Mumbai: The Securities and Exchange Board of India (Sebi) is evaluating Ashok Chawla’s eligibility to continue as chairman of the National Stock Exchange (NSE) after the Central Bureau of Investigation (CBI) named him in a chargesheet prompting multiple complaints, two people aware of the matter said. Sebi received the complaints in the first week of October and started its scrutiny the same week, said the first of the two people, both of whom asked not to be identified.
The charges against Chawla relate to a CBI probe into suspected corruption in the Aircel-Maxis case. On 19 July, CBI, as part of its investigation, filed a chargesheet naming 18 individuals, including Chawla. On 1 October, Special CBI judge O.P. Saini set the investigative agency a deadline of 26 November to secure the government’s nod to prosecute Chawla and others.
Chawla, a former finance secretary, might have to step down as NSE chairman if CBI gets the go-ahead to prosecute him, said the second person.
Individuals under prosecution and those who have been convicted of any offence involving moral turpitude or an economic offence or violation of securities laws cannot lead stock exchanges under Sebi’s stock exchanges and clearing corporations (SECC) norms.
Chawla said in a telephonic interview that it was for the regulators (the Reserve Bank of India and Sebi) to decide on the so-called “fit and proper" criteria. “The chargesheet has not been put in motion or accepted by the court yet because before filing the chargesheet, CBI needs the government’s approval. The government approval is not in place yet," he added.
Mint has seen copies of at least two letters to Sebi, which asked how it could permit a person facing a CBI investigation to chair a quasi-regulator like NSE. Chawla is also part of the boards of Yes Bank Ltd and Jet Airways (India) Ltd.
According to the first person, Sebi will continue its scrutiny even if CBI fails to secure permission to prosecute Chawla.
“Even though SECC norms on “fit and proper" criteria for board members of market infrastructure institutions are slightly grey, such complaints from the public regarding the integrity and trustworthiness of the chairman appointed at a stock exchange is a matter of serious concern for the regulator," the person said.
After a preliminary examination, Sebi wrote to the government about a week ago, stating that as long as no formal charges were filed, Chawla was deemed to be “fit and proper", said the second person.
Emails sent to NSE and Sebi remained unanswered.
CBI wants to prosecute the individuals under the charges of criminal conspiracy, public servant taking illegal gratification, abetting this offence and public servant committing criminal misconduct under The Prevention of Corruption Act, 1988. If convicted, the offences entail a maximum punishment of seven years.
The court has granted CBI seven weeks to obtain the government’s sanction to prosecute former Union finance minister P. Chidambaram, Chawla and other serving or former public servants.
“Granting sanction is under active consideration of the government," senior advocate Sonia Mathur, representing CBI, submitted to the judge.