Bombay HC refuses to stay LIC’s proposed IPO to determine if policyholders are entitled to a dividend from surplus fund

The Bombay High Court has denied ad-interim relief to a handful Nashik policyholders who sought a halt on the Life Insurance Corporation of India’s projected Initial Public Offering (IPO).

The Supreme Court recently heard a petition to overturn revisions to the Life Insurance Corporation Act of 1956 made by the Finance Act of 2021.

The petitioners also requested an ad hoc injunction to prevent the LIC from filing a Draft Red Herring Prospectus (DRHP) for the issuing of shares in a public offering to investors.

While the court did not find a sufficiently strong prima facie case for ad-interim relief at this time, the court stated that this is not a final decision on any of the matters that will be decided in June. this calendar year It also urged the respondents to file an affidavit in response to the plea by June 9 if they wanted to, and the petitioners to file a rejoinder by June 16 if they wanted to.

The Securities and Exchange Board of India (SEBI) approved the LIC’s initial public offering last month, allowing the government to proceed with the deal, which is expected to raise roughly Rs 60,000 crore.

On a petition filed by three LIC policyholders from Nashik, Charudatt Pawar, Manohar Sonawane, and Prakash Desale, a division bench of Justice Gautam S Patel and Justice Madhav J Jamdar issued a decision.

“We are not totally convinced that persons such as the petitioners may be claimed to have an enforceable estate in the surplus of the LIC fund,” the court stated. This is a subject that will demand a lot of thought. To put it another way, we don’t understand how this group of people can claim that the surplus is theirs or any part of the LIC fund is their “property” as defined by Article 300 A of the Indian Constitution.”

“It’s one thing to suggest that a person is entitled to a dividend, a bonus, or some other type of remuneration,” it continued. That may be conceptually distinct from stating that the individual has a specific stake in the fund. It’s feasible to make the analogy that when a person is given a check or a negotiable instrument, he has the right to receive the monies as the holder, but he cannot be said to own the bank account on which the cheque is drawn.”

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