Issuu on Google+

eBook - SEBI, UK Sinha, Omita Paul In a major decision, the Supreme Court of India on September 26, 2012 issued notice to the Central government asking it to file their response to a plea that alleged irregularities in the appointment of SEBI chairman UK Sinha. According to a news report, "The bench also impleaded the President's Secretary Omita Paul, who was the advisor of the then finance minister when the decision to appoint Sinha as SEBI chairman was taken by the government." Paul was impleaded after the petitioner of the PIL Arun Agrawal alleged that she had bent rules to facilitate Sinha's appointment as SEBI chairman. Canary Trap has been reporting on the entire issue since May 2011. This ebook is a compilation of all the articles written by petitioner Arun Agrawal and published on our blog. The PIL filed in the Supreme Court of India starts from page 39 of this book.

Š Canary Trap Download other eBooks

2G Spectrum Scam Real story behind Gen (Retd) VK Singh's age row Was former CJI KG Balakrishnan corrupt?


Table of Contents 1. Complaint against Omita Paul in a letter addressed to the PM (May 30, 2011) 2. Omita Paul, SEBI, and RIL’s 2000 crore stock market scam. Details of the complaint to the Chief Vigilance Commissioner against Omita Paul, UK Sinha and Reliance Industries (September 11, 2011) 3. UTI AMC, Jitesh Khosla, and Omita Paul. Its a complaint letter to the PM (November 10, 2011) 4. How U K Sinha became SEBI Chairman? (November 24, 2011) 5. Pranab Mukherjee, Omita Paul and corruption in Finance Ministry (July 17, 2012) 6. Copy of PIL filed in the Supreme Court challenging the appointment of SEBI chairman UK Sinha (September 26, 2012)


Complaint against Mrs Omita Paul

26/09/12 4:56 PM

Complaint against Mrs Omita Paul Date: 30/5/2011 The Honorable Prime Minister of India, Government of India, South Block, New Delhi Complaint against Mrs Omita Paul, Advisor to the Finance Minister with the rank of Secretary. Dear Hon’ble Prime Minister, Mrs Omita Paul’s proximity to the present Finance Minister is too well known to the members of the Appointment Committee of the Cabinet, as she has been appointed in the rank of Secretary as Advisor to the Finance Minister, Defence Minister and Foreign Minister at various times in the government coinciding with the tenure of Shri Pranab Mukerjee in the three ministries mentioned above. She was also appointed as Information Commissioner in the CIC on 9/5/10 after the model code came into being under which these appointments were to be kept in abeyance. Though the then Chief Election Commissioner Naveen Chawla, whose appointment to the post had been disputed by the Opposition for his proximity to the Congress, subsequently gave a clean chit to the appointment, a retired High Court Judge Justice Quereshi in his legal opinion on the subject matter thought otherwise. That she was appointed without there being a panel of other candidate being made available for the post, that the three existing vacancies had not been filled up earlier, and that she was the only person appointed led to the reasonable conclusion that she was accommodated in a fixed tenure post for five years in case the UPA lost the elections. The concern shown for Mrs Paul in appointing her to the post of Information Commissioner as an insurance against UPA losing the election was indeed touching. That http://canarytrap.in/2011/06/03/complaint-against-mrs-omita-paul/

Page 1 of 7


Complaint against Mrs Omita Paul

26/09/12 4:56 PM

the then leader of the opposition Shri Advani could find time to meet barely one week before the election day with other members of the appointment authority (which includes the Prime Minister) to clear the appointment unanimously shows the importance attached to the appointment of Mrs Omitta Paul. The suspicion that the appointment of Mrs Paul to the post of Information Commissioner was an insurance against the electoral defeat of the UPA was confirmed when the UPA came back to power and she was reappointed as advisor to the Finance Minister on 26/6/09 on the very day that she resigned as Information Commissioner. Such prompt resignation and appointment being made by the Appointment Committee of the Cabinet is truly unprecedented in the history of such appointments. What is worse is that her resignation was not accepted and the note relating to recommending her resignation did the rounds of various ministries till November when it was agreed by the powers that be that the resignation came into effect on the date it was submitted and need not be accepted. However, the fact was not known at the time of her appointment as Advisor to the Finance Ministry and the same yardstick was not applied to the reported resignation of the then Chief Information Commissioner who went on to complete his term. If the appointment of Mrs Paul as Information Commissioner, her subsequent resignation and her reappointment as Adviser with the rank of Secretary on the very day of her resigning as Information Commissioner tells its own tale then the manner in which a exemption in the Income Tax Act was given to benefit her husband (and 13 to 15 other persons incidentally) was not only unprecedented but a blatant act of nepotism. In the budget that followed her appointment as Adviser the following exemption was granted to members of the UPSC. Under section 10 (45) of the Income Tax Act. (45) any allowance or perquisite, as may be notified by the Central Government in the Official Gazette in this behalf, paid to the Chairman or a retired Chairman or any other member or retired member of the Union Public Service Commission; The exemption was granted in 2011 for the financial year 2007-2008. Mr KK Paul, the husband of Mrs Omita Paul was appointed a member of the UPSC http://canarytrap.in/2011/06/03/complaint-against-mrs-omita-paul/

Page 2 of 7


Complaint against Mrs Omita Paul

26/09/12 4:56 PM

on 26/7/2007 and would be eligible for the exemption for the entire period of his tenure which he would not have been, had the exemption not been made with retrospective effect. In that case he would have availed the exemption for only three months. The same exemption was not granted to the members of the Election Commission or the Information Commission. It is being alleged that Mrs Paul misused her office to influence the grant to her husband this largesse. If in the process, fifteen other individuals (members of UPSC) benefited, it was because the budget could not grant benefit to only the husband of Mrs Paul. The concession being made retrospective is a complete giveaway so that the entire period of tenure of Mr Paul could be covered. It was definitely a new low in the falling standards of public morality and corruption. The consequence of similar acts of nepotism would have been disastrous in any other mature democracy with either the adviser or the Minister (or both) made to resign. As this act of nepotism was neither noticed nor acted upon by the government, it emboldened the concerned officer in another act of nepotism, this time to promote the interest of her brother. This time at stake was the chairmanship of UTI asset management company, managing Rs 67,000 crores of public fund. According to Financial Express dated 9/4/11: While Khosla was rejected after interviews by the search committee on the grounds that other candidates had solid experience in the financial services business, the ministry has repeatedly pushed his candidature. Khosla is the brother of Omita Paul, adviser to finance minister Pranab Mukherjee. Incidentally, Paul has worked with Mukherjee not only in the finance ministry but also in his earlier stints at the defence and external affairs ministries. The government is intent on appointing Mrs Paul’s brother despite objections from the foreign shareholder having a 26 per cent stake in UTI AMC and the recommendation of the search committee. What is of concern is not the fact that the Advisor, Mrs Paul, is indulging in nepotism as the potential of damage to the nation is limited, but the fact that she is also interfering in the appointment and functioning of functioning of the regulator Securities and Exchange Board of India (SEBI). She has no background of finance and no experience http://canarytrap.in/2011/06/03/complaint-against-mrs-omita-paul/

Page 3 of 7


Complaint against Mrs Omita Paul

26/09/12 4:56 PM

and would never have made it to the level of Secretary in the Finance Ministry if there were any objective norms set for her appointment. Her role has become that of an intermediary on behalf of the lobbyist who have crores at stake like the Saharas, MCX and Reliance against whom the regulator was taking action. Her interference in the affairs of SEBI has been making news in the media for the wrong reasons. The fact is that what is appearing in media is only the tip of the iceberg. Her role in the ouster of competent and honest persons has portends of a major disaster for the capital market and the economy of the country. The country cannot afford the luxury of another major stock market scam or a downturn in the stock market due to loss of confidence by investors, both domestic and foreign, on regulatory issues due to the interference of Mrs Paul. It appears that the decision makers have not learnt anything from the debacle of the wall street on account of lax regulators susceptible to corporate lobbying. Details of press reports are as follows: Mrs Paul interference in the appointment of SEBI chairman was reported in The Indian Express of 23/4/10, the headline is produced below and the article as Annexure A. “After FM cleared Bhave extension, advisor stepped in to roll it back” When stock market regulator C B Bhave stepped down as Securities and Exchange Board of India chairman on February 17 this year, it was seen as a routine event, the end of his three-year term. Behind the scenes, however, the chain of events was anything but routine. Records available with The Indian Express reveal that more than a year before his term was to end, Bhave was cleared for another two years by Finance Minister Pranab Mukherjee. This, after Mukherkee asked for — and got a positive recommendation from then Finance Secretary Ashok Chawla — on his performance. Sources said a section in the Finance Ministry had concerns regarding Bhave’s earlier http://canarytrap.in/2011/06/03/complaint-against-mrs-omita-paul/

Page 4 of 7


Complaint against Mrs Omita Paul

26/09/12 4:56 PM

stint with National Securities Depository Ltd (NSDL) and his very public spat with Multi-Commodity Exchange of India Ltd (MCX), an electronic exchange that offers trading services in commodities. But after the Finance Ministry formally wrote to Bhave seeking his consent, Bhave sent a letter to Chawla saying he was willing to accept a two-year extension. Until the intervention of Omita Paul, Advisor to Finance Minister. It was her note suggesting that no action was needed so early, records show, which was the tipping point: Mukherjee put on hold the process for eight months. The Finance Ministry called back the proposal on tenure extension sent to the Appointment Committee of the Cabinet in January 2010.…. When contacted, Paul said she would not like to comment. Another article on Mrs Paul interference appearing in Times of India dated 25/4/11 written by P Vaidyanathan is reproduced below. Both Handled Sensitive Issues This signals a dismantling of the team built during Bhaves tenure, said two persons with direct knowledge of the matter. Both Sinha and Bhave declined comment. Ajay Shah, professor at the National Institute of Public Finance and Policy and a former consultant to the finance ministry, said the performance of Sebi in the last couple of years was the best in its history. “It would be a tragedy if a top quality team like this is dispersed, “he said. Two other securities market professionals said the quality of fact-finding and orders issued by the regulator had improved considerably during the last couple of years. In its edition dated August 23,2010, Economic Times had reported that Bhave was unlikely to see his term extended beyond three years. On February 17 this year, we revealed the behind-the scene manoeuvring behind the decision, the crucial element of which was the decision by North Block, in early 2010,to withdraw a recommendation to give Bhave a five-year term. The decision on this was to have been taken by the cabinet committee on appointments, a group of senior ministers, including the prime minister. But in January 2010,the finance ministry called back the proposal. This ,according to media reports, was prompted by a note from Omita Paul, an advisor to the finance minister. In that note, Paul is reported to have suggested that there was no need to decide on Bhave’s tenure more than a year before it expired. Abrahttp://canarytrap.in/2011/06/03/complaint-against-mrs-omita-paul/

Page 5 of 7


Complaint against Mrs Omita Paul

26/09/12 4:56 PM

ham, who is from the Indian Administrative Services, Is an MTech from IIT-Kanpur and a chartered financial analyst. He holds a PhD from the University of Michigan. He was earlier the finance secretary of Kerala. Sahoo, who is originally from the Indian Economic Services, quit when he was a director in the finance ministry to take up the assignment in Sebi. Abraham handled sensitive issues such as the investigation into the case relating to the alleged violation of portfolio investment rules by ADAG; the proposal of MCX-SX to offer a trading platform in equity and derivatives, and several other cases of insider trading. The allegations against ADAG were settled through a process known as consent order ,in which the entity being investigated pays a fee but does not admit or deny guilt. ADAG entities paid Rs 50 crore,a record amount, for the settlement. The MCX proposal to set up a new stock exchange has virtually been rejected by Sebi. Sahoo is currently hearing arguments relating to the charges of insider trading raised against RIL.Both Abraham and Sahoo declined to comment. The government has approved changes to the rules relating to the terms and conditions of appointment of the Sebi chairman and members, including a five-year term, but is yet to notify these changes. From acts of nepotism having marginal impact on the economy of the country, Mrs Paul has progressed into interfering in the affairs of capital market regulator for the benefit of companies with dubious background. This will have a major impact on investment decision of the discerning investor and the economy of the country. It is requested that her appointment as Advisor in three different ministries with the rank of Secretary (she would have remained as a joint secretary in her parent cadre), her appointment as Information Commissioner, her resignation as Information Commissioner and re-appointment on the same day, her acts of nepotism in favouring her brother for appointment to a key post and her husband with income tax exemption and interference in the affairs of SEBI be investigated. It is also requested that Mrs Paul be restrained from interfering with the appointments and functioning of SEBI, formally or informally, till it is established that she has not indulged in acts of nepotism or has not been influenced by cash rich powerful companies in interfering with the appointment to and functioning of SEBI. With sincere regards Arun Kumar Agrawal http://canarytrap.in/2011/06/03/complaint-against-mrs-omita-paul/

Page 6 of 7


Complaint against Mrs Omita Paul

26/09/12 4:56 PM

PS: The government has deliberately not given a clean chit to the co-Chairman of the Drafting Committee of the Jan Lokpal Bill. One hopes that the Chairman of the Drafting Committee too is subjected to similar scrutiny on his role in the appointment of his advisor Mrs Omita Paul, exemption to Mr Paul in the budget and other acts of his Advisor. (Arun Agrawal is the author of the book Reliance: The Real Natwar. The opinions expressed by the author and those providing comments are theirs alone, and do not reflect the opinions of Canary Trap or any employee thereof)

http://canarytrap.in/2011/06/03/complaint-against-mrs-omita-paul/

Page 7 of 7


Omita Paul, SEBI, and RIL’s 2000 crore stock market scam

26/09/12 4:57 PM

Omita Paul, SEBI, and RIL’s 2000 crore stock market scam Reports in the media recently has pointed towards a battle in the country’s financial regulator, Securities and Exchange Board of India (SEBI). K M Abraham, a whole time member of SEBI wrote to the Prime Minister’s Office and leveled serious allegations against Finance Minister Pranab Mukherjee, his advisor Omita Paul and the regulator’s chairman U K Sinha. Abraham, in a letter on June 1, has alleged that “the finance minister and his advisor pressurized the SEBI chairman to manage some high-profile corporate cases,” the Indian Express reported. Now, a complaint filed with the Central Vigilance Commissioner (CVC) on September 10, 2011 confirms Abraham’s allegations. The complaint is filed against Smt Omita Paul, Special Adviser & Secretary, Ministry of Finance; (2) Sri U K Sinha, Chairman, Securities and Exchange Board of India (SEBI); and (3) Sri Mukesh D. Ambani, Chairman & Managing Director, Reliance Industries Ltd. The complainant has alleged that all of them are engaged in a crime in progress to deprive the exchequer of Rs 2000 crores. The complainant had earlier complained (CVC ref no: 416/09/02) about the 2G scam showing how Anil Ambani had transferred Swan Telecom as a bribe on the day he was given the GSM license in Reliance Communication. The complaint has been annexed in the pending PIL petition before the Hon’ble Supreme Court. According to the complainant, “the complaint relates to the mala fide manipulation of appointments to the Securities and Exchange Board of India (SEBI) to the demonstrable benefit of Reliance Industries Ltd (Sri Mukesh Ambani) by over Rs. 2000 crores in the pending Fraudulent and Unfair Trading case before SEBI in which the company is liable to pay a penalty of up to Rs. 1539 crores along with the disgorgement of profit of Rs. 513 crores..”

