Delhi HC Postpones Hearing On Swamy's Axis Bank-Max Life Plea To 24 April

The Delhi High Court postponed the hearing on Wednesday regarding a petition seeking an investigation into purported fraudulent activities by Axis Bank concerning the sale and purchase of shares in Max Life Insurance.

Lawyers representing Axis Bank and Max Life Insurance informed the court that the matter is under the jurisdiction of the Securities and Exchange Board of India (Sebi), which has the authority to handle such cases. They argued that the dispute, revolving around a commercial transaction between two private entities, does not directly impact the interests of public shareholders, indicating limited judicial intervention is appropriate.

The case is scheduled for the next hearing on 24 April.

In February, Subramanian Swamy, a leader of the Bharatiya Janata Party, filed a petition with the Delhi High Court alleging a potential scam of approximately Rs 5,100 crore related to Axis Bank's sale and purchase of shares in Max Life Insurance Co. Max Life is a joint venture between Max Financial Services Ltd and Axis Bank.

On 6 February, the Insurance Regulatory and Development Authority of India (Irdai) approved Axis Bank's proposal to acquire an additional 7 per cent stake in Max Life for Rs 1,612 crore. This would increase the collective ownership of Axis group entities in the insurer to 19.02 per cent.

The petition claimed that significant profits were generated from transactions conducted between February 2016 and April 2021. Swamy highlighted that in March 2021, Axis Bank sold a 0.998 per cent stake in Max Life to Max Financial Services and Mitsui Sumitomo International at Rs 166 per share. Subsequently, between March and April 2021, Axis Bank and its affiliates repurchased a 12.002 per cent stake from Max Financial Services at prices ranging from Rs 31.51 to Rs 32.12 per share.

The petition alleged that Axis Bank benefitted considerably from these transactions, as the selling price far exceeded the purchasing price.

During the hearing, Max Life Insurance's legal team, represented by senior counsel Sajan Poovayya, informed the court that Sebi had initiated an investigation into the alleged fraudulent activities and issued notices accordingly.

Moreover, Max Life's lawyers asserted that the transaction had received all necessary approvals from regulatory bodies such as Irdai and the Competition Commission of India, including those from public shareholders.

In response, senior advocate Rajshekhar Rao, representing Swamy, emphasized the disparity between the potential Sebi penalty, capped at Rs 25 crore and the transaction's value, which exceeds Rs 4,000 crore. This raised concerns about public shareholders' interests. Rao argued that shareholders might be unaware of the alleged fraud, urging the court to issue a notice to Sebi in the matter.