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Saturday, November 2, 2013

Public interest litigation questioning the appointment of Mr. U.K.Sinha as chairman of SEBI -In our opinion,the petition does not satisfy the test of utmost good faith which is required to maintain public interest litigation. Apex court dismissed the writ filed under Art.32 of Indian constitution = Arun Kumar Agrawal ...Petitioner Versus Union of India & Ors. …Respondents - Reported in http://judis.nic.in/supremecourt/filename=40945

Public interest litigation questioning the appointment of Mr. U.K.Sinha as chairman of SEBI -In our  opinion,the petition does not satisfy the test of utmost good faith  which  is required to maintain public interest litigation. Apex court dismissed the writ filed under Art.32 of Indian constitution =

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.

        2. 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.
=

the preliminary objections raised  by  the
      respondents that the writ petition deserves to  be  dismissed  on  the
      ground that  it  is  not  a  bona  fide  petition.  
According  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 respondents have successfully  demonstrated
      how the petitioner  has  cleverly  distorted  and  misinterpreted  the
      official documents on virtually each and every issue. 
In our  opinion,
      the petition does not satisfy the test of utmost good faith  which  is
      required to maintain public interest litigation.  
We  have  been  left
      with the very un savoury impression that the petitioner is a  surrogate
      for  some  powerful  phantom  lobbies.  Respondent  No.2-SEBI  in  its
      affidavit has stated that the petitioner is a  habitual  litigant.  
He
      files writ petitions against individuals to  promote  vested  interest
      without any relief to the public  at  large.  
We  are  at  a  loss  to
      understand as to how in the facts of this  case,  the  petitioner  can
      justify invoking the jurisdiction of  this  court  under  Article  32.
      This is not a petition to protect the Fundamental Rights of any  class
      of down trodden or deprived section of the population.  It is more for
      the protection of the vested interests of some  unidentified  business
      lobbies.  
The petitioner had earlier  filed  writ  petition  in  which
      identical relief had been claimed and the same had been dismissed. The
      aforesaid  writ  petition  is  sought  to  be  distinguished  by   the
      petitioner on the ground that three  successive  writ  petitions  were
      withdrawn as sufficient pleadings were  not  made  for  the  grant  of
      necessary relief.  
Even if this preliminary objection is  disregarded,
      we are satisfied that the present petition is filed at the  behest  of
      certain interested powerful  lobbies.  
The  allegations  made  in  the
      letter written by Dr.  Abraham  are  without  any  basis  and  clearly
      motivated. 
Further, a perusal  of  the  record  clearly  reveals  that
      several complaints  were  filed  against  Dr.  Abraham,  wherein  some
      serious allegations have been made against  him  in  relation  to  his
      tenure as the Whole Time Member (WTM), SEBI. 
Also, it was  only  after
      the Ministry of Finance decided not to extend his tenure as WTM,  SEBI
      and advertisements for new appointments were issued that  Dr.  Abraham
      started complaining about interference of the Ministry of  Finance  in
      SEBI through the present Chairman. 
We may also notice  here  that  the
      letter dated 1st June, 2011  written  by  Dr.  Abraham  to  the  Prime
      Minister, that the Petitioner seeks reliance upon, was written  merely
      a month and a half before Dr. Abrham’s tenure was  to  end.  
From  the
      above, it is manifest that the  letter  written  by  Dr.  Abraham  was
      clearly motivated and espouses no public interest. 
The affidavit  also
      narrates the  action  which  has  been  taken  by  SEBI  against  very
      influential  and  powerful  business  Houses,  including  Sahara   and
      Reliance. It is pointed out that the  petitioner  is  a  stool  pigeon
      acting on the directions of these Business Houses. 
We  are  unable  to
      easily discard the reasoning put forward by respondent No.4. It  is  a
      well known fact that in recent times, SEBI has been active in pursuing
      a number of cause celebre against some very powerful Business  Houses.
      
Therefore, the anxiety of these Business Houses for the removal of the
      present Chairman of SEBI is  not  wholly  unimaginable.  
We  make  the
      aforesaid observations only to put on record that the present petition
      could have been  dismissed  as  not  maintainable  for  a  variety  of
      reasons. 
However, we have  chosen  to  examine  the  entire  issue  to
      satisfy our judicial conscience that the appointment to  such  a  High
      Powered Position has actually been made fairly and in accordance  with
      the procedure established by law.
      64.    We  find  no  merit  in  this  petition  which  is  accordingly
      dismissed.


                                                                  REPORTABLE



                          IN THE SUPREME COURT OF INDIA
                          CIVIL ORIGINAL JURISDICTION



                    WRIT PETITION (CIVIL) NO.374 OF 2012


      Arun Kumar Agrawal                               ...Petitioner


      Versus


      Union of India & Ors.                           …Respondents


                               J U D G M E N T




      SURINDER SINGH NIJJAR, J.




        1. 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.

        2. 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.

      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
     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.


      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.


      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. 22400-525-24500.  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.




      7.    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.


      8.    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  AMC  approved  that  the  CMD  can  draw
      revised compensation with effect from 27th December, 2006.


      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.


      10.   Mr. Bhushan pointed out that this information was necessary  for
      getting the no-objection from the Cadre Controlling Authority and from
      the office from where the officer retired. Mr. Bhushan further pointed
      out that not only Mr. Sinha gave false information in the  application
      for seeking voluntary retirement; he repeated the same in the  counter
      affidavit, in response to the writ petition in this  Court.  According
      to Mr. Bhushan, the averments made in  paragraph  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 (10½ 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  Death-cum-Retirement  Benefit
      Rules to the effect that in the  last  three  years  of  his  official
      career he has not been privy to sensitive or strategic information  of
      UTI AMC.     Mr. Bhushan pointed out that this statement  is  patently
      false as Mr. Sinha was already on deputation in the same  organization
      at the time of taking VRS.


      11.   Mr. Bhushan also pointed out  that  the  third  deliberate  mis-
      statement made by Mr. Sinha in the application to accept the  post  of
      CEO of UTI AMC, was to the effect that  such  higher  level  post  are
      generally not advertised. This statement was in answer to the question
      whether the post on which the appointment  is  sought  was  advertised
      and, if not, how was the offer made. Mr. Sinha had stated that keeping
      in mind the contribution made by him and the needs of the company, the
      shareholders have made the offer to him. Mr. Bhushan submits that  the
      statement about such higher level post not generally being  advertised
      was against the Aapte Committee’s direction. In fact, after Mr.  Sinha
      relinquished the post, an advertisement was issued to fill the post of
      CMD, UTI AMC on 4th June, 2012. On the basis of the  aforesaid  facts,
      Mr.  Bhushan  submits  that  manipulation  of  deputation  under  Rule
      6(2)(ii),  extension  of  deputation,   concealment   of   emoluments,
      misrepresentation and distortion  of  facts  in  the  application  for
      voluntary retirement and re-employment clearly reflect that respondent
      No.4 is not a man of integrity.


      12.   Mr. Bhushan has also made a reference to a very lengthy  letter,
      written by one Dr. K.M. Abraham, a former Whole Time Member  of  SEBI,
      dated 1st June, 2011, to the Prime Minister of India. In this  letter,
      the Whole Time Member has complained that  the  Chairman,  SEBI,   Mr.
      U.K. Sinha is being directly  influenced  by  the  Union  Minister  of
      Finance or Smt. Omita Paul, Adviser to Finance Minister.  Mr.  Bhushan
      reiterated that the letter by            Dr. Abraham contains unbiased
      information. The former Whole Time  Member  was  only  expressing  his
      concern that under the leadership of Mr. U.K. Sinha the  institutional
      integrity of SEBI is being compromised.


