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TMI Blog2013 (11) TMI 696X X X X Extracts X X X X X X X X Extracts X X X X ..... ationist 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 I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt Committee of the Cabinet (hereinafter referred to as ACC ). (c) The appointment of respondent No.4, a Chairman of SEBI, is mala fide. 3. Mr. Prashant Bhushan, learned counsel appearing for the petitioner, has made detailed submissions with regard to the manipulations and the maneuvers indulged in by the petitioner with the active connivance of some other persons to successfully mislead the Search Committee as well as the ACC. He has highlighted that the petitioner does not fulfill the requirements of Section 4(5) of SEBI Act which provides as under:- (5) The Chairman and the other members referred to in clauses (a) and (d) of sub-section (1) shall be persons of ability, integrity and standing who have shown capacity in dealing with problems relating to securities marker or have special knowledge or experience of law, finance, economics, accountancy, administration or in any other discipline which, in the opinion of the Central Government, shall be useful to the Board. 4. Giving the factual background, he referred to the communication dated 10th September, 2010 of the Department of Economic Affairs inviting the application for the post of Chairman SEBI. In paragraph 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on to an officer who had overseen the organization to which he was being deputed. Deputation of Mr. Sinha was also in conflict of interest as he was Joint Secretary, Banking till May 2002 and the ownership of UTI AMC was with the SBI, Bank of Baroda, PNB and LIC. According to Mr. Bhushan, Mr. Sinha was privy to sensitive information. Under the rules, Mr. Sinha was required to file affidavit/undertaking that person sent on deputation was not privy to any sensitive information. 6. Continuing further, Mr. Bhushan pointed out that on appointment as CMD, UTI AMC on 13th January, 2006, Mr. Sinha continued to get pay scale of Joint Secretary, even though he had an option under Rule 6(2)(ii) of drawing the pay of the UTI AMC or the scale of pay of the Government which is beneficial. There was no separate pay scale for CMD of UTI AMC and the same needed to be created in view of the option under Rule 6(2)(ii). On 29th January, 2007, Mr. Sinha made representation to the Government claiming that his batch cadre IAS Officer has been empanelled as Additional Secretary, therefore, his salary be fixed accordingly in the pay scale of Additional Secretary to the Government of India i.e. 22400-525- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h an officer is sent on deputation. On 12th December, 2007, the Finance Ministry, Department of Economic Affairs requested the Department of Personnel and Training (DOPT) to extend the deputation of Mr. Sinha for the remaining one year and nine months under Rule 6(1). On 10th March, 2008, the ACC advised the Finance Ministry (Department of Economic Affairs) that extension of tenure as CMD of UTI AMC has been granted to Mr. Sinha till 31st May, 2008 under Rule 6(1). It was indicated that upon completion of the aforesaid term he would return to his parent cadre (Bihar). A direction was issued to the Department of Economic Affairs to identify a suitable replacement of Mr. Sinha by that date. Mr. Bhushan points out that in the meantime on 25th March, 2008, the shareholders approved the emoluments of Mr. Sinha as recommended with effect from 27th December, 2006. This, according to Mr. Bhushan, was not permissible since 28th November, 2007 or at best since February, 2008 the deputation of Mr. Sinha was no longer under Rule 6(2)(ii). Mr. Bhushan points out that inspite of the recommendation of the ACC on 10th March, 2008, a recommendation was made by the Chairman of SBI on behalf of other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18 of the counter affidavit are contrary to the Balance Sheet of the UTI AMC for the year 2007-2008. Mr. Bhushan emphasized that it is apparent from the annual report of UTI AMC for the year 2008-2009, 2009-2010 and 2010-2011 (10 months), Mr. Sinha got remuneration of Rs.2.15 crores, Rs. 2.36 crores and Rs.3.62 crores, respectively. According to Mr. Bhushan again in paragraph 21 of the affidavit Mr. Sinha has tried to mislead this Court. Mr. Sinha had stated that the excessive payment of Rs. 4 crores for the year 2010-2011 was on account of severance payment. He submits that the severance payment is payable only when the concerned organization asks the CEO to leave. In the case of Mr. Sinha, UTI AMC did not ask