Arun Khurana, former Deputy CEO of IndusInd Bank, while challenging Securities and Exchange Board of India’s (SEBI’s) interim order against him in Securities Appellate Tribunal (SAT) made an interesting revelation. Khurana claimed that he has resigned earlier but was placed under suspension. This is intriguing that when he had resigned why he has been put under suspension.
Khurana’s counsel in SAT, said, “I am in service but suspended, because of the order I offered to resign they (bank) said, no we want to hold you. So, technically I am in service but suspended." The same revelation was also recorded in the order passed by SAT after hearing the regulator’s and Khurana’s sides. The SAT order noted that, “Admittedly, the appellant has been discontinued from the service of the bank and is presently under suspension”.
During hearing in SAT, Khurana’s counsel also argued that SEBI misunderstood the UPSI (Undisclosed Price Sensitive Information) period. According to SAT order, Khurana’s counsel contended that, “the ex-parte order has confused totally different issues to hold that the UPSI came into existence on December 4, 2023”. Khurana’s side maintained that Treasury Back Office of the bank was following the Indian Generally Accepted Accounting Principles (IGAAP), accounting standards for the derivatives transactions.
As per his submissions, the bank was required to submit a proforma to the Reserve Bank of India (RBI) detailing the impact between IGAAP and Ind AS accounting standards, which the RBI plans to make mandatory for all banks in the future. To meet this requirement, the bank engaged PwC, held a meeting of treasury officers, and conducted an internal review on March 3, 2025. The findings of the internal review committee were presented to the board of directors on April 10, 2025. Subsequently, the bank announced an impact of Rs 1,979 crore on its net worth due to accounting discrepancies.
Referring to Khurana’s arguments, the SAT noted, “Therefore, according to him and the bank, the UPSI started from March 4, 2025, the date of internal review committee." Khurana's side argued that trades have taken place much prior to the date of commencement of UPSI or insider information period, which his side claimed commenced from March 4, 2025. Therefore, the direction issued by the SEBI interim order calling up him to deposit a sum of Rs. 14.39 crore was harsh.
However, SEBI, in its interim order, had stated that the UPSI period commenced earlier, from the date the then IndusInd Bank MD&CEO, Sumant Kathpalia wrote an email to CFO and Khurana, then Deputy CEO, communicating that discrepancy in the derivatives accounting needs to be reported. The email quoted by SEBI read, “We need to do the reporting. There seems to be a huge impact”.
According to SEBI by end of November 2023, the management had an estimate of the potential losses as the head of accounts in an internal email had quoted a figure of Rs 1,749.98 crore.
SEBI order dated May 28, 2025 observed, “UPSI in the instant matter originated prima facie on or before December 04, 2023. It can be seen that the MD & CEO was aware about the probable huge impact of the discrepancy in the account balances of the Derivative portfolio”. SEBI inferred the UPSI period ran from December 4, 2023 to March 10, 2025, the date of disclosure to the exchanges. On March 10, IndusInd Bank disclosed the likely impact of accounting discrepancy and estimated an adverse impact of approximately 2.35 percent of Bank’s Net worth as of December 2024.
However, it was not classified by bank as UPSI till March 04, 2025. Khurana had sold shares of IndusInd Bank between December 8, 2023 and June 25, 2024, which he received as ESOPs or called stock options.
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SEBI had examined the case from September 12, 2023 to March 10, 2025. September 12, 2023 was the date of Master Direction- Classification, Valuation and Operation of Investment Portfolio of Commercial Banks (Directions), with respect to accounting treatment of Derivative Contracts entered into by Banks, which triggered bank to look into possible discrepancy due to accounting lapses.
SEBI counsel argued before the tribunal that Khurana had not complied with its interim order requiring disclosure of his asset details. Khurana, however, assured the tribunal that he would file a reply and participate in SEBI’s proceedings. SEBI had directed Khurana and others to submit a full inventory of movable and immovable assets and investments.
SAT in its order gave partial relief to Khurana. SAT recorded in its order, “In the circumstances, in our opinion, ends of justice would be met by directing the appellant to deposit 50% of Rs. 14,39,36,026.47 with the SEBI. The appellant shall be at liberty to liquidate his shares and to comply with the condition to deposit 50% of the amount, as a condition for the interim order”.
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