Insurance company's defiance comes to light

In a clear violation of Insurance Board (IB)directives, National Life Insurance Company Limited (NLICL) is found to have invested millions ina private company.

This violation comes to light days after IB, the insurance regulatory body,took action against the company for controversial removal of chairman of the insurance firm in the wake of clash of interest between two groups of directors.

According to IB officials, NLICL has invested as much as Rs. 20 million in Tara Fund Pvt. Ltd. against its Directives on Investment, which prohibits insurance companies from investing in private companies. For over a year,IB had been directing the insurance firm to withdrawits investment from Tara Fund.

"NLICL officials are now telling us that the Tara Fund itself is seeking its share in the company at the rate of Rs. 105 per share,"said IB Chairman Phatta Bahadur K.C.

However, NLICL Chairperson Prema RajyaLaxmi Devi Singh said they were in the process of selling their shares that are with the private company.

IB has barred the insurance company from with drawing money deposited in various financial institutions but has allowed it to collect premium, deposit them and continue with rights share issuance.

The Security Board of Nepal (SEBON) has also barred the company from selling shares that are with companies. According SEBON Chairman SurbirPoudel, the share market regulator did not stall the process of issuing right shares as per IB's request.

The IB had taken action against the insurance company after Dumbar Bahadur Malla, who was removed as chairman of the company on May 7, filed a case against the current board chairman Singh at IB, claiming his removal was illegal. IB chairman K.C. said the insurance company's accounts were frozen to safeguard policy holders' interests.

He clarified that the company was allowed to continue with right share offerings to enable it to increase paid-up capital to Rs. 250 million from Rs.132 million. Though the Insurance Act has it that each life insurance company must have increased its paid-up capital to Rs. 250 million by mid-July 2008, NLICL began collecting funds 19 days ago through issuance of right shares. IB has told the warring sides to reconcile differences.

Malla was removed by the board meeting of majority directors, which he didn't call and attend, according to Singh. "We had to call board meeting ourselves as he didn't call the meeting even after seven days of our request," Singh maintained. Post's repeated efforts to contact Malla for comments failed.

In the seven-member board, Singh enjoys support of three directors whereas Malla has support of two. Earlier, both sides had equal number of directors.

But this equation changed after the recently appointed representative of Sleek quote Limited, an American company which has stakes in the insurance firm, supported Singh. Incidentally, Singh happens to be niece of Malla.

The insurance company's case is similar to what Bank of Kathmandu (BoK)witnessed recently. In BoK's case, a majority of directors removed its immediate managing director Radhesh Panta in a similar fashion.

Ironically, the group led by Sanjaya Shah, which also comprises Malla's family,had unseated Panta. Malla's wife Rita was one of the BoK directors, who aligned with Shah to remove Pant.
Source:
Ekantipur