2012 (5) TMI 875 - HC - FEMA

Summary

Issues Involved:
1. Legality of the appellant's insurance activities in India under the Insurance Act, 1938 and the Insurance Regulatory and Development Authority Act, 1999.
2. Applicability of Indian insurance laws to foreign insurance policies issued in India for coverage abroad.
3. Requirement of registration and licensing for the appellant under Indian insurance regulations.
4. The extra-territorial application of Indian insurance laws.
5. The impact of prohibiting the appellant's activities on Indian citizens traveling abroad.

Issue-wise Detailed Analysis:

1. Legality of the Appellant's Insurance Activities:
The primary issue was whether the appellant's activities of selling foreign insurance policies in India, for coverage in Ukraine and Belarus, constituted carrying on the business of insurance in India. The respondent IRDA had determined that the appellant was engaged in the business of insurance by collecting premiums and issuing certificates on behalf of foreign state insurance companies, thus requiring registration and licensing under Indian laws. The appellant argued that the insurance policies were only operative outside India and thus not subject to Indian insurance regulations.

2. Applicability of Indian Insurance Laws:
The court examined whether the Indian insurance laws applied to the foreign insurance policies sold by the appellant. It was noted that the Insurance Act and IRDA Act did not explicitly cover insurance policies that were only effective outside India. The court found no legislative intent to apply these laws extra-territorially, especially when the insurance coverage was for risks incurred outside India.

3. Requirement of Registration and Licensing:
The court analyzed whether the appellant needed to be registered or licensed under the Insurance Act and IRDA Act to sell foreign insurance policies in India. The IRDA had argued that any person carrying on insurance business in India required a valid license. However, the court concluded that since the insurance policies were not effective in India, the appellant's activities did not constitute carrying on insurance business in India, thus not necessitating registration or licensing.

4. Extra-territorial Application of Indian Insurance Laws:
The court considered the extra-territorial application of Indian insurance laws and referred to the Supreme Court's decision in Vodafone International Holdings B.V. v. Union of India, which stated that Indian laws are generally not intended to apply outside Indian territory unless explicitly stated. The court found no provision in the Insurance Act or IRDA Act indicating an intention to regulate insurance business conducted outside India.

5. Impact on Indian Travelers:
The court addressed the practical implications of prohibiting the appellant's activities, highlighting the inconvenience and increased costs for Indian travelers to Ukraine and Belarus who would otherwise have to purchase insurance policies at the destination at a higher price. The court deemed this an arbitrary and unreasonable restriction on travel, emphasizing that the appellant's activities provided a beneficial service to travelers.

Conclusion:
The court allowed the appeal, setting aside the orders of the learned Single Judge and the IRDA. It held that the provisions under which the IRDA acted were not applicable to the appellant's activities. The court clarified that if the government wished to regulate such activities, it should enact specific laws or regulations. The decision underscored the need for a clear legislative framework to address the unique nature of foreign insurance policies sold in India for coverage abroad. No costs were awarded.