him to leave. In fact, Mr. Sinha did not even give the mandatory three months notice, and relinquished the charge without giving any opportunity to the organization to appoint another CEO. Mr. Bhushan submits that Mr. Sinha wrongly received benefits of retirement when in fact he had only resigned. He reiterated that Mr. Sinha has given false information repeatedly. He gives a false declaration under Rule 26(3)(ii) of All India Services Deathcum- Retirement Benefit Rules to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e scale of pay and basic pay of the post presently held along with service of the petitioner. The first meeting of the Search-cum- Selection Committee was held on 2nd November, 2010. The SSC short listed five candidates out of nineteen. Mr. Bhushan then points out that the second meeting of the Committee was held on 13th December, 2010, wherein the names of Mr. U.K. Sinha and Mr. Himadri Bhattacharya were recommended for the post of Chairman, SEBI in the order of merit. Mr. Bhushan further submitted that the selection of Chairman of SEBI required the approval of the ACC. The appointments recommended to the ACC have to be sent along with a standard Performa and annexures which are to be filled in by the Ministry recommending the appointment. The proposal for the appointment of Mr. Sinha was put up to the ACC by the Finance Ministry vide its confidential letter No.D.O.No.2/23/2007-RE dated 13th December, 2010. Blatantly false information is given against the column requiring details about the pay scale presently enjoyed by the applicant. In reply to this column, it is stated not available . Against Column 6(ii), scale of pay of the post it is stated that the chairman shall have an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advertisement, he would have to reveal the emoluments received by him. Relying on the aforesaid facts, Mr. Bhushan submits that since vital pieces of information was withheld from the Search Committee as well as ACC, Mr. Sinha clearly cannot be said to be a man of high integrity. The post of the Chairman, SEBI is a very important position having a bearing on the flow of investment, Indian and Foreign, economic growth and the safety of funds invested by large and small investors. Therefore, according to Mr. Bhushan, it was important that the complete facts particularly those having direct bearing on deciding the question of integrity should have been placed before the Search-cum-Selection Committee and the ACC. In support of the submission learned counsel has relied on the judgment of this Court in Centre for PIL Anr. Vs. Union of India Anr. (2011) 4 SCC 1. 14. The next ground of challenge of the petitioner to the appointment of Mr. Sinha as the Chairman of SEBI is that it is vitiated by mala fide. Mr. Bhushan pointed out that to accommodate Mr. Sinha the earlier Chairman of SEBI was denied extension in tenure. The SEBI (Term and Condition of Service of Chairman and Members) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cilitate the selection of Mr. Sinha there was illegal and arbitrary change in composition of Search-cum-Selection Committee. Ms. Omita Paul ordered two new names of her own to be appointed as experts of eminence on the Selection Committee. She also suggested Secretary (Financial Services) over and above the two experts. Thus, according to Mr. Bhushan, three of the five members of the Search-cum- Selection Committee were hand picked by Ms. Paul. In order to include Secretary (Financial Services) in the Search Committee, Rule 5 of the Rules, 2010 was amended to include clause (e) under which two nominees of the Finance Minister were included. In such a way, primacy was given to the Finance Minister. Mr. Bhushan submits that the record clearly shows that the object of the entire exercise of changing the Rules was to ensure that the Committee desired by the Advisor Ms. Omita Paul remains unchanged. It was also done probably to ensure that the ex-officio Chairman, the Cabinet Secretary, remains the only member unconnected with the Finance Minister. Mr. Bhushan submits that Ms. Omita Paul in the reply affidavit has admitted that her role was merely advisory. Mr. Bhushan submits that in s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irman and professional managers of UTI-II should be done in a transparent manner, whether they are picked up from the public or private sector. If an official from the public sector is selected, in no case should deputation from the parent organization be allowed and the person chosen should be asked to sever all connections with the previous employer. This is imperative because under no circumstance should there be a public perception that the mutual fund schemes of UTI-II are subject to guarantee by the Government and will be bailed out in case of losses. 