The Union Carbide of the Indian financial system

The National Stock Exchange (NSE), the backbone of India’s capital market, has grabbed the headlines for all the wrong reasons. In mid-February, mind-boggling details about former NSE CEO Chitra Ramkrishna and an unknown “Himalayan Yogi” shocked India and the entire financial world for their astonishing improbability.

As NSE MD & CEO, Chitra was guided every step of the way by the Yogi with whom she shared confidential company information. She had also appointed the inexperienced Anand Subramanian, as chief strategy officer and then as group operations director, at an exorbitant salary, higher than everyone but Chitra.

Vigilance, security and an unblemished reputation should be imperative for NSE, a company operating in a high-stakes fintech environment. And yet, Chitra’s grave breaches and flagrant abuse of power indicate that the exchange has failed to abide by any of these basic rules during his tenure.

Chitra abused his power from 2013 to 2016. His alleged wrongdoing was brought to light by NSE’s external auditor, SNACO, and investigations and complaints by the Nomination, Remuneration and Compensation Committee (NRC), a body composed of non-executive members of the NSE Board of Directors.

Chitra’s office along with other NSE executives then misled the NRC and later the SEBI after investigation. It is pertinent to note that the then autocratic culture of NSE, after questioning, prompted the company’s management to cover up wrongdoing rather than correct it.

The board of trustees at the time included illustrious names such as Justice BN Srikrishna; former LIC President, SB Mathur; Ravi Narain, the CEO and MD of NSE who had handed over to Chitra; NSE Regulatory Director, VR Narasimhan and more. And yet, SEBI held only the company, NSE, responsible for both, hiding Chitra’s wrongdoings from the regulator and providing false information during the investigation. Ravi Narain and Narasimhan were also found guilty of the same offences.

The NSE board had asked Chitra to resign when the entire board was informed that an unknown person was using Chitra as an intermediary to make decisions for NSE, and was sharing confidential information about business with that person. Although she knew that Chitra was leaking crucial information, instead of keeping evidence for proper investigation, the company considered her electronic waste and chose to destroy her laptop.

Had NSE not destroyed the evidence, authorities might have discovered the other people involved in Chitra’s wrongdoings. Who benefited and how much did they benefit from Chitra’s breaches would have been crucial in transforming Chitra’s case from a regulatory breach to a financial crime.

Did NSE commit a corporate crime?

In law, corporations are considered as legal persons with rights and duties. However, in practical situations, companies act through individuals. Generally, corporate criminal liability involves two approaches, ‘vicarious liability’ and ‘lifting the corporate veil’.

Under the vicarious liability approach, the company is held liable for the commission of offenses by its agents while performing their duty to the company. However, the responsibility of a company is engaged only when it is proven that the offense was committed at its request or in the exercise of its functions.

In the “lifting the corporate veil” approach, the law identifies the person or persons in the company who are responsible for the commission of an offense, prima facie committed by the company. Again, due to fluid and complicated organizational structures, it is often difficult to find the real author by this approach.

Since these approaches often do not work due to the complexity of the corporate structure and the flow of its human resources, a new concept of “corporate responsibility” has evolved which analyzes the corporate culture to consider the organizational responsibility. According to this model, rather than corporate liability for the actions of individual offenders, a corporation is liable because its “culture”, policies, practices, management or other characteristics encouraged or enabled the commission of the offence.

An unethical culture is fertile ground for smart sociopaths who have both the intelligence and the unencumbered value system to commit white-collar crimes.

In Chitra’s case, senior NSE officials and its board let her abuse power for years. SEBI’s request for an explanation was met with misleading facts. Regulatory abuses were covered up by the people who were supposed to be the regulator’s watchdogs. Evidence that could have revealed Chitra’s accomplices, the beneficiaries of his transgressions, and the monetary value of the financial crimes committed during Chitra’s tenure has been destroyed. No individual but the NSE through various employees, board members and other members has committed these offenses against the regulator, the capital market and the people of India.

Toxic corporate cultures proving costly for India

When a company’s culture promotes a healthy disregard for the law, even benefiting to the detriment of society, or covering up its faults instead of fixing its faults, its employees forget that the consequences of their actions can cause terrible harm to society. society.

For example, the Bhopal gas tragedy was the consequence of Union Carbide’s culture that created an environment of disregard for the more serious consequences of the company’s actions.

The Union Carbide plant was not even up to minimum safety standards – large quantities of methyl isocyanide were recklessly stored in a crowded area with its refrigeration unit deliberately turned off to save 40 $ per day in costs. His security systems were non-existent and the alarm was disabled. This happened despite the same plant having suffered an accidental release of phosgene, a deadly nerve agent, in the past.

In the Bhopal gas tragedy, no individual could be identified as the real perpetrator of the crime that killed thousands of people.

In the case of NSE, the company and its management know how crucial it is to the Indian capital market. There are very few entities that would be able to raise the funds, talent, and infrastructure to start an exchange, and even fewer would reach the size and scale of NSE.

In a way, NSE may have been the Union Carbide of the Indian financial ecosystem, a tragedy waiting to happen.


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Don F. Davis