Axis Bank-Max Life Deal: Sebi, RBI directed by Delhi High Court to expedite probe

The Delhi High Court on Monday declined to admit a public interest litigation (PIL) filed by Bharatiya Janata Party (BJP) leader Subramanian Swamy that sought to probe alleged fraudulent practices by Axis Bank in the sale and purchase of shares in Max Life Insurance. 

"Axis Bank welcomes the Delhi High Court's decision to dispose of the PIL concerning the transactions with respect to Max Life Insurance. We will continue to work closely with the regulators in sustaining the highest standards of integrity and governance. Axis Bank remains committed to conducting business with transparency, fairness, and a focus on delivering value to our stakeholders," an Axis Bank spokesperson said after the development.

The bench, led by Acting Chief Justice Manmohan and Justice Tushar Rao Gedela, declined to admit the PIL, after senior counsels Mukul Rohatgi and Rajeev Nayar, representing Axis Bank, successfully argued that the PIL was not maintainable, citing the following:

• The principle of locus standi for PILs applies only in specific conditions, such as cases involving the most disadvantaged individuals. The petitioner (Swamy) did not meet these criteria. 
• The transactions were purely commercial and involved shares of an unlisted company, thus falling outside the purview of writ jurisdiction
• Regulatory bodies such as SEBI, RBI, and IRDAI were already handling the matter, making the court’s intervention unnecessary

The counsels representing Max Financial Services and Max Life Insurance supported these submissions. Despite counter-arguments from Rajshekhar Rao, representing Swamy, the court ruled that the PIL was not maintainable, directing banking regulator RBI and capital market regulator Sebi to complete their investigations expeditiously.

Meanwhile, Swamy took to microblogging site X (formerly Twitter) to state that he is “exploring to move criminal court and invoke” the Prevention of Money Laundering law in the matter. 

Today, in my PIL in Delhi HC directed RBI and SEBI to complete the investigation in the Axis-Max Life deal expeditiously in accordance with law. Also, I’m exploring to move criminal court and invoke PMLA to further move in the matter on a scam of more than 4000 Cr.

— Subramanian Swamy (@Swamy39) August 12, 2024

PMLA or Prevention of Money Laundering Act, 2002, is a special legislation enacted with the intent of dealing with money laundering. 

In February, Swamy had moved the Delhi High Court accusing Axis Bank of making approximately Rs. 4,000 crore in undue profits through non-transparent share transactions in Max Life Insurance - a joint venture between Max Financial Services and Axis Bank, and criticising insurance regulator IRDAI’s penalty of Rs 3 crore on Max Life as insufficient. 

The petition sought the court’s intervention to investigate the matter and formulate guidelines to prevent similar occurrences in the future.

In August 2023, the insurer announced a capital infusion by the private sector lender by issuance of about 14.3 crore equity shares to help Max Life support its future growth ambitions, augment its capital position, and improve its solvency margin.

Axis Bank provides services in retail banking, including retail lending, while Max Life Insurance is engaged in the business of providing life insurance, annuity products, and investment plans in the country.

Deals beyond a certain threshold require regulatory approval. This keeps a tab on unfair business practices as well as promotes fair competition in the marketplace.

Max Life is a joint venture between Max Financial Services Ltd and private lender Axis Bank.

With inputs from agencies