      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]


      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)  Rules
      were amended on 23rd July, 2009 not to extend the term of the Chairman
      and the WTM from three to five years. The Director of  Capital  Market
      Division put up a proposal on 2nd September,  2009  for  aligning  the
      terms of the Chairman and WTM by giving two years  extension  and  the
      same was endorsed by the Finance Secretary. After  following  the  due
      procedure, consent for the extension  of  the  concerned  persons  was
      taken and the proposal for extension of tenure was recommended to  the
      DOPT by the Director, Capital Market Division  by  letter  dated  16th
      November,  2009.   According  to  Mr.   Bhushan,   from   that   stage
      manipulation started with the active cooperation of  Ms.  Omita  Paul,
      the then Advisor in the Finance Ministry. On 25th November, 2009,  she
      called for the file relating to the recommendation for  extension,  in
      the term of the Chairman and the Whole Time Member. The file was  sent
      to her by the Finance Secretary on 27th November, 2009 and was seen by
      her on 30th November, 2009. It was again sent to the Advisor  for  her
      perusal on 16th December, 2009 and noting was  made  by  her  on  21st
      December, 2009 drawing the attention of the Finance Minister  to  Page
      22 regarding the composition of the SEBI Board and the present  tenure
      of the Board. Mr. Bhushan submits that the note was written in such  a
      way by Ms. Omita Paul, the then Finance Minister reversed his  earlier
      decision to accord extension to the then Chairman.  Subsequently,  the
      orders were issued to start the selection process for the Chairman  on
      10th August, 2010. Suggestion  of  giving  further  extension  to  the
      existing  officers  was  overruled.  Mr.  Bhushan  submits  that   the
      justification given by the respondents in the  counter  affidavit  for
      non grant of the extension is wholly fallacious. He submits  that  the
      justification that earlier Chairman was not granted extension  as  his
      name was reported in  newspapers  of  being  involved  in  NSDL  Scam.
      According to Mr. Bhushan, there is no  such  noting  in  the  official
      files. Mr. Bhushan also emphasized that the real reason for denial  of
      extension to the former chairman is that it was at his insistence that
      investigations were being held against the Sahara and RIL. There was a
      complaint pending with regard to insider trading relating to  RIL  and
      Reliance Petroleum in which over Rs.500 crores were made in four  days
      of trading in September, 2007. Mr. Bhushan then submits that in  order
      to facilitate 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  spite  of  the  admitted
      position  that  her  role  was  merely  advising  without  having  any
      authority to process the matter or take a decision, the files relating
      to further extension or composition of Search-cum-Selection  Committee
      were regularly sent to her. The composition of  the  Search  Committee
      was changed at  her  behest.  Mr.  Bhushan  then  submitted  that  the
      respondents have sought to justify the selection of Mr. Sinha  on  the
      basis that he was earlier  unanimously  selected  by  the  Search-cum-
      Selection Committee in 2008, on the same post. If that was so,  it  is
      surprising that the Government, in fact, appointed Mr. C.B.  Bhave  as
      the Chairman, SEBI, who had neither applied for the post nor  appeared
      in the interview. He had in fact informed the Committee  that  he  did
      not want to be considered for the post of Chairman, SEBI. According to
       Mr. Bhushan, this  can  hardly  be  a  fact  relevant  to  judge  the
      integrity of Mr. Sinha.


      15.  To further establish the ground  of  a  mala  fide,  Mr.  Bhushan
      submits that the post of CMD of UTI AMC was kept vacant for 17  months
      to accommodate the brother of  respondent  No.6  Ms.  Omita  Paul.  He
      points out that shortly after the appointment of  Mr.  Sinha  in  mid-
      February reports started appearing in the press from April, 2011, that
      the brother of Ms. Omita Paul, Jitesh Khosla, was the front runner for
      the post of UTI  AMC  because  he  had  the  backing  of  the  Finance
      Minister. These reports also stated  this  was  being  resisted  by  a
      foreign investor and whose consent was necessary. Thus,  the  post  of
      CMD UTI AMC continued to remain  vacant  for  17  months  because  the
      brother of Omita Paul could not be appointed to the post. According to
      Mr. Bhushan, the whole episode of appointment of Mr. Sinha as CMD, UTI
      AMC and the proposed appointment of Mr. Jitesh  Khosla  was  adversely
      commented upon by  the  Joint  Parliamentary  Committee,  because  the
      recommendations of the Committee were ignored. The Joint Parliamentary
      Committee had gone into the entire UTI  Scam  as  a  result  of  which
      massive losses were incurred  by  the  Government  investors  and  tax
      payers. The report in paragraph 5 made the following recommendations :-


           “(V) Government has stated  that  a  professional  Chairman  and
           Board of Trustees will manage UTI-II and that advertisements for
           appointment  of  professional  managers  will  be  issued.   The
           committee  recommended  that  it  should  be  ensured  that  the
           selection of the Chairman 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-terminus with that of Finance  Minister.  He
      emphasized that it  was  only  then  the  advertisement  was  released
      fulfilling the commitment given to the JPC by the Government in 2002.


      17.   In reply to the preliminary objection raised by the  respondents
      in the counter affidavit/replies, he submits that they deserve  to  be
      ignored. According to  Mr.  Bhushan,  the  respondents  including  the
      Government have made concerted attack on the public spirited  attitude
      of the petitioner. He is wrongly labeled as a person who has been  set
      up by persons or entities having vested interests. It is also  wrongly
      alleged that the petitioner had similarly challenged  the  appointment
      of another past Chairman of SEBI which was decided  against  him  with
      imposition of costs. The respondents have  also  wrongly  stated  that
      this is the 4th similar petition on a similar issue. Re-enforcing high
      credentials of the petitioner, Mr. Bhushan submits that he  has  filed
      several  notable  public  interest  litigations  that  have  unearthed
      corruption  and  financial  irregularities.  The  appointment  of  the
      petitioner as Advisor to Prasar Bharti benefited the  organization  by
      about Rs. 20 Crores.  He  was  the  original  complainant  in  the  2G
      spectrum scam which eventually led to the registration of the  FIR  by
      the CBI. This fact has been noted by this Court in the 2G case. On the
      basis of the above, Mr. Bhushan submits that the petitioner has  given
      his time and forgone earnings selflessly in the true spirit of Article
      51A of the Constitution  and  continues  to  unravel  financial  scams
      because of the paucity of people who both understand and  are  willing
      to take risks and make sacrifices. Mr. Bhushan then  points  out  that
      the petitioner had previously challenged the appointment of a previous
      SEBI Chairman, but it was not related to the  integrity  of  the  then
      Chairman. In fact, the then Chairman was a person with high  integrity
      and compassion. However, his leniency in trusting the sharp players in
      the market resulted in lot of scams in the first three  years  of  his
      tenure. Therefore, the petitioner has challenged  the  extension  that
      had been given to the then  Chairman  SEBI  on  the  ground  that  the
      Government should reassess his performance after three years. The writ
      petition was dismissed. The Chairman was given yet  another  extension
      in 2000 to make him the longest serving Chairman.  What  followed  was
      the  largest  stock  market  scam  in  which  the  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 Union of India, has  submitted  that
      public interest litigation jurisdiction is based on the  principle  of
      Uberrimae fide which means ‘utmost good faith’. Therefore, before  the
      petitioner can attack the integrity of respondent No.4, he would  have
      to establish his own good faith in filing the present  writ  petition.
      He further submits that this is a very unfair petition. Documents have
      been presented before the  Court  in  a  very  selective  manner.  The
      petitioner has admitted the suppression of earlier petition but he has
      tried to explain it by giving some excuses.   The  submission  of  the
      petitioner that the petition was dismissed on the pleadings  has  been
      contended by Mr. Vahanvati to be totally without any  basis.  This  is
      evident from his letter to the Registrar  sent  in  August,  2000.  He
      stated that Writ Petition (C) No.69 of 2012 deals  with  Cairn-Vedanta
      deal and it has nothing to do with the present writ petition. Then  it
      is stated that there is one similar matter filed by some other  person
      which is pending before this Court which is W.P. (C) No.246  of  2012.
      The petitioner never mentioned the  earlier  petitions  filed  by  him
      which were  dismissed.  The  objection  taken  is  that  the  petition
      deserves to be dismissed for  suppression  of  earlier  petition.  The
      letter given to the Registrar gives  the  totally  distorted  version.
      Similarly, the petitioner has distorted the entire sequence of  events
      with regard to the deputation of Mr. Sinha.
      19.   Mr. Vahanvati points out to paragraph 34 of the petition and the
      emphasis placed by the petitioner that “within a period of a  day  the
      emoluments too increased from around six lacs per annum to  one  crore
      per annum”. It is submitted that the  deputation  of  respondent  No.4
      commences on 3rd November,  2005  he  became  CEO,  UTI  AMC  on  27th
      December, 2006. The letter  dated  16th  April,  2006  which  is  very
      relevant to the issue has been withheld by the  petitioner.  Referring
      to the affidavit of Mr. Sinha, he submits that all  other  information
      has been  given  according  to  law.  The  terms  and  conditions  for
      deputation clearly show that Mr. Sinha was permitted to  opt  for  his
      grade of pay or pay scale whichever is more beneficial  for  him.  The
      recommendations made by the Aapte Committee  were  taken  into  notice
      when extension of tenure of Mr. Sinha was approved  by  the  Board  of
      Directors UTI AMC  on 17th September, 2007. Actual  sanction  came  on
      11th April, 2008, as 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 that respondent No.4 had  given  a  false  declaration
      that he was not privy to any sensitive information. This would clearly
      only indicate that the respondent No.4 has to disclose that he was not
      privy to any sensitive information received in his official  capacity.
      Learned Attorney General submits that the petitioner in  fact  has  an
      absurdity of facts with  regard  to  compensation  which  were  placed
      before the Ministry of Finance on 1st May, 2008. The Finance  Minister
      approved the proposal. It was specifically observed that there  is  no
      conflict of interest between the Government of India and UTI  AMC.  On
      17th  April,  2008,  Department  of  Personnel  and  Training  sent  a
      comprehensive note with regard to the application of  respondent  No.4
      in the prescribed format to seek permission under Rule 26 of  the  All
      India Services (DCRB) Rules, 1958 to join the Company i.e.  UTI  Asset
      Management Company Ltd. on regular basis, post  voluntary  retirement.
      The proposal was thoroughly examined and  duly  approved  by  all  the
      authorities. Learned Attorney General drew our attention to  paragraph
      30 of the petition and submitted a list of documents. The petition has
      given a twist in the tale. This has been done,  according  to  learned
      Attorney General, to give the  same  controversy  a  new  flavour.  He
      submits that the allegations about the pattern of JPC  directions  are
      false. The same petitioner  had  challenged  Mr.  Mehta’s  appointment
      earlier. It is the submission of learned Attorney General that  public
      interest litigation cannot  be  filed  irresponsibly.  It  has  to  be
      handled very carefully. It cannot be used as an AK-47  with  the  hope
      that some  bullets  will  hit  the  target.  The  allegations  of  the
      petitioner that the rules were deliberately amended to hand  pick  Mr.
      Sinha are  without  any  basis.  In  fact,  there  was  no  illegality
      committed  in  changing  the   composition   of   Search-cum-Selection
      Committee. Prior to 23rd July, 2009 there was no rule on the procedure
      to be followed for the selection of Chairman/WTM of  SEBI.  Therefore,
      before July, 2009 selections were  made  as  decided  by  the  Finance
      Minister from time to time. However, for the  selection  of  the  SEBI
      Chairman in 2008  the  then  Finance  Minister  had  approved  on  2nd
      November, 2007 that the High Powered Search Committee (later  notified
      as the Search Committee) which had four members and one Chairman.  The
      Finance Minister noted that there should be one more  outside  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
      selection of WTM and two experts of eminence from the relevant  field.
      When it was decided in 2010 to initiate action for the fresh selection
      for the post of Chairman,  SEBI  two  experts  of  eminence  from  the
      relevant field  were  Shri  Suman  Bery,  Director  General,  National
      Council  of  Applied  Economic  Research  (NCAER)  and  Prof.  Shekhar
      Choudhary, former Director,  IIM  Calcutta.  The  composition  of  the
      Search-cum-Selection Committee was sent to the Department of Personnel
      & Training for approval. However on 23rd September,  2010,  Department
      of Personnel and Training pointed out that inclusion of the  Secretary
      Financial Services was not within the Rules as amended on  23rd  July,
      2009. Therefore, the matter was again referred to the Ministry of  Law
      & Justice. During the discussion that was held with  the  Ministry  of
      Law, it was suggested that there could be an  amendment  to  the  rule
      based on the Income Tax Appellate Tribunal  Members  (Recruitment  and
      Conditions of Service) Rules, 1963. Under these rules,  the  Selection
      Board inter alia consists of a nominee of the Ministry of Law as  well
      as such other persons if any, not exceeding two, as the  Law  Minister
      may appoint. It was in these circumstances that the proposal to  amend
      the 1992 Rules was approved.


