Murmurs over NSE chairman’s ‘conflict of interest’, but rules allow multiple board membership

Ashok Chawla | The non-executive chairman of Yes Bank stepped down on November 14 amidst reports that he felt the private bank needed someone who could devote more time and attention while CEO Rana Kapoor is on his way out. Chawla, who is also the chairperson of the National Stock Exchange and a board member of Jet Airways, was at the helm of the fourth largest private sector bank in India since 2016. Due to the multiple positions he holds, Chawla previously faced questions over possible conflict of interests. In July, CBI named him in a charge sheet in the Aircel-Maxis corruption case.

The government has received representations to look into former finance secretary Ashok Chawla’s possible 'conflict of interest' situation over his multiple roles as National Stock Exchange (NSE) chairman and also as a board member of listed companies including Jet Airways and Yes Bank.

Sources, however, told Moneycontrol that existing rules allow stock exchange board members to represent boards of other companies, if relevant disclosures are made.

The procedure on the appointment of directors as stipulated in the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018 require stock exchange board members to disclose the details of their past and present employment, details of other directorships and their Director Identification Number (DIN), besides other details.

According to the regulations, directors’ appointments are made after the stock exchange forwards the details to the Board, recommending their names along with a confirmation that they are fit and proper persons to be inducted to the Board.

The government has received representations from shareholders of these companies as well as independent individuals raising questions on Chawla’s multiple roles and leading to situations of conflict of interest.

Chawla has been serving as the chairman of NSE, a quasi-regulator under the SEBI Act, since 2016. He is also the chairman of Yes Bank, and is overseeing a leadership transition in the bank.

Chawla, a former chairman of India’s anti-trust body Competition Commission of India (CCI), was also inducted as an independent director into the board of Jet Airways in April this year.

“Mr Chawla should, therefore, be advised to step down from the Board of all companies where he is a member, so long as he is serving on the NSE Board,” said Ashok Kumar, who has written to the NSE as well as the finance ministry pointing out the former finance secretary’s conflict of interest.

At the NSE, Chawla is also a member of mandatory committees such as Ethics Committee, Defaulters Committee, Sub-Committee for monitoring compliance of suggestions given in the SEBI inspection report and Public Interest Directors Committee.