Buch allegedly earned rent from Wockhardt firm while Sebi was probing the drugmaker

Mumbai: In a fresh salvo against Madhabhi Puri Buch, the Congress party has alleged that the chair of the Securities and Exchange Board of India earned rental income from an associate firm of Wockhardt Ltd that was investigated for insider trading last year.

The principal opposition party claimed that Buch received about ₹2.17 crore between fiscal years 2018-19 and 2023-24 from a company called Carol Info Services Ltd. In its annual report for 2022-23 Carol Info states that it is a subsidiary of Khorakiwala Holdings and Investments Pvt. Ltd and that Wockhardt Hospitals Ltd is an associate company.

Habil Khorakiwala, the founder and chairman of pharmaceutical firm Wockhardt, is a director of Khorakiwala Holdings and Investments, according to Tofler.

Mint couldn’t independently establish if Buch or any entity or persons closely associated with her received the alleged rental income from Carol Info. The allegations place Buch potentially in contravention of Sebi’s regulations, apart from raising charges of conflict of interest.

The Congress said that Wockhardt, a regulated entity, was under Sebi’s investigation during 2023 for various cases including that of insider trading. In a statement, the party said this was “an outright case of corruption that invokes conflict of interest violating Section 4, 7, and 8 of Sebi’s 2008 Code on Conflict of Interests for members of (Sebi) board”.

According to a person familiar with details of the latest allegations, Buch rented out an office space at 102, Vivarea Wing D in posh South Mumbai’s Mahalakshmi racecourse locality to Carol Info Services. The property is located just about a half kilometre from Sri BasavWockhardt Hospital. Madhabi’s husband Dhaval Buch is a 37% co-owner of the property, said this person, declining to be identified.

Sebi and Wockhardt did not respond to requests for comment. Wockhardt shares on NSE fell 5% to ₹1,034.55 apiece at close of trading on Friday, when the benchmark Nifty 50 index lost 1.17%, or 292.95 points, to end at 24,852.15.

Also read | Whom is Madhabi Puri Buch really accountable to?

To be sure, the documents shared by the Congress showed that the Sebi orders pertaining to Wockhardt were passed by a single adjudicating officer named Vijayant Kumar Verma. Buch served as a whole-time member of Sebi between 2018 and 2021, before taking over as chairperson in March 2022.

Sebi, in an order dated 2 March 2023, stated that Vijay Khetan, a former compliance officer of Wockhardt, had paid ₹27.06 lakh towards a settlement for failing to disclose price sensitive information in 2013. 

As per Sebi’s website, the regulator ordered a settlement of ₹27.06 lakh from Vijay Khetan, a former compliance officer of Wockhardt, for failing to disclose price sensitive information in 2013, followed by related settlement orders on 22 May and 31 July last year. 

“In my view there should be no implication on Wockhardt unless something untoward is proved,” said a lawyer, speaking anonymously. “The calculation of settlement amount is formulaic and there is unlikely to be any issue with it.”

The strain of multiple allegations

Buch has been firefighting several allegations the past few weeks ever since US-based Hindenburg Research disclosed a show cause notice sent by Sebi to the short-seller regarding a case related to Adani Group (in connection with a Supreme Court-directed investigation on money trail within the group).

Hindenburg has also accused Buch and her husband Dhaval Buch of holding shares in an offshore fund, which in turn had seen investments from another offshore fund that is alleged to have been used by Vinod Adani, elder brother of billionaire Gautam Adani, as a vehicle to manipulate Adani Group firms’ share prices. 

The Buchs and the Adani group have strenuously denied these allegations.

Earlier this week, the Congress accused Buch of drawing a ‘salary’ from her former employer ICICI Bank Ltd and its subsidiary ICICI Prudential AMC even after retiring from the private group in 2013 and joining Sebi. In an exchange notice, ICICI Bank denied paying a salary or granting stock options to Buch after her retirement, other than her retiral benefits.

Later, Mint reported that Buch’s stint at ICICI Bank between 2011 and 2013 appeared to have coincided with a full-time job at Greater Pacific Capital, a revelation that raises questions about how she could have worked with two financial services firms at the same time.

Also read | Sebi chair Buch worked at ICICI and a PE firm between 2011 and 2013

“Previous Sebi chairpersons have gone to great lengths to avoid even the appearance of a conflict of interest, both in their roles at Sebi and in their previous positions,” said Congress said in its latest statement.

“For instance, M. Damodaran sold his 50 (State Bank of India) shares when he took over UTI in 2001, and C.B. Bhave recused himself from all matters involving the National Securities Depository Limited (NSDL), where he was formerly chairman. In contrast, Ms. Buch merely transferred her investments to her spouse, which raises concerns about credibility.”

Damodaran, who was Sebi chair from February 2005 to February 2008, was succeeded by Bhave, who held the top position for three years.

Also read | Full disclosure for Sebi chief: Key to preventing next Hindenburg-like scandal

As per extant laws, Buch, while being a Sebis whole time member or the chairperson, is liable to adhere to Sebi’s principles, which state that a member shall take all steps necessary to ensure that any conflict of interests to which he/she may be subject to does not affect any decision of the board.

Further, a Sebi member needs to disclose any interests that may conflict with their duties, and they cannot exploit to their personal advantage any personal or professional relationship with regulated entities or any employee of such entities, according to Sebi’s guidelines.

A whole time member of Sebi is prohibited from holding any other office of profit or engaging in any other professional activity, which entails receipt of salary or professional fees, according to Sebi’s rules.