16. Mr. Bhushan submits that the aforesaid recommendations were blatantly ignored in the selection of Mr. Sinha. He further pointed out that neither Mr. Sinha nor Mr. Jitesh Khosla were professionals. Neither of them met any of the four criteria in the advertisement inserted for the post of UTI CMD in newspaper dated 4th June, 2012. In fact, the entire manipulation and mala fide exercise, according to Mr. Bhushan, is exposed by the advertisement that was released after the brother of Ms. Omita Paul, Advisor opted out of the race because the tenure of Ms. Omita Paul, Advisor was coming to an end on account of it being co-termi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he investors and the government lost tens of thousands of crores and the entire JPC report is the testimony to the scam. The Government and tax payer lost over Rs.10,000 crores in the UNIT 64 scam. Similarly Mr. Bhushan submits that the respondents have wrongly taken the preliminary objection that earlier two writ petitions having been filed by the petitioner challenging the appointment of respondent No.1 having been dismissed as withdrawn. He further submits that the respondents have wrongly leveled allegations that this petition is at the behest of some other person who is interested to continue as the Chairman of SEBI. The petitioner has not prayed for the reinstatement of any of the previous incumbents. The petitioner only prays for appointment of a person as the Regulator who should be a person of high integrity functioning in a transparent manner. Mr. Bhushan submits that although the respondents claim that the petitioner has suppressed material facts, the suppression of facts by respondent No.4 is not treated with the same amount of concern. Respondents Submissions: 18. In response to the submission made, learned Attorney General Mr. G.E. Vahanvati, appearing for the Un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the approval of the Bank of Baroda did not come till 29th March, 2008. Therefore, there was no approval prior to 11th April, 2008 of the compensation of Rs.1 crore per annum alongwith the related payment of bonus of Rs. 1 crore. Similarly, it is stated by Mr. Vahanvati that submission of the application for voluntary retirement was done four days after the approval on 15th April, 2008. Until then, the petitioner had been in receipt of pay scale which was duly sanctioned on the post held by him in the Government. Therefore, the petitioner has unnecessarily tried to create an impression that there has been any deliberate misrepresentation or concealment of fact by respondent No.4. In the form of application to accept commercial appointment, respondent No.4 had clearly stated that he has been working as the Director/CEO UTI AMC since 3rd November, 2005 till date. Respondent No.4 had to state the pay scale of the post and the pay drawn by the officer at the time of the retirement which in his case was of Rs.22,400-535- 24,500. Respondent No.4 had clearly mentioned his present basis pay as Rs.23,450/-. 20. Learned Attorney General submitted that the petitioner has wrongly alleged tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utside expert. Accordingly, Dr. S.A. Dave, Chairman CMIE, was nominated as the Member. Therefore, to say that the amendment of the rules has been made just to ensure that balance was tilted in favour of the Finance Minister is without any basis. 21. Learned Attorney General also pointed out that the Search-cum-Selection Committee in its meeting held on 29th January, 2008 had unanimously short listed two names in the following order: (1) Mr. U.K. Sinha and (2) Mr. J. Bhagwati. However, notwithstanding the recommendation of Mr. Sinha by the Selection Committee, Shri Bhave was appointed as Chairman, SEBI on 15th February, 2008. In 2009, a statutory system was established for selection of Chairman/Whole Time Member of the SEBI. The proposal was also placed to amend Rule 3 of the Securities Exchange Board of India (Terms and Conditions of Service of Chairman and Members) Rules, 1992 to include the provision relating to procedure to be followed for the selection of Chairman/WTM of SEBI. This was done by incorporating sub-rule (5) which required the recommendation of the Search-cum-Selection Committee consisting of Cabinet Secretary, Department of Economic Affairs, Chairman, SEBI for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... candal. In the earlier petition (W.P. No. 340 of 2012), the petitioner has sought an extension to continue the tenure of Mr. Bhave for 5 years which was withdrawn. Prayer No.2 in the W.P.