When Chitra Ramkrishna abused her powers regarding irregular appointment of Anand Subramanian, Chitra was backed by the then Board of the National Stock Exchange (NSE). But converting a grave criminal offence by Chitra into a regulatory indiscretion may set a dangerous precedent for the entire capital market ecosystem. Especially, as SEBI it appears sees her criminal offence of sharing NSE's internal confidential information with an unknown person as an indiscretion.

CBI though has taken cognizance of Chitra's misconduct and is questioning her following an income tax raid in her premises by the I-T department. Multiple complaints were lodged in SEBI against the then NSE MD & CEO, Chitra Ramkrishna that led SEBI to investigate her case. In essence, Chitra was accused of appointing Anand Subramanian as chief strategic advisor, without following any HR procedures; awarding him with stupendous salaries worth crores; and not complying with regulatory norms while conferring Anand with disproportionate official powers.

A Pandora's box of Chitra's offences and NSE's weak corporate governance opened up as SEBI investigated the matter of appointment of Anand Subramaniam.

The SEBI investigation led to another startling revelation that Chitra's executive decisions were being guided by an alleged Himalayan Yogi with whom she was sharing sensitive information that, in her official capacity, she was privy to.

However, the order passed by SEBI's wholetime member, Ananta Barua, contains no provision for conducting any investigation into the possible criminal aspects of Chitra's conduct.

In response to Fortune India's phone call to speak with Barua, he hurriedly responded that he cannot speak with an 'Outsider'.

The lies Chitra told

SEBI's final order notes that Chitra's claims about her Yogi mentor being a Siddhapurush were bogus. The order says Chitra is concealing the identity of the unknown person by claiming that he was a Yogi from Himalayas.

Interestingly, the Yogi even demanded a part of Anand Subramanian's compensation as "gratitude payment" to himself, in one of his emails to Chitra.

It is incredible that despite this person demanding 'cuts' from Anand's salary and going on beach vacations with Chitra by booking through travel agents, Chitra declares that he is a spiritual force who can manifest at will!

Where NSE slipped

As per SEBI's enquiry, the NSE Board chairman upon discovering that Chitra was sharing information regarding NSE with her Himalayan Yogi, apprised the NSE Board members in a closed-door meeting. And that information was too sensitive to be even recorded in minutes of the board meeting.

The question is: If an unknown person was privy to information that was too sensitive for being recorded in minutes of the meeting of NSE Board, how was NSE sure that this information in the hands of an unknown entity is not a potential threat to the institution? And why Chitra was never charged for leaking confidential information?

In his order, Barua observes that NSE had knowledge that Chitra shared sensitive information with the alleged yogi and NSE Board had concealed this information from SEBI.

Long after Chitra had resigned, and only when SEBI probed, NSE directed Ernst & Young to figure out the identity of Chitra's alleged Yogi. The E&Y investigation implied that Anand Subramanian himself is the Yogi who had entrapped Chitra for financial gains.

NSE thus argued that no harm was done to the company as Anand Subramanian was already privy to the confidential information that Chitra shared. And thus, no further investigation in the matter was required.

However, SEBI's investigations dismissed the E&Y report due to inconsistencies. In SEBI's order, Barua mentions the fallacies in the report and expresses frustration that despite her conduct NSE had let Chitra resign on "personal Grounds" rather than sacking her from the company.

The NSE Board has been deemed guilty of misconduct by SEBI because it allowed Chitra to continue her office despite knowing that she was steering the company as per the directions of the alleged Yogi and blatantly sharing confidential information with him.

SEBI's approach: Grave offence deserves lenient punishment

Given the concerns Barua expresses in his order, one would expect SEBI to institute further probe into the matter of discovering the identity of Chitra's alleged yogi and impose strict punishments, but that's not to be. Penalty imposed on Chitra is ₹3 crore - less than 7% of her severance package of ₹44 crore.

It missed an opportunity to make an example of Chitra's case as a warning to rogue managers. However, the meagre penalty meted out by SEBI indicates the regulator is as keen as NSE to close the case rather than address the ethical and legal cracks within the system.

By relegating this case to a mere issue of breach of compliance, SEBI has effectively turned a possible criminal offence into a civil case. This case will embolden more of those like Chitra or Ravi Narain who may now find it easier to abuse their official positions to compromise their own company's integrity or hurt national interest.

Interestingly, since SEBI, in its adjudicating capacity, has already conducted enquiry and passed its order with regards to Chitra and others at NSE in this case, unless the SEBI Order is contested by the penalised parties, the case will be closed. It is quite easy for Chitra to pay a penalty of ₹3 crore, and NSE, to pay a penalty of ₹2 crore and end the matter.

However, for the sake of millions who trust SEBI to preserve the integrity of the Indian capital market, the regulator must fix the systemic deficiencies in Indian exchanges.

Why is it important to levy criminal charges on Chitra?

This is not the first such instance of impropriety at NSE. The co-location scam that favoured certain brokers has already put a question-mark on the conduct of NSE.

Clean corporate governance and strategic security of NSE is integral to the existence of India's capital market. In such a scenario, offences by NSE's own management that compromised the integrity and safety of the institution should not go unnoticed and unpunished, if only to safeguard the system against future violators.

No enquiry against Chitra and cohorts can be initiated unless SEBI or NSE approach the government with a criminal complaint as crime related investigation and further charges can only be instituted by criminal investigation agencies.

Given NSE's reluctance to pursue Chitra's case, it becomes more important that SEBI should take the mantle of cleaning up the systemic mess that Chitra's case has revealed.

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