http://canarytrap.in/2011/09/11/omita-paul-sebi-and-rils-2000-crore-stock-market-scam/

Page 1 of 11


Omita Paul, SEBI, and RIL’s 2000 crore stock market scam

26/09/12 4:57 PM

EXCERPTS FROM THE COMPLAINT LETTER (Reproduced with permission of the complainant) The facts of the scam/fraud: The following facts relate to violation under Fraudulent and Unfair Trade Practices Regulations, relating to RIL and its subsidiary, In November 2007, the company secured an illegal gain of Rs. 513 crores. Under the law, RIL was liable for a penalty of three times the gain — that is, Rs. 1539 crores – and the disgorgement of its profit of Rs 513 crores, taking the total amount to Rs. 2056 crores. Factoring in interest, this amount would increase by another Rs. 200 -500 crores. More importantly, the violation could also entail criminal prosecution under IPC punishable with seven years imprisonment as unsuspecting g investors had been defrauded/cheated of Rs. 513 crores. A clean (or, more accurately, dirty) profit of Rs. 513 crores earned unlawfully in five days by shorting the market on the basis of information not available to investors is most impressive, even by the standards set by Reliance. It bears noting here that Rs. 7.85 crores shares were sold for Rs. 210 were the very same shares allotted for Rs. 10 a year back and that they earned a 20-fold profit (approximately Rs. 1400 crores) to the promoters of RIL in less than a year. In addition, it is relevant to note that RIL had the guts to indulge in this fraudulent practice in 2007, when SEBI had been around for 15 years, speaks volumes of their complete confidence in the support of the present political dispensation which, incidentally, is almost identical to that of 1983 when Fiasco and Crocodile Investment were used as benami foreign fronts by Reliance to bring in money through Channel Islands. RIL’s confidence is justified: At that time, a leading English newspaper had screamed “Pranab Mukerjee: Minister of Finance or Reliance?” This time around, there has been pin drop silence. The details of the fraudulent trade: In the show cause notice to RIL, SEBI had stated that that between Nov 1-5, 2007, some 12 entities acting on behalf of Reliance Industries had created short position of around Rs. 7.65 crore shares at Rs. 290 per share. The market watchdog had then gone on to state that the 12 entities had sold the Rehttp://canarytrap.in/2011/09/11/omita-paul-sebi-and-rils-2000-crore-stock-market-scam/

Page 2 of 11


Omita Paul, SEBI, and RIL’s 2000 crore stock market scam

26/09/12 4:57 PM

liance Petroleum shares heavily in the cash market, amounting to 4.01 percent of the company’s equity, and depressed the price to around Rs. 210. “By artificially depressing the price in the cash market and thereby lowering the settlement price of the futures on expiry, Reliance Industries gained on its short positions in the derivatives market,” the SEBI notice had said. It had added: “The whole manipulative operation was arranged by Reliance Industries and it was aided by the 12 related entities. Reliance Industries earned Rs. 513 crore by indulging in these manipulative activities.” As all with even an elementary knowledge of the capital market in India know only too well, this manipulative and fraudulent transaction was the standard operating procedure for the company in the badla days of the eighties. A group of promoter companies would take short-positions in Reliance Petroleum in the futures market with the prior knowledge that the promoters would sell large quantity of shares in the cash market. In short, they knew the market price would fall when Reliance Petro shares were sold, and that they would be able to make money with this prior knowledge by selling in the futures market. This practice, repeated at regular intervals, was and is in egregious violation of the Prohibition of Fraudulent and Unfair Trade Practices Act. The matter came into the limelight when it was raised in the Parliament and with SEBI in August 2008 by none other than Sri Amar Singh. Unfortunately for RIL, by then the new SEBI chief, Sri C B Bhave, a no-nonsense officer, had taken over. He had immediately ordered an investigation which had resulted in the finding of the Rs. 513 crores in illegal profit and the issuance of a a show cause notice to the company in May, 2009. The company had been charged under Prevention of Fraudulent and Unfair Trade Practices Regulations Section 15HA of SEBI Act which states: 15HA – Penalty for fraudulent and unfair trade practices: If any person indulges in fraudulent and unfair trade practices relating to securities, he shall be liable to a penalty of twenty-five crore rupees or three times the amount of profits made out of such practices, whichever is higher.. The penalty would be three times the profit, that is Rs. 1539 crores. As the fraud was http://canarytrap.in/2011/09/11/omita-paul-sebi-and-rils-2000-crore-stock-market-scam/

Page 3 of 11


Omita Paul, SEBI, and RIL’s 2000 crore stock market scam

26/09/12 4:57 PM

committed knowingly by a company having the largest market capitalization, the penalty should have been the maximum under the law. This was more so to instill the confidence of the Foreign Institutional Investors that the Regulator does not surrender before corporates enjoying politic patronage but has the will to discipline the largest and the most influential company listed on the market. There was hardly any scope for leniency, given the nature of the crime. Faced with the daunting prospect of losing Rs. 2056 crores and inability to influence the honest and competent officers at SEBI, a long term conspiracy was hatched between RIL and the Finance Ministry. The strategy was simple and time tested. Reliance would delay the matter at SEBI for two years during which years certain key officers in SEBI, would complete their tenure – the chairman, whole time directors and three executive directors. The Finance Ministry, on its part, would ensure that the officers were not given an extension. A pliant and obliging SEBI chief would be installed and the case against RIL would be compromised for a token amount. Smt. Omita Paul whose only qualification (MSC chemistry, M Phil social science and BA Journalism, retired from Indian Information service) ) to the high office of Adviser with the rank of Secretary, is her proximity to the Finance Minister, was the point person in the Finance Ministry. She was to ensure that Bhave would not get an extension, and would be replaced by a pliant and friendly successor. Other senior officers like Dr Abraham and Mr Sahoo (whole time members) who had performed commendably and would not agree to the compromise too would not be given an extension. As a first step towards the objective of removing the key officers, Smt Omita Paul refused to put up the file for the approval of the Cabinet for extension of tenure of Bhave by two years by stating that it was premature, even after it had been approved earlier by the Finance Minister after obtaining the consent of Mr Bhave for the extension. Similar consent of the two whole time members of the Board including Dr Abraham had been obtained. Incidentally the decision to call back the file was contemporaneous with the thorough investigation/ inquiry done by SEBI into the illegal trading in RIL shares resulting in an illegal profit of Rs. 513 crores. http://canarytrap.in/2011/09/11/omita-paul-sebi-and-rils-2000-crore-stock-market-scam/

Page 4 of 11


Omita Paul, SEBI, and RIL’s 2000 crore stock market scam

26/09/12 4:57 PM

Subsequently, Smt Omita Paul changed the composition of the selection panel for the selection of SEBI Chairman by introducing more members from the Finance Ministry to ensure that Sri C B Bhave was not appointed and that her candidate, the amiable and obliging Sri U K Sinha was selected. A headline in The Indian Express edition of 23/4/10, is produced below: After FM cleared Bhave extension, advisor stepped in to roll it back: Records available with The Indian Express reveal that more than a year before his term was to end, Sri Bhave had been cleared for an extension in office of another two years by the Finance Minister, Sri Pranab Mukherjee. This, after he had asked for — and obtained — a positive recommendation from then Finance Secretary, Sri Ashok Chawla, on Sri Bhave’s performance. But after the Finance Ministry formally wrote to Bhave seeking his consent, Sri Bhave sent a letter to Sri Chawla, affirming that he was willing to accept a two-year extension. Things were proceeding smoothly — until Smt Omita Paul did what she had been mandated to do by the Finance Minister. It was her note suggesting that no action was needed so early, records show, which was the tipping point. Sri Pranab Mukherjee lost no time in putting on hold the process for eight months. The Finance Ministry called back the proposal on tenure extension sent to the Appointment Committee of the Cabinet in January 2010.…. When contacted, Smt Paul said she would not like to comment.. Presumably, she did not want to comment about the ouster of Sri Bhave and her role in the appointment of her protégé U K Sinha as also in ensuring that Dr Abraham too did not get an extension/reappointment. Dr Abraham too had to agree to any consent order (explained in detail below) to be passed in the case against RIL. The active involvement of Omita Paul in preventing the then SEBI chief from getting an extension is proof of her involvement in the conspiracy. RIL, on its part, had to merely drag its feet to help Smt Omita Paul to oust two key officers who would not compromise their integrity in handing an order to RIL.

http://canarytrap.in/2011/09/11/omita-paul-sebi-and-rils-2000-crore-stock-market-scam/

Page 5 of 11


Omita Paul, SEBI, and RIL’s 2000 crore stock market scam

26/09/12 4:57 PM

Consent Order: Consent order is a parachute to bail out large corporates from financial crimes. While an ordinary man, if caught in a fraud of ten thousand rupees will be jailed, the super rich, for a stock market fraud of Rs. 500 crores, can buy his way out by a device borrowed from the west known as consent terms. It is an agreement between the offender (RIL) and the regulator (SEBI) by which the company does not admit to the guilt but agrees to pay a certain amount and SEBI in turn agrees not to prosecute the offender or pronounce him guilty, if the mutually agreed amount is paid. It is the price paid by the company for not admitting the guilt and also not being prosecuted under criminal law! Consent order is resorted to only when the evidence is weak and there is a doubt that the case may not stand in a Court of law. However, when the case is backed by foolproof evidence (though in law nothing is foolproof) there is no question of the Authority agreeing to consent terms .Full penalty is levied. RIL fell in this category. RIL is the largest company of the country by market capitalization (Coal India overtook it recently). Though a good part lot of the promoters’ wealth has been earned on the Stock market, (the legal Rs. 1400 crores and the illegal Rs. 500 crores mentioned above is an example) they cannot afford the stigma of being caught on a violation of Insider Trading/ Prevention of Fraudulent and Unfair Trade Practices Regulations. The financial consequences would be grave and immediate. It would lead to their being automatically blacklisted the world over by fund managers and their capacity to raise capital would be diminished. It is the accused party that has to apply for consent orders and to initiate proceedings for such an order, a lengthy process. However, in the case of RIL, it is the company that decides the law that would apply to it and the amount it would pay to hush things up through a consent order. There is no question of finding the company guilty. If officers like Sri Bhave and Dr Abraham insisted on coming in the way of Reliance, then Smt Omita Paul, her boss, or other dubious individuals in government would steamroller them aside. While Mrs Paul was taking care of the non-renewal of Sri Bhave’s term , RIL was doing its little bit to prolong the decision-making beyond Sri Bhave’s term by filing for a consent order and by offering to pay Rs. 2 crores in November, 2009, http://canarytrap.in/2011/09/11/omita-paul-sebi-and-rils-2000-crore-stock-market-scam/

Page 6 of 11


Omita Paul, SEBI, and RIL’s 2000 crore stock market scam

26/09/12 4:57 PM

knowing fully well that it would be rejected but the process would consume time. When that was predictably rejected, Reliance file another application for a consent order in August, 2010, this time it for a princely sum of Rs. 8 crores or 400% more than the previous offer but 0.5% of the Rs. 2056 crores. These two ridiculously low offers of Rs 2 crores and Rs. 8 crores (as against a total amount of Rs. 2056 crores gain through fraud of Rs. 513 crores, plus penalty of Rs.1539 crores) are in themselves proof that a deal had been struck between RIL and Omita Paul After she had replaced the existing Chairman, the new Chairman would ensure that the penalty does not exceed Rs. 50 crores. It was for this reason alone that RIL offered the meager amount so that it could negotiate from a low base of Rs. 8 crores. It would make perfect business sense to spend Rs. 50 crores in consent order, Rs. 100 crores in bribes/donations (or much less), and pocket Rs. 1900 crores. That way RIl would be able to pocket Rs. 350 of the illegal/ fraud money! These offers too had to be rejected, again involving a drawn-out process which would give Smt Omita Paul time to oust Sri Bhave through behind- the-scenes manipulations and to install her very civil servant, Sri Sinha. With Sri Sinha duly installed in office, it was expected that things would move smoothly. Reliance would come back with another settlement for a consent order at Rs. 15 crores and the matter would be closed at Rs. 50 or even Rs. 100 crores. RIL would save about Rs. 1900 crores — and ensure that it would be immune from prosecution on that particular transaction for all time. Predictably enough, another consent order was filed after Sri Sinha planted himself in the SEBI chairman’s office in May 2011. The amount offered is not known. As anticipated, the obliging Sri Sinha, made it his highest priority to deliver the RIL consent order. After all, the company (and the Finance Minister) had waited long enough. In his letter to the Finance Ministry in response to the accusation of Dr Abraham that Sri U K Sinha had tried to influence him on various vital cases, he wrote with remarkable sagacity and somewhat less clarity:

http://canarytrap.in/2011/09/11/omita-paul-sebi-and-rils-2000-crore-stock-market-scam/

Page 7 of 11


Omita Paul, SEBI, and RIL’s 2000 crore stock market scam

26/09/12 4:57 PM

Consent is another area where there is prevailing perception that it is subjective, provides escape route to offenders and quality of orders is not high and is not transparent.. While I have publicly defended the decision of consent proceedings which are legal and as per law and is practiced in many advance jurisdictions, I do feel that there is need to bring in uniformity and consistency. All these efforts on my part may not have gone well with everybody in the organization but by and large the officers have appreciated my commitment and drive to improve the system in SEBI. I advised the executives to have more clarity on when consent orders can be passed, how to improve the quality of orders, how to improve the drafting and to provide training to the officers so that the quality of their orders can improve. I presume that these are efforts to improve systems and procedures within SEBI and are my legitimate responsibility and cannot be counted as interfering or influencing the investigation or the quasi – judicial responsibilities of a delegated authority. Before my joining, SEBI had passed consent orders in January 2011 against Reliance ADAG entity imposing settlement charges and restraint. It was in this background that when briefs were put up regarding Reliance Industries Ltd, I discussed the background of how and in what manner the settlement amount was arrived at in the ADAG case and whether any consent petition has been filed in RIL case or not. Except for the brief that came to me through Dr Abraham, I have not seen any file, passed any orders or given any directions to any employee. The matter is still with the WTM and to the best of my knowledge no decision has been taken so far. The plain truth is that Sri Sinha has not written a single order in his life on regulatory issues. Though he may have concerns as SEBI chief, he simply does not have proven expertise in drafting or passing quality orders. On the other hand, there are a large number of articles available in the public domain in which orders passed by SEBI during the tenure of Sri Bhave have been hailed as well reasoned and quality orders. If Sri Sinha was so concerned about transparency as he purports to be, he should have ordered that all consent orders along with the charges and the investigative report be posted on the internet. Further if he believes that consent orders provided an escape route to the offender, it was his bounden duty to pass orders that no consent order would be passed in cases where there was sufficient evidence against the offender. This would be upholding public policy. Consent orders are resorted to only where there is insuffihttp://canarytrap.in/2011/09/11/omita-paul-sebi-and-rils-2000-crore-stock-market-scam/