(C) No.340 of 2011 was as follows : Issue a writ of mandamus or any other appropriate writ, order or, direction to quash and declare void constitution of sub-committee of the Search-cum-Selection Committee under Shri U.K.Sinha, Chairman SEBI for conducting interview to the post of whole time members and proceedings/recommendation thereof. 24. This would clearly ensure that as soon as Mr. Sinha s appointment was declared void, Mr. Bhave would continue as a Chairman. This is evident from Prayer 5 which is as under : Issue a writ of mandamus or any other appropriate Writ, order or direction to direct Respondent Nos.1 2 to act in accordance with the Government of India Notification No.2/106/2006-RE, dated 23rd July, 2009 which stipulates enhancement of the tenure of existing Chairman and Whole Time directors of SEBI from three (3) to five (5) years. 25. Similarly, Writ Petition (C) No.392 of 2011 again repeats the prayer which was made in the earlier writ petition. It was submitted by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase. This petition is motivated by ill will, and the moving spirit behind the petition is Mr. C.B. Bhave. He reiterated the submissions of the Attorney General that Mr. C.B. Bhave and the Whole Time Member Dr. K.M. Abraham were aggrieved by the non-grant of extension to them, on the posts occupied by them, in the light of change in the rules. In fact, the petitioner, in his submission, has made detailed reference to the motivated complaint made by the Whole Time Member Dr. K.M. Abraham about the functioning of the new Chairman, i.e., Mr. U.K. Sinha. This was only because Mr. Bhave and Mr. Abraham were upset about the nonextension of tenure of Mr. Bhave. Apart from the change of rules, the extension was not granted to Mr. Bhave for his lapses in dealing with the IPO Scam of 2005 when he was the Chairman of NSDL. Conclusions: 27. We have considered the submissions made by the learned counsel for the parties. Although all the respondents have raised the preliminary issue about the maintainability of the writ petition, we shall consider this submission after we have considered the issue on merits. The foremost issue raised by the petitioner and emphasized vehemently by Mr. Parshant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. It can impound and retain the proceeds or securities in respect of any transaction which is under investigation. The wide sweep of the powers of SEBI leaves no manner of doubt that it is the supreme authority for the control and regulations and orderly development of the securities market in India. It would not be mere rhetoric to state that in this era of globalisation, the importance of the functions performed by SEBI are of paramount importance to the well being of the economic health of the nation. Therefore, Mr. Bhushan is absolutely correct in emphasising that the Chairman of SEBI has to be a person of high integrity. This is imperative and there are no two ways about it. The importance of the functions performed by SEBI has been elaborately examined by this Court in the case of Sahara India Real Estate Corporation Ltd. Ors. Vs. Securities and Exchange Board of India Anr. 2013 (1) SCC 1 Justice Radhakrishnan, upon examination of the various provisions of the SEBI Act, has observed that it is a special law, a complete code in itself containing elaborate provisions to protect interest of the investors. The paramount duty of the Board under the SEBI Act is to protect t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s he or she is a person of high integrity. We, therefore, have no hesitation in accepting the submission of Mr. Bhushan that the selection and appointment of respondent No.4 could be challenged before this Court in a writ petition under Article 32 of the Constitution of India on the ground that he does not satisfy the statutory requirements of a person of high integrity. 31. Since Mr. Bhushan has relied on the judgment of this Court in Centre for PIL Anr. (supra), it would be appropriate to notice the observations made in that judgment by S.H. Kapadia, C.J. in paragraph 2 of the judgment, it has been observed as follows :- 2. The Government is not accountable to the courts in respect of policy decisions. However, they are accountable for the legality of such decisions. While deciding this case, we must keep in mind the difference between legality and merit as also between judicial review and merit review. . If a duty is cast under the proviso to Section 4(1) on the HPC to recommend to the President the name of the selected candidate, the integrity of that decision-making process is got to ensure that the powers are