Another conflict of interest of SEBI Chairperson? Dr Subramanian Swamy alleges Madhabi Puri Buch's past association with Max Healthcare behind slow SEBI inquiry

In the latest developments in the high-profile Axis-Max case at the Delhi High Court, Dr Subramanian Swamy has alleged a lack of action from the Securities and Exchange Board of India (SEBI) due to potential conflicts of interest. The case, which centers on regulatory oversight involving Axis Bank and Max Life Insurance, has drawn significant attention because Dr Swamy claims that SEBI’s actions may have been influenced by a conflict of interest. 
 
During the proceedings, Swamy's counsel presented an additional affidavit, dated March 13, 2024, revealing that the SEBI Chairperson previously held positions as an additional director and director at Max Healthcare Institute Ltd between February 4, 2015, and April 3, 2017. The counsel argued that this past affiliation could have affected SEBI’s approach to investigating the Axis-Max case.

SEBI said inquiry is on in the matter. In its affidavit, the regulator said that pursuant to the order passed by the IRDAI, it has initiated a preliminary examination in the said matter, and that the said investigation is at an advanced stage of completion. In the affidavit, it has also been averred that the petitioner’s letter, dated October 19, 2023, has been forwarded to the RBI vide letter dated November 17, 2023, considering the fact that Axis Bank and its subsidiaries are involved in transactions and the allegations primarily relate to the conduct of a bank.

The court also addressed the allegations against the SEBI Chairperson but pointed out that the writ petition had not been amended to specifically include these claims, nor was the Chairperson named as a respondent. The court emphasised that even if the SEBI Chairperson had a prior professional relationship with the Max group, it did not exempt SEBI from its duty to regulate the matter according to legal standards.

The court reassured the Petitioner that if SEBI’s final decision appears to be influenced by the Chairperson’s previous association with Max Healthcare, it could be challenged.

In defense, the counsel representing the Insurance Regulatory and Development Authority of India (IRDAI) highlighted that penalties had already been imposed on Axis Bank and Max Life Insurance. Specifically, IRDAI issued two orders on October 13, 2022, imposing fines of Rs 2 crore on Axis Bank and Rs 3 crore on Max Life Insurance. These orders were also shared with the Reserve Bank of India (RBI) and SEBI for further review.

With the PIL now dismissed, the focus shifts to the regulatory bodies, which have been directed by the court to complete their investigations swiftly and lawfully. The outcomes of these investigations will be critical in determining the future course of this ongoing case.

Dr Swamy had alleged that Axis Bank and affiliates are trying to acquire shareholding in Max Life, in unfair and non-transparent ways. He alleged that as per the disclosure made on August 9, 2023, the Axis Bank board approved the infusion of Rs 1,612 crore in Max Life by way of preferential allotment, resulting in Axis Bank’s direct stake in Max Life increasing to 16.22 per cent and collective stake of Axis entities increasing to 19.02 per cent as proposed in letters issued to stock exchanges. He also alleged that Axis Bank sold its stake of 0.998 per cent shares of Max Life in March 2021 to Max Financial and Mitsui Sumitomo for Rs 166 per share, and subsequently, in March-April 2021, Axis Bank and its group entities acquired 12.002 per cent shares from Max Financial at the price range of Rs 31.51-32.12 per share. This way, Axis Bank has gained substantially while selling shares as the selling price has been exponentially more than the purchasing price which is contrary to the directions issued by the IRDAI in its letter dated January 28, 2021.

As per the Delhi HC order copy, Dr Swamy’s counsel said the promoters of the insurer, i.e. Max Financial and Sumitomo, have been engaging in the transfer of shares of the insurer to Axis Bank at a price substantially lower than the fair market value and subsequently buying the same from Axis Bank at a substantially higher price.
 
Axis Bank vehemently denied the allegations brought forward in the public interest litigation (PIL). The bank stressed its commitment to transparency and fairness, stating that the Delhi High Court, after hearing all arguments, declined to admit Dr Swamy’s PIL and disposed of the case. The court noted that regulatory authorities were already addressing the issue and instructed them to conclude their investigations promptly and in accordance with the law. Axis Bank reiterated its dedication to conducting business with transparency, fairness, and a focus on delivering value to its stakeholders.