Lokpal exonerates Madhabi Buch

The Lokpal, which serves as the anti-corruption watchdog, has exonerated former chairperson of the Securities and Exchange Board of India (Sebi), Madhabi Buch (Madhabi Puri Buch), along with her husband, Dhaval Buch, regarding allegations of misconduct, impropriety, and conflict of interest. In a comprehensive 116-page ruling, a six-member panel led by Lokpal chairperson Justice AM Khanwilkar determined that a formal investigation was unnecessary, as the claims were founded on presumptions and assumptions without any substantiated evidence.

The three complaints were lodged following allegations from US-based Hindenburg Research, which claimed that the Sebi chairperson and her spouse had investments in offshore funds associated with the companies of Gautam Adani while Sebi was conducting inquiries into the conglomerate. Among these complaints, one was submitted by Mahua Moitra, a member of parliament from the Trinamool Congress.

The ruling indicated that the allegations were fundamentally rooted in the claims made by Hindenburg Research, which aimed to expose or challenge the Adani group.

The Lokpal concentrated on five primary allegations, which included investments in a fund connected to the Adani group without proper disclosure; quid pro quo arrangements with firms such as Mahindra and Mahindra and Blackstone Inc under the guise of consultancy services provided by a company in which she held a 99% stake; quid pro quo from Wockhardt Limited disguised as rental income from Carol Info Services Private Limited, a company under investigation by Sebi for insider trading; obtaining undue benefits by selling ESOPs from ICICI Bank over a five-year period from 2017 to 2024, coinciding with regulatory issues faced by ICICI with Sebi; and feigning recusal from matters involving M&M Group and Blackstone Inc while still influencing other whole-time members and the board of Sebi for a favorable resolution.

Lokpal says

“...we have concluded that the allegations in the complaint (s) are more on presumptions and assumptions and not supported by any verifiable material and do not attract the ingredients of the offences (under Prevention of Corruption Act), so as to direct an investigation,” the Lokpal said in the order.

“Accordingly, these complaints are disposed of,” the order read.

Background

Buch, who assumed the role of chief of the Sebi on March 2, 2022, resigned from her position on February 28 of this year after completing her term.

Last year, Hindenburg Research, based in the United States, accused her of having a conflict of interest and showing favoritism towards the Adani Group. Both Buch and the Adani Group have refuted these claims.

In response to a notice from the Lokpal dated November 8, Buch submitted a comprehensive 31-page affidavit to the Lokpal on December 7, 2024, describing the allegations as politically motivated.

Ex-Sebi chief did nothing wrong

Regarding the claims associated with the Adani Group, including investments in a fund connected to it and Sebi's alleged preferential treatment of the conglomerate during investigations, the Lokpal stated that Buch's position is "fully vindicated from the contemporaneous official records relied upon by her" in this case and "has not been countered" by the complainant.

“Concededly, in our view, neither the incorporation of two consultancy companies because of the initiative of Buch after her retirement from ICICI Bank; nor the substantial investment made by Buch and her husband in a Fund in 2015, has any relevance to bring home how it is a case of taking or obtaining undue advantage or one of quid pro quo,” the Lokpal order said.

The Lokpal emphasized that Buch had previously withdrawn the investments from the fund well before Sebi initiated investigations into the allegations of stock manipulations involving the Adani Group of companies.

“Thus, we hold that the allegation that the RPS intentionally provided heavily redacted documents to the expert committee of the Hon'ble Supreme Court is devoid of merit, truly a veiled attempt to reopen and question the findings of the Supreme Court. We cannot be party to such an attempt. More so, these complaints are chiefly based on a report authored by Hindenburg Research, whose credibility has already been seriously doubted by the Supreme Court in respect of its report dated 24.01.2023,” the order added.

“Pertinently, the investigations by Sebi have been put seal of approval by the Hon'ble Supreme Court of India as being just and proper, which has attained finality,” it said.

As for the allegations related to Wockhardt, the Lokpal dismissed it as an attempt to politicise the matter. “The complainant (s) by making such unverified and flimsy or fragile allegations, only to sensationalize or so to say politicize the matter, has inevitably trivialised the process before the Lokpal,” the order stated.

On the charge of enchashment of ESOPs, Lokpal said that, as Buch had argued, “ESOP is not in the form of salary payment by ICICI Bank but a prerequisite enuring to the employees while in employment, to be cashable as per his/her discretion at a later point of time including after superannuation”.

“This is a common practice followed by many leading companies and a well-known concept in business environment. This is a package of service and recognition of long services rendered by concerned including in senior positions,” Lokpal said, adding that there was no merit in the allegations.

It stressed that “no credible material is forthcoming or has been placed before us (Lokpal) by the complainant (s) to demonstrate as to what undue advantage has been given to ICICI Bank owing to the settlement orders passed by the high-powered committee”.

On complaints of making money, which attracts the Prevention of Corruption Act, Lokpal said: “From the detailed analysis hitherto, of relevant facts and our findings in that regard, we have no hesitation in concluding that even with a liberal approach to be adopted, in favour of the complainant (s), none of the ingredients of Section 13 (of PC Act) would be attracted in the fact situation of the present case”.

“While parting, we need to record that the complaint (s) under consideration were essentially founded on the Hindenburg report dated 10.08.2024, by a known short seller trader whose focus was to expose or corner Adani Group of Companies,” it said.

Referring to its previous order dated September 20, 2024, (about accepting the complaints and initiating an enquiry), Lokpal said, “that report (Hindenburg report) by itself cannot be made the sole basis to escalate action against Buch.”

“The complainant (s) being conscious of this position advisedly attempted to articulate allegations independent of the stated report but the analysis of the allegations by us, ended with a finding that the same are untenable, unsubstantiated and bordering on frivolity,” the Lokpal said.

During the proceedings, Lokpal permitted the complainants to verbally communicate about Buch’s affidavit and took up the matter on January 20.

Lokpal said that the analysis (in its order) “will not be to verify the veracity or otherwise of the information presented before us, but only to ascertain whether the narrative set forth reveals commission of any cognizable offence deserving investigation”.