exercised for the purposes and in the manner envisaged by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DOPT and the Government of Bihar, wherever applicable. Respondent No.4 was first appointed as CEO, UTI AMC by order dated 30th October, 2005. He was initially on deputation under Rule 6(2) (ii) and subsequently under Rule 6(2)(i) of the IAS Cadre Rules. The terms and conditions of service of respondent No.4 at UTI AMC were settled on 16th April, 2007. This was in conformity with the letter dated 31st October, 2005 written by the DOPT accepting the request made by the Government of Bihar in its letter dated 28th October, 2005 for approval of deputation of respondent No.4 with UTI AMC for a period of two years under Rule 6(2)(ii) of IAS Cadre Rules. The letter further indicated that terms and conditions applicable in the aforesaid deputation were under examination and would be communicated shortly. The deputation was converted from Rule 6(2)(ii) to Rule 6(2)(i), upon clarification of the applicability of the appropriate rule. This fact is noticed by the petitioner himself whilst stating that although on 6th November, 2007, the proposal for extension of deputation of Mr. Sinha was for two years, but the extension was granted only for a period of three months until 2nd February, 2008, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l fund, portfolio management, venture fund management, pension fund and offshore fund management. The UTIAMC is managing the 'financial assets of over Rs. 50,000/- crores. Considering the challenges that UTI AMC faces in the prevailing market conditions and the need for continuity necessitated by the structural changes undertaken in the Company, the Chairman of SBI, in consultation with other stakeholders of UTI AMC (viz. LIC, BoB and PNB) has offered to Shri Sinha a four year tenure as CMD of UTIAMC w.e.f. 1st June, 2008, or earlier without break of continuity on the understanding that Shri Sinha will take voluntary retirement from Government service and that Shri Sinha will be entitled for salary and perquisites decided by the Compensation Committee of the Board of the Company from time to time. Hon'ble Finance Minister has approved this proposal. 2. The Department of Economic Affairs supports the request of Shri U.K. Sinha for post retirement commercial employment with UTI AMC as its CMD and certify the following: The proposed employment of Shri U.K. Sinha with UTIAMC as its CMD is in public interest and has the approval of Hon'ble Finance Minister. There is no conflict ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the pay scale of Rs.22400-525-24500. He also stated his present pay to be Rs.23,450/-. There is no legal infirmity in the aforesaid statement by respondent No.4. It is a settled proposition of law that deputationist would hold the lien in the parent department till he is absorbed on any post. The position of law is quite clearly stated by this Court in State of Rajasthan Anr. Vs. S.N.Tiwari Ors. (2009) 4 SCC 700 18. This Court in Ramlal Khurana v. State of Punjab observed that: (SCC p. 102, para 8) 8. Lien is not a word of art. It just connotes the right of a civil servant to hold the post substantively to which he is appointed. 19. The term lien comes from the Latin term ligament meaning binding . The meaning of lien in service law is different from other meanings in the context of contract, common law, equity, etc. The lien of a government employee in service law is the right of the government employee to hold a permanent post substantively to which he has been permanently appointed. 39. Similarly, in the case of Triveni Shankar Saxena Vs. State of U.P. Ors. 1992 Supp. (1) SCC 524 , it has been held as under:- 24. A learned Single Judge of the Allaha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required if the Officer was in receipt of information whilst working as Officer in the Government and is aware of the sensitive proposals or other decisions which are not otherwise known to others and which can be used for giving undue advantage to the Organization in which he is seeking a future position. In the case of respondent No.4, he was already working as CMD-cum-CEO in the UTI AMC. Therefore, there was no question of respondent No.4 having been privy to any sensitive information with regard to UTI AMC at the time when he was posted as Joint Secretary/Additional Secretary in the Government of India. In fact, respondent No.4 in the same Form No. L at Sr.No.7-C had stated that he was earlier working as Director in UTI AMC and was appointed as CEO cum MD from 3rd November, 2005 and CMD from 13th January, 2006. The declaration is in fact in conformity with the 3rd proviso to Rule 26 of All India Service (DCRB) Rules which envisages that an Officer in deputation of an Organization under Cadre rules can be absorbed in the same Organization post VRS. The word Service in Sr. No. 9(ii) in Form L is in contrast to the work of proposed Organization. 