How Madhabi Puri Buch Destroyed The Market Regulator SEBI?

Development of events – in response to the RTI filed by activist Commodore Lokesh Batra (retd), SEBI (Securities and Exchange Board of India) has straight up refused to disclose any information. The regulatory body has refused to disclose the instances where Buch recused herself due to conflict of interest.  

Further, in its response, SEBI says that the cases where the chairperson recused herself are not “readily” available and putting them together would “disproportionately divert” its resources. 

SEBI even repudiated to provide the copies of declaration of Buch, to the government and the SEBI Board about the equities and financial assets owned by her family as the securities regulatory body deemed them being “personal information” and that the disclosure of the following documents could “endanger” the personal safety of the family.

But What About The Rights of Information?

Does The Chairperson of SEBI Only Answer To The Conglomerate That Makes Her Profit?

Following these developments, Congress has slammed SEBI once again. Reacting to the attitude of the regulatory body, Congress general secretary in-charge communications Jairam Ramesh said, “The multiple conflicts of interest of the SEBI Chairperson that have been revealed so far are shocking in themselves. Now in a move that adds more fuel to the raging fire, SEBI has simply refused to divulge information to a RTI activist on instances of the SEBI Chairperson recusing herself on issues where there have been potential conflicts of interest.”

Later at night, taking it to X, he further added, “This makes a mockery of public accountability and transparency as far as SEBI is concerned.” 

What Is The Government Doing Right Now? 

Will The Courts Stay Silent On The Case?

Adding to the list of rejections, the SEBI Central Public Information Officer(CPIO) has also declined the request to disclose the date of the disclosures on the grounds of “personal information” and “safety”. 

“Since the information sought do not pertain to you and the same relates to personal information, the disclosure of which has no relationship to any public activity or interest and may cause unwarranted invasion into the privacy of the individual and may also endanger the life or physical safety of the person(s). The same is, therefore, exempt in terms of Section 8(1)(g) and 8(1)(j) of the RTI Act, 2005,” the response to the RTI said.

“Further the information on cases where Madhabi Puri Buch recused herself due to potential conflicts of interest during her tenure is not readily available and collating the same will lead to disproportionately diverting the resources of the public authority in terms of Section 7(9) of the RTI Act,” it reads further. 

Let’s understand these two laws –

Section 8(1)(g) : let’s a public authority to holdback information if its disclosure could put someone’s life or physical safety at risk.

Section 8(1)(j) : allows a public authority to withhold personal information that is unrelated to any public activity or interest. 

Congress has been putting pressure on the Chairperson of SEBI to resign immediately unless proven not guilty and we, at Inventiva have been trying to do the same. 

Revisit All That Madhabi Puri Buch Is Being Accused Of – 

Offshore Fund Investment:

   Buch and her husband are said to have invested in an offshore fund called IPE Plus Fund 1 in June 2015.

   There are claims that this fund has affiliations with the Adani Group particularly with Vinod Adani, brother of Gautam Adani. 

   The choice of this investment in the said offshore fund has raised eyebrows especially when there were many other onshore fund options in India available itself. 

Conflict of Interest:

   Adani group shares 10% of IPE Plus Fund 1 and this investment is considered as a ‘conflict of interest’ since Sebi investigates Adani group.

   Hindenburg suggests that there is more that goes into Sebi’s failure to arrest offshore Adani shareholders, especially Buch, who has been involved in similar investment structures.

Undisclosed Income and Business Interests:

 Buch supposedly owns 99% of an Indian consulting company, Agora Advisory. There are strong indications that she was earning through this firm at the time when she was holding her position as the Chairperson of SEBI. 

A report stated that between April 2017 to March 2022, Agora Advisory’s revenue was only Rs 3.7 crore.

   The year 2024 was successfully managed to get a revenue of Rs. 14 lakh and the net profit of the company is Rs. 809882/-.

Delayed Transfer of Overseas Assets:

   Sebi was quoted saying that Buch allegedly transferred her shares in a Singapore consulting entity known as Agora Partners to her husband in March 2022 when she had already joined Sebi.

