Sebi selection petition withdrawn

A petition asking the Supreme Court to order the annulment of a 2010 notification on the selection of top Sebi functionaries was allowed to be withdrawn for the second time on Monday.

A bench presided by Chief Justice S H Kapadia stated in the order the new petition was almost identical to the one withdrawn earlier. The court allowed the petitioners to file a new one. But, the Chief Justice orally told their counsel that would be the last time the court would hear it.

The main question raised during arguments by the counsel was over the constitutional aspects of the selection and appointment of the chairman and members of Sebi (the Securities and Exchange Board of India). But, the judges pointed out there was nothing on that aspect in the petition. It did not say the notification and rules were constitutionally invalid. Instead of enunciating constitutional principles, the petition went “roundabout” and “haywire” and demanded the present chairman be removed and things like that, it was observed. The judges remarked they were “indignant”, as this was the second time the petition was being moved. “It is not fair to the court,” they said. There were several allegations and they had nothing to do with the constitutional questions raised by the counsel but not found in the petition, the judges said, and added, “This is all towards publicity.”

If there was mala fide in the appointment, it must be said so, the judges said. In the order, the court emphasised it expected “proper pleadings” on the constitutional doctrines vis-a-vis the regulatory mechansism.

The counsel said the notification impinged on Sebi's independence, and it was not just about Sebi but the principles of all regulatory authorities set up under statutes. The Sebi notification affected the constitutional principle of separation of powers, he said. There should be a balance in the selection panel between experts and others, he added. The judges remarked all these issues did not find any place in the petition and were orally submitted.

Attorney General G E Vahanvati echoed the judges' views. He did not argue at length as his views were identical to those of the bench.

The public interest petition was moved by former Chief of Staff S Krishnaswamy and ex-DGP Julio Ribeiro. They clarified through their counsel it was not against any particular individual. Their main grievance was against the amendment to the Sebi (Terms and Conditions of Service of Chairman and Members) Rules. The new rules introduced in October allowed the finance minister to appoint any two persons in the panel for selection of the chairman and members. It also changed the constitution of the selection panel from a three-member to a five-member committee. According to the petition, the change would impact the crucial balance of the committee and compromise Sebi’s role as a regulator.

In its written reply, the government denied the allegations and alleged the petition strove to espouse the cause of some disgruntled former officers of the capital markets regulator. It explained the circumstances under which former chairman C B Bhave’s term was not extended and how the incumbent, U K Sinha, was chosen.