42. We are also not much impre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in various writ petitions filed by the petitioner. In a company like the UTI AMC, it is for the shareholder on the Board to decide what process to follow and whom to appoint. When the selected candidate is not a government employee having a lien on a government job, then the government would have nothing to do with the selection process. In this case, the shareholders made a request to the Government for the deputation of respondent No.4. They again made a request for extending his deputation beyond two years. In April 2008, respondent No.4 was offered commercial employment provided he took VRS. At each stage, permission was duly granted by the competent authority after duly following the prescribed procedure as per the rules of executive business. Therefore, we do not find any justifiable reason to doubt the legality of the manner in which respondent No.4 continued to work in UTI AMC since he initially came on deputation in October, 2005. 44. Mr. Bhushan has vehemently argued that respondent No.4 had deliberately concealed or distorted the information in his application for voluntary retirement. We have already noticed that in filling up the Form `L', respondent No.4 had correct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Board of Directors. Respondent No.4 would clearly have no say in the matter. 46. We are also of the opinion that there is nothing so outlandish or farfetched in the statement made by respondent No.4 that such higher-level posts are generally not advertised . It is a matter of record that previously Shri M. Damodaran, an IAS Officer of the rank of Additional Secretary, the post was not advertised. Subsequently also, the appointment of Mr. S.B. Mathur and Administrator Mr. K.N. Tripathi Raj was made without any advertisement. In fact, both the appointments were made without even resorting to the Search-cum-Selection Process. The erstwhile Chairman of SEBI was also appointed without any advertisement. It is also a matter of common knowledge that the posts such as the Government of Reserve Bank of India are hardly ever advertised. Similarly, the post of Chairman, SEBI was advertised for the first time in 2008. Prior to that, it was not advertised. The statement made by respondent No.4 that such higher posts are generally not advertised, cannot be said to be a misleading or a false statement. It is a statement setting out general practice of appointments in the commercial world on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondent No.4 was sent on deputation. However, at the risk of repetition, since the petitioner has made such a grievance about the same, it will be apt to notice that DOPT had agreed with the proposal of DEA with the consent of Government of Bihar for deputation of respondent No.4 for a period of two years under Rule 6(2)(ii) and conveyed to the Government of Bihar, Department of Economic Affairs through Letter No.14017/26/2005-AIS-(II) dated 31st October, 2005. As noticed earlier, the deputation of respondent No.4 as CEO, UTI was conveyed to UTI vide DOPT letter dated 16th April, 2007. The terms and conditions clearly provided that the Officer could draw the pay of the organization or the government pay scale which was beneficial to respondent No.4. Respondent No.4 had made a representation to DOPT vide his application dated 29th January, 2007 requesting to allow him to draw the pay in the scale of Additional Secretary to the Government of India as he had already been empanelled to the said post or the pay of CMD of UTI AMC whichever is beneficial to him. The competent authority approved the release of pay of Additional Secretary to respondent No.4 w.e.f. 10th February, 2007, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Cabinet (ACC) had approved the extension of tenure of respondent no.4 as CMD UTI AMC till 31st may, 2008. 49. This takes us past the alleged irregularities regarding deputation of respondent No.4, the alleged misstatement/nondisclosure about his pay scale/sanctioned emoluments as disclosed in the letter dated 16th April, 2007; the alleged appointment of respondent No.4 is contrary to recommendations made by the AAPTE Committee on July, 2007; the alleged false declaration under Rule 26(3)(ii) of AIS Death-cum-Retirement Rules that in the last three years of his career he had not been privy to sensitive and strategic information of UTI AMC; the alleged false statement about higher-level posts are generally not advertised. Was the recommendation and appointment of Mr. U.K. Sinha vitiated by MALA FIDE exercise of powers? 