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Public interest litigation questioning the appointment of Mr. U.K.Sinha as chairman of SEBI -In our opinion,the petition does not satisfy the test of utmost good faith which is required to maintain public interest litigation. Apex court dismissed the writ filed under Art.32 of Indian constitution =Arun Kumar Agrawal …Petitioner Versus Union of India & Ors. …Respondents – Reported in http://judis.nic.in/supremecourt/filename=40945

Public interest litigation questioning the appointment of Mr. U.K.Sinha as chairman of

English: The supreme court of india. Taken abo...

English: The supreme court of india. Taken about 170 m from the main building outside the perimeter wall (Photo credit: Wikipedia)

SEBI -In our  opinion,the petition does not satisfy the test of utmost good faith  which  is required to maintain public interest litigation. Apex court dismissed the writ filed under Art.32 of Indian constitution =

 

This writ petition has been filed by one Mr. Arun Kumar  Agrawal

           under Article  32  of  the  Constitution  of  India;  seeks  the

           issuance of a writ  of  quo  warranto  or  any  other  direction

           against Mr. U.K. Sinha, Chairman of the Securities and  Exchange

           Board of India (hereinafter  referred  to  as  ‘SEBI’)  and  his

           consequential removal from the post of Chairman.

 

        2. Stated concisely, the petitioner challenges the  appointment  of

           respondent No.4 on the following  grounds :-

 

              a)  Mr.  Sinha  failed  to  fulfill  one  of  the  eligibility

                 condition as laid down in sub-section (5) of Section  4  of

                 the Securities  and  Exchange  Board  of  India  Act,  1992

                 (hereinafter referred to as ‘SEBI Act’),  as  well  as  the

                 qualification contained in Government communication,  which

                 required that the  Chairman  shall  be  a  person  of  high

                 integrity.

 

              b) The  appointment  of  respondent  No.4  is  the  result  of

                 manipulation, misrepresentation and  suppression  of  vital

                 material before the Search-cum-Selection Committee and  the

                 Appointment Committee of the Cabinet (hereinafter  referred

                 to as ‘ACC’).

 

              c) The appointment of respondent No.4, a Chairman of SEBI,  is

                 mala fide.

=

 

the preliminary objections raised  by  the

      respondents that the writ petition deserves to  be  dismissed  on  the

      ground that  it  is  not  a  bona  fide  petition.  

According  to  the

      respondents, the petitioner has been set up by interested parties.  

We

      entirely agree with the  submissions  made  by  the  learned  Attorney

      General that the first requirement for the maintainability of a public

      interest litigation is the uberrimae fide of the  petitioner.  

In  our

      opinion, the petitioner has unjustifiably attacked  the  integrity  of

      the entire selection process. 

It is virtually impossible to accept the

      submission that respondent No.6 was able  to  influence  the  decision

      making process which involves the active participation of the  ACC,  a

      high powered Search-cum-Section Committee with the final  approval  of

      the Finance Minister and the Prime Minister.  

The  proposition  is  so

      absurd that the allegations with regard to mala fide could  have  been

      thrown out at the threshold. 

We have,  however,  examined  the  entire

      issue not to satisfy the ego of the  petitioner,  but  to  demonstrate

      that it is not entirely inconceivable that  a  petition  disguised  as

      “public interest litigation” can be filed with an ulterior  motive  or

      at the instance of some other person who hides  behind  the  cloak  of

      anonymity even in cases where the procedure  for  selection  has  been

      meticulously followed. 

The respondents have successfully  demonstrated

      how the petitioner  has  cleverly  distorted  and  misinterpreted  the

      official documents on virtually each and every issue. 

In our  opinion,

      the petition does not satisfy the test of utmost good faith  which  is

      required to maintain public interest litigation.  

We  have  been  left

      with the very un savoury impression that the petitioner is a  surrogate

      for  some  powerful  phantom  lobbies.  Respondent  No.2-SEBI  in  its

      affidavit has stated that the petitioner is a  habitual  litigant.  

He

      files writ petitions against individuals to  promote  vested  interest

      without any relief to the public  at  large.  

We  are  at  a  loss  to

      understand as to how in the facts of this  case,  the  petitioner  can

      justify invoking the jurisdiction of  this  court  under  Article  32.

      This is not a petition to protect the Fundamental Rights of any  class

      of down trodden or deprived section of the population.  It is more for

      the protection of the vested interests of some  unidentified  business

      lobbies.  

The petitioner had earlier  filed  writ  petition  in  which

      identical relief had been claimed and the same had been dismissed. The

      aforesaid  writ  petition  is  sought  to  be  distinguished  by   the

      petitioner on the ground that three  successive  writ  petitions  were

      withdrawn as sufficient pleadings were  not  made  for  the  grant  of

      necessary relief.  

Even if this preliminary objection is  disregarded,

      we are satisfied that the present petition is filed at the  behest  of

      certain interested powerful  lobbies.  

The  allegations  made  in  the

      letter written by Dr.  Abraham  are  without  any  basis  and  clearly

      motivated. 

Further, a perusal  of  the  record  clearly  reveals  that

      several complaints  were  filed  against  Dr.  Abraham,  wherein  some

      serious allegations have been made against  him  in  relation  to  his

      tenure as the Whole Time Member (WTM), SEBI. 

Also, it was  only  after

      the Ministry of Finance decided not to extend his tenure as WTM,  SEBI

      and advertisements for new appointments were issued that  Dr.  Abraham

      started complaining about interference of the Ministry of  Finance  in

      SEBI through the present Chairman. 

We may also notice  here  that  the

      letter dated 1st June, 2011  written  by  Dr.  Abraham  to  the  Prime

      Minister, that the Petitioner seeks reliance upon, was written  merely

      a month and a half before Dr. Abrham’s tenure was  to  end.  

From  the

      above, it is manifest that the  letter  written  by  Dr.  Abraham  was

      clearly motivated and espouses no public interest. 

The affidavit  also

      narrates the  action  which  has  been  taken  by  SEBI  against  very

      influential  and  powerful  business  Houses,  including  Sahara   and

      Reliance. It is pointed out that the  petitioner  is  a  stool  pigeon

      acting on the directions of these Business Houses. 

We  are  unable  to

      easily discard the reasoning put forward by respondent No.4. It  is  a

      well known fact that in recent times, SEBI has been active in pursuing

      a number of cause celebre against some very powerful Business  Houses.

      

Therefore, the anxiety of these Business Houses for the removal of the

      present Chairman of SEBI is  not  wholly  unimaginable.  

We  make  the

      aforesaid observations only to put on record that the present petition

      could have been  dismissed  as  not  maintainable  for  a  variety  of

      reasons. 

However, we have  chosen  to  examine  the  entire  issue  to

      satisfy our judicial conscience that the appointment to  such  a  High

      Powered Position has actually been made fairly and in accordance  with

      the procedure established by law.

      64.    We  find  no  merit  in  this  petition  which  is  accordingly

      dismissed.

 

REPORTABLE

IN THE SUPREME COURT OF INDIA
CIVIL ORIGINAL JURISDICTION

WRIT PETITION (CIVIL) NO.374 OF 2012
Arun Kumar Agrawal …Petitioner
Versus
Union of India & Ors. …Respondents
J U D G M E N T
SURINDER SINGH NIJJAR, J.
1. This writ petition has been filed by one Mr. Arun Kumar Agrawal
under Article 32 of the Constitution of India; seeks the
issuance of a writ of quo warranto or any other direction
against Mr. U.K. Sinha, Chairman of the Securities and Exchange
Board of India (hereinafter referred to as ‘SEBI’) and his
consequential removal from the post of Chairman.

2. Stated concisely, the petitioner challenges the appointment of
respondent No.4 on the following grounds :-

a) Mr. Sinha failed to fulfill one of the eligibility
condition as laid down in sub-section (5) of Section 4 of
the Securities and Exchange Board of India Act, 1992
(hereinafter referred to as ‘SEBI Act’), as well as the
qualification contained in Government communication, which
required that the Chairman shall be a person of high
integrity.

b) The appointment of respondent No.4 is the result of
manipulation, misrepresentation and suppression of vital
material before the Search-cum-Selection Committee and the
Appointment Committee of the Cabinet (hereinafter referred
to as ‘ACC’).

c) The appointment of respondent No.4, a Chairman of SEBI, is
mala fide.

3. Mr. Prashant Bhushan, learned counsel appearing for the
petitioner, has made detailed submissions with regard to the
manipulations and the maneuvers indulged in by the petitioner with the
active connivance of some other persons to successfully mislead the
Search Committee as well as the ACC. He has highlighted that the
petitioner does not fulfill the requirements of Section 4(5) of SEBI
Act which provides as under:-

“(5) The Chairman and the other members referred to in
clauses (a) and (d) of sub-section (1) shall be persons of
ability, integrity and standing who have shown capacity in
dealing with problems relating to securities marker or have
special knowledge or experience of law, finance, economics,
accountancy, administration or in any other discipline which,
in the opinion of the Central Government, shall be useful to
the Board.”
4. Giving the factual background, he referred to the communication
dated 10th September, 2010 of the Department of Economic Affairs
inviting the application for the post of Chairman SEBI. In paragraph 3
of the aforesaid communication which provided that “keeping in view
the role and importance of SEBI as a regulator, it is desirable that
person with high integrity, eminence and reputation preferably with
more than 25 years of professional experience and in the age group of
50 to 60 years may apply”. Learned counsel submits that Mr. Sinha
lacks integrity which is well illustrated by a reference to events
leading to his appointment.
5. He points out that Mr. Sinha was Joint Secretary, Banking till
May, 2002. He became Joint Secretary, Ministry of Finance in June,
2002. Thereafter, he held the post of Joint Secretary, Capital Market,
Ministry of Finance from 1st July, 2003. Whilst working as such he
was appointed as Additional Director on the Board of Unit Trust of
India Asset Management Company Ltd. (hereinafter referred to as ‘UTI
AMC’). Thereafter, on 3rd November, 2005 Mr. Sinha was appointed as
CEO and MD of UTI AMC on deputation for two years. According to Mr.
Bhushan, Mr. Sinha was wrongly sent on deputation under Rule 6(2)(ii)
of the IAS (Cadre) Rules, 1954, which is applicable in case of
deputation in an international organization, NGO or body not owned by
the Government. Since the equity share capital in UTI AMC is held by
the State Bank of India, Life Insurance Corporation, Bank of Baroda
and Punjab National Bank, each holding 25% of the shares, it could not
be said that UTI AMC was not controlled by the Government. According
to Mr. Bhushan, Mr. Sinha ought to have been sent on deputation under
Rule 6(2)(i) of the IAS (Cadre) Rules, 1954 which is applicable for
deputation of an IAS officer “under a company, association or body of
individuals, whether incorporated or not, which is wholly or
substantially owned or controlled by the State Government, Municipal
Corporation or a local body by the State Government on whose cadre
she/he is borne.” According to Mr. Bhushan, Mr. Sinha was
deliberately sent on deputation under Rule 6(2)(ii) for
ulterior motive. He points out that the deputation of Mr. Sinha was
against the accepted assurance given to the J.P.C. on the appointment
of CMD of UTI AMC. Mr. Sinha as Joint Secretary, Capital Market and
member of the Board of UTI AMC was aware of the recommendation of JPC.
He deliberately violated the recommendations. According to Mr.
Bhushan, the deputation was also in violation of policy of not
allowing deputation to an officer who had overseen the organization to
which he was being deputed. Deputation of Mr. Sinha was also in
conflict of interest as he was Joint Secretary, Banking till May 2002
and the ownership of UTI AMC was with the SBI, Bank of Baroda, PNB and
LIC. According to Mr. Bhushan, Mr. Sinha was privy to sensitive
information. Under the rules, Mr. Sinha was required to file
affidavit/undertaking that person sent on deputation was not privy to
any sensitive information.
6. Continuing further, Mr. Bhushan pointed out that on appointment
as CMD, UTI AMC on 13th January, 2006, Mr. Sinha continued to get pay
scale of Joint Secretary, even though he had an option under Rule
6(2)(ii) of drawing the pay of the UTI AMC or the scale of pay of the
Government which is beneficial. There was no separate pay scale for
CMD of UTI AMC and the same needed to be created in view of the option
under Rule 6(2)(ii). On 29th January, 2007, Mr. Sinha made
representation to the Government claiming that his batch cadre IAS
Officer has been empanelled as Additional Secretary, therefore, his
salary be fixed accordingly in the pay scale of Additional Secretary
to the Government of India i.e. 22400-525-24500. On 1st March, 2007,
the salary of Mr. Sinha was fixed in the aforesaid scale, with effect
from 10th February, 2007. A communication was also sent on 16th April,
2007 enclosing the terms and conditions of the deputation of Mr.
Sinha. It was pointed out that the member of service may opt for his
grade pay or the pay of the post, whichever is more beneficial to him.
It was also pointed out that the terms and conditions will be
applicable with effect from 27th December, 2007. Mr. Bhushan
thereafter laid considerable emphasis on the fact that on 27th
September, 2007 the Board UTI AMC approved the remuneration package of
Mr. Sinha keeping in view the remuneration package of CEO in the
industry, roles and responsibilities of the CMD, UTI AMC and the
current surge of the salary structure in the market, as follows :-
• Fixed Pay Rs. 10 million per annum

