-
12.
---e::::
ANNEXURE-PIS: True Copy of the file noting
>5
made by the Finance Minister on 22.12.2009. 13.
ANNEXURE-P/9: True Copy of the Noting F. No. 2/23, '2007-FE' made by the Director (PM & RE)
4-0-4-3
dated 11.1.2010. 14.
ANNEXURE-PlIO: True Copy of the Notification F. No. R-16011/ 02/2009-Ins III dated 18.2.2010 issued
4-4--
by the Ministry of Finance. :/.-
-
15.
ANNEXURE-Pill: True Copy of the Notification F. No. 1/6/2007-PR dated 3.5.2010issued by the
C\-b-q-.:r
Ministry of Finance. 16.
ANNEXURE-P/12: True copy of the file noting made by the Finance Minister on 10.8.2010.
17.
'1--3
ANNEXURE-P/13: True copy of the Notification dated 7.10.2010 issued by the Ministry of Finance, Department of Economic Affairs, Govt. of India.
S-O..-S-)
1'"'"
....
18.
ANNEXURE -P/14: True copy of the letter dated 1.6.2011 written by the K.M. Abraham to the
btJ
Prime Minister. 19.
ANNEXURE
True Copy of the Order dated
26.8.2011 passed by this Hon'ble Court in Writ Petition
bS-
(C) No. 340 of 2011 20.
l.A. No.
of 2011 :
Application for ad-interim ex-parte stay
a: 69
A·1 LISTING PROFORMA IN THE SUPREME COVRT OF INDIA
1.
Nature of the matter
2.
(a) Name (s)ot petitioner (s)/Appellant(s)
CIVIL S. Krishnaswamy & Others
(b) e-mail 10 3.
NA
(a) Name(s)of Respondent (s)
Ministry of Finance & Others
(b) e-mail 10
N.A.
4.
Number of case
5.
(a) Advocate(s) for Petitioner(S)
W.P: (C) NO.
,M/S AP&J CHAMBERS,
(b) e-mail 10 6.
','
OF ,2011
prashant@apilaw.com
(a) Advocate(s) for Respondent(s)
N.A.
(b) e-mail 10
NA
7.
Section dealing with the matter
PIL
B.
Date of the impugned order /judgment
NA
SA.
Name of Hon'ble Judges
NA
SB.
In land Acquisition Matters
NA
(i).
Notification. Gov. Order No. (u/s 4,6)
NA
Dated
issued by Center /State of
(ii).
Exact purpose of acquisition & Village involved
SC.
In Civil Matters:-
(i).
Suit No, Name of Lower Court
N.A.
Date of JUdgment
NA
80.
NA
, In Writ Petition :-
NA
• Catchword" of other similar matter BE.
In, Case of motor vehicle Accident Matters :Vehicle No.
8F. r: "-
BG.
N.A.
In Service Matters :-
(i). Relevant service rule, if any
NA
NA
if application or question
In Labour Industrial disputes Matters:-
1.0. Reference /Award No, If application
N.A.
9. :'
Nature of urgency
STAY
10.
In case it is a Tax matter:
(a)
Tax amount involved in the matter
(b)
Whether
a
reference/
statement
rejected (c)
NA of
the
case
was,
called
for
or
N.A.
Whether similar Tax matter of same parties filed earlier (may be for earlier/other Assessment Year)?
NA
(d) 11.
Exemption Notification/Circular No. Valuation ot the matter
NA NA
12;
Class fiction of the matter: (pleasEt fill up the number & name of relevant category with sub category as per the list pircula.ted) , No. of subject category with full name NO,of sub -Category with full name
A-2 13.
Title of the Act involved (Center/state)
14.
(a).Sub- Classification (indicate section /Article of the status)
Constitution of India Article 14 & 21
(b).Sub-section involved
N.A.
(c) Title of the Rule involved (state)
N.A.
(d) Sub- Classification (indicate Rule/Sub-Rule of the status)
N.A.
15:
Pointof law arid Question of law raised in the case... Whether the legislative mandate and the rationale behind the enactment of the SEal Act. 1992 was to ensure that SEBI worked fairly and freely and devoid of any political pressure or political clout playing its part in attempting to protectthe erring privateplayers and corporate houses?
16.
Whether matter is not to be listed before any Hon'ble Judge? Mention the name of the Hon'ble jUdge
N.A.
Particular of identical/similar case, if any (a).Pending case
N.A.
17.
. (b) Decided case with citation 17A.
NA
Was SLP/ Appeal/writ filed against same impugned judgment /order earlier? NA particulars
18.
Whether the petition is againstinterlocutory/final order/decree in the case N.A.
19.
If it is a fresh matter, please state the name of the High court and the Coram in the Impugned JUdgment/order N.A.
20.
If the matter was already listed in this court : (a) When was the listed?
N.A
(b) What was the Coram?
N.A.
Whatwas the direction of the court 21. 22. ...,...
. N.A.
Whether a date has already been fixed either by court or on being mentioned, for the hearing of matter? If so, please indicate the date fixed.
N.A.
Is there a caveator? If so, Whethera notice has been issued to him?
NA
23.路 Whetherdate entered in the Computer?
NA
24.
If It is a criminal matter, please state.
N.A.
(8)
Whether accused has surrendered
N.A.
(b)
Nature of offence, i.e., Convicted undersection with Act
N.A.
(c)
Sentenced awarded
N.A.
(d)
Sentenced already undergone by the accused
NA
24 (e). (i) FIR/RC/etc
(ii) (Iii)
Date of Registration of FIR etc.
N.A.
Name & Place of the Police Station
N.A.
Name & Placeof Trial Court
N.A.
Case No. in Trial court and Date of jUdgment
N.A
st
Nameand Place of 1 Appellate court st
Case No. in 1 Appellatecourt& date of JUdgment
N.A. N.A.
Date 0109.2011 (M/S AP&J CHAMBERS) C.C. No.1552 Advocate for Petitioner(s )/Appeffent(s)/RespeAd.ent(s) Address:12,Old Lawyer'sChambers, Supreme Court Compound, N.D.-1,Ph: 23381803
A-3 CHECKLIST
-
Whether Special Leave Petition (Civil) has been filed in Form No. 28 with certificates as per notification dated 17.06.19977
(Ii)
Whether the prescribed court fee has been paid?
2(i)
Whether proper and required number of paper books (1 +3) have been filed?
Yes/No
(Ii)
Whether brief list of dates/events has been filed?
(iii)
Whether paragraphs .and pages of paper books have been numbered consecutively and correctly noted in Index?
3.
Whether. the. contents of the petition/appeal application and accompanying YesINo documents are dear, legible and typed in double space on one side of the paper.
4.
Whether the Petition and the applicant bear the signatures of the counsel/ inperson.
5.
Whether¡ the affidavit of the of the petitioner in support petition/appeal/application has been filed, properly attested and identified.
6.
If there are many vernacular documents/portions/lines and translation of such documents are not filed, Whether application for exemption from filing official translation, with affidavit and court fee, has been filed.
7.
If a party in the court below has died.. Whether application for bringing LRs on . record Indicating the date of death, relationship age and addresses alongwfth affidavit and court fee has been filed.
8(1)
_.
•
1(t)
V
.
lYesINolNA
v
..)e;/NO
V
V"
Yes/No
Whether the Vakalatnama has been properly executed by the petitioners/Appellants and accepted and identified by the Advocate and Memo of . Appearance filed.
(Ii)
If a petitioner is represented through power of attorney, Whether the original power of attorney in English/Translated copy has been filed and Whether application for permission to appear before the court has also been filed?
YesIN'6"
9.
the ¡Petition/ appeal contains a statement in terms of Order XVI/XXI of Supreme Court Rules as to whether the Petitioner has filed any Petition against the impugned order/ Judgment earlier, and if so, the result thereof statedin the Petition.
10.
Whether certified copy of the impugned judgment has been filed and if certified. YesINo/NY copy is not available, Whether an application for exemption from filing certiffed : copy has been filed.
11.
Whether the particulars of the impugned judgment passed by the Court(s) below are uniformly written in all the documents.
h2(l)
Whether the addresses of the parties and their representation are complete and set out property and Whether detailed cause title has been mentioned. in the impugned judgment and if not, Whether 'the memo of parties has been filed, if required?
ii)
Whether the cause title of he Petition/appeal corresponds to that of the impugned judgment and namesof parties therein?
'-"""
A.. 4
•
..-
13.
Whether in case of appeal by certificate the appeal is accompanied by judgment . and decree appealed from and order granting certtttcate.
14.
If the Petition/ appeal is time barred, Whether application for condonation of Yes/No/I\)." delay mentioning the no. of days of delay, with affidavit and court fee has been filed.
15.
Whether the Annexurereferred to in thepetitton/list of dates are true copies of the document before the court below and are filed in chronological order as per of dates.
16
Whether the petition/appeal confined only to the pleadings in the court/Tribunal below and
Yes/NoIN·19
If not Whether application for taking additional grounqs/ document with affidavit and court fees has been filed.
I ;
-
Yes/tJ6"
V
I.'.'
In speciet Leave Petition/Appeal against the order passed in Second Appeal Yes/NO/NX' whether copies of the orders passed by the Trial Court and first Appellate Court havebeen filed. .
•
If required copy of the judgment/order/notification etc, is not filed, whether letter·of undertaking has been filed in Civil matters?
.,....
18.
In matters involving conviction whether separate proof of surrender in respect of all convicts or application for exemption from. surrendering has been filed (Please see judgment dated 16.06.2006 in Crt. Appeal No. 68512006 entitled Mayuram Subramanian Srinivasan Versus (C81) (Copy of surrender proof to be included in the paper books).
19.
Whether in case where proof of surrender/separate certificate from the jail . authority has not been filed, from the jail authority has not. been filed, an application for exemption from fillnR separate proof of surrender has been filed.
V'
Yes/No/N.A .
20..
In case of quashing of FIR whether a copy of the Petition filed before the High Yes/No/N.A """"'" Court under section 482 of Cr. has been filed.
21.
. In case of anticipatory bail whether a copy of FIR or translated copy has been . .Yes/NolN.A• filed.
(ii)
p.e.
'-'"
Whether the complete listing proforma has been filed in, signed and included in . Yes/No/N.A the paper books? If any identical matter is pending in/disposed of by Supreme Court, Whether complete particulars of such matters have been given.
(MIS APftJ CHAMBERS) ADVOCATE FOR THE PETITIONERS
C.C. No. Dated: -
1552
0L09.2011
....
. .
SYNOPSIS
The instant Writ Petition is being filed because the constitution of the Search-cum-Selection Committee for recommending the name of Chairman and every Whole-Time Members of the SEBl for appointment has been altered directly impacting its crucial balance which will compromise the role of the SEBl as a watchdog. It is the only instance of its sort where the concerned Minister has placed two Members of his own :''''
choosing in the Search-cum-Selection Committee. The problem is now endemic because the orders to extend the term of the erstwhile Chairman of the SEBl (2008-2011). and. two Whole-Time Members from three (3) years to five (5) years were not only reviewed and negated, but also, thereafter, the Security and Exchange Board of India (Terms and Conditions of Service of Chairman and members) Rules, 1992 were amended. The amended Rule 3 (5) added Clause (e)
...... authorising the Finance Minister, not the Central Government, to appoint any two persons on Search-cum-Selection Committee for Chairman and Whole-Time Members of the SEBl Board. In this manner, new members were duly appointed thereby subverting the process of selection and eliciting persons who would not necessarily have any expertise in the
•
.