      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.


      23.   With regard to the  role  played  by  Ms.  Omita  Paul,  learned
      Attorney General submitted that in fact the present petition is a mala
      fide attempt to resurrect  the  challenge  earlier  rejected  by  this
      Court. The petition is a sheer  abuse  of  the  process  of  law.  The
      petitioner is guilty of making reckless allegations against two highly
      respected  dignitaries  who  were  appointed  expert  members  of  the
      Selection Committee. Learned Attorney General also submitted that  the
      submissions with regard to the non extension of tenure  of  Mr.  Bhave
      are totally baseless and need to be ignored. He makes a reference to a
      detailed explanation given in the affidavit filed by the UOI. The term
      of  Mr.  Bhave  was  not  extended  to  avoid  the  Government   being
      unnecessarily involved in a scandal. 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 learned Attorney General that the present writ  petition  is  a
      camouflage for  the  earlier  writ  petitions  which  were  dismissed.
      Learned Attorney General submitted that the submission of Mr.  Bhushan
      that why a person, who was earning crores, would expect a position  on
      which he was only to be paid lacs, is too absurd  to  be  even  taking
      cognizance of. Respondent No.4 accepted the Chairmanship of SEBI as  a
      matter of national duty and as a matter of  honour.  Finally,  learned
      Attorney General  submitted  that  in  the  interest  of  justice  the
      tendency among the petitioners to  make  wild  allegations  in  public
      interest       litigation       needs       to       be        curbed.






      26.    Mr. Harish Salve, learned senior counsel and Mr. Rajesh Dwivedi
      appearing  for  respondent  No.  4  have  also  raised  a  preliminary
      objection on the ground of maintainability.  According to  Mr.  Salve,
      the writ petition is not maintainable  because  it  is  not  filed  in
      public interest.  In  fact,  the  writ  petition  has  been  filed  as
      surrogate litigation on behalf of an individual who was  very  anxious
      to continue as Chairman, SEBI, namely Mr. C.B. Bhave.   Secondly,  Mr.
      Salve submits that the writ petition is liable to be dismissed  as  it
      does not make a candid disclosure of all the facts which are  relevant
      for the adjudication of the issues  raised.   Learned  senior  counsel
      submits that a litigant is duty bound to make full and true disclosure
      of the facts without any reservation, even if they seem to be  against
      them.  In support of this proposition, he relies on  State  of  Madhya
      Pradesh Vs. Narmada Bachao Andolan & Anr.[2] and K.D. Sharma Vs. Steel
      Authority of India Limited &  Ors.[3].   The  factual  basis  for  the
      aforesaid submission is that the petitioner had filed a writ  petition
      in the Delhi High Court against the  then  Chairman,  SEBI,  Mr.  D.R.
      Mehta, which was  dismissed  with  cost.   A  Special  Leave  Petition
      against the same was dismissed.  However, this Court reduced the cost.
       This fact is deliberately suppressed.  Writ Petition No. 340 of  2011
      on the same issue was dismissed by this  Court.   Dismissal  of  these
      petitions has also been suppressed by  the  petitioner.            Mr.
      Salve reiterates the submissions of the Attorney General  that  public
      interest litigation is founded on  the  principle  of  uberrima  fide,
      i.e., the utmost  good  faith  of  the  petitioner.  To  buttress  his
      submission, learned senior counsel relied on S.P. Gupta’s case.   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 non-extension 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 Bhushan is that respondent No.4  lacks  the
      integrity and does not meet the eligibility conditions  laid  down  in
      sub-section (5) of Section 4 of the SEBI Act. Additionally, respondent
      No.4 does not fulfil the conditions contained in communication of  the
      government dated 10th September, 2010  which  emphasizes,  keeping  in
      view the role and importance of  SEBI  as  a  regulator,  that  it  is
      desirable that only a person with high integrity and reputation should
      be appointed as Chairman of SEBI.


      28.  We have narrated the  sequence  of  events  relied  upon  by  the
      petitioner to establish that respondent No.4 is  not  a  man  of  high
      integrity. We have also narrated how the respondents have, with  equal
      vehemence, countered the submissions made on behalf of the petitioner.
      All the respondents have submitted that the writ petition filed by the
      petitioner ought to be dismissed  on  the  ground  of  maintainability
      alone.  As  noticed  earlier,  we  shall  consider   the   preliminary
      objections later.


