India – INS Substantial Shareholding Breach

India – INS Substantial Shareholding Breach

On 14 October 2022, IND INS issued findings on Axis Bank and Max Life shares.

  • IND INS issued two orders in the matter of Axis Bank Limited and Max Life Insurance Co. Ltd, along with other companies in Axis group, for making undue profits or gains.


  • Axis Bank had been granted a certificate of registration to act as a corporate agent for insurance companies by IND INS, and was therefore the registered agent for Axis Life.
  • The Insurance Act, 1938, Insurance Laws (Amendment) Act, 2015, as well as IRDAI (Transfer of Equity shares of Insurance Companies) Regulations, 2015 regulate shares.
  • Every insurance company must seek prior approval of IND INS for a transfer of shares exceeding 1% of shareholding, or if total shareholding exceeds 5% of paid-up capital.
  • Max Life Insurance Company Ltd had made application for transfer of shares, where Axis Bank Ltd along with its group companies proposed to acquire 12.002% of shares.
  • These shares in Max Life Insurance were held by Max Financial Services Ltd (MFSL).
  • While processing the application, IND INS confirmed the basis for determining the fair market value (FMV) of shares, needs to be clear and needs to be uniformly followed.
  • Approval was granted by IND INS for this transaction after assessing the FMV basis.
  • Later, a similar transaction was proposed for a proposed transfer of shares in Max Life Insurance, held by the Mitsui Sumitomo Insurance Company Ltd. (MSI), on to MFSL.
  • While processing this application, IND ISN noted that the promoters of the insurer, MFSL and MSI had both had a series of sale and purchase transactions with Axis Bank.
  • It was noticed the promoters of Max Life insurance had engaged in a transfer of shares to Axis Bank at a price, which had been substantially lower than the relevant FMV.


  • On a charge of not complying with the IND INS directions, a penalty of Rs 1 crore was levied on Axis Bank, under the terms of section 102(b) of the Insurance Act, 1938.
  • On a charge of making undue gains of substantial amounts via transactions in shares of Max Life Insurance, and circumventing IND INS regulations, a penalty of Rs 1 crore.
  • Axis Bank was directed that the order be placed before its board at its next meeting, so it can take note of violations and take preventive steps to avoid such violations.
  • For its part in the breaches, Max Life insurance was fined Rs 1 crore, for not complying with the directions issued by IND INS in relation to trading in its shares and FMV rules.
  • For its misrepresentation of the circumstances, in order to obtain approval of IND INS, Max Life insurance was then fined a further Rs 1 crore, as part of the overall penalties.
  • For registering a transfer of shares in violation of the directions of IND INS, resulting in passing of undue monetary consideration of substantial amounts to a corporate agent.
  • Max Life Insurance was fined a further Rs 1 crore, for circumventing commission limits.
  • The insurer was also directed to place the order before its board at its next meeting, so it could take note of violations and take preventive steps to avoid such violations.