• Variable Pay upto 100% of Fixed pay subject to performance
and as may be approved by the Board on yearly basis.
7. According to Mr. Bhushan, this decision was taken on the basis
of the recommendation made by the Aapte Committee in July, 2007. This
Committee had been set up to recommend the compensation to be paid to
CMD, UTI AMC. This Committee had recommended the compensation to be
paid to CMD, UTI AMC on the basis that the compensation should be
market competitive to attract appropriate talent from the market.
8. According to Mr. Bhushan, the actual fact situation would show
that the recommendation to appoint CMD, UTI AMC from the market was
given a complete go by at the time of the appointment of Mr. Sinha in
2008, when his extension to deputation was denied. Therefore, in order
to continue as CMD, UTI, AMC Mr. Sinha took voluntary retirement. Mr.
Bhushan states that on 6th November, 2007 though a proposal for
extension of deputation of Mr. Sinha for a period of two years was
made, he was only granted an interim extension of three months till
2nd February, 2008. This was because some general issue regarding
deputation under Rule 6(2)(ii) was being re-examined. On 28th
November, 2007, the Consolidated Deputation Guidelines for All India
Services was circulated by the Ministry of Personnel and under the
Guidelines the deputation of Mr. Sinha was determined to be under Rule
6(1). He points out that under Rule 6(1) there is no option of getting
remuneration as per the scheme of the organization to which an officer
is sent on deputation. On 12th December, 2007, the Finance Ministry,
Department of Economic Affairs requested the Department of Personnel
and Training (DOPT) to extend the deputation of Mr. Sinha for the
remaining one year and nine months under Rule 6(1). On 10th March,
2008, the ACC advised the Finance Ministry (Department of Economic
Affairs) that extension of tenure as CMD of UTI AMC has been granted
to Mr. Sinha till 31st May, 2008 under Rule 6(1). It was indicated
that upon completion of the aforesaid term he would return to his
parent cadre (Bihar). A direction was issued to the Department of
Economic Affairs to identify a suitable replacement of Mr. Sinha by
that date. Mr. Bhushan points out that in the meantime
on 25th March, 2008, the shareholders approved the emoluments of Mr.
Sinha as recommended with effect from 27th December, 2006. This,
according to Mr. Bhushan, was not permissible since 28th November,
2007 or at best since February, 2008 the deputation of Mr. Sinha was
no longer under Rule 6(2)(ii). Mr. Bhushan points out that inspite of
the recommendation of the ACC on 10th March, 2008, a recommendation
was made by the Chairman of SBI on behalf of other shareholders
proposing that Mr. Sinha should continue as CMD of UTI AMC even beyond
31st May, 2008. In the recommendation letter, it was proposed to
offer four years tenure to Mr. Sinha as CMD of UTI AMC with effect
from 1st June, 2008 or earlier without break of continuity. The letter
also notices that under the existing Government Rules Mr. Sinha will
be able to take this offer only if he takes voluntary retirement from
the Government Service. A formal letter for extension of tenure was
issued to Mr. Sinha on 11th April, 2008 by the UTI AMC. On 12th
April, 2008 the Board of UTI AMC approved that the CMD can draw
revised compensation with effect from 27th December, 2006.
9. Mr. Bhushan had laid considerable amount of emphasis on these
facts to support the submission that although the words in the
aforesaid letters give the impression that the approval of the
shareholders of the pay package and the bonus was for the future but
in reality the resolution enhanced the emoluments with effect from
27th December, 2006. Mr. Sinha in fact drew emoluments on that basis
with effect from 27th December, 2006. This fact, according to Mr.
Bhushan, is evident from the annual return of UTI AMC for the year
2007-2008. The annual return shows his salary for the year ended 31st
March, 2008 as Rs.20.12 million. The return also shows that Mr. Sinha
has also been paid Rs. 4.40 million as an arrear of his salary from
27th December, 2006 to 31st March, 2007 consequent to his salary
restructured with effect from 27th December, 2006. Being
fully aware of all the facts and having received compensation in
crores of rupees, Mr. Sinha did not disclose the same while making an
application for VRS on 15th April, 2008. Whilst giving the answer to
column No.5 in the form of application to accept the commercial
appointment, Mr. Sinha stated Rs.22,400–Rs.525-Rs.24,500/- as his pay
scale and Rs. 23,450/- as his present basic pay.
10. Mr. Bhushan pointed out that this information was necessary for
getting the no-objection from the Cadre Controlling Authority and from
the office from where the officer retired. Mr. Bhushan further pointed
out that not only Mr. Sinha gave false information in the application
for seeking voluntary retirement; he repeated the same in the counter
affidavit, in response to the writ petition in this Court. According
to Mr. Bhushan, the averments made in paragraph 18 of the counter
affidavit are contrary to the Balance Sheet of the UTI AMC for the
year 2007-2008. Mr. Bhushan emphasized that it is apparent from the
annual report of UTI AMC for the year 2008-2009, 2009-2010 and 2010-
2011 (10½ months), Mr. Sinha got remuneration of Rs.2.15 crores, Rs.
2.36 crores and Rs.3.62 crores, respectively. According to Mr. Bhushan
again in paragraph 21 of the affidavit Mr. Sinha has tried to mislead
this Court. Mr. Sinha had stated that the excessive payment of Rs. 4
crores for the year 2010-2011 was on account of severance payment. He
submits that the severance payment is payable only when the concerned
organization asks the CEO to leave. In the case of Mr. Sinha, UTI AMC
did not ask him to leave. In fact, Mr. Sinha did not even give the
mandatory three months notice, and relinquished the charge without
giving any opportunity to the organization to appoint another CEO. Mr.
Bhushan submits that Mr. Sinha wrongly received benefits of retirement
when in fact he had only resigned. He reiterated that Mr. Sinha has
given false information repeatedly. He gives a false declaration under
Rule 26(3)(ii) of All India Services Death-cum-Retirement Benefit
Rules to the effect that in the last three years of his official
career he has not been privy to sensitive or strategic information of
UTI AMC. Mr. Bhushan pointed out that this statement is patently
false as Mr. Sinha was already on deputation in the same organization
at the time of taking VRS.
11. Mr. Bhushan also pointed out that the third deliberate mis-
statement made by Mr. Sinha in the application to accept the post of
CEO of UTI AMC, was to the effect that such higher level post are
generally not advertised. This statement was in answer to the question
whether the post on which the appointment is sought was advertised
and, if not, how was the offer made. Mr. Sinha had stated that keeping
in mind the contribution made by him and the needs of the company, the
shareholders have made the offer to him. Mr. Bhushan submits that the
statement about such higher level post not generally being advertised
was against the Aapte Committee’s direction. In fact, after Mr. Sinha
relinquished the post, an advertisement was issued to fill the post of
CMD, UTI AMC on 4th June, 2012. On the basis of the aforesaid facts,
Mr. Bhushan submits that manipulation of deputation under Rule
6(2)(ii), extension of deputation, concealment of emoluments,
misrepresentation and distortion of facts in the application for
voluntary retirement and re-employment clearly reflect that respondent
No.4 is not a man of integrity.
12. Mr. Bhushan has also made a reference to a very lengthy letter,
written by one Dr. K.M. Abraham, a former Whole Time Member of SEBI,
dated 1st June, 2011, to the Prime Minister of India. In this letter,
the Whole Time Member has complained that the Chairman, SEBI, Mr.
U.K. Sinha is being directly influenced by the Union Minister of
Finance or Smt. Omita Paul, Adviser to Finance Minister. Mr. Bhushan
reiterated that the letter by Dr. Abraham contains unbiased
information. The former Whole Time Member was only expressing his
concern that under the leadership of Mr. U.K. Sinha the institutional
integrity of SEBI is being compromised.
13. Another ground of attack on the appointment of the respondent
No.4 pertains to the suppression of material facts relating to the
remuneration of Mr. Sinha as CMD, UTI AMC before the Search-cum-
Selection Committee and the ACC. Mr. Bhushan points out that the
application form for the post of SEBI Chairman required the applicant
to disclose scale of pay and basic pay of the post presently held
along with service of the petitioner. The first meeting of the Search-
cum-Selection Committee was held on 2nd November, 2010. The SSC
short listed five candidates out of nineteen. Mr. Bhushan then points
out that the second meeting of the Committee was held on 13th
December, 2010, wherein the names of Mr. U.K. Sinha and Mr. Himadri
Bhattacharya were recommended for the post of Chairman, SEBI in the
order of merit. Mr. Bhushan further submitted that the selection of
Chairman of SEBI required the approval of the ACC. The appointments
recommended to the ACC have to be sent along with a standard Performa
and annexures which are to be filled in by the Ministry recommending
the appointment. The proposal for the appointment of Mr. Sinha was put
up to the ACC by the Finance Ministry vide its confidential letter
No.D.O.No.2/23/2007-RE dated 13th December, 2010.
Blatantly false information is given against the column requiring
details about the pay scale presently enjoyed by the applicant. In
reply to this column, it is stated “not available”. Against Column
6(ii), scale of pay of the post it is stated that “the chairman shall
have an option to receive pay (a) as admissible to a Secretary to the
Government of India; or (b) a consolidated salary of Rs.3,00,000 per
month. It was also submitted that in between the first and the second
meeting of the Search-cum-Selection Committee, there were 40 days for
the officials to ensure that the particulars of Mr. Sinha are verified
before filling up the application form. The officials could have
ascertained the particulars of his emoluments as CMD, UTI AMC. Mr.
Bhushan submits that in order to mislead this Court, Mr. Sinha in
paragraph 10 of the counter affidavit has given a totally false
explanation that the Finance Secretary was aware of his market-bench-
marked salary as CMD, UTI AMC. This, according to Mr. Bhushan, is a
bald assertion without any material to substantiate the same. Mr.
Bhushan submits that the other explanation given by Mr. Sinha that
information relating to emoluments of CMD, UTI AMC was in public
domain as full disclosure is made in the Balance Sheet of UTI AMC. It
is submitted by Mr. Bhushan that such an explanation cannot possibly
be accepted. The question before this Court, according to Mr. Bhushan,
is not whether the person who filled up the form knew or could have
known the correct emoluments drawn by Mr. Sinha. The issue is that the
applicant had failed to disclose the correct particulars about his
emoluments and the pay scale before the Search Committee. This
misinformation was also placed before the ACC. According to Mr.
Bhushan, such a manipulative person cannot be said to be a man of
integrity. Mr. Bhushan, as noticed earlier, submitted that the
Committee in its second meeting had recommended two names. However,
the Finance Minister forwarded only the name of Mr. Sinha to the ACC
for approval. Even the document which was placed before the ACC
seeking approval for the appointment of Mr. Sinha mentions “not
available” against the present scale of pay. Mr. Bhushan further
pointed out that Mr. Sinha’s total emoluments for the year 2010-2011
were over 4 crores per annum. This amount was probably more than what
the bureaucrats senior to him and involved in the selection process
were paid by the Government in their entire career. Mr. Bhushan,
therefore, submits that it was for this reason that Mr. Sinha
manipulated that there should be no advertisement and the selection
should be made through the Search route. In the case of advertisement,
he would have to reveal the emoluments received by him. Relying on the
aforesaid facts, Mr. Bhushan submits that since vital pieces of
information was withheld from the Search Committee as well as ACC, Mr.
Sinha clearly cannot be said to be a man of high integrity. The post
of the Chairman, SEBI is a very important position having a bearing on
the flow of investment, Indian and Foreign, economic growth and the
safety of funds invested by large and small investors. Therefore,
according to Mr. Bhushan, it was important that the complete facts
particularly those having direct bearing on deciding the question of
integrity should have been placed before the Search-cum-Selection
Committee and the ACC. In support of the submission learned counsel
has relied on the judgment of this Court in Centre for PIL & Anr. Vs.
Union of India & Anr.[1]
14. The next ground of challenge of the petitioner to the
appointment of Mr. Sinha as the Chairman of SEBI is that it is
vitiated by mala fide. Mr. Bhushan pointed out that to accommodate Mr.
Sinha the earlier Chairman of SEBI was denied extension in tenure. The
SEBI (Term and Condition of Service of Chairman and Members) Rules
were amended on 23rd July, 2009 not to extend the term of the Chairman
and the WTM from three to five years. The Director of Capital Market
Division put up a proposal on 2nd September, 2009 for aligning the
terms of the Chairman and WTM by giving two years extension and the
same was endorsed by the Finance Secretary. After following the due
procedure, consent for the extension of the concerned persons was
taken and the proposal for extension of tenure was recommended to the
DOPT by the Director, Capital Market Division by letter dated 16th
November, 2009. According to Mr. Bhushan, from that stage
manipulation started with the active cooperation of Ms. Omita Paul,
the then Advisor in the Finance Ministry. On 25th November, 2009, she
called for the file relating to the recommendation for extension, in
the term of the Chairman and the Whole Time Member. The file was sent
to her by the Finance Secretary on 27th November, 2009 and was seen by
her on 30th November, 2009. It was again sent to the Advisor for her
perusal on 16th December, 2009 and noting was made by her on 21st
December, 2009 drawing the attention of the Finance Minister to Page
22 regarding the composition of the SEBI Board and the present tenure
of the Board. Mr. Bhushan submits that the note was written in such a
way by Ms. Omita Paul, the then Finance Minister reversed his earlier
decision to accord extension to the then Chairman. Subsequently, the
orders were issued to start the selection process for the Chairman on
10th August, 2010. Suggestion of giving further extension to the
existing officers was overruled. Mr. Bhushan submits that the
justification given by the respondents in the counter affidavit for
non grant of the extension is wholly fallacious. He submits that the
justification that earlier Chairman was not granted extension as his
name was reported in newspapers of being involved in NSDL Scam.
According to Mr. Bhushan, there is no such noting in the official
files. Mr. Bhushan also emphasized that the real reason for denial of
extension to the former chairman is that it was at his insistence that
investigations were being held against the Sahara and RIL. There was a
complaint pending with regard to insider trading relating to RIL and
Reliance Petroleum in which over Rs.500 crores were made in four days
of trading in September, 2007. Mr. Bhushan then submits that in order
to facilitate the selection of Mr. Sinha there was illegal and
arbitrary change in composition of Search-cum-Selection Committee. Ms.
Omita Paul ordered two new names of her own to be appointed as experts
of eminence on the Selection Committee. She also suggested Secretary
(Financial Services) over and above the two experts. Thus, according
to Mr. Bhushan, three of the five members of the Search-cum-Selection
Committee were hand picked by Ms. Paul. In order to include Secretary
(Financial Services) in the Search Committee, Rule 5 of the Rules,
2010 was amended to include clause (e) under which two nominees of the
Finance Minister were included. In such a way, primacy was given to
the Finance Minister. Mr. Bhushan submits that the record clearly
shows that the object of the entire exercise of changing the Rules was
to ensure that the Committee desired by the Advisor Ms. Omita Paul
remains unchanged. It was also done probably to ensure that the ex-
officio Chairman, the Cabinet Secretary, remains the only member
unconnected with the Finance Minister. Mr. Bhushan submits that Ms.
Omita Paul in the reply affidavit has admitted that her role was
merely advisory. Mr. Bhushan submits that in spite of the admitted
position that her role was merely advising without having any
authority to process the matter or take a decision, the files relating
to further extension or composition of Search-cum-Selection Committee
were regularly sent to her. The composition of the Search Committee
was changed at her behest. Mr. Bhushan then submitted that the
respondents have sought to justify the selection of Mr. Sinha on the
basis that he was earlier unanimously selected by the Search-cum-
Selection Committee in 2008, on the same post. If that was so, it is
surprising that the Government, in fact, appointed Mr. C.B. Bhave as
the Chairman, SEBI, who had neither applied for the post nor appeared
in the interview. He had in fact informed the Committee that he did
not want to be considered for the post of Chairman, SEBI. According to
Mr. Bhushan, this can hardly be a fact relevant to judge the
integrity of Mr. Sinha.
15. To further establish the ground of a mala fide, Mr. Bhushan
submits that the post of CMD of UTI AMC was kept vacant for 17 months
to accommodate the brother of respondent No.6 Ms. Omita Paul. He
points out that shortly after the appointment of Mr. Sinha in mid-
February reports started appearing in the press from April, 2011, that
the brother of Ms. Omita Paul, Jitesh Khosla, was the front runner for
the post of UTI AMC because he had the backing of the Finance
Minister. These reports also stated this was being resisted by a
foreign investor and whose consent was necessary. Thus, the post of
CMD UTI AMC continued to remain vacant for 17 months because the
brother of Omita Paul could not be appointed to the post. According to
Mr. Bhushan, the whole episode of appointment of Mr. Sinha as CMD, UTI
AMC and the proposed appointment of Mr. Jitesh Khosla was adversely
commented upon by the Joint Parliamentary Committee, because the
recommendations of the Committee were ignored. The Joint Parliamentary
Committee had gone into the entire UTI Scam as a result of which
massive losses were incurred by the Government investors and tax
payers. The report in paragraph 5 made the following recommendations :-
“(V) Government has stated that a professional Chairman and
Board of Trustees will manage UTI-II and that advertisements for
appointment of professional managers will be issued. The
committee recommended that it should be ensured that the
selection of the Chairman and professional managers of UTI-II
should be done in a transparent manner, whether they are picked
up from the public or private sector. If an official from the
public sector is selected, in no case should deputation from the
parent organization be allowed and the person chosen should be
asked to sever all connections with the previous employer. This
is imperative because under no circumstance should there be a
public perception that the mutual fund schemes of UTI-II are
subject to guarantee by the Government and will be bailed out in
case of losses.”
16. Mr. Bhushan submits that the aforesaid recommendations were
blatantly ignored in the selection of Mr. Sinha. He further pointed
out that neither Mr. Sinha nor Mr. Jitesh Khosla were professionals.
Neither of them met any of the four criteria in the advertisement
inserted for the post of UTI CMD in newspaper dated 4th June, 2012. In
fact, the entire manipulation and mala fide exercise, according to Mr.
Bhushan, is exposed by the advertisement that was released after the
brother of Ms. Omita Paul, Advisor opted out of the race because the
tenure of Ms. Omita Paul, Advisor was coming to an end
on account of it being co-terminus with that of Finance Minister. He
emphasized that it was only then the advertisement was released
fulfilling the commitment given to the JPC by the Government in 2002.
17. In reply to the preliminary objection raised by the respondents
in the counter affidavit/replies, he submits that they deserve to be
ignored. According to Mr. Bhushan, the respondents including the
Government have made concerted attack on the public spirited attitude
of the petitioner. He is wrongly labeled as a person who has been set
up by persons or entities having vested interests. It is also wrongly
alleged that the petitioner had similarly challenged the appointment
of another past Chairman of SEBI which was decided against him with
imposition of costs. The respondents have also wrongly stated that
this is the 4th similar petition on a similar issue. Re-enforcing high
credentials of the petitioner, Mr. Bhushan submits that he has filed
several notable public interest litigations that have unearthed
corruption and financial irregularities. The appointment of the
petitioner as Advisor to Prasar Bharti benefited the organization by
about Rs. 20 Crores. He was the original complainant in the 2G
spectrum scam which eventually led to the registration of the FIR by
the CBI. This fact has been noted by this Court in the 2G case. On the
basis of the above, Mr. Bhushan submits that the petitioner has given
his time and forgone earnings selflessly in the true spirit of Article
51A of the Constitution and continues to unravel financial scams
because of the paucity of people who both understand and are willing
to take risks and make sacrifices. Mr. Bhushan then points out that
the petitioner had previously challenged the appointment of a previous
SEBI Chairman, but it was not related to the integrity of the then
Chairman. In fact, the then Chairman was a person with high integrity
and compassion. However, his leniency in trusting the sharp players in
the market resulted in lot of scams in the first three years of his
tenure. Therefore, the petitioner has challenged the extension that
had been given to the then Chairman SEBI on the ground that the
Government should reassess his performance after three years. The writ
petition was dismissed. The Chairman was given yet another extension
in 2000 to make him the longest serving Chairman. What followed was
the largest stock market scam in which the investors and the
government lost tens of thousands of crores and the entire JPC report
is the testimony to the scam. The Government and tax payer lost over
Rs.10,000 crores in the UNIT 64 scam. Similarly Mr. Bhushan submits
that the respondents have wrongly taken the preliminary objection that
earlier two writ petitions having been filed by the petitioner
challenging the appointment of respondent No.1 having been dismissed
as withdrawn. He further submits that the respondents have wrongly
leveled allegations that this petition is at the behest of some other
person who is interested to continue as the Chairman of SEBI. The
petitioner has not prayed for the reinstatement of any of the previous
incumbents. The petitioner only prays for appointment of a person as
the Regulator who should be a person of high integrity functioning in
a transparent manner. Mr. Bhushan submits that although the
respondents claim that the petitioner has suppressed material facts,
the suppression of facts by respondent No.4 is not treated with the
same amount of concern.
Respondents’ Submissions:
18. In response to the submission made, learned Attorney General Mr.
G.E. Vahanvati, appearing for the Union of India, has submitted that
public interest litigation jurisdiction is based on the principle of
Uberrimae fide which means ‘utmost good faith’. Therefore, before the
petitioner can attack the integrity of respondent No.4, he would have
to establish his own good faith in filing the present writ petition.
He further submits that this is a very unfair petition. Documents have
been presented before the Court in a very selective manner. The
petitioner has admitted the suppression of earlier petition but he has
tried to explain it by giving some excuses. The submission of the
petitioner that the petition was dismissed on the pleadings has been
contended by Mr. Vahanvati to be totally without any basis. This is
evident from his letter to the Registrar sent in August, 2000. He
stated that Writ Petition (C) No.69 of 2012 deals with Cairn-Vedanta
deal and it has nothing to do with the present writ petition. Then it
is stated that there is one similar matter filed by some other person
which is pending before this Court which is W.P. (C) No.246 of 2012.
The petitioner never mentioned the earlier petitions filed by him
which were dismissed. The objection taken is that the petition
deserves to be dismissed for suppression of earlier petition. The
letter given to the Registrar gives the totally distorted version.
Similarly, the petitioner has distorted the entire sequence of events
with regard to the deputation of Mr. Sinha.
19. Mr. Vahanvati points out to paragraph 34 of the petition and the
emphasis placed by the petitioner that “within a period of a day the
emoluments too increased from around six lacs per annum to one crore
per annum”. It is submitted that the deputation of respondent No.4
commences on 3rd November, 2005 he became CEO, UTI AMC on 27th
December, 2006. The letter dated 16th April, 2006 which is very
relevant to the issue has been withheld by the petitioner. Referring
to the affidavit of Mr. Sinha, he submits that all other information
has been given according to law. The terms and conditions for
deputation clearly show that Mr. Sinha was permitted to opt for his
grade of pay or pay scale whichever is more beneficial for him. The
recommendations made by the Aapte Committee were taken into notice
when extension of tenure of Mr. Sinha was approved by the Board of
Directors UTI AMC on 17th September, 2007. Actual sanction came on
11th April, 2008, as the approval of the Bank of Baroda did not come
till 29th March, 2008. Therefore, there was no approval prior to 11th
April, 2008 of the compensation of Rs.1 crore per annum alongwith the
related payment of bonus of Rs. 1 crore. Similarly, it is stated by
Mr. Vahanvati that submission of the application for voluntary
retirement was done four days after the approval on 15th April, 2008.
Until then, the petitioner had been in receipt of pay scale which was
duly sanctioned on the post held by him in the Government. Therefore,
the petitioner has unnecessarily tried to create an impression that
there has been any deliberate misrepresentation or concealment of fact
by respondent No.4. In the form of application to accept commercial
appointment, respondent No.4 had clearly stated that he has been
working as the Director/CEO UTI AMC since 3rd November, 2005 till
date. Respondent No.4 had to state the pay scale of the post and the
pay drawn by the officer at the time of the retirement which in his
case was of Rs.22,400-535-24,500. Respondent No.4 had clearly
mentioned his present basis pay as Rs.23,450/-.
20. Learned Attorney General submitted that the petitioner has
wrongly alleged that respondent No.4 had given a false declaration
that he was not privy to any sensitive information. This would clearly
only indicate that the respondent No.4 has to disclose that he was not
privy to any sensitive information received in his official capacity.
Learned Attorney General submits that the petitioner in fact has an
absurdity of facts with regard to compensation which were placed
before the Ministry of Finance on 1st May, 2008. The Finance Minister
approved the proposal. It was specifically observed that there is no
conflict of interest between the Government of India and UTI AMC. On
17th April, 2008, Department of Personnel and Training sent a
comprehensive note with regard to the application of respondent No.4
in the prescribed format to seek permission under Rule 26 of the All
India Services (DCRB) Rules, 1958 to join the Company i.e. UTI Asset
Management Company Ltd. on regular basis, post voluntary retirement.
The proposal was thoroughly examined and duly approved by all the
authorities. Learned Attorney General drew our attention to paragraph
30 of the petition and submitted a list of documents. The petition has
given a twist in the tale. This has been done, according to learned
Attorney General, to give the same controversy a new flavour. He
submits that the allegations about the pattern of JPC directions are
false. The same petitioner had challenged Mr. Mehta’s appointment
earlier. It is the submission of learned Attorney General that public
interest litigation cannot be filed irresponsibly. It has to be
handled very carefully. It cannot be used as an AK-47 with the hope
that some bullets will hit the target. The allegations of the
petitioner that the rules were deliberately amended to hand pick Mr.
Sinha are without any basis. In fact, there was no illegality
committed in changing the composition of Search-cum-Selection
Committee. Prior to 23rd July, 2009 there was no rule on the procedure
to be followed for the selection of Chairman/WTM of SEBI. Therefore,
before July, 2009 selections were made as decided by the Finance
Minister from time to time. However, for the selection of the SEBI
Chairman in 2008 the then Finance Minister had approved on 2nd
November, 2007 that the High Powered Search Committee (later notified
as the Search Committee) which had four members and one Chairman. The
Finance Minister noted that there should be one more outside expert.
Accordingly, Dr. S.A. Dave, Chairman CMIE, was nominated as the
Member. Therefore, to say that the amendment of the rules has been
made just to ensure that balance was tilted in favour of the Finance
Minister is without any basis.
21. Learned Attorney General also pointed out that the Search-cum-
Selection Committee in its meeting held on 29th January, 2008 had
unanimously short listed two names in the following order: (1) Mr.
U.K. Sinha and (2) Mr. J. Bhagwati. However, notwithstanding the
recommendation of Mr. Sinha by the Selection Committee, Shri Bhave was
appointed as Chairman, SEBI on 15th February, 2008. In 2009, a
statutory system was established for selection of Chairman/Whole Time
Member of the SEBI. The proposal was also placed to amend Rule 3 of
the Securities & Exchange Board of India (Terms and Conditions of
Service of Chairman and Members) Rules, 1992 to include the provision
relating to procedure to be followed for the selection of Chairman/WTM
of SEBI. This was done by incorporating sub-rule (5) which required
the recommendation of the Search-cum-Selection Committee consisting of
Cabinet Secretary, Department of Economic Affairs, Chairman, SEBI for
selection of WTM and two experts of eminence from the relevant field.
When it was decided in 2010 to initiate action for the fresh selection
for the post of Chairman, SEBI two experts of eminence from the
relevant field were Shri Suman Bery, Director General, National
Council of Applied Economic Research (NCAER) and Prof. Shekhar
Choudhary, former Director, IIM Calcutta. The composition of the
Search-cum-Selection Committee was sent to the Department of Personnel
& Training for approval. However on 23rd September, 2010, Department
of Personnel and Training pointed out that inclusion of the Secretary
Financial Services was not within the Rules as amended on 23rd July,
2009. Therefore, the matter was again referred to the Ministry of Law
& Justice. During the discussion that was held with the Ministry of
Law, it was suggested that there could be an amendment to the rule
based on the Income Tax Appellate Tribunal Members (Recruitment and
Conditions of Service) Rules, 1963. Under these rules, the Selection
Board inter alia consists of a nominee of the Ministry of Law as well
as such other persons if any, not exceeding two, as the Law Minister
may appoint. It was in these circumstances that the proposal to amend
the 1992 Rules was approved.
22. The Search-cum-Selection Committee after scrutinizing the
qualification and experience of the short listed candidates
unanimously placed respondent No.4 first in the order of merit. The
impression sought to be given wrongly by the petitioner is that
respondent No.4 was placed at No.2 and Mr. Bhattacharya was at No.1.
This is a deliberate distortion by the petitioner.
23. With regard to the role played by Ms. Omita Paul, learned
Attorney General submitted that in fact the present petition is a mala
fide attempt to resurrect the challenge earlier rejected by this
Court. The petition is a sheer abuse of the process of law. The
petitioner is guilty of making reckless allegations against two highly
respected dignitaries who were appointed expert members of the
Selection Committee. Learned Attorney General also submitted that the
submissions with regard to the non extension of tenure of Mr. Bhave
are totally baseless and need to be ignored. He makes a reference to a
detailed explanation given in the affidavit filed by the UOI. The term
of Mr. Bhave was not extended to avoid the Government being
unnecessarily involved in a scandal. In the earlier petition (W.P. No.
340 of 2012), the petitioner has sought an extension to continue the
tenure of Mr. Bhave for 5 years which was withdrawn. Prayer No.2 in
the W.P.(C) No.340 of 2011 was as follows :