      29.   We agree with Mr. Bhushan that SEBI is an  institution  of  high
      integrity. A bare perusal of the SEBI Act makes it apparent that  SEBI
      was established to protect the interests of  investors  in  securities
      and to promote the development of,  and  to  regulate  the  securities
      market. In fact, the SEBI Act gives wide ranging powers to  the  Board
      to take such measures as it thinks fit to perform its duty to  protect
      the  interests  of  investors  in  securities  and  to   promote   the
      development of, and to regulate the securities market. These  measures
      may provide for regulating the business in  stock  exchanges  and  any
      other securities markets. Further measures are  set  out  in  Sections
      11(1), (2)(a to m) to enable SEBI to perform its duties and  functions
      efficiently.  Section  11(2)(a)  provides  that  the  Board  may  take
      measures to undertake inspection  of  any  book,  register,  or  other
      document or record of any listed public company or  a  public  company
      which intends to get its securities listed  on  any  recognised  stock
      exchange. The Board can exercise its power  where  it  has  reasonable
      grounds to believe that such company has  been  indulging  in  insider
      trading  or  fraudulent  and  unfair  trade  practices   relating   to
      securities market. To enforce its directions,  the  Board  has  powers
      under Section 11(4) to issue any suspension/restraint  orders  against
      the persons including office bearers of any  stock  exchange  or  self
      regulatory organisation. 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.[4] 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 the interest of the investors and  to
      prevent unscrupulous operators to enter and remain in  the  securities
      market. It is reiterated in paragraph 67 that SEBI is also duty  bound
      to  prohibit  fraudulent  and  unfair  trade  practice   relating   to
      securities  markets.  Similarly,  Justice  Khehar  in  the  concurrent
      judgment has emphasised the importance of the functions  performed  by
      SEBI in exercise of its powers under Section 11. In  paragraph  303.1,
      it is observed as follows :-
              “303.1. Sub-section (1) of Section 11 of the SEBI  Act  casts
              an obligation on SEBI to protect the interest of investors in
              securities, to promote  the  development  of  the  securities
              market, and to  regulate  the  securities  market,  “by  such
              measures as it thinks fit”. It is therefore apparent that the
              measures  to  be  adopted  by  SEBI  in  carrying   out   its
              obligations  are  couched  in  open-ended  terms  having   no
              prearranged limits. In other words, the extent of the  nature
              and the manner of measures which can be adopted by  SEBI  for
              giving effect to the functions assigned  to  SEBI  have  been
              left to the discretion and wisdom of SEBI. It is necessary to
              record here that the aforesaid power to adopt “such  measures
              as it thinks fit” to promote investors’ interest, to  promote
              the development of the securities market and to regulate  the
              securities market, has not been curtailed or whittled down in
              any manner by any other provisions under the SEBI Act, as  no
              provision has been given overriding effect  over  sub-section
              (1) of Section 11 of the SEBI Act.”




           In sub-paras 303.2, 303.3 and 303.4, the powers  of  SEBI  under
      Section 11(2), 11(3) and 11(4)  have  been  analysed  and  elaborately
      explained.


      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.
      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
           the  said  Act,  otherwise  such  recommendation  will  have  no
           existence in the eye of the law.”



            In our opinion, these observations are relevant as the procedure
      prescribed for the appointment of Chairman, SEBI  is  similar  to  the
      procedure which was prescribed  for  the  selection  on  the  post  of
      Central Vigilance Commissioner. This apart,  it  has  been  emphasised
      that CVC is an integrity institution. The reasons  for  the  aforesaid
      view are stated in paragraph 39, it has been observed as follows :-
              “39. These provisions indicate that the office of the Central
              Vigilance Commissioner is not  only  given  independence  and
              insulation from external influences, it also  indicates  that
              such protections are given in order to enable the institution
              of the CVC to work  in  a  free  and  fair  environment.  The
              prescribed form of  oath  under  Section  5(3)  requires  the
              Central Vigilance Commissioner to uphold the sovereignty  and
              integrity of the country and to perform  his  duties  without
              fear or favour. All these provisions indicate that the CVC is
              an integrity institution. The HPC  has,  therefore,  to  take
              into consideration the values, independence and  impartiality
              of the  institution.  The  said  Committee  has  to  consider
              institutional competence. It has to take an informed decision
              keeping in mind the abovementioned vital aspects indicated by
              the purpose and policy of the 2003 Act.”


      32.   Elaborating further, Kapadia, C.J., has further observed :
           “43.  Appointment  to  the  post  of   the   Central   Vigilance
           Commissioner must satisfy not only the eligibility  criteria  of
           the candidate  but  also  the  decision-making  process  of  the
           recommendation...”


      33.   In paragraph 44,  it  was  clarified  that  “we  should  not  be
      understood to  mean  that  personal  integrity  is  not  relevant.  It
      certainly has a co-relationship with institutional integrity.”
      34.   Keeping in view the aforesaid observations and the ratio of  the
      law laid down, let us  now  examine  the  issue  with  regard  to  the
      validity of the recommendation made for the appointment of  Mr.  Sinha
      together with the issue as to whether Mr. Sinha does  not  fulfil  the
      statutory requirement  to  be  appointed  as  the  Chairman  of  SEBI.




      DEPUTATION : Was it  irregular,  illegal  or  vitiated  by  colourable
                        exercise of power?




      35.  It is a matter of record that respondent No.4 was  on  deputation
      with UTI AMC since the year 2005. His deputation was duly approved  by
      the Ministry of Finance, 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,  as  an  interim  measure.  This,  according  to  the
      petitioner  himself,  was  because  some   general   issue   regarding
      deputation under Rule 6(2)(ii) of  IAS (Cadre) Rules, 1954  was  being
      examined. Therefore, we are unable to accept  the  submission  of  Mr.
      Bhushan that respondent No.4 was in any manner responsible  for  being
      sent on deputation initially  under  Rule  6(2)(ii)  and  subsequently
      under Rule 6(2)(i). The “Final Consolidated Deputation Guidelines  for
      All India Service” issued              on 28th  November,  2007  would
      also indicate that respondent No.4  cannot  be  said  to  be,  in  any
      manner, responsible for being sent on deputation under Rule  6(2)(ii).
      Nor can it be said that any individual officer aided Mr. U.K. Sinha to
      gain any unfair advantage.  Therefore, it  cannot  be  said  that  his
      deputation under Rule 6(2)(ii) was approved in colourable exercise  of
      power.


      “False Declaration in Form L”

      36.   A perusal of Office Memorandum dated 1st May, 2008 sent  by  the
      Department of Economic Affairs in reference  to  the  letter  sent  by
      DoP&T seeking comments of DEA under Rule 26(3) of All  India  Services
      (Death-cum-Retirement Benefits) Rules, 1958 would show that  necessary
      facts relating to the service of respondent  No.4  in  the  six  years
      prior to the response dated 1st May, 2008 had been faithfully set out.
       The Memorandum records the following facts:-
           “Shri U.K. Sinha had been working as  Joint  Secretary  (Capital
           Markets) in DEA from 2nd  June,  2002  to  29th  October,  2005.
           Before joining DEA (Main) he had been  Joint  Secretary  in  the
           erstwhile Banking Division (presently  Department  of  Financial
           Services) from 30th October, 2000 to 1st June, 2002.

            • With the approval of the competent authority, he has been  on
              deputation to Unit Trust of India  Asset  Management  Company
              (UTI AMC) as its CMD since 3rd November, 2005, and  his  term
              there expires on 31st May, 2008. Going by his experience  and
              qualifications, the name of Shri Sinha had  been  unanimously
              shortlisted by the Chairmen of the sponsors of UTI AMC [State
              Bank of India (SBI),  Life  Insurance  Corporation  of  India
              (LIC), Bank of Baroda (BoB) and Punjab National Bank  (PNB)].
              The Government has approved his deputation  to  UTI  AMC,  in
              public interest.
            • UTI AMC is a company formed by SBI, PNB, BoB  and  LIC,  each
              having equal shareholding. It is registered  with  Securities
              and  Exchange  Board  of  India  (SEBI)  and  is  engaged  in
              activities pertaining to mutual 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 of interest between  the  Government  of
              India and the UTIAMC.
            • UTIAMC, formed by SBI, PNB, BoB and LIC, is neither  involved
              in  activities  prejudicial  to  India's  foreign  relations,
              national security and domestic harmony nor is undertaking any
              form of intelligence gathering prejudicial to India.
            • In the prevailing financial markets condition, the fixed  pay
              of Rs. 1 crore per  annum,  along  with  performance  related
              payouts and other usual perks,  offered  by  UTIAMC  to  Shri
              Sinha is considered reasonable.
            • As per the information available in DEA, the  service  record
              of Shri U.K. Sinha is clear,  particularly  with  respect  in
              integrity and dealings with NG0s.
           3. Department of personnel &, Training is accordingly  requested
           kindly to grant requisite permission to Shri U.K.  Sinha,  under
           intimation to this Department.

