Mohit S. Shah, CJ.
1. All these three petitions under Article 226 of the Constitution of India purporting to be public interest litigation, have been filed by the same petitioner - Sambhaji Savakar Jadhav, mainly alleging violation of Guidelines for Foreign Direct Investment (FDI), particularly the Guideline imposing 26% Cap on FDI in Insurance Sector.
2. In PIL No.34 of 2013, the petitioner is complaining about alleged violation of FDI Regulations by Future Generali Life Insurance Company Ltd. (Future Generali) and for seeking suspension of its licence and for removing its Directors and members of the Managing Committee.
3. In PIL No.42 of 2013, the petitioner is seeking a direction against Insurance Regulatory and Development Authority (IRDA) to :
(i) levy monetary penalty on Future Generali for alleged FDI violation;
(ii) to conduct probe into capital structuring by Future Generali and to direct IRDA to withhold its approval to the transaction of stake sale by Future Generali's any of the insurance ventures or by any other promoters to any entity;
(iii) on the ground of illegal transactions undertaken by Participatie Maathaschappij Graafschaap/Generali) to direct IRDA to deny the continuation of the business by the said Company or any of their group company.
4. In PIL No.41 of 2013, the petitioner has sought probe into :
(i) the share holdings of Bank of India and Union of India in the Board of Star Union Dai-chi Life Insurance Co. Ltd. (Star Union);
(ii) probe into the selection and posting of their senior personnel and particularly into selection and appointment of Shri Girish Kulkarni as CEO and Managing Director of Star Union and for removal of Shri Girish Kulkarni from the services of Star Union;
(iii) to continue such probe even if Shri Girish Kulkarni resigns from his position any time before/during the course of/conclusion of probe proceedings.
5. When petitions reached hearing on 17 July 2014, learned counsel for Future Generali and two banks raised a preliminary objection about locus and bona fides of the petitioner and, therefore, looking to the nature of the preliminary objections, we called upon petitioner Shri Sambhaji Savkar Jadhav to appear before this Court.
Accordingly the petitioner appeared before us at the hearing on 24 July 2014.
6. The serious objection raised by the learned counsel for the Respondents is that the Petitioner is only a front put up by Shri Partha Sarathy Sarkar (his Advocate), who was an employee of Future Generali and was posted under Shri Girish Kulkarni, Shri Partha Sarathy Sarkar came to be dismissed from service of Future Generali and, therefore, the present petitions have been filed to take revenge of his dismissal. The petitions are thus filed out of vendetta against Future Generali and against Shri Girish Kulkarni.
On merits, it is submitted on behalf of the Respondents that the Respondents have not committed violation or breach of FDI Policy/FDI Regulations and that present three PILs are filed mala fide and out of vendetta against Future Generali and against Shri Girish Kulkarni.
7. Before we deal with the Petitioner's contentions on merits or the Respondents' contentions on locus standi and bona fides of the Petitioner, it is necessary to refer to the share holding pattern of different entities as the allegations are about violation of FDI Guidelines prescribing 26% cap on FDI in the Insurance Sector.
Share Holding Pattern
Future Generali
| Sprint Advisory | 49.00% |
| Pantaloons and its Nominees | 25.50% |
| Participatie Maatschappij Graafsschap | 25.50% |
| Total : | 100.00% |
| Pantaloons and its Nominees | 99.60% |
| Participatie MaatschappijGraafsschap | 0.40% |
| Total | 100.00% |
| Pantaloons | 25.50 % + 99.6 % of 49 % = 74.304 % |
| Participatie MaatschappijGraafsschap | 25.50 % + 0.4 % of 49 % = 25.696 % |
| Total : | 100.000% |
9. The learned Advocate for the petitioner, however, would submit that Future Generali has committed serious violations of FDI Guidelines by manipulating the prices of shares. It is contended that as per FDI Guidelines at the relevant time, there could not have been any FDI exceeding 26%. But, it is alleged that, Shri Girish Kulkarni was a senior management employee of Future Grup of Companies - `Pantaloon Retail Financial Services'. Within a year or so of his joining, he got started Future Generali Life and Non-life Insurance in which the actual FDI of the Holland based company Participatie Maatschappij Graffschaap was about 50%. However, it was disguised to sub 26% so as to fit within the FDI cap. It is contended that the manipulation has taken place by Pantaloons by manipulating the prices of its shares.