“Issue a writ of mandamus or any other appropriate writ, order
or, direction to quash and declare void constitution of sub-
committee of the Search-cum-Selection Committee under Shri
U.K.Sinha, Chairman SEBI for conducting interview to the post of
whole time members and proceedings/recommendation thereof.”
24. This would clearly ensure that as soon as Mr. Sinha’s
appointment was declared void, Mr. Bhave would continue as a Chairman.
This is evident from Prayer 5 which is as under :
“Issue a writ of mandamus or any other appropriate Writ, order
or direction to direct Respondent Nos.1 & 2 to act in accordance
with the Government of India Notification No.2/106/2006-RE,
dated 23rd July, 2009 which stipulates enhancement of the tenure
of existing Chairman and Whole Time directors of SEBI from three
(3) to five (5) years.”
25. Similarly, Writ Petition (C) No.392 of 2011 again repeats the
prayer which was made in the earlier writ petition. It was submitted
by the learned Attorney General that the present writ petition is a
camouflage for the earlier writ petitions which were dismissed.
Learned Attorney General submitted that the submission of Mr. Bhushan
that why a person, who was earning crores, would expect a position on
which he was only to be paid lacs, is too absurd to be even taking
cognizance of. Respondent No.4 accepted the Chairmanship of SEBI as a
matter of national duty and as a matter of honour. Finally, learned
Attorney General submitted that in the interest of justice the
tendency among the petitioners to make wild allegations in public
interest litigation needs to be curbed.
26. Mr. Harish Salve, learned senior counsel and Mr. Rajesh Dwivedi
appearing for respondent No. 4 have also raised a preliminary
objection on the ground of maintainability. According to Mr. Salve,
the writ petition is not maintainable because it is not filed in
public interest. In fact, the writ petition has been filed as
surrogate litigation on behalf of an individual who was very anxious
to continue as Chairman, SEBI, namely Mr. C.B. Bhave. Secondly, Mr.
Salve submits that the writ petition is liable to be dismissed as it
does not make a candid disclosure of all the facts which are relevant
for the adjudication of the issues raised. Learned senior counsel
submits that a litigant is duty bound to make full and true disclosure
of the facts without any reservation, even if they seem to be against
them. In support of this proposition, he relies on State of Madhya
Pradesh Vs. Narmada Bachao Andolan & Anr.[2] and K.D. Sharma Vs. Steel
Authority of India Limited & Ors.[3]. The factual basis for the
aforesaid submission is that the petitioner had filed a writ petition
in the Delhi High Court against the then Chairman, SEBI, Mr. D.R.
Mehta, which was dismissed with cost. A Special Leave Petition
against the same was dismissed. However, this Court reduced the cost.
This fact is deliberately suppressed. Writ Petition No. 340 of 2011
on the same issue was dismissed by this Court. Dismissal of these
petitions has also been suppressed by the petitioner. Mr.
Salve reiterates the submissions of the Attorney General that public
interest litigation is founded on the principle of uberrima fide,
i.e., the utmost good faith of the petitioner. To buttress his
submission, learned senior counsel relied on S.P. Gupta’s case. This
petition is motivated by ill will, and the moving spirit behind the
petition is Mr. C.B. Bhave. He reiterated the submissions of the
Attorney General that Mr. C.B. Bhave and the Whole Time Member Dr.
K.M. Abraham were aggrieved by the non-grant of extension to them, on
the posts occupied by them, in the light of change in the rules. In
fact, the petitioner, in his submission, has made detailed reference
to the motivated complaint made by the Whole Time Member Dr. K.M.
Abraham about the functioning of the new Chairman, i.e., Mr. U.K.
Sinha. This was only because Mr. Bhave and Mr. Abraham were
upset about the non-extension of tenure of Mr. Bhave. Apart from the
change of rules, the extension was not granted to Mr. Bhave for his
lapses in dealing with the IPO Scam of 2005 when he was the Chairman
of NSDL.
Conclusions:
27. We have considered the submissions made by the learned counsel
for the parties. Although all the respondents have raised the
preliminary issue about the maintainability of the writ petition, we
shall consider this submission after we have considered the issue on
merits. The foremost issue raised by the petitioner and emphasized
vehemently by Mr. Parshant Bhushan is that respondent No.4 lacks the
integrity and does not meet the eligibility conditions laid down in
sub-section (5) of Section 4 of the SEBI Act. Additionally, respondent
No.4 does not fulfil the conditions contained in communication of the
government dated 10th September, 2010 which emphasizes, keeping in
view the role and importance of SEBI as a regulator, that it is
desirable that only a person with high integrity and reputation should
be appointed as Chairman of SEBI.
28. We have narrated the sequence of events relied upon by the
petitioner to establish that respondent No.4 is not a man of high
integrity. We have also narrated how the respondents have, with equal
vehemence, countered the submissions made on behalf of the petitioner.
All the respondents have submitted that the writ petition filed by the
petitioner ought to be dismissed on the ground of maintainability
alone. As noticed earlier, we shall consider the preliminary
objections later.
29. We agree with Mr. Bhushan that SEBI is an institution of high
integrity. A bare perusal of the SEBI Act makes it apparent that SEBI
was established to protect the interests of investors in securities
and to promote the development of, and to regulate the securities
market. In fact, the SEBI Act gives wide ranging powers to the Board
to take such measures as it thinks fit to perform its duty to protect
the interests of investors in securities and to promote the
development of, and to regulate the securities market. These measures
may provide for regulating the business in stock exchanges and any
other securities markets. Further measures are set out in Sections
11(1), (2)(a to m) to enable SEBI to perform its duties and functions
efficiently. Section 11(2)(a) provides that the Board may take
measures to undertake inspection of any book, register, or other
document or record of any listed public company or a public company
which intends to get its securities listed on any recognised stock
exchange. The Board can exercise its power where it has reasonable
grounds to believe that such company has been indulging in insider
trading or fraudulent and unfair trade practices relating to
securities market. To enforce its directions, the Board has powers
under Section 11(4) to issue any suspension/restraint orders against
the persons including office bearers of any stock exchange or self
regulatory organisation. It can impound and retain the proceeds or
securities in respect of any transaction which is under investigation.
The wide sweep of the powers of SEBI leaves no manner of doubt that it
is the supreme authority for the control and regulations and orderly
development of the securities market in India. It would not be mere
rhetoric to state that in this era of globalisation, the importance of
the functions performed by SEBI are of paramount importance to the
well being of the economic health of the nation. Therefore, Mr.
Bhushan is absolutely correct in emphasising that the Chairman of SEBI
has to be a person of high integrity. This is imperative and there are
no two ways about it. The importance of the functions performed by
SEBI has been elaborately examined by this Court in the case of Sahara
India Real Estate Corporation Ltd. & Ors. Vs. Securities and Exchange
Board of India & Anr.[4] Justice Radhakrishnan, upon examination of
the various provisions of the SEBI Act, has observed that it is a
special law, a complete code in itself containing elaborate provisions
to protect interest of the investors. The paramount duty of the Board
under the SEBI Act is to protect the interest of the investors and to
prevent unscrupulous operators to enter and remain in the securities
market. It is reiterated in paragraph 67 that SEBI is also duty bound
to prohibit fraudulent and unfair trade practice relating to
securities markets. Similarly, Justice Khehar in the concurrent
judgment has emphasised the importance of the functions performed by
SEBI in exercise of its powers under Section 11. In paragraph 303.1,
it is observed as follows :-
“303.1. Sub-section (1) of Section 11 of the SEBI Act casts
an obligation on SEBI to protect the interest of investors in
securities, to promote the development of the securities
market, and to regulate the securities market, “by such
measures as it thinks fit”. It is therefore apparent that the
measures to be adopted by SEBI in carrying out its
obligations are couched in open-ended terms having no
prearranged limits. In other words, the extent of the nature
and the manner of measures which can be adopted by SEBI for
giving effect to the functions assigned to SEBI have been
left to the discretion and wisdom of SEBI. It is necessary to
record here that the aforesaid power to adopt “such measures
as it thinks fit” to promote investors’ interest, to promote
the development of the securities market and to regulate the
securities market, has not been curtailed or whittled down in
any manner by any other provisions under the SEBI Act, as no
provision has been given overriding effect over sub-section
(1) of Section 11 of the SEBI Act.”
In sub-paras 303.2, 303.3 and 303.4, the powers of SEBI under
Section 11(2), 11(3) and 11(4) have been analysed and elaborately
explained.
30. It becomes clear from the above that the functions performed by
SEBI are such that any malfunctioning in the performance of such
functions can disturb the economy of our country. Keeping in view the
aforesaid scope and ambit of the discretionary powers conferred on the
Members of the SEBI Board, there is little doubt in our mind that only
persons of high integrity would be eligible to be appointed as
Chairman/Member of the SEBI. Section 4(5) inter alia stipulates that
the Chairman and other Members of the SEBI shall be persons of
“ability, integrity and standing who have shown capacity in dealing
with problems relating to securities market.” Statutorily, therefore,
a person cannot be appointed as Chairman/Member of the SEBI unless he
or she is a person of high integrity. We, therefore, have no
hesitation in accepting the submission of Mr. Bhushan that the
selection and appointment of respondent No.4 could be challenged
before this Court in a writ petition under Article 32 of the
Constitution of India on the ground that he does not satisfy the
statutory requirements of a person of high integrity.
31. Since Mr. Bhushan has relied on the judgment of this Court in
Centre for PIL & Anr. (supra), it would be appropriate to notice the
observations made in that judgment by S.H. Kapadia, C.J. in paragraph
2 of the judgment, it has been observed as follows :-
“2. The Government is not accountable to the courts in respect
of policy decisions. However, they are accountable for the
legality of such decisions. While deciding this case, we must
keep in mind the difference between legality and merit as also
between judicial review and merit review. …. If a duty is cast
under the proviso to Section 4(1) on the HPC to recommend to the
President the name of the selected candidate, the integrity of
that decision-making process is got to ensure that the powers
are exercised for the purposes and in the manner envisaged by
the said Act, otherwise such recommendation will have no
existence in the eye of the law.”

