IF INDIA Inc flaunts retired civil servants on its boards as directors, regulators are its prize catch.
Registrar of Companies and Ministry of Corporate Affairs records investigated by The Indian Express show that over the last 11 years, at least six heads of top regulatory bodies, and two senior associates, took directorships with private companies within their regulatory domain raising questions of propriety and conflict of interest. In some cases, even the norm on cooling-off period was given the go-by.
Among top regulators, markets monitor Securities and Exchange Board of India (SEBI) has a one-year period before its chairman or whole-time member can accept other employment after tenure. The Reserve Bank of India also has a cooling-off period of one year for its Governor and Deputy Governors.
Anti-trust watchdog Competition Commission of India’s members cannot accept, for two years after tenure, employment linked to an enterprise that has been part of proceedings before it.
As for Insurance Regulatory and Development Authority of India (IRDAI), the chairperson or whole-time members cannot accept employment under Central or State governments or any company in the insurance sector for a period of two years after tenure.
Now, consider an illustrative compilation of top regulators, and associates, who have joined boards of companies linked to their regulatory domain:
T S Vijayan: Head of IRDAI from February 21, 2013 to February 20, 2018. Took up several board positions within the two-year cooling period: Muthoot Microfin (May 15, 2018 till date); Nippon Life India Trustee (June 29, 2018 to Jan 28, 2020); Shriram Properties (Nov 2018 till date).
Muthoot Microfin is a subsidiary of Muthoot Fincorp, which is in insurance broking through its subsidiary Muthoot Risk Insurance and Broking Services. Nippon Life India Trustee, formerly known as Reliance Capital Trustee Co Ltd, is a subsidiary of Nippon Life Insurance Company (Japan). Nippon Life Insurance has a 49 per cent stake in Reliance Nippon Life Insurance Company.
Also joined the boards of Bajaj Allianz Life Insurance and Bajaj Allianz General Insurance on April 1, 2020, but vacated the seats on July 17, 2020.
In August 2020, Vijayan was issued a show-cause notice by the Centre to explain why he joined the board of Yes Bank in December 2018, allegedly without taking approval — he was with Yes Bank till March 5, 2020.
Vijayan said: “None of the companies I joined are in the insurance sector.”
Ashok Chawla: Headed CCI from January 2011 to January 7, 2016; retired as Finance Secretary in January 2011. Within two months of leaving CCI, joined Yes Bank board as non-executive director on March 5, 2016; seven months later, became bank chairman. Resigned in November 2018 after being named in a CBI chargesheet on alleged corruption charges.
In April 2018, joined Jet Airways board. In November 2015, under Chawla, the CCI had fined three airlines, including Jet, for contravention of anti-trust regulations. Jet Airways was penalised Rs 151.69 crore, the highest of the three. In March 2018, on appeal, the CCI reduced Jet’s penalty to Rs 39.8 crore — penalties for the other two were also slashed.
Joined the National Stock Exchange board on March 28, 2016, and later named chairman.
Was on board of Reliance Nippon Life Insurance Company from March-Sep 2018. On February 3, 2016, almost a month after he retired from CCI, the regulator allowed Nippon Life to increase its shareholding in Reliance Life Insurance to 49 per cent.
Chawla said: “I demitted office as Chairperson of the CCI in January 2016. Since I had already superannuated from the Government in January 2011, the one-year cooling-off did not apply to me. I was subject to Section 12 of the Competition Act where I could not be connected for two years with the management of any enterprise, which had been a party to a proceeding before the CCI. As this was not attracted in either case, I was not barred or conflicted in taking up a Board position in the NSE or Yes Bank.”
He said: “Further, a Stock Exchange and a Bank are regulated entities — the former by SEBI and the latter by the RBI. As such, appointments to their boards require the specific approval of the regulator. My appointments became effective in 2016 only after the NSE and Yes Bank had applied to and obtained the approval of SEBI and RBI, respectively. There was nothing in my role as Chairperson, CCI, and before that as Finance Secretary, which put me in direct conflict with my role as a Director in these organisations.”
U K Sinha: SEBI chairman from February 18, 2011 to March 1, 2017. Joined board of Saumitra Research and Consulting (Jan 10, 2018) before end of cooling-off period — the company has since been struck off.
