In a relief to SBI Life Insurance, the Supreme Court has stayed the Allahabad High Court order that asked the Insurance Regulatory and Development Authority (Irda) to scrutinise all policies of the private life insurer and direct discontinuation of its policies and winding up of its business if it detected any regulatory breaches.
A bench headed by justice Ranjan Gogoi stayed the HC judgment of May 29 that held that the Centre will do well to ensure that the investors are not cheated in a manner, as in the present case, in which the entire investment of the senior citizen has been lost on the pretext of the policy being in tune with Irda guidelines. The HC further held that the insurance contract in the present case was arbitrary, illegal and void document.
The court noted that SBI Life is a joint venture between State Bank of India and BNP Paribas Cardif and that SBI Life Unit Plus II - Single, a unit-linked product on a standard form of contract, did not have the Irda approval to its twin options in which the higher option reduced the entire investment of a senior citizen with high rate of mortality charges. It was an unconscionable contract and was thus arbitrary, illegal and void document. It did not bind the petitioner, said the court.
Irda is at present looking into the order and trying to see how to implement the order.
The HC order had come on a petition filed by one SBI Life customer, Virendra Pal Kapoor, who had invested R50,000 in 2007 in SBI Lifes Unit Plus II-Single, a Ulip with an option of a limited term of five years, for a sum assured or insurance cover of R3,12,500 (625% of the investment), with a choice of investment in a growth fund. But on maturity, he was paid a mere R248.
SBI Life in its appeal argued that State Bank of India has been created by State Bank of India Act, 1955, and hence it is a statutory body. Any company created by a statutory corporation, having more than 50% share, is a State within the meaning of Article 12 of the Constitution of India.
The HC also observed that Kapoor was misled into entering into a contract without the individual knowing the finer details and without him being explained the contents of the policy.