50. Mr. Bhushan submitted that the appointment of Mr. Sinha, as Chairman, SEBI was made mala fide. Undoubtedly, if the allegations of mala fide are established, it would vitiate the selection procedure, recommendation and the appointment of Mr. U.K.Sinha as the Chairman, SEBI. But the burden of proving the allegations of mala fide would lie very heavily on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the imputations are grave and they are made against the holder of an office which has a high responsibility in the administration. 52. Further, in Saradamani Kandappan s case (supra) this court again emphasized that the contention of fraud has to be specifically pleaded and proved. 53. Keeping in mind the aforesaid observations, we shall now examine the material placed before us by the petitioner to establish the allegations of mala fide exercise of power. 54. The first instance of mala fide relied upon by Mr. Bhushan that number of steps were taken deliberately to deny extension to the earlier Chairman. According to Mr. Bhushan, the moving spirit in the strategic plan to deny the extension to Mr. C.B. Bhave was respondent No.6. The allegations made by the petitioner have been emphatically denied by UOI, Mr. Sinha, respondent No.4 and Ms. Omita Paul, respondent No.6. As far as the grievance of the petitioner that Mr. C.B. Bhave was denied extension just to accommodate respondent No. 4 is concerned, we are inclined to accept the submission of Mr. Mohan Parasaran, learned Solicitor General, that there was no mala fides involved in taking that decision. Learned Solicitor Gen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mittee in its meeting held on 29th November, 2008, it was Shri C.B. Bhave who was appointed Chairman, SEBI on 15th February, 2008. We also find substance in the submission of learned Attorney General that the amendment in Rule 3 of the Security Exchange Board of India (Terms and Conditions of Service and Members) Rules, 1992 was to provide for more participation by the expert members. Therefore, sub-rule (5) of the aforesaid rules was incorporated which requires that recommendation of Search-cum-Selection Committee will consist of Cabinet Secretary, Department of Economic Affairs, Chairman, SEBI for selection of WTM and two expert eminent from relevant field. We have also been taken through the necessary correspondence for the inclusion of Shri Suman Berry and Shekhar Chaudhary, two experts of eminence from the relevant filed for the selection of Chairman, SEBI in 2010. But it was noticed that inclusion of Secretary Finance Services was not within the rules as amended on 23rd July, 2009. Upon discussion with the Ministry of Law, it was decided that the amendment in the rules could be made in line with the rule prevalent for the selection made to the Income Tax Appellate Tribunal. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... losed with the Confidential Letter No. DO No.2/23/2007-RE dated 13th December, 2010. The letter clearly mentions that Search-cum-Selection Committee was constituted under Rule 3 of the SEBI Rules, 1992. The Searchcum- Selection Committee consisted of :- 1. Shri K.M.Chandrasekhar, Cabinet Secretary - Chairman 2. Shri Ashok Chawla, Finance Secretary - Member 3. Shri R.Gopalan, Secretary (DFS) - Member 4. Shri Devi Dayal, Former Secretary (Banking) - Member 5. Prof. Shekhar Chaudhuri, Director, IIM Kolkata - Member 6. Dr. Suman K.Bery, Director General, NCAER - Member 57. Applications were invited by circulating the vacancy position to all cadre controlling authorities in the Government of India and States on 10th September, 2010. The vacancy was simultaneously put on the Website of the Ministry of Finance, Department of Personnel and Training. It was also advertised in three largest circulating English Newspapers of the country on 18th September, 2010. It is clearly mentioned that out of the 19 applicants, who were respondents to the advertisement in the first meeting of the Committee held on 2nd November, 2010, five were short listed. In addition, the Search-cum- Selec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gher emoluments as Chairman, UTI AMC. This non-mention cannot lead to the conclusion that if the same had been mentioned, respondent No.4 would not have been selected as Chairman, SEBI on the ground that it would have been illogical for a person drawing higher emoluments on one post to join another post having lesser emoluments. Mr. Salve