Joined board of Havells India (March 1, 2018), Vedanta Ltd (March 13, 2018), HDFC Limited (April 30, 2018) and Aavishkar Venture Management Services (May 2018). Joined board of Max Healthcare Institute, which got listed in August last year, in June 2019.
Sinha declined to comment.
Urjit Patel: RBI Governor from September 4, 2016 to December 11, 2018. Joined board of shipping major Great Eastern Shipping Company on August 1, 2020. Joined boards of Britannia Industries (March 31, 2021) and John Cockerill India Ltd (April 1, 2021).
Patel did not respond to requests for comment.
Dhanendra Kumar: CCI chief from February 28, 2009 to June 5, 2011. Founded a company, Competition Advisory Services, on October 13, 2011 and is managing director.
The company, according to its website, offers “niche Advisory and Consulting firm, providing expert and strategic assistance in the fields of Competition Law, Regulatory and Government Policies and Market Entry Strategies”.
Kumar’s profile on the website states that after retirement, he “headed the Experts’ Committee to frame the Draft National Competition Policy, and suggesting amendments to the Competition Act, 2002”; and chaired “the Committee of experts of the Ministry of Housing to suggest regulatory reforms in the real estate and housing sector”.
Kumar said: “I am overseas, can’t respond in detail, but all rules were followed.”
Sudhir Mital: joined CCI as member on April 11, 2014, retired as acting chairman on November 9, 2018. Joined Hindalco board on November 11, 2019.
In 2018, as CCI member, was part of a bench that passed an order in a 2015 case against A V Birla company UltraTech Cement for allegedly hiding information during an acquisition of cement assets of Jaiprakash Associates.
CCI noted that Kumar Mangalam Birla and his family (KM Family in records) had substantial shareholding in two other cement companies, Century Textiles and Industries and Kesoram Industries, which was not conveyed to CCI. The KM Family also owned 34.59 per cent shares of Hindalco, the CCI noted. It penalised the KM Family Rs 50 lakh for allegedly hiding information.
As CCI member, he sat on the bench looking at nine other cases involving Jaiprakash Associates, one of which also included UltraTech Cements. On November 7, 2020, two days before cooling-off period got over, joined the board of Jaiprakash Power Ventures Ltd, which is a subsidiary of Jaiprakash Associates.
Joined a limited liability firm, Kisco Business Centre, on December 27, 2018 as a designated partner — less than two months after retirement.
Mital did not respond to requests seeking comment.
Rama Subramaniam Gandhi: Retired as RBI Deputy Governor on April 2, 2017; supervisory domain included payments systems, IT, Department of Banking Operations and Development, and Department of Non-Banking Supervision.
According to RoC records, joined the board of Jana Small Finance Bank on March 21, 2018. Stepped down in May 2019, continues as senior advisor. In June 2018, joined as an advisor in e-payments giant PayTM, and director in Electronic Payment and Services Pvt Ltd, which describes itself as a retail banking tech provider.
Gandhi said: “I did not join any Board before completing the one-year cooling period. I joined Jana SFB in May 2018 and in the May 2018 meeting only, my appointment as a director was approved. As Dy Governor I had handled functions relating to regulation of banks and payment system entities among other duties. I do not consider handling any of these functions is in conflict with my role as a Director in these companies after a gap of a year.”
Anand Sinha: Retired as RBI Deputy Governor on January 18, 2014; was in charge of regulation of commercial banks, non-banking financial companies, urban cooperative banks and IT.
Joined board of IDFC Bank (now IDFC First Bank) in August 2016. RBI had granted “in-principle” bank licence to Infrastructure Development Finance Co in April 2014, three months after Sinha retired.
Joined board of KKR ARC Ltd, the asset reconstruction arm of global equity firm KKR, in December 2016. Member of the GST Network board since June 2016.
Sinha said: “I joined the Board of the IDFC Bank on their request well after my retirement from RBI and as such in my view there was no conflict of interest. The bank in fact would have benefitted from my expertise in gaining better understanding and appreciation of regulatory requirements and the spirit of regulations leading to better adherence to the requirements.”
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