Lack of Transparency:

   Another client of the Indian consulting firm, Buch, has asked Hindenburg to provide all the engagements and the directory of the consulting clients through her Singapore-incorporated business. They have also sought any other unreported investments or businesses that were carried out through her husband while she held her position at SEBI. 

Questionable Net Worth Declaration:

   The Buchs are said to be worth $10 million; they invested this amount in the IPE Plus Fund.  On this figure, Hindenburg has noted that it appears to be rather high, especially if one assumes that the only income that Buch earned was from the government salary.

Regulatory Failure: 

Buch is being accused of failing in her regulatory duties as the Chairperson of the Securities and Exchange Board of India and rightfully so as she held on to any profit making and all profit making companies that she was a part of before being appointed as the Chairperson of SEBI. 

She did not take any action on the Adani group either after the Hindenburg reported them for fraud and stock manipulation; two things that the SEBI was formed to keep a control on. 

Association with Controversial Entities:

It raises an eyebrow that the decision by PMD to invest in a fund affiliated to a company with reported links to the Wirecard scandal has been made.

Collectively, all these allegations imply that there is at least a bias and, hence, potential violations of rules and guidelines; information concealment; and possibly suboptimal regulation in the regulatory body of the country. 

If you think that is all then be ready to be disappointed even further. In the current times, discourse around the work culture in the companies has got the spotlight and Buch is not that behind there either. 

Madhabi Puri Buch has also been accused of making the work culture toxic in the regulatory body of the country by officials of SEBI. These officials have filled a written complaint with the Finance Ministry, accusing the Chairperson of using coarse language, setting unrealistic targets and monitoring employees excessively. 

“Shouting, scolding and public humiliation have become a norm in meetings” said the letter, dated 6 August 2024. What makes this even more interesting is that it is possibly the first time that SEBI officials have made such a claim. The officials said that such working conditions have taken a toll on their mental health and have disrupted their peaceful work-life balance. 

 Who Is Responsible For The Downfall Of The Regulatory Bodies Of India? 

The question remains – Is It Just The Chairperson of Sebi or Is The Paralyzed Judicial System Of The Country Also Responsible For Such A Scam? 

Well Let Me Help You Understand How The Judicial System Excuses The Rich –

Two complaints were lodged with Lokpal as per The Lokpal and Lokayuktas Act 2013, accusing Buch of being incompetent and this is the aftermath of those complaints –

The Lokpal carrying the former Supreme Court judge Justice AM Khanwilkar has demanded additional “foundational and jurisdictional facts” from the complainants in order to proceed with the Lokpal investigation.

Out of the two complaints, one was filed by Trinamool Congress MP Mahua Moitra in the Lok Sabha.

The Lokpal claimed it cannot function merely on the basis of the Hindenburg research report’s quid pro quo against the SEBI Chief because of investments made in offshore funds connected with the Adani group.

The anti- corruption body also revealed that most of the complaints were made based on information found in the Hindenburg report without further investigating its authenticity of the information contained in the report.

The Lokpal relied on the judgment of the Supreme Court given on January 3, 2024, wherein SEBI investigation into the group of companies belonging to Adani had been approved.

Lokpal is still waiting for the verdict on the latest application filed in the Supreme Court based on the fresh Hindenburg report and findings of SEBI out of total 24 inquiries conducted against Adani group in which only two cases are left.

The Lokpal reprimanded Mahua Moitra for approaching the public with her complaint, informing the complainant and the public servant under investigation cannot be disclosed during any investigation as per Rule 4 of Lokpal (Complaint) Rules, 2020.

The Lokpal has asked both complainants to file affidavits by October 17, relating to ten specific questions concerning the allegations, the authenticity of the Hindenburg report and whether the Lokpal has jurisdiction in this matter.

To avoid any perception that they are forming an opinion regarding the candidature and tenability of the complaints, the Lokpal made it clear that anything stated in the order part of the response is not an expression of any opinion but simply the processes.

The Lokpal thought it was fine to release this order to the public and the internet with the physical features of the persons in question obscured so as not to create confusion.

This Is Exactly How The Indian Judicial System Enables People To Fraud The Rest Of The Country. 

They certainly have enough evidence to set up an in-detail inquiry on Madhabi Puri Buch but when will they do the needful?