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SAT: Common Appellate Authority For SEBI, PFRDA & IRDA

Published on Tue, Jan 20,2015 | 18:40, Updated at Tue, Jan 20 at 18:40Source : Moneycontrol.com 

By: Vaneesa Agrawal, Advocate, Bombay High Court

Recently, on 26th December, 2014 Government issued The Insurance Laws (Amendment) Ordinance, 2014 ("the Ordinance") in order to hike Foreign Direct Investment (FDI) cap in the insurance sector to 49% from current 26% and allowing the entry of foreign re-insurers (companies that insure insurance companies) among other things, as the legislation could not be passed in the winter session of Parliament.
 
The Ordinance also provides for appeals against decisions by IRDA to lie with the Securities Appellate Tribunal (SAT), set up under the SEBI Act, 1992. This is in line with recommendations made by the K.P. Narasimhan Committee which suggested amendments to provisions of The Insurance Act 1938, and also the Report of the Financial Sector Legislative Reforms Commission (FSLRC Report) which seeks to bring all financial regulators under judicial oversight of SAT while converting SAT into Financial Sector Appellate Tribunal (FSAT). The Government has set up a Task Force on FSAT for finalizing the road map for creation of FSAT and a detailed transition plan to transform the present SAT into FSAT. The Task Force is expected to complete its tasks by October, 2015.

Hitherto, for decisions under certain sections of Insurance Act 1938, the government was the appellate authority while appeals could be made in a high court. Insurance policyholders could also appeal to consumer forums and the ombudsman appointed under the IRDA Act. On one hand, this recent ordinance provides that appeals against decisions by IRDA lie with SAT, as per Section 110(2) of Insurance Act, 1938 as amended by this Ordinance, Central Government is yet to prescribe rules for form and fee for appeal, the procedure for filing and disposing of an appeal.

For quick look at appeal to SAT for various directions of IRDA, one may note the following new sections on Insurance Act:-

Section

Text of the Provision

Section 3 (2C) - Appeal against Refusal to Register by IRDA

Any person aggrieved by the decision of the Authority refusing registration may, within thirty days from the date on which a copy of the decision is received by him, appeal to the Securities Appellate Tribunal.

Section 21 (2) – Appeal against non-acceptance of returns furnished by insurers to IRDA

The Securities Appellate Tribunal may, on the application of an insurer and after hearing the Authority, cancel any order made by the Authority under clause (d) of sub-section (l) or may direct the acceptance of such a return which the Authority has declined to accept, if the insurer satisfies the Tribunal that the action of the Authority was in the circumstances unreasonable:

Provided that no application under this sub-section shall be entertained unless it is made before the expiration of four months from the date when the Authority made the order or declined to accept the return.

Section 33(8) – Appeal against exercise of power of investigation & inspection by IRDA

Any insurer or intermediary or insurance intermediary aggrieved by any order made under this section may prefer an appeal to the Securities Appellate Tribunal.

Section 37A (4C) - Appeal against IRDA’s assessment of compensation in scheme of amalgamation of two insurers

Any member or shareholder aggrieved by the assessment of compensation made by the Authority under sub-section (4A) may within thirty days from the publication of such assessment prefer an appeal to the Securities Appellate Tribunal.”

Section 110 – Appeal to Securities Appellate Tribunal (SAT)

(a) by an order of the Authority made on and after the commencement of the Insurance Laws (Amendment) Ordinance, 2014, or under this Act, the rules or regulations made thereunder, or

(b) by an order made by the Authority by way of adjudication under this Act, may prefer an appeal to the Securities Appellate Tribunal having jurisdiction in the matter.

(2) Every appeal made under sub-section (1) shall be filed within a period of forty-five days from the date on which a copy of the order made by the Authority is received by him and it shall be in such a form and be accompanied by such fees as may be prescribed:

Provided that the Securities Appellate Tribunal may entertain an appeal after the expiry of the said period of forty-five days if it is satisfied that there was sufficient cause for not filing it within that period.

(3) On receipt of an appeal under sub-section (1), the Securities Appellate Tribunal may after giving parties to the appeal, an opportunity of being heard, pass such orders thereon as it thinks fit, conforming, modifying or setting aside the order appealed against.

(4) The Securities Appellate Tribunal shall make available copy of order made by it to the Authority and parties.

(5) The appeal filed before the Securities Appellate Tribunal under sub-section (1), shall be dealt with by it as expeditiously as possible and endeavour shall be made by it to dispose of the appeal finally within six months from the date of receipt of appeal.

(6) The procedure for filing and disposing of an appeal shall be such as may be prescribed.

(7) The provision contained in Section 15U, Section 15V, Section 15W, Section 15Y and Section 15Z of the Securities and Exchange Board of India Act, 1992 shall apply to the appeals arising out of the provisions of this Act, as they apply to the appeals under the Securities and Exchange Board of India Act, 1992.

SAT consists of members who have shown capacity in dealing with problems relating to securities laws, corporate law, finance, economics or accountancy. It should also be noted that the Ordinance does not provide for the SAT to have a member with experience in insurance law, which would necessitate an amendment to Section 15M(2) of Securities and Exchange Board of India Act, 1992.

Last year also, similar problems were identified when Government of India notified on 26th May, 2014 the Pension Fund Regulatory and Development Authority (Appeal to Securities Appellate Tribunal) Rules, 2014 to file appeal under Section 36 of PFRDA Act, 2013 from PFRDA to SAT.

Though there are no known cases where PFRDA has been dragged to SAT, after the Insurance Laws (Amendment) Ordinance 2014, it remains to be seen how SAT deals with PFRDA & IRDA related cases, as and when they come. But in sum, a common appellate authority in SAT for financial markets is a welcome step, as common judicial oversight can take a holistic view and bring about greater convergence in the legal interpretation of financial market laws.

 
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