.
.
. and .would be handpicked. All this
independence of the SEBI and its status as a watchdog.
away from the
LIST QF DATES
1992
The SEBI Act, 1992is a special legislation enacted after several scams emerged in the stock markets and the
•
Act was enacted to address the vulnerabilities of the system. The Act mandates a crucial and central role to SEBl in protecting the interests of the investors and the players and participants in the stock market and the field of securities in India.
23.7.2009
Ministry of Finance issued a Notification on 23.7.2009 whereby the Securities and Exchange Board of India (Terms and Conditions of Service of the Chairman and Members) Rules, 2009 were promulgated. By way of Rule 2 thereof, Rule 3(2) of the Securities
.... .A
and Exchange Board of India (Terms and Conditions of Service of Chairman . and Members) Rules, 1992 were amended and the term of office of the Chairman and the Whole Time Members was increased from three (3) years to five (5) years. The above stated amendments also added sub rule (5) to rule (3) constituting a Search
cum Selection
Committee headed by Cabinet Secretary for selection
y of Chairman and Members of SEBl. In case of selection of Members,. Chairman SEBl was included as a Member to this Committee. These changes.were made with the prior approval of the decision makers at the Finance Ministry.
1.9.2009
The office put up a Note sheet for the approval of the Finance Secretary for orders on the extension of the I
tenure of office of the Chairman and the Whole Time Members ofthe SEBI for two (2) more years apart from the existing tenure as per the Notification dated 23.7.2009.
8.9.2009
The file was put up before the Finance Minister for .
.
decision on the extension of tenure of the Chairman and the Whole Time Members of the SEBI in accordance with the Notification dated 23.7.2009. The Finance Minister noted that prior to making the offer of extension of tenure to the incumbent Chairman and
•
Whole Time Members, the performance of the officials ought to be appraised.
8.10.2009
The Finance Secretary categorically recorded on 8.10.2009 that the performance of the then current Board- the Chairman and the Whole Time Members was very good both in terms of the extent of the
activities undertaken by the SEBI and the quality and delivery of those activities. It was further noted that it
•
was for this reason that when the Rules amending the tenure of those positions were promulgated, the Ministry had no hesitation in offering the extended tenure to the then current incumbents of those positions. In this light the Finance Minister approved the proposal for two years extension and Ministry decided to move the proposal
seek the willingness
of the incumbents. 21.10.2009¡
On 21.10.2009 the Director Capital Markets wrote to the then Chairman of the SEBI to ascertain his willingness to be considered for the further tenure of two years beyond the present tenure.
28.10;2009
The then Chairman of the SEBI, Shri C.B. Bhave and members, duly gave their consent to be considered for the extended tenure of two years beyond the then present tenure.
18.11.2009
The file was again submitted to the Finance Minister on 17.11.2009 and approved by the Finance Minister. on 18.11.2009
F 23.11.2009
Ministry of Finance after this approval sent the proposal
for
approval
of
ACC
(Appointment
Committee on Cabinet) 25.11.2009
Within two days, OSD to the Finance Minister asked to see the file, file is sent on 27.11.2009 by Finance Secretary and OSD .to FM (Finance Minister) noted "Seen thanks".
15.12.2009 '
On 15.12.2009, the Director, Capital Markets made a noting on the file that the file be, submitted. for the perusal of the Advisor to the Finance Minister. This was the second occasion on which the OSD desired to ' see the file. This was a deviation from the norm as there was no reason for the file to be placed before the
•
Advisor to the Finance Minister. .-.......
,
21.12.2009
The Advisor to the Finance Minister, made a noting on the file on 21.12.2009 that the Finance Minister may see Page 22 regarding the composition of the SEBl Board and the issue of the present tenure of the Chairman and Whole Time Members may also be considered.
22.12.2009
On 22.12.2009, on the next day, the Finance Minister simply noted that there was no need for any action at that stage because the tenure of the then Chairman,
'-7 SEBI was upto February, 2011. The tenures of other three members extended beyond the middle. of 2011. The Finance Minister noted that the appropriate time for moving the ACC for any extension would be six months prior to the end of the existing tenures. 11.1.2010
On 11.1.2010, the Director resubmitted the file for orders as to whether the proposals already sent to the
Ace should be recalled or whether the decision of the ACC, if positive, be implemented only a few months before the tenures of the then incumbents were to expire. 18.2.2010
Surprisingly, on 18.2.2010, the Executive Director of the SEBI was appointed as a Whole Time Member of the Insurance Regulatory Development Authority .
.
.(IRDA) for a .period of, 5 years by the Ministry of Finance but for some reason, the Ministry of Finance sat over its own Notification extending the term of office of Chairman and whole time Members of SEBI from three years to five years and finally negated it by not applying the same to the incumbent officers, for reasons best known to itself. 3.5.2010
Once again, the Ministry of Finance has appointed Shri Yogesh Agarwal as Chairman, Interim Pension fund
Regulatory and Development Authority (PFRDA) for a period of five years. It is only in the case of the erstwhile Chairman of the SEBI and the Whole Time Members of the SEBI that this has not been given effect to despite the amendment to the Rules specifying the term of office.
10.8.2010 ..... -
In fact the entire initiative of extension of the tenures
of the Chairman and the Whole-Time Members stood
..... -
scuttled due to the noting on the' file that since the tenure of Shri C.B. Bhave, Chairman, SEBI, was coming to an end on 17.2.2011 action was to be initiated for fresh selection for the post of Chairman,
•
SEBI. The entire sequence of events. ascertaining the willingness of the Chairman, receiving the same and
--
other proceedings stood negated.
.
07.10.2010
The Respondents No, 1 and 2 amended the SEBI (Terms and Conditions of Service of Chairman and . Members) Rules, 1992 by inserting clause (e) in rule 3, in sub-rule (5), after clause (d), as follows.
"such other persons,
if any, not exceeding two as the
Minister ofFinance may nominate."
I As stated hereinabove there is no requirement of expertise for the persons to be inducted under the newly inserted clause and they are to be handpicked by an individual. This is at variance with the other persons on the Committee as Ministry of Finance is represented under clause (b) by Secretary Economic Affairs and (d) two experts .of eminence from the relevant field to be nominated by the Central 路
-.
Government. The appointments made pursuant to Clause (e) as
aforesaid and those which may be made in the future stand to jeopardise the independence of the SEBL Oct.,2010
Process of selection of Chairman SEBI took place and following the aforesaid. amendment the Finance Minister included Mr. Devi Dayal and Mr. R. Gopalan as his nominees. The Committee selected Shri U.K. Sinha, the present Chairman SEBl.
1.6.2011
An insight into the true state of affairs operating at the
SEBI and the Ministry of Finance can be gleaned from the letter dated 1.6.2011 sent by a Whole Time Member of the SEBI to the Hon'ble Prime Minister of India.
June, 2011
For selection of Whole-Time Members, the Finance Minister nominated Mr. B.L. Meena and Mr. Shashi Kant Sharma as his nominees. Incidentally, Shri Meena happens to be the brother of MoS (Finance) Shri Namo Narain Meena.
.Interviews were held by a sub-
committee of the Search cum Selection Committee under the chairmanship of Shri U.K. Sinha, Chairman SEBI and recommendations :are under process of approval by ACC (Appointments Committee of
•
Cabinet) June - July 2011
The process of selection of Members was delegated to Chairman, SEBI, impermissible under sub rule (5) and Mr. Bimal ]ulka, an Additional Secretary level officer, not directly connected with theSEBI at the functional level, was included as a part of the selection process for Members. The Petitioners are unable to document. these actions because no written orders have been issued and the Petitioners urge the Hon'ble Court to obtain the files.
01.08.2011
There are clear indications that there is a nexus . between the Ministry of Finance and major corporate players and that the free and fair functioning of the SEBI is no longer possible. Hence the instant Writ
Petition is being filed to protect the interest of the common investor from the workings of a tainted machinery. The Notification dated 7.10.2010 which amends the constitution of the Search-cum-Selection committee arbitrarily is patently illegal because it seeks to give unbridled power to the Finance Minister by placing two of his nominees in the Committee who would finally select the Chairman and Whole-Time Members of the SEBI.Interestingly . the amendment does not .
clothe the said nominees with
requirement of
expertise for their nomination to the Comri:rittee. The newly provided for nominees in the Selection Committee are no independent members. This amendment derogates from the independence of the SEBI .in the all-important matter of theappointrnent and functioning of the Chairman and the Whole-Time Members. It is respectfully submitted that this would be the only instance where the nominees of a Minister . would be placed in a Committee in this manner and the status of a watchdog earmarked for the SEBI would stand to be significantly compromised by this amendment. Such an amendment militates against the
L very object and purpose of creating SEBI as an independent body and therefore deserves to be struck down by this Hon'ble Court. 2.8.2011
The Petitioners filed a Writ Petition before this Hon'ble Court agitating these issues. The Writ Petition filed by the Petitioners was numbered as Writ Petition (C) No. 340 of 2011.
26.8.2011
Writ Petition (C) No. 340 of 2011 came up for hearing before this Hon'ble Court on 26.8.2011 when this Hon'ble Court was pleased to permit the Petitioners to withdraw the Writ Petition with liberty to file the Writ Petition afresh within a period of two weeks.
2.9.2011
Hence the instant Writ Petition is being filed before this Hon'ble Court in public interest.
IN THE SUPREME COURT OF INDIA CIVIL ORIGINAL JURISDICTION WRIT PETITION (CIVIL) NO.
OF 2011
(Under Article 32 of the Constitution of India) IN THE MATIER OF: 1.
S. Krishnaswamy, (Retd.),Former Chief of Air Staff.
--
V-321 16 A&B, DLF Phase III,
Gurgaon -122002 (Haryana).
2.
Julio F. Ribeiro, Ex DGP, Punjab & Commissioner of Police, Mumbai. 51, Sagar Tarang, Worli Sea Face, Mumbai - 400 030.
3.
B.R. Lall, Former It. Director, CBI!DGP Haryana H. No. 301, Harmitage Society, Sector-48, Hamilton Court, Gurgaon, Haryana
... Petitioners
Versus 1.
Ministry of Finance Through its Secretary North Block, New Delhi-llOOOl.
2.
Securities and Exchange Board of India, Through the Chairman, Plot No. C-4A, G Block, Bandra-Kurla Complex, Bandra (East), Mumbai-400051.
3.
Chairman, Securities and Exchange Board of India, Plot No. C-4A, G Block,
:;;';',
Bandra-Kurla Complex, Bandra (East), Mumbai-400051
4.
Union of India Through Cabinet Secretary, . North Block, New Delhi-ll0001. ....Respondents ALL ARE CONTESTING RESPONDENTS
WRIT PETITION IN PUBLIC INTEREST UNDER ARTICLE 32 OF THE CONSTITUTION OF INDIA SEEKING ISSUANCE OF WRITS OF MANDAMUS TO DECLARE THE INSERTION OF CLAUSE (E) IN THE SEBI (TERMS AND CONDITIONS OF CHAIRMAN AND MEMBERS) RULES, 1992, IN RULE 3, IN SUB-RULE (5), AFTER
} CLAl.}SE (0)
ORDJ;RS DATED 7TH OCTOBER, 2010 MALAFIDE
ANp T;HEREBY NULL ANQ VQID; QECLARE ALL APPOINTMENTS MADยง AFTER 7TH OCTOBER, 2010 NULL AND VOID AND DIRECT I
RESPONDENT NO.3 TO HOLD THE' SEARCH-CUM-SELECTION PROCESS FOR APPOINTMENT OF THE CHAIRMAN AND WHOLE . ;.
