Padmanabhan figures in CBI inquiry, Sebi removes him as CVO

MUMBAI | NEW DELHI: Capital market regulator Securities Exchange Board of India (Sebi) on Friday removed its chief vigilance officer (CVO), RK Padmanabhan, after his name figured in a preliminary inquiry by CBI. The agency is probing his role in a Sebi investigation against the promoters of the erstwhile Bank of Rajasthan (BoR) — which was later taken over by ICICI Bank.

The promoters, led by ed by Pravin Kumar Tayal, had allegedly raised their holding in the bank in an improper manner in 2009 and they were banned from accessing the stock market. In 2012, Sebi gave a clean chit to the Tayals and revoked the ban. The appropriateness of the actions of Padmanabhan, executive director, (investigation) of Sebi, in that period is under CBI scrutiny. The Tayals are also under the CBI’s lens.

A top Central Bureau of Investigation official confirmed that a formal PE to probe the allegations was registered recently. Meanwhile, Gyan Bhushan, an executive director at Sebi who holds charge of the integrated surveillance department, has been appointed the new CVO. Padmanabhan’s removal from the post of CVO occurred on the same day that he received an extension to his tenure at Sebi.

An email query sent to Sebi remained unanswered. If the CBI finds incriminating evidence, it will register an FIR. The agency usually tries to wrap up its preliminary inquires within three months of registering them.

In 2009, a year before Bank of Rajasthan was merged with ICICI Bank, Tayals had announced that they had lowered their stake from 44.18% to 28.61%. But a probe by Sebi subsequently found that the promoters’ stake had in fact risen to 63% with the active collusion of front entities who were alleged to be persons acting in concert.

As a result, Sebi had levied fines ranging between Rs 5 lakh and Rs 18 lakh on the entities involved.

A penalty of Rs 5 crore was imposed on each member of the Tayal family involved in the affair and it is the adequacy of the quantum of these penalties that is said to be the subject of the CBI probe. A ban on dealing in securities was also imposed on some 114 entities related to the Tayals, but this was later revoked.

Last month, the minority shareholders of erstwhile Bank of Rajasthan had moved the Bombay High Court alleging that Sebi had imposed a much lower penalty in the case than warranted by the facts and circumstances.

The minority shareholders had also asked the court to direct the CVC to appoint an independent CVO at Sebi. The petition requested the court to ask the CVC to appoint the heads of the vigilance and investigation departments of Sebi.