The insurance regulator has imposed a penalty of 1 crore on Cholamandalam MS General Insurance after charging the company of paying money in advance to businesses in violation of corporate governance rules.

Insurance Regulatory and Development Authority (IRDA) said in a statement that it framed charges against Cholamandalam MS General Insurance in a case related to declaration of funds paid in advance to Ashok Leyland, Cholamandalam MS Risk Services and DHFL.

IRDA raised suspicion on business transaction of Cholamandalam MS General Insurance for making these advance payments. The company paid these funds to these companies in advance, which the regulator held was in violation of guidelines.

The case was framed on charges of violation of control functions under guidelines of corporate governance, the regulator said.

The company has to pay the penalty amount of Rs 1 crore within 15 days of receiving the order.

The insurer paid about Rs 23 crore to Ashok Leyland in advance and it was adjusted towards advertising and publicity expenses against a bill raised after March 21, 2017.

The regulator said the money was paid despite the fact that Ashok Leyland was no advertising and publicity company. The money was paid on the basis of a number of hoardings and advertising materials displayed at all touch points.

A sum of Rs 9.39 crore was paid to Cholamandalam MS Risk Services in advance and same was adjusted against advertisement expenses, it said.

Cholamandalam MS General Insurance also paid a sum of about Rs 41 crore to DHFL Sales and Services despite not having expertise in this field.

First Published:Jan 9, 2020 4:42 PM IST