FinMin admits to past mistake

FinMin admits to past mistake

The blame game has begun on who is to own up for the discrepancies in the appointment of Chairman of the country’s apex market watchdog SEBI (Securities Exchange Board of India).

After a PIL in the Supreme Court challenged the appointment of SEBI Chairman UK Sinha and further alleged corporate interests to influence the functioning of the market regulator, the Ministry of Finance in its latest affidavit suggested that in a bid to overcome past mistakes, corrective measures were since adopted and thus Sinha's appointment or SEBI's functioning cannot be faulted.

In doing so, the Ministry exposed its past wrongs by suggesting how prior to Pranab Mukherjee's tenure as Finance Minister, his predecessor had bypassed the recommendation of the Selection Committee formed for this purpose to appoint the then SEBI Chairman.

The Centre's affidavit said, "Prior to July 2009, selections (of Chairman and whole time members) were made by Committees as decided by the Finance Minister from time to time." This had Cabinet Secretary as Chairman, Finance Secretary as Member along with four other experts. The Committee unanimously forwarded two names - UK Sinha and J Bhagwati for the Chairman post.

The affidavit went on to suggest, "However, notwithstanding the recommendation of UK Sinha by the Selection Committee, CB Bhave was appointed as Chairman on February 15, 2008." What is shocking to note, the affidavit added, "The Committee recorded that CB Bhave had informed the Committee of his disinclination to be considered for the position of Chairman SEBI." Moreover, the decision to appoint Sinha was unanimous.

Realizing that this practice hit the reputation of the market regulator, it was the present Finance Minister who put in place a statutory system by amending Rule 3 of SEBI Act that institutionalized the Selection Committee's recommendation as a mandatory step to appoint Chairman and whole time members.

The affidavit claimed that the petition filed by a set of renowned civil society members seeks to "espouse the cause of certain disgruntled ex-officers of SEBI", one of them being KM Abraham, who complained of interference of Centre in functioning of SEBI just days before he failed to get another extension as whole time member of the regulatory body.

But showing the mirror on the conduct of this officer, the affidavit pointed out numerous complaints received against Abraham of which some related to "abuse of power for aiding corruption and purchase of flat at concessional rate from an entity that had benefited from the sale of office space to National Stock Exchange which is regulated by SEBI."

Even the Central Vigilance Commissioner (CVC) reported about Abraham to the Finance Ministry. Despite the allegations against him, the then SEBI Chairman Bhave recommended his as head of National Institute of Securities Markets in violation of the rules under which a panel had to be submitted for selection. Ultimately, the Finance Ministry decided to advertise the post and received 48 applications forcing Abraham to complain of interference against the Finance Ministry.