In our opinion, these observations are relevant as the procedure
prescribed for the appointment of Chairman, SEBI is similar to the
procedure which was prescribed for the selection on the post of
Central Vigilance Commissioner. This apart, it has been emphasised
that CVC is an integrity institution. The reasons for the aforesaid
view are stated in paragraph 39, it has been observed as follows :-
“39. These provisions indicate that the office of the Central
Vigilance Commissioner is not only given independence and
insulation from external influences, it also indicates that
such protections are given in order to enable the institution
of the CVC to work in a free and fair environment. The
prescribed form of oath under Section 5(3) requires the
Central Vigilance Commissioner to uphold the sovereignty and
integrity of the country and to perform his duties without
fear or favour. All these provisions indicate that the CVC is
an integrity institution. The HPC has, therefore, to take
into consideration the values, independence and impartiality
of the institution. The said Committee has to consider
institutional competence. It has to take an informed decision
keeping in mind the abovementioned vital aspects indicated by
the purpose and policy of the 2003 Act.”
32. Elaborating further, Kapadia, C.J., has further observed :
“43. Appointment to the post of the Central Vigilance
Commissioner must satisfy not only the eligibility criteria of
the candidate but also the decision-making process of the
recommendation…”
33. In paragraph 44, it was clarified that “we should not be
understood to mean that personal integrity is not relevant. It
certainly has a co-relationship with institutional integrity.”
34. Keeping in view the aforesaid observations and the ratio of the
law laid down, let us now examine the issue with regard to the
validity of the recommendation made for the appointment of Mr. Sinha
together with the issue as to whether Mr. Sinha does not fulfil the
statutory requirement to be appointed as the Chairman of SEBI.
DEPUTATION : Was it irregular, illegal or vitiated by colourable
exercise of power?
35. It is a matter of record that respondent No.4 was on deputation
with UTI AMC since the year 2005. His deputation was duly approved by
the Ministry of Finance, DOPT and the Government of Bihar, wherever
applicable. Respondent No.4 was first appointed as CEO, UTI AMC by
order dated 30th October, 2005. He was initially on deputation under
Rule 6(2)(ii) and subsequently under Rule 6(2)(i) of the IAS Cadre
Rules. The terms and conditions of service of respondent No.4 at UTI
AMC were settled on 16th April, 2007. This was in conformity with the
letter dated 31st October, 2005 written by the DOPT accepting the
request made by the Government of Bihar in its letter dated 28th
October, 2005 for approval of deputation of respondent No.4 with UTI
AMC for a period of two years under Rule 6(2)(ii) of IAS Cadre Rules.
The letter further indicated that terms and conditions applicable in
the aforesaid deputation were under examination and would be
communicated shortly. The deputation was converted from Rule 6(2)(ii)
to Rule 6(2)(i), upon clarification of the applicability of the
appropriate rule. This fact is noticed by the petitioner himself
whilst stating that although on 6th November, 2007, the proposal for
extension of deputation of Mr. Sinha was for two years, but the
extension was granted only for a period of three months until 2nd
February, 2008, as an interim measure. This, according to the
petitioner himself, was because some general issue regarding
deputation under Rule 6(2)(ii) of IAS (Cadre) Rules, 1954 was being
examined. Therefore, we are unable to accept the submission of Mr.
Bhushan that respondent No.4 was in any manner responsible for being
sent on deputation initially under Rule 6(2)(ii) and subsequently
under Rule 6(2)(i). The “Final Consolidated Deputation Guidelines for
All India Service” issued on 28th November, 2007 would
also indicate that respondent No.4 cannot be said to be, in any
manner, responsible for being sent on deputation under Rule 6(2)(ii).
Nor can it be said that any individual officer aided Mr. U.K. Sinha to
gain any unfair advantage. Therefore, it cannot be said that his
deputation under Rule 6(2)(ii) was approved in colourable exercise of
power.
“False Declaration in Form L”

