State general insurance cos' directors on firing line
Delhi HC order bars BBB from selecting GMs, Directors
image for illustrative purpose
Mumbai: As a result of a recent Delhi High Court's judgement that the Banks Board Bureau (BBB) can't select the General Managers and Directors of state-owned general insurance companies, directors serving on the boards of the three companies- Oriental, United and National- and two from national reinsurer GIC Re are already on the firing line. While New India and GIC are listed entities, other state-run general insurers are not listed. Hence, they are not liable to inform the stock exchange about any such development. The country's largest non-life insurer, New India Assurance has no director on its board at the moment. Requesting anonymity, one of the affected directors told Bizz Buzz, "we had stopped as directors since the very day the court order came. However, we continue to work in our capacity as general managers."
The official added that it was upto the government to inform the court what will it do with all the six affected directors. In its regulatory filing, GIC Re has said Madhulika Bhaskar, General Manager has vacated office as Director with effect from November 3, consequent to Delhi High Court's order in Ravi vs. Union of India & Others. Chennai based United India Insurance has announced the withdrawal of its director YK Shimray, though he will continue to work as general manager. The other PSU general insurers will also comply with the Delhi HC order. It was expected that the government may challenge the Delhi HC order but it didn't happen.
In another case which may look into selections of CMDs of PSU general insurers by the BBB, after being denied posting as CMD of Chennai based United India Insurance, Inderjeet Singh, general manager, New India Assurance, had challenged the government decision on the matter in the Delhi High Court on November 11.
Singh had pleaded in the court that despite being selected by the BBB, for the top post of UII, the government has appointed Satyajit Tripathy, who was a reserve candidate for the post.
Justice V Kameswar Rao J of Delhi High Court, who had earlier delivered the judgment in Ravi vs Union of India & Others had admitted the petition filed by Singh and had kept the hearing on November 30 which has been further adjourned to Dec 17.
"The petitioner (Singh) is seeking necessary orders from the Court to the government of India for his appointment as CMD of UII on the strength of the recommendation made by BBB on May 07, 2021," said Justice Kameswar Rao J while admitting Singh's plea.
However, Justice Kameswar Rao J has pointed out to one of his earlier verdicts, delivered on October 04, in the case of Ravi vs Union of India & Others, he has rejected BBB's power to appoint directors in the public sector general insurance companies.
The advocates of government of India and Singh sought time to look into the judgment and hearing on the case has been postponed. Singh's case in Delhi HC will also throw light on its stand with regard to BBB's power to conduct interview and select the names of CMDs of PSU general insurers, sources said. The Delhi HC in October had held that the BBB cannot select the General Manager and Directors of public sector general insurers as it is not a competent body.
It also ordered setting aside of appointments made pursuant to the selections of General Manager and Directors of public sector general insurers are liable to be set aside. The ruling came on a case filed by National Insurance Company General Manager Ravi, complaining people junior to him were selected by the BBB for the position of Director in public sector general insurers twice – in August 2020 and May 2021.
The court also held that the circulars enabling BBB to select the General Manager and Directors of government owned general insurers are not legally valid and are set aside.
"Consequently, the impugned selections could not have been undertaken by the BBB. The appointments made pursuant to the impugned selections of General Manager and Directors of PSGICs (public sector insurance companies) are liable to be set aside. It is ordered accordingly," said the Delhi HC.
Even though there is no additional pay for a General Manager when he/she is selected as a Director, still he/she and their family members get the life-time medical insurance benefits. In fact, it is the biggest charm for a general manager to become a director.
