2013 (11) TMI 696 - SC - Indian Laws

Removal from the post of Chairman of the Securities and Exchange Board of India - Non fulfillment of eligibility conditions under Securities and Exchange Board of India Act 1992 - Lack of integrity - Suppression of facts - Validity of the recommendation made for the appointment - Held that - functions performed by SEBI are such that any malfunctioning in the performance of such functions can disturb the economy of our country - Therefore only persons of high integrity would be eligible to be appointed as Chairman/Member of the SEBI - Respondent was on deputation in UTI AMC when he filled up Form L . At that time he held lien on the post of Additional Secretary Government of India. His application for voluntary retirement had been processed. He was however required to obtain approval under Rule 26 for commercial employment-post retirement. Sr.No.5 of Form L requires the person seeking approval to state the pay scale of the post and pay drawn by the Officer at the time of retirement - deputationist would hold the lien in the parent department till he is absorbed on any post. Respondent No.4 had sought retirement from the IAS w.e.f. 15th May 2008 to enable him to join UTI AMC on a regular basis as its CMD. Therefore it cannot be said that at the time when he filled the Form for seeking VRS respondent No.4 was not drawing the pay scale stated by him. We do not find much substance in the allegation that respondent No.4 had deliberately suppressed the information regarding his salary. The fact that emoluments paid to respondent No.4 w.e.f. 27th December 2006 would not affect the statement made by respondent No.4 in Form L filled on 15th April 2008. The Board of UTI AMC by resolution dated 12th April 2008 approved that the CMD can draw revised compensation w.e.f. 27th December 2006. Till that date he was still placed in the scale of Additional Secretary Government of India. Respondent No.4 he was already working as CMD-cum-CEO in the UTI AMC. Therefore there was no question of respondent No.4 having been privy to any sensitive information with regard to UTI AMC at the time when he was posted as Joint Secretary/Additional Secretary in the Government of India. In fact respondent No.4 in the same Form No. L at Sr.No.7-C had stated that he was earlier working as Director in UTI AMC and was appointed as CEO cum MD from 3rd November 2005 and CMD from 13th January 2006. The declaration is in fact in conformity with the 3rd proviso to Rule 26 of All India Service (DCRB) Rules which envisages that an Officer in deputation of an Organization under Cadre rules can be absorbed in the same Organization post VRS. Respondent No.4 had no role to play in the grant of approval of deputation once he fully disclosed that he had been working as Joint Secretary Banking. He had no further role to play. It is a too farfetched submission that whilst respondent No.4 worked as Joint Secretary Banking that he can be said to have over-seen the Organization of UTI AMC. The petitioner had unnecessarily and without any basis tried to confuse that respondent No.4 would be disqualified for deputation in UTI AMC as he would have been privy to receiving some sensitive information with regard to its functioning. Such higher-level posts are generally not advertised. Keeping in mind the contribution made by him and the needs of the Company the shareholders had made the offer to him - As such all the decisions are made by the Board of Directors. The shareholders are Life Insurance Corporation PNB BOP and SBI - it is the responsibility of the Board to ensure succession planning at the top. As a normal practice nominations are made by the Board and share-holders either directly or through a search firm and the post is rarely advertised. In any event it would be the decision to be taken by the Board of Directors. Respondent No.4 would clearly have no say in the matter. The deputation of respondent No.4 was considered under Rule 6(2)(ii) which provides for deputation of a cadre Officer under an international organization an autonomous body not controlled by the Government or a private body. The aforesaid deputation can be made only in consultation with the State Government on whose cadre the Officer is borne. We had earlier noticed that due procedure was followed when respondent No.4 was sent on deputation. Just for the sake of accommodating respondent No.4 the recommendations of the JPC were not concealed from the Government. This submission is fallacious on the face of it as the recommendations of the JPC were placed before the Parliament and Government of India directly. Respondent No.4 had no role to play in that procedure. In fact the Government of India submitted action taken report in context of the recommendations from time to time and was fully aware of it. The Government of India never adopted the policy of not sending IAS Officer on deputation to UTI AMC and informed the Parliament in its 3rd action taken report submitted in December 2004. The decision to grant approval of commercial employment post retirement under Rule 26 was taken by the Government of India. The post was filled up by Board of Directors and shareholders of UTI AMC. It was entirely for them to adopt such policy of appointment as they deem fit. We fail to understand that even upon respondent No.4 complying with all the conditions of deputation it would render him a person of not high integrity. There is nothing surprising in respondent No.4 accepting the post of Chairman SEBI which carried much lesser emoluments than he enjoyed as Chairman UTI AMC. It is not abnormal for people of high integrity to make a sacrifice financially to take up the position of honour and service to the nation. In any event we are of the opinion the acceptance by Mr. Sinha of lesser salary as Chairman of SEBI cannot ipso facto lead to the conclusion that he accepted the position for the purpose of abusing the authority of Chairman SEBI. It was incumbent on the petitioner not only to make specific allegations but to produce very strong evidence to lead to a clear conclusion that the selection was actuated by mala fide. The 7 steps relied upon by the petitioner to establish conspiracy per se do not amount to conspiracy to mislead the ACC. It is unbelievable to expect such a coordinated overt and covert operation to have been even conceived let alone successfully executed just to have Mr. U.K. Sinha appointed as Chairman SEBI. The appointment of Mr. Sinha is strictly in conformity with the procedure prescribed by service rules i.e Rules 16 and 26 of the AIS (DCRB) Rules 1958. The files were sent to PMO as and when required by rules of business. In matter of VRS and post retirement commercial employment there is no requirement under the rules of business of sending the file to PMO/ACC Appointment to such a High Powered Position has actually been made fairly and in accordance with the procedure established by law - Decided against Petitioner.

