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TMI Blog2017 (2) TMI 746X X X X Extracts X X X X X X X X Extracts X X X X ..... s that the mode of appointment indicated above shall not be resorted to unless there is exigency of work. 3 By prayer clause (b) and the amended prayers, what is sought is that existing and future vacancies be directed to be filled in by promoting the eligible and suitable departmental Grade-F officers of SEBI. Then, a blanket prayer to call for all the records in relation to the appointment to the posts of Executive Directors and Chief General Managers in the SEBI and finally to quash and set aside an advertisement issued by the SEBI in the newspaper of 5th November, 2016 inviting applications for making appointments to the two posts of Executive Directors on deputation / contract basis. 4 The Petitioners had moved this Petition before a Division Bench of this Court and later on sought to amend it. A Chamber Summons (L) No. 384 of 2016 was moved. After hearing both sides on December 2, 2016, we granted leave to amend and by reserving all contentions on the merits of the amended plea. Hence, we have considered the Writ Petition as amended. 5 The Petitioners before us include the first Petitioner stated to be a registered and recognized association of the employees of SEBI. The R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egulations states that the post in Grade-D and above can be filled in by deputation / contract or direct recruitment only in special circumstances, namely, the suitable internal candidates are not available and / or exigencies of the work require. Then, there is a reference to the Schedule appended to these Regulations which refers to the mode of recruitment and proportion of posts to be filled up through different modes under the provisions of sub-regulation-4 of Regulation-6. Inviting our attention to paragraph 12, it is submitted that the Schedule mandates that 50% of the total posts to be filled up by promotion from the internal candidates of SEBI and remaining 50% should be filled up by deputation / contract basis and/or direct recruitment subject to the condition that internal candidates are not available. However, this Schedule is not at all applicable to Regulation-7(3) which deals with deputation / contract basis. The Schedule refers to Regulation 6 (4) which deals only with direct recruitment. It is argued that from the past several years, SEBI has filled up to 50% of posts in the grade of Executive Director routinely on deputation / contract basis in the Schedule but wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion basis. The challenge is raised to this advertisement on the ground that it violates the SEBI Regulations. 11 It is in the above facts and circumstances that the reliefs are sought. 12 After the Writ Petition was served on the SEBI, an affidavit in reply has been filed. In that affidavit in reply, it has been stated that the Petition is filed on a erroneous basis and on a flawed understanding of the applicability of the provisions of law. The provisions are being misread and misinterpreted. If the Petitioners are aggrieved by an advertisement and seeking to appoint the Executive Directors, then, what that argument and challenging the same fails to notice is that by sub-section (1) of Section 9, the Board has power to appoint the Executive Directors and other officers of its choice. The Mandate of sub-section (2) makes it clear that terms and other conditions of service of officers and employees of the board appointed under sub-section-1 shall be as may be determined by the Regulations. Thus, the power to appoint under the Act is different from the power to regulate the terms and conditions by making the Regulations of 2001. Hence, notwithstanding anything contained in these R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted that the Petition be dismissed. 13 What we have in the file is also a Notice of Motion and a reply thereto. But it is not necessary to refer to the same. It is on the above pleadings that we have heard the submissions and in great detail. 14 Mr. Aney, learned Senior Counsel appearing on behalf of the Petitioners invited our attention to the allegations in the Writ Petition to submit that the Petitioners have based their case on the pleadings. The pleadings would denote as to how the whole system of appointment and promotion operates. Our attention has been invited to some of the definitions. Mr. Aney would rely upon the definition of the term 'Board' appearing in Section- 2 (1) (a), 'prescribed' as appearing in Section- 2 (1) (g) and 'regulations' appearing in Section 2 (1) (h). Mr. Aney would submit that Chapter-II provides for 'establishment of the SEBI'. Then, 'Management of SEBI' is set out by Section 4 and it consists of the members whose designation is set out in sub-section-1 of Section- 4. By Section-5 'term of office and conditions of service of Chairman and members of the Board', is set out. Mr Aney would submit tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the Regulations shall not apply, except as otherwise provided in these Regulations or to such extent as may be specifically or generally decided by the Board, to persons employed temporarily or on contract. After inviting our attention to the definitions appearing in these Regulations, it is submitted that the power to implement the Regulations vests in the Chairman. He is empowered to issue administrative instructions as may be necessary to give effect and carry out purpose of these Regulations or otherwise to secure effective control of the employees and decision of the Chairman is binding on the employees. There is a power but that is in the Board to relax or waive the strict application of the provisions of these Regulations. Mr. Aney would rely upon Chapter-II of these Regulations and particularly Regulation-6. He would submit that the whole time employees of the Board shall be classified as officers (Grades -A, B, C, D, E, F and Executive Director). Thus, the Executive Director is as much an employee of the Board as other officers. It is the Board who has been empowered to specify from time to time the pay and to sanction the posts in general. Though, there may not be a ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey are accepted, then, such of these Petitioners who have applied pursuant to the advertisement inserted on 5th November, 2016, were clearly ineligible and not permitted to apply at all. Once they could not have applied given the argument of the Petitioners, then, the legal basis must fail. If the Petitioners are conceding that even the officers within the SEBI are eligible for being considered to the promotional posts either in the promotional exercise or otherwise, then, the right to be considered for promotion, is not defeated or frustrated but protected. Mr Dada would, therefore, submit that the Writ Petition be dismissed. 