has rightly reiterated that there was nothing abnormal; in the course adopted by respondent No.4. No material has been placed on record to show that respondent No.4 was in receipt of ESOP illegally. It has been pointed out that under ESOP, an employee is given an option by the company to buy its shares upto the given quantity allotted to him which can be exercised after a specified time. In the case of UTI AMC, the stock option was to vest after a period of three years. Secondly, an employee could not exercise 100% of the option in one go. It was spread over four years, 10% in the 4th year, 20% in the 5th year, 30% in the 6th year and last 40% in the 7th year. After vesting of each trench, the employee had one year to make up his mind whether to exercise his option or to let it go by. In UTI AMC, ESOP was approved by the shareholders. The HR Commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of notings in the official files. 61. The observations made by this Court in the judgments noticed earlier make it clear that it was incumbent on the petitioner not only to make specific allegations, but to produce very strong evidence to lead to a clear conclusion that the selection was actuated by mala fide. The 7 steps relied upon by the petitioner to establish conspiracy per se do not amount to conspiracy to mislead the ACC. It is unbelievable to expect such a coordinated overt and covert operation to have been even conceived, let alone successfully executed just to have Mr. U.K. Sinha appointed as Chairman, SEBI. The appointment of Mr. Sinha is strictly in conformity with the procedure prescribed by service rules, i.e, Rules 16 and 26 of the AIS (DCRB) Rules, 1958. The files were sent to PMO as and when required by rules of business. In matter of VRS and post retirement commercial employment, there is no requirement under the rules of business of sending the file to PMO/ACC. We find substance in the submission of Mr. Salve that the petitioner has not placed on record any material to establish that any conspiracy was hatched to ensure the selection of respondent No.4. 62. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Even at that time, Mr. Sinha was short-listed and placed at Sr.No.1. Out of the two names short listed as noticed by us earlier in spite of the recommendations, it was C.B. Bhave who was appointed. In 2009, a statutory system was established for the selection of Chairman/Whole time Member of SEBI. In this back-ground, Rule 3 was amended by introducing sub-rule (5) which provided that the Chairman and every whole time member shall be appointed by the Central Government on the recommendation of the Selection-cum-Search Committee consisting of the (i) Cabinet Secretary as the Chairman, (ii) Secretary, Department of Economic Affairs, (iii) Chairman, SEBI (for selection of whole time members) (iv) two experts of eminence from the relevant field to be nominated by the Central Government. In 2010, it was decided to initiate action for a fresh selection for the post of Chairman, SEBI. Therefore, a note was initiated on 18th July, 2010 for the constitution of a Committee. Various names were suggested for inclusion as experts. While approving the constitution of the Selection Committee, the Finance Minister also observed that going by earlier precedent, the Committee should have compositio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the respondents, the petitioner has been set up by interested parties. We entirely agree with the submissions made by the learned Attorney General that the first requirement for the maintainability of a public interest litigation is the uberrimae fide of the petitioner. In our opinion, the petitioner has unjustifiably attacked the integrity of the entire selection process. It is virtually impossible to accept the submission that respondent No.6 was able to influence the decision making process which involves the active participation of the ACC, a high powered Search-cum-Section Committee with the final approval of the Finance Minister and the Prime Minister. The proposition is so absurd that the allegations with regard to mala fide could have been thrown out at the threshold. We have, however, examined the entire issue not to satisfy the ego of the petitioner, but to demonstrate that it is not entirely inconceivable that a petition disguised as public interest litigation can be filed with an ulterior motive or at the instance of some other person who hides behind the cloak of anonymity even in cases where the procedure for selection has been meticulously followed. The respond ..... X X X X Extracts X X X X X X X X Extracts X X X X
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