TIM);
SJ;:lH AFRESH
To, Hon'ble the Chief Justice of India and his Companion judges of the Supreme Court of India .
The humble petition of the Petitioners above namedM9ST RF;SPECTFULl-Y 1.
The instant Writ Petition is being filed in public interest by the Petitioners protesting a violation of the fundamental rights
....
--
enshrined in Articles 14 and 21 of the Constitution of India, to protect the interest of the common investor from the workings of a . , tainted machinery because the constitution of the Board of the SEBl . has been altered and it is now possible for people with no expertise in the area to be handpicked at the whims and fancies of those empowered to do so under the amendment and this will impair the working of the SEBl and derogate. from its role as a watchdog. Also, in an inexplicable fashion the proposal to extend the tenure of the then Chairman and Whole-Time Members from three (3) to five,
(5) years has been negated, first by postponing the' issue to six
•
months prior to the retirement of the concerned persons atthe SEBI and then by 'the quashing the proposal itself. lA.
That the Petitioners have not approached any authority regarding the instant matter as the matter relates to changes in the constitution
of
the'
Search-Cum-Selection
Committee' for
recommending the name of Chairman and Whole-Time Members , of the SEBI, which is challenged before this Hon'ble Court and can
",-_.
be adjudicated upon only by a Court of competent jurisdiction. 2.
That all the Petitioners herein in this Writ Petition, are citizens of India, having attained high standards in public ,life during the course of their official duties and have committed themselves to the public cause of curbing corruption and restoration of probity and , accountability in public life. The Petitioners are members of India
,,,.....
Rejuvenation Initiative, " a 'non-profit; ,apolitical, unregistered informal social forum, comprising of committed citizens who share the common objective of stemming the deterioration and fall in moral and ethical values and to restore uprightness, honesty and dignity in public life. That this group, of, petitioners, had earlier , filed successful public interest petitions, where they brought to the notice of this Hon'ble Supreme Court, inter alia the illegal appointment of the Chief Vigilance Commissioner and the illegal stashing of black money abroad and the Public Interest Litigation
for investigation into "Cash for Vote Scam" . The petitioners state that they have no personal interest in the litigation, but are trying to raise the issue in the wider interest of people at large, that is, in bonafide public interest which is clear from the facts of the Petition. The instant Writ Petition is being filed by the petitioners in their individual capacity. The Petitioners had filed Writ Petition (C) No. 340 of 2011 before this Hon'ble Court seeking identical relief. Vide its Order dated 26.8.2011 in Writ Petition (C) No. 340 of 2011 this Hon'ble Court permitted the Petitioners to withdraw the Petition with liberty to file afresh within two weeks.
3.
The brief facts giving rise to the instant Writ Petition are as follows:
(a)
The SEBI Act, 1992 is a special legislation enacted after several scams emerged in the stock markets and the Act was enacted to address the vulnerabilities of the system so that the private corporate houses as well as individuals participating in the markets could not exploit the system to garner undue advantage and private illegal monetary gain.
(b)
The SEBI路 Act was further enacted to ensure and guarantee an independent and autonomous SEBI which could address these issues and regulate the sphere of financial transactions and interactions without any fear, political pressure and the financial clout of the major corporate houses.
(c)
In this manner it is abundantly clear that SEBI has a crucial and central
role in protecting the
interests
of
the
investors and the
, players and participants in, the stock market and the' field of ' securities in India. (d)
Ministry of Finance issued a Notification on 23.7.2009 whereby the .
.
.
.
Securities and Exchange Board of India (Terms and Conditions of Service of the Chairman and Members) Rules, 2009 were promulgated. By way of Rule 2 thereof, Rule 3 (2) of the Securities , and Exchange Board of India '(Terms andConditions of Service of ' Chairman and Members) Rules, 1992 were amended and the term
,-'-
of office of the Chairman and the Whole Time Members was increased from three (3) years to five (5) years. True Copy of the Notification No. 2106-2006-RE dated 23.7.2009 issued by the Ministry of Finance is annexed herewith' and marked as ANNEXURE-P/I. (Pgs.2
to
1-6 )
(e) ,The office put up a Note sheet for the approval of the Finance Secretary for orders on the extension of the tenure of office of the Chairman and the Whole Time Members of the SEBI for two (2) more years apart from the existing tenure as per the Notification dated 23.7.2009. True Copy of the Note sheetF: No. 2/23/2007-RE dated 1.9.2009 is annexed herewith and marked as ANNEXURE路 P/2.
(f) ,
(pgs.2'1- to
L9 )
The file was put up before the Finance Minister, for decision on the extension of tenure of the Chairman and the Whole Time Members of the SEBI in accordance with the Notification dated 23.7.2009. The
Finance Minister noted that prior to making the offer of extension of tenure to the incumbent Chairman and Whole Time Members, the performance of the officials ought to be appraised. True copy of the noting made by the Finance Minister dated 8.9.2009 is annexed .
.
.
herewith and marked as ANNEXURE-P/3.(Pgs:J0 to ) \ (g)
)
The Finance Secretary categorically recorded on 8.10.2009·that the .
.
performance of the then current Board- the Chairman and the Whole Time Members was very good both in terms of the extent of . the activities undertaken by the SEBland the quality and. delivery .of those activities. It was further noted that it was for this reason·
••
thatwhen the Rules amending the tenure of those positions were promulgated, the Ministry had no hesitation in offering the extended tenure to the then current incumbents of.those positions. In this light the Ministry decided to move the proposal to seek the
willingness of the incumbents. True Copy 'of the Note dated 8.10.2009 written by the Finance Secretary seeking the willingness of the. incumbents for extension of their
tenure is
annexed herewith and marked as ANNEXURE-PI4.
(Pgs. .:1 L
to);J ) (h) ·On· 21.10.2009 the Director Capital Markets' wrote to the then Chairman of the SEBl to ascertain his willingness to be considered .for the further tenure of two years beyond the present tenure.
(i)
.The then Chairman of the SEBI, Shri C.B. Bhave duly gave his consent to be considered for the extended tenure of two years beyond the then present tenure. True Copy of' the letter dated 28.10.2009 written by C.B.Bhave, the then Chairman of the SEBI to the Finance Secretary is annexed herewith and marked as ANNEXURE-P/S.(Pgs.311
)
On 15.12.2009, the Director, Capital Markets made a noting on the file that the file be submitted for the perusal of the Advisor to the Finance Minister. True Copy of the noting dated 15.12.2009 written by the Director, Capital Markets is annexed herewith and marked
S
as ANNEXURE-P/6. (Pgs. J (k)
to)} )
The Advisor to the Finance Minister, made a noting on the file on 21.12.2009 that the Finance Minister may see Page 22 regarding the composition of the SEBI Board and the issue of the present tenure of the Chairman and Whole Time Members may also be considered. True copy of the file noting dated 21.12.2009 made by the Advisor to the Finance Minister. is annexed herewith and marked as ANNEXURE-P/7. (Pgs.38" '(
(1)
)
On 22.12.2009, on the next day, the Finance Minister simply noted
that there was no need for any action at that stage because the tenure of the then Chairman, SEBI was up to February, 2011. The tenures of other three members extended beyond the middle of
..
2011. The Finance Minister noted that the appropriate time for
moving the ACC for any extension would be six months from ... before the end of the existing.tenures. True Copy of the file noting made by the Finance Minister on 22.12.2009路 is annexed herewith . and marked as ANNEXYRE-P/S.. (Pgs.
3 1 :.;,
)
(m) On 11.1.2010, the Director resubmitted the file for orders as to whether the proposals already sent to the ACC should be recalled or whether the decision of the ACC, if 'positive, be implemented
..
. only a few months before the tenures of the then incumbents were to expire. True Copy of the Noting F. No. 2/23, '2007-FE' made by the .Director (PM & RE) dated 路11.1.2010 herewith and marked as (n)
is annexed
40
to
lit 3- )
Surprisingly, on 18.2.2010, the Executive Director of the SEBI was appointed as a Whole Time Member of the Insurance Regulatory Development Authority (IRDA) for a period of 5 years by the
-0.. .
Ministry of Finance but for some reason, the Ministry of Finance sat . over its .own Notification extending the term of office of Chairman and whole time Members of SEBI from three years to five years and .
. .
finally. negated it by not applying the same to the incumbent officers, for reasons best known to itself. True Copy . of .the Notification F. No. R-16011/ 02/2009-Ins III dated 18.2.2010 issued . by the Ministry of Finance is annexed herewith and marked as ANNEX\1RE-P/IO. (Pgs.
L1
to
fA? ).
/0 (0) . Onceagain, the Ministry of Finance has appointed Shri Yogesh
Agarwal as Chairman, Interim· Pension Fund· Regulatory and Development Authority (PFRDA) for a period of five years. It is only in the case of the erstwhile Chairman of the SEBl the Whole Time Members of the SEBI that this was not given effect to ·despite the amendment to the Rules specifying the term of office. True Copy of the Notification F. No. 1/6/2007-PRdated 3.5.2010
issued by the Ministry of Finance is annexed herewith and marked as ANNEXURE-PIll (Pgs.t1' to (p)
fA:r )
In fact the entire initiative has come to a naught by noting on the
file that since the tenure of Shri C.B.Bhave, Chairman, SEBI, was ·coming to an end on 17.2.2011 action was tobe initiated for fresh selection for the post of Chairman, .SEBL True copy of the file noting made by the Finance Minister on 10.8.2010 is annexed herewith and marked as (q)
r,.,
r .)
Further, under Rule (3), sub rule (5) of the SEBI (Terms and Conditions of Service of 'Chairman and Members)Rules, 1992 for ·appointment as Chairman and Whole time Members of SEBl, a new clause (e) was inserted vide notification dated 7th October, 2010
•
namely
II
such other person, if any, not exceeding. two, as the
Minister of Finance may nominate
II •.
The .Search-cum-Selection
Committee thereafter recommended the name of.Shri U.K. Sinha, current incumbent, for appointment as Chairman of SEBL . True
JI copy of the notification dated 7.10.2010 issued by the Ministry of Finance, Department Of Economic Affairs, Govt.of India is annexed .herewith and marked as ANNEXURE-PI13. (Pgs.)O to (r)
51 )
An insight into the true state of affairs operating at the SEBI and
the Ministry of Finance can be gleaned from the letter dated
••
1.6.2011 sent by Shri K.M. Abraham,. a Whole Time Member of the . . .
