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Axis MF front running case | Sacked fund manager Viresh Joshi sues MF house alleging wrongful termination

In its reply to Moneycontrol, Axis AMC has rubbished Joshi's allegations and stands by its decision to sack him. Any compensation or damages payable to him is out of question, says the fund house. The investigations are still underway into the alleged case of front-running.

June 24, 2022 / 09:50 AM IST
Axis AMC, India’s seventh largest mutual fund house with assets worth Rs 2.43 trillion, sacked Joshi on May 18 in the case in which Joshi and his former colleague and assistant fund manager Deepak Agarwal are under investigation.

Axis AMC, India’s seventh largest mutual fund house with assets worth Rs 2.43 trillion, sacked Joshi on May 18 in the case in which Joshi and his former colleague and assistant fund manager Deepak Agarwal are under investigation.

Viresh Joshi, a former fund manager and chief trader of Axis Mutual Fund, has filed a lawsuit accusing the asset management company of unfairly terminating his employment in connection with a suspected front-running case.

Axis Asset Management Co. Ltd. (Axis AMC), India’s seventh largest mutual fund house with assets worth Rs 2.43 trillion, sacked Joshi on May 18 in the case in which Joshi and his former colleague and assistant fund manager Deepak Agarwal are under investigation.

The fund house also sacked Agarwal on May 20. Axis AMC had first suspended Joshi on May 3 before letting him go.

The lawsuit follows a legal notice Joshi’s lawyers sent to the fund house on May 20, seeking a detailed explanation as to why he had been sacked pending completion of the investigation into the alleged front-running case.

The fund house has so far not publicly disclosed the exact nature of wrongdoings that it has been investigating, but has maintained that there have been alleged violations of securities law.


The case came to light in early May when the fund house implemented changes in its equity fund management. At the time, Axis AMC didn’t comment on the reasons behind the changes. However, in a communication sent to investors and distributors on May 9, Chandresh Nigam, managing director and chief executive officer of Axis AMC, said the fund house had started an investigation and appointed “reputed external advisors” to carry out the investigation.


Joshi has sued Axis Asset Management for ​alleged wrongful termination as well as mental trauma and sought damages to the tune of Rs 54 crore. Joshi, who has been in the capital market since around 20 years, has been with Axis AMC since 2009. Prior to working at Axis AMC, he has worked at BNP Paribas Securities and ICICI Securities.

His lawyers, Mansukhlal, Hiralal & Co. Advocates and Solicitors, filed suit on June 23, in the Bombay High Court. "The termination letter that Axis AMC sent to my client, Joshi, is invalid," says Purvi Asher, Partner, Mansukhlal Hiralal & Co., Advocates & Solicitors.

In front-running, a dealer with an institutional money manager like a mutual fund takes advantage of his knowledge of the orders that his employer has lined up for the day and tries to profit from them.

If the dealer wants to profit, he enters the market minutes before he punches in the orders by the fund house. Mutual funds usually place large orders on the stock market that can move the price of a stock.

The dealer buys or sells the stock minutes before the mutual fund places its trades. The idea is to profit from the big investor’s moves, either by buying or selling shares.

The probe  

Axis AMC appointed law firm AZB & Partners and management consultants Alvarez & Marsal to conduct an investigation into the front-running allegations. Last month, the fund house also brought in audit and consulting firm Deloitte to co-conduct this investigation.

Nigam said in the same letter that the investigation started in February 2022. It has been close to around four months -- and a month after Joshi was sacked -- but the investigation is still underway, one of Joshi’s contentions in his lawsuit.

Moneycontrol sent a detailed list of questions to Axis AMC on the evening of June 14, one of which was why the investigation has taken so long and by when the fund house expects the probe to be completed. In its reply, the fund house said: “Any internal investigation (including the existing suo moto investigation) is iterative in nature, involves following detailed processes, has inherent limitations (since some data is not publicly available) and evolves over a period of time, based inter alia on ongoing findings. We are working and co-operating with regulatory authorities.”

To a question why Joshi had been sacked before the investigation was completed, the fund house said: “In relation to Mr. Joshi, we have more than adequate findings concerning breaches of our policies, including non-cooperation with our internal investigation (during his suspension period). We also have strong reasons to believe that he has violated securities law.”

The fund house did not elaborate on these allegations. To be sure, front-running is just one of the many, and not the only, aspects of the securities law.

Five reasons for the sacking  

In a detailed termination letter Axis AMC sent to Joshi on May 18, the fund hose spelled out five reasons why it had sacked him.

