Sneha Shah

Mumbai

The Insurance Regulatory and Development Authority (Irda) and the Securities Exchange Board of

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India (Sebi) have decided on invoking Section 90 of the Civil Procedure Code (CPC), 1908 to resolve their dispute on the jurisdiction over unit-linked insurance plans (Ulips)

The move by the two regulators to have their statutes analysed by a court to determine which one will regulate Ulips comes after finance minister Pranab Mukherjee’s suggestion that the two warring financial market regulators should approach an appropriate court of law to decide their dispute.

According to a senior Irda official, renowned jurist Fali S Nariman has suggested that the regulators file a case under Section 90 of the Civil Procedure Code that deals with the power to state a case for the opinion of the court. Nariman told the two regulators that this was the appropriate legal provision under which they can approach a court as both were not adversaries fighting each other and need only a clarification on interpretation of the law. Section 90 of the CPC reads as follows: “Where any person agrees in writing to state a case for the opinion of the court, the court shall try and determine the same in the manner prescribed.”

Only four high courts in the country – Delhi, Bombay, Madras and Calcutta – are empowered to take up cases under this section.

“We have written to Sebi on the issue and since it has to be a mutual agreement to approach the court, we are waiting for their response on the same after which we will file a case in one of the four high courts,” Irda chairman Hari Narayan told Financial Chronicle.

Sebi chairman CB Bhave did not respond to calls made and messages sent to him by Financial Chronicle. Nariman also did not take calls made to him. The issue of regulation of Ulips arose after the Sebi issued orders to 14 life insurance companies on April 9 asking them to stop selling of Ulips as they had not sought Sebi’s permission before launching these products.

The capital market regulator’s contention was that the product (Ulip) exposes an investor to stock market risks and is akin to mutual funds as allocation towards insurance cover in many cases is hardly 2 per cent of the premium paid.

Irda had on April 10 asked life insurance companies to ignore the Sebi order and carry on business as usual. After this, the finance ministry intervened on April 12 and brokered peace between the two regulators by ordering status quo and asking both the regulators to get their respective laws examined by an appropriate court.