Is mis-governance “order of the day”, at premier Indian exchanges under the “governance” of SEBI?

How did SEBI appoint a PID knowing fully well that it would create a conflict of interest?

How did SEBI appoint a PID knowing fully well that it would create a conflict of interest?
How did SEBI appoint a PID knowing fully well that it would create a conflict of interest?

Is SEBI sleeping again?

Exchanges in India, being Market Infrastructure Institutions (MII), are considered as the first level of the regulator by themselves and are expected to follow the highest standard of Governance. Caesar’s wife must be above suspicion.

To ensure good governance, as a rule, SEBI being the sectoral regulator, appoints Public Interest Directors (PIDs) on the Board of MIIs. This is to ensure the development of good governance practices, to protect the legitimate interests of the Company, its employees, stakeholders, maintain board & management accountability, understanding the regulatory framework, ensuring compliance thereof in letter & spirit, risk assessment and its minimization.[1]

SEBI’s back to making questionable calls

It appears that the recent infamous order of SEBI against NSE in general and Chitra Ramakrishna, Ravi Narain & others at the helm of affairs at NSE doesn’t seem to have raised eyebrows at SEBI. This is evident from the fact that the SEBIs in its order dated 7th March 2022 in the matter of Dish TV India Limited & its directors have confirmed lack of governance in managing the affairs of the company but has ignored the fact that one of the directors (Mr. Shankar Aggarwal) on board of Dish TV India Limited is appointed as PID by SEBI on a premier MII of India[2]. It is the largest commodity exchange of the country, namely, Multi Commodity Exchange of India Ltd (MCX).

Mr. Shankar Aggarwal is serving as a Public Interest Director on the Board of MCX since 1st October 2017. Apart from being on the board, Mr. Aggarwal is also serving as the Chairman of critically important committees viz. Audit Committee, Nomination and Remuneration Committee, Standing Committee for Technology (SCT), Regulatory Oversight Committee, and MCX IPF Trust.

SEBI ignores its own rules and regulations

SEBI has prima-facie found that Mr. Shankar Aggarwal being a Non-Executive Independent Director on the Board of Dish TV India Limited and others have violated various provisions of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations) and SEBI Act, 1992, as well as relevant provisions of Code of Conduct for Directors and Senior Management read with LODR Regulations.[3]

Besides, SEBI in Para 40 of the order, has prima-facie observed that the Independent Directors on the Board of Dish TV India Limited, which includes Mr. Shankar Aggarwal, has failed to uphold high ethical standards; assist the Company in implementing the best corporate governance practices; safeguard the interest of all stakeholders; balance the conflicting interest of the stakeholders; moderate and arbitrate in the interest of the Company as a whole, and thus prima-facie found guilty of the violation of clauses 1 and 2 of Schedule A of the Code of Conduct read with Regulation 26(3) of the LODR Regulations, in addition to the violations mentioned above.

It is evident that this SEBI order has tarnished the reputation and credibility of the entire Board of Dish TV India Limited, including the Independent Directors such as Mr. Shankar Aggarwal. The integrity of each Board Member has become questionable.

A clear case of Conflict of interest

It is therefore surprising that how Mr. Shankar Aggarwal who has been show caused by SEBI for failing to implement best corporate governance practices and safeguarding the interest of the stakeholders, continues to serve on the Board of MCX and Committees of MCX as a Public Interest Director. Why is SEBI silent on it? Is it not fair on the part of Mr. Shankar Aggarwal to step down as Director of MCX and Chairman of various committees on the moral ground? Is it not the fiduciary duty of the other directors to take corrective actions when SEBI is silent?

The minimum expectation from SEBI, as a prudent market regulator was to disqualify with immediate effect, individuals approved/ nominated by SEBI from the board and committees of the companies where approval of such appointment is given by SEBI itself. In the case of Dish TV Ltd., SEBI ought to have disqualified Mr. Shankar Aggarwal from acting on the Board and Committees of MCX with immediate effect as a natural action along with the order of March 7, 2022.

It is understandable, that SEBI may not know about other directorships of the individuals that they deal with. However, MCX being an MII and its directors having been approved by none other than SEBI, SEBI is bound to have this knowledge and is expected to act vigilantly.

It is imperative that SEBI should disqualify the director of any company against whom charges of compliance & governance are under investigation, to hold directorship of any company until the matter is disposed of.

The continuation of the Directorship of Mr. Shankar Aggarwal with questionable character and conduct as a Public Interest Director (PID) on the Board of MCX shows that the SEBI has still not learnt its lesson from the NSE scandal which is now all over the media.

SEBI whose credibility is now in question from all quarters should be proactive enough in its approach to safeguard the interest of the investors, particularly in overseeing the senior level appointments and affairs at the systematically important MIIs, such as MCX. This is one of the factors, which could ensure that in the future NSE-like fiasco doesn’t reoccur, at least at the Board and Management level of any of the Exchanges under SEBI’s regulatory oversight.

It is a matter of guessing here that being Chairman of NRC, Mr. Shankar Aggarwal must be Chairman of Selection Committee who selects and recommended incumbent MD, Mr. P S Reddy. Given that the SEBI order is about non-compliance, we just hope that we don’t get to learn at later stage that there were any irregularities in MD selection. As a matter of fact, Mr. Shankar Aggarwal has drawn about Rs.33.50 lacs as sitting fees for FY 2020-21 as per the annual report of the company.[4]


[1] Sebi comes out with rules to review performance of public interest directorsFeb 05, 2019, Business Today

[2] Sebi gives Dish TV 24 hrs to reveal AGM results, directors get show-causeMar 07, 2022, Business Standard

[3] Interim Order in the matter of Dish TV India LimitedMar 07, 2022, SEBI

[4] Submission of Annual Report and Notice of Annual General Meeting of the Company for FY 2020-21Aug 10, 2021, BSE India

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An inventor and out-of-the-box thinker, Sree Iyer has 37 patents in the areas of Hardware, Software, Encryption and Systems.

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