10. The Department of Industrial Policy and Promotion in the Ministry of Commerce and Industry, Government of India issued FDI policy. There is no dispute about the fact that at the relevant time, no FDI could be made by a non resident company in the Insurance Sector in excess of 26%. The Indian Companies can issue capital against FDI by issuing equity shares, convertible debentures etc. The price of shares/ conversion formula of convertible capital instruments is required to be determined upfront at the time of issue of the instruments. Guideline No.3.4.2 is relevant in this behalf and the same reads as under:
â3.4.2 Issue price of shares - Price of shares issued to persons resident outside India under the FDI Policy, shall not be less than -
a. the price worked out in accordance with the SEBI guidelines, as applicable, where the shares of the company is listed on any recognised stock exchange in India;
b. the fair valuation of shares done by a SEBI registered Category-I Merchant Banker or a Chartered Accountant as per the discounted free cash flow method, where the shares of the company is not listed on any recognised stock exchange in India; and
c. the price as applicable to transfer of shares from resident to non-resident as per the pricing guidelines laid down by the Reserve Bank from time to time, where the issue of shares is on preferential allotment.
However, where non-residents (including NRIs) are making investments in an Indian company in compliance with the provisions of the Companies Act, 1956, by way of subscription to its Memorandum of Association, such investments may be made at face value subject to their eligibility to invest under the FDI scheme.â
11. The advocate for the petitioner does not dispute the application of Clause 3.4.2 of the Consolidated FDI Policy. It is clear that the Consolidated FDI Policy provides that clause (a) will apply only where the shares of the company are listed on any recognized stock exchange in India. Future Generali is not listed on any recognized stock exchange in India. Hence, clause (a) will not apply. Now, it is not the case of the petitioner that price of shares issued to Participatie Maathaschappij Graafschaap was less than the fair valuation of the shares done by SEBI registered category-I Merchant Banker or a Chartered Accountant as per the discounted free cash flow method or that the price was less than the price as applicable to transfer of shares from resident to non-resident as per the pricing guidelines laid down by the Reserve Bank of India from time to time, where the issue of shares is on preferential allotment. On the contrary, it is the case of the Respondents, and not disputed by the Petitioner, that the price at which the shares in Future Generali were offered to Participatie Maathaschappij Graafschaap, a Holland based company, was more than the price determined under the above formula prescribed in clauses (b) and (c) of the FDI Policy. The petitioner has also not invoked the last part of Regulation 3.4.2. We, therefore, fail to appreciate as to on what basis the petitioner can possibly contend the violation of the FDI Policy.
12. In PIL No. 41 of 2013, the petitioner has focused his attention on selection and appointment of Shri Girish Kulkarni as CEO and Managing Director of Star Union and prayed for removal of Shri Girish Kulkarni from the service of Star Union on the ground of alleged illegalities committed by him in violation of the FDI Policy when he was a senior management employee of Future Group of Companies and he also became CEO of Future General.
13. Now it is necessary to note that as per the affidavit dated 17 December 2013 of Shri K.B. Nageswara Rao, Assistant General Manager of Bank of India; Bank of India, Union Bank of India and Dai-chi Life Insurance Co. Ltd. of Japan formed a Joint Venture to enter into a Life Insurance business in India and an MOU was signed between the parties on 21 December 2006. Accordingly the Company known as Star Union Dai-chi Life Insurance Co. Ltd. (Star Union) was incorporated on 25 September 2007 with the Registrar of Companies, Maharashtra for carrying on Life Insurance business in India, for which the license was granted by the Insurance Regulatory and Development Authority (IRDA) on 26 December 2008. The shareholding pattern in the said Company is as under:
| Bank of India | 48.00% |
| Union Bank of India | 26.00% |
| Dai-chi Life Insurance Co. Ltd., Japan | 26.00% |
| Total | 100.00% |
Shri R. Ganesan, Senior Manager of Union Bank of India has also filed affidavit in reply dated 13 June 2014 on similar lines.
14. The term of Shri Kamaljit Sahai, Managing Director and CEO of Star Union was to come to an end on 14 May 2012. By a Board Resolution dated 20 October 2011, Star Union constituted a Joint Selection Committee for selection of Managing Director and CEO of Star Union. It formed a Search Committee and engaged a globally reputed HR firm to find out eligible candidates. The HR firm shortlisted four candidates. After considering all candidates, the Selection Committee approved and recommended the candidature of Shri Girish Kulkarni at the second meeting of the Search Committee held on 28 February 2012. Star Union then sought approval from IRDA as per letter dated 14 April 2012. Thereafter IRDA by its letter dated 9 May 2012 conveyed approval of selection of Shri Girish Kulkarni as MD and CEO of Star Union for a period of 3 years with effect from 15 May 2012 to 14 May 2015 in place of Shri Kamaljit Sahai, whose term expired on 14 May 2012.
