The final order, passed by Whole-Time Member Amarjeet Singh, covered 12 noticees, including Max Financial Services, Max Life Insurance, Axis Bank, Axis Capital, Axis Securities, Analjit Singh, Mohit Talwar, Rahul Khosla, Sujatha Ratnam, Rahul Ahuja, Jatin Khanna and V Krishnan.
The case arose from Sebi’s investigation into transactions between Max Financial, Max Life and Axis Bank from FY10 to FY22. The regulator had examined whether the entities violated securities laws, listing norms and fraud regulations in relation to a series of share sale and buyback arrangements involving Max Life shares.
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The proceedings followed a show-cause notice issued in October 2024. Sebi had alleged that Max Financial made inadequate or delayed disclosures about the bancassurance arrangement with Axis Bank and related share transactions in 2010, 2015 and 2020. The notice had also alleged that Max Financial, Max Life and Axis entities devised a fraudulent scheme to benefit Axis Bank at the cost of Max Financial and its shareholders.
The matter had also drawn from earlier findings by the Insurance Regulatory and Development Authority of India. Irdai had informed Sebi that it had imposed penalties of Rs 2 crore on Axis Bank and Rs 3 crore on Max Life for violation of its directions. Irdai had observed that the transactions had circumvented limits on commission, remuneration or reward payable to insurance agents and intermediaries.
Under the 2010 arrangement, Max Life issued shares to Axis Bank at Rs 10 per share, while later tranches saw the shares bought back at prices ranging from Rs 54 to Rs 111 per share. Under the 2015 arrangement, Max Financial and Mitsui Sumitomo sold a 4.99% stake in Max Life to Axis Bank at Rs 10 per share, and later bought back part of that stake at higher prices.Under the 2020 arrangement, Max Financial sold stakes in Max Life to Axis Bank, Axis Capital and Axis Securities. The order said Max Financial transferred 2% of Max Life to Axis Capital, 1% to Axis Securities and 9.002% to Axis Bank in March-April 2021. Max Life later became Axis Max Life Insurance.
The show-cause notice had alleged that the transactions caused a loss of Rs 3,912 crore to Max Financial and gave a corresponding benefit to Axis Group entities. It also alleged that disclosures by Max Financial were incomplete and misleading.
Sebi, however, said the disclosure framework applicable to listed entities had changed significantly since 2010. It said the old listing agreement left more room for judgment on materiality, while the later LODR framework introduced clearer thresholds and more detailed guidance.
The regulator said Max Financial’s disclosures could have been more comprehensive and that a more cautious and consistent approach may have been desirable. But it added that the conduct of the company and other noticees had to be tested against the law that existed at the relevant time.
On the disclosure-related charges, Sebi said there was no material establishing violation of the specific provisions invoked in the show-cause notice. The order said liability could not be sustained merely because some disclosures could have been fuller.
On the fraud allegation, Sebi said active concealment of material information by Max Financial was not established. It also said there was no evidence of price or volume manipulation, creation of an artificial market, or any other interference with market integrity.
The order said the show-cause notice did not establish injury from the alleged wrongful acts, including inducement to deal in securities. It also did not show such blatant conduct or circumstances that would establish wrongful intent to defraud or manipulate the securities market.
As a result, Sebi held that the allegation that Max Financial, Max Life, Axis Bank, Axis Capital, Axis Securities and other noticees devised a fraudulent scheme to defraud shareholders was not established.
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