SEBI to the Hon'ble Prime Minister of India. (s)
The Whole Time Member categorically stated that a deep rot and malaise. was setting into the. furictioning of the SEBI. Four cases were cited by the Whole Time Member whereby clear indications were given by the Chairman of the SEBI, Shri U.K. Sinha that the SEBI was to go easy on the selected corporate houses. which had .. engaged in wrongdoing and that these were the instructions from . the Ministry of Finance. True copy of the letter dated 1.6.2011 written by the K.M. Abraham. to the Prime. Minister is annexed herewith and marked as ANNEXURE-P!14 (Pgs.52- to
(t)
(4 )
The conclusion is inescapable that the extension of the term of office which ought to have been granted to the erstwhile Chairman and the Whole Time Members was not given arid the. constitution . of the Search-cum-Selection Committee constituted as per rule 3, sub rule (5) altered vide notification dated 7th October, 2010 even when the said Search cum Selection Committee had not conducted any selection process so that pliant officers, could be brought in to
shield. the errant companies. This was wholly unnecessary because the committee having been constituted by the Ministry of Finance itself, there was no question of MOF seeking representation on the committee. (u)¡
It is clear from the documents attached with the instant writ¡
petition filed in public interest that certain large and influential corporate houses/ private companies were involved in extra legal and illegal activities being carried out to the detriment of the interest of the investors and were otherwise falling foul . of the mandate ofthe SEBI Act. (v) . The most damaging factor in the case of all these private players is the fact that the present Chairman of the SEBI itself, rather than supporting and applauding and encouraging the legal actions taken by a dutiful Whole Time Member of the SEBI, has expressed concern and apprehension on behalf of the said private players and on several occasions coaxed the Whole Time Member to refrain from taking any strict measures against the wrongdoers.
•
To
support his inaction and wrong actions; the Chairman has referred . to the Union Finance Minister, certain officials-of the Union Finance Ministry as playing specific roles as power brokers and, facilitators for the Corporate Houses rather than acting as regulators and a check on .the .said private players clearly indicating a rot in the . system and a complete failure of the state financial machinery.
(w)
It is categorically reiterated before this Hon'ble Court that the
aforesaid actions are closely connected with a number of sensitive cases pending before SEBI at the relevant time and, in particular, the case of an investment company which had flouted all norms of SEBI. Sahara Group had filed a Red Herring Prospectus before SEBI in September 2009 and it was in trouble from December 2009 when Respondent Nos. 2&3 conspired to review orders of extension of term of office of Chairman and Members of SEBI. The other cases in the list were also making no headway in escafing the rigours of the Regulator (SEBI). It is worthy of investigation as to why the previous initiative of granting extension to the incumbent Chairman and the Whole-Time Members was negated and fresh selection ordered without assigning any meaningful reason whatsoever. This compliant attitude of present Chairman, SEBI has been methodically secured by (a)
Denying the 5 years term to Mr. Bhave despite his acquiescence pursuant to the amendment in the rules,
(b)
ensuring his selection after the amendment of rules vide notification dated 7th October, 2010,
(c)
keeping him on leash by giving him a term of 3 years and not 5 years, which was helpful in more ways than one.
11
Chairman started reporting to the concerned persons in the Finance Ministry on all matters of interest to him which is clearly evidenced from. the letter written by
Mr. Abraham to
the Prime Minister." Quasi judicial proceedings .pending before Members were summarized and taken personally by .
.
. the present Chairmanto Delhi for reasons other than those that might truly reflect probity and justice. In short, since February 2011 the effective control of SEBI has passed from .
.
the Chairman SEBI and its Board to the concerned persons in the Finance Ministry, . (x)
In June 2011, the process for selection of two whole time . Members of SEBI was initiated and the interview of short-listed candidates was taken by a sub-committee of the Search-cumSelection Committee headed by Shri U.K.Sihha,Chairman; SEBI
•
and attended inter alia by Shri Bimal :[ulka, Additional Secretary, Ministry of Finance but functionally unconnected with SEBI. There is no provision for delegation of the search.
.
'
.
'
cum-selection process to any member of the Search-cumSelection Committee by the Chairman of the. said Committee . under¡ the rules.. Thus, the selection process for whole time members of SEBI too suffers from legalinfirmity. .
. .
(y) .Therefore it is clear from a sequence given above that it has been , the effort of the Ministry of Finance and those' parts of the SEBI.
which are keen to protect the illegal actions of the private players in the spot light by first denying an extension of their term from 3 to 5 years to Chairman and whole time Members of SEBI as provided under rules and has been done in case of appointments to certain other bodies like IRDA and PFRDA to minimize the chances of genuine investigation and enforcement into the wrong doing and financial irregularities which . have come to light in the context of the private players mentioned in the instant Writ Petition; secondly, malafidely inserting clause (e) after clause (d) in sub rule (5) of rule 3 of SEBI (Terms and Conditions of Service of Chairman and Members) Rules, 1992 to include two nominees of Minister of Finance apart from those of Ministry of Finance. '7".
(z)
The Petitioners filed a Writ Petition before this Hon'ble Court agitating these issues. The Writ Petition filed by the Petitioners was numbered as Writ Petition (C) No. 340 of 2011.
(aa)
Writ Petition (C) No. 340 of 2011 came up for hearing before this Hon'ble Court on 26.8.2011 when this Hon'ble Court was pleased to permit the Petitioners to withdraw the Writ Petition with liberty to file the Writ Petition afresh within a period of two weeks. True Copy of the Order dated 26.8.2011 passed by this Hon'ble Court in Writ Petition (C) No. 340 of 2011 is annexed as ANNEXURE-PitS. (Pgs.
GS-
to
b-' )
(bb) Hence the instant writ petition is being filed in public interest to show the serious problems that beset the proper functioning of SEBI due to
.:oor
political interference and the unholy nexus between Corporate Houses and the political bigwigs. (cc)
That the Petitioners state that Writ Petition (C) No. 340 of 2011 arising out of the same cause of action had been filed by the petitioners before the Hon'ble Supreme Court. The Hon'ble Supreme Court vide its Order dated 26.8.2011 passed in Writ Petition (C) No. 340 of 2011 was pleased to permit the Petitioners to withdraw the Petition with liberty to file the Writ Petition afresh within two weeks, as aforesaid; ..
(dd) That the Annexures Pl1 to PI15 produced along with the Writ Petition are true copies of the documents.
16
4.·
That being aggrieved by the said developments attempting to reconstitute the Board for extraneous reasons by denying the extension to the outgoing Chairman of the SEBI and the Whole Time Members and offering a three year tenure to the incumbent . Chairman, vitiating the selection process by inserting clause (e) in Rule 3, sub rule (5); constituting a sub-committee of the Searchcum-Selection Committee under
the
chairmanship of Shri
U.K.Sinha, Chairman, SEBI for conducting.interview to the post of
-
whole time Members of SEBI and wrongful presenc:e of Shri Bimal [ulka, an Additional Secretary level officer of Ministry of Finance, .functionally unconnected with SEBI the Petitioners seek your . lordships leave to prefer the instant petition under Article 32 ofthe Constitution of India, inter alia on the following grounds amongst
•
others; which are set out herein below without prejudice to each other: .. ,,:
5.·
GROUNDS
A.
Because the legislative mandate and the rationale behind the . enactment of the SEal Act! 1992 was to ensure that SEBI worked fairly and freely and devoid of. any political pressure. or political clout playing its part in attempting to protect the erring private players and corporate houses.
B.
Because the SEBI Act, 1992 came into force after the happening of . the scams in the financial sector and the Act was intended to plug
I 'j the loopholes and vulnerabilities in the system which object is
.sought to be defeated by the actions of the political masters and the corporate payers as enunciated in the instant Writ Petition being filed in public interest to bring these facets before ;this Hon'ble Court so that the rot may be checked before it can develop into an incurable and full-fledged disease.
c.
. Because there have been allegations in the media against some of . the former officers of the SEBl and it is important to know as to why the Respondents did. not take any action against the erring officials by way of removal or otherwise, if there was substance to these allegations.
D.
. Because the amendment to the Rules of 1992, inserting clause (e) . after clause (d) in sub rule (5) of Rule 3 of SEBI (Terms and
-,
Conditions Of Service of Chairman and Members) Rules, 1992 to include two nominees of Minister of Finance without there being any requirement of expertise on their part is going to upset the balance and compromise the position of the SEBl in the matter of .selection of the Chairman and the Whole-Time Members of the .. SEBl.
E.. . Because this is a solitary instance where the Union Finance Minister has been allowed to simply place. two of his nominees on the Search and Selection Committee and therefore the status as a
{5 watchdog enjoyed by SEBI stands to be compromised and its independence taken away. .
F.
.
.
.
.
, .
Because the impugned amendment to the Rules cannot stand the ,
, test of the law as the very object and purpose of having SEBT would be defeated if the Search and Selection Committee is infiltrated by the nominees of individuals at the helm of affairs in this manner.
G.
Because whether it is former officials or the present officials of the
the fact is that irregular official conduct which compromises .
..
,
, the status of the SEBT as a watchdog is a matter of serious concern for the nation. .
.,
.
H. 'Because the' Ministry of Finance ought, to be asked to explain its conduct in not granting the due' extension to the erstwhile Chairman of the SEBT despite the amendment to the' Rules extending the term of office from three (3). to five (5) years and duly , seeking and receiving the consent and willingness of the outgoing " Chairman. 1.
Because,the outgoing Chairman and Whole Time Members of the SEBT had been stated to have excellent credentials by the Finance Secretary himself and there was no reason, to withhold the extension.
J.
Because the amendment to, the Rules ,read together with the decision of, the Finance Ministry to ,negate, its prior stand of
I1 granting an extension of tenure to the Chairman and the WholeTime Members is sufficient to indicate behind the scenesactivities for ulterior motives. K.
Because the need of the hour is to carry out a fair and impartial investigation into the manner in which the proper decision taken by a Whole Time Member of. the SEBI is being sought to be ,overruled and interfered with by certain parts and Members of the . SEBlitself working at the behest and direction of the Ministry of Finance as well as the Corporate players caught in the loop.
L
Because the documentary evidences show that 'the actions taken by the .Ministry of Finance that are arbitrary, malafide and initiated with ulterior motives and are in violation or Articles 14 and 21 of ,the Constitution of India.
M.
Because.the impugned actions smack of deviance from the wellestablished canons of probity in governmental action and due adherence to transparent governmental action.' '.. .
,
it is inexplicable that the Respondents and the Union
, Government would act in dire opposition' to its own decisions which actions appear to bea part of a larger, more sinister design.
.
o.
Because the vesting of unusual and unconstitutional power in one
,.
government functionary which made deviation from set official
2.-v, paths easy is suspect and appears to have been Undertaken with an eye on dishonest and unfair goals. P.
Because the reluctance of the Respondents to take further the ,decision to extend the term of the Chairman and the Members of, the SEBl appears to be motivated arid guided to extend murky protection to private players.
-
Q.
Because the entire imbroglio appears to have been given shape to, .
,
.
in order .to shield and protect the murky dealings of, certain corporate houses, the facts pertaining to which have been indicated ,in the Petition above.
R.
Because the extreme power assumed and' wrested by the MOF in crucial matters relating to the SEBI is not warranted at all.
s.
.
.
'
Because this Hon'ble Court is required to urgently intervene in the . instant matter in public interest so that the Union Government may be asked to explain its dubious conduct and so that the truth behind the matter may properly emerge.
. T.
Becausethe unfair practices of the Respondents are apparent on the face of it and that the respondents have not acted ingood faith.
PRAYER It is, therefore, most respectfully prayed that this Hon'ble Court may be
pleased to: .
.
(i)
..
