Subramanian Swamy's PIL for probe against Axis Bank not maintainable, HC told

New Delhi: Axis Bank on Wednesday opposed before the Delhi High Court BJP leader Subramanian Swamy's public interest litigation (PIL) seeking a probe into an alleged fraud committed by the bank to make "undue profits" through sale and purchase of shares in Max Life Insurance.

Senior counsel for Axis Bank as well as Max Life told a bench headed by Acting Chief Justice Manmohan that the PIL by the former BJP MP was not maintainable as the issue squarely fell in the realm of a commercial transaction between private entities.

Senior advocate Mukul Rohatgi, appearing for Axis Bank and its related companies, argued that the PIL does not state the "class" of individuals for whose benefit it has been filed when the aggrieved shareholders, if any, were capable of coming to court.

Senior advocate Neeraj Kishan Kaul, who appeared for Max companies, asserted that the transaction, which was a purely commercial arrangement, has been looked into by the sector regulator.

Counsel for insurance sector regulator IRDAI said "possible penalty" has already been imposed by it in relation to the transaction in question.

Senior advocate Rajsekhar Rao, on behalf of the petitioner, stated that the issue "warrants a larger look".

The bench, also comprising Justice Manmeet P S Arora, listed the matter for further hearing on April 3.

Swamy, a former BJP MP, in his PIL has sought a direction from the court for constituting a committee of experts to investigate the matter, asserting that the "rot" in private sector banks should be brought to light.

In his petition, Swamy has alleged Axis Bank made undue profits totalling Rs 4,000 crore from the sale and purchase of equity shares of Max Life in a non-transparent manner and in violation of the applicable regulations.

"Axis Bank sold its stake of 0.998% shares of Max Life in March 2021 to MFSL (Max Financial Services Ltd) & Mitsui Sumitomo International at INR 166/- per share. Subsequently, in a very short span of time i.e., in March-April 2021 itself, Axis Bank Limited and its group entities acquired 12.002% shares from MFSL at price range of INR 31.51 - INR 32.12 per share," the petition said.

"12.002 % of shareholding in Max Life is bought by the Axis Bank group companies at Rs. 31.51 / Rs. 32.12 per share at total consideration of 736 crores, which is evidently below the fair market value. On simple calculation, resulting in undue profits/gains from the purchase on the sale of equity shares of Max Life in non-transparent manner, Axis Bank has unlawfully gained approx. Rs 4000 crore," the petition claimed.

The plea has said even IRDAI imposed a penalty of Rs 3 crore on Max Life but this amount is "negligible" against the total "fraud" of Rs 4,000 crore by Axis Bank resulting in unlawful gains.

"It is, therefore, prayed that this Hon’ble Court may intervene by directing investigation by a Committee of Experts appointed by it, as also by directing the formulation of proper and comprehensive guidelines in accordance with the recommendations of such Committee, to prevent such future acts/transactions of such nature and to regulate the arrangements entered into between banks or other financial/ insurance institutions," the petition has said.

It has further said "rampant corruption" in the banking and insurance industry and the executive's "manifest unwillingness" to take requisite action gravely impairs the right of the people to live in a corruption-free society.