           4. This issues with the approval of Hon'ble Finance Minister.

                                                                (S.K. Verma)

                                       Director to the Government of India…”


      37.   Keeping in view the aforesaid, we are  not  satisfied  that  the
      petitioner has made any false declaration in 'Form L', Clause  9  read
      with Rule 26(3) of All India Services (Death-cum-Retirement  Benefits)
      Rules, 1958, while working in his previous job as Chairman,  UTI  AMC.
      Mr. Bhushan has pointed out the following mis-statements and  opinions
      :-

           i. In Serial-5, pay scale for the post of  Addl.  Secretary  was
              mentioned although respondent No.4 was drawing the higher pay
              scale approved by UTI AMC.
          ii. In Serial 9, the 2nd declaration was false as respondent No.4
              was working as CEO cum CMD of UTI AMC during the last 3 years
              on deputation and therefore he  was  privy  to  sensitive  or
              strategic information relating to areas of interest  or  work
              of UTI AMC.
         iii. A mis-statement had been made that generally such  posts  are
              not advertised and that was against the JPC Recommendation.


      38.   In our opinion, the respondents have rightly  pointed  out  that
      respondent No.4 was on deputation in UTI AMC when he  filled  up  Form
      `L'. At that time, he held lien on the post of  Additional  Secretary,
      Government of India. His application for voluntary retirement had been
      processed.  He was, however, required to obtain approval under Rule 26
      for  commercial  employment-post  retirement.  Sr.No.5  of  Form   `L'
      requires the person seeking approval to state the  pay  scale  of  the
      post and  pay  drawn  by  the  Officer  at  the  time  of  retirement.
      Undoubtedly, respondent No.4 was drawing 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.[5]
           “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.[6], it has been held as under:-
              “24. A learned Single Judge of the  Allahabad  High  Court  in
             M.P. Tewari v. Union of India following the dictum laid down in
             the above Paresh Chandra case and distinguishing  the  decision
             of this Court in P.L. Dhingra v. Union of  India  has  observed
             that “a person can be said to acquire a lien  on  a  post  only
             when he has been confirmed and made permanent on that post  and
             not earlier”, with which view we are in agreement.”




      40.   In response to Column No.7 of the same Form, respondent No.4 has
      quite clearly mentioned that he has been offered a fixed  pay  of  Rs.
      1.00 crore per annum alongwith performance related payment  and  other
      usual perks. The letter containing the offer  was  enclosed  with  the
      Form. The letter clearly states that the Board of Directors, UTI  AMC,
      after going through the prevailing practice in the Industry, has fixed
      a compensation  of  Rs.1.00  crore  per  annum  alongwith  performance
      related perks and other usual prerequisites. The shareholders  of  the
      UTI  AMC  have  also  indicated  their  concurrence   to   the   above
      compensation. It must be  noticed  that  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.


      41.   The next submission of Mr. Bhushan is that Mr. Sinha had wrongly
      stated in reply to Sr. No. 9(ii) in Form `L' that he was not privy  to
      any sensitive or strategic information in  the  last  three  years  of
      service. This submission of the petitioner is based only on assumption
      and cannot be accepted without  any  supporting  material.  Respondent
      No.4 in his capacity as  a  Joint  Secretary/Additional  Secretary  to
      Government of India was required to state whether he was privy to  any
      sensitive information in his official capacity. The information  would
      be 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 impressed by the submission  on  behalf  of
      the petitioner that the deputation was in violation of policy  of  not
      allowing deputation to an Officer who has over-seen  the  Organization
      to which he was being deputed. As noticed earlier, respondent No.4 had
      no role to play in the grant of approval of deputation, once he  fully
      disclosed that he had been working as Joint Secretary Banking. He  had
      no further role to play. It is a too farfetched submission that whilst
      respondent No.4 worked as Joint Secretary Banking that he can be  said
      to have over-seen the Organization of  UTI  AMC.  The  petitioner  had
      unnecessarily and without any basis tried to confuse  that  respondent
      No.4 would be disqualified for deputation in UTI AMC as he would  have
      been privy to receiving some sensitive information with regard to  its
      functioning. As noticed earlier, Rule 36 of All India  Service  (DCRB)
      Rules envisages that an Officer on deputation to an  Organization  can
      be  absorbed  in  the  same  Organization  after   seeking   voluntary
      retirement.
      43.   We may also notice here that even the petitioner has not pleaded
      that UTI AMC is a Government owned Company under Section  617  of  the
      Companies Act. Mr. Bhushan tried to establish that it is a  Government
      controlled company as the shares are all held by instrumentalities  of
      the State. In our view, UTI AMC can not be said  to  be  a  Government
      company. It was for this very reason that respondent No.4 had to  make
      a request for VRS to seek re-employment in a Commercial  Organization.
      We are also not much impressed by the objection of the petitioner that
      the deputation of respondent No.4 was contrary to  the  recommendation
      of JPC. Subsequent to the recommendation of JPC,  the  Parliament  had
      passed UTI (Transfer of Undertaking and Repeal) Act,  2002  which  was
      gazetted on 17th December,  2002  and  came  into  force  w.e.f.  29th
      October, 2002. Under the Act, UTI was bifurcated into  SUUTI  and  UTI
      Mutual Fund, managed by UTI AMC. The  Central  Government  transferred
      its entire share holding in UTI AMC  to  Life  Insurance  Corporation,
      Punjab National Bank, Bank of Baroda and SBI. The entire consideration
      for the aforesaid transfer was received  by  the  Central  Government.
      Therefore, it becomes quite evident that UTI AMC is not a  “Government
      Company” under Section 617 of the  Companies  Act.  In  the  affidavit
      filed, this has  been  the  consistent  stand  taken  by  the  Central
      Government and  the  CAG  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 correctly stated the  pay  scale  of
      the post at the time of seeking voluntary  retirement.  We  have  also
      earlier held that respondent No.4 cannot be said to have been privy to
      any sensitive information relating to areas of interest of work of UTI
      AMC whilst he was holding the post of  Joint  Secretary.  In  fact  in
      reply to Column No. C of Form `L' i.e. “Whether the Officer had during
      the last three years of his official  career,  any  dealing  with  the
      Firm/Company/Cooperative Society etc?”  Respondent  No.4  had  clearly
      stated that in his capacity as Joint Secretary in  the  Department  of
      Economic Affairs, Capital Market of his Division, he was also inducted
      as a Director on the Board of  UTI  AMC.  In  the  meanwhile,  he  was
      appointed as MDMCU and CMD w.e.f. 3rd November, 2005 and 13th January,
      2006, respectively by the Board of Directors of UTI AMC.


      45.   The next grievance of the petitioner is that respondent No.4 had
      made a mis-statement  in  Column  No.7F  of  Form  `L'  whilst  giving
      information as to whether the post which has been offered to  him  was
      advertised, if not, how was offer made?  In  reply  to  the  aforesaid
      question against,  respondent  No.4  categorically  stated  that  such
      higher-level posts are generally not advertised. Keeping in  mind  the
      contribution  made  by  him  and  the  needs  of  the   Company,   the
      shareholders  had  made  the  offer  to  him.  Alongwith  this  reply,
      respondent No.4 had attached copy of the letter dated 3rd April, 2008.
      We have already noticed that UTI AMC is a company  incorporated  under
      the Companies Act. As such all the decisions are made by the Board  of
      Directors. The shareholders are Life Insurance Corporation,  PNB,  BOP
      and SBI. We have earlier noticed that respondent No.4 was initially on
      deputation with UTI AMC since 2005. In 2008, he was offered  the  post
      of CMD on contractual basis. Consequently, according  to  the  service
      rules, he sought his  voluntary  retirement  from  the  parent  cadre,
      Bihar. This was duly processed by the State of Bihar and  approved  by
      the Central Government. UTI AMC is  managed  on  a  commercial  basis.
      Therefore, in a commercial company as a part of good governance, it is
      the responsibility of the Board to ensure succession planning  at  the
      top. As a normal practice, nominations are made by the Board and share-
      holders, either directly or through a search  firm  and  the  post  is
      rarely advertised. In any event, it would be the decision to be  taken
      by the 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  such
      posts.


