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Mumbai: The Delhi High Court quashed appointments made by the Bank Board Bureau (BBB) ​​to general public sector insurance companies, stating that the same is ultra vires the Banking Companies Act 1980. The ordinance could have implications for the board’s role in selecting senior executives for the insurance industry.
The order was part of a petition filed by a senior National Insurance Company official arguing that the BBB is not a competent body to make the selections. According to the petition, the BBB is a banking organization established under the Banking Companies (Acquisition and Transfer of Businesses) Act 1980.
“BBB’s very competence to make the selections to the PSU General Insurance Boards is in question and the selection and nominations are put aside. In my opinion, this should also apply to selections of CMD by BBB, â€said KK Srinivasan, former member of insurance regulator Irdai. Recently, the BBB had also shortlisted candidates for the post of Managing Director of the Life Insurance Corporation of India (LIC).
The petition also stated that the Cabinet Appointments Committee has no role in appointing an employee of a public sector insurance company to the board of directors, as such appointments are made ex officio. He also said that the board includes banking experts but none from the insurance industry. In its order, the court said that the BBB should exercise its jurisdiction under the Banking Companies Act 1980.
“If the BBB had not been able to undertake the process of selecting CEOs / directors in public sector insurers, then the selection by the BBB would not be in accordance with the law,” the ordinance said. He added that the selection process must be undertaken with regard to the provisions of the memoranda and statutes of each public sector insurer, through circulars already issued or validly framed rules relating to the criteria and composition of the committee.
The order was part of a petition filed by a senior National Insurance Company official arguing that the BBB is not a competent body to make the selections. According to the petition, the BBB is a banking organization established under the Banking Companies (Acquisition and Transfer of Businesses) Act 1980.
“BBB’s very competence to make the selections to the PSU General Insurance Boards is in question and the selection and nominations are put aside. In my opinion, this should also apply to selections of CMD by BBB, â€said KK Srinivasan, former member of insurance regulator Irdai. Recently, the BBB had also shortlisted candidates for the post of Managing Director of the Life Insurance Corporation of India (LIC).
The petition also stated that the Cabinet Appointments Committee has no role in appointing an employee of a public sector insurance company to the board of directors, as such appointments are made ex officio. He also said that the board includes banking experts but none from the insurance industry. In its order, the court said that the BBB should exercise its jurisdiction under the Banking Companies Act 1980.
“If the BBB had not been able to undertake the process of selecting CEOs / directors in public sector insurers, then the selection by the BBB would not be in accordance with the law,” the ordinance said. He added that the selection process must be undertaken with regard to the provisions of the memoranda and statutes of each public sector insurer, through circulars already issued or validly framed rules relating to the criteria and composition of the committee.
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