2)
issue a writ of Mandamus or any other appropriate Writ,order or direction to quash the Notification dated 7.10.2010 and declare void Rule 3(5) (e) of Security and Exchange Board of India (Terms and Conditions of Service of Chairman and MembersjRules, 1992;
(ii)" 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 SEBl for conducting interview to the post of whole time Members and proceedings /recommendation thereof; issue a writ of Mandamus or any other appropriate Writ, order or
(iii)
direction to quash and declare void appointments of Chairman and . inembers of SEBI consequent to the said amended rule; (iv)
issue a writof Mandamus or any other appropriate Writ, order or direction to direct a free, fair and impartial investigation into the whole matter by any independent investigating agency of the .
.
choosing of this Hon'ble Court which would be governed by the doctrine of continuing mandamus to ensure periodic supervision . . of the said investigation by this Hon'ble Court;
• (v)
issue a writ-of Mandamus
Of
any other appropriate Writ,. order or
direction to direct the Respondents 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
2..2Chairman and Whole Time directors of SEBI from three (3) to five (5) years;
(vi)
•
Issue or pass any writ, direction or order, which this Hon'ble Court . may deem fit and proper under the facts and circumstances of the case.· .
AND FOR THIS ACT OF KINDNESS THE PETITIONERS AS IN DUTY BOUND SHALL EVERPRAY.
'.-=DRAWN AND FILED BY: . .
( MIS AP&J CHAMBERS) ADVOCATE FORTHE PETITIONERS
NEW DELHI DRAWN ON: 5/$.2011 FILED ON :.
L/ IN THE SUPREME COWT OF INDIA CIVIL ORIGINALJURlSDICTION WRITPETITION (CIVIL) NO. IN
OF 2011
MATTER OF :.... Petitioners
S. Krishnaswamy & Others Versus Ministry of Finance & Others
.... Respondents AFFIQAYIT
..::..
•
I, S. Krishnaswamy, Son of Late Shri S. Ramaswamy, aged about 68 years, Resident of V-32/ 16 A&B, DLF Phase III, Gurgaon -122 002 (Haryana) presently at New Delhi do hereby solemnly affirm and state as under.1.
That I am the Petitioner No.1 in the aforesaid matter and as such and conversant with the facts and circumstances of the instant case and hence am competent to swear the instant affidavit.
2.
That I have read a copy of the accompanying Writ Petition, Paras 1 to 5, List of Dates, pages .6-1-, and LA.'s filed along the Writ Petition, and having understood the contents thereof, I say that the facts stated therein are true to my knowledge.
3.
That the Annexures are true copies of their respective originals.
4.
That the Writ Petition paper books contains total pages.
5.
That the facts stated in the above affidavit are true to my knowledge. No part of the same is false and nothing material has been concealed therefrom.
J
DEPONENT VERIFICATION I, the abovenamed depoeent <:l0, that the facts stated in the above affidavit are true to my knowledge. No part of the same is false and nothing material has been concealed therefrom. Verified at New DehQD.this 3
of August 2011.
DEPONENT
ANNEXURE P/l
[Tobe published in gazette of India part ii section 2 sub section (ii)] GOVERNMENT OF INDIA MINISTRY OF FINANCE (DEPARTMENT OF ECONOMIC AFFAIRS) No. 2106-2006-RE
New Delhi the 23.7.2009.
NOTIFICATION
so....
(E) - In exercise of the powers conferred by section 29 of the
Securities and Exchange Board of India Act.1992 (5.of 1992),the Central Government hereby makes the following rules father to amend the Securities and Exchange Board of India ( Terms and Conditions of Service of Chairman and Members) Rules,1992; namely:--
1(1)
These rules may be called the securities and exchange Board of
India
(terms and conditions of service of Chairman and Members)
Amendment Rules,2009.
(2)
They shall come into force on the date of their publication
in the official Cazettee.
2. .
In ..the Securities and Exchange Board of India (Terms and'
conditions
of Service of Chairman
and Members) Rules, 1992
(hereinafter refer to as the said rules) in rule 3:
2'; (i)
in sub -rule (2) for the figure and work "3 years", the words "five years" shall be substituted.
(ii)
After
sub-rule (3), the following sub-rules shall be inserted,
namely: "(4). The Chairman or whole time Member shall not accept any employment before the expiry of a period of one year from the date of demitting the office in the Securities and Exchange Board . of India, except
with the previous sanction
of the Central
Government.
(5)
The Chairman and even whole time Member shall be
appointed by the Central Government on the recommendation of a Search-cum-Selection Committee consisting of the following namely (a)
The cabinet Secretary
(b)
The Secretary, Department of Economic Affairs
(c)
Member
The Chairman SEBI (for selection of whole time Member
(d)
Chairman
Member
two experts or commence from the relevant field to be nominated by the . Central Government
Member
3.
In ruled 4 of the said rule
/!TRUE COPY//
.,.
.
21ANNEXURE P!2
F.NO.2/23/2007..RE GOVERNMENTOF INDIA MINISTRY OF FINANCE
DEPARTMENT OF ECONOMIC AFFAIRS CAPITAL MARKETS DIVISION RE SECTION
Subject: Replacement of Pay scales of Securities and Exchange Board of India (SEBI). The Chairman and Whole Time Members of SEBI are appointed by the Central Govt. under Section 4(4) of SEBI Act, 1992. the status of the Chairman and whole Time Members, SEBI are laid down in the SEBI (Terms and Conditions of Service of chairman and Members) Rules, 1992.
2.
. The SEBl's Terms and conditions of Service of Chairman and
Members Rules,路 1992
has been amended vide this Ministry's
Notification No. 2/106/2006-RE, dated 23rd July, 2009.
As per this路
Notification the term of tenure of deputation of Chairman and Whole Time Members of SEBI has been increased from 3 years to 5 years.
3.
. The following is the present constitution of the Chairman and
Members of SEBI. .
28 . S1.· Name, Relevant Date of No Designation . Section of the Notific Date of Birth of SEBlAct ation the Officer & (S/Shri) Appoi ntment 1. 2. 4 3 1.
Shri C B Bhave, Under Chai'rman, SEBl
Section
(do b 28.8.1950 (f (a) no.2/23/2007-re)
18.2.20 4(1) 08
of : The
SEBl
Dr.
K
M
Abrahma
6
a For a period
For
period of of 5 years i.e . years upto
i.e . upto 17.2.2013
Act,
17.2.2011 14.7.20 .For
Under Section
5
3
1992 2.
Present Extension Tenure Of tenure per as .order
4 08
a For a period
period of. of 5 years i.e
(1)(d) of the
three
upto
SEBl·
years
13.7.2013
Act,
from the
1992
date
of
taking over charge i.e tipto 13.7.2011 3.
Shri M S Sahoo
Under
Wholetime
Section
Member, (DoB
14.7.20 4 08
SEBl (1)(d) of the 12.5.59) SEBl
. (aginst Shri V K 1992
Act,
For
period of of 5 years years from
the
from the date
of
.3
date
of taking over
Chopra)(F No.
taking
charge
2/23/2007-RE)
over
upto
•charge
13.7.2013)
(.e.
...
a For a period
up
(i.e
13.7.2011 -
.,
,
4.
Shri
18.5.20 For
Prashant Under
Saran
Section 4 (1) 09
Wholetime
(d)
Member,
SEBI SEBI
of . the Act,
a For a period
period of of 5 years 3
years (i.e
from
the 17.5.2014)
(DoB 24.6.1951) 1992
date - of
(F
taking
NO.
upto
over
2/26/2008-RE)
charge'
.
,
."
(i.e. upto
,
7.5.2012)
4.
for orders whether we may seekthe approval of Finance
Secretary for allowing a case for extending the tenure of the Chairman and Whole Time Members in SEBI for 2 (Two ) more' years from the existing tenure. Thereafter, we will seek consent of the Chairman and Whole .:ime Members, SEBI. In respect of Shri K M Abraham,
Government of Kerala will also have to be consulted.路
Sd/1.9.2009
,
/(fRUE COPY//
/0 ANNEXURE P/3
F. NO .2/23/2007 :-RE DEPARTMENT OF ECONOMIC AFFAIRS CAPITAL MARKETS DIVISION Subject:
Extension of tenure of Chairman and Whole Time Members of SEBI.
Vide Notification
dated 23.7.2009 (F/A) some of the terms and
conditions of the SEBI (Terms and Conditions of Service of Chairman -',
and Members) Rules, 1992 (FIB)
have been amended. ' One of the
important amendment is relating to the tenure of' Chairman
and
Members of the Board which has been increased from" not exceeding three years" to "not exceeding five years".
Since the incumbent
Chairman and Members are appointed under the earlier rules with the tenure of three years, we need to consider extending their tenure with
the-revised rules.
2.
' Details of the date of joining etc. of the incumbent Chairman and
Members are given in para 3 of the notings at page 22/N. Since all of them are appointed presently.on a three year basis, their willingness for further extension needs to be obtained for processing the matter further. In the case of one of the Whole Time Members.
â&#x20AC;˘
I I ,!
Dr. K.M. Abraham,
.,
clearance from his cadre (Govt. of Kerala/DOPT) is also needed as he is a serving officer of the lAS and is appointed in SEBI on, deputation basis. '
Âť/ 3.
File is submitted seeking orders of FS/FM as to whether an offer of
,of the tenure may be given to the incumbent Chairman and
WTMs of SEBi in tune with the revised rules relating to their tenure.
(K G Nair)
â&#x20AC;˘
Director (PM & RE)
2.9.2009 May pIs see the notes above. In view of the position stated at para 1 above, para 3 is for appl. Once FS/FM approve para 3 above, the ,
,
finalities of para 2 would be completed. I have orally ascertained their willingness to be considered ..
Sd/-
6.9.09
Before making an offer of extension
of tenure to the incumbent
I "
Chairman and whole Time Members, we should, appraise
the
performance of these officials. What is the performance evaluation system being followed in SEBi.
, Sd/(Pranab Mukherjee) Finance Minister 8th Sep. 2009
I(TRUE COPYII
ANNEXURE P/4· (PERFORMANCE EVALUATION SYSTEM BEING FOLLOWED IN SEBI) 1.
Reference Finance Minister's minutes on pre page
2.
SEBI. is created by a statute and autonomous in its operations. The appointment
to the Board -Chairman and whole time
Members (WTM)-is done on contract/deputation for a period of three years.
Given the arms length relationship between the
Governmentand
Independent
Regulatory Authorities, no
· system of writing of ACRs for Chairman and WTMs is being followed.
3.
The Chairman and WTMs of SEBI
are recruited through a
rigorous search-cum-selection process by a committee chaired by the Cabinet Secretary with Finance Secretary, two experts of ,-:
· repute and Chairman, SEBI (in respect of WTMs) as Members. The credentials and
capabilities
of the candidates
are
examined by the Committee before Act accords approval for their
•
appointment.
4.
The efficiency of SEBI as an organization is also observed by the Finance Secretary (Formally) in THEHLCC and otherwise in · structured as well as informal meetings) and the Joint Secretary · in-charge of the Capital
Markets Division through regular
3.3
interaction, board meetings and the inputs received from the various. stake
â&#x20AC;˘
holders of the securities market.
As such,
performance evaluation of the Board is an on going process.
5.
As far as the current Board is concerned, the performance of them- Chairman and three Whole Time Members - is inmy . opinion very good in terms of both the extent of activities SEBI .
