Writ Petition (Civil) No. 374 of 2012. Case: Arun Kumar Agrawal Vs Union of India & Ors.. Supreme Court (India)
| Case Number | Writ Petition (Civil) No. 374 of 2012 |
| Judges | Surinder Singh Nijjar & Pinaki Chandra Ghose, JJ. |
| Issue | Constitution of India - Articles 32, 51A; Securities and Exchange Board of India Act, 1992 - Sections 4(5), 11(1); IAS (Cadre) Rules, 1954 - Rules 6(2)(i), 6(2)(ii); All India Services (DCRB) Rules, 1958 - Rules 16, 26, 26(3); Income Tax Appellate Tribunal Members (Recruitment and Conditions of Service) Rules, 1963; Companies Act - Section 617;... |
| Judgement Date | November 01, 2013 |
| Court | Supreme Court (India) |
Judgment:
Surinder Singh Nijjar, J.
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This writ petition has been filed by one Mr. Arun Kumar Agrawal under Article 32 of the Constitution of India; seeks the issuance of a writ of quo warranto or any other direction against Mr. U.K. Sinha, Chairman of the Securities and Exchange Board of India (hereinafter referred to as 'SEBI') and his consequential removal from the post of Chairman.
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Stated concisely, the petitioner challenges the appointment of respondent No.4 on the following grounds:-
a) Mr. Sinha failed to fulfill one of the eligibility condition as laid down in sub-section (5) of Section 4 of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as 'SEBI Act'), as well as the qualification contained in Government communication, which required that the Chairman shall be a person of high integrity.
b) The appointment of respondent No.4 is the result of manipulation, misrepresentation and suppression of vital material before the Search-cum-Selection Committee and the Appointment Committee of the Cabinet (hereinafter referred to as 'ACC').
c) The appointment of respondent No.4, a Chairman of SEBI, is mala fide.
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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."
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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 of the aforesaid communication which provided that "keeping in view the role and importance of SEBI as a regulator, it is desirable that person with high integrity, eminence and reputation preferably with more than 25 years of professional experience and in the age group of 50 to 60 years may apply". Learned counsel submits that Mr. Sinha lacks integrity which is well illustrated by a reference to events leading to his appointment.
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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.
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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. 22400-525-24500. On 1st March, 2007, the salary of Mr. Sinha was fixed in the aforesaid scale, with effect from 10th February, 2007. A communication was also sent on 16th April, 2007 enclosing the terms and conditions of the deputation of Mr. Sinha. It was pointed out that the member of service may opt for his grade pay or the pay of the post, whichever is more beneficial to him. It was also pointed out that the terms and conditions will be applicable with effect from 27th December, 2007. Mr. Bhushan thereafter laid considerable emphasis on the fact that on 27th September, 2007 the Board UTI AMC approved the remuneration package of Mr. Sinha keeping in view the remuneration package of CEO in the industry, roles and responsibilities of the CMD, UTI AMC and the current surge of the salary structure in the market, as follows:-
• Fixed Pay Rs. 10 million per annum
• Variable Pay upto 100% of Fixed pay subject to performance and as may be approved by the Board on yearly basis.
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According to Mr. Bhushan, this decision was taken on the basis of the recommendation made by the Aapte Committee in July, 2007. This Committee had been set up to recommend the compensation to be paid to CMD, UTI AMC. This Committee had recommended the compensation to be paid to CMD, UTI AMC on the basis that the compensation should be market competitive to attract appropriate talent from the market.
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According to Mr. Bhushan, the actual fact situation would show that the recommendation to appoint CMD, UTI AMC from the market was given a complete go by at the time of the appointment of Mr. Sinha in 2008, when his extension to deputation was denied. Therefore, in order to continue as CMD, UTI, AMC Mr. Sinha took voluntary retirement. Mr. Bhushan states that on 6th November, 2007 though a proposal for extension of deputation of Mr. Sinha for a period of two years was made, he was only granted an interim extension of three months till 2nd February, 2008. This was because some general issue regarding deputation under Rule 6(2)(ii) was being re-examined. On 28th November, 2007, the Consolidated Deputation Guidelines for All India Services was circulated by the Ministry of Personnel and under the Guidelines the deputation of Mr. Sinha was determined to be under Rule 6(1). He points out that under Rule 6(1) there is no option of getting remuneration as per the scheme of the organization to which 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 shareholders proposing that Mr. Sinha should continue as CMD of UTI AMC even beyond 31st May, 2008. In the recommendation letter, it was proposed to offer four years tenure to Mr. Sinha as CMD of UTI AMC with effect from 1st June, 2008 or earlier without break of continuity. The letter also notices that under the existing Government Rules Mr. Sinha will be able to take this offer only if he takes voluntary retirement from the Government Service. A formal letter for extension of tenure was issued to Mr. Sinha on 11th April, 2008 by the UTI AMC. On 12th April, 2008 the Board of UTI...
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