15. While denying the allegations made by the petitioner, it is contended by Bank of India and Union Bank of India that Star Union is not a public sector undertaking and that appointment of MD and CEO of Star Union was made by Star Union as per Article 38(a) of the Articles of Association of Star Union. It is also submitted that the selection and appointment of Shri Girish Kulkarni as MD and CEO of Star Union is not made by Bank of India or Union Bank of India, but by Star Union.
16. Without going into the question, whether any petition would be maintainable against Star Union, It is clear that in PIL No. 41 of 2013, the petitioner has challenged the appointment of Shri Girish Kulkarni as MD and CEO of Star Union merely on the ground of his alleged role in the alleged violation of FDI guidelines in the matter of shareholding of a Holland based company, Participatie Maathaschappij Grraafschaap, in Future Generali. The petitioner and his advocate Shri Partha Sarathy Sarkar do not dispute the fact that Shri Sarkar was an employee of Future Generali and was working under Shri Girish Kulkarni in the same company. Whether Shri Sarkar was dismissed from service of Future Generali or Shri Sarkar resigned after Shri Girish Kulkarni left Future Generali are not matters to be probed into in these PILs, but the fact remains that some of the communications, which are produced as annexures to PIL Nos. 34 and 42 of 2013 regarding alleged violation of FDI Policy by Future Generali, are replies which were received by the father of Shri Partha Sarathy Sarkar under the Right to Information Act, 2005. For instance,
(i) IRDA response dated 7 January 2013 addressed to Shri Prakriti Ranjan Sarkar
(ii) IRDA response dated 9 January 2013 addressed to Shri Prakriti Ranjan Sarkar
(iii) IRDA response dated 16 January 2013 addressed to Shri Prakriti Ranjan Sarkar
17. In view of serious objections raised by the learned counsel for the respondents about bonafides and locus standi of the petitioner, we had called upon the petitioner to remain present in Court and accordingly the petitioner appeared before us on 24 July 2014. Response to the first query â âWhat is FDIâ, was âForeign Deposit Investmentâ and thereafter corrected to âForeign Direct Investmentâ. It transpires that the petitioner knows Shri Partha Sarathy Sarkar and his father for the last 25 years. According to the petitioner, he thought of filing this PIL because he was not satisfied with the returns he was getting on his insurance policies taken from Birla Sun Life and Bajaj Allianze. Admittedly the petitioner has not taken any policy of Future Generali. When questions were put to the petitioner from where he got the letters / documents pertaining to Future Generali produced as annexures to the PILs, the replies given by the petitioner were not satisfactory and advocate Shri Partha Sarathy Sarkar tried to help or prompt the petitioner. All this is recorded in our separate order dated 24 July 2014.
18. It is necessary to note that these PILs were not filed at the relevant time when the alleged FDI violations took place, but they were filed after Shri Girish Kulkarni came to be appointed as Managing Director and CEO of Star Union Dai-chi Life Insurance Co. Ltd., which is a Joint Venture Company set up by Bank of India, Union Bank of India and Dai-chi Life Insurance Co. Ltd. of Japan. No allegations are made against any of these three companies or against Star Union about any FDI violations.
19. We may now refer to some of the judgments of the Supreme Court, which were cited before us by the learned counsel for the respondents in support of the contention that only a person acting bonafide and having sufficient interest in the proceedings of PIL will alone have locus standi to approach the Court in filing public interest litigation.