36. A perusal of Office Memorandum dated 1st May, 2008 sent by the
Department of Economic Affairs in reference to the letter sent by
DoP&T seeking comments of DEA under Rule 26(3) of All India Services
(Death-cum-Retirement Benefits) Rules, 1958 would show that necessary
facts relating to the service of respondent No.4 in the six years
prior to the response dated 1st May, 2008 had been faithfully set out.
The Memorandum records the following facts:-
“Shri U.K. Sinha had been working as Joint Secretary (Capital
Markets) in DEA from 2nd June, 2002 to 29th October, 2005.
Before joining DEA (Main) he had been Joint Secretary in the
erstwhile Banking Division (presently Department of Financial
Services) from 30th October, 2000 to 1st June, 2002.

• With the approval of the competent authority, he has been on
deputation to Unit Trust of India Asset Management Company
(UTI AMC) as its CMD since 3rd November, 2005, and his term
there expires on 31st May, 2008. Going by his experience and
qualifications, the name of Shri Sinha had been unanimously
shortlisted by the Chairmen of the sponsors of UTI AMC [State
Bank of India (SBI), Life Insurance Corporation of India
(LIC), Bank of Baroda (BoB) and Punjab National Bank (PNB)].
The Government has approved his deputation to UTI AMC, in
public interest.
• UTI AMC is a company formed by SBI, PNB, BoB and LIC, each
having equal shareholding. It is registered with Securities
and Exchange Board of India (SEBI) and is engaged in
activities pertaining to mutual fund, portfolio management,
venture fund management, pension fund and offshore fund
management. The UTIAMC is managing the ‘financial assets of
over Rs. 50,000/- crores.
• Considering the challenges that UTI AMC faces in the
prevailing market conditions and the need for continuity
necessitated by the structural changes undertaken in the
Company, the Chairman of SBI, in consultation with other
stakeholders of UTI AMC (viz. LIC, BoB and PNB) has offered
to Shri Sinha a four year tenure as CMD of UTIAMC w.e.f. 1st
June, 2008, or earlier without break of continuity on the
understanding that Shri Sinha will take voluntary retirement
from Government service and that Shri Sinha will be entitled
for salary and perquisites decided by the Compensation
Committee of the Board of the Company from time to time.
Hon’ble Finance Minister has approved this proposal.
2. The Department of Economic Affairs supports the request of
Shri U.K. Sinha for post retirement commercial employment with
UTI AMC as its CMD and certify the following:
• The proposed employment of Shri U.K. Sinha with UTIAMC as its
CMD is in public interest and has the approval of Hon’ble
Finance Minister.
• There is no conflict of interest between the Government of
India and the UTIAMC.
• UTIAMC, formed by SBI, PNB, BoB and LIC, is neither involved
in activities prejudicial to India’s foreign relations,
national security and domestic harmony nor is undertaking any
form of intelligence gathering prejudicial to India.
• In the prevailing financial markets condition, the fixed pay
of Rs. 1 crore per annum, along with performance related
payouts and other usual perks, offered by UTIAMC to Shri
Sinha is considered reasonable.
• As per the information available in DEA, the service record
of Shri U.K. Sinha is clear, particularly with respect in
integrity and dealings with NG0s.
3. Department of personnel &, Training is accordingly requested
kindly to grant requisite permission to Shri U.K. Sinha, under
intimation to this Department.

4. This issues with the approval of Hon’ble Finance Minister.

(S.K. Verma)

Director to the Government of India…”
37. Keeping in view the aforesaid, we are not satisfied that the
petitioner has made any false declaration in ‘Form L’, Clause 9 read
with Rule 26(3) of All India Services (Death-cum-Retirement Benefits)
Rules, 1958, while working in his previous job as Chairman, UTI AMC.
Mr. Bhushan has pointed out the following mis-statements and opinions
:-

