The government has suspended the New India Assurance Company's Chairman and Managing Director M Ramadoss for alleged irregularities in granting credit insurance cover to Paramount Airways.
Following his suspension, United India Insurance chief G Srinivasan has taken up the additional charge of CMD of the New India Assurance from Wednesday, official sources said.
Ramadoss has been suspended for alleged irregularities in the grant of credit insurance cover to the private airline company during his tenure as the head of the Delhi-based Oriental Insurance Company.
The CBI has alleged that Ramadoss entered into criminal conspiracy with Paramount officials for providing credit insurance cover to the airline, which was in violation of the existing rules and regulations of the Insurance Regulatory and Development Authority.
Credit insurance is provided to a corporate by an insurer to guarantee payment of dues in case of default.
Oriental Insurance has provided credit insurance amounting to Rs. 14-25 crore (Rs. 142.5-250 million) to Paramount Airways in 2008-09 toward multiple bank guarantees for covering fuel purchases.
Paramount
Airways had taken a loan of about Rs. 400 crore (Rs. 4 billion) from five major banks to make payments for fuel to oil companies.
However, it reportedly defaulted in repaying the amount.
The five banks had subsequently sent claims to Oriental Insurance, which had issued the credit insurance to the airline.
The allegations against Ramadoss are being investigated by the Central Bureau of Investigation, official sources said, adding a case is also pending against Ramadoss with anti-corruption watchdog, the Central Vigilance Commission.
Last month, CBI had raided the residence of Ramadoss in connection with alleged irregularities in the credit insurance cover given to Paramount Airways by Oriental Insurance.
Ramadoss is the second chief of a state-owned insurer to face action this year. In May 2011, the government removed Life Insurance Corporation Chairman T S Vijayan following alleged irregularities in investment decisions taken by the insurer during his tenure and subsequently CBI enquiry was initiated.
The planes of Paramount Airways, which was promoted by M Thiagarajan, were de-registered in 2010, following which they could not operate their flights.
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The government has suspended the New India Assurance Company's Chairman and Managing Director M Ramadoss for alleged irregularities in granting credit insurance cover to Paramount Airways.