Alleged Conflict Of Interest: SEBI Chairperson’s Past Ties To Max Healthcare Questioned In Axis-Max Case

In a recent hearing at the Delhi High Court concerning the Axis-Max case, Dr. Subramanian Swamy raised concerns about potential conflicts of interest involving the Securities and Exchange Board of India (SEBI). The case, which involves regulatory scrutiny of transactions between Axis Bank and Max Life Insurance, has come under increased public attention due to allegations that SEBI's actions might be compromised.

Dr. Swamy's legal team submitted an affidavit on March 13, 2024, suggesting that SEBI Chairperson Madhabi Puri Buch’s previous roles as an additional director and director at Max Healthcare Institute Ltd., from February 4, 2015, to April 3, 2017, could have influenced the regulator's approach in the ongoing investigation. This potential conflict of interest, they argued, might explain SEBI's alleged slow response in the case.

SEBI, however, maintained that its inquiry is progressing and asserted in an affidavit that a preliminary examination, prompted by the Insurance Regulatory and Development Authority of India (IRDAI), is at an advanced stage. The regulator also acknowledged forwarding a letter from the petitioner, dated October 19, 2023, to the Reserve Bank of India (RBI) for further consideration, given the involvement of Axis Bank and its subsidiaries.

The court addressed the allegations but noted that the writ petition had not been updated to formally include claims against the SEBI Chairperson, nor was she named as a respondent. The court emphasized that despite any prior professional connections, SEBI remains obligated to regulate the case according to legal standards. It also reassured the petitioner that SEBI's final decision could be challenged if evidence suggests it was unduly influenced by Buch’s past association with Max Healthcare.

In defense, IRDAI’s counsel highlighted that penalties had already been imposed on Axis Bank and Max Life Insurance, with fines totaling Rs 5 crore. These penalties, issued on October 13, 2022, were communicated to both RBI and SEBI for further review.

The court ultimately dismissed Dr. Swamy's public interest litigation (PIL) but directed the regulatory bodies to expedite their investigations and ensure compliance with the law. The resolution of these investigations is expected to significantly impact the future course of the case.

Dr. Swamy has accused Axis Bank and its affiliates of attempting to acquire a controlling stake in Max Life Insurance through unfair means. He claimed that Axis Bank’s board approved a preferential allotment of Rs 1,612 crore to Max Life, which increased the bank’s stake in the insurer to 16.22 percent, with a collective stake of 19.02 percent among Axis entities. Additionally, Swamy alleged that Axis Bank profited significantly from stock transactions with Max Life, which he argues were conducted at unfair prices, in violation of IRDAI directives.

Axis Bank has strongly denied the allegations, reaffirming its commitment to transparency and fairness. The bank emphasized that the Delhi High Court dismissed the PIL, recognizing that the issues were already under the scrutiny of regulatory authorities. Axis Bank reiterated its dedication to conducting business in an ethical manner, prioritizing the interests of its stakeholders.