RBI and SEBI to Investigate Max Life and Max Financial Allegations: Delhi High Court

On Monday, the Delhi High Court issued a stern directive to the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI) to expedite their investigations into the alleged fraudulent activities perpetrated by Max Life Insurance and Max Financial Services.

A bench led by acting Chief Justice Manmohan rejected a petition filed by former Rajya Sabha member Subramanian Swamy for the establishment of a dedicated probe committee and underscored the need for a swift and thorough investigation into the matter.

Swamy’s petition had accused Axis Bank of orchestrating a scam worth approximately ₹5100 crore, alleging that the private lender had unfairly profited from transactions involving Max Life Insurance shares. He had urged the court to mandate RBI, SEBI, and the Insurance Regulatory and Development Authority of India (IRDA) to formulate comprehensive guidelines to prevent such future misconduct and regulate arrangements between financial institutions.

Opposing Swamy’s plea, senior counsel Mukul Rohatgi, representing Axis Bank, argued that the matter was essentially a commercial dispute between private entities and did not warrant judicial intervention. He emphasised that aggrieved shareholders, if any, could pursue legal recourse independently.

IRDA, in its response, informed the court that it had already imposed penalties of ₹2 crore and ₹3 crore on Axis Bank and Max Life, respectively, for their involvement in the alleged irregularities. The regulator forwarded copies of these penalties to RBI and SEBI for further examination and action.

Meanwhile, SEBI counsel revealed that the regulatory body had initiated preliminary investigations into the case, which were progressing at an advanced stage. He also confirmed that Swamy’s letter seeking a probe had been forwarded to RBI.

Swamy’s allegations against Max Life Insurance and Max Financial Services centered on their alleged collusion with Axis Bank and its group companies to manipulate Max Life’s share price for personal gain. He contended that Axis Bank, acting as both a shareholder and corporate agent of Max Life, had exploited its dual role to engage in unlawful profiteering, amassing an estimated ₹4,000 crore.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.