Court not super regulator, says Delhi High Court on Swamy's plea against Axis-Max transaction

New Delhi: Stating that it should not act as a "super regulator", the Delhi High Court has refused to interfere with the alleged fraud committed by Axis Bank to make "undue profits" through sale and purchase of shares in Max Life Insurance.

A bench headed by Acting Chief Justice Manmohan, while dealing with a PIL on the issue filed by BJP leader Subramanian Swamy, asserted that the tendency to examine commercial transactions under Article 226 jurisdiction of the Constitution is to be eschewed, especially when the respective sector regulators are seized of the matter.

The court closed the proceedings on the PIL with directions to markets regulator SEBI and the Reserve Bank of India (RBI) to complete the investigation in the matter as expeditiously as possible and take further action that is required.

In his petition, Swamy 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.

"This court is of the view that where a field is regulated and where an appropriate regulator has either already taken note of and addressed the transaction or is investigating the said transaction, the court in writ jurisdiction should not interfere. In such a situation, the regulator must be allowed to do its job," said the bench, also comprising Justice Tushar Rao Gedela, in an order passed on August 12.

"Consequently, keeping in view the fact that the Petitioner challenges private commercial transactions between commercial entities as well as the fact that shareholders of the public limited company have approved the transactions and in addition insurance and banking sectors are regulated and the independent sectoral regulators, namely, SEBI and RBI are seized of the controversy, this Court is of the view that it should not act as a ‘super regulator’ and interfere in exercise of Article 226 jurisdiction," it stated.

The court also noted that in essence, the petitioner challenged "purely commercial transactions" between private entities involving acquisition of shares of a life insurance company, and though a personal allegation was also made against the Chairperson of SEBI, she was not made a party to the PIL.

"This court is of the view that even if the Chairperson of SEBI has had a professional relationship with Max group in the past, it will not take away the Regulator’s obligation and duty to decide the matter in accordance with law. Also, if the final decision of SEBI is in any manner influenced or affected because of the alleged erstwhile professional relationship of its Chairperson, the petitioner shall surely be entitled to agitate the said ground at that stage," it said.

"Accordingly, this court disposes of the present writ petition with a direction to SEBI and RBI to complete the investigation as expeditiously as possible. If, after completion of any investigation, any further action is required to be taken, the same shall be taken by independent sectoral regulators in accordance with law," the court ordered.

Swamy, a former member of Parliament, 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.

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