MUMBAI : Senior BJP leader Subramanian Swamy on Thursday 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 Company.
Max Life is a joint venture between Max Financial Services 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 ₹5,100 crore was the total profit made by Axis Bank through these transactions between February 2016 and April 2021. Swamy alleged that, for instance, Axis Bank sold its stake of 0.998% in Max Life in March 2021 to Max Financial Services Ltd and Mitsui Sumitomo International at ₹166 per share. Then, between March and April 2021, Axis Bank and its group entities acquired a 12.002% stake from Max Financial Services at ₹31.51-32.12 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 petition alleged, demanding a probe by an expert panel.
Axis Bank termed the allegations unfounded and without any merit.
“We have not yet been served with a copy of the writ petition today. The bank has obtained necessary regulatory approvals in connection with the sale / purchase of shares of Max Life Insurance Company Limited. We will take necessary steps to vigorously defend the bank against the unfounded allegations made which are totally devoid of any merit,” it said in a statement.
Max Life, in its statement, said: “In this regard, we would like to state that the share transactions being highlighted were consummated post taking appropriate approvals from the respective regulators viz. RBI, Irdai and CCI, wherever applicable. We believe that there is no legal or regulatory anomaly in the transactions and due process of law has been followed. The company and MFSL shall take all requisite legal recourse to defend the matter before the high court.”
The petition also said that Max Financial Services Ltd (MFSL) and Mitsui Sumitomo International (MSI) have been engaging in transfer of shares of Max Life to Axis Bank at a price, which is substantially lower than the fair market value and subsequently buying them from Axis Bank at a substantially higher price.
Swamy, a former Union minister, alleged that there was “blatant fraud” by Max Life Insurance and Max Financial Services in allowing shareholder Axis Bank Ltd and its group companies to make “undue profits/gains from the purchase and sale of equity shares of Max Life in non-transparent manner”.
He added that the transactions were in violation of the directions of Irdai. Therefore, these transactions should be investigated by a committee of experts, the petition said.
A division bench of acting Chief Justice Manmohan and Justice Manmeet Pritam Singh Arora have agreed to hear the matter on 13 March.
The regulators including Securities and Exchange Board of India (Sebi), Reserve Bank of India (RBI), Irdai have been made a party in the matter along with Axis Bank, its group companies and Max Life.
Senior counsel Mukul Rohatgi represented the Axis group, while senior advocate Rajshekhar Rao appeared for Swamy. Shares of Axis Bank on the BSE closed at ₹1,072.6 apiece on Thursday, down 2.11% from the previous close.
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Published: 16 Feb 2024, 12:20 AM IST