Max Life Insurance on Monday said it has decided to pay the ₹3-crore penalty imposed by IRDAI for, among other things, misrepresentation to obtain permission for a share sale deal with Axis Bank and its group companies. 

IRDAI also found that a higher-than-permitted compensation was paid to the corporate agent (Axis Bank), besides failure to followfair market value in share transactions. 

Max Life said the penalty payment was being done to strengthen the long-term strategic partnership with Axis Bank and “avoid unnecessary and long legal escalation”. At the same time, it said there was no wrongdoing on its part.

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Analjit Singh, Chairman of Max Life Insurance, said, “Max Life and its shareholders have always conducted their affairs in compliance with applicable laws and will continue to abide by the same and will work with all earnestness to create value for all its stakeholders. 

The above transactions were undertaken in a bona-fide manner. However, keeping the best interest of the company and its stakeholders in mind, we have resolved to remit the payment towards the penalty.”

Axis Bank, together with its subsidiaries, Axis Capital Ltd and Axis Securities, are now the co-promoters of Max Life Insurance, following the acquisition of 12.99 per cent stake in April 2021.

Under the deal, Axis Bank and its group entities have the right to acquire an additional stake of up to 7 cent in one or more tranches. Axis Bank is also the largest corporate agent distributor for Max Life Insurance.

In its order, signed by Chairman Debasish Panda, IRDAI said the transfer of shares was not done at fair market value determined on a uniform basis, which has led to Axis Bank, a registered corporate agent of the insurer, along with its group companies, receiving undue monetary gain

The IRDAI order said it is evident that Axis Bank had sold its stake of 0.998 per cent shares of Max Life in March 2021 to Max Financial Services (MFSL) and Mitsui Sumitomo International (MSI) at ₹166 per share. Subsequently, in March-April 2021, Axis Bank and its group entities acquired 12.002 per cent shares from MFSL in the range of ₹31.51-Rs 32.12 per share. This is not in compliance with the directions issued by the Authority (IRDAI).”

The IRDAI order said the transfer of shares at a substantial differential by the promoters of the insurer had resulted in undue monetary gain for the corporate agent -- Axis Bank -- it was thereby alleged to have violated relevant regulations around payment of commission or remuneration to agents and intermediaries.

In another order, IRDA has imposed a penalty of ₹2 crore on Axis Bank for making undue gains by way of transactions in shares of Max Life Insurance and in violation of certain other regulations.

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