Mumbai, March 23 In the wake of the HDFC Bank crisis triggered by chairman Atanu Chakraborty's sudden resignation, Sebi chairman Tuhin Kanta Pandey said on Monday that independent directors need to act responsibly and back up any accusations with evidence.
In comments that came days after problems at the largest private-sector lender, Pandey said that independent directors like Chakraborty play a very important role in protecting the interests of minority shareholders on the board and outlined the process for voicing concerns as per the regulations.
Chakraborty resigned, citing concerns about values and ethics, which led to widespread worries about governance at the systemically important bank and a sharp correction in its stock prices as investors became wary.
Reading from the code of conduct for independent directors (ID), Pandey said that any concern about the functioning of a company or a proposed action needs to be taken up with the board, and if the same is not resolved, include the same in the minutes of the board meeting.
Pandey said that the IDs need to "act responsibly", and added that they cannot keep things "vague".
"Obviously, no one is expected to make any accusations without proper evidence and documentation because this has an impact on the interests of minority shareholders. The independent directors have to be actually responsible in terms of whatever they say and document," he said.
Declining to spell out Sebi's stance in the matter, Pandey stuck to reading the regulations but added that the capital markets regulator will go into whatever is there on the record.
"Strategic details of an investigation cannot be discussed in a press conference," Sebi's whole-time member Kamlesh Varshney said.
Pandey admitted that IDs have explicit powers to question a company and so on, including at forums like the audit committee or the remuneration committees, they need to be responsible and ensure minority investor interest is protected.
It can be recalled that the HDFC Bank board members, including the chief executive and managing director Sashidhar Jagdishan, have said that they were "baffled" by Chakraborty's actions because the former bureaucrat from the Gujarat cadre did not back up his claims.
Pleas to relook at the words in the resignation letter, where Chakraborty cites concerns on ethics and values, were also ignored, as per the directors.
Three senior executives have been sacked by the bank in the immediate aftermath of the resignation for mis-selling.