      47.   We also do not find much substance  in  the  submission  of  Mr.
      Bhushan that in order to  facilitate  the  appointment  of  respondent
      No.4,  the  recommendations  of  the  JPC  that  the  post  should  be
      advertised, was deliberately concealed.  A perusal of  paragraph  21.9
      of the recommendations dated 12th December, 2002 would show  that  the
      Government had stated  that  a  professional  Chairman  and  Board  of
      Trustees would manage UTI II. It was also  stated  that  advertisement
      for the appointment  of  professional  Manager  will  be  issued.  The
      Committee  also  recommended  that  it  should  be  ensured  that  the
      selection of the Chairman and Professional Managers of UTI  should  be
      done in a transparent manner whether  they  are  picked  up  from  the
      public or private Sectors. It was  further  pointed  out  that  if  an
      official  from  the  public  sector  is  selected,  in  no  case   the
      deputation from the parent organization  be  allowed  and  the  person
      chosen should be asked to severe all  connections  with  the  previous
      employer. This, according to the Government,  was  imperative  because
      under no circumstances should there be any public perception that  the
      mutual fund scheme of     UTI-II  are  subject  to  guarantee  by  the
      Government and would be bailed out in case of losses. In the affidavit
      filed by UOI, the entire service history of respondent No.4  has  been
      set out from the time he joined  erstwhile  banking  division  of  the
      Department of Economic Affairs (DEA) as Joint  Secretary  w.e.f.  30th
      October, 2000. Thereafter, he was posted as DEA (Main)  on  2nd  June,
      2002; he was assigned the charge of CM Division and  was  relieved  by
      DEA on 28th October, 2005 on completion of his Central Deputation.  At
      that time a proposal was received in DEA from Chairman, SBI on  behalf
      of the shareholders  of  UTI  AMC  regarding  initial  appointment  of
      respondent No.4 as CEO, UTI AMC for a period of two  years.  This  was
      forwarded by the DEA to  the  Department  of  Personnel  and  Training
      (DOPT) with the approval of the then Finance Minister. The  deputation
      of respondent No.4 was considered under Rule 6(2)(ii)  which  provides
      for deputation of a cadre Officer under an international organization,
      an autonomous body not controlled by the Government or a private body.
      The aforesaid deputation can be made only  in  consultation  with  the
      State Government on whose cadre the Officer is borne. We  had  earlier
      noticed that due procedure was followed when 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,  the  information  was  duly  communicated  to   UTI.
      Furthermore, DEA by its letter dated 19th  July,  2007  had  requested
      DOPT for extension of deputation of respondent No.4 as CMD of UTI  AMC
      for a further period of two years beyond 2nd November, 2007 under Rule
      6(2)(ii) of the IAS Cadre Rule 1954 on the same terms and  conditions.
      However, the deputation was extended only for a period of three months
      beyond  2nd November, 2007,  as  an  interim  measure
      till the issue of deputation of IAS Officer under Rule 6(2)(ii) of IAS
      Cadre Rules 1954 was finalized. Therefore, the deputation was extended
      upto 2nd February, 2008. Thereafter the matter was again taken  up  by
      the DEA, DOPT for consideration of the case of respondent  No.4  under
      Rule 6(1) of the IAS Cadre Rules under which an Officer may be deputed
      to service under the Central Government or under State  Government  or
      under  a  Company,   Organization,   Body   of   Individuals   whether
      incorporated or not, which is wholly substantially owned or controlled
      by the Central Government or by any other State Government. Therefore,
      ultimately, according to the consolidated guidelines,  the  deputation
      of respondent No.4 was covered under Rule 6(1)(i)  of  the  IAS  Cadre
      Rules.


      48.   There is not much substance in the submission that just for  the
      sake of accommodating respondent No.4, the recommendations of the  JPC
      were concealed from the Government. This submission is  fallacious  on
      the face of it as the recommendations of the JPC  were  placed  before
      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. We  may  notice  here
      that the Appointment Committee of 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/non-disclosure
      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 the petitioner.  The law in relation to  the  standard
      of proof required in  establishing  a  plea  of  mala  fide  has  been
      repeatedly stated and restated by this Court. Mr. Salve had relied  on
      the three judgments of this Court  viz.,  Purushottam  Kumar  Jha  Vs.
      State of Jharkhand & Ors.,[7]  Indian Railway  Construction  Co.  Ltd.
      Vs. Ajay Kumar,[8]  and Saradamani  Kandappan  Vs.  S.  Rajalakshmi  &
      Ors.[9]  The law concerning the aforesaid issue  is  so  well  settled
      that it was  hardly  necessary  to  make  any  reference  to  previous
      precedent. We may, however, notice the observations made by this Court
      in the aforesaid three cases. In Purushottam Kumar Jha’s case (supra),
      this court held that :

           “23. It is well settled that whenever  allegations  as  to  mala
           fides have been  levelled,  sufficient  particulars  and  cogent
           materials making out prima facie case must be  set  out  in  the
           pleadings. Vague allegation or bald assertion  that  the  action
           taken was mala fide and malicious is not enough. In the  absence
           of material particulars, the  court  is  not  expected  to  make
           “fishing”  inquiry  into  the  matter.  It   is   equally   well
           established and needs no authority that the  burden  of  proving
           mala fides is on the person  making  the  allegations  and  such
           burden is “very heavy”. Malice cannot be inferred or assumed. It
           has to be remembered that such a charge can easily be “made than
           made out” and hence it is necessary for the courts to examine it
           with extreme care,  caution  and  circumspection.  It  has  been
           rightly described as “the last refuge  of  a  losing  litigant”.
           (Vide Gulam Mustafa v. State of Maharashtra; Ajit Kumar  Nag  v.
           GM (PJ), Indian Oil Corpn. Ltd.)”




      51.    In Indian Railway Construction Co. Ltd. Vs. Ajay Kumar (supra),
      this court reiterated the law laid down in S. Partap Singh  Vs.  State
      of Punjab and E.P. Royappa Vs. State of T.N. on the standard of  proof
      required to establish the plea of mala fide in the following words:-

           “It cannot be overlooked that the burden  of  establishing  mala
           fides  is  very  heavy  on  the  person  who  alleges  it.   The
           allegations of mala  fides  are  often  more  easily  made  than
           proved, and the very seriousness  of  such  allegations  demands
           proof of a high order of credibility. As noted by this Court  in
           E.P. Royappa v. State of T.N.  courts  would  be  slow  to  draw
           dubious inferences from incomplete facts placed before it  by  a
           party, particularly when 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  General  pointed
      out that in 2009 when the name of   Mr. Bhave was being considered for
      an extension, serious controversies came to be unearthed  with  regard
      to the entire NSDL issue relating to the IPO  scam  during  which  Mr.
      Bhave was the CMD of NSDL. A two member “Special Committee” consisting
      of Dr. G. Mohan Gopal and Mr. V. Leeladhar that was appointed by  SEBI
      to look into the matter passed three orders. In one of  these  orders,
      there was a serious indictment of NSDL. The media reports published in
      connection with this controversy adversely commented upon the role  of
      Mr. Bhave as CMD of NSDL. Even Mr. J.S. Verma, former CJI, had  voiced
      his concern about possible shielding of Mr.  Bhave  by  SEBI.  Dr.  G.
      Mohan  Gopal  wrote  a  letter  dated  8th  April,  2009,  wherein  he
      criticized the action  of  SEBI  on  the  role  played  by  Mr  Bhave.
      According to Mr. Parasaran, the then Finance Minister perused some  of
      the relevant documents cited above before  making  the  note  on  22nd
      December, 2009, that led to denial of extension to Mr. Bhave. In these
      circumstances, the noting made by the Finance  Minister  that  led  to
      denial  of  extension  to  Mr.  Bhave  cannot   ever   be   considered
      unreasonable, let alone mala fide. Thus, we are inclined to accept the
      submission of Mr. Parasaran that there is no mala  fides  involved  in
      denying an extension of Mr. Bhave.