Page 8 of 11


Omita Paul, SEBI, and RIL’s 2000 crore stock market scam

26/09/12 4:57 PM

cient evidence. It is also not true that consent terms are offered to offenders in advance jurisdiction and Sinha may not have heard of Michael Milken, Ivan Boesky, Martha Steward and our own Rajirathanam. He may really not have heard of them or he may be faking ignorance. All of them would have agreed to a consent order! The very fact that he clubbed ADAG consent order with that of RIL pending application (in the letter mentioned above) shows his anxiety to deliver on the deal between RIL and Smt Omita Paul. Dr Abraham was a whole time member and not a subordinate of Sri Sinha. Could the Chief Justice have similar discussions with his brother judges? The fact of the matter is that, in the consent order relating to ADAG, no profit was made and yet it was made to pay Rs. 25 crores in each of the two companies that diverted the funds to the capital market! RIL, on the other hand, had made illegal profits Rs. 513 crores and SEBI should not have provided the “escape route to the offender” and should have been fined it Rs. 1539 crores along with interest. In fact, the two paragraphs quoted above from the correspondence of Sri Sinha to the Finance Ministry show that his overwhelming concern was that liberal consent terms be offered to RIL — and not that an ‘escape route’ to the offender should be denied. It was logical for Mr Sinha to try and get Dr Abraham to clear the consent terms before he demitted office and not by a successor chosen by him/his mentor (Smt Omita Paul), so that the stink of the scam would not affect him or his mentor in the Finance Ministry later on! The importance of this complaint lies in the fact that it has been filed even as a crime is in progress. Unlike most complaints, it has been filed before the crime has been completed and injury done. If acted upon, injury can be prevented. If ignored, injury will result. Thus, it is important that immediate action is taken against the erring conspirators to prevent the impending loss of Rs. 2000 crores to the exchequer. In case the consent terms are agreed to there will be absolutely no future possibility of recovering the loss to the exchequer. The protagonist will claim that the decision was taken by common consensus by various officers as has been the case in the various scams in the http://canarytrap.in/2011/09/11/omita-paul-sebi-and-rils-2000-crore-stock-market-scam/

Page 9 of 11


Omita Paul, SEBI, and RIL’s 2000 crore stock market scam

26/09/12 4:57 PM

public domain. It is essential that the following preventive steps are taken to avert the loss: The investigative report and the show cause notice be put in public domain so that there is no doubt that the Rs. 513 crores of illegal profit was due to fraudulent and unfair trade practice and that the case is on a sound footing. SEBI is prevented from entering into consent term with RIL. Policy decision taken that consent terms will not be entertained in cases where there is strong evidence to prove the violation of law. In fact that is the public policy. Penalty of three times the profit is levied. It must be remembered the company made a profit of Rs. 1400 crores on sale of shares in addition to the Rs. 513 crores of illegal profit. SEBI should ensure that the disgorged amount of Rs. 513 crores is distributed to investors who were defrauded. Action be taken against the persons in conspiracy to displace officers of integrity in order to make the deal with RIL possible. The complainant has also alleged that the SEBI Chairman deliberately leaked his response to the Finance Ministry on Dr Abraham’s letter. The letter states: “The Chairman also ensured the exit of three Executive Directors while it is SEBI Board which decides on the appointment and extension of tenure of EDs. The minutes of the Board meeting show that no decision was taken by the Board but it was decided by the Chairman to issue fresh advertisements and that the existing members would have to apply afresh. It is learnt that the Board was deliberately misled by the Chairman. It was not surprising that three of the Executive Directors who had performed admirably chose not to apply and serve under Sri Sinha. By this clever manipulation, three experienced and competent senior officers who are men of high caliber and who worked for SEBI on a salary cut have been lost to the cause of public service as they were denied the job satisfaction of serving under an honest dispensation. http://canarytrap.in/2011/09/11/omita-paul-sebi-and-rils-2000-crore-stock-market-scam/

Page 10 of 11


Omita Paul, SEBI, and RIL’s 2000 crore stock market scam

26/09/12 4:57 PM

Competent and honest people are rare and are not to be insulted by making them reapply for a post along with others – at least, not by an honest government.” The letter concludes by requesting the CVC to prevent the scam.

http://canarytrap.in/2011/09/11/omita-paul-sebi-and-rils-2000-crore-stock-market-scam/

Page 11 of 11


UTI AMC, Jitesh Khosla, and Omita Paul

26/09/12 4:58 PM

UTI AMC, Jitesh Khosla, and Omita Paul 10/11/2011 The 
Hon’ble Prime Minister of India, Govt of India, South Block, New Delhi Act of Nepotism: Proposed Irregular and Illegal Appointment of Omita Paul’s brother as Chairman of UTI MF at over Rs 3 crore per annum salary. Kindly refer to my complaints dated 30/5/2011 and 12/9/2011. One of the issues mentioned in the complaint dated 30/5/11 related to the acts of nepotism of Ms Omita Paul, Adviser to the Finance Minister and Secretary in the Minister of Finance. Ms Omita Paul’s husband was favoured by an unprecedented amendment in the IT Act. The following exemption granted in the year 2011 was notified for being applied retrospectively from the year 2007-08 to cover the entire tenure of Mr Paul in the UPSC Section 10 (45) of the Income Tax Act stated: (45) any allowance or perquisite, as may be notified by the Central Government in the Official Gazette in this behalf, paid to the Chairman or a retired Chairman or any other member or retired member of the Union Public Service Commission. The other issue in the complaint on nepotism, related to the strenuous efforts being made by the Finance Ministry to ensure that the brother of Omita Paul, Jitesh Khosla, an IAS officer, be appointed as the Chairman of the UTI Asset Management Company.

http://canarytrap.in/2011/11/10/uti-amc-jitesh-khosla-and-omita-paul/

Page 1 of 4


UTI AMC, Jitesh Khosla, and Omita Paul

26/09/12 4:58 PM

What was not mentioned in the complaint was the fact that the emolument of Chairman of UTI AMC is over three crore per annum (information is not in public domain). This is more than 15 times than what the three highest constitutional authorities of the country get. How the emoluments came to be over three crores is another story but suffice to mention that it was on account of clever and illegal manipulation by the erstwhile incumbent, U K Sinha, who was promoted to the post of SEBI chairman in a bizarre intervention by the same Mrs Paul, which is the subject matter of another complaint to be filed shortly. The fact is that not many know that the emoluments on offer is over three crores per annum and it will come as a surprise to the bureaucrats who may happen to read this complaint. For the record, Sinha earned over 10 crores in his four year stay at UTI MF. (Please refer to the balance sheet of the fund for the respective years) The proposed appointment is a blatant act of nepotism and illegal for the following reasons: Violates Article 14 of the Constitution. Violates Article 16 of the Constitution. The appointment is in gross violation of the crucial policy laid down by the government and endorsed by the JPC which went into the securities fraud of 2002. The last para of the report states: 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 recommend 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 organisation 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. The contents of the paragraph show that a specific commitment was made by the http://canarytrap.in/2011/11/10/uti-amc-jitesh-khosla-and-omita-paul/

Page 2 of 4


UTI AMC, Jitesh Khosla, and Omita Paul

26/09/12 4:58 PM

government and the same was endorsed by the JPC. The final recommendation was a key recommendation in the context of preventing future scams. The accepted policy is being violated on three counts: Mr Khosla is not a professional of the investment industry. In fact he is not even an amateur given his degree and zero experience of investment banking. The post was not advertised Mr Khosla does not propose to sever his connection with his previous employer but to join on deputation. Other IAS officers and professionals in the field of investment too should have been allowed to compete for the highest salary on offer by an institution controlled by the government through three public sector banks and LIC. The obscene and undeserved salary approved through dubious and illegal means (the chairman of the Banks and LIC and the heads of the AMC of the mutual funds promoted by them get emoluments much less than 50 lakh per annum) should not be the monopoly of the brother of the secretary of the Finance Minister, whose appointment in turn as special advisor in itself is questionable, on account of the personal recommendation of the concerned minister. It needs to be mentioned that Mr Khosla was not even on the shortlist of the selection committee. The post of the chairman has been vacant since last ten months so that he alone may be selected for the post. During the period UTI has not been able to float any new scheme of mutual fund due to a SEBI rule that the AMC should have a permanent head. One wonders as to what is the limit of manipulating salaries, of nepotism and of the arrogance of power. How many scams will it take for the corrupt to fear the law? In this context, it may not be surprising that the honest hierarchy of officers at SEBI were removed to make way for the controversial Sinha so that Khosla could be appointed on emoluments over three crores! I sincerely hope that the appointment will be halted by timely intervention so that it does not become a source of embarrassment to the government. http://canarytrap.in/2011/11/10/uti-amc-jitesh-khosla-and-omita-paul/

Page 3 of 4


UTI AMC, Jitesh Khosla, and Omita Paul

26/09/12 4:58 PM

For the record the corpus with UTI AMC is around Rs 55,000 crores. With sincere regards Arun Kumar Agrawal (Arun Agrawal is the author of the book Reliance: The Real Natwar. The opinions expressed by the author and those providing comments are theirs alone, and do not reflect the opinions of Canary Trap)

http://canarytrap.in/2011/11/10/uti-amc-jitesh-khosla-and-omita-paul/

Page 4 of 4


How U K Sinha became SEBI Chairman?

26/09/12 4:59 PM

How U K Sinha became SEBI Chairman?

BY ARUN AGRAWAL One has to admire this former IAS officer for increasing his annual emoluments from Rs 6 lakh per annum to Rs 2.01 crore per annum (a rise of thirty three times) in less than a year and then to Rs 4 crore. He earned around Rs 10.5 crore in four years as head of UTI Asset Management Company (UTI AMC), while the chief justice of the country earned less than Rs 50 lakh during the same period. And then became the chairman of SEBI. First the story in brief Sinha was a joint secretary in the Finance Ministry. He was appointed to the post of Chairman of UTI AMC in violation of government policy and JPC recommendations. He joined the company on deputation for two years, resigned when the government refused to extend his deputation, then used his position in the company to extend his appointment and give himself a salary hike with retrospective effect to include the period under which he was under deputation as a government servant. After making over Rs 10 crore he was appointed to the post of SEBI chairman. This is a story of how those who have usurped power through questionable means combined to further their cause, irrespective of the colossal damage they do to the institutions. What is tragic is that the lessons of the two securities scams which resulted in setting up of JPC have not been learnt. Just when SEBI was gaining credibility due to its series of orders holding the powerful corporates accountable, it was decided to hand over the chairmanship of SEBI to Sinha. Details on Sinha

http://canarytrap.in/2011/11/24/how-u-k-sinha-became-sebi-chairman/

Page 1 of 7


How U K Sinha became SEBI Chairman?

26/09/12 4:59 PM

1. As joint secretary, Banking and Insurance, U K Sinha ensured that the chairman of SBI, Bank of Baroda, PNB and LIC (from now on referred as four financial institutions) were indebted to him for either their appointments as chairman or cover up some scam or some favour that they needed from the Finance Ministry. The above mentioned four financial institutions each owned 25% of the shares of UTI AMC, which manages all the mutual funds of the UTI. They were joint owners of UTI AMC due to the recommendation of the JPC, set up on the collapse of UTI. The JPC had recommended that UTI should no more be owned by the government to dispel the notion that the government would bail it out in case of a future collapse. That is how UTI came to be owned jointly by the four financial institutions under an agreement with the government. 2. Sinha, IAS and joint secretary (Banking), ensured that he was the only choice of the four public financial institutions for the post of UTI AMC chairman in January 2006. The appointment was in gross violation of the crucial policy laid down by the government and endorsed by the JPC which went into the securities fraud of 2002. The extracts from the JPC report: “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 recommend 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 organisation 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.� The above text is the last para of the JPC recommendation. It shows that a specific commitment was made by the government and the same was endorsed by the JPC and hence was a policy decision. The final recommendation was a key in context of preventing future scams. The accepted policy was knowingly violated by Sinha, the four financial institutions, and all others involved in his appointment on three counts and needs to be enquired into. http://canarytrap.in/2011/11/24/how-u-k-sinha-became-sebi-chairman/

Page 2 of 7


How U K Sinha became SEBI Chairman?

26/09/12 4:59 PM

Sinha was not a professional of the investment industry. In fact he was not even an amateur, given his degree and experience of investment banking. The post was not advertised and Sinha did not sever his connection with his previous employer but joined on deputation. 3. All the erstwhile members on the Board of UTI AMC resigned and a new Board was reconstituted. These members were handpicked by Sinha to do his bidding. Sinha and the new Board took charge from 13/1/2006 with Sinha’s term being limited to two years, ending on 13/1/2008 on account of his deputation from the IAS. The remuneration of Sinha at the time of appointment till January 2008 was as follows: Basic pay at the rate of Rs. 23,450 per month with effect from April 29, 2006 which is as per the scale advised by the Government of India. Other perquisites: Dearness allowance at the rate of 50% of the basic pay received from the Company Dearness pay at the rate of 41% of accumulated amount of basic pay and dearness allowance City compensatory allowance at the rate of Rs. 300 per month Provident fund equivalent to 10% of basic pay Rent free furnished accommodation with free use of all the facilities and amenities, such as air-conditioners, stove, geysers, gas, electricity, water etc. etc etc. He will be required to obtain prior permission of the central government before accepting any commercial employment, including directorship of companies, within two years of demitting office on retirement on superannuation, expire of tenure, resignation, or any other reason. The above disclosures were made in the prospectus filed with SEBI by UTI AMC in January 2008, which shows that till January 2008 there was no increase in salary. And later he managed to get salary increase effective December 2006. This retrospect revision of salary raises many question as it is timed at almost the same time when the government had refused him extension and asked him to revert to parent cadre in Bihttp://canarytrap.in/2011/11/24/how-u-k-sinha-became-sebi-chairman/

Page 3 of 7


How U K Sinha became SEBI Chairman?

26/09/12 4:59 PM

har. Did government refuse extension on salary issue? Or on any other ground? This is not in public domain, but either way it shows impropriety. 4. Within a month of his appointment, on 6/2/06, Sinha set up an HR Committee on remuneration payable to Directors and other key management personnel. This committee deliberately included Sinha, whose salary was fixed at the time of deputation so that he could give himself a handsome hike by camouflaging it as industry related hike. 5. Sinha got his term extended for two years by a Board resolution on 17/9/2007, that is four months before his deputation from the central government was to end. The appointment was made well in advance to enable Sinha to defy the government in case the latter did not extend his deputation. The correct order was to appoint him only if the deputation was extended. The Board members and the four financial institutions were once again guilty of not adhering to the government policy of hiring a professional through an advertisement. This condition was further breached for a third time when Sinha was given a further extension. 6. Sinha approached the central government for extension of his deputation. The PMO put its foot down, denied him the extension as he had been on deputation for more than seven years and asked him to go back to his parent cadre.. 7. Sinha, armed with the board resolution extending his appointment for a further two year term, defied the PMO and resigned. Obviously he had the support of the Finance Ministry in his defiance of the government as he had invested in the right people in the right place. One of the conditions of his deputation from the IAS was that he would not take up directorship or commercial employment for two years after resignation without government permission. The moment Sinha resigned, the clause kicked in because he was now in a commercial employment. And yet when Sinha took advantage of being clever enough of having extended his appointment through a Board resolution and later on defying the government by resigning when his deputation was not extended, one wonders why the government did not take any action and allowed him to continue? One also wonders if the IAS officers have to give advance notice at the time of resignhttp://canarytrap.in/2011/11/24/how-u-k-sinha-became-sebi-chairman/

Page 4 of 7


How U K Sinha became SEBI Chairman?