18 For appreciating these contentions, we must refer to the Securities and Exchange Board of India Act, 1992 (for short 'Act'). The Act has been enacted by the Parliament with a view to promote orderly and healthy growth of the securities market and for investors protection. SEBI was established for monitoring the activities of stock exchange, mutual funds or merchant bankers etc. Going by the tremendous growth of the capital market and increasing participation of the public with the view to boost investors' confidence, various amendments have be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... curities and exchange board to the board', and 'powers and functions of the Board'. That aspect is covered by Chapter-IV. Section-11 appearing therein reads as under:- "POWERS AND FUNCTIONS OF THE BOARD Functions of Board. 11. (1) Subject to the provisions of this Act, it shall be the duty of the Board to protect the interests of investors in securities and to promote the development of, and to regulate the securities market, by such measures as it thinks fit. (2) Without prejudice to the generality of the foregoing provisions, the measures referred to therein may provide for - (a) regulating the business in stock exchanges and any other securities markets; (b) registering and regulating the working of stock brokers, sub-brokers, share transfer agents, bankers to an issue, trustees of trust deeds, registrars to an issue, merchant bankers, underwriters, portfolio managers, investment advisers and such other intermediaries who may be associated with securities markets in any manner; 13[(ba) registering and regulating the working of the depositories,14 [participants,] custodians of securities, foreign institutional investors, credit rating agencies and such other i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Board may take measures to undertake inspection of any book, or register, or other document or record of any listed public company or a public company (not being intermediaries referred to in section 12) which intends to get its securities listed on any recognised stock exchange where the Board has reasonable grounds to believe that such company has been indulging in insider trading or fraudulent and unfair trade practices relating to securities market."] 22[(3) Notwithstanding anything contained in any other law for the time being in force while exercising the powers under 23[clause (i) or clause (ia) of sub-section (2) or subsection (2A)], the Board shall have the same powers as are vested in a civil court under the Code of Civil Procedure, 1908 (5 of 1908),while trying a suit, in respect of the following matters, namely : (i) the discovery and production of books of account and other documents, at such place and such time as may be specified by the Board; (ii) summoning and enforcing the attendance of persons and examining them on oath; (iii) inspection of any books, registers and other documents of any person referred to in section 12, at any place;] 24[(iv) inspection ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties market: Provided further that the Board shall, either before or after passing such orders, give an opportunity of hearing to such intermediaries or persons concerned.] 26(5) The amount disgorged, pursuant to a direction issued, under section 11B of this Act or Section 12A of the Securities Contracts (Regulation) Act, 1956 or section 19 of the Depositories Act, 1996, as the case may be, shall be credited to the Investor Protection and Education Fund established by the Board and such amount shall be utilized by the Board in accordance with the regulations made under this Act." 24 Inserted by the SEBI (Amendment) Act, 2002 (w.e.f. 29-10-2002). 25 Inserted by the SEBI (Amendment) Act, 2002, (w.e.f. 29-10-2002). 26.Inserted by the Securities Laws (Amendment) Act, 2014 w.r.e.f.18-07-2013." 21 A bare perusal of the various clauses of sub-section 2 of Section 11 would mean that the Board's primary duty is to protect the interest of investors in securities and to promote development of the securities market by such measures as it thinks fit. It can also perform such other functions as may be prescribed. That 'prescribe' is a term traceable to the definitions and would mean ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other matter is required to be, or may be, specified by regulations or in respect of which provision is to be made by regulations.] 22 A bare perusal of this section would show that Regulations governing the term and other conditions of service of officers and employees of the Board are traceable to Section 9 (2). Once Section 9 speaks of officers and employees of the Board, then, their term and other conditions of service can be determined by these Regulations. Accordingly, the Regulations have been made. The Regulations are heavily relied upon. The Regulations define the terms and conditions of service of the employees of the Board. The Regulations shall apply to every whole-time employee appointed by the Board under sub-section-1 of Section 9 of the Act and to every whole-time employee transferred to the Board under Clause (d) of sub-section (1) of Section 10 of the Act. Section-10 of the Act though not referred to by parties, is equally relevant and that enables the Board, in terms of its powers, to enter into contracts and to continue the old contracts. The various clauses and to be found in these Regulations are then important. Those are to be found in Regulation-2. Regulat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all other employees, concerned Executive Director is the Competent Authority. Then, what we have is the definition of a term "duty", which includes service as a probationer and which would indicate as to how the Regulations have to be implemented and power to implement the same vests in the Chairman. Chapter-II of these Regulations deal with appointments, probation and termination of service. Therein appears Regulation (6) which reads as under:- "APPOINTMENTS, PROBATION AND TERMINATION OF SERVICE Classification and appointment of whole-time employees 6. (1) The whole-time employees of the Board shall be classified as follows: (a) Officers (Grades A, B, C, D, E, F and Executive Director); (b) Secretarial Staff, Accounts Assistants and Library Assistants (Grades A,B, C); 2[(ba) Junior Secretarial Assistant, Junior Accounts Assistant 3[Junior Library Assistant and Junior engineer]] (c)4 [***] (d) Messenger, Cook, Driver, Messenger-cum-Driver, Messenger-cum-General Assistant. 