Arun Kumar Agrawal vs Union Of India & Ors

5. He points out that Mr. Sinha was Joint Secretary, Banking till May, 2002. He became Joint Secretary, Ministry of Finance in June, 2002. Thereafter, he held the post of Joint Secretary, Capital Market, Ministry of Finance from 1st July, 2003. Whilst working as such he was appointed as Additional Director on the Board of Unit Trust of India Asset Management Company Ltd. (hereinafter referred to as ‘UTI AMC’). Thereafter, on 3rd November, 2005 Mr. Sinha was appointed as CEO and MD of UTI AMC on deputation for two years. According to Mr. Bhushan, Mr. Sinha was wrongly sent on deputation under Rule 6(2)(ii) of the IAS (Cadre) Rules, 1954, which is applicable in case of deputation in an international organization, NGO or body not owned by the Government. Since the equity share capital in UTI AMC is held by the State Bank of India, Life Insurance Corporation, Bank of Baroda and Punjab National Bank, each holding 25% of the shares, it could not be said that UTI AMC was not controlled by the Government. According to Mr. Bhushan, Mr. Sinha ought to have been sent on deputation under Rule 6(2)(i) of the IAS (Cadre) Rules, 1954 which is applicable for deputation of an IAS officer “under a company, association or body of individuals, whether incorporated or not, which is wholly or substantially owned or controlled by the State Government, Municipal Corporation or a local body by the State Government on whose cadre she/he is borne.” According to Mr. Bhushan, Mr. Sinha was deliberately sent on deputation under Rule 6(2)(ii) for ulterior motive. He points out that the deputation of Mr. Sinha was against the accepted assurance given to the J.P.C. on the appointment of CMD of UTI AMC. Mr. Sinha as Joint Secretary, Capital Market and member of the Board of UTI AMC was aware of the recommendation of JPC. He deliberately violated the recommendations. According to Mr. Bhushan, the deputation was also in violation of policy of not allowing deputation to an officer who had overseen the organization to which he was being deputed. Deputation of Mr. Sinha was also in conflict of interest as he was Joint Secretary, Banking till May 2002 and the ownership of UTI AMC was with the SBI, Bank of Baroda, PNB and LIC. According to Mr. Bhushan, Mr. Sinha was privy to sensitive information. Under the rules, Mr. Sinha was required to file affidavit/undertaking that person sent on deputation was not privy to any sensitive information.

9. Mr. Bhushan had laid considerable amount of emphasis on these facts to support the submission that although the words in the aforesaid letters give the impression that the approval of the shareholders of the pay package and the bonus was for the future but in reality the resolution enhanced the emoluments with effect from 27th December, 2006. Mr. Sinha in fact drew emoluments on that basis with effect from 27th December, 2006. This fact, according to Mr. Bhushan, is evident from the annual return of UTI AMC for the year 2007-2008. The annual return shows his salary for the year ended 31st March, 2008 as Rs.20.12 million. The return also shows that Mr. Sinha has also been paid Rs. 4.40 million as an arrear of his salary from 27th December, 2006 to 31st March, 2007 consequent to his salary restructured with effect from 27th December, 2006. Being fully aware of all the facts and having received compensation in crores of rupees, Mr. Sinha did not disclose the same while making an application for VRS on 15th April, 2008. Whilst giving the answer to column No.5 in the form of application to accept the commercial appointment, Mr. Sinha stated Rs.22,400–Rs.525-Rs.24,500/- as his pay scale and Rs. 23,450/- as his present basic pay.

