Sebi’s Buch pulls up a list of recusals amid allegations in ICICI, Mahindra cases | Stock Market News

Mumbai: The chair of India’s markets regulator, Madhabi Puri Buch, said she had recused herself from cases involving prominent companies including Mahindra Group, ICICI Group, and Pidilite Industries, which have a significant presence in the stock exchanges. 

Buch’s statement on Friday, issued jointly with her husband Dhaval Buch, came in response to a series of allegations made by Congress politician Pawan Khera flagging potential conflict of interest. 

“Madhabi has complied with all the disclosure and recusal guidelines of Sebi, and in fact, maintained a proactive continuing recusal list with Sebi over and above the requirements under the guidelines,” they said in the statement.

Buch claimed that the “baseless allegations” reflected a clear disregard for the Securities and Exchange Board of India’s (Sebi) comprehensive legal framework and were motivated to mislead the public.

“Such allegations, devoid of factual support, seek to tarnish the reputation of individuals, respected corporates, as well as institutions of the country,” her statement said.

All the allegations were based on income tax returns that contained disclosures, the Buchs said. “Shockingly, our income tax returns clearly have been obtained by adopting fraudulent means and illegally. This is a clear breach of not only our right to privacy (which is a fundamental right) but also a violation of the Income Tax Act,” they added in the statement.

The couple said facts mentioned in their returns had been twisted deliberately to create a false narrative.

Companies in question

Buch said she never dealt with any file involving Agora Advisory, Agora Partners, Mahindra Group, Pidilite, Dr Reddy’s, Alvarez and Marsal, Sembcorp, Visu Leasing or ICICI group of companies at any stage after joining Sebi.

Madhabi Puri Buch, who was appointed a whole-time director of Sebi in 2017 and as its chairperson in 2022, owns 99% of Agora Advisory, which earned consultancy fees from regulated entities.

As of today, Mahindra Group has a market cap of around ₹5.56 trillion, while ICICI Group has a market cap of ₹11.2 trillion with ICICI Bank having a market cap of around ₹8.8 trillion. Pidilite has a market cap of around ₹1.6 trillion.

Buch said she did not deal with any files related to Wockhardt or its associate company, which incidentally happened to be a lessee on a jointly owned property of Madhabi and Dhaval Buch. 

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Given the India-wide remit of Sebi’s responsibilities, the chairperson said she was usually not even aware of specific cases, as they are handled normally by other designated officials.

“For investigations, various powers are vested in senior officials such as chief general managers, executive directors, or whole-time members. Accordingly, no investigation files go to the chairperson,” she said in the statement.

Agora Advisory and Agora Partners

Mahindra Group, Pidilite, and Dr Reddy’s have already emphasized that Dhaval Buch was associated with the companies for his professional expertise and merit, and this did not coincide with the time his wife was working in Sebi, Buch clarified.

“Questions about the motivations behind the decisions taken by these companies are unfortunate and defamatory not just for Dhaval, but for these respected companies as well”, she said.

A similar statement was issued by Alvarez & Marsal, which accounted for 100% of the operating income of the Singapore-based Agora Partners.

The Sebi chief claimed to have disclosed all requisite shareholdings in Agora companies in 2017.

Holding ESOPs as Sebi chief

The Sebi chief said the regulator’s guidelines permitted board members, including the chairperson, to hold and transact in Esops.

“Madhabi had disclosed her ESOP holdings since 2017 when she first joined Sebi and disclosed each subsequent transaction. This forms a part of contemporaneous official records of Sebi,” the statement said.

Buch also claimed that she had not engaged in any unauthorized external employment while working at ICICI Bank.

She said that in 2011, ICICI Bank granted her long unpaid leave to join her husband in Singapore, with full and prior approval from the bank.

Buch said both organisations, the PE firm and ICICI Bank, were fully aware of her move.

“When it became clear in 2013 that she would remain in Singapore, she superannuated from ICICI Bank as per the Bank’s rules. The arrangement was completely legal, transparent, and equally transparently was displayed on the LinkedIn profile of Madhabi,” the statement said.

Also Read | Sebi’s Madhabi Buch worked at ICICI Bank and a PE firm between 2011 and 2013

Disclosure by Buch enough?

Subhash Chandra Garg, former secretary in the economic affairs department in the ministry of finance and a former Sebi board member, said that the present statement confirmed the allegations made about the transactions involving the chairperson. 

As for the disclosures about recusals, he said that Buch’s statement was not enough, and the regulator was required to confirm if such recusals had indeed happened.

Also Read: To whom is Madhabi Puri Buch really accountable?

“You cannot take her statement at face value. Sebi needs to confirm that she has indeed not been involved in the cases,” Garg said.

Garg said to whom and when Buch made these disclosures was not clear. “The disclosures could have been made by either Sebi or the government. But what were the exact disclosures? There needs to be clarity on the same,” he said.

He also added that the “elephant in the room” was what happened to the disclosures and why the government and Sebi did not act when they knew about the conflicts.

“Was the chairperson consciously taking actions after having made the disclosures? Did none of the authorities (the then Sebi chairperson and central government) read the disclosures made?”

He also said the rules did not clarify what disclosures were to be made, for instance, whether it was only shares or also other businesses. 

Garg wondered if more disclosures were expected from the chairperson for other companies. “The market regulator cannot function like that if there are so many recusals. It could create a bizzare situation in the market. Say you are not dealing with the recused companies’ cases, you are still dealing with policies which could impact those companies. This makes the position very vulnerable,” he added.