Markets

Does Ashok Chawla’s presence on NSE, Jet boards give rise to conflict of interest?

PALAK SHAH Mumbai | Updated on August 16, 2018

Ready to recuse myself, says NSE Chairman

Ashok Chawla, former bureaucrat and Secretary in the Finance Ministry, may be staring at a possible ‘conflict of interest’ situation due to his position as Chairman of the NSE and a board member of Jet Airways, legal and corporate governance experts told BusinessLine.

The NSE has questioned Jet Airways for deferring its April-June earnings announcement and difference in statements clarifying the same. Jet initially said its auditors “did not present results to the board.” Later, the airline said “it sought more time from auditors to complete its accounts”. The NSE asked Jet Airways to clarify the position.

Experts say, the NSE’s queries could reach Jet’s board. Chawla, an NSE board member since 2016, joined Jet as independent director in April.

Conflict with duties

At the NSE, Chawla is also 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. Jet says on its website that Chawla is on the Audit Committee as required under listing regulations.

Experts say, in the Companies Act, ‘interest’ may not be be limited to financial interest but involves interest arising out of ‘fiduciary duties’ and in this case it would conflict with the duties of Chawla as the NSE chairman and some of the oversight committees, which he is part of in the exchange, with his board membership of companies listed on the NSE.

BusinessLine has learnt that three senior board members, including an ex-bureaucrat, had to resign from the BSE’s clearing corporation, ICCL, in 2014 after SEBI sent them a note stating how they were in ‘conflict of interest’ due to ‘their position on the board of an unlisted company, whose group company was listed on the BSE’.

Responding to a query from BusinessLine, Chawla said, “Day-to-day regulatory issues between the NSE and listed companies do not come to the board of either the exchange or the company concerned on the other side. These are between officials of the exchange and the management of the company concerned. That is why there is no bar on an exchange director being a director on widely-held companies. Having said that, if substantive regulatory issues are raised by the NSE, good corporate governance would oblige me to recuse myself from the discussion on that in the company board/ committee concerned.”

YES Bank board too

Chawla is also an independent director on the board of YES Bank, another NSE-listed company.

He joined the NSE in May 2016 after retiring as Chairman of Competition Commission of India in January of the same year. SEBI did not respond to queries.

Published on August 14, 2018

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