Summary

Issues Involved:
1. Eligibility and integrity of Mr. U.K. Sinha for the post of Chairman, SEBI.
2. Allegations of manipulation, misrepresentation, and suppression of material facts during the appointment process.
3. Alleged mala fide intentions behind Mr. Sinha's appointment.
4. Maintainability of the writ petition.

Detailed Analysis:

1. Eligibility and Integrity of Mr. U.K. Sinha for the Post of Chairman, SEBI:
The petitioner challenged Mr. Sinha's eligibility under Section 4(5) of the SEBI Act, which requires the Chairman to be a person of ability, integrity, and standing. The petitioner argued that Mr. Sinha lacked integrity, citing his previous roles and the manner of his deputation to UTI AMC. The Court examined the factual background, including Mr. Sinha's professional history and the processes followed for his deputation and subsequent appointment. The Court concluded that Mr. Sinha's deputation was duly approved by the competent authorities and found no evidence of false declarations or violations of rules. The Court emphasized the importance of SEBI's role and agreed that the Chairman must be a person of high integrity, but found no grounds to disqualify Mr. Sinha on this basis.

2. Allegations of Manipulation, Misrepresentation, and Suppression of Material Facts:
The petitioner alleged that Mr. Sinha manipulated the deputation rules, misrepresented his salary, and suppressed material facts during the application process for the SEBI Chairman position. The Court reviewed the sequence of events and the documentation provided, including Mr. Sinha's application for voluntary retirement and commercial employment. The Court found that Mr. Sinha had correctly stated his pay scale and was not privy to any sensitive information that would disqualify him. The Court also rejected the claim that the post was not advertised, noting that such high-level posts are generally not advertised and that the selection process was transparent.

3. Alleged Mala Fide Intentions Behind Mr. Sinha's Appointment:
The petitioner argued that Mr. Sinha's appointment was driven by mala fide intentions, involving a conspiracy to deny extension to the previous Chairman, Mr. C.B. Bhave, and to manipulate the selection process. The Court examined the allegations of mala fide and the role of various officials, including Ms. Omita Paul. The Court found no evidence to support the claim of a conspiracy or mala fide intentions. The Court noted that the decision not to extend Mr. Bhave's tenure was based on legitimate concerns and that the selection process for Mr. Sinha was conducted fairly and in accordance with the rules.

4. Maintainability of the Writ Petition:
The respondents argued that the writ petition was not maintainable, alleging that the petitioner had ulterior motives and was acting on behalf of vested interests. The Court agreed that the petitioner failed to establish good faith and that the petition appeared to be motivated by interests other than public welfare. The Court highlighted the importance of utmost good faith in public interest litigation and found that the petition did not meet this standard. The Court also noted that the petitioner had previously filed similar petitions that were dismissed.

Conclusion:
The Court dismissed the writ petition, finding no merit in the allegations against Mr. Sinha's appointment as Chairman, SEBI. The Court emphasized the integrity of the selection process and the lack of evidence to support claims of manipulation or mala fide intentions. The petition was deemed not maintainable due to the petitioner's failure to demonstrate good faith and the appearance of acting on behalf of vested interests.