Sucheta Dalal :Shooting the messenger sometimes ricochets (14 April 2002)
Sucheta Dalal

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Shooting the messenger sometimes ricochets (14 April 2002)  

Although investigations into the stock market scam of 2001 continue to ramble, the scam itself has claimed a strange victim. He is neither an investor who lost money, nor a broker who indulged in price manipulation.

The victim, A A Tirodkar, is an employee-director of the Bombay Stock Exchange (BSE) who was given his marching orders for doing his job diligently. Instead of rewarding him, he was charged with damaging the image of the organisation, which, in the past had commended him for his “high degree of honesty and strength of character.”

All that changed on March 3 last year when Tirodkar decided to take a tough stand about BSE president Anand Rathi seeking price-sensitive information from the surveillance department headed by him.

As it happened, Rathi’s conversation was taped on the surveillance department’s data/voice recording system.

When Rathi’s impropriety was brought to the attention of BSE executive director AN Joshi, he chose to ignore it. He later deposed before an inquiry commission saying that he did not think Rathi’s transgression was serious enough to be reported to the regulator.

Hence, Tirodkar called for a tape recorder, copied the conversation on an audiotape in the presence of witnesses, and took it home for safe keeping for fear that the official recording would be sabotaged.

Information about the taped conversation leaked to the media and reached the Securities and Exchange Board of India (SEBI). SEBI officials immediately seized the data on March 6 and began an inquiry into Rathi’s conduct.

The regulator also sacked all the broker-directors of the BSE governing board. Subsequently, Rathi was indicted for his serious breach of SEBI rules and guidelines. This indictment was recently upheld by the Securities Appellate Tribunal (SAT), although it reduced SEBI’s punitive action barring him from holding any position in any capital market-related institution from two years to one year.

For Tirodkar, however, his whistle blowing has resulted in endless harassment and could lead to an end to his career.

Within days of the Rathi tape episode the BSE gave Tirodkar his marching orders. Vested interests in the BSE launched a “high powered” inquiry against him for allegedly trying to tarnish the image of the exchange.

They also tried to bolster their case by putting together a slew of trivial charges against him. Simultaneously, Tirodkar’s reputation was damaged by leaking utterly false and defamatory information to CNBC — including a charge that he had links with the underworld and had threatened BSE officials. These allegations however, were not made in the official charge sheet.

Tirodkar fought back. Fortunately, he received crucial support from SEBI, which probably realised the negative implications of allowing a self-regulatory organisation to shoot a whistle blower. SEBI told the BSE that any action against Tirodkar would have to be referred to the governing board of the bourse.

The powerful broker lobby ensured that even a board comprising only of public representatives was all set to summarily sack Tirodkar on the grounds of Termination Simpliciter for loss of confidence. It was to be off-with-his-head backed by a callous, one-sided investigation. But again, SEBI put its foot down and forced the BSE to order an independent inquiry by a retired judge of the Mumbai High Court.

One year later, Justice B V Chavan, who conducted the inquiry has exonerated Tirodkar of all the most serious charges and said that they certainly do not invite either dismissal or loss of confidence leading to Termination Simpliciter.

More importantly, the judge’s findings fault the BSE and tend to expose how it victimised a senior employee for holding his ground against the broker’s clique that runs BSE.

He says “the manner in which Tirodkar was dealt with, as if he had committed a fraud which called for quick action by keeping him away from his office to prevent tampering of evidence, was certainly not called for.”

After sifting through various contradictory depositions by BSE officials, the judge says that in the circumstances that prevailed in March last year and the “murky atmosphere of scams created by bulls and bears,” Tirodkar’s action in taping Rathi’s conversation to protect it from possible sabotage was not without justification.

He also found no fault with the bona fides of Tirodkar’s action. He also dismissed BSE’s charge that Tirodkar had leaked information to the press.

As for Tirodkar’s alleged attempt to damage the BSE’s reputation, the learned Judge says: “First and foremost question to be asked is, who damaged, if at all, the image of the institution? Is it Mr Tirodkar who tried to protect the evidence of malpractice or the perpetrator of the malpractice? In my opinion, the answer is obvious and needs no elaboration.” The judge says that at best, Tirodkar may have committed an impropriety by not returning the Rathi tapes once SEBI had taken charge of the inquiry, “but in no case can it be described as misconduct, negligence, breach of office discipline or breach of duty.”

One would have expected this exoneration to end Tirodkar’s problems. But the BSE cabal is not one to give up so easily. The board of public directors, which lingers beyond its term, is grasping at the last paragraph of the judge’s order.

It says: if the board still thinks that Tirodkar’s services are no more useful to the organisation, it would be open to it to terminate him with a reasonable notice of say six months, along with all terminal benefits that will accrue to him in normal course in the absence of any statutory or contractual provisions providing for a fixed tenure.

Interestingly, the BSE top brass was questioned by the Joint Parliamentary Committee. about the action against Tirodkar. At that time, BSE directors assured the JPC that they would abide by the independent judge’s report.

Yet, the board has already met once to consider the option of terminating Tirodkar’s services. However, luck was on his side again. One of the public directors is understood to have objected to such drastic action being decided by the board, when the entire organisation itself was being restructured.

At this time, Tirodkar’s fate is uncertain. If the BSE persists with its vindictive action at the behest of the broker lobby he could lose his job. Unless SEBI steps in again in order to send the signal that those who aid effective supervision would be entitled to its protection. However, if Tirodkar does lose his job, it will send out the message that officials charged with supervisory duties owe their first allegiance to their bosses (however feckless they may be) and not to their job or to the regulatory system. Otherwise, they may end up sacked, humiliated and hounded by those who are actually guilty!

-- Sucheta Dalal