5[(2) The Board shall specify from time to time the pay of each post or group of posts and shall grant approval for sanction of posts at the level of Executive Director while the Chairman shall be the Compe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch grade as may be specified by the competent authority or in special circumstances where no suitable candidate is available in the Board's service, or the exigencies of work require, at a higher grade by issuing newspaper advertisement. Provided that the Competent Authority may recruit trainee officers and such trainee officers may be considered for regular appointment on successful completion of the training period and subject to passing a departmental test and interview." 25 A perusal of this Regulation would indicate that by sub-regulation (1) the classification of the whole-time employees of the Board is made. Though it is clear that officers are classified together with their Grades A to F and Executive Director is also classified as a whole-time employee of the Board, what it further states by sub-regulation (2) is that the Board shall specify from time to time the pay of each post or group of posts and shall grant approval for sanction of posts at the level of Executive Director. Therefore, the Board would have to sanction and grant necessary approval for the posts at the level of Executive Director. While the Chairman shall be the Competent Authority for sanctioning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perience and other incidental matters related to recruitment and promotion in the Board's service shall be as specified in the Schedule. Therefore, recruitment can be made in terms of the substituted Regulations. In the case before us the Schedule that is referred to by the parties would be referred to a little later but what one finds from the further sub-regulations of Regulation (6) is that it is entirely the domain of the Board and when it comes to the appointment to the post of the Executive Director, the Selection Committee consisting of the Chairman and two other members of the Board constituted by the Chairman, will make appointment to the post of Executive Director. That appointment has to be approved by the Board before an offer of appointment is issued to the selected candidate. The temporary / contract employee is a matter governed by Regulation (7), that reads as under:- "Temporary/Contract employees 7. (1)(a) Notwithstanding anything contained in these Regulations, the competent authority may appoint persons on a temporary basis due to exigencies of work, on suitable terms and conditions, subject to such general or special directions, if any issued by the Board ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her organizations for a specified period and their terms and conditions of deputation shall be specified by the competent authority in consultation with the lending organization. Therefore, we have noticed that there is a power to make temporary appointment, to make contractual appointment or appointment on contract or to take on deputation an employee in Grade-D and above from Government or any other organizations. Sub-regulation (4) of Regulation-7 deals with appointment to the post of Executive Director by deputation or contract. Therefore, it is not in dispute that appointment to the post of Executive Director by deputation and/or contract can be made and that has to be approved by the Board before an offer of appointment is issued. Equally, the Board is conferred with some other powers. As far as promotions are concerned, they are governed by Regulation (16). Regulation (16) read thus:- "Promotion 16. (1) All promotions shall be made at the discretion of the Board and notwithstanding his seniority in a grade no employee shall have a right to be promoted to any particular post or grade. Provided that an employee, who has put in a minimum of 3 years of service in any post or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SEBI (Employees' Service) (Amendment) Regulations, 2010 w.r.e.f. 30-1-2008." 28 A perusal of sub-regulation-3 would show as to how a departmental promotion committee constituted by the Chairman makes the promotions. That is not disturbed and mode of promotions also is unaffected. Therefore, there is a power to appoint, appoint on probation and therefore the period of probation and termination of service is provided broadly by this Chapter. For the purpose of all this, there is a classification and appointment of whole-time employees, their recruitment either temporarily or on contract basis and matters of their recruitment and appointment including that of promotions. 29 We, now come to the Schedule and that is referred to Clause (b) of sub-regulation (4) of Regulation-6. At the cost of repetition, we must indicate that sub-regulation (4) of Regulation- 6 deals with recruitment and at the entry level or in Grade-B or in such Grade as may be specified by the competent authority by such method which the Chairman may determine including by campus selection. The proviso to this sub-regulation deals with special circumstances and when no suitable candidate is available in the Boar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng and throughout is that they have some sort of a vested right and they alone ought to be considered in promotional matters. What one finds from their representations is that a meeting was held with the concerned officials and in regard to a complaint that SEBI should take into consideration the resources and expertise already available within, in a manner that furthers the career prospects & opportunities of its own employees. Representations Annexures-B, C, D and others falling therein highlight these aspects. What we have found and projected as a serious grievance is the interpretation of the regulation on the filling up of 50% of the posts and as made in this representation but that does not accord with the Regulations. It is not as if there is an embargo or restriction and of the nature placed before us by the Petitioners on the power to recruit an Executive Director. We have not found that the representations and which culminate into the advocates notice have any legal or valid basis. The grievance projected therein is just an interpretation by the Petitioners of the Regulations. The Petitioners have projected that though there are eligible departmental candidates available ..... X X X X Extracts X X X X X X X X Extracts X X X X
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