On Thursday, senior BJP leader Subramanian Swamy filed a case in the Delhi High Court, claiming that Axis Bank had engaged in a roughly ₹5,100 crore fraud in the sale and acquisition of insurer Max Life Insurance Company shares.
Axis Bank, a private lender, and Max Financial Services jointly own Max Life. The application by Axis Bank to acquire an additional 7% of Max Life for ₹1,612 crore was accepted by the Insurance Regulatory and Development Authority of India (Irdai) on February 6. The Axis group companies will then jointly possess 19.02% of the insurance, up from their present ownership of less than 13%.
According to the public interest lawsuit, Axis Bank profited ₹5,100 crore in total from these transactions between February 2016 and April 2021. For example, according to Swamy, Axis Bank sold Mitsui Sumitomo International and Max Financial Services Ltd. its 0.998% ownership in Max Life in March 2021 for ₹166 per share. Subsequently, Axis Bank and its affiliated companies purchased a 12.002% interest at a price per share of ₹31.51-32.12 from Max Financial Services in March and April of 2021.
Thus, by selling shares at a price that was exponentially more than the purchase price, Axis Bank has profited significantly,” the petition claimed, calling for an investigation by a team of experts. Axis Bank described the accusations as baseless and devoid of any substance.
“A copy of the writ petition was not served to us today. The bank has acquired the required regulatory clearances for the acquisition and selling of Max Life Insurance Company Limited shares. The bank issued a statement saying, “We will take the necessary actions to vigorously defend the bank against the unfounded allegations made which are totally devoid of any merit.”
In a statement, Max Life said: “In this context, we would like to clarify that the highlighted share transactions were completed after obtaining the necessary clearances from the relevant regulators, namely the RBI, Irdai, and CCI, where applicable. We think that the transactions have been conducted legally and in accordance with regulations, and that due process has been observed. The business and MFSL will pursue all necessary legal avenues to fight the case in front of the supreme court.”
The petition also claimed that Mitsui Sumitomo International (MSI) and Max Financial Services Ltd (MFSL) had been selling shares of Max Life to Axis Bank for a price that was significantly less than their fair market value, then purchasing those same shares back from Axis Bank for a significantly higher price.
The former Union minister Swamy said that Axis Bank Ltd. and its group firms had engaged in “blatant fraud” by allowing them to profit unfairly from the acquisition and sale of equity shares of Max Life in a way that was not transparent.
He continued by saying that the transactions were against Irdai’s instructions. Thus, the petition said that an expert committee need to look into these transactions.
The case will be heard on March 13 by a division bench consisting of Justice Manmeet Pritam Singh Arora and Acting Chief Justice Manmohan.
Along with Axis Bank, its group businesses, and Max Life, the regulators, including the Securities and Exchange Board of India (Sebi), Reserve Bank of India (RBI), and Irdai, have been included as parties in the action.
Senior lawyer Rajshekhar Rao spoke on behalf of Swamy, while senior counsel Mukul Rohatgi represented the Axis company. Thursday’s closing price for Axis Bank shares on the BSE was ₹1,072.6 per share, a decrease of 2.11% from the previous day.