      55.   The learned Attorney General, in our  opinion,  rightly  pointed
      out that no illegality was committed in making the  amendment  in  the
      rules pertaining to the selection of Chairman/WTM of SEBI. It is borne
      out from the record that prior to 23rd July, 2009, there was  no  rule
      on the procedure to be followed in  the  selection  of  Chairman/whole
      time Member of SEBI. The selection procedure for the Chairman of  SEBI
      in 2008 was approved by the Finance Minister on  2nd  November,  2007.
      This procedure envisaged that the selection has  to  be  made  on  the
      recommendation of the high powered Search Committee.  The  composition
      of the Search Committee was changed  on  the  orders  of  the  Finance
      Minister. The learned Attorney  General  also  pointed  out  that  the
      amendment of the rules  had  no  relevance  to  the  consideration  of
      recommendation of Mr. Sinha to be appointed as Chairman of  the  SEBI.
      The Attorney General had also pointed out that in spite of the  change
      in the Selection Committee and in spite of Mr. Sinha having been short-
      listed at No.1 by the Search-cum-Section Committee 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. In view of the record produced in this  court,  we
      are of  the  opinion  that  the  submission  made  on  behalf  of  the
      petitioner is not correct. Learned Attorney General submitted that the
      Search-cum-Selection Committee, after scrutinizing  the  qualification
      and experience  of  the  short-listed  candidates  unanimously  placed
      respondent No.4 first in the merit list.  We  have  also  perused  the
      record and it appears that respondent No.4 was unanimously  placed  at
      Sr.No.1 by the Search-cum-Selection Committee.  It  has  wrongly  been
      submitted on behalf of the petitioner that respondent No.4 was  placed
      at No.2 and yet he was appointed ignoring the person who was placed at
      No.1.
      56.   Mr. Salve has  made  very  detailed  submissions  on  behalf  of
      respondent No.4. Giving us the entire sequence of how the  rules  were
      amended. Mr. Salve has rightly pointed out  that  the  petitioner  has
      falsely contended that rules concerning the constitution of Search-cum-
      Selection Committee amended through notification  dated  7th  October,
      2010 were to ensure the selection of Mr. Sinha. The  applications  for
      filling up the post of SEBI Chairman were invited on  10th  September,
      2010. It is noteworthy that Mr. Sinha did not apply in response to the
      invitation. Further more, the rules were amended in  exercise  of  the
      powers conferred on the Finance Minister under Section 29 of the  SEBI
      Act. The aforesaid notification issued by the Finance Ministry has not
      been challenged by the petitioner. We also notice here that  prior  to
      the amendment, the procedure  for  selection  of  Chairman,  SEBI  was
      determined by the Finance Minister. Having perused the entire  record,
      we are not satisfied that the petitioner has made out a case  of  mala
      fide to vitiate the proceedings of the Search-cum-Selection Committee.
      The first meeting of the Search-cum-Selection Committee  was  held  on
      2nd November, 2010.  Upon  deliberations,  the  Committee  decided  to
      invite Mr. Sinha alongwith five others. We may notice here  that  Shri
      Suman Bery did not attend the meeting. The suitability  of  respondent
      No.4 had to be determined by the  Search-cum-Selection  Committee.  We
      are unable to discern any illegality in the procedure adopted  by  the
      Search-cum-Selection  Committee.  We  also  find  substance   in   the
      submission of   Mr. Salve that the petitioner has made much a do about
      the non-mention of the pay scale of the  petitioner  in  the  Performa
      sent to the ACC which was enclosed 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 Search-cum-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-
      Selection Committee also decided to invite Mr. Sinha CMD, UTI AMC  for
      interaction.  The  Search-cum-Selection   Committee   based   on   the
      qualification, experience and  personal  interaction  with  the  short
      listed candidates, recommended the names of  Mr. U.K.  Sinha  and  Mr.
      Himadri Bhattacharya in that order of merit, for being considered  for
      appointment as Chairman SEBI. The letter  further  mentions  that  the
      Finance Minister  proposed  the  appointment  of  Mr.  U.K.  Sinha  as
      Chairman, SEBI, for an initial period of three years from the date  he
      resumes the charge or till he attain the age of 65 years, whichever is
      earlier. It is noted that willingness of Mr. Sinha has  been  obtained
      and was enclosed with the letter. On this basis, it was requested that
      approval of the ACC be obtained for the appointment of  Mr.  Sinha  as
      Chairman, SEBI. The letter also notes that  the  prescribed  Performa,
      duly filled in, is also enclosed. We fail to  see  what  role      Mr.
      Sinha had to play in the whole  procedure  except  for  accepting  the
      invitation of the Search-cum-Selection Committee for interaction. Even
      if the pay scale has not been mentioned, it cannot cast  a  shadow  on
      the integrity of the  proceedings  held  by  the  Search-cum-Selection
      Committee. It is also to be noticed that the proposal was sent to  the
      ACC on the express approval  of  the  then  Finance  Minister.  It  is
      noteworthy that the then Finance Minister was Mr. Pranab Mukherjee. He
      is renowned for his transparency in the performance  of  his  official
      functions. He is at present the President of India.


      58.   Mr. Salve, in our opinion, has also rightly submitted that 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  opinion,  the
      acceptance by Mr. Sinha of lesser salary as Chairman  of  SEBI  cannot
      ipso facto lead to the conclusion that he accepted  the  position  for
      the purpose of abusing the authority of Chairman, SEBI.  Adverting  to
      the allegation of non-disclosure of ESOP, in our  opinion,  Mr.  Salve
      has rightly submitted that it was not done to avoid any  investigation
      by the ACC into the question as to why respondent No.4 would  wish  to
      join Chairman, SEBI when he was  drawing  much  higher  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 Committee of the Board and the Board,  the
      decision by the Board was taken                      on 27th December,
      2007. The minutes of the meeting of the Board dated 12th  April,  2008
      clearly shows that the stock option was exercised by  respondent  No.4
      in accordance with due procedure. However, even  though  the  decision
      had been taken by the Board of Directors on 17th  September,  2007  to
      grant respondent  No.4  market  based  compensation,  the  matter  was
      pending with the share holders. It was only on 12th April,  2008  that
      the Board took a decision to release the market based compensation  to
      respondent No.4. The actual allocation of ESOP was made to  respondent
      No.4 on 17th May, 2008 through the letter of head of HR  Committee  of
      the Board. In fact in 2011 after respondent No.4  got  appointment  in
      SEBI and had to leave UTI AMC on 31st January,  2011,  he  surrendered
      his entire ESOP and rescinded all his rights to exercise his option in
      future. We, therefore, find no substance  in  the  submission  of  the
      petitioner that  there  was  any  ulterior  motive  involved  in  non-
      disclosure of the information with regard to ESOP to the ACC.


      59. This brings us to the issue whether there was a conspiracy hatched
      to ensure the selection of respondent  No.4  as  Chairman,  SEBI.  The
      petitioner stated that the conspiracy  involved  taking  seven  steps,
      namely:-
              i. Mr.Sinha would seek voluntary retirement from IAS.

             ii. SBI Chairman would move to make a fresh offer.

            iii. Mr.Sinha would seek approval for post retirement commercial
                 employment.

             iv. Ministry of Finance would recommend commercial employment.

              v. DOPT would approve the same and waive the waiting period.

             vi. All concerned persons in the decision making process  would
                 designate  the  employment  with  UTI  AMC  as   commercial
                 employment.

            vii. File would not be sent to the PMO/ACC  for  information  or
                 approval.


