Sebi moves Supreme Court for clubbing Ulip cases

The Securities and Exchange Board of India (Sebi) has moved the Supreme Court seeking a clubbing of all cases related to the issue of regulation of unit linked insurance plans (Ulips) to a single court.

Sources close to the development confirmed that the capital markets regulator has filed a petition seeking transfer of the law suits in the Allahabad and Bombay high courts to the Supreme Court.

Currently, there are two public interest litigations (PILs) pending in the two high courts.

The first PIL, filed in the Bombay High Court on April 15, 2010 by one Rajendra Thacker, a businessman based in the Mumbai suburb of Borivalli, is against the Sebi order preventing insurance companies from selling Ulips.

The second PIL, filed in the Allahabad High Court on April 22, 2010 by one Dhruv Kumar, a lawyer and former insurance professional, is against the Insurance and Regulatory Development Authority (Irda) of India.

The PIL alleges that insurance agents are mis-selling Ulips by promising high returns on them. It also alleges that a few insurance companies are using the multi-level marketing structure to sell insurance policies.

Ulips are investment plans offered by insurance companies with a dash of insurance.

Contrary to the finance minister’s recommendation and their own earlier stance on the issue, Sebi and Irda have not filed any joint case in any court, as differences have crept up between the two regulators.

Irda said it wanted to seek a legal mandate jointly with Sebi, but the market regulator had reservations.

“Sebi has written a letter to us, that according to their legal counsel, the joint application is not valid in this (Ulip) case under section 90 of Civil Procedure Court,” Irda chairman J Harinarayan said.

Sebi’s request for moving both the PILs to either Supreme Court or to any one high court in the country is based on the view that given its importance, the issue is bound to be appealed in the Supreme Court for finality even if a high court decides on the matter. Also, it obviates the likely confusion in case the judgements of the two courts were to differ.

Sources suggested the move also has to do with the movement of judges. The chief justice of Bombay High Court, Anil Ramesh Dave, who was hearing one of the PILs, has been elevated as a Supreme Court Judge.

The PIL in the Bombay High Court was listed for hearing on three consecutive Thursdays —- April 15, 22 and 29. The case was adjourned on one occasion and did not come for hearing on the other two occasions.

“If the case doesn’t come up next week,then there will have to be a long wait as the Bombay High Court will go on leave starting May 7, 2010,” said Sumedha Rao, the lawyer of Rajendra Thacker who filed the PIL against Sebi in the Bombay High Court.

When contacted for a confirmation, Sebi counsel and additional solicitor general Darius Khambatta said, “Personally I do not know whether the case has been filed. I am hearing it has been.”
But fighting the battle in the Supreme Court will prove expensive for the people who have filed PILs. If the PILs are shifted to any one high court, then one of the PIL petitioners will have to travel there. And if the matter is dragged to the Supreme Court, both will be impacted.

“Why should we bear the financial brunt of fighting the case in Supreme Court?” Rao asked.