One, Joshi did not cooperate with the investigation and did not provide the information the probe agencies sought from him.

Two, Joshi’s assets were disproportionate to his legal income and he did not provide the sources of the “disproportionate assets” to prove that they had not been acquired through illegal activities “as a dealer and fund manager of the company.”

Three, Joshi repeatedly gave false statements to the investigating team, orally and in writing as well.

Four, Joshi failed to disclose an email (on his official and personal email ID) that someone sent him in January alleging he was engaged in front– running. Further, he did not disclose that he had a personal email id, to the investigation team, contrary to an undertaking he had given to Axis MF in February 2022.

Five, Joshi failed to give contents of the above-mentioned personal email account to the investigating team, despite being asked to do so, and he also deleted contents of one of the above email accounts.

The letter also accused Joshi of violating securities laws. The termination letter did not mention specific allegations or front-running.

Moneycontrol has a copy of this detailed termination letter.

Lawsuit claims 

In his lawsuit, Joshi has claimed that contrary to Axis AMC’s claim that it had received a tip-off from an external source alerting it to the alleged front-running activity, it was he who had first told his seniors about increased activity in the shares he had been trading on behalf of the fund house.

He claims that he had begun to alert the fund house in around June 2021. Between November 2021 and ​January 2022, trading activity in the shares he dealt with on behalf of the fund house, spiked, he added in his lawsuit. This, he claims, led to the fund house starting an investigation.

Sometime in February 2022, Nigam called the entire equity fund management team to Axis AMC ‘s boardroom at its Mumbai headquarters and announced the start of the investigation and that it was crucial everyone must cooperate.

Axis AMC has strongly denied Joshi’s claims of being a whistle-blower.

In its reply to Moneycontrol’s questionnaire sent to the fund house earlier,  it said: “Any depiction of Mr. Joshi including in your queries, as a whistle-blower is wholly baseless. Specifically, any statement that refers to Mr. Joshi highlighting any specific compliance concerns with our management or our compliance team is factually incorrect, and is denied.”

The portion on “compliance concerns” Axis AMC referred to were Joshi’s claims that he had alerted his seniors to suspicious trading activity in stocks he traded on the fund house’s behalf.

Moneycontrol reached out Axis AMC, again, after the lawsuit was filed. The fund house said: "The Company is not aware of any suit by Mr. Joshi filed against it, as it has not yet been served - and will take appropriate action once it has relevant details. In any event, the allegations of Mr. Joshi are baseless and without any merit, and that the action taken by the Company in relation to termination of his employment for wrongdoing (including where Company has reason to believe violations of securities law) is valid and legally sustainable, and there is no question of any compensation or damages payable to him.

‘Internal findings’

In an interview to CNBC in Davos, Switzerland, on the sidelines of the World Economic Forum meetings, Axis Bank MD and CEO Amitabh Chaudhry said there had been no whistleblower complaint that triggered the investigation.

Both Chaudhry and the fund house have maintained that an internal finding led to the start of the probe.

Moneycontrol couldn’t independently verify either Joshi’s or Axis MF’s claims about what prompted the probe as the investigation is still underway.

Joshi also claims in his lawsuit that in raids conducted by the fund house at his house, his personal laptops, phones and tablets as well as devices belonging to his daughter and father were taken away.

Multiple rounds of grilling 

Joshi said he had made himself available for multiple rounds of questioning first by the investigating firms and then later by the capital market regulator, the Securities and Exchange Board of India (SEBI).

The only time he was unavailable was when he was attending to his father-in-law, who had been admitted in hospital for surgery, he claimed in his lawsuit.

Axis MF’s claims about him being unavailable for questioning pertained to the period between May 3, when he was suspended, and May 18, when his employment was terminated.

Moneycontrol couldn’t independently verify Joshi’s whereabouts during this period, although his father-in-law’s medical records and hospitalisation proof (including his admission and discharge details) during the period are part of Joshi’s legal filings in the Bombay High Court.

Nor could Moneycontrol independently verify the veracity of Joshi’s responses to the investigations, one of the main charges behind his sacking.

Due process followed 

Axis AMC said to Moneycontrol that “post the suo moto investigation which started in February 2022, we (i.e. the AMC) had reason to act upon the interim findings, after diligently following due process.”

A email send to AZB didn’t elicit a response.

Kayezad E Adajania heads the personal finance bureau at Moneycontrol. He has been covering mutual funds and personal finance for the past two decades, having worked in Mint and Outlook Money magazine. Kayezad was the founding member of Mint’s personal finance team when it was set up in 2009.
first published: Jun 23, 2022 06:23 pm
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