26/09/12 4:59 PM

ing and if so did Sinha gave notice or the same was waived? But what takes the cake is that Sinha could squat on a government controlled organization, treat it as his personal fiefdom and the government remained helpless! 8. After resigning from the civil service and getting his term extended through a Board resolution, Sinha got the new salary structure recommended by the Committee on remuneration set up in February 2006. Not surprisingly, Sinha got a hike from Rs 6 lakh per annum to over Rs 2 crore per annum with retrospective effect from December 27, 2006. This retrospect revision of salary raises many questions as it was timed at almost the same time when the government had refused him extension and asked him to return to his parent cadre in Bihar. Did the government refuse his extension on the issue of his salary or some other ground? Either way it shows gross impropriety and the profit made by Sinha during the period of deputation needs to be disgorged. It appears that the members of the remuneration committee were blissfully unaware of the JPC recommendation on UTI or the government policy. More importantly, it appears that they did not know that the pay of Sinha was fixed while he was sent on deputation. They did not even know the pay parity between other IAS officers and Sinha. They were also not aware of the salaries of the chairman of SBI, PNB and BOB, or the CEO of the AMC promoted by SBI, BOB, PNB and LIC. The fact that the HR Committee on remuneration deliberately did not submit its report for two years that Sinha was on deputation — so that the government would not come to know of the hike in salary to crores and disallow it — shows that there was collusion in the fraud committed on the company. That Sinha could defy the PMO, retain the chairmanship of the PSU and increase his salary to Rs 2 crore even for the period for which he was on deputation and for subsequent years needs to be admired and is worthy of national recognition for being the most clever bureaucrat that the country has ever known. Sinha also ensured that all information about UTI AMC is not covered under the RTI Act by appealing against the decision of Central Information Commission to the Mumbai High Court in September 2008 so that the details of his scandal would not come into public domain.

http://canarytrap.in/2011/11/24/how-u-k-sinha-became-sebi-chairman/

Page 5 of 7


How U K Sinha became SEBI Chairman?

26/09/12 4:59 PM

That fact of the matter is that government has full control over ownership of UTI AMC as per share sale agreement. It was owned by four PSUs and CIC held that it was covered under the RTI Act. It is therefore not surprising that at SEBI Sinha professes transparency and then denies information under RTI on the investigative report on the Rs 513 crore Reliance Petroleum trading scam. His emoluments for three months of financial year 06-07 is Rs 44 lakh, for 07-08 Rs 2.12 crore, for 08-09 Rs 2.15 crore, for 09-10 Rs 2.36 crore, and for 10-11 Rs 3.62 crores (upto 13/1/11). There is no disclosure in annual report as to how his salary of Rs 2.36 crore in 09-10 became Rs 3.62 crore in 10-11 (10 months only). Was it inflation adjustment or performance bonus for UTI having slipped from number one spot to fourth spot? Sinha was paid Rs 10 cores 69 lakh for less than 50 months whereas the Chief Justice of India got less than Rs 50 lakh in the same period (the salary of CJI was increased from Rs 33000/per month to Rs 1 lakh/per month in Feb 2009). The above figures have been sourced from the balance sheet of the company. If Sinha failed to comply with a major requirement of a scam affected organization then should he have been considered to be appointed as SEBI chairman? What then was the reason for the appointment of Sinha as chairman of SEBI given his above mentioned manipulations which were definitely in the knowledge of the Finance Ministry? Was the emolument of Rs 3.6 crore the reason for his appointment to the post of SEBI chairman? Was it because by removing him from the post and rewarding him with the chairmanship of SEBI, Jitesh Khosla, brother of Omita Paul could be appointed to the post of chairman UTI AMC so that he too could earn the same salary? Or was it because the Reliance Scam of Rs 2000 crore on account of trading fraud had to be settled for less than fifty crore after his appointment? Or was it because of the Sahara scam of Rs 27,000 crore? Or was it because the takeover code was to be manipulated in favour of the promoters? http://canarytrap.in/2011/11/24/how-u-k-sinha-became-sebi-chairman/

Page 6 of 7


How U K Sinha became SEBI Chairman?

26/09/12 4:59 PM

Or was it because the government feared that an independent, fearless, honest and competent SEBI would unearth the money laundering scams in which some of its own members were involved? Or was it all of the above factors? The fact remains that the government refused to learn the lessons from the earlier stock market scams (1992, 2002 and 2012?), and choose to dismantle a regulator that for the first time was professional and had gained the confidence of the investors (Indian and foreign). The capital market is a highly complex subject having huge impact on the economy. It cannot be left to the mercy of amateurs and interlopers posing as experts and to do so is inviting a third scam from which it will be difficult to recover. The world over the stock markets are getting discredited due to lax regulation. The Occupy Wall Street Movement has gained global support despite regulators having prosecuted offenders and put them behind bars for decades. This is in sharp contrast to the cover ups of our market of which Sinha is an example. For the record, the emoluments of Sinha at SEBI is Rs 36 lakh. Will the government consider giving him parity of Rs 3.6 crore that he earned at UTI? (Arun Agrawal is the author of the book Reliance: The Real Natwar. The opinions expressed by the author and those providing comments are theirs alone, and do not reflect the opinions of Canary Trap)

http://canarytrap.in/2011/11/24/how-u-k-sinha-became-sebi-chairman/

Page 7 of 7


Pranab Mukherjee, Omita Paul and corruption in Finance Ministry

26/09/12 5:00 PM

Pranab Mukherjee, Omita Paul and corruption in Finance Ministry BY ARUN AGRAWAL Is the role of Omita Paul, India’s Presidential candidate Pranab Mukherjee’s confidant over long years and the de facto No 2 in every Ministry that the latter has occupied in the last eight years, that of a fixer? Does she act on her own behalf or on behalf of Mukherjee? Is she a lobby centre for corrupt corporations? Or is she a buffer to take the heat off any scandal/wrong doing? And what is the reason for Mukherjee’s silence when blatant act of her nepotism and corruption are reported in the press? Is he helpless or being helpless? Whatever be the reason, the former Finance Minister is constructively responsible for all acts of Omita Paul. First the obvious question: What is the reason for the appointment of Paul in the number two position in the three key Ministries that Mukherjee has been a Minister. Paul has been continuously appointed as an advisor with the rank of Secretary in the three key Ministries — Foreign, Defnece and Finance — which has been co-terminus with the tenure of Mukherjee. Her appointment as Advisor in three different ministries is without precedent in independent India and it is not because of her specialized knowledge on the subject matter of any of the three Ministries. All attempts to get information on the law/guidelines under which she was appointed and the papers relating to her appointment under the RTI have been in vain. Hers was an arbitrary appointment for arbitrary goals. Even the Secretary of the Ministry was subordinate to her. Though there have been extra-constitutional authorities and power centres in the past, the country has not known an official power centre like that of Paul. It may be mentioned that Paul was also appointed as Information Commissioner at the time of http://canarytrap.in/2012/07/17/pranab-mukherjee-omita-paul-and-corruption-in-finance-ministry/

Page 1 of 7


Pranab Mukherjee, Omita Paul and corruption in Finance Ministry

26/09/12 5:00 PM

election between UPA-I and UPA-II and that the then Leader of Opposition L K Advani and the Prime Minister on May 9, 2012 found time to select her as Information Commissioner for five years. The post of Information Commissioner was an insurance cover in case the Congress lost the election. She worked for eight days and disposed a total of 58 cases before re-joining as Advisor-cum-Secretary in the Ministry of Finance once UPA came back to power. That Paul was an independent power centre, and worked for the benefit of herself, her family members and the corporate lobby and in the process compromised national interest is obvious from the incident relating to appointment of SEBI chief. Did she not manipulate the entire system in order to have her candidate, U K Sinha, appointed to the post of Chairman of SEBI so that he would favour companies like Reliance and Sahara? It would also enable her to have her brother appointed to the post vacated by Sinha at UTI AMC, which has emoluments of four crores per annum. This despite the fact that her brother did not have required qualification to be appointed to the post. But first her role in removing honest officials from SEBI to install Sinha: The decision to give extension to the existing Chairman and members of SEBI by the Secretary and the Minister (approved on 19/10/09) was canceled at her behest (2122/12/09), the existing members were never considered later for extension (10/8/10), she changed the composition of the committee to select the Chairman, had her own experts nominated to the Committee (25/8/10), ensured that the candidature U K Sinha is by the so-called search route. The search route was taken to conceal the illegal emoluments of Rs 4 crores (Per Annum) drawn by Sinha in a Public Sector Enterprise (PSE). If his emoluments were revealed he would not have been selected on grounds of lacking integrity as the ceiling of pay for PSE is Rs 1.25 lakh per month. Concealment of emoluments was also necessary for Paul to push the candidature of her brother for the vacant post at UTI AMC so that he could enjoy the lavish salary without others knowing the real reason for the appointment. After having Sinha selected as Chairman, Paul ensured that even the Appointment Committee of the Cabinet (ACC) does not come to know about the emoluments of Sinha while confirming his appointment. (Refer confidential letter DO no 2/23/2007http://canarytrap.in/2012/07/17/pranab-mukherjee-omita-paul-and-corruption-in-finance-ministry/

Page 2 of 7


Pranab Mukherjee, Omita Paul and corruption in Finance Ministry

26/09/12 5:00 PM

RE dated 13/12/2010 of Dr Thomas Mathew, to Est Officer Annexure -1 item 4 (ii) Scale of pay: Not available) It is obvious that the concealment of Sinha’s emoluments was deliberate and designed to mislead the selection committee and the ACC to presume that he was being paid the maximum pay payable to a PSE chief of Rs 1.25 lakh per month. Sinha’s emoluments were over Rs 4 crores per annum (Rs 3.62 crores for 10.5 months as per balance sheet of UTI AMC) which is not possible in a public sector organization like UTI AMC. The Establishment Officer vide his order dated 4/1/08 had stated that the deputation was covered under Rule 6 (1) and not 6 (2) (ii) of IAS Cadre Rules. Sinha not only got his emoluments increased after the decision of the Establishment Officer in 2008, but also increased it with retrospective effect from December 2006 and raked in a bonanza of over Rs 10 crores in the process. Was the purpose of appointing such a person to the sensitive post of SEBI chairman to settle issues of thousands of crores in favour of the concerned companies which had lobbied with Paul? The allegation of Paul acting on behalf of the corrupt companies is borne by the fact that Dr Abraham as a WTM (Whole Time Member) of SEBI Board had leveled allegation in a letter written on 1/6/2011 to the Prime Minister that Sinha tried to influence him on four cases. One of the cases related to securities fraud of Reliance group and others related to Tayals of Bank of Rajasthan, Sahara, and MCX. While trying to influence him Sinha had stated that these were “engaging the attention of Union Minister for Finance or Mrs Omita Paul, Advisor to the Finance Minister”. The denial of extension to the then Chairman and members of SEBI by Paul, the fact that extension was stopped when SEBI recommended action against the Reliance group to the Finance Ministry on an eight year complaint by Gurumurthy involving over Rs 25,000 crores of benefit to the promoters, the extraordinary interest taken by Paul in having Sinha appointed as SEBI chairman by suppressing his illegal salary from the selection committee and the Appointment Committee, and the subsequent actions of Sinha all show that Paul was involved in harming national interest by promoting corporate interest of the respective companies. Sahara was a company taking deposits from small un-bankable people. From 2008 onwards, during the tenure of Mukherjee, it violated the deposit norms under section http://canarytrap.in/2012/07/17/pranab-mukherjee-omita-paul-and-corruption-in-finance-ministry/

Page 3 of 7


Pranab Mukherjee, Omita Paul and corruption in Finance Ministry

26/09/12 5:00 PM

58A of Companies Act which allowed it to collect unsecured deposits from debentures for 10% of its own fund. By doing that it could have collected only Rs 230 crores but went on to collect over Rs 20,000 crores. Almost the entire money collected was siphoned out and there were virtually little assets in the company in whose name deposits were taken so that the group could not be compelled to refund the amount. It was the largest ponzi scheme involving two crore poor people. Dr Abraham had passed orders on the company which were contested by Sahara in the High Court. But by a freak chance the matter came before him for adjudication because the CJI referred the matter to SEBI. He adjudicated the matter at the fag end of the tenure (23/6/11) directing the group to refund the entire money to the investors. His order was upheld by the Tribunal and is likely to be upheld by the Supreme Court also. The order of Dr Abraham is proof of his competency and honesty, while the shenanigans of Sinha at UTI AMC are proof of his cleverness and manipulative skills. The second case that interested Paul was the securities fraud of Rs 513 crores of Reliance group (Mukesh Ambani group). Reliance Petroleum shares were short sold for Rs 290 by the group and later bought back when there was a hefty fall in price when the group sold the shares in the cash segment. The Reliance group made Rs 513 crores in five days .The securities fraud took place in November 2007. Such a blatant act of securities fraud by the promoter was unprecedented. The penalty under the law is three times the amount of the fraud and the total amount involved was Rs 2000 crores along with criminal prosecution. Reliance tried to settle the matter by paying a fine of only Rs 2 crores and then Rs 8 crores through consent order. It was not even willing to pay back the fraud amount of Rs 513 crores. These meager offers of settlement were made by Reliance to buy time so that the honest officers of SEBI could be replaced by more pliant ones. Sinha changed the circular on the consent order (25/5/2012) in a manner that favored Reliance group and continue the settlement of the criminal offence through a consent order. This is in sharp contrast with the case of Rajat Gupta whose offence was much less but then he did not have an Omita Paul or U K Sinha to bail him out. The third case is about the Tayals of Bank of Rajasthan in whose favour the outgoing member Prashant Saran passed a favourable order so that he could be re-appointed. http://canarytrap.in/2012/07/17/pranab-mukherjee-omita-paul-and-corruption-in-finance-ministry/

Page 4 of 7


Pranab Mukherjee, Omita Paul and corruption in Finance Ministry

26/09/12 5:00 PM

The order only confirmed the allegation of Dr Abraham. Similar conclusion was made by the media. Kindly refer links in Financial Express and Mint on Saran’s order. The fourth case is related to MCX which wanted to open a parallel stock exchange. The Ministry ensured that Dr Bimal Jalan Committee report is taken up by SEBI after Sinha became the Chairman so that the portion relating to not listing of the shares of the stock exchange company is rejected. This would enable MCX to list the shares of the stock exchange and help in giving market value to the MCX license. Further the terms of complying with other norms too have been diluted. Other related scandals On the slot vacated by by Sinha at UTI AMC, Paul wanted her brother to be appointed and though the four financial institutions under her were agreeable the foreign shareholder was not. As a result the post of the CMD remained vacant for fifteen months because Paul wanted to have her brother appointed. Great harm to public interest was done because UTI has around Rs 60,000 crores invested in the financial market and large part of the money comes from government sources. It was only when the candidature of Mukherjee was considered seriously for the post of President that Paul’s brother withdrew from the race for the post of CMD of UTI AMC. The advertisement released subsequently for the post thereafter shows that neither Paul’s brother nor Sinha had the qualification to take up the post because it states that the person should be a seasoned financial service professional with minimum 20 years of experience. He should also have a degree of MBA from a top university or a CA. Both of them are neither financial service professional nor do they have a day’s experience. In fact, the advertisement which was released for the first time honours the commitment given by the government to the JPC II on securities scam that a professional would be appointed through an advertisement. Sinha, who had increased his emolument through a rubber stamp Board on the grounds of industry parity, conveniently forgot that he was appointed to an executive post and industry parity is given to persons in non-executive posts like pilots etc. He did not disclose that his deputation was covered under Rule 6(1) of the cadre rules and that the organization was a PSE where the maximum pay that could be drawn was Rs 1.25 lakh per month. It was for this reason he appealed to the High Court against the order of the Information Commission that UTI AMC is covered under the RTI Act. Both Sinha and Paul wanted the illegal emoluments to be a secret for http://canarytrap.in/2012/07/17/pranab-mukherjee-omita-paul-and-corruption-in-finance-ministry/