13. Another ground of attack on the appointment of the respondent No.4 pertains to the suppression of material facts relating to the remuneration of Mr. Sinha as CMD, UTI AMC before the Search-cum- Selection Committee and the ACC. Mr. Bhushan points out that the application form for the post of SEBI Chairman required the applicant to disclose scale of pay and basic pay of the post presently held along with service of the petitioner. The first meeting of the Search- cum-Selection Committee was held on 2nd November, 2010. The SSC short listed five candidates out of nineteen. Mr. Bhushan then points out that the second meeting of the Committee was held on 13th December, 2010, wherein the names of Mr. U.K. Sinha and Mr. Himadri Bhattacharya were recommended for the post of Chairman, SEBI in the order of merit. Mr. Bhushan further submitted that the selection of Chairman of SEBI required the approval of the ACC. The appointments recommended to the ACC have to be sent along with a standard Performa and annexures which are to be filled in by the Ministry recommending the appointment. The proposal for the appointment of Mr. Sinha was put up to the ACC by the Finance Ministry vide its confidential letter No.D.O.No.2/23/2007-RE dated 13th December, 2010. Blatantly false information is given against the column requiring details about the pay scale presently enjoyed by the applicant. In reply to this column, it is stated “not available”. Against Column 6(ii), scale of pay of the post it is stated that “the chairman shall have an option to receive pay (a) as admissible to a Secretary to the Government of India; or (b) a consolidated salary of Rs.3,00,000 per month. It was also submitted that in between the first and the second meeting of the Search-cum-Selection Committee, there were 40 days for the officials to ensure that the particulars of Mr. Sinha are verified before filling up the application form. The officials could have ascertained the particulars of his emoluments as CMD, UTI AMC. Mr. Bhushan submits that in order to mislead this Court, Mr. Sinha in paragraph 10 of the counter affidavit has given a totally false explanation that the Finance Secretary was aware of his market-bench- marked salary as CMD, UTI AMC. This, according to Mr. Bhushan, is a bald assertion without any material to substantiate the same. Mr. Bhushan submits that the other explanation given by Mr. Sinha that information relating to emoluments of CMD, UTI AMC was in public domain as full disclosure is made in the Balance Sheet of UTI AMC. It is submitted by Mr. Bhushan that such an explanation cannot possibly be accepted. The question before this Court, according to Mr. Bhushan, is not whether the person who filled up the form knew or could have known the correct emoluments drawn by Mr. Sinha. The issue is that the applicant had failed to disclose the correct particulars about his emoluments and the pay scale before the Search Committee. This misinformation was also placed before the ACC. According to Mr. Bhushan, such a manipulative person cannot be said to be a man of integrity. Mr. Bhushan, as noticed earlier, submitted that the Committee in its second meeting had recommended two names. However, the Finance Minister forwarded only the name of Mr. Sinha to the ACC for approval. Even the document which was placed before the ACC seeking approval for the appointment of Mr. Sinha mentions “not available” against the present scale of pay. Mr. Bhushan further pointed out that Mr. Sinha’s total emoluments for the year 2010-2011 were over 4 crores per annum. This amount was probably more than what the bureaucrats senior to him and involved in the selection process were paid by the Government in their entire career. Mr. Bhushan, therefore, submits that it was for this reason that Mr. Sinha manipulated that there should be no advertisement and the selection should be made through the Search route. In the case of advertisement, he would have to reveal the emoluments received by him. Relying on the aforesaid facts, Mr. Bhushan submits that since vital pieces of information was withheld from the Search Committee as well as ACC, Mr. Sinha clearly cannot be said to be a man of high integrity. The post of the Chairman, SEBI is a very important position having a bearing on the flow of investment, Indian and Foreign, economic growth and the safety of funds invested by large and small investors. Therefore, according to Mr. Bhushan, it was important that the complete facts particularly those having direct bearing on deciding the question of integrity should have been placed before the Search-cum-Selection Committee and the ACC. In support of the submission learned counsel has relied on the judgment of this Court in Centre for PIL & Anr. Vs. Union of India & Anr.[1]

22. The Search-cum-Selection Committee after scrutinizing the qualification and experience of the short listed candidates unanimously placed respondent No.4 first in the order of merit. The impression sought to be given wrongly by the petitioner is that respondent No.4 was placed at No.2 and Mr. Bhattacharya was at No.1. This is a deliberate distortion by the petitioner.

30. It becomes clear from the above that the functions performed by SEBI are such that any malfunctioning in the performance of such functions can disturb the economy of our country. Keeping in view the aforesaid scope and ambit of the discretionary powers conferred on the Members of the SEBI Board, there is little doubt in our mind that only persons of high integrity would be eligible to be appointed as Chairman/Member of the SEBI. Section 4(5) inter alia stipulates that the Chairman and other Members of the SEBI shall be persons of “ability, integrity and standing who have shown capacity in dealing with problems relating to securities market.” Statutorily, therefore, a person cannot be appointed as Chairman/Member of the SEBI unless he or she is a person of high integrity. We, therefore, have no hesitation in accepting the submission of Mr. Bhushan that the selection and appointment of respondent No.4 could be challenged before this Court in a writ petition under Article 32 of the Constitution of India on the ground that he does not satisfy the statutory requirements of a person of high integrity.

3. Department of personnel &, Training is accordingly requested kindly to grant requisite permission to Shri U.K. Sinha, under intimation to this Department.

Was the recommendation and appointment of Mr. U.K. Sinha vitiated by MALA FIDE exercise of powers?

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

November 01, 2013.