BENGALURU : On 29 November 2016, just before the then board members of the National Stock Exchange of India Ltd could sack managing director and CEO Chitra Ramkrishna, she quickly jotted down a handwritten resignation letter, pre-empting a possible sacking.
The resignation posed a dilemma for the 11 board members gathered at the exchange’s corporate office in Mumbai’s Bandra Kurla Complex that day. Should they accept her resignation letter or go ahead and sack her?
Though they had made up their minds to terminate her services, the board decided to accept Ramkrishna’s resignation based on the advice of law firm Shardul Amarchand Mangaldas, three people familiar with the developments said, requesting anonymity.
The board’s plan to sack Ramkrishna was triggered by the serendipitous discovery during a forensic audit that even after the sacking of Anand Subramanian, a confidante of Ramkrishna whom she had hired from relative obscurity and elevated to the post of chief operating officer, she continued to share confidential company information with him. Subramanian was let go by NSE on 21 October 2016, and Ramkrishna was warned against sharing company information with outsiders, including her former deputy.
“Was sharing information with an outsider a reason to sack the CEO? Yes. She (Chitra Ramkrishna) had lost faith of the board. But she gave her resignation letter, and when the legal advice was to accept the resignation, the board did not want to start a new process of sacking her," said one of the three people cited above.
On why the board lost faith in Ramkrisha, the second executive said: “It was during one of the board meetings in September when the board again asked her to submit a three-year business plan and a succession plan for CEO and KMP (key management personnel). And she always remained vague."
An email sent to Shardul Shroff, executive chairman of Shardul Amarchand Mangaldas, seeking comment went unanswered. Text messages to Subramanian and Ramkrishna, too, went unanswered. Ashok Chawla, who was chairman of the board at the time, declined to comment.
The events that unfolded about five years ago are under the spotlight after an order by the Securities and Exchange Board of India (Sebi) earlier this month that imposed a fine on Ramkrishna for having shared privileged information with a person identified only as a Himalayan yogi.
The markets regulator also criticized the exchange’s board for failing in its fiduciary duties.
NSE’s board was reconstituted in 2016, with seven members, with Chawla as chairman. The reconstitution, according to the three executives, was spearheaded by the then finance minister, Arun Jaitley, and then Sebi chairman U.K. Sinha.
Until December 2015, the board of NSE was led by chairman S.B. Mathur, vice-chairman Ravi Narain and Ramkrishna. Representatives of investors General Atlantic and Premji Invest Abhay Havaldar and Prakash Parthasarathy were the other two directors. Apart from Narain, Ramkrishna, Havaldar and Parthasarathy, all remaining members were replaced with new faces.
Subramanian, who joined the exchange as a consultant in April 2013, was not a board member but attended most of these board meetings as a special invitee, up until September 2016, according to two of the three executives cited earlier.
In the summer of 2016, Ramkrishna proposed to spin off all of NSE’s 10 subsidiaries (nine in India and one overseas) and put them under a holding company. Subramanian, then group operating officer and adviser to CEO, was proposed to be the president of this holding company.
“The board rejected this proposal," said the second executive. “This structure was being suggested so that Subramanian would escape the board’s oversight".
“Chitra told us he (Subramanian) was a counsel to her and so used to be a special invitee in the board meetings," said the third executive. “Soon, we stopped him (Subramanian) from attending board meetings)."
The trigger for the newly reconstituted board stopping Subramanian from attending board meetings and to start a review of his appointment and remuneration was a letter from Sebi. On 15 September, the NSE board met to discuss the 9 September letter from Sebi, which wanted the exchange to place its letter before the board and check if there were irregularities in the re-designation of Subramanian, who joined as a chief strategic adviser in April 2013 and rose to become group operating officer two years later. Subramanian’s remuneration during this time increased from ₹1.68 crore to ₹4.2 crore a year.
The board scrambled to set up an inquiry panel headed by Dinesh Kanabar, chairperson of its nomination and remuneration committee (NRC).
At 4pm on 21 October, based on the findings of the NRC, the NSE board called Ramkrishna and told her to “terminate" Subramanian’s contract and “walk him out" of the building.
“The board asked Chitra to terminate Anand’s services as she, as the CEO, had appointed him and to make sure that he does not take any property of NSE, and to ensure that his resignation is taken and the matter is closed," said the first executive.
A shocked Ramkrishna walked to Subramanian’s cabin, spoke for a few minutes, and in less than 30 minutes, Subramanian walked out of NSE headquarters.
Four days later, on 19 September, NSE received another letter from Sebi. This time the markets regulator wanted the exchange to conduct a forensic audit on the algorithmic trading scandal, or co-location scandal. NSE entrusted Deloitte and EY to do the audit. It was as part of EY’s forensic audit that the board discovered that Ramkrishna continued to share information over emails with Subramanian after his ouster on 21 October.
“Once Chitra was out, we appointed an interim CEO and, later, a full-time CEO in Vikram (Limaye) and a compliance officer," said the third executive. “Now, where is the question of the board not having done its fiduciary duties? On the question of not recording our discussions, please understand that any board in any company does not minute or record all discussions but only the actions. So, when Anand was ousted, we recorded that, and when Chitra resigned, we placed that on record too".
