life Insurance said that the case is pending with the Securities and Exchange Board of India (Sebi), which has the authority to adjudicate in these kinds of matters.
The entities argued that the dispute, centering on a commercial transaction between two private parties, does not directly implicate the interests of the public shareholders, suggesting limited judicial intervention is warranted.
The matter will be next heard on 24 April.
In February, Bharatiya Janata Party leader Subramanian Swamy had moved the Delhi high court alleging a scam of nearly ₹5,100 crore in the way Axis Bank sold and purchased shares of insurer Max Life Insurance Co.
Max Life is a joint venture between Max Financial Services Ltd and private lender Axis Bank.
On 6 February, the Insurance Regulatory and Development Authority of India (Irdai) approved Axis Bank’s proposal to purchase another 7% in Max Life for ₹1,612 crore. After this, the Axis group entities will collectively own 19.02% of the insurer, up from less than 13% currently.
The public interest litigation alleged that the profits accrued through transactions between February 2016 and April 2021. Swamy pointed out that in March 2021, Axis Bank had sold a 0.998% stake in Max Life to Max Financial Services and Mitsui Sumitomo International for ₹166 per share. Subsequently, between March and April 2021, Axis Bank and its affiliates bought back a 12.002% stake from Max Financial Services for between ₹31.51 and ₹32.12 per share.
“Meaning, thereby, Axis Bank has gained substantially while selling shares as the selling price has been exponentially more than the purchasing price,” the plea alleged.
The petition also said that Max Financial Services and Mitsui Sumitomo International engaged in transfer of shares of Max Life to Axis Bank at a price lower than the fair market value and subsequently bought them from Axis Bank at a substantially higher price.
During today’s hearing, senior counsel Sajan Poovayya, representing Max Life Insurance, pointed out that Sebi has already initiated an investigation into the alleged fraudulent activities and has issued notices in this regard.
Additionally, Max Life’s legal team told the court that the transaction had all relevant approvals from regulatory bodies like Irdai and the Competition Commission of India, including that from public shareholders.
In response, senior advocate Rajshekhar Rao, representing Swamy, highlighted the discrepancy between the potential Sebi penalty of up to ₹25 crore and the transaction’s value, which exceeds ₹4,000 crore, pointing to a concern for public shareholders. He argued that the lack of court challenges from shareholders was due to unawareness of the alleged fraud, urging the court to issue a notice to Sebi in the case.
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Published: 03 Apr 2024, 05:07 PM IST
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