i. In Serial-5, pay scale for the post of Addl. Secretary was
mentioned although respondent No.4 was drawing the higher pay
scale approved by UTI AMC.
ii. In Serial 9, the 2nd declaration was false as respondent No.4
was working as CEO cum CMD of UTI AMC during the last 3 years
on deputation and therefore he was privy to sensitive or
strategic information relating to areas of interest or work
of UTI AMC.
iii. A mis-statement had been made that generally such posts are
not advertised and that was against the JPC Recommendation.
38. In our opinion, the respondents have rightly pointed out that
respondent No.4 was on deputation in UTI AMC when he filled up Form
`L’. At that time, he held lien on the post of Additional Secretary,
Government of India. His application for voluntary retirement had been
processed. He was, however, required to obtain approval under Rule 26
for commercial employment-post retirement. Sr.No.5 of Form `L’
requires the person seeking approval to state the pay scale of the
post and pay drawn by the Officer at the time of retirement.
Undoubtedly, respondent No.4 was drawing the pay scale of Rs.22400-525-
24500. He also stated his present pay to be Rs.23,450/-. There is no
legal infirmity in the aforesaid statement by respondent No.4. It is a
settled proposition of law that deputationist would hold the lien in
the parent department till he is absorbed on any post. The position of
law is quite clearly stated by this Court in State of Rajasthan & Anr.
Vs. S.N.Tiwari & Ors.[5]
“18. This Court in Ramlal Khurana v. State of Punjab observed
that: (SCC p. 102, para 8)
“8. … Lien is not a word of art. It just connotes the right
of a civil servant to hold the post substantively to which
he is appointed.”
19. The term “lien” comes from the Latin term “ligament” meaning
“binding”. The meaning of lien in service law is different from
other meanings in the context of contract, common law, equity,
etc. The lien of a government employee in service law is the
right of the government employee to hold a permanent post
substantively to which he has been permanently appointed.”
39. Similarly, in the case of Triveni Shankar Saxena Vs. State of
U.P. & Ors.[6], it has been held as under:-
“24. A learned Single Judge of the Allahabad High Court in
M.P. Tewari v. Union of India following the dictum laid down in
the above Paresh Chandra case and distinguishing the decision
of this Court in P.L. Dhingra v. Union of India has observed
that “a person can be said to acquire a lien on a post only
when he has been confirmed and made permanent on that post and
not earlier”, with which view we are in agreement.”
40. In response to Column No.7 of the same Form, respondent No.4 has
quite clearly mentioned that he has been offered a fixed pay of Rs.
1.00 crore per annum alongwith performance related payment and other
usual perks. The letter containing the offer was enclosed with the
Form. The letter clearly states that the Board of Directors, UTI AMC,
after going through the prevailing practice in the Industry, has fixed
a compensation of Rs.1.00 crore per annum alongwith performance
related perks and other usual prerequisites. The shareholders of the
UTI AMC have also indicated their concurrence to the above
compensation. It must be noticed that respondent No.4 had sought
retirement from the IAS w.e.f. 15th May, 2008 to enable him to join
UTI AMC on a regular basis as its CMD. Therefore, it cannot be said
that at the time when he filled the Form for seeking VRS, respondent
No.4 was not drawing the pay scale stated by him. We do not find much
substance in the allegation that respondent No.4 had deliberately
suppressed the information regarding his salary. The fact that
emoluments paid to respondent No.4 w.e.f. 27th December, 2006 would
not affect the statement made by respondent No.4 in Form `L’ filled on
15th April, 2008. The Board of UTI AMC by resolution dated 12th April,
2008 approved that the CMD can draw revised compensation w.e.f. 27th
December, 2006. Till that date, he was still placed in the scale of
Additional Secretary, Government of India.
41. The next submission of Mr. Bhushan is that Mr. Sinha had wrongly
stated in reply to Sr. No. 9(ii) in Form `L’ that he was not privy to
any sensitive or strategic information in the last three years of
service. This submission of the petitioner is based only on assumption
and cannot be accepted without any supporting material. Respondent
No.4 in his capacity as a Joint Secretary/Additional Secretary to
Government of India was required to state whether he was privy to any
sensitive information in his official capacity. The information would
be required if the Officer was in receipt of information whilst
working as Officer in the Government and is aware of the sensitive
proposals or other decisions which are not otherwise known to others
and which can be used for giving undue advantage to the Organization
in which he is seeking a future position. In the case of respondent
No.4, he was already working as CMD-cum-CEO in the UTI AMC.
Therefore, there was no question of respondent No.4 having been privy
to any sensitive information with regard to UTI AMC at the time when
he was posted as Joint Secretary/Additional Secretary in the
Government of India. In fact, respondent No.4 in the same Form No. L
at Sr.No.7-C had stated that he was earlier working as Director in UTI
AMC and was appointed as CEO cum MD from 3rd November, 2005 and CMD
from 13th January, 2006. The declaration is in fact in conformity with
the 3rd proviso to Rule 26 of All India Service (DCRB) Rules which
envisages that an Officer in deputation of an Organization under Cadre
rules can be absorbed in the same Organization post VRS. The word
“Service” in Sr. No. 9(ii) in Form L is in contrast to
the work of proposed Organization.
42. We are also not much impressed by the submission on behalf of
the petitioner that the deputation was in violation of policy of not
allowing deputation to an Officer who has over-seen the Organization
to which he was being deputed. As noticed earlier, respondent No.4 had
no role to play in the grant of approval of deputation, once he fully
disclosed that he had been working as Joint Secretary Banking. He had
no further role to play. It is a too farfetched submission that whilst
respondent No.4 worked as Joint Secretary Banking that he can be said
to have over-seen the Organization of UTI AMC. The petitioner had
unnecessarily and without any basis tried to confuse that respondent
No.4 would be disqualified for deputation in UTI AMC as he would have
been privy to receiving some sensitive information with regard to its
functioning. As noticed earlier, Rule 36 of All India Service (DCRB)
Rules envisages that an Officer on deputation to an Organization can
be absorbed in the same Organization after seeking voluntary
retirement.
43. We may also notice here that even the petitioner has not pleaded
that UTI AMC is a Government owned Company under Section 617 of the
Companies Act. Mr. Bhushan tried to establish that it is a Government
controlled company as the shares are all held by instrumentalities of
the State. In our view, UTI AMC can not be said to be a Government
company. It was for this very reason that respondent No.4 had to make
a request for VRS to seek re-employment in a Commercial Organization.
We are also not much impressed by the objection of the petitioner that
the deputation of respondent No.4 was contrary to the recommendation
of JPC. Subsequent to the recommendation of JPC, the Parliament had
passed UTI (Transfer of Undertaking and Repeal) Act, 2002 which was
gazetted on 17th December, 2002 and came into force w.e.f. 29th
October, 2002. Under the Act, UTI was bifurcated into SUUTI and UTI
Mutual Fund, managed by UTI AMC. The Central Government transferred
its entire share holding in UTI AMC to Life Insurance Corporation,
Punjab National Bank, Bank of Baroda and SBI. The entire consideration
for the aforesaid transfer was received by the Central Government.
Therefore, it becomes quite evident that UTI AMC is not a “Government
Company” under Section 617 of the Companies Act. In the affidavit
filed, this has been the consistent stand taken by the Central
Government and the CAG in various writ petitions filed by the
petitioner. In a company like the UTI AMC, it is for the shareholder
on the Board to decide what process to follow and whom to appoint.
When the selected candidate is not a government employee having a lien
on a government job, then the government would have nothing to do with
the selection process. In this case, the shareholders made a request
to the Government for the deputation of respondent No.4. They again
made a request for extending his deputation beyond two years. In April
2008, respondent No.4 was offered commercial employment provided he
took VRS. At each stage, permission was duly granted by the competent
authority after duly following the prescribed procedure as per the
rules of executive business. Therefore, we do not find any justifiable
reason to doubt the legality of the manner in which respondent No.4
continued to work in UTI AMC since he initially came on deputation in
October, 2005.
44. Mr. Bhushan has vehemently argued that respondent No.4 had
deliberately concealed or distorted the information in his application
for voluntary retirement. We have already noticed that in filling up
the Form `L’, respondent No.4 had correctly stated the pay scale of
the post at the time of seeking voluntary retirement. We have also
earlier held that respondent No.4 cannot be said to have been privy to
any sensitive information relating to areas of interest of work of UTI
AMC whilst he was holding the post of Joint Secretary. In fact in
reply to Column No. C of Form `L’ i.e. “Whether the Officer had during
the last three years of his official career, any dealing with the
Firm/Company/Cooperative Society etc?” Respondent No.4 had clearly
stated that in his capacity as Joint Secretary in the Department of
Economic Affairs, Capital Market of his Division, he was also inducted
as a Director on the Board of UTI AMC. In the meanwhile, he was
appointed as MDMCU and CMD w.e.f. 3rd November, 2005 and 13th January,
2006, respectively by the Board of Directors of UTI AMC.
45. The next grievance of the petitioner is that respondent No.4 had
made a mis-statement in Column No.7F of Form `L’ whilst giving
information as to whether the post which has been offered to him was
advertised, if not, how was offer made? In reply to the aforesaid
question against, respondent No.4 categorically stated that such
higher-level posts are generally not advertised. Keeping in mind the
contribution made by him and the needs of the Company, the
shareholders had made the offer to him. Alongwith this reply,
respondent No.4 had attached copy of the letter dated 3rd April, 2008.
We have already noticed that UTI AMC is a company incorporated under
the Companies Act. As such all the decisions are made by the Board of
Directors. The shareholders are Life Insurance Corporation, PNB, BOP
and SBI. We have earlier noticed that respondent No.4 was initially on
deputation with UTI AMC since 2005. In 2008, he was offered the post
of CMD on contractual basis. Consequently, according to the service
rules, he sought his voluntary retirement from the parent cadre,
Bihar. This was duly processed by the State of Bihar and approved by
the Central Government. UTI AMC is managed on a commercial basis.
Therefore, in a commercial company as a part of good governance, it is
the responsibility of the Board to ensure succession planning at the
top. As a normal practice, nominations are made by the Board and share-
holders, either directly or through a search firm and the post is
rarely advertised. In any event, it would be the decision to be taken
by the Board of Directors. Respondent No.4 would clearly have no say
in the matter.
46. We are also of the opinion that there is nothing so outlandish
or farfetched in the statement made by respondent No.4 that “such
higher-level posts are generally not advertised”. It is a matter of
record that previously Shri M. Damodaran, an IAS Officer of the
rank of Additional Secretary, the post was not advertised.
Subsequently also, the appointment of Mr. S.B. Mathur and
Administrator Mr. K.N. Tripathi Raj was made without any
advertisement. In fact, both the appointments were made without even
resorting to the Search-cum-Selection Process. The erstwhile Chairman
of SEBI was also appointed without any advertisement. It is also a
matter of common knowledge that the posts such as the Government of
Reserve Bank of India are hardly ever advertised. Similarly, the post
of Chairman, SEBI was advertised for the first time in 2008. Prior to
that, it was not advertised. The statement made by respondent No.4
that such higher posts are generally not advertised, cannot be said to
be a misleading or a false statement. It is a statement setting out
general practice of appointments in the commercial world on such
posts.
47. We also do not find much substance in the submission of Mr.
Bhushan that in order to facilitate the appointment of respondent
No.4, the recommendations of the JPC that the post should be
advertised, was deliberately concealed. A perusal of paragraph 21.9
of the recommendations dated 12th December, 2002 would show that the
Government had stated that a professional Chairman and Board of
Trustees would manage UTI II. It was also stated that advertisement
for the appointment of professional Manager will be issued. The
Committee also recommended that it should be ensured that the
selection of the Chairman and Professional Managers of UTI should be
done in a transparent manner whether they are picked up from the
public or private Sectors. It was further pointed out that if an
official from the public sector is selected, in no case the
deputation from the parent organization be allowed and the person
chosen should be asked to severe all connections with the previous
employer. This, according to the Government, was imperative because
under no circumstances should there be any public perception that the
mutual fund scheme of UTI-II are subject to guarantee by the
Government and would be bailed out in case of losses. In the affidavit
filed by UOI, the entire service history of respondent No.4 has been
set out from the time he joined erstwhile banking division of the
Department of Economic Affairs (DEA) as Joint Secretary w.e.f. 30th
October, 2000. Thereafter, he was posted as DEA (Main) on 2nd June,
2002; he was assigned the charge of CM Division and was relieved by
DEA on 28th October, 2005 on completion of his Central Deputation. At
that time a proposal was received in DEA from Chairman, SBI on behalf
of the shareholders of UTI AMC regarding initial appointment of
respondent No.4 as CEO, UTI AMC for a period of two years. This was
forwarded by the DEA to the Department of Personnel and Training
(DOPT) with the approval of the then Finance Minister. The deputation
of respondent No.4 was considered under Rule 6(2)(ii) which provides
for deputation of a cadre Officer under an international organization,
an autonomous body not controlled by the Government or a private body.
The aforesaid deputation can be made only in consultation with the
State Government on whose cadre the Officer is borne. We had earlier
noticed that due procedure was followed when respondent No.4 was sent
on deputation. However, at the risk of repetition, since the
petitioner has made such a grievance about the same, it will be apt to
notice that DOPT had agreed with the proposal of DEA with the consent
of Government of Bihar for deputation of respondent No.4 for a period
of two years under Rule 6(2)(ii) and conveyed to the Government of
Bihar, Department of Economic Affairs through Letter No.14017/26/2005-
AIS-(II) dated 31st October, 2005. As noticed earlier, the
deputation of respondent No.4 as CEO, UTI was conveyed to UTI vide
DOPT letter dated 16th April, 2007. The terms and conditions clearly
provided that the Officer could draw the pay of the organization or
the government pay scale which was beneficial to respondent No.4.
Respondent No.4 had made a representation to DOPT vide his application
dated 29th January, 2007 requesting to allow him to draw the pay in
the scale of Additional Secretary to the Government of India as he had
already been empanelled to the said post or the pay of CMD of UTI AMC
whichever is beneficial to him. The competent authority approved the
release of pay of Additional Secretary to respondent No.4 w.e.f. 10th
February, 2007, the information was duly communicated to UTI.
Furthermore, DEA by its letter dated 19th July, 2007 had requested
DOPT for extension of deputation of respondent No.4 as CMD of UTI AMC
for a further period of two years beyond 2nd November, 2007 under Rule
6(2)(ii) of the IAS Cadre Rule 1954 on the same terms and conditions.
However, the deputation was extended only for a period of three months
beyond 2nd November, 2007, as an interim measure
till the issue of deputation of IAS Officer under Rule 6(2)(ii) of IAS
Cadre Rules 1954 was finalized. Therefore, the deputation was extended
upto 2nd February, 2008. Thereafter the matter was again taken up by
the DEA, DOPT for consideration of the case of respondent No.4 under
Rule 6(1) of the IAS Cadre Rules under which an Officer may be deputed
to service under the Central Government or under State Government or
under a Company, Organization, Body of Individuals whether
incorporated or not, which is wholly substantially owned or controlled
by the Central Government or by any other State Government. Therefore,
ultimately, according to the consolidated guidelines, the deputation
of respondent No.4 was covered under Rule 6(1)(i) of the IAS Cadre
Rules.
48. There is not much substance in the submission that just for the
sake of accommodating respondent No.4, the recommendations of the JPC
were concealed from the Government. This submission is fallacious on
the face of it as the recommendations of the JPC were placed before
the Parliament and Government of India directly. Respondent No.4 had
no role to play in that procedure. In fact, the Government of India
submitted action taken report in context of the recommendations from
time to time and was fully aware of it. The Government of India never
adopted the policy of not sending IAS Officer on deputation to UTI AMC
and informed the Parliament in its 3rd action taken report submitted
in December, 2004. The decision to grant approval of commercial
employment post retirement under Rule 26 was taken by the Government
of India. The post was filled up by Board of Directors and
shareholders of UTI AMC. It was entirely for them to adopt such policy
of appointment as they deem fit. We fail to understand that even upon
respondent No.4 complying with all the conditions of deputation, it
would render him a person of not high integrity. We may notice here
that the Appointment Committee of the Cabinet (ACC) had approved the
extension of tenure of respondent no.4 as CMD UTI AMC till 31st may,
2008.
49. This takes us past the alleged irregularities regarding
deputation of respondent No.4, the alleged misstatement/non-disclosure
about his pay scale/sanctioned emoluments as disclosed in the letter
dated 16th April, 2007; the alleged appointment of respondent No.4 is
contrary to recommendations made by the AAPTE Committee on July, 2007;
the alleged false declaration under Rule 26(3)(ii) of AIS Death-cum-
Retirement Rules that in the last three years of his career he had not
been privy to sensitive and strategic information of UTI AMC; the
alleged false statement about higher-level posts are generally not
advertised.