Page 5 of 7


Pranab Mukherjee, Omita Paul and corruption in Finance Ministry

26/09/12 5:00 PM

their respective reasons. The other act of nepotism involved Paul’s husband, who was favored by an unprecedented amendment in the IT Act. The following exemption granted in the year 2011 was notified for being applied retrospectively from the year 2007-08 to cover the entire tenure of Paul in the UPSC Section 10 (45) of the Income Tax Act stated: (45) Any allowance or perquisite, as may be notified by the Central Government in the Official Gazette in this behalf, paid to the Chairman or a retired Chairman or any other member or retired member of the Union Public Service Commission. Retrospective amendment to undo a judgment or wrong has been known but never to pass on a benefit like the one above. The amendment was sought to be justified on the basis of sixth pay commission report but there no such recommendation in the report. Paul, out of sheer vindictiveness, used her influence to initiate disciplinary proceedings of major penalty against an honest officer like Abraham who exposed her corruption and refused to compromise. His order against Sahara is in sharp contrast to the manipulations of Paul and Sinha. In fact there is sufficient material to charge her for offences committed by her under PCA and IPC. Answers are needed on whether all these actions of Paul narrated above were within the knowledge of Mukherjee? Some of them were also covered in the press. He gave official approval whenever the same was required. Which brings us to the original question: Is he helpless or being helpless? Paul is the responsibility of Mukherjee. The latest extension given to her on 15/6/2012 states that her tenure is “co -terminus with the tenure of Shri Pranab Mukherjee as Finance Minister”. Speculation is already rife about her being given a position higher than that of Secretary to the President. (Arun Agrawal is the author of the book Reliance: The Real Natwar. The opinions expressed by the author and those providing comments are theirs alone, and do not reflect the opinions of Canary Trap or any employee thereof) Also Read: http://canarytrap.in/2012/07/17/pranab-mukherjee-omita-paul-and-corruption-in-finance-ministry/

Page 6 of 7


Pranab Mukherjee, Omita Paul and corruption in Finance Ministry

26/09/12 5:00 PM

How UK Sinha became SEBI chairman? UTI AMC, Jitesh Khosla, and Omita Paul Omita Paul, SEBI, and RIL’s 2000 crore stock market scam Ministers in the Lokpal panel involved in Sahara Scam? Complaint against Mrs Omita Paul

http://canarytrap.in/2012/07/17/pranab-mukherjee-omita-paul-and-corruption-in-finance-ministry/

Page 7 of 7


IN THE SUPREME COURT OF INDIA [CIVIL WRIT JURISDICTION] WRIT PETITION (CIVIL) No. ___________of 2012 IN THE MATTER OF: Arun Kumar Agrawal

… Petitioner //Versus//

Union of India & Ors

…Respondents

I.A.______OF 2012 (APPLICATION FOR INTERIM DIRECTION)

PAPER BOOK (FOR INDEX KINDLY SEE INSIDE)


PRASHANT BHUSHAN: COUNSEL FOR THE PETITIONER


INDEX SL. NO. PARTICULARS 1.

Limitation Report

2.

Listing Performa

3.

Synopsis & List of dates

4.

PAGE NO.

Writ Petition under article 32 with Affidavit

5.

Annexure P1-Copy of the notification dated 23/7/2009 amending the rules for term and condition of service of the Chairman and members of SEBI.

6.

Annexure P2-Copy of the proposal of the director of capital


market division dated 02/09/09 7.

Annexure P3- Copy of the noting dated 08/09/09 of the then Finance Minister.

8.

Annexure P4- Copy of the noting dated 08/10/09 of the Finance Secretary

9.

Annexure P5- Copy of the letter dated 16/11/09 by the Director, Capital Market Division.

10.

Annexure P6- Copy of the relevant pages of the file notings from 25.11.09 to 21.12.09

11. Annexure P7- Copy of the relevant file noting 22/12/09 of the then Finance Minister

dated


12.

Annexure P8 (colly)-Copies of the relevant pages of the notings and final order regarding fresh selection of new Chairman SEBI. A. Notings from 11/01/10 to 22/01/10 B. Noting dated 06/08/10 C. Noting dated 10/08/10 C. Final order dated 10/08/10 of the Finance Minister

13. Annexure P9 (Colly)-Copies of the letter and file noting A. Copy of the letter dated 18/08/10 by the director (PM & RE) B. Copy of the file noting dated 20/08/10 14. Annexure P10 (Colly)-Copies of the file notings A. Copy of the noting dated 24/08/10 of the


DG (Doc) B. Copy of the noting dated 25/08/10 of the then advisor to the FM. 15. Annexure P11- Copy of the amendment notification dated 07/10/10 making change in the composition of the selection committee. 16. Annexure P12 – Copy of the communication dated 10/09/10 of the Department Of Economic Affairs Inviting applications for the post of chairman SEBI. 17. AnnexureP13 - Copy of the application form for The post of Chairman, SEBI dated nil 18. Annexure P14 (Colly)- Copy of the minutes of the first Meeting and document showing pay scale Minutes of the first meeting of the search-cum-selection committee dated 02.11.2010. (B) Documents showing pay scale of other invitees


19. Annexure P15- Copy of the relevant page of the notes forming part of the accounts for the year ended march 31, 2011 showing Shri Sinha’s remuneration in UTI AMC. 20. Annexure P16 (Colly) Copies of the minutes of the second meeting along with the approval of the then Finance Minister A. Copy of the minutes of the search-cum-selection committee dated 13.12.2010 B. Copy of the approval dated 13.12.10 of the then Finance Minister 21. Annexure P17- Copy of the letter dated 13.12.2010 of the Joint Secretary, capital markets along with annexures 22. Annexure P18 (Colly)- Copy of the DPE OM No th DPE/11(47)2006-Fin dated 4 December 2007 23. Annexure P19 - Copy of the relevant extracts of the prospectus dated 09.01.2008 of UTI.


24. Annexure P20- Copies of the representation and letters Copy of the representation dated 29.01.2007 of Shri Sinha to the Special Secretary, DOPT B. Copy of the letter dated 01.03.2007 of the desk officer in DOPT to Shri Sinha 25. Annexure P21- Copy of the guideline and file noting Copy of letter dated 28.11.2007 of the Director (Service) enclosing guideline Copy of noting relating to extension of deputation of Mr Sinha. 26. Annexure P22- Copy of the OM dated 12/12/2007 regarding extension of deputation 27. Annexure P23 (Colly)- Copies of the note and noting A. Copy of the note dated 02/01/2008 prepared by the DOPT. B. Copy of the noting dated 04.01.2008 of the Establishment Officer


28. Annexure P24- Copy of the letter dated 10/3/2008 by the ACC. 29. Annexure P25 (Colly)-Copies of letters, application and OM A. Copy of the letter dated 03.04.08 of the SBI chairman to the Finance Secretary B. Copy of the letter of the Company Secretary dated 11.04.2008 to Shri Sinha C. Copy of the letter dated 15.04.2008 of Shri Sinha to the Chief Secretary, Govt. Of Bihar for VRS D. Copy of the application dated 15.04.08 of Shri Sinha seeking VRS in the prescribed Format under Schedule L E. Copy of the Letter dated 30.03.08 from Secretary Personnel, Bihar to DOPT regarding sanction of Shri Sinha’s VRS F. Copy of the OM dated 01.05.08 regarding


Shri Sinha’s VRS G. Copy of the letter dated 17.06.08 from DOPT to Chief Secretary Bihar conveying permission for commercial employment with UTI AMC. 30. Annexure P26 (Colly)- Copy of the note and rules. A. Copy of the note dated 17.04.08 prepared by the section officer in the DOPT B. Copy of the Note of Section Officer dtd 09/05/08 containing rule 26 (3) (ii) of AIS Death cum Retirement Benefit Rules and Also note of MoS dated 17/06/08 31. Annexure P27- Copy of the relevant page of the balance sheet dated 31/03/2008 of UTI 32. Annexure P28 (Colly)- Copies of the balance sheets Of UTI A. Copy of the relevant pages of the balance sheet of the year ended march 31, 2009. B. Copy of the relevant pages of the balance sheet of


the year 2009-2010. C. Copy of the relevant pages of the balance sheet of the year 2011 -2012. 33. Annexure P29 (Colly)- Copies of articles A. Copy of the article dated 09/06/2011 published in India Express. B. Copy of the article 13/06/2011 published in the Economic Times. C. Copy of the article dated 23/01/2012 published in the first post. 34. Annexure P30 (Colly)-Copies of the complaints filed by the Petitioner with the Prime Minister Copy of the complaint dated 30/5/2011 Copy of the complaint dated 12/9/2011 Copy of the complaint dated 10/11/2011. 35. Annexure P31- Copy of the Para 21.9 (v) of the report Of Joint Parliamentary Committee. 36. Annexure P32- Copy of an advertisement for the


post of UTI CMD in newspaper dated 04/06/2012. 37. Annexure P33- Copy of the Times Of India report dated 07/05/2012. 38. Annexure P34- Copy of the letter dated 1/6/12 Of the WTM to the Prime Minister. 39. Annexure P35- Copy of the relevant portion of the balance sheet of of Sahara year 1/7/10 to 30/6/11 40. Annexure P36 (Colly)-Copies of the circular along with the complaints filed by the petitioner A. Copy of the circular dated 25.05.12 B. Copy of the complaint dated 10/09/2011 filed by the petitioner with CVC C. Copy of the complaint dated 28.05.2012 filed by the petitioner with CVC D. Copy of the complaint dated 21/06/2012 to the Cabinet Secretary regarding Shri Sinha’s Appointment. 41. Annexure P37 (Colly)-Copies of articles


A. Copy of the article in Mint dated 02/04/2012. B. Copy of the article in Financial Express dated 22/07/2012. 42. Application for interim direction


SYNOPSIS AND LIST OF DATES That the present writ petition under Article 32 of the Constitution of India is being filed challenging the appointment of Shri U. K. Sinha as Chairman of SEBI on mainly following grounds: (i)

Shri Sinha failed to fulfill one of the eligibility conditions as laid down in Sub-section (5) of Section 4 of the SEBI Act as well as in the govt. communication which requires that the Chairman shall be a person of high integrity. Shri Sinha is not a person of high integrity is apparent from the following facts: (a)   Shri Sinha before joining SEBI was working as the CMD of a Public Sector Enterprises, Asset Management Company Private Ltd. (UTI AMC). Mr Sinha was first sent in UTI AMC on deputation in Nov. 2005 for two years when he was posted as Joint Secretary in the Finance Ministry overlooking affairs of UTI and was also on the Board of UTIAMC. He was appointed to the post of CEO of UTI AMC by overlooking the policy of not seeking deputation in an organization which he had overseen in the Ministry and also the JPC recommendation accepted by the government. The first deputation was for a period of two years ending on 2/11/07. (b)Thereafter, he was given extension upto 31/05/08.

  The


Appointment Committee of the Cabinet vide its letter dated 10/3/2008 advised the Finance Ministry (Department of Economic Affairs) that after 31/5/2008 Shri Sinha would return to his parent cadre (Bihar) and directed the Ministry to identify a suitable replacement of Shri Sinha by that date. (c) Instead of accepting the order of the ACC, Mr. Sinha took voluntary retirement and thereafter, he sought permission for postretirement commercial employment in UTI AMC as CMD. The DOPT waived the post retirement waiting period before accepting the commercial employment inspite of the provision in Rule 26 of AIS(D&RB) Rules stating that PSUs which were substantially owned or controlled by the government would not mean commercial appointment and also apparently ignored the fact that the declaration given by Shri Sinha under Rule 26 (3) (ii) of AIS Death cum Retirement Benefit Rules that in the last three years of his official career he has not been privy to sensitive or strategic information of UTI AMC could not be true as he was already on deputation in the same organization at the time of taking VRS. (d) Shri Sinha remained in the same position and the organization remained the same, but the character of the employment changed


from that of a government servant on deputation to a PSU to that of a retired bureaucrat having taken up commercial employment. (e) Within a period of a month the emoluments too increased from around six lacs per annum to one crore per annum. Later on these emoluments were made over two crores and then four crores. Mr Sinha’s total emoluments for the year 2010-11 were at over 4 crores per annum while working in a PSE (3.62 crores for 10.5 months). Mr Sinha also gave himself emoluments of over Rs 2 crores per annum for the period of his deputation from the IAS to the PSU retrospectively. The pay scale and the pay drawn by him at the time of his retirement was 22400-525-24500 and Rs23,450 respectively. (f) All the aforementioned crucial facts were suppressed before the Search-cum-Selection Committee. Mr Sinha did not fill the column relating to pay which was mandatory data for the post. Facts were deliberately suppressed from the Appointment Committee of the Cabinet also. Against the column for scale of pay it was mentioned not available. (g) Further, the manner in which the facts regarding his deputation to the UTI AMC was suppressed and when denied extension, how he


took VRS and immediately thereafter illegally joined UTI AMC and got his salary increased to Rs. 4 Crores per annum also raise serious question about his integrity. (ii) The appointment of Shri Sinha as Chairman of SEBI is malafide and a result of deep rooted conspiracy which is apparent from the following facts: (a)   The then advisor to the Finance Minister ensured that the earlier Chairman could not get further extension though he was entitled to get extension of two years as per the amended notification. (b)Further, the composition of Search-cum- Selection Committee for selecting the SEBI Chairman and WTMs was changed arbitrarily to give primacy to the Finance Ministry so that Shri Sinha’s appointment could be ensured. It was probably also done to reduce the Cabinet Secretary, who was ex officio Chairman of the Committee,  to a minority as he was aware of the deputation history of Shri Sinha. Mr Sinha was the only candidate who did not apply for the post but was handpicked through the search route. (c) The developments subsequent to Shri Sinha’s appointment show that it was done to benefit some of the big corporates like Reliance, Sahara against whom action after investigation was pending before


the SEBI. One Whole Time Member of SEBI in his complaint to the Prime Minister made serious charges against the then Advisor to the Finance Minister and Mr. Sinha of acting on behalf of the corrupt companies in the cases related to securities fraud of Reliance group, Tayals of Bank of Rajasthan, Sahara, and MCX. (d)Shortly after the appointment of Mr Sinha as Chairman of SEBI, all out efforts were made by the Finance Ministry to appoint the brother of the then Advisor as the CMD of UTIAMC, and the post remained vacant for sixteen months as his appointment was objected to by a foreign shareholder who had bought a 26% stake because he was not suited for the post. Ultimately when the advertisement for the post was released it became clear that neither Mr Sinha nor his proposed successor, the brother of the then Advisor to the Finance Minister met any of the eligibility conditions. The post of UTI AMC managing around Rs 60,000 crores of public money lay vacant for sixteen months because the brother of the Advisor could not be appointed to the post having emoluments of four crores.

