Chennai June 12 (IANS) The merger and amalgamation (M and A) regulations notified by the Insurance Regulatory and Development Authority (IRDA) is discriminatory, inconsistent with the Insurance Act, say industry and legal experts.
Fuming at IRDA prescribing a processing fee ranging between Rs.5 million to Rs.50 million, an industry official told IANS: "There is no such processing fee charged on life insurers when they go in for M and A. But charging the non-life insurers high fee is certainly discriminatory," an industry official told IANS.
According to a private company chief executive, "the fees charged should be commensurate with the work involved and the value perceived. Moreover the merged entity would continue to pay annual licence fee".
Legal experts feel that IRDA arrogating such a power would suffer from excessive delegation and would be struck down as arbitrary exercise of power.
"Wherever fees are to be levied by IRDA, the same has to be quantified in the law itself. The regulator cannot arrogate such a power which has not been given by the Parliament," an official said.
According to the regulation, on getting various approvals, including the high court sanction for the merger and amalgamation, the transacting parties shall approach the IRDA for its final approval.
The regulation states that the IRDA would ensure the scheme finally approved is consistent with "…such requirements or stipulations as might have been imposed by other competent authorities while according their regulatory approvals…"
The IRDA can also issue directions if necessary or expedient to remove a difficulty or problem faced by the transacting parties if they face any problem in implementing an approved scheme.
"This is a grey area and I am keeping my fingers crossed in regard to the power of final nod as has been reserved by the regulations, even after the court's approval," D. Varadarajan, a Supreme Court lawyer specialising in company and insurance laws, said.
According to senior advocate Arvind P. Datar, once the high court approves the scheme of amalgamation, nobody can review it. The only option available is to go on appeal.
Industry officials also complained that the different layers of approval procedures laid down by IRDA for merger and amalgamation are quite elaborate and time consuming.
According to Varadarajan, transfer of stakes in excess of five percent prescribed in the Insurance Act requiring IRDA's permission will not come under the regulations.