Two years on, securities tribunal still lukewarm to insurance

Appellate body SAT passes few insurance orders after sector brought under its purview

A little over two years after insurance was brought under Securities Appellate Tribunal, SAT has passed only a couple of orders on the sector. Less-than-optimal capacity, delay in forming Benches, and lack of awareness are to blame for the slack, said lawyers. 

"True that not many orders have been passed. SAT is burdened with securities matters. Certainly, it needs to build capacity," said Moin Ladha, associate partner, Khaitan & Co, who deals in SAT matters.  

According to the SAT website, it has passed only four orders in all under the head 'Irdai' (Insurance Regulatory and Development Authority of India). The first order came in December 2015 in the matter of LMB Insurance Brokers. A long lull followed, before a judgment in the matter of Efficient Insurance Brokers in August 2016. 

In December 2016, two orders were passed in the matter of Happy Insurance TPA Services and Mehta Insurance.

Bringing in insurance and pension matters under SAT was in line with the government's plans to make SAT a financial sector appellate tribunal (FSAT).  In September 2014, an FSAT task force was set up under former SAT presiding officer N K Sodhi.  

In December 2014, an ordinance moved appeals relating to orders passed by Irdai from central government to SAT. In March 2015, a law to this effect came into force. 

That is not all. In his Budget Speech last year, finance minister Arun Jaitley said, "I also propose to change the Sebi (Securities and Exchange Board of India) Act 1992 in the coming year to provide for more members and Benches of SAT." Lawyers said there were expectations then that a SAT Bench in Hyderabad, from where Irdai operates, would help coordinate insurance matters.  

But, even as the next Budget approaches, these new members and Benches are still a work in progress. "Bringing more Benches and some hand-holding of these comparatively new regulators (Irdai and Pension Fund Regulatory and Development Authority) by providing adequate staff, capacity-building, budget, and infrastructure would go a long way in achieving the objective of creating a common appellate authority," said Sumit Agrawal, partner, Suvan Law Advisors.

The lukewarm action in insurance matters is in contrast to the many securities cases handled by SAT every day. According to the latest Sebi annual report, during 2015-16, 591 appeals were filed before SAT as compared to 520 appeals in 2014-15. Further, during 2015- 16, 261 appeals were dismissed (ruled in favour of Sebi) while 33 were allowed (ruled against Sebi) compared to 103 cases dismissed and 18 cases allowed in 2014-15. At the end of March 31, 2016, 423 appeals were pending with SAT as against 381 a year ago."

Ladha of Khaitan & Co added that the process would need more time to develop. "Relevant rules for this were passed only around a year ago. Therefore, it is fairly a recent phenomenon. Irdai itself passes fewer orders in comparison with Sebi. There is very little awareness among the aggrieved about the appeals process," he said. 

Several insurance cases are pending before SAT and more are on the way. Some litigants say Irdai itself has a long way to go before it builds up a budget and experience in passing orders and defending these before SAT.  On the other hand, SAT has little experience in understanding the plight of an insurance policy holder because the members do not have a background in insurance matters. Lawyers pointed out shortcomings in legislation that need to be addressed to suit the pan-financial sector plans for SAT.