1998

The Government gave Rs 3000 crore as bailout programme for


UTI appointed Deepak Parikh Committee whose report has not been implemented. August 2001

Issues relating to UTI were referred to the existing JPC on stock scam.

31/8/2002

Government announces a RS 14,500 crore bailout for UTI, after it is found to be involved in Ketan Parekh stock scam. Investors loss is an additional Rs 8000 crores.

29/8/02

UTI Act was repealed.

Dec 2002

JPC’s 450 page report was tabled in the House.

15/1/2003

A notification bearing No. SO 40(E), dated 15-1-2003, in exercise of the powers conferred by sub-section (h) of section 2 of the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 (‘the Act’), the State Bank of India, the Punjab national Bank, the Bank of Baroda and the Life Insurance Corporation of India are made equal subscribers to the share capital of UTI Trustee Company Private Limited as trustee of the UTI Mutual Fund and UTI Asset Management Company Private Ltd. (UTI AMC), a company sponsored by the same set of subscribers to which all the employess of the erstwhile company were transferred. The Mutual Fund


would comply with the SEBI Mutual Fund Regulations. 03/02/200319/12/2004 Mr K Damodaran IAS was appointed as CMD of UTI AMC. He was paid Rs 6,37,901 as annual remuneration. Dr R H Patil took over as Chairman from 13/1/05 but he was not paid remuneration, he got sitting fees till Nov 2005. 01/07/2003 Mr U K Sinha, Joint Secretary, Capital Market, Ministry of Finance, appointed as additional Director on the Board of UTI AMC. 03/11/2005

Mr Sinha was appointed as CEO and MD of UTI AMC on deputation overlooking the fact that professionals were to be appointed through advertisement (JPC report).

13/01/2006 Mr Sinha was appointed as Chairman and Managing Director and the entire Board of UTI AMC was replaced to suit the Chairman. 01/03/2007 DOPT releases the pay of Additional Secretary to Shri U K Sinha on his representation dated 29/1/07. 09/04/2007 DOPT advised that Mr Sinha’s deputation was under Rule 6(2) (ii) of the IAS cadre Rules 06/11/2007 The Prime Minister approved a short extension in tenure of Mr U K Sinha for a period of three months instead of the


proposed 2 years till the issue related to deputation of IAS officers under rule 6(2)(ii) is finalized, according to the note signed by Cabinet Secretary. 28/11/2007 The consolidated Guidelines with respect to Rule 6 of the IAS cadre Rules were published 12/12/07

The Office Memorandum of the Ministry of Finance to DOPT requesting the extension of tenure for the balance period of 1 year 9 months beyond 2 Feb 2008 under Rule 6 (1) 1,2,3 Posts to Central PSUs of the DOPT’s policy guideline dated 27/1/107. The request for further extension of tenure under Rule 6 (1) had the approval of the Finance Minister.

02/01/2008 The Note prepared by the Section officer for further extension under Rule 6(1) was moved and though the Director Services recommended that the approval should be under Rule 6(2) (ii) because it was initially so approved, the same was turned down by the Establishment Officer on the ground that according to the latest instruction further deputation would come under Rule 6(1). 09/01/2008 The prospectus for public issue was filed with SEBI making various disclosures.


10/03/2008 The Appointment Committee of the Cabinet approved the extension of tenure of Mr Sinha as CMD, UTIAMC till 31/5/08 after which he was to return to his cadre and the Department of Economic Affairs was directed to identify a suitable replacement by then. 03/04/2008 The SBI Chairman’s letter to the Finance Secretary, on behalf of other shareholders, misrepresenting that the tenure of Mr Sinha was not extended due to rules of deputation and the only alternative for Mr. Sinha to continue under existing government rules was to take voluntary retirement. Further he was given to understand that as per government instruction, Mr. Sinha would be entitles to salary according to the decision of compensation committee. He therefore, proposed a term of four years four years after voluntary retirement. No rules or government instructions were referred to by the Chairman of SBI. 11/04/2008 The company secretary of UTI made an offer on behalf of shareholders of UTI AMC to Mr Sinha of a salary of Rs one crore with performance related payments and perquisites on his continuance in the post after taking


voluntary retirement. 15/04/2008 Mr Sinha wrote to Bihar government seeking voluntary retirement with effect from 15/5/2008 to enable him to join UTI AMC on a regular basis as its CMD. Mr Sinha wrote to the DOPT seeking permission to join the company post retirement. The application is in Schedule L under Rule 26(1) (2) of All India Services (Death-cum-Retirement Benefits) Rules, 1958. Under item no 5 Mr Sinha stated that the pay scale of the post and the pay drawn by him at the time of retirement as 23,450 and also that such high level posts are not advertised and that the remuneration offered are a fixed pay of one crore per annum with performance related payouts. 17/04/2008 The matter was sent to department of Economic Affairs, Ministry of Finance for comments. 30/04/2008 The Bihar government sanctioned Mr Sinha’s voluntary retirement w.e.f. 15 May 2008. 17/05/2008 Mr Sinha signed the balance sheet of UTI which shows that he has taken remuneration of Rs 2 crores for the year 07-08 for the period of deputation and an additional amount of 44 lacs for three months for the year 06-07.


17/06/2008 The note of section officer dated 9/5/08 of approving the appointment of Mr Sinha under Rule 26(1) (2) of All India Services (Death-cum-Retirement Benefits) Rules, 1958 by designating as a commercial employment was advised to the Bihar government after obtaining the approval of the Minister of State. 2009-2011 Mr Sinha’s remuneration according to the balance sheet for 08-09 was 2.15 crores, for 09-10 was 2.35 crores and for and 2011 -12 over 4 crores ( 3.62 crores for 10.5 months). 23/07/2009 The Terms and Condition of Services of Chairman and Members Rules 1992 amended to increase the tenure of Chairman and Whole Time member from 3 years to 5 years 08/09/2009 On the extension of tenure suggested by the Finance Secretary in accordance with the above amendment, the Finance Minister stated that before offering extension in tenure of the Chairman/WTM their performance should be appraised. 19/10/2009 The Finance Secretary approved the extension on the appraisal of the concerned officers by the Finance Secretary. 20/11/2009 The letter from the Secretary, Department of Economic Affairs was written to the Establishment Officer, DOPT for


obtaining approval of the ACC for the extended tenure of Chairman and WTM of SEBI. 30/11/2009 The then Advisor to the Finance Minister saw the file after desiring to do so on 25/11/09. 21/12/2009 After desiring to see the file again on 5/12/09, the then Advisor to the then Finance Minister drew the attention of the then Minister to the tenure of the officers. 22/12/2009 The then Finance Minister ordered that the extension be considered six months before the present tenure comes to an end. 17/01/2010 The Finance Secretary confirmed that the recommendation made to DOPT is to be withdrawn. 10/08/2010 On the query as to by the Director as to whether the existing Chairman/WTM were to be given extension in tenure or fresh recruitment made, the Minister clarified that the process for selection of SEBI chairman be initiated. 20/08/2010 The Finance Secretary suggested the names of four experts (two from the earlier committee) for selecting two experts for the Search cum Selection Committee to select the SEBI chairman and marked the file to the then Finance Minister. 23/08/2010 The file was sent to the then Advisor who asked the DG (DOC) to discuss on 23/8, the DG (DOC) after reiterating the


existing Rules marked the file to the Advisor who in turn suggests her own experts and Secretary Financial Services for the selection of the post on 25/8 and the same is approved by the then Minister on 26/8/08. 18/09/2010

An advertisement was issued in newspapers for the post of SEBI chairman. Earlier communication was sent to all Secretaries and Chief Secretaries relating to the vacancy of the post and the job profile.

07/10/2010 Rule 3 of SEBI (Terms and Conditions of Service of Chairman and Members) Rules was amended to give the Finance Minister the discretion to appoint two other persons (apart from two experts) so as to ensure that the recommendation of the Advisor to include Secretary, Financial Services in the Search cum Selection Committee was given effect to. 2/11/10

First Meeting of the Search cum Selection Committee held. Five candidates from the nineteen applicants are shortlisted. The Committee also decided to invite Shri U K Sinha as a candidate.

13/12/10

The second meeting of the Search and Selection Committee took place and the Committee interacted with the six candidates including Mr Sinha and recommends the names of Mr Sinha and Mr Himadri Chaterjee in that


order for the post. The Minister selected the name of Mr U K Sinha for a period of three years and directed that the same may be put up for the approval of the ACC. 13/12/10

The Joint Secretary, Capital Market forwarded the candidature of Shri Sinha to the Establishment Officer, DOPT for the approval by the ACC and concealed the scale of pay of Mr Sinha by stating it to “Not Available� in the relevant column. The total emoluments were around four crores per annum for the year 2010-11.

Feb 2011

The ACC approved the appointment and Mr Sinha took charge from 18/2/10.

1/6/2011

The Whole Time Member of the SEBI sent a complaint to the Prime Minister against Mr Sinha and others in the Finance Ministry trying to influence decisions on matters relating to corporate like Sahara, Reliance, MCX and Tayals of Bank of Rajasthan.

23/6/11

The WTM passed the order against Sahara on the matter being referred by the Supreme Court.

From March 2011

The post of CMD UTIAMC remained vacant with reports in the press appearing from April 2011 that the vacancy could not be filled up because the Finance Ministry wanted the brother of the Advisor in the


Finance to be appointed even though he was not short listed as a suitable candidate. 10/9/11

The Complaint was addressed by the Petitioner to the CVC on the Rs 2,000 crore Reliance case.

7/05/12

The Times of India reported that the brother of the Advisor has opted out of the race for the post of UTI AMC.

25/5/12

The consent order circular of the SEBI was revised.

28/5/12

The complaint was filed by the Petitioner to the CVC on the Consent Order circular to help Reliance in the Rs 2000 crores case.

4/6/12

An advertisement was issued in newspapers for the recruitment of CMD of UTI AMC.

21/6/12

A complaint was sent by the Petitioner to the Cabinet Secretary on the appointment of Mr Sinha as SEBI Chairman. But the govt. has not responded so far to the complaints of the Petitioner.

/08/12

Hence, the instant writ petition.


IN THE SUPREME COURT OF INDIA (CIVIL WRIT JURISDICTION) WRIT PETITION (CIVIL) No.

OF 2012

(Under Article 32 of the Constitution of India)

IN THE MATTER OF:: Arun Kumar Agrawal T8 Eagleton Golf Village 30km Bangalore Mysore Versus Highway Bidadi Bangalore-5621 09

1(a)

‌.Petitioner

Union of India through its Secretary, Ministry of Finance Department of Economic Affairs IES Cadre Controlling Authority North Block, New Delhi-110 001


1(b)

2.

Union of India Through its Secretary Ministry of Personnel, Public Grievances & Pensions, Through its Secretary (Personnel), Department of Personnel & Training, Govt. of India, Sardar Patel Bhavan Sansad Marg New Delhi- 110 001.

Securities Exchange Board of India, Through its Chairman Plot No. C4A,'G' Block, Bandra Kurla Complex, Bandra (East), Mumbai 400051


3.

Central Vigilance Commission Through The Chief Vigilance Commissioner, S atar kata Bhawan New Delhi

4.

Shri U. K. Sinha, Chairman, SEBI, Plot No. C4A,'G' Block, Bandra Kurla Complex, Bandra (East), Mumbai 400051

5.

Central Bureau of Investigation, through the Director, Block No.3, Ground Floor, C.G.O Complex, Lodhi Road, New Delhi – 110 003.


A

WRIT

PETITION

UNDER

ARTICLE

32

OF

THE

CONSTITUION OF INDIA To, The Hon’ble the Chief Justice of India and His Companion Justices of the Hon’ble Supreme Court of India. The Humble petition of the petitioner above-named

MOST RESPECTFULLY SHOWETH: That the present writ petition is being filed in public interest under Article 32 of the Constitution of India to challenge the appointment of Respondent No. 4, Mr U K Sinha as Chairman of SEBI on the grounds of his not being a person of integrity which was one of the eligibility conditions as laid down in Sub-section 5 of Section 4 of the SEBI Act as well as in government communication and also for fraud committed on the Search and Selection Committee and the Appointment Committee of the Cabinet. The fraud relates to concealing from the Committees the unheard emoluments of over Rs four crores per annum which he wrongfully earned while working for a PSU by declaring the post of the CMD, UTI AMC as commercial appointment. The information relating to emoluments was mandatory information and it had a material bearing on the selection to a post of high


integrity that Shri Sinha failed to fulfill. Moreover, the facts regarding Shri Sinha’s illegal appointment as the CMD of the UTI AMC (i.e. the post which he held before joining the SEBI), after his extension to the deputation in UTI AMC was denied by the ACC, by taking VRS from the govt. and immediately thereafter joining the UTI AMC as a commercial appointment was not placed before the Search-cum-Select Committee. Mr Sinha illegally also gave himself emoluments of over Rs 2 crores per annum for the period of his deputation from the IAS to the UTI AMC retrospectively. The developments subsequent to the appointment of Shri Sinha as the Chairman SEBI show that it was done for extraneous consideration to benefit some of the big corporates like Reliance, Sahara against whom action after investigation was pending before the SEBI. The Petitioner is, therefore, also seeking an investigation into the entire process of the appointment of Shri Sinha as CMD, UTI AMC as well as Chairman, SEBI. The Petitioner herein is a financial expert and a lawyer. He has filed several notable public interest petitions that have unearthed corruption and financial irregularities. His PIL against Cogentrix prevented a loss worth approximately rupees 30,000 crores to the exchequer, and one against


Prasar Bharti benefited the organization by about Rs. 20 crores. He was the complaint of the petitioner in the 2G spectrum scam that eventually led to the registration of the FIR by the CBI, as has been noted by this Hon’ble Court in the 2G case. He has filed several notable PILs against the Karnataka mining scam in the Karnataka High Court. This Hon’ble Court has recently admitted his PIL against the Cairn-Vedanta deal.

The Petitioner has obtained the enclosed documents through the RTI Act. He has also complained to the concerned authorities at various points of time which are placed as Annexure P30 & P36.