Was the recommendation and appointment of Mr. U.K. Sinha vitiated by
MALA FIDE exercise of powers?
50. Mr. Bhushan submitted that the appointment of Mr. Sinha, as
Chairman, SEBI was made mala fide. Undoubtedly, if the allegations of
mala fide are established, it would vitiate the selection procedure,
recommendation and the appointment of Mr. U.K.Sinha as the Chairman,
SEBI. But the burden of proving the allegations of mala fide would lie
very heavily on the petitioner. The law in relation to the standard
of proof required in establishing a plea of mala fide has been
repeatedly stated and restated by this Court. Mr. Salve had relied on
the three judgments of this Court viz., Purushottam Kumar Jha Vs.
State of Jharkhand & Ors.,[7] Indian Railway Construction Co. Ltd.
Vs. Ajay Kumar,[8] and Saradamani Kandappan Vs. S. Rajalakshmi &
Ors.[9] The law concerning the aforesaid issue is so well settled
that it was hardly necessary to make any reference to previous
precedent. We may, however, notice the observations made by this Court
in the aforesaid three cases. In Purushottam Kumar Jha’s case (supra),
this court held that :

“23. It is well settled that whenever allegations as to mala
fides have been levelled, sufficient particulars and cogent
materials making out prima facie case must be set out in the
pleadings. Vague allegation or bald assertion that the action
taken was mala fide and malicious is not enough. In the absence
of material particulars, the court is not expected to make
“fishing” inquiry into the matter. It is equally well
established and needs no authority that the burden of proving
mala fides is on the person making the allegations and such
burden is “very heavy”. Malice cannot be inferred or assumed. It
has to be remembered that such a charge can easily be “made than
made out” and hence it is necessary for the courts to examine it
with extreme care, caution and circumspection. It has been
rightly described as “the last refuge of a losing litigant”.
(Vide Gulam Mustafa v. State of Maharashtra; Ajit Kumar Nag v.
GM (PJ), Indian Oil Corpn. Ltd.)”
51. In Indian Railway Construction Co. Ltd. Vs. Ajay Kumar (supra),
this court reiterated the law laid down in S. Partap Singh Vs. State
of Punjab and E.P. Royappa Vs. State of T.N. on the standard of proof
required to establish the plea of mala fide in the following words:-

“It cannot be overlooked that the burden of establishing mala
fides is very heavy on the person who alleges it. The
allegations of mala fides are often more easily made than
proved, and the very seriousness of such allegations demands
proof of a high order of credibility. As noted by this Court in
E.P. Royappa v. State of T.N. courts would be slow to draw
dubious inferences from incomplete facts placed before it by a
party, particularly when the imputations are grave and they are
made against the holder of an office which has a high
responsibility in the administration.”
52. Further, in Saradamani Kandappan’s case (supra)¸ this court again
emphasized that the contention of fraud has to be specifically pleaded
and proved.
53. Keeping in mind the aforesaid observations, we shall now examine
the material placed before us by the petitioner to establish the
allegations of mala fide exercise of power.
54. The first instance of mala fide relied upon by Mr. Bhushan that
number of steps were taken deliberately to deny extension to the
earlier Chairman. According to Mr. Bhushan, the moving spirit in the
strategic plan to deny the extension to Mr. C.B. Bhave was respondent
No.6. The allegations made by the petitioner have been emphatically
denied by UOI, Mr. Sinha, respondent No.4 and Ms. Omita Paul,
respondent No.6. As far as the grievance of the petitioner that Mr.
C.B. Bhave was denied extension just to accommodate respondent No. 4
is concerned, we are inclined to accept the submission of Mr. Mohan
Parasaran, learned Solicitor General, that there was no mala fides
involved in taking that decision. Learned Solicitor General pointed
out that in 2009 when the name of Mr. Bhave was being considered for
an extension, serious controversies came to be unearthed with regard
to the entire NSDL issue relating to the IPO scam during which Mr.
Bhave was the CMD of NSDL. A two member “Special Committee” consisting
of Dr. G. Mohan Gopal and Mr. V. Leeladhar that was appointed by SEBI
to look into the matter passed three orders. In one of these orders,
there was a serious indictment of NSDL. The media reports published in
connection with this controversy adversely commented upon the role of
Mr. Bhave as CMD of NSDL. Even Mr. J.S. Verma, former CJI, had voiced
his concern about possible shielding of Mr. Bhave by SEBI. Dr. G.
Mohan Gopal wrote a letter dated 8th April, 2009, wherein he
criticized the action of SEBI on the role played by Mr Bhave.
According to Mr. Parasaran, the then Finance Minister perused some of
the relevant documents cited above before making the note on 22nd
December, 2009, that led to denial of extension to Mr. Bhave. In these
circumstances, the noting made by the Finance Minister that led to
denial of extension to Mr. Bhave cannot ever be considered
unreasonable, let alone mala fide. Thus, we are inclined to accept the
submission of Mr. Parasaran that there is no mala fides involved in
denying an extension of Mr. Bhave.
55. The learned Attorney General, in our opinion, rightly pointed
out that no illegality was committed in making the amendment in the
rules pertaining to the selection of Chairman/WTM of SEBI. It is borne
out from the record that prior to 23rd July, 2009, there was no rule
on the procedure to be followed in the selection of Chairman/whole
time Member of SEBI. The selection procedure for the Chairman of SEBI
in 2008 was approved by the Finance Minister on 2nd November, 2007.
This procedure envisaged that the selection has to be made on the
recommendation of the high powered Search Committee. The composition
of the Search Committee was changed on the orders of the Finance
Minister. The learned Attorney General also pointed out that the
amendment of the rules had no relevance to the consideration of
recommendation of Mr. Sinha to be appointed as Chairman of the SEBI.
The Attorney General had also pointed out that in spite of the change
in the Selection Committee and in spite of Mr. Sinha having been short-
listed at No.1 by the Search-cum-Section Committee in its meeting held
on 29th November, 2008, it was Shri C.B. Bhave who was appointed
Chairman, SEBI on 15th February, 2008. We also find substance in the
submission of learned Attorney General that the amendment in Rule 3 of
the Security Exchange Board of India (Terms and Conditions of Service
and Members) Rules, 1992 was to provide for more participation by the
expert members. Therefore, sub-rule (5) of the aforesaid rules was
incorporated which requires that recommendation of Search-cum-
Selection Committee will consist of Cabinet Secretary, Department of
Economic Affairs, Chairman, SEBI for selection of WTM and two expert
eminent from relevant field. We have also been taken through the
necessary correspondence for the inclusion of Shri Suman Berry and
Shekhar Chaudhary, two experts of eminence from the relevant filed for
the selection of Chairman, SEBI in 2010. But it was noticed that
inclusion of Secretary Finance Services was not within the rules as
amended on 23rd July, 2009. Upon discussion with the Ministry of Law,
it was decided that the amendment in the rules could be made in line
with the rule prevalent for the selection made to the Income Tax
Appellate Tribunal. In view of the record produced in this court, we
are of the opinion that the submission made on behalf of the
petitioner is not correct. Learned Attorney General submitted that the
Search-cum-Selection Committee, after scrutinizing the qualification
and experience of the short-listed candidates unanimously placed
respondent No.4 first in the merit list. We have also perused the
record and it appears that respondent No.4 was unanimously placed at
Sr.No.1 by the Search-cum-Selection Committee. It has wrongly been
submitted on behalf of the petitioner that respondent No.4 was placed
at No.2 and yet he was appointed ignoring the person who was placed at
No.1.
56. Mr. Salve has made very detailed submissions on behalf of
respondent No.4. Giving us the entire sequence of how the rules were
amended. Mr. Salve has rightly pointed out that the petitioner has
falsely contended that rules concerning the constitution of Search-cum-
Selection Committee amended through notification dated 7th October,
2010 were to ensure the selection of Mr. Sinha. The applications for
filling up the post of SEBI Chairman were invited on 10th September,
2010. It is noteworthy that Mr. Sinha did not apply in response to the
invitation. Further more, the rules were amended in exercise of the
powers conferred on the Finance Minister under Section 29 of the SEBI
Act. The aforesaid notification issued by the Finance Ministry has not
been challenged by the petitioner. We also notice here that prior to
the amendment, the procedure for selection of Chairman, SEBI was
determined by the Finance Minister. Having perused the entire record,
we are not satisfied that the petitioner has made out a case of mala
fide to vitiate the proceedings of the Search-cum-Selection Committee.
The first meeting of the Search-cum-Selection Committee was held on
2nd November, 2010. Upon deliberations, the Committee decided to
invite Mr. Sinha alongwith five others. We may notice here that Shri
Suman Bery did not attend the meeting. The suitability of respondent
No.4 had to be determined by the Search-cum-Selection Committee. We
are unable to discern any illegality in the procedure adopted by the
Search-cum-Selection Committee. We also find substance in the
submission of Mr. Salve that the petitioner has made much a do about
the non-mention of the pay scale of the petitioner in the Performa
sent to the ACC which was enclosed with the Confidential Letter No. DO
No.2/23/2007-RE dated 13th December, 2010. The letter clearly mentions
that Search-cum-Selection Committee was constituted under Rule 3 of
the SEBI Rules, 1992. The Search-cum-Selection Committee consisted of
:-
1. Shri K.M.Chandrasekhar, Cabinet Secretary – Chairman

2. Shri Ashok Chawla, Finance Secretary – Member

3. Shri R.Gopalan, Secretary (DFS) – Member

4. Shri Devi Dayal, Former Secretary (Banking) – Member

5. Prof. Shekhar Chaudhuri, Director, IIM Kolkata – Member

6. Dr. Suman K.Bery, Director General, NCAER – Member

57. Applications were invited by circulating the vacancy position to
all cadre controlling authorities in the Government of India and
States on 10th September, 2010. The vacancy was simultaneously put on
the Website of the Ministry of Finance, Department of Personnel and
Training. It was also advertised in three largest circulating English
Newspapers of the country on 18th September, 2010. It is clearly
mentioned that out of the 19 applicants, who were respondents to the
advertisement in the first meeting of the Committee held on 2nd
November, 2010, five were short listed. In addition, the Search-cum-
Selection Committee also decided to invite Mr. Sinha CMD, UTI AMC for
interaction. The Search-cum-Selection Committee based on the
qualification, experience and personal interaction with the short
listed candidates, recommended the names of Mr. U.K. Sinha and Mr.
Himadri Bhattacharya in that order of merit, for being considered for
appointment as Chairman SEBI. The letter further mentions that the
Finance Minister proposed the appointment of Mr. U.K. Sinha as
Chairman, SEBI, for an initial period of three years from the date he
resumes the charge or till he attain the age of 65 years, whichever is
earlier. It is noted that willingness of Mr. Sinha has been obtained
and was enclosed with the letter. On this basis, it was requested that
approval of the ACC be obtained for the appointment of Mr. Sinha as
Chairman, SEBI. The letter also notes that the prescribed Performa,
duly filled in, is also enclosed. We fail to see what role Mr.
Sinha had to play in the whole procedure except for accepting the
invitation of the Search-cum-Selection Committee for interaction. Even
if the pay scale has not been mentioned, it cannot cast a shadow on
the integrity of the proceedings held by the Search-cum-Selection
Committee. It is also to be noticed that the proposal was sent to the
ACC on the express approval of the then Finance Minister. It is
noteworthy that the then Finance Minister was Mr. Pranab Mukherjee. He
is renowned for his transparency in the performance of his official
functions. He is at present the President of India.
58. Mr. Salve, in our opinion, has also rightly submitted that there
is nothing surprising in respondent No.4 accepting the post of
Chairman, SEBI which carried much lesser emoluments than he enjoyed as
Chairman, UTI AMC. It is not abnormal for people of high integrity to
make a sacrifice financially to take up the position of honour and
service to the nation. In any event, we are of the opinion, the
acceptance by Mr. Sinha of lesser salary as Chairman of SEBI cannot
ipso facto lead to the conclusion that he accepted the position for
the purpose of abusing the authority of Chairman, SEBI. Adverting to
the allegation of non-disclosure of ESOP, in our opinion, Mr. Salve
has rightly submitted that it was not done to avoid any investigation
by the ACC into the question as to why respondent No.4 would wish to
join Chairman, SEBI when he was drawing much higher emoluments as
Chairman, UTI AMC. This non-mention cannot lead to the conclusion that
if the same had been mentioned, respondent No.4 would not have been
selected as Chairman, SEBI on the ground that it would have been
illogical for a person drawing higher emoluments on one post to join
another post having lesser emoluments. Mr. Salve has rightly
reiterated that there was nothing abnormal; in the course adopted by
respondent No.4. No material has been placed on record to show that
respondent No.4 was in receipt of ESOP illegally. It has been pointed
out that under ESOP, an employee is given an option by the company to
buy its shares upto the given quantity allotted to him which can be
exercised after a specified time. In the case of UTI AMC, the stock
option was to vest after a period of three years. Secondly, an
employee could not exercise 100% of the option in one go. It was
spread over four years, 10% in the 4th year, 20% in the 5th year,
30% in the 6th year and last 40% in the 7th year. After vesting of
each trench, the employee had one year to make up his mind whether to
exercise his option or to let it go by. In UTI AMC, ESOP was approved
by the shareholders. The HR Committee of the Board and the Board, the
decision by the Board was taken on 27th December,
2007. The minutes of the meeting of the Board dated 12th April, 2008
clearly shows that the stock option was exercised by respondent No.4
in accordance with due procedure. However, even though the decision
had been taken by the Board of Directors on 17th September, 2007 to
grant respondent No.4 market based compensation, the matter was
pending with the share holders. It was only on 12th April, 2008 that
the Board took a decision to release the market based compensation to
respondent No.4. The actual allocation of ESOP was made to respondent
No.4 on 17th May, 2008 through the letter of head of HR Committee of
the Board. In fact in 2011 after respondent No.4 got appointment in
SEBI and had to leave UTI AMC on 31st January, 2011, he surrendered
his entire ESOP and rescinded all his rights to exercise his option in
future. We, therefore, find no substance in the submission of the
petitioner that there was any ulterior motive involved in non-
disclosure of the information with regard to ESOP to the ACC.
59. This brings us to the issue whether there was a conspiracy hatched
to ensure the selection of respondent No.4 as Chairman, SEBI. The
petitioner stated that the conspiracy involved taking seven steps,
namely:-
i. Mr.Sinha would seek voluntary retirement from IAS.