.
. ahs undertaken in the receipt past andthe quality of delivery of
those activities. That is ¡whywhen the Rules, amending tenure of these positions were modified we had no hesitation to offer the extended tenure to the current incumbents of these positions provided they accept the offer. Hence, the proposal to seek their willingness, before.
the Government moves the proposal
forward, for approval of the FM.
Sd/(Ashok Chawla) Finance Secretary .
'08.10.2009
//TRUE COPY!l
J'i ANNEXURE PIS
C.B.Bhave Chairman
Securities and Exchange Board of India
CONFIDENTIAL OCH/181018/09 October 28,2009 Mr. Ashok Chawla Secretary -(Finance) Department of Economic Affairs, Ministry of Finance. Government of India New Delhi - 110 001 Sir, This has reference to the letter 2009
No. 2/23/2007-RE dated 21st October,
from Shri C.K.G. Nair, Director, Capital Markets Division
regarding the amended tenure of appointment to the post of Chairman and Whole time Members ofSEBI. .
I am hereby intimating my .
.
.
willingness to be considered for a tenure of further two years beyond the present tenure.
Yours faithfully, Sd/C B Bhave.
//TRUE COPY// .
.
.. .
.
37 ANNEXURE P/6
. (FILE PUT UP FOR APPROVAL OF Ace (APPOINTMENTS . COMMITTEE ON CABINET FOR EXTENSION OF TENURE OF SEBI .CHAIRMAN & MEMBERS FROM 2 TO 5 YEARS) MINISTRY OF FINANCE . Department of Economic Affairs (Capital Markets Division) 1.
Reference notes at page 26/ante relating to the extension of tenure
of incumbent Chairman and WTMsof SEBI
2..
.Consequent to the amendment to the tenure of the posts of
Chairman and WTM in SEBI from 3 years to 5 years, it had been .
..
.
.
decided to seek the willingness or otherwise of the incumbents to these posts. iSEB!' Chairman Shri C B Bhave and 3 WTMs- S/Shri M.S.Sahoo, K.M. Abrahma and P. Saran have all given their willingness to-continue
for a further period of 2 years beyond the 3 years of the present appointment. .
Before seeking the willingness of these incumbents .
approval of the Hon'ble FM was taken vide notings at page 26/Ante.
Not that the incumbents have indicated their willingness in writing, we may. send the proposal to the. DOP&T (Establishment Officer) for processing the case for approval of the appointment committee of the Cabinet. DFAPlease Sd/-.. (CKG Nair) Director (PM&RE) 16.11.2009
FS & FM have seen the file earlier (pp 24-26N) .It is for orders whether 'the appl at pp 26(N) can be treated as the starting point the ac appl. If
not, appl, is sought of FS/FM for continuance of the others mentioned above for 5 years instead of 3 years. The proposal itself is based on the appl. of try and the consent of others.
16/x/09 Note on page 26/Ant refers.
....May kindly accord formal approval for extension of tenure from 3 to 5 years in respect of SEBI Chairman (Sh. Bhave) and the 3 whole time members (S/Shri Sahoo, Abrahim and Saran)
..
Sd/- Ashok Chauhan, Finance Secretary. pp
Pl. issue (illegible) letter place in file. Keep O/c Sd/- 23/xi Ms. Alka Please issue today and retain Olc Issued 23/xi
It is North.Block..
SD/- 23/xi
IS (CM)/Dir.
had desired to see the file in todaysmeeting. .Reg
extension of tenure of Chairman/members SEBL
SD/-路 25.11.2009
Advise to FM spoke to the u/s & wanted to see the file. Accordingly submitted. As appl. of the
FM dated 18/IX) on
.prepage. A letter
has been issued to the EO on 20/XI (F/A)
Sd/- 27.XI . Ashok Chawla. Finance Secretary
Seen. Thanks
Sd/- 30/XI
-
Deptt, of Eeo Affairs
(Capital Monitor Division) . As desired file is submitted for the perusal of advisorto FM. I
Sd/
15.12.09 Dir(PM &PE)
JS(CM) has seen Sd/16.12.09
/{fRl)E COpy//
.ANNEXURE P/7
Advise to FM.
. FM may kindly note on page 22 ante regarding the composition
of the SEBl Board and present tenures of the chairman and WTD's of the Board.'
-50/- 21.12.09
--
I/TRUE COPYI/
J9 ANNEXURE PIS
(HOLDING OF EXTENSION TO SEBI CHAIRMAN & MEMBERS BY FINANCE MINISTER) .
. The present tenure of Chairman, SEBI, is upto February, 2011. The tenures ·of other three whole time members extend beyond middle of 2011. The appropriate time to move the ACC for any extension will be six months before the end of existing tenures. No further action is required at this page.
Sd/(Pranab Mukherjee) Finance Minister 22 Dec 09
/(TRUE COPY/!
•
\
/-
ANNEXURE P/9
No. 2/23/2007-RE DEPTT. OF ECONOMIC AFFAIRS Subject: Extension of tenure of the Chairman and whole time Members, SEBI.
•
The present composition of the Board is as follows: . ,
...
.
5I.
.Designation .
No.
Section Name
Status
of SEBI . Act
1-
,
4(1)(a)
Chairman
Shri C B Bhave
Three
w.e.f.:
18.2.2008
2. . Official Member, 4(1)(b)
R Part time member
Shri Bandyopadhya,
MCA
FM
Sec.MCA
3.
Official Member 4(1)(b) MOF
4.
Dr. K P Krishnan PTM Date of appo .
..
Usha ·nlegible
Official Member 4(1)(c)
Smt.
RBI
Thorat, DY. Gov. RBI Sh M.S. Sahoo Dr.
K
M
.. Abraham lAS
5.
Whole
.,
Member (1).·
time 4(1)(d)
Sh.MSSahoo
Illegible .-
..
6..
Whole
time 4(1)(d) .Dr.
Member (2) 7.
Whole
.Abraham, lAS time 4(1)(d)
Member(3) 8.
Part
Part
time 4(1)(d)
Dr.
G
Mohan Illegible
Gopal.
Time 4
Member (PTM)
-
Prashant illegible
Shri Saran
Member (PTM)
9.
M illegible
K
(d)
(1) Shri
T
V Illegible
Mohandas Pai
Consequent upon amendment of the SEBl Terms and conditions. of Service of Chairman and TWMs w.e.f. 23.7.2009,they. can now hold officer for a
It is for orders whether the proposal for extending the tenure of
the
Chairman and TWMs in this file stands withdrawn and fresh
proposal will be put up at the appropriate time.
Sd/- Illegible . 11.01.2010 .
â&#x20AC;˘
â&#x20AC;˘
,No.2/23/2007.REI MINISTRY OF FINANCE
DEPARTMENTOF ECONOMICSAFFAIRS (CAPITAL MARKET DIVISION) ,
.'
In July, 2009(23.7.2009) the terms and conditions of service of. '
L
Chairman and Whole Time Members of SEBI .were partly modified Accordingly, the tenure of appointment to these posts was raised from 3 ,
to 5 years.
2.
Subsequently with the approval of Hon'ble Finance Minister,
willingness of the present incumbents for continuing for another 2 years beyond their current 3 years tenure was sought On receipt of their willingness, approval of FM was again taken for moving ACC (P.28/N) Accordingly, ,a proposal was sent to the ACC on 20th November, 2009 (PP.25.26/corr).
Subsequently, the file was re-submitted on orders from the Office
3;
of the FM. Vide minutes at P.31/ante FM has directed that since the
presenttenure of the incumbents is upto February/middle of 2011 appropriate time to moveth4e ACC for extension will be six months ,
,
priorto that As such no further action is required at this stage.
4.
' Accordingly, file is Re-submitted for orders as to:
5. i.
Whether the proposal already sent to the ACe should be recalled;
11.
Whether the decision of the ACC, if positive, be implemented only a few months before the present tenures of the incumbents' expire.
. (CKG Nair) .Director (PM & RE) 11/1/2010
JS(CM) . FM's order are unambiguous
The proposal before' the ACC may be Withdrawn. Sd/ 17.1.2010
â&#x20AC;˘â&#x20AC;˘
//TRUE COPY//
ANN"§Xl.}RE P!10
• TO BE PUBLISHED IN PART II-SECTION 3:'SUB-SECTION (II) OF THE GAZETTE OF INDIA Government of India Ministry of Finance Department ofFinancial Services New Delhi, the February 18,2010
NOTIFICATION
S.O... In exercise of the powers conferred by Section 4 of the insurance . .
Regulatory and Development Authority Act, 1999 (41 of 19990, the Central Government hereby appoints Shri Radha Krishnan Nair, . \
.
Executive Director; Securities 7 Exchange of India (SEBI) as Whole-time
Member of the Insurance Regulatory and Development Authority .
.
(IRDA) on a consolidated salary of Rs.2.50 lakh per month, without facility of house and car for a period of five years .from the date of assumption of charge of the post, or till he attains the age of 62 years or until further orders, whichever is the earliest. .
[F.ND. R-16011/02/2009-lns.III)
a·S.S.SASTRI) DEPUTYSECRETARY to THE GOVT. OF INDIA TEL 23748788
To The Manager, Government of India Press, Mayapuri Press, New Delhi. Copy to: 1.
The Chairman, IRDA, Hyderabad..
2.
The Chairman, SEBl, Mumbai, .
3.
Office of the Establishment Officer (Mr. Moh. Moniruzzaman.. · Under Secretary), DoPT, New Delhi, with reference to communication No. 18/48/2009-EO (SM.II dated 15.02.2010).
4..
Shri Radha Krishnan Nair, Executive Directorr SEBIr Mumbai..
5.
Chairman,
LIC,
Mumbai/CMDs-GIC/National/New
India/Oriental/United India/ AICL.
•
."
6.
P.S.to F.M.
7.
P.S. to MOS (EB&I)
P.S. to Secretary. (FS)/PS to AdditionalSecretaryPA to JS (I & P), Department of Financial Services, New Delhi.
Sd/(J.S.S.SASTRI) DEPUTY SECRETARY TO THE GOVT. OF INDIA TEL 23748788
.//TRUECOPY// .
ANNEXURE Pill
TO BE PUBLISHED IN PART II-SECTION 3-StrB-SECTION (II) OF THE GAZETTE OF INDIA
GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENTOF FINANCIAL SERVICES . New Delhi, the dated the 3rd May 2010 .
NOTIFICATION S.O
The President is pleased to appoint Shri Yogesh Agarwal as
Chairman, interim pensionfund regulatory and development authority (PFRDA) on a consolidated salary of Rs.3 lakh per month, without facility of house and car or replacement pay of secretary with car and
house, for a period of five years from the date of assumption of charge of the post, or till he attains the age of 65 years or until further orders, whichever is the earliest.
[F.NO.l/6/2007-PR) Sd/(D.D. Maheshwari) Under Secretary to the Government of India. To, The Manager, Government of India Press, Mayapuri Industrial Area. Rind Road, New Delhi. Endorsement 1.
Shri Yogesh Agarwal, CMD, lOBI Bank, Mumbai-.
2.
office of the Establishment Officer, Do P & T, North Block, New Delhi. w.e.f. their Note No.18/l/2010-EO (SM-II) dated 27.04.2010.
3.
PS to Finance Minister, North Block, New Delhi.
4.