Facts of the case: Illegality in not granting extension as per the amended notification in the Rules to the earlier Chairman and then members of the SEBI

The Chairman and Whole Time Members of the SEBI are appointed by the Central Government under section 4 (4) SEBI Act 1992. Rules framed under section 29 of the SEBI Act titled as SEBI (Term and Condition of Service of Chairman and Members) Rules lay down the pay, tenure, allowances leave of the Chairman and the WTM. The SEBI (Term and Condition of Service of Chairman and Members)


Rules were amended vide notification no. 2/106/2006-RE dated 23/7/2009 to extend the term of the Chairman and the WTM from three to five years. Copy of the notification dated 23/7/2009 amending the Rules for term and condition of service is annexed hereto as Annexure P1 (From Page NOs. ______to _______). The Director of Capital Market Division put up a proposal on 2/9/09, for aligning the terms of the Chairman and WTM by giving two years extension and the same was endorsed by the Finance Secretary. Copy of the proposal of the Director of Capital Market Division dated 02/09/09 is annexed hereto as Annexure P2 (From page nos. _______to ________). The then Finance Minister stated that before the extension is offered the performance of the concerned officers should be appraised. Copy of the noting dated 08/09/09 of the then Finance Minister is annexed hereto as Annexure P3 (From page nos. _______to ________). The Finance Secretary vide his noting dated 8/10/09 justified the decision for proposing the extension as the performance of the concerned officers was considered good in terms of the extent of the activities SEBI had undertaken and the quality of delivery of those activities and the same was approved by the Finance Minister on 19/10/09. Copy of the noting dated 08/10/09 of the Finance Secretary is annexed hereto as Annexure P4 (From page nos. _______to ________). Thereafter, 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 vide his letter dated 16/11/2009. Copy of the letter dated 16/11/09 for the proposal of extension by the Director Capital Market Division is annexed hereto as Annexure P5 (From page nos. _______to ________). It was at this point that Ms Omita Paul, the then Advisor in the Finance Ministry desired to see the file on 25/11/09. The file was sent to her by the Finance Secretary on 27/11/09, and was seen by her on 30/11/09. The file was once again sent to the Advisor for her perusal on 16/12/09 and noting was made by her on 21/12/09 drawing the attention of the Finance Minister to page 22 regarding the composition of the SEBI Board and the present tenure of the Board. Copy of the relevant pages of the file notings of the aforementioned dates is annexed hereto as Annexure P 6 (From page nos. _______to ________). This document was already there on the file and was brought to the attention of the then Finance Minister at the time the extension was proposed on 2/2/09. It was on the noting of the then Advisor that the then Finance Minister reversed his earlier decision to accord extension to the then Chairman and the Whole time Members by stating that the tenure of the then Chairman was upto Feb 2011 and the ACC was to be moved for extension six months before the tenure came to an end. Copy of the relevant file noting dated


22/12/09 of the then Finance Minister reversing earlier decision of the extension is annexed hereto as Annexure P7 (From page nos. _______to ________). The sole reason for the then Advisor intervening was to ensure that senior officers who were discharging their duties commendably were denied further extension and they are not reappointed. This would create a vacancy shortly and enable her to have her candidate to the post of Chairman appointed in a year’s time. This unmistakable conclusion is supported by the fact that extension was never considered at the appropriate time. As the then incumbent were denied extension on the intervention of the then Advisor Ms Omita Paul, the letter for extension of tenure proposed for the then Chairman and WTM to be placed before the ACC was ordered to be withdrawn, and subsequently orders were issued to start the selection process afresh for the Chairman on10/8/10. Copies of the relevant pages of the notings from 11/01/10 to 22/01/10 withdrawing the proposal for extension and noting the Director dated 06/08/10 seeking clarification regarding extension and the final order dated 10/08/10 of the Finance Minister ordering for fresh selection of the SEBI Chairman are annexed hereto as Annexure P8 (Colly) (From page nos. _______to ________) Suggestion of giving further extension to the existing officers made by the junior officers, was overruled.


II.

Illegal and arbitrary change in the composition of Search-cumSelection Committee for selecting the SEBI chairman and WTM

Under the Rules there is a Search-cum- Selection Committee for selecting the SEBI chairman and WTM. As per relevant Rules the members of the Committee were the Cabinet Secretary, Secretary Financial Services, Chairman SEBI (for whole Time member) and two experts. At the time of initiation of the process for the selection of a new Chairman of SEBI in place of the existing incumbent, the Director General suggested the names of four persons as experts and the Finance Secretary endorsed the names and stated that any two names could be selected. Two of these experts were from the earlier Selection Committee. Copies of the letter dated 18/08/10 by the Director (PM & RE) as well as file noting dated 20/08/10 are annexed hereto as Annexure P9 (Colly) (From Page nos. ____to _____). Though the file was marked to the Finance Minister by the Finance Secretary, the file was sent to the then Advisor. After discussing the matter with the then Advisor, the DG (DOC) apprised the Advisor about the composition of the Committee for the selection of the SEBI Chairman under the Rules and marked the file to the Advisor, Ms Omita Paul. The Advisor, in her noting added the Finance Secretary to the Committee, did not select any of the four

experts (of which two were

existing experts) suggested by the DG/ Finance Secretary, but ordered two


new names of her own to be appointed as experts on the selection committee. Thus three of the five members of the Search cum Selection Committee were hand picked by Ms Paul.

Copies of the noting dated

24/08/10 of the DG (DOC) and the noting dated 25/08/10 of the then Advisor to the FM are annexed hereto as Annexure P10 (colly) (From page nos. ______to ___). The fact that no reasons were given for the rejection of the four experts suggested by the Finance Secretary/DG (DOC) and selecting both the members herself clearly establishes that Advisor had some interest in the composition of the committee which would select the Chairman of SEBI. The Finance Minister appended his signature to the Committee suggested by the Advisor. The Committee nominated by Ms Paul violated Rule 5 of the SEBI (Terms and Conditions of Service of Chairman and Members) Rules. The records show that the officers of the Ministry went to great length to amend the Rules in a manner to accommodate all the members nominated by her. This was done by giving the Finance Minister the discretion to nominate two members to the Search cum Selection Committee. In doing so, permanent primacy was given to the Finance Minister in the choice of the members of Search cum Selection Committee, by amending the rules in a manner to give him powers to nominate two more members at his discretion. Thus


four persons would be nominees of the Finance Minister and two/ three members ex officio members as against the earlier ratio of two experts and two/three ex officio members. Thus the impartiality of the selection process was compromised to the extent that the majority of the members of the selection committee will be the nominees of the Finance Ministry. The amendment notification dated 07/10/10 making change in the composition of the Selection Committee is placed as Annexure P11 (From Page Nos. _______to ______). The documents show that the object of the entire exercise of changing the Rules was to ensure that the Committee desired by the Advisor Ms 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 Ministry. The noting of the Deputy secretary that the amendment at this stage would send “undesirable signals” was ignored. Subsequent to the notification of the amended Rules, the Finance Minister was asked to nominate one more member to the Selection Committee and he nominated Mr Devidayal an ex-bureaucrat who had joined the Congress Party after retirement. III Introduction of Mr Sinha’s candidature through search route and Suppression of emoluments of Sinha’s from the Selection Committee and ACC.


The Department of Economic Affairs vide communication dated 10/09/10, annexed

her eto

as

An n exu re

P 12

( F rom

p age

n os.

________to__________), invited application for the post of Chairman SEBI and one of the criterion among other criteria was: “Keeping in view the role and importance of SEBI as a regulator, it is desirable that persons 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.� The application form for the post at item no. 5 had asked the applicants to file the present pay and scale of pay while item no. 8 had column no. 4 for filling in the pay scale with each of the earlier assignment shown in the experience column. A copy of the application form for the post of Chairman SEBI dated nil is placed as Annexure P13 (From Page Nos. _______to ______). The first meeting of the Search cum Selection Committee was held on 2/11/10. There were a total of 19 application received through advertisement. These included Secretary, Ministry of Corporate Affairs and other senior officials. All the serving officers had filled the pay column. Of these five candidates were short-listed. These persons with their salary were: Shri G P Singhal, Principal Secretary, Madhya Pradesh( 79,000pm); Shri R


Bandhopadhyay, Secy. to the Govt of India(, Ministry of Corporate Affairs, Rs80,000pm); Shri Sidhartha Pradhan, Additional Secretary, Department of Disinvestment(67,000-79,000pm); Shri Himadri Bhattacharya, Executive Vice President, Tata Capital Limited (2.37 lacs pm) and Shri R Sridharan MD of SBI ( 77,765-80,000pm). The highest pay scale was that of a senior official working with in the private sector with the Tatas. His pay scale was 2.37 lacs which would be around 30 lacs per annum. One candidate, Mr U K Sinha, was invited by the Committee. The minutes do not mention the name of the member who suggested the name of U K Sinha CMD UTI AMC. Copy of the minutes of the first meeting of the Search-CumSelection Committee dated 02.11.2010 along with the document showing pay scales of other candidates are placed at Annexure P 14 (Colly) (From Page nos. ______to _____). The second meeting of the Committee was held on 13

th

December 2010.

There were forty days for the officials to have the particulars of U K Sinha filled up as per the application form. In particular the emoluments or the pay scale of Mr Sinha for the present and earlier assignments could have been ascertained and filled in. The emoluments of Mr U K Sinha, which could have been very easily found by either asking him, or found from the four government companies which held majority stake in UTI AMC, or by looking it up on the web site. This omission was not by accident but by


design. Mr Sinha’s total emoluments for the year 2010-11 were at over 4 crores per annum while working in a PSE (3.62 crores for 10.5 months) Copy of the relevant page of the Notes forming part of the Accounts for the year ended march 31, 2011 showing Shri Sinha’s remuneration in UTI AMC is annexed hereto as Annexure P15 (From page nos. ______to ______). The emoluments also had to be concealed because UTI AMC was a PSU and could not pay the emoluments that were being paid to Mr Sinha. The emoluments paid to Mr Sinha was almost 30 times more than paid to those occupying very high position in the government. It was also more than what the bureaucrats senior to him and involved in the selection process were paid by the Government in their entire career. It appears that it was for this reason that Mr Sinha did not apply through the advertisement route because had he done so he would have to reveal his salary. It was for the same reason that his name was proposed through the search route, so that his salary need not be revealed. It was for this reason that the Selection Committee was hand picked by the Advisor, Ms Omita Paul. The Committee at its second meeting recommended two names, that of Shri Himadri Bhattacharya, Executive Vice President, Tata Capital Limited the only candidate from the private sector, and Mr U K Sinha (supposedly from


the Public Sector). Mr U K Sinha’s name was selected by the then Finance Minister, and his name was directed by the Minister to be sent to the ACC for approval. Copies of the minutes of the second meeting of the SearchCum-Selection Committee dated 13.12.2010 along with approval of the then Finance Minister Dated 13.12.2010 are placed at Annexure P16 (Colly) (From page nos. ______to ________). The selection of Chairman of SEBI requires the approval of the Appointment Committee of the Cabinet (ACC). The appointments recommended to the ACC have a standard performa and annexures which are to be filled in by the Ministry recommending the appointment. The recommendation is routed through the Establishment Officer of the DOPT. The proposal for the appointment of Mr U K Sinha was put up to the ACC by the Finance Ministry vide its confidential letter no D.O. No 2/23/2007RE dated 13/12/2010 wherein the Performa for the ACC was filled up. In Annexure 1 item no. 4, it was shown that the post presently held was that of CMD UTI AMC and against the scale of pay it was mentioned: “Not Available”. Copy of the letter dated 13.12.2010 of the Joint secretary, Capital Markets along with Annexures is placed at Annexure P 17 (From page nos. ______to ______). For reasons mentioned above this was done deliberately as the facts of the salary/emoluments were not to be revealed, and a false impression was to be


created that Mr Sinha was getting the normal pay that a CMD of any PSU gets, the highest being Rs1.25 Lacs as per the recommendation of the second pay commission. V Illegality in the deputation and appointment of Mr. Sinha as the CMD of UTI MAC The Department of Public Enterprise vide its DPE OM No DPE/ 11(47)2006-Fin dated 4

th

  December 2007 clarified the “Public Sector

Mutual Fund” means the Mutual Fund registered with and regulated by SEBI where the Government of India, its financial institutions and public sector banks holds/hold individually or collectively more than 50% of equity/shares in the Asset management Company of the Mutual Fund.” th Copy of the DPE OM No DPE/11(47)2006-Fin dated 4  December 2007 is annexed hereto Annexure P 18 (From page nos.________ to ______)   The UTI MF had filed a prospectus with SEBI for a public issue. At various places it had claimed to be a government controlled entity. The relevant extracts of the prospectus dated 09.01.2008 of UTI is placed as  Annexure P19 (From page nos.________ to ______). The document is dated January 9, 2008 and shows the salary of Mr Sinha, the CMD as on January 2008 with basic pay as Rs 23,450 per month etc. Mr Sinha’s history of his deputation to UTIAMC dated back to the period


when he was posted as Joint Secretary in the Finance Ministry overlooking affairs of UTI and was also on the Board of UTIAMC. He got appointed to the post of CEO of UTI AMC by concealing the recommendation of the JPC mentioned below (Para 44, Annexure P 31), and also by overlooking the policy of not seeking deputation in an organization which he had overseen in the Ministry. The first deputation was for a period of two years ending on 2/11/07. The deputation was wrongly approved as being under section 6 (2) (ii) of the IAS cadre rules from 27/12/2206 to 2/11/ 07. A deputation under Rule 6 (2) gives the choice to the deputed person the option to draw the pay of the organization to which he is deputed or his cadre pay. However, Mr Sinha continued to draw the pay scale to which he was entitled and got his pay revised to that of additional secretary in the pay scale of Rs 22400-525-24500 with effect from 10/2/2007, the date of appointment of his junior as Additional Secretary. Copy of the representation dated 29.01.2007 of Shri Sinha to the Special Secretary, DOPT regarding his terms and conditions as CMD, UTI AMC and copy of the letter dated 01.03.2007 of the Desk Officer in DOPT to Shri Sinha are annexed hereto as Annexure P 20 (Colly) (From page nos. ______to _______). His predecessor too had drawn the salary of an IAS officer for the entire period that he was on deputation.


It was decided by the four public sector entities which owned UTIAMC and the government to give another extension of two years to Mr Sinha, and the recommendations were sent to DOPT with the approval of the Finance Ministry. When the matter of deputation was put up to the Prime Minister, Mr Sinha was given interim extension for three months upto 2/2/08 on the grounds that his deputation was coming to an end and general matter of policy regarding deputation of IAS officers under section6(2)(ii) were to be decided. The Consolidated Deputation Guidelines for All India Services was circulated by the Ministry of Personnel on 28/11/07 and under the Guidelines the deputation of Mr Sinha was determined to be under Rule 6(1) and not under Rule 6(2)(ii) as was wrongly decided earlier. UTI AMC was a central PSU as per clause 1.2- 1.2.3 of the Guideline. Copy of the letter dated 28.11.2007 of the Director (Service) enclosing guideline and the noting of the Cabinet Secretary dated 6.11.2007 relating to   extension of   deputation   by three months by the Prime Minister   are placed at Annexure P 21 (Colly) (From page nos.________ to ______).   The Finance Ministry, Department of Economic Affairs vide its OM dated 12/12/2007 requested the DOPT to extend the deputation by the balance one year and nine months under Rule 6 (1). Copy of the OM dated 12/12/2007 regarding extension of deputation is placed at Annexure P22 (From page


nos.________ to ______).   In the note prepared   by the section officer of   DOPT,   it was stated that the recommendation of the Department of Economic Affairs  for further deputation under section 6(1)   be referred to the EO Division.   The Establishment officer ordered that in view of the latest instructions his ( Mr Sinha’s) further deputation will come under Rule 6(1) and a note be prepared for the Cabinet Secretary for extension under Rule 6 (1) mentioning the cooling off period between the two deputation.  Copy of the note dated 2/1/08 of the Section Officer along with noting of the Establishment Officer dated 4/1/08 is annexed hereto as Annexure P23 (From Page NOs. _______to _______). The Appointment Committee of the Cabinet vide its letter dated 10/3/2008 advised the Finance Ministry (Department of Economic Affairs) that extension of tenure as CMD of UTI AMC to Mr Sinha had been granted till 31/5/2008 and thereafter he would return to his parent cadre (Bihar) and directed the Ministry to find a replacement by then. Copy of the letter dated 10/3/2008 by the Appointment Committee of the Cabinet is placed at Annexure P 24 (From Page NOs. _______to _______). Instead of accepting the order of the Appointment Committee of the Cabinet, and conceding that there was no way out but to comply with the orders of the ACC, a conspiracy was hatched between Mr Sinha, the SBI chairman, Finance Ministry officials and the DOPT to defy the Cabinet


committee in a manner that Mr. Sinha could continue in the post without either informing or taking approval of the ACC in the following manner: Mr. Sinha would seek voluntary retirement, SBI Chairman would make a fresh offer. Mr. Sinha would seek permission for post retirement commercial employment, The Ministry of Finance would recommend the re- employment as commercial employment, The DOPT would approve it and waive the post retirement waiting period before accepting the commercial employment. All the concerned persons in the decision making process would ignore the meaning of commercial employment as stated in the section and designate employment with the PSE as commercial employment. The file would not be sent to the PMO or the ACC for information or approval. Copy of the letter dated 03.04.08 of the SBI Chairman to the Finance Secretary requesting the govt. to approve the proposal of extension for two years, copy of the letter of the Company Secretary dated 11.04.2008 to Shri Sinha regarding compensation in case of his continuing in UTI AMC after taking VRS, copy of the letter dated 15.04.2008 of Shri Sinha to the Chief Secretary, Govt. of Bihar for