ii. SBI Chairman would move to make a fresh offer.

iii. Mr.Sinha would seek approval for post retirement commercial
employment.

iv. Ministry of Finance would recommend commercial employment.

v. DOPT would approve the same and waive the waiting period.

vi. All concerned persons in the decision making process would
designate the employment with UTI AMC as commercial
employment.

vii. File would not be sent to the PMO/ACC for information or
approval.
60. We have already considered all the points raised by the
petitioner in the earlier part of the judgment. Therefore, it is not
necessary to repeat the same. This, apart, the charge of conspiracy
has to be taken seriously as it involves the commission of very
serious criminal offence under Section 120-B of the IPC. Such a charge
of criminal intent and conduct had to be clearly pleaded and
established by evidence of very high degree of probative value. No
notice of such allegations can be taken based only on pure
conjectures, speculations and interpretation of notings in the
official files.
61. The observations made by this Court in the judgments noticed
earlier make it clear that it was incumbent on the petitioner not only
to make specific allegations, but to produce very strong evidence to
lead to a clear conclusion that the selection was actuated by mala
fide. The 7 steps relied upon by the petitioner to establish
conspiracy per se do not amount to conspiracy to mislead the ACC. It
is unbelievable to expect such a coordinated overt and covert
operation to have been even conceived, let alone successfully executed
just to have Mr. U.K. Sinha appointed as Chairman, SEBI. The
appointment of Mr. Sinha is strictly in conformity with the procedure
prescribed by service rules, i.e, Rules 16 and 26 of the AIS (DCRB)
Rules, 1958. The files were sent to PMO as and when required by rules
of business. In matter of VRS and post retirement commercial
employment, there is no requirement under the rules of business of
sending the file to PMO/ACC. We find substance in the submission of
Mr. Salve that the petitioner has not placed on record any material to
establish that any conspiracy was hatched to ensure the selection of
respondent No.4.
62. The submissions made by the learned Attorney General and Mr.
Salve have also been supported by learned Solicitor General appearing
on behalf of respondent No.6. Mr. Prasaran submitted that baseless
allegations have been made against respondent No.6. She was neither
the recommending authority nor the appointing authority for the post
of SEBI. She was appointed as Advisor to the Finance Minister on 26th
June, 2009. Mr. Prasaran, in our opinion, has rightly made a grievance
that all the actions taken by respondent No.6 in the execution of her
duty have been deliberately warped and distorted to unnecessarily
involve her in the trumped up controversy. Her role as Advisor was
limited to advising/assisting the Finance Minister on the work
assigned to her. The nature of work was, therefore, different from the
role of a functionary who performed an assigned line of functions. She
could have neither recommended respondent No.4 for appointment nor
negated any recommendation. By making a detailed reference to the
official record, Mr. Prasaran has pointed out that the Chairman, SEBI
is appointed by the Central Government by following an established
process by the ACC headed by the Prime Minister. This is done on the
basis of Search-cum-Selection Committee of the Government of India.
The opinion of other independent and reputed experts in the field of
Economics, Finance and Management is also taken through an
institutional mechanism approved by the DOPT. We are inclined to
accept the submission of the learned Solicitor General that the
allegations made against respondent No.6 are imaginary and based on a
distorted interpretation of the official notes appended with the writ
petition. With regard to the non-extension of Mr. C.B. Bhave, the
learned Solicitor General relied upon the averments made in the
counter affidavit filed by the UOI in Writ Petition No.391 of 2011.
The aforesaid affidavit has been attached as Annexure R-4 to the
counter affidavit filed by respondent No.6 in the present writ
petition. In the aforesaid affidavit, it has been set out that prior
to July, 2009; selections were made by the Committee as
decided by the Finance Minister from time to time. As noticed earlier,
the name of Dr. S.A. Dave, Chairman, CMIE was added as an expert
member of the high powered Selection Committee constituted by the
Finance Minister for the selection of Chairman, SEBI in 2008. Even at
that time, Mr. Sinha was short-listed and placed at Sr.No.1. Out of
the two names short listed as noticed by us earlier in spite of the
recommendations, it was C.B. Bhave who was appointed. In 2009, a
statutory system was established for the selection of Chairman/Whole
time Member of SEBI. In this back-ground, Rule 3 was amended by
introducing sub-rule (5) which provided that the Chairman and every
whole time member shall be appointed by the Central Government on the
recommendation of the Selection-cum-Search Committee consisting of the
(i) Cabinet Secretary as the Chairman, (ii) Secretary, Department of
Economic Affairs, (iii) Chairman, SEBI (for selection of whole time
members) (iv) two experts of eminence from the relevant field to be
nominated by the Central Government. In 2010, it was decided to
initiate action for a fresh selection for the post of Chairman, SEBI.
Therefore, a note was initiated on 18th July, 2010 for the
constitution of a Committee. Various names were suggested for
inclusion as experts. While approving the constitution of the
Selection Committee, the Finance Minister also observed that going by
earlier precedent, the Committee should have composition that includes
Secretary, Finance Services, who functionally deals with special
critical aspects of the capital market. Thus, with the addition of the
Secretary Finance Services, the number of nominees in the Search-cum-
Selection Committee became five. Unlike in the past, the composition
of the Selection Committee was sent to the DOPT for approval. However,
on 23rd September, 2010, DOPT pointed out as noticed earlier that
inclusion of Secretary Finance Services was not within the rules
amended on 23rd July, 2009 which led to the amendment of the rules. To
rectify this shortcoming, the amendment of the rules became necessary.
It was within the powers of the Central Government to make the
aforesaid amendment, which was carried out in accordance with the
rules. It is, therefore, difficult to accept the submission of the
petitioner that the amendment in the rules was made to ensure the non-
extension of Mr. C.B. Bhave as Chairman, SEBI. In fact, Mr. Bhave was
not granted the extension for the reasons which have been given in
detail by Mr. Prasaran in his submission, the same need not be
reiterated. We are also unable to take the allegations made by Dr.
Abraham seriously, as the same seem to be actuated by ulterior motive.
It is a direct attack on the integrity of respondent No.4. The opinion
expressed by Dr. Abraham, in his lengthy letter, cannot be given much
credence unless it is supported by very convincing material. We are
also not much impressed by the submission of Mr. Bhushan that the
constitution of the Search-cum-Selection Committee was changed at the
instance of respondent No.6. As narrated by the Solicitor General, the
ultimate selection was made by a Selection Committee consisting of
Members who were all serving Officers in the Government. Therefore, it
is difficult to accept the submission that 3 out of 5 members were
hand-picked by respondent No.6 to select Mr. Sinha. We are also unable
to see any merit in the submission of the petitioner that the post of
CMD, UTI AMC was kept vacant for 17 months to accommodate the brother
of respondent No.6. In our opinion, the allegations are malicious and
without any basis, and therefore, cannot be taken into consideration.
63. This now brings us to the preliminary objections raised by the
respondents that the writ petition deserves to be dismissed on the
ground that it is not a bona fide petition. According to the
respondents, the petitioner has been set up by interested parties. We
entirely agree with the submissions made by the learned Attorney
General that the first requirement for the maintainability of a public
interest litigation is the uberrimae fide of the petitioner. In our
opinion, the petitioner has unjustifiably attacked the integrity of
the entire selection process. It is virtually impossible to accept the
submission that respondent No.6 was able to influence the decision
making process which involves the active participation of the ACC, a
high powered Search-cum-Section Committee with the final approval of
the Finance Minister and the Prime Minister. The proposition is so
absurd that the allegations with regard to mala fide could have been
thrown out at the threshold. We have, however, examined the entire
issue not to satisfy the ego of the petitioner, but to demonstrate
that it is not entirely inconceivable that a petition disguised as
“public interest litigation” can be filed with an ulterior motive or
at the instance of some other person who hides behind the cloak of
anonymity even in cases where the procedure for selection has been
meticulously followed. The respondents have successfully demonstrated
how the petitioner has cleverly distorted and misinterpreted the
official documents on virtually each and every issue. In our opinion,
the petition does not satisfy the test of utmost good faith which is
required to maintain public interest litigation. We have been left
with the very unsavoury impression that the petitioner is a surrogate
for some powerful phantom lobbies. Respondent No.2-SEBI in its
affidavit has stated that the petitioner is a habitual litigant. He
files writ petitions against individuals to promote vested interest
without any relief to the public at large. We are at a loss to
understand as to how in the facts of this case, the petitioner can
justify invoking the jurisdiction of this court under Article 32.
This is not a petition to protect the Fundamental Rights of any class
of down trodden or deprived section of the population. It is more for
the protection of the vested interests of some unidentified business
lobbies. The petitioner had earlier filed writ petition in which
identical relief had been claimed and the same had been dismissed. The
aforesaid writ petition is sought to be distinguished by the
petitioner on the ground that three successive writ petitions were
withdrawn as sufficient pleadings were not made for the grant of
necessary relief. Even if this preliminary objection is disregarded,
we are satisfied that the present petition is filed at the behest of
certain interested powerful lobbies. The allegations made in the
letter written by Dr. Abraham are without any basis and clearly
motivated. Further, a perusal of the record clearly reveals that
several complaints were filed against Dr. Abraham, wherein some
serious allegations have been made against him in relation to his
tenure as the Whole Time Member (WTM), SEBI. Also, it was only after
the Ministry of Finance decided not to extend his tenure as WTM, SEBI
and advertisements for new appointments were issued that Dr. Abraham
started complaining about interference of the Ministry of Finance in
SEBI through the present Chairman. We may also notice here that the
letter dated 1st June, 2011 written by Dr. Abraham to the Prime
Minister, that the Petitioner seeks reliance upon, was written merely
a month and a half before Dr. Abrham’s tenure was to end. From the
above, it is manifest that the letter written by Dr. Abraham was
clearly motivated and espouses no public interest. The affidavit also
narrates the action which has been taken by SEBI against very
influential and powerful business Houses, including Sahara and
Reliance. It is pointed out that the petitioner is a stool pigeon
acting on the directions of these Business Houses. We are unable to
easily discard the reasoning put forward by respondent No.4. It is a
well known fact that in recent times, SEBI has been active in pursuing
a number of cause celebre against some very powerful Business Houses.
Therefore, the anxiety of these Business Houses for the removal of the
present Chairman of SEBI is not wholly unimaginable. We make the
aforesaid observations only to put on record that the present petition
could have been dismissed as not maintainable for a variety of
reasons. However, we have chosen to examine the entire issue to
satisfy our judicial conscience that the appointment to such a High
Powered Position has actually been made fairly and in accordance with
the procedure established by law.
64. We find no merit in this petition which is accordingly
dismissed.
……………………………J.
[Surinder Singh
Nijjar]
……………………………J.
[Pinaki Chandra
Ghose]
New Delhi;
November 01, 2013.
———————–
[1] (2011) 4 SCC 1

[2] (2011) 7 SCC 639
[3] (2008) 12 SCC 481
[4] 2013 (1) SCC 1.

[5] (2009) 4 SCC 700
[6] 1992 Supp. (1) SCC 524
[7] (2006) 9 SCC 458
[8] (2003) 4 SCC 579
[9] (2011) 12 SCC 18
———————–
75

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