      60.   We  have  already  considered  all  the  points  raised  by  the
      petitioner in the earlier part of the judgment. Therefore, it  is  not
      necessary to repeat the same.  This, apart, the charge  of  conspiracy
      has to be taken seriously  as  it  involves  the  commission  of  very
      serious criminal offence under Section 120-B of the IPC. Such a charge
      of  criminal  intent  and  conduct  had  to  be  clearly  pleaded  and
      established by evidence of very high degree  of  probative  value.  No
      notice  of  such  allegations  can  be  taken  based  only   on   pure
      conjectures,  speculations  and  interpretation  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.   The submissions made by the learned  Attorney  General  and  Mr.
      Salve have also been supported by learned Solicitor General  appearing
      on behalf of respondent No.6. Mr.  Prasaran  submitted  that  baseless
      allegations have been made against respondent No.6.  She  was  neither
      the recommending authority nor the appointing authority for  the  post
      of SEBI. She was appointed as Advisor to the Finance Minister on  26th
      June, 2009. Mr. Prasaran, in our opinion, has rightly made a grievance
      that all the actions taken by respondent No.6 in the execution of  her
      duty have been deliberately  warped  and  distorted  to  unnecessarily
      involve her in the trumped up controversy. Her  role  as  Advisor  was
      limited  to  advising/assisting  the  Finance  Minister  on  the  work
      assigned to her. The nature of work was, therefore, different from the
      role of a functionary who performed an assigned line of functions. She
      could have neither recommended respondent  No.4  for  appointment  nor
      negated any recommendation. By making  a  detailed  reference  to  the
      official record, Mr. Prasaran has pointed out that the Chairman,  SEBI
      is appointed by the Central Government  by  following  an  established
      process by the ACC headed by the Prime Minister. This is done  on  the
      basis of Search-cum-Selection Committee of the  Government  of  India.
      The opinion of other independent and reputed experts in the  field  of
      Economics,  Finance  and  Management  is   also   taken   through   an
      institutional mechanism approved by  the  DOPT.  We  are  inclined  to
      accept the submission  of  the  learned  Solicitor  General  that  the
      allegations made against respondent No.6 are imaginary and based on  a
      distorted interpretation of the official notes appended with the  writ
      petition. With regard to the non-extension  of  Mr.  C.B.  Bhave,  the
      learned Solicitor General  relied  upon  the  averments  made  in  the
      counter affidavit filed by the UOI in Writ Petition  No.391  of  2011.
      The aforesaid affidavit has been  attached  as  Annexure  R-4  to  the
      counter affidavit  filed  by  respondent  No.6  in  the  present  writ
      petition. In the aforesaid affidavit, it has been set out  that  prior
      to           July, 2009; selections were  made  by  the  Committee  as
      decided by the Finance Minister from time to time. As noticed earlier,
      the name of Dr. S.A. Dave, Chairman,  CMIE  was  added  as  an  expert
      member of the high powered  Selection  Committee  constituted  by  the
      Finance Minister for the selection of Chairman, SEBI in 2008. 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 composition that includes
      Secretary, Finance  Services,  who  functionally  deals  with  special
      critical aspects of the capital market. Thus, with the addition of the
      Secretary Finance Services, the number of nominees in the  Search-cum-
      Selection Committee became five. Unlike in the past,  the  composition
      of the Selection Committee was sent to the DOPT for approval. However,
      on 23rd September, 2010, DOPT pointed  out  as  noticed  earlier  that
      inclusion of Secretary Finance  Services  was  not  within  the  rules
      amended on 23rd July, 2009 which led to the amendment of the rules. To
      rectify this shortcoming, the amendment of the rules became necessary.
      It was within the  powers  of  the  Central  Government  to  make  the
      aforesaid amendment, which was carried  out  in  accordance  with  the
      rules. It is, therefore, difficult to accept  the  submission  of  the
      petitioner that the amendment in the rules was made to ensure the non-
      extension of Mr. C.B. Bhave as Chairman, SEBI. In fact, Mr. Bhave  was
      not granted the extension for the reasons which  have  been  given  in
      detail by Mr. Prasaran  in  his  submission,  the  same  need  not  be
      reiterated. We are also unable to take the  allegations  made  by  Dr.
      Abraham seriously, as the same seem to be actuated by ulterior motive.
      It is a direct attack on the integrity of respondent No.4. The opinion
      expressed by Dr. Abraham, in his lengthy letter, cannot be given  much
      credence unless it is supported by very convincing  material.  We  are
      also not much impressed by the submission  of  Mr.  Bhushan  that  the
      constitution of the Search-cum-Selection Committee was changed at  the
      instance of respondent No.6. As narrated by the Solicitor General, the
      ultimate selection was made by a  Selection  Committee  consisting  of
      Members who were all serving Officers in the Government. Therefore, it
      is difficult to accept the submission that 3 out  of  5  members  were
      hand-picked by respondent No.6 to select Mr. Sinha.
We are also unable
      to see any merit in the submission of the petitioner that the post  of
      CMD, UTI AMC was kept vacant for 17 months to accommodate the  brother
      of respondent No.6. In our opinion, the allegations are malicious  and
      without any basis, and therefore, cannot be taken into consideration.


      63.   This now brings us to 
the preliminary objections raised  by  the
      respondents that the writ petition deserves to  be  dismissed  on  the
      ground that  it  is  not  a  bona  fide  petition.  
According  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 respondents have successfully  demonstrated
      how the petitioner  has  cleverly  distorted  and  misinterpreted  the
      official documents on virtually each and every issue. 
In our  opinion,
      the petition does not satisfy the test of utmost good faith  which  is
      required to maintain public interest litigation.  
We  have  been  left
      with the very un savoury impression that the petitioner is a  surrogate
      for  some  powerful  phantom  lobbies.  Respondent  No.2-SEBI  in  its
      affidavit has stated that the petitioner is a  habitual  litigant.  
He
      files writ petitions against individuals to  promote  vested  interest
      without any relief to the public  at  large.  
We  are  at  a  loss  to
      understand as to how in the facts of this  case,  the  petitioner  can
      justify invoking the jurisdiction of  this  court  under  Article  32.
      This is not a petition to protect the Fundamental Rights of any  class
      of down trodden or deprived section of the population.  It is more for
      the protection of the vested interests of some  unidentified  business
      lobbies.  
The petitioner had earlier  filed  writ  petition  in  which
      identical relief had been claimed and the same had been dismissed. The
      aforesaid  writ  petition  is  sought  to  be  distinguished  by   the
      petitioner on the ground that three  successive  writ  petitions  were
      withdrawn as sufficient pleadings were  not  made  for  the  grant  of
      necessary relief.  Even if this preliminary objection is  disregarded,
      we are satisfied that the present petition is filed at the  behest  of
      certain interested powerful  lobbies.  The  allegations  made  in  the
      letter written by Dr.  Abraham  are  without  any  basis  and  clearly
      motivated. 
Further, a perusal  of  the  record  clearly  reveals  that
      several complaints  were  filed  against  Dr.  Abraham,  wherein  some
      serious allegations have been made against  him  in  relation  to  his
      tenure as the Whole Time Member (WTM), SEBI. Also, it was  only  after
      the Ministry of Finance decided not to extend his tenure as WTM,  SEBI
      and advertisements for new appointments were issued that  Dr.  Abraham
      started complaining about interference of the Ministry of  Finance  in
      SEBI through the present Chairman. 
We may also notice  here  that  the
      letter dated 1st June, 2011  written  by  Dr.  Abraham  to  the  Prime
      Minister, that the Petitioner seeks reliance upon, was written  merely
      a month and a half before Dr. Abrham’s tenure was  to  end.  
From  the
      above, it is manifest that the  letter  written  by  Dr.  Abraham  was
      clearly motivated and espouses no public interest. The affidavit  also
      narrates the  action  which  has  been  taken  by  SEBI  against  very
      influential  and  powerful  business  Houses,  including  Sahara   and
      Reliance. It is pointed out that the  petitioner  is  a  stool  pigeon
      acting on the directions of these Business Houses. 
We  are  unable  to
      easily discard the reasoning put forward by respondent No.4. It  is  a
      well known fact that in recent times, SEBI has been active in pursuing
      a number of cause celebre against some very powerful Business  Houses.
      
Therefore, the anxiety of these Business Houses for the removal of the
      present Chairman of SEBI is  not  wholly  unimaginable.  We  make  the
      aforesaid observations only to put on record that the present petition
      could have been  dismissed  as  not  maintainable  for  a  variety  of
      reasons. 
However, we have  chosen  to  examine  the  entire  issue  to
      satisfy our judicial conscience that the appointment to  such  a  High
      Powered Position has actually been made fairly and in accordance  with
      the procedure established by law.
      64.    We  find  no  merit  in  this  petition  which  is  accordingly
      dismissed.


                                              ……………………………J.
                                                 [Surinder   Singh
      Nijjar]






                                              ……………………………J.
                                                 [Pinaki   Chandra
      Ghose]
      New Delhi;
      November 01, 2013.
-----------------------
[1]    (2011) 4  SCC 1

[2]    (2011) 7 SCC 639
[3]    (2008) 12 SCC 481
[4]    2013 (1) SCC 1.

[5]    (2009) 4 SCC 700
[6]    1992 Supp. (1) SCC 524
[7]    (2006) 9 SCC 458
[8]    (2003) 4 SCC 579
[9]    (2011) 12 SCC 18


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