VRS, copy of the application dated 15.04.08 of Shri Sinha seeking VRS in the prescribed format under Schedule L, copy of the letter dated 30.04.08 regarding Sinha’s sanction of VRS w.e.f. 15.05.08, copy of the OM dated 01.05.08 regarding Shri Sinha’s reemployment in the same position after VRS and copy of the letter dated 17.06.08 of DOPT to of the Chief Secretary, Bihar granting permission for post VRS commercial employment with UTI AMC

are annexed

hereto as Annexure P25 (Colly) (From Page Nos. ______ to ______). This omission was not accidental but deliberate as it was the only way out for Mr Sinha and those interested in his continuation for reasons unsaid to retain him as CMD of UTI AMC inspite of the orders of the ACC headed by none other than the Prime Minister. The note prepared by the Section Officer in the DOPT was approved by every authority right upto the Minister even though Rule 26 was reproduced in its entirety in the note. Further, the DOPT also apparently ignored the fact that the declaration given by Shri Sinha under Rule 26 (3) (ii) of AIS Death cum Retirement Benefit Rules that in the last three years of his official career he has not been privy to sensitive or strategic information of UTI AMC could not be true as he was already in deputation in the same organization at the time of taking VRS. The text of the relevant portion of Rule 26 is reproduced


which states as to what commercial employment means: `Commercial Employment’ means: (i) an employment, whether paid or honorary, in any capacity including that of an agent under a company, firm, co-operative society, body or individual engaged in trading, commercial, industrial, financial or professional business, and includes a directorship of such company or partnership of such firm but does not include employment under a body corporate, wholly or substantially owned or controlled by Government.� Copies of the note dated 17.04.08 and Note of Section Officer dtd 09/05/08 containing Rule 26 (3) (ii) of AIS Death cum Retirement Benefit Rules and note of MOS dated 17/6/08 are annexed hereto as Annexure P26 (Colly) (From Page Nos. ______ to ______). Mr Sinha in column 5 of his application to the Special Secretary, DOPT, dated 15/4/2008 filed in Schedule L under Rule 26 for seeking permission for taking commercial employment post retirement stated that the pay scale and the pay drawn by him at the time of his retirement was 22400-525-24500 and present pay as Rs23,450. In column 7(f) relating to the details of the commercial appointment, against the question as to whether the post was advertised, and if not as to how the offer was made;


Mr Sinha wrote that such high level posts are not advertised. This assertion was wrong in light of the assurance of the government given to the JPC as mentioned below (para 44). Further the application under Rule 26 was in violation of the meaning of commercial employment. The records show that the proposal for further extension of deputation of Mr Sinha as CMD UTIAMC was denied on 10/3/2008. His application for voluntary retirement and permission for commercial employment is dated 15/4/2008. His retirement was accepted from 15/5/2008 but the permission of the Central Government for the post retirement commercial employment to take up employment with UTI AMC was given only on 17/6/08. Though he was reemployed in the same organization he was occupying the post illegally for a period of one month. The illegal increase in emoluments with retrospective effect and the signing of the balance sheet of UTI AMC on 17/5/08 took place on dates on which he should not have been office. The implication of this mischief of illegal commercial re-employment of Mr Sinha was that he could draw full pension for over 30 years of service as an IAS officer and rake in crores while working for the same PSU to which his deputation was denied by the ACC headed by the Prime Minister. Though Shri Sinha remained in the same position and the organization remained the same, the character of the employment changed from that of a government servant on deputation to a PSU to that of a retired bureaucrat


having taken up commercial employment. Within a period of a day the emoluments too increased from around six lacs per annum to one crore per annum. Later on these emoluments were made over two crores and then four crores. Mr Sinha also gave himself emoluments of over Rs 2 crores per annum for the period of his deputation from the IAS to the PSU retrospectively on a date on which he could not be occupying the office of CMD UTI AMC. Mr Sinha’s voluntary retirement was with effect from 15/5/08 while the permission for commercial employment under Rule 26(1) of the AIS (DCRB) was given on 17/6/08 and hence he could not be occupying the office from 16/5/5/08 to 16/6/08. The fact that the emoluments were in crores, were with retrospective effect and was done when he was not entitled to be in office or sign the balance sheet reflects adversely on his integrity. He also put in his papers for voluntary retirement and got himself re-employed in the same PSU when the extension of his deputation was turned down by the ACC. His re-employment was against the relevant Rules. All this crucial information, having a bearing on his integrity, had to be concealed from the Chairman of the Selection Committee who as Cabinet Secretary was aware of the deputation history of Mr Sinha in 2007-2008. It is undisputed through various documents, the filing of prospectus, performa of his application for post retirement employment etc, that Sh.


Sinha was drawing a pay in the scale of Rs 23,450 per month till the point of his retirement, and was to draw one crore thereafter, that is from 17/6/2008 according to offer made to him by the Company Secretary and approved by other authorities. In the form filled on 15/4/2008, Shri Sinha had shown his pays scale as Rs 23450. Mr Sinha’s commercial employment commenced from 17/6/2008. His voluntary retirement was from 15/5/2008. The balance sheet for the year ending 31

st

March 2008 dated 17

th

May 2008 (a Saturday) shows that the

remuneration in the form and salary and allowances (including perquisites) paid to Mr Sinha by UTI AMC was Rs 2 crores for 2007-08, and in addition he was paid a sum of Rs 44 lacs for three months and three days in the previous year (2006-2007) Copy of the relevant page of the balance sheet dated 31/03/2008 is annexed hereto as Annexure P 27 (From Page Nos. ______ to ______). The first act that Mr Sinha

did on 16/05/08,

when he should have been in retirement and not the CMD, as the CMD was to give himself a handsome pay hike many more times than every other person of the government be it in the executive, the judiciary, the PSU or in any other position. Even a promoter of a privately owned company does not act in the manner Mr Sinha did of giving himself a raise of 30 times with retrospective effect. This hike pertained to the period for which he was on deputation as an IAS officer in the employ of the government, and for


which he had shown his remuneration in various documents as linked to a basic of Rs 23,450. The approval was for emoluments of one crore per annum from 17/06/2008. Mr. Sinha increased his emoluments to four crores in 2010-2011, 2.36 crores, for the year 09-10, and 2.15 crores for 08-09. Copies of the relevant pages of the balance sheet of the year ended March 31, 2009, balance sheet of 2009-10 and 2011 -12 are annexed hereto as Annexure P28 (Colly) (From page nos. _______to ________). Mr Sinha paid himself an excess of over 7.5 crores even after considering his pay of Rs one crore per annum for the post retirement period from May 2008 as legitimate. It is for this reason that the emoluments of Mr Sinha had to be concealed from the Cabinet Secretary, the Chairman of the Search cum Selection Committee who also had knowledge of Mr Sinha’s history of deputation, of extensions, of it being under Rule 6(1) and of it having come to an end. The Cabinet Secretary had not changed between November 2007 to February 2011. As the papers of Mr Sinha’s appointment to the ACC would also go through him, hence the emoluments had to be concealed from him and the members of the ACC and the Cabinet Secretary. It was also probably for this reason that the composition of the Selection Committee was changed by amending the relevant Rule so that the Cabinet Secretary,


the Chairman of the Selection Committee is reduced to the minority of one. The history of Mr Sinha’s deputation

to UTI AMC and the manner in

which he increased his emoluments cannot be described as acts of a person of integrity, much less of high integrity, expected from a person to be appointed as chief of SEBI. The purpose of denying extension to the then incumbents and appointing a manipulative person with questionable integrity to the sensitive post of SEBI chairman by committing fraud on the ACC could not be without a purpose. Mr Sinha forgoing emoluments of Rs 4 crores to serve on a post of Rs36 lacs and losing the pension paid to him as CMD of UTI AMC, too could not be without reason. The promoters of companies who were under investigations by SEBI and who had thousands of crores on stake could be expected to lobby and replace the intransigent officers with more pliable and amenable ones. V

Post of CMD of UTI AMC was kept vacant for 17 months

Shortly after the appointment of Mr. Sinha in mid February reports started appearing in the press from April 2011, that the brother of Ms Paul, Jitesh Khoshla, though not considered suitable for the post of CMD by a Committee was nevertheless the front runner for the post of UTI AMC because he had the backing of the Finance Ministry and the state owned financial institution, which owned the majority shares of UTI AMC. These


reports stated that the Finance Ministry was insistent that Mr Khosla be appointed as CMD but this was being resisted by a foreign investor who had 26% shares in UTIAMC (due to a subsequent divestment through a controversial private placement) and whose consent was necessary. Copy of the article dated 09/06/2011 published in India Express, the article 13/06/2011 published in The Economic Times and the article dated 23/01/2012 published in the First Post are placed as Annexure P 29 (colly) (From Page Nos. ____to _____). Specific complaints were filed by the petitioner with the Prime Minster on 30/5/2011, 12/9/2011 and 10/11/2011, which are placed at Annexure P 30 (colly) (From Page Nos. ____to _____), against Omita Paul. The practice of forwarding the complaint to the Ministry for their comments would have been followed but it too did not have any effect. The post of CMD UTIAMC continued to remain vacant for seventeen months because the brother of Ms Omita Paul could not be appointed to the post and the government remained indifferent to the fact that the fund had a corpus of around Rs 60,000 crores and

a large part of it came from

government sources and pension schemes. The massive losses incurred by the government, the investors and the tax payers in the two UTI scams leading to setting up of JPC and its recommendations accepted by the government were ignored by those having


their petty interests in the post of CMD of UTI AMC. The overriding public interest of the government and the PSU which had invested its funds, the pension funds and investors who too had invested their money amounting to Rs 60,000 crores was ignored for the sake of the massive illegal emoluments that IAS officers could milk the organization while on deputation/commercial employment by treating it as their fiefdom. UTI had been involved in a major scam in which ordinary investors lost huge sums of money.

In 1998 when the fund crashed a Rs 3500 crore

government bailout plan rescued it. Then it crashed again in 2001 due to a political appointee being made its head and the fund lost almost half of its money, asset value of Unit 64 became Rs 8 instead of Rs 14 (the traded value) and the government agreed to make it Rs 10 so that the investors would incur only a 30% loss. The government announced a Rs 14,500 crore bailout programme, which was paid for by the tax payer. A Joint Parliamentary Committee went into the entire scam and submitted its report.

Para 21.9 (v) of the report is placed as Annexure P 31 (From

Page Nos. _______to ______) and is reproduced below: “(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 organisation 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.� Neither Mr U K Sinha, the ex CMD of UTI AMC nor Mr Jitesh Khoshla were professionals nor were proposed to be recruited as professionals through an advertisement. Yet they wanted to enjoy the fantastic salaries which they did not merit. Neither of them met any of the five criteria in the advertisement inserted recently for the post of UTI CMD in newspaper dated 04/06/2012 placed at Annexure P 32 (From Page Nos. ____to _____). The advertisement was released only after the brother of Ms Omita Paul/Advisor opted out of the race because the tenure of Ms Paul/ Advisor was coming to an end on account of it being co terminus


with that of the Minister. Copy of the Times of India report dated 07/05/2012 is annexed hereto as Annexure P 33 (From Page Nos. _______to _______). It was then and only then the advertisement was released, fulfilling the commitment given to the JPC by the government in 2002. The petitioner had brought to the above mentioned assurance of the government to the JPC to the notice of the Prime Minister and placed it in public domain. VI

Complaint of the then Whole Time Member Dr. Abraham against Mr. Sinha and Ms. Paul to the Prime Minister of lobbying for companies against whom the complaints were being examined by the SEBI

The allegation of Ms Paul acting on behalf of the corrupt companies and how Mr Sinha was lobbying for them with the WTM was revealed by Dr Abraham as a WTM (Whole Time Member) of the SEBI Board, in a letter written by him on 1/6/2011 to the Prime Minister, after Mr Sinha became the Chairman of the SEBI. The letter is a telling expose on extraneous forces influencing the functioning of the regulator of the capital market. In the letter the WTM alleged that Mr Sinha tried to influence him on four cases and invoked the name of Advisor while doing so. One of the cases related to securities fraud of Reliance group, and others related to Tayals of Bank of Rajasthan, Sahara, and MCX. While trying to influence him, Mr


Sinha had stated that these matters were “engaging the attention of Union Minister for Finance, or Mrs Omita Paul, Advisor to the Finance Minister,�. This letter dated 1/6/12 came in the public domain through a RTI query and is placed at Annexure P 34 (From page nos. ____ to _____).

The events subsequent to the writing of the letter to the Prime

Minister show that there was great substance in the allegations and given the credibility of the WTM as against that of Sinha and Ms Paul, the former was speaking the truth. Sahara was a company taking deposits from small un bankable people. From 2008 onwards, it violated the deposit norms under section 58 A of Companies which allowed it to collect unsecured deposits from debentures up to 10% of its owned fund. By the Acceptance of Deposit Rules, it could have collected only Rs 230 crores but went on to collect over Rs 20,000 crores. Copy of the relevant portion of the balance sheet of Sahara year 01/07/2010 to 30/06/2011 is placed as Annexure P 35 (From page nos. ____ to _____). Almost the entire money collected was siphoned out and virtually there were negligible assets in the company in whose name deposits were taken from the public so that the group could not be compelled to refund the amount. It was the largest ponzi scheme involving 2 crore poor people. These deposits were being shown as OFCD (optionally fully convertible debentures) and no public issue had been made though the


inflated number of depositors were said to be two crores. The WTM had detected the scam in a public issue proposed by the group for a real estate company and showed great courage in taking on the group as the ongoing scam was going on for decades and no authority dared to cross swords with the Sahara group. The WTM had passed orders against the company which was contested by Sahara in the High Court at the time he wrote the letter to the Prime Minister. However, by a freak chance the matter came before him for adjudication because this Hon’ble Court referred the matter to SEBI. He adjudicated the matter at the fag end of the tenure (23/6/11). In a well reasoned order, he directed the group to refund the entire money to the investors. His order was upheld by the Securites Appellate Tribunal and an appeal against the said order is pending before this Hon’ble Court. In fact, the matter has been heard and judgment is reserved. The second case that interested the Advisor to the Finance Minister and Mr Sinha was the securities fraud of Rs 513 crores of Reliance