CBI probe against Sebi chief vigilance officer Padmanabhan

Central Bureau of Investigation (CBI) has registered a preliminary enquiry (PE) into the role of Securities and Exchange Board of India 's chief vigilance officer (CVO) R.K. Padmanabhan in connection with alleged weakening of a case against promoters of Bank of Rajasthan (BoR), which was being probed by the market regulator, and other suspected irregularities in the investigations. Sources said that Padmanabhan, a 1991-batch IPS officer from the Maharashtra cadre, will be investigated for allegedly diluting the case against the promoters of BoR.

It is alleged that Sebi did not levy adequate penalty on BoR promoters, who had made fraudulent declarations about their shareholding. BoR was acquired by ICICI Bank in 2010. Sources further said that on the basis of complaints received by CBI against Padmanabhan, who is also executive director (investigation) in Sebi, the agency has decided to register the PE.

Sebi found that shareholding of the promoters had increased from 46.8 per cent in June 2007 to 63.15 per cent in December 2009 whereas they had declared only 28.61-per cent shares.

Last year, Sebi slapped a fine on BoR's then-promoter Pravin Kumar Tayal-his brothers Sanjay and Navin-and his son Saurabh for violation of norms. It is alleged that while illgotten gains of the promoters made by making wrong disclosures were nearly Rs 700 crore, Sebi had imposed a penalty of only Rs 30 crore.

The penalty should have been in the range of more than Rs 2,000 crore. The PE will focus whether the case was allegedly weakened by the active participation of Sebi officials and the purported role played by Padmanabhan. In February, Securities Appellate Tribunal had upheld the penalty of Rs 4 crore each on Sanjay and Pravin.

However, a fine of Rs 1 crore imposed on each of them by Sebi was set aside. A group of minority shareholders in BoR have alleged serious lapses in the probe carried out by Padmanabhan. The group had alleged that being CVO, he is looking into these complaints against him which is a conflict of interest and against norms of Central Vigilance Commission manual.