IRDAI Order dated 10.11.2023 – Whether penalty of Rs.3 lakhs on broker is “appropriate” for grave misconduct of submission of forged certificates – For consideration and views

Facts

On 30.6.2021, the Direct Broker (Life & General) had applied for renewal of its registration certificate and submitted the documents.

There were three charges against the Direct Broker (Life & General) for violation of Regulations 39(1), 39(2) and 39(3) of the Regulations, 2018.

Charge No.3 was for submission of false or wrong certification or concealments of the facts in the certificates submitted to the Authority.  The Broker has cut and pasted the letter head and signature portion of its Auditor from previous certificates and used the same for other certificates of second half yearly returns of 2019-2020 and 2020-21.

Defence

The defence of the broker was that the misconduct was committed by a disgruntled employee, it was not done by the Company, the police complaint was filed both by the CA & the organisation and the misconduct was not attributable to the organisation.

Decision on Charge No.3

The decision was that the Broker had submitted forged CA certificate to the Authority amounting to “grave misconduct” under Regulation 39(3) of the IRDAI (Insurance Brokers) Regulations, 2018.

The Authority has imposed penalty of Rs.3 lakhs in exercise of powers under Section 102(a) of the Insurance Act, 1938.

Section 102 of the Insurance Act 1938 provides for – Penalty for default in comply with, or act in contravention, this Act – If any who is required under this Act, or rules or regulations made thereunder – (a) to furnish any document, statement, account, return or report to the Authority fails the same; or (b) …. (c) …..(d) …. he shall be liable to a penalty of one lakh rupees for each day during which such failure continues or one crore rupees, whichever is less.

Regulation 39 of the Regulations, 2018, provides for filing of returns and sub-regulation (3) provides that any false or wrong certification or concealment of facts in the certificates submitted to the Authority shall attract penal action as specified under these Regulations.

Questions – Whether the company or IRDAI can absolve liability for gross misconduct only because it was committed by disgruntled employee and police complaint was filed against him?

Whether the imposition of penalty of Rs.3 lakhs is “appropriate” penalty for gross misconduct of submission of fake certificates?

To my mind, the imposition of such meagre penalty is not commensurate with the grave misconduct but also violative of the provisions of Section 102 of the Insurance Act since it is provides for penalty per day continuously or one crore rupees whichever is less.

Moreover, the application for renewal of registration certificate ought to have been rejected.

For consideration and views –

Order in the matter of M_s. Centcart Insurance Broking Services Private Limited.pdf

In the matter of M/s. Centcart Insurance Brokers Private Limited.