The government today defended itself before the Supreme Court by saying that a petition which sought the annulment of a 2010 notification regarding the selection of the top functionaries of the Securities and Exchange Board of India (Sebi) strove to espouse the cause of some disgruntled former officers of the country’s securities market regulator.
The public interest litigation (PIL) had alleged that last year’s notification had subverted the process of recruitment of Sebi chairman U K Sinha and other high-ranking members.
Also read: 'Sinha topped the 2008 shortlist'
Today, the union finance ministry, in its response to the PIL, filed an affidavit in the apex court, saying that the litigation stemmed from certain dismay within a section of Sebi ex-officers. In it, Amit Bansal , under secretary in the ministry of finance, said the petition was filed based on “incomplete documents and annexes”. Giving an example, he noted that a “motivated” letter dated June 1 this year written by a former whole-time member (WTM) to the prime minister made “broad, sweeping and unsubstantiated allegations”.
Overall, the affidavit said the ministry found no merit in the petition and deserved to be dismissed with costs.
Last Friday, the court had allowed the government to respond to the PIL listed before it. A bench headed by Chief Justice S H Kapadia deferred its hearing after Attorney General G E Vahanvati said the Centre would file an affidavit in the case. The petitioners include former Chief of Air Staff S Krishnaswamy and ex-DGP Julio Ribeiro. Represented by counsel Gopal Subramaniam, they had told the court that the petition was not against any individuals, instead it aimed at raising some important questions of law.
The affidavit filed today said selections till July 2009 were made time to time by committees, as decided by the finance minister. As for the 2008 selection of the Sebi chairman, it said the then finance minister had approved on November 2, 2007, a high-powered search committee (later notified as the “Search Committee”).
It had four members and one chairperson, and had noted that there should be one more expert from outside. Subsequently, after the present finance minister took over in 2009, a statutory system was established for the selection of both chairman and WTMs of Sebi, the affidavit said. “The allegation that this is the only instance when the nominees of the minister are placed in a committee is false and a mis-statement,” it added.
The Search-cum-Selection committee after scrutinising and analysing the qualifications and experience of the shortlisted candidates, “unanimously placed” Sinha first in the order of merit, the affidavit said.
The PIL had stated that the notification dated October 7, 2010, which amends the constitution of the search-cum-selection committee, was “arbitrary” and was “patently illegal because it sought to give unbridled power to the finance minister by placing two of his nominees in the committee who would finally select the Chairman and the WTMs of the Sebi.” To this, the finance ministry today said the amendment was done on the suggestion of the law ministry, which had relied on the provisions contained in the Income Tax Appellate Tribunal Members (Recruitment and Conditions of Service) Rules, 1963.
On the alleged malafides in not granting an extension to former Sebi chairman C B Bhave despite having obtained his consent and despite the finance secretary having opined, on 8 October 2009, that his performance was “good”, the affidavit said the time of the finance minister’s approval to the committee’s proposal the following month coincided with “serious controversies” that broke out with regard to the entire issued related to the National Securities Depository Limited (NSDL) and the IPO scam. Bhave was then the chairman-cum-managing director of NSDL.
Giving details of the developments pertaining to the NSDL case, the affidavit outlined, that the finance minister, being “fully aware” of that controversy, noted on the file on December 22, 2009, that the question of granting an extension to Bhave need not be processed further since his tenure was up to February 2011 and the “appropriate time to move the ACC would be six months before the end of the existing tenure”.
The affidavit termed as “curious” the letter former Sebi member K M Abraham wrote to the prime minister. “It is curious that Abraham started writing to various authorities complaining of alleged interference by the Ministry of Finance, only after he knew that he may not succeed in getting extension as WTM and he lost hope of being appointed as Director of NISM [National Institute of Securities Market].” Also, “no person from the ministry has tried to influence in any case or with the regulatory functions of Sebi”.
It has also stressed that Sebi’s Sinha had himself repudiated the statements Abraham made in his June 1 letter this year. In fact, the chairman stated that Abraham even “attempted to interfere with the implementation of the orders of the Hon’ble Supreme Court for reconsidering the decision of the Sebi Board which had declared in November 2009, the orders of the Inquiry Committee in the IPO scam as non est [non-exitent].” Further, Abraham was a member of the Board that took this decision and that he was “emotional and vehement” in telling the Sebi chairman that the regulator’s board “should stick to its earlier decision despite the orders” of the apex court.