In Dr. B. Singh vs. Union of India, (2004) 3 SCC 363, the Supreme Court, inter alia, observed as under:
â12. Public interest litigation is a weapon which has to be used with great care and circumspection and the judiciary has to be extremely careful to see that behind the beautiful veil of public interest an ugly private malice, vested interest and/or publicity seeking is not lurking. It is to be used as an effective weapon in the armory of law for delivering social justice to the citizens. The attractive brand name of public interest litigation should not be allowed to be used for suspicious products of mischief. It should be aimed at redressal of genuine public wrong or public injury and not publicity oriented or founded on personal vendetta. As indicated above, Court must be careful to see that a body of persons or member of public, who approaches the court is acting bona fide and not for personal gain or private motive or political motivation or other oblique consideration. The Court must not allow its process to be abused for oblique considerations by masked phantoms who monitor at times from behind. Some persons with vested interest indulge in the pastime of meddling with judicial process either by force of habit or from improper motives and try to bargain for a good deal as well to enrich themselves. Often they are actuated by a desire to win notoriety or cheap popularity. The petitions of such busy bodies deserve to be thrown out by rejection at the threshold, and in appropriate cases with exemplary costs.â
20. Similarly, in Kushum Lata vs. Union of India, (2006) 6 SCC 180, the Supreme Court has sounded a similar caution in the following terms:
â5. When there is material to show that a petition styled as a public interest litigation is nothing but a camouflage to foster personal disputes, said petition is to be thrown out. Before we grapple with the issue involved in the present case, we feel it necessary to consider the issue regarding public interest aspect. Public Interest Litigation which has now come to occupy an important field in the administration of law should not be "publicity interest litigation" or "private interest litigation" or "politics interest litigation" or the latest trend "paise income litigation". The High Court has found that the case at hand belongs to the second category. If not properly regulated and abuse averted, it becomes also a tool in unscrupulous hands to release vendetta and wreck vengeance, as well. There must be real and genuine public interest involved in the litigation and not merely an adventure of knight errant borne out of wishful thinking. It cannot also be invoked by a person or a body of persons to further his or their personal causes or satisfy his or their personal grudge and enmity. Courts of justice should not be allowed to be polluted by unscrupulous litigants by resorting to the extraordinary jurisdiction. A person acting bona fide and having sufficient interest in the proceeding of public interest litigation will alone have a locus standi and can approach the Court to wipe out violation of fundamental rights and genuine infraction of statutory provisions, but not for personal gain or private profit or political motive or any oblique consideration. These aspects were highlighted by this Court in The Janta Dal v. H.S. Chowdhary (1992 (4) SCC 305) and Kazi Lhendup Dorji vs. Central Bureau of Investigation, (1994 Supp (2) SCC 116). A writ petitioner who comes to the Court for relief in public interest must come not only with clean hands like any other writ petitioner but also with a clean heart, clean mind and clean objective. (See Ramjas Foundation vs. Union of India, (AIR 1993 SC 852 and K.R. Srinivas v. R.M. Premchand, (1994 (6) SCC 620).â
21. In State of Uttaranchal vs. Balwant Singh Chaufal, (2010) 3 SCC 402, also the Supreme Court has laid down the following directions to preserve the purity and sanctity of PILs:
â(1) The courts must encourage genuine and bona fide PIL and effectively discourage and curb the PIL filed for extraneous considerations.
(2) Instead of every individual judge devising his own procedure for dealing with the public interest litigation, it would be appropriate for each High Court to properly formulate rules for encouraging the genuine PIL and discouraging the PIL filed with oblique motives. Consequently, we request that the High Courts who have not yet framed the rules, should frame the rules within three months. The Registrar General of each High Court is directed to ensure that a copy of the Rules prepared by the High Court is sent to the Secretary General of this court immediately thereafter.
(3) The courts should prima facie verify the credentials of the petitioner before entertaining a P.I.L.
(4) The court should be prima facie satisfied regarding the correctness of the contents of the petition before entertaining a PIL.
(5) The court should be fully satisfied that substantial public interest is involved before entertaining the petition.
(6) The court should ensure that the petition which involves larger public interest, gravity and urgency must be given priority over other petitions.
(7) The courts before entertaining the PIL should ensure that the PIL is aimed at redressal of genuine public harm or public injury. The court should also ensure that there is no personal gain, private motive or oblique motive behind filing the public interest litigation.
(8) The court should also ensure that the petitions filed by busybodies for extraneous and ulterior motives must be discouraged by imposing exemplary costs or by adopting similar novel methods to curb frivolous petitions and the petitions filed for extraneous considerations.â
22. Applying the above principles and having carefully considered the preliminary objections of the respondents, we are satisfied that the petitioner cannot be considered as a person having sufficient interest in the proceedings of these three PILs and that not merely from the allegations made in the petitions but also the tenor of allegations and the manner in which the allegations are made and prayers are framed, these three PILs are coloured by the personal prejudice of the advocate for the petitioner who was himself an employee of Future Generali when Shri Girish Kulkarni was his superior in the said company. It cannot be said that in filing these three PILs, the petitioner is acting bona-fide and has sufficient interest in the proceedings of these three PILs. We are, therefore, not inclined to entertain these petitions as bona-fide PILs.
23. We have also recorded the finding that in view of shareholding pattern indicated in para 7 hereinabove and in view of the fact that even according to the petitioner, the issue price of shares issued by Future Generali to Holand based Participatie Maathaschappij Grraafschaap was not lower than the price worked out as per the formula prescribed in Guideline No. 3.4.2 of FDI Guidelines, the petitioner has also not made out a prima facie case of alleged violation of FDI cap of 26% on shareholding of a nonresident company.
24. In view of the above discussion, all the three petitions are dismissed.