Madhabi Puri Buch made history when she became the first woman to be appointed as the chairperson of the Securities and Exchange Board of India (SEBI) in February 2022. But a barrage of conflict of interest allegations regarding her dubious links to the financial sector and her subsequent silence have raised concerns about the autonomy of the market regulator since April 2017, when she was a whole-time member.

In the latest development, Lokpal, a statutory body that investigates corruption allegations against public officials at the national level, has said that the Hindenburg report – which made allegations of quid pro quo arrangements against Madhabi –   alone was not enough to take action against Madhabi. Without naming Trinamool Congress MP Mahua Moitra, Lokpal questioned why the complaint was made public on her social media account and suggested that she revised the complaint after the Hindenburg report was published on August 10.

Mahua Moitra had filed a complaint with the Lokpal, accusing the SEBI head of improper conduct and entering into quid pro quo arrangements before the Hindenburg report was released. She then uploaded a photo of the complaint on her social media handle, stating, "My LokPal complaint against Ms. Puri-Buch has been filed electronically & in physical form. LokPal must within 30 days refer it to CBI/ED for a preliminary investigation and then a full FIR enquiry. Every single entity involved needs to be summoned & every link investigated." 

While this case was posted to October, Congress has continuously demanded Madhabi’s resignation on several occasions and demanded a Joint Parliamentary Committee (JPC) probe into these allegations. However, the Union government reportedly rejected the demand. The opposition escalated the issue, raising fresh allegations against Madhabi, stating that six companies availed of consultancy services from Agora Advisory, where Madhabi Puri Buch holds a 99% stake. TNM takes a detailed look at the events that unfolded.

The Hindenburg report

Hindenburg Research, on August 10, 2024, released a report alleging that Madhabi and her husband Dhaval had hidden stakes in offshore entities in Bermuda and Mauritius. These entities have been linked to money syphoning by the Adani Group. This report came after Hindenburg released a similar report on January 24, 2023, where Adani Group was accused of accounting fraud after a two-year investigation. Hindenburg had said Adani Group had shell companies in tax havens such as Mauritius, Cyprus, UAE, Singapore, and several Caribbean Islands. The 2024 report said that SEBI chief Madhabi did not take action against Adani since they had invested in IPE Plus Fund 1, an offshore fund in Mauritius, which had links to a company allegedly controlled by Gautam Adani’s brother Vinod Adani. 

An expert panel constituted by the Supreme Court of India in May 2023 had found that SEBI’s investigation into the Adani case could be a “journey without a destination” and that the regulatory body had drawn a blank in the investigation.

Denying the Hindenburg report, the panel said that all disclosures as required have already been furnished to SEBI over the years. “We have no hesitation in disclosing any and all financial documents, including those that relate to the period when we were strictly private citizens, to any and every authority that may seek them,” the statement read. In response to a show cause notice issued by SEBI, they also accused Hindenburg Research of bias and resorting to character assassination.

Madhabi’s ‘shady’ business

Soon after the letter became public, Congress intensified their protest and said Madhabi had earned income from six companies—Mahindra and Mahindra, ICICI, Dr Reddy’s Labs, Pidilite, Sembcorp, and Visu Leasing and Finance. On September 9, Congress leader Pawan Khera held a press conference and said that Madhabi serving as a whole-time director of SEBI while these companies availed services from Agora violated Section 5 of SEBI’s code on Conflict of Interest for board members. The party refuted her claim that Agora had become dormant when she assumed SEBI office, stating that it generated Rs 2.95 crore since 2016-17. “Of the total money Agora received, 88% of the fund came from one company—Mahindra and Mahindra. Apart from this, the chairperson’s husband, Dhaval Buch, got Rs 4.78 crore from the same firm.” 

A Scroll report also said that Agora Advisory was active between 2019 and 2024 and made Rs 3.63 crore in revenue.

In what seems like an attempt to distance Madhabi from the controversy, M&M released a seven-point counterclaim. Labelling the claims as “false” and “misleading,” they said the group hired Dhaval Buch in 2019, three years before Madhabi was appointed as the SEBI chairperson. They also said the compensation was only for Dhaval’s supply chain expertise and management skills. “The group or its subsidiaries have nothing to do with three out of five approvals by SEBI. One was a fast-track rights issue which did not need SEBI approval, while the other was an order issued in May 2018, before Dhaval Buch was appointed,” the statement read. Dr Reddy's Laboratories and Pidilite Industries followed suit, toeing the same line. They approached Agora because of Dhaval’s expertise. 

Zee-Sony broken deal 

Earlier in September 2024, Essel Group Chairman Dr Subhash Chandra came out with an accusation that hinted at a quid pro quo deal. He said that Madhabi was responsible for the failure of the ZEE Limited-Sony deal. A person who identified himself as Manjit Singh approached him in February with an offer to settle or resolve outstanding issues with SEBI in exchange for a monetary "price" or payment. SEBI had barred Subhash Chandra and former MD Punit Goenka from holding key managerial positions till an investigation into conflict of interest allegations was completed. 

“The interests of entities, Subhash Chandra and Punit Goenka, are factually in direct conflict with the interests of the public shareholders and the company,” an order by Madhabi Puri Buch in August 2023 noted. This order was set aside by the Securities and Appellate Tribunal (SAT).

Accusations by hundreds of SEBI employees expressing unhappiness with Madhabi Buch’s leadership shed light on the organisation’s work culture. A letter sent by them to the Union Finance Department, accessed by Economic Times, revealed that “fear has become the primary driving force in SEBI in the last 2-3 years.” SEBI immediately released a statement stating that outside elements were influencing its officials to leak this narrative to the media, but later withdrew it and said issues would be discussed internally.

Why the uproar over Madhabi’s silence

The appointment in itself raises several concerns, as pointed out by Congress leader Jairam Ramesh. He asked whether the Union government was aware of Madhabi’s 99% stake in Agora and was receiving money from publicly listed companies. Madhabi also had a 100% stake in Singaporean entity Agora Partners—which does not have to disclose its financial statements in India. Hence, there is no clear information about how much money it makes or who its clients are. It should also be noted that the Appointments Committee of the Cabinet, comprising the Prime Minister and the Union Home Minister, is tasked with appointing the chairperson of SEBI.

Another issue is about SEBI’s principles that are laid out in its code on conflict of interest. Board members should not exploit any personal or professional relationship with regulated entities or any employee of such entities for personal gains. They are also advised that if there is any conflict of interest, the decision of the Board is not affected. In case of doubts regarding conflict of interest, disclosures have to be made “at the earliest possible opportunity.” Board members are also not allowed to accept gifts from a regulated entity.

SEBI and Madhabi stated that relevant disclosures required in terms of holdings of securities and transfers from time to time were made and that she had recused herself in matters involving potential conflicts of interest. However, it is not specifically mentioned whether she recused herself in the Adani case.