PS to MOS (E&FS), North Bloc, New Delhi
5.
PPS to Finance Secretary, North Bloc, New Delhi
6.
PPS. to the Comptroller and Auditor General of India, CAG Office, 10. Bahadurshah Zafar Marg, New Delhi
7.
PPS to Secretary (Financial Services),.New Delhi, .
8.
PPS toSecretary (Disinvestments), CGO Complex, New Delhi.
9.
.:
.
. PPS to Secretary (Revenue) North Block, New Delhi.
10.
PPS to Secretary (Expenditure) North Block, New Delhi.
11.
PPS to Chief Economic .Adviser, DEA, North Block, New Delhi.
12.Chairmanj Interim Pension Fund Regulatory and Development Authority (PFRDA), Vasant Kun, New Delhi.
13.路路 Guard File ."""-
Sd/(D.O. Maheshwari) Under Secretary to the Government of India
/rrRUECOPY//
ANNEXURE P/l2
F.No.2/23/2007.REl Ministry of Finance Department of Economics Affairs (Capital Market Division)
Subject:
Extension/appointment to the post of Chairman and WholeTime Members in SEBI.
Reference minutes of Hon'ble FM on page 31/N.路
. Pursuant to amending the terms and conditions of service of Chairman
and
Members
of
SEBl
vide
Notification
dated
23.07.2009(PP.21-22/corr.) a proposal was路 submitted for considering extension the tenure of the incumbent Chairman and Whole-Time. Members of SEBlfrom 3 years to 5 years. The proposal was approved by the 路Hon'ble FM (P.28/N)and was forwarded to the DoP&tfor processing ACC approval November, 2009.
Subsequently; vide minutes at page 31/ante Hon'ble FM directed on 22nd December,2009 that since the present tenure of Chairman, SEBl is upto February, 2011 and that of whole-Time Members beyond middle .
..
.
.
of 2011, the proposal may be processed six months before the end of
l1,
existing tenures. Accordingly the proposal was withdrawn from the DoP&T (P.34/corr). . File is re..submitted for orders as to whether extension to the tenure of the incumbent Chairman and Whole-Time Members. may be processed in tune with the 5 year tenure provided for under or the possible circulated for initiating fresh recruitment as per procedure.
Sd/(CKG Nair)
Director (PM & RE)
06/08/2010 DG(DoC) (from pre-page)
As the tenure of Shri C.V. Bhave, Chairman.Sfibl, is coming to an end on 17.2.2011, please initiate action for fresh selection for the post of
Chairman, SBEI. Sd/(Pranab Mukherjee) Finance Minister.
10-Aug-l0 F.S- OT
//TRUE cora!
50 ANNEXURE P/13
TO BE PUBLISHED IN GAZETTE OF INDIAN EXTRA ORDINARY PART II-SECTION 3-SUB-SECTION (II) "
GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF ECONOMIC AFFAIRS
New Delhi, the 7th October, 2010
So.(E).-:-In exercise of the powers conferred by section 29 of the Securities and Exchange Board of India Act, 1992 (5 to 1992), the Central Government hereby makes the following rules further to amend the Securities and Exchange Board of India (Terms and conditions of Service of Chairman and Members) Rules, 1992, namely:-
,
,
1.
(1)
These rules may be called the Securities and Exchange
Board of India (terms and Conditions of Service of Chairman and . Members) (Amendment) Rules, 2010.
(2)
They shall come into force on the date of their publication
in the official Gazette.
2; â&#x20AC;˘ .
In the Securities and Exchange Board of India (Terms and . Conditions of Service of Chairman and Members) Rules, 1992 in .
5/ rule 3/ in sub-rule (5)/ after clause (d), the following clause shall be inserted, namely.-
n(e)
Such other person, if any, not exceeding two/ as the
Minister of Finance may nominate". (F.No.2!106!2006 RE) (Dr Thomas Mathew) Joint Secretary to the Government of India
Note: the principal rules were p.,lished in the Gazette of India, Extraordinary, vide notificatios number S.Q.l46 (E), dated the 21st
1992 and subsequtntly amended vide notification
numbers 5.0.153(E), dated thl 7th February, 1994, 5.0. 732 (E), dated the 18th May, 2006 and SO No.2037, dated the 23rd July, 2009.
To
--- The Manager, (along with Hindi Versinn) Government of India Press, Mayapuri, New Delhi.
;
/ffRUE COPY//
5"2ANNEXURE P/14
Dr. K. M. Abraham CFA Whole Time Member
Securities and Exchange Board of India SEBI/KMA/2011/17495 June I, 2011
Most Honourable Prime Minister Sir,
I am a Whole Time Member on the Board of the Securities and Exchange Board of India (SEBI) and have been working in this capacity from July 21,2008. I have been on deputation from the Indian Administrative Service (Kerala Cadre) during this period.
2.
I believe. I have discharged
the responsibilities
and duties
entrusted to me sincerely, diligently and honourable, under the powers delegated to me by the SEBI Board. 3.
During my nature here, I have been the Board Member in charge of the departments. for Primary Market,
much of Secondary
Market, Investigation and Surveillance Department in addition to other duties. I have as on date, issued over 380 quasi-judicial orders and 300 consent (settlement) orders. This, I humbly submit,
â&#x20AC;˘
is a new record for any Whole Time Member of SEBI. These disposal include several significant landmark cases in the Securities Markets involving fraud¡ or violations by major corporate groups. Some of the entities or their promoters involved in these orders/investigations under my charge include Sahara
. Group, Reliance (Both of Ambani Groups of companies), Bank of Rajasthan and the Stock Exchange (MCX-SX). 4.
I am submitting the following with considerable anguish and pain. I am humbly aware that it is unusual for a person serving on
â&#x20AC;˘
a
regulatory body set up by Parliament to
approach
the
Honourable Prime minister directly. But such is the gravity of the situation, that I make myself bold to do so, and entreat your kind indulgence.
-
.
5.
Supervising the investigation and surveillance functions in the securities markets as the Whole Time Member of SEBI for the last three years, has made me deeply conscious of the fact that the securities market in India is still fragile-despite considerable . improvements following the implementation of several
key
recommendations of the two Joint Parliament Committees set up after the two scams. Several attempts continue to be made by. powerful groups to misappropriate wealth both individually and at a corporate level, exploiting the vulnerability Of this fragile ecosystem. All of it do not necessarily result in scams and most of it, despite attempts to modernise surveillance and investigation systems in . SEBI, gets finely obfuscated and is hence beyond its regulatory reach.
6.
Personally, I have been exposed to, what I believe sincerely, are attempts to harass and intimidate me in the discharge of my duties. I propose to raise these issues in the SEBI Board Meeting . schedule for June 30,2011. A copy of the Board Note that I have circulated in this regard is attached .as Annexure. However, painful these personal experiences have been, the purpose of this letter to the Honourable Prime Minister is not to highlight my grievances in this regard.
7.
I am writing this letter to point out a malaise that is gradually setting into the functioning of SEBl itself. I sincerely believe that it can be corrected only by urgent intervention at the highest level. The regulatory
institution is under duress and under severe
attack from powerful corporate interest, operating concertedly to undermine SEBL I am citing below several specific reasons why I believe these insidious attempts are orchestrated from the office . of the Union Minister for Finance. Some of what I have submitted
â&#x20AC;˘
to the Honourable Prime Minister, herein, makes me also believe that what is happening is staking place with the knowledge of the. Union Minister for Finance.
8.
As referred to above, I am handling several .enforcement cases . against many corporate groups a few of which are Sahara Group, Reliance Industries Ltd and ADAG Companies, Bank of
sr
â&#x20AC;˘
. Rajasthan and the Stock Exchange (MCX-SX). While reviewing
these cases in his three months as Chairman SEBl, Shri. U.K. Sinha, Chairman, SEBl has directly or indirectly, referred to how. these cases are sensitive and are engaging the attention of the Union Minister for Finance or Smt. Omite Paul, Advisor to the Finance Minister.
9.
Prior to most of the visits of Chairman SEBl, to New Delhi, he has briefing notes prepared by the concerned officers on these cases which he,
carries with him for discussions; Given the
.apparent pressure that he seems to be. under, he is unable to communicate to the
forces bearing down on him, that SEBl
exercises quasi-judicial functions in disposing of such matters, and that a proceeding in a court of .law should not even be discussed and least of all settles elsewhere, extra-legally.]
10.
On several occasions, Shri. Sinha mentioned that "they are not interested in too many cases in SEBl ",and
if he is able to
'manage' these few cases, . then it becomes 'easy' for him. One some of these cases, he has suggested whether I could help resolve these cases before my . tenure endsjn SEBl, as I am conversant with the facts, without waiting for a new hand to take charge
in my place. On two such occasions, I had simply
mentioned that SEBl has several good .and talentedofficers, and
5--' that given a free hand; it is only natural that such cases of corporate entities will keep getting detected and will investigated in to. I was merely pointing out that a vigilant investigative . machinery would detect fraud by groups both minor and major, _._--.- ._---" .
and one should not expect such cases to go away for good. I could only see that he maintained a helpless silence to my¡ response.
"h
11.. On a few occasions, the Chairman, in his discussions with me, has mentioned that on some of these issues, (which he . then
the "Big Man"
clarifies is the .Union Finance Minister). is
interested, and that he has personally told him so.
12.
â&#x20AC;˘
Furthermore, on a few occasions, the Chairman has aired his sad frustration that the
"Lady" [referring to Smt. Omita
Paul,
Advisor to the Union Finance Minister] is controlling everything. and all such things are being done at her instance. He has, on a few occasions referred to [ulka [referring to Shri. Bimal [ulka, Additional Secretary (Capital Markets) DEA] as the "schemer" and Thomas [referring to Shri. Thomas Mathew, Joint Secretary (Capital Markets), DEA] as the "executor". I have heard him mention that it is so difficult to interact . with the Finance . Ministry-"There is no single person there to whom one can talk-
first one has to convince Thomas, thenIulka and then finally the Lady.
13.
Even while discussing my own case of being personally harasses (as mentioned in the Annexure,) he has, on more than one occasion, expressed that "I know that the Lady (referring to Smt. Omita Parl, Advisor to the Union Finance Minister) is behind this."
..,'.
14.
I now Cite a few instances on a some of these cases, on which I feel that the Chairman is under severe coercion and stress, from the above mentioned interests in the Ministry of Finance.
a.
In a matter of Sahara in Honourable Supreme Court and Honourable Lucknow High Court:
1.
On April 7, 2011, the Lucknow High Court vacated its stay of order prohibiting few
issued by
me on November 24,2010
Sahara Group Companies
and its
promoters from raising funds in the Securities Markets. After reading g the news, he called me in to explain what . happened-and told me, after the discussion "see that your officers do not gloat over this". I was quite hurt by the fact that instead of complimenting the investigating officers for their professional work- he was more worried about how the perceptions elsewhere needed to be managed. When I
proposed,
that
SEBI
should
issue a . Newspaper
Advertisement in the light of the judgment of the Honourable High Court for the benefit of investors (as had . been
done earlier by SEBI .on a mention
Houmourable
Supreme
Court
and
form the also
done
independently by RBI), discouraged me and .finally agreed to a press release on the SEBI website. in place of
the
newspaper advertisement. .' .
. 11.
On May, 12, 2011, the Honourable Supreme Court dismissed the appeal of the Sahara Group and has directed
â&#x20AC;˘
SEBI to expeditiously issue its final orders in the matter. Chairman SEBI expressed anxiety and asked me to be careful that nothing "harsh" is done; I assured
him that
such orders are issued very professionally in SEBI after careful legal consideration. All this confirms my belief that . he Chairman is .being subjected to undue pressure by vested interests, prime
facie, borne out by his own
statements, operating through the office of the Honourable Finance Minister.
b.
In the matter of Reliance Industries Limited: The Chairman asked for a review of the enforcement matter in this case and personally requested me to see whether the
5/
. case can be settled through' the consent' mechanism in I
SEBI. I explained to him that the unlawful gain by the company, prima facie, established in the investigation, has been placed at over Rs.500 crores and that under the SEBI Act, the punishment could be up to a maximum of three times that amount. He then requested me to look into the transaction
and see' whether there are classes of
transactions that can get a benefit of doubt and be excluded in the computation of unlawful gains. Here again, I could see that he seemed to be acting under compulsion to make such a request to me.
c. In the matter of Bank of Rajasthan: In this case also, the Chairman asked for a review of the
enforcement matter and personally requested me to. examine whether the case can be. settled .through the 'consent' mechanism. He asked me to explore the possibility of allowing the promoters to sell the ICleI shares received by them. I explained to him, that the SEBI interim . orders prohibiting market transactions of the promoters cannot be selectively waived for this. I decided could see, that he was under pressure from extraneous forces.
d. In the matter of MCX-SX Stock Exchange: .
In one of the first reviews the Chairman conducted on
selected orders in SEBI, he asked me to explain possibility of any compromise in the orders (issued by me) disallowing the application of MCX stock Exchange (MCX-5X)
for
granting the equity segment. I explained to him that the¡ matter is in the Honourable Mumbai High Court, in an appeal filed by the MCX-SX. I now understand that he has
â&#x20AC;˘
-.....
instructed the Executive Director (Legal DepartmentO of SEBI to file the affidavit on behalf of SEBI after he vets it. I have never .come across any instance and indeed .it is extremely unusual for a Chairman to express a desire to vet. the affidavit to be filed on behalf oiSEBI in a High Court. .
.
The Affidavits are not even pout up to the level ofMember, and they get approved at lower levels in the organization, after due care and consideration. 15.
The admissions of the Chairman in his own words about the need to 'manage' some of the cases now live in SEBI, about the interest that the Union Finance Minister has in some of them, the admission that Smt. Ornita Paul is behind what is happening,the difficulty that he is experiencing in interaction with key Ministry . officials-suggest to me that Shri. Sinha is being pressured to
.
.
.
.
.
..intervene in several cases that are currently being dealt with in SEBI. 16.
I am aware of other cases in SEBI also, where he has got such briefing notes for discussions prepared, prior to his visits to New . Delhi. But in other cases, he has not had. any discussions personally with me-and hence I have not included them in this letter..Whether the pressure exerted on Shri. Sinha by the above-
--
mentioned interests yield the obviously and illegal outcomes intended by the vested interests behind the same, no doubt depends on whether the Whole
Time Members and officers
succumb under such pressure, requests, demands or suggestions . that get conveyed to them through the Chairman. This clearly is (l matter that will have to largely do with the personal integrity of the officers themselves. But the fact that briefing .notes are being prepared on selected enforcement cases and are being discussed outside SEBI, is already sapping the vitality of the investigative machinery in SEBI.
18.
What I see happening now a calculated assault on the regulatory framework in SEBI. A massage. is now spreading that cases
â&#x20AC;˘
against the influential and the powerful might put officers in SEBI . . .
to undue risk and scrutiny. A feeling is now gradually becoming pervasive in the investigative arm that it would be easy now for
offenders violating laws and regulations relating to the securities markets to thwart the enforcement process itself, by approaching SEBl through the Ministry of Finance. This will, in no time, incapacitate the investigative machinery in SEBI. Needless to say, it does not bode well for the safety and integrity of the markets
â&#x20AC;˘
and for the investors. SEBl will be rendered toothless in fulfilling .
.
its mandate that Parliament has entrusted it under the SEBl Act to
protect investors and the safety and integrity of the markets. 19.
Under the SEBI Act, the Whole Time Members and the Adjudicating Officers operate as courts administering securities laws and regulations, .in disposing of quasi-judicial matters. It is.
clearly illegal to discuss possible settlement of these matters in forums outside SEBI. They could further have deleterious effects on the governance of the country and on our democratic .institutions, their processes and procedures. Such discussions could .dangerously degenerate into tools in the hands of vested and pave the ways for what could be grave forms of
corruption.
20.
It is just over three months since Shri. Sinha has assumed office as
Chairman, SEBL But the order of pressure that he admittedly is . facing is dearly significant. This can potentially debilitate the regulatory authority.. demoralize officers themselves and reduce the machinery in SEBI to an abject state of ineffectiveness. If the.
integrity of SEBI ¡is to be preserved, Shri. Sinha should not be subjected to and should be insulated from the kind of pressures and fears that he is facing now. 21..
Other than copies of the briefing notes themselves, which are . prepared for discussions outside SEBI, and are available in the files, there may not be any other documentary trail on what I have outlined above. I have attempted to humbly place before the
.
Honourable Prime Minister only those facts, which I know myself . with certitude, which are fires hand and are not hearsay in nature. I am willing. to testify to the above .facts, under oath in any appropriate judicial or administrative forum, should I be called . upon to do so.
22.
I am also submitting a copy of this letter in a sealed cover to Sri. R. Sri Kumar, Vigilance Commissioner, for information, so that the facts will be on record of the official vigilance machinery of Government also.
â&#x20AC;˘
23. . My term on deputation as Whole Time member in SEBI comes to an end on July 20,2011, and thereafter that I will repatriate to my parent cadre in Kerala. But, I believe it is my moral, statutory and constitutional
obligation
to bring
these
unfortunate
and
disturbing developments to the kind attention of the Honourable Prime Minister of India, in the hope that the institution of SEBI
'(;7 itself, and the Chairman, its Members and its officers, get sufficient protection from the clutches of vested interests and be
â&#x20AC;˘
fully safeguarded from collusive action as outlined herein.
24.
I pray and am hopeful that the Honourable Prime Minister of India will intervene in the best interest of. the country, as' appropriate as he deems fit, to safeguard the integrity of the securities market.
y ourrespectfully,
Sd/K.M. Abraham Shri. Manmohan Singh Prime Minister of India Prime Minister's Office South Block,'Raisina Hill New Delhi 110101
IfTRUE COPYII
ANNEXURE P/15
ITEM NO.20
SECTION PIL
COURT NO.1 SUPREME
COURT OF
INDIA
RECORD OF PROCEEDINGS WRIT PETITION (CIVIL) NO.340 OF 2011 (For Prel. Hearing) S.KRISHNASWAMY
a ORS.
Petitioner(s) VERSUS
MIN.OF FINANCE
a ORS.
Respondent(s)
(With appln(s) for ad-interim ex-parte stay) Date: 26/08/2011 This Petition was called on for hearing today. CORAM : HON'BLE THE CHIEF JUSTICE HON'BLE MR. JUSTICE K.S. RADHAKRISHNAN HON'BLE MR. JUSTICE SWATANTER KUMAR For Petitioner(s)
Mr.Gopal Subramaniam,Sr. Adv. Mr. Prashant Kumar,Adv. Mr. Rudreshwar Singh,Adv. Mr. Anurag Sharma,Adv. for Mis. AP & J Chambers, Advs.
For Respondent(s) Mr. Goolam E. Vahanvati,AG. Mr. R.F. Nariman,SG. Mr. Devadatt Kamat,Adv.
Mr., T.A. Khan,Adv. Mr. NakulDewan,Adv. Mr. B.V. Balaram Das,Adv. UPON hearing counsel the Court made the following. ORDER . Mr. Gopal Subramaniam, learned senior counsel appearing for the petitioner seeks permission to withdraw this petition with liberty to file the petition afresh within two weeks. Permission is granted. This writ petition is, accordingly, dismissed as withdrawn.
[ T.I. Rajput ]
[ Madhu Saxena ]
A.R.-cum-P.S.
.Assistant Registrar
--
IITRUE COPY/I
.
---------------. IN THE SUPREME COURT OF INDIA CIVIL ORIGINAL JURISDICTION LA. NO.
OF 2011 IN
WRIT PETITION (CIVIL) NO.
OF2011 .
IN THE MATTER OF: S. Krishnaswamy & Others
,... Petitioners Versus
Ministry of Finance & Others .
.... Respondents
APPLICATION FOR AD-INTERIM EX-PARTE
AY
To, Hon'ble the Chief Justice of India and his Companion judges of the Supreme Court of India
The humble petition of the Petitioners above named- . MOST RESPECTFULLY SHOWETH:
1.
The instant Writ Petition is being filed in public interest by the Petitioners protesting a violation of the fundamental rights . enshrined in Articles 14 and 21 of the Constitution of India, to . protect the interest of the common investor from the workings of a tainted machinery because the constitution of the Board of the SEBI has been altered and it is now possible for people with no expertise in the area to be handpicked at the whims and fancies of those empowered to do so under the amendment and this will impair the
. working of the SEBI and derogate. from its role as a watchdog. Also, in an inexplicable fashion the proposal to extend the tenure of the then Chairman and Whole-Time Members from three (3) to five (5) years has been negated, first by postponing the issue to six . ,
.
'
months prior to the retirement of theconcerned persons at the SEBI and then by the quashing the proposal itself.
2.
That it is of utmost importance that the independence of the SEBI be kept intact while the instant Writ Petition is pending before this Hon'ble Court.
3.
That. since the notification dated 7.10.2010 and the consequent amendment of the Rules of 1992 inserting Clause (e) in Rule 3(5) of Security. and Exchange Board of India (Terms and Conditions of Service of Chairman and Members) Rules, 1992 are Patently illegal, all actions taken in pursuance thereof may kindly be stayed during the pendency of the instant Writ Petition.
4.
That . any appointments made to the Search-cum-Selection Committee in consequence of the Notification dated 7.10.2010 and the amendment to Rule 3(5) of the 1992 Rules may be kept in abeyance during the pendency of the instant Writ Petition. PRAYER
It is therefore most respectfully prayed that this Hon'ble Court may
kindly bepleased to:
(i)
Direct that Notification dated. 7.10.2010 and the consequent amendment of the Rules of 1992 inserting Clause (e) in Rule 3(5) of Security and Exchange Board of India (Terms and Conditions of Service of Chairman and Members) Rules, 1992 shall remain stayed during the pendency of the instant Writ Petition;
(ii)
Direct that any appointments made to the Search-cum-Selection Committee in consequence of the Notification dated 7.102010 and the amendment to Rule 3(5)0拢 the 1992 Rules shall remained
\
.
stayed during the pendency of the instant Writ Petition; and
(iii)路 Pass any other and further directions which. this Hon'ble Court .
.
.
.
may deem fit in the facts and circumstances of this case.
AND FOR THIS ACT OF KINDNESS THE PETITIONERS AS IN DUTY
,
.
_.
BOUND SHALL EVER PRAY.
DRAWN AND FILED BY:
( MIS AP&J CHAMBERS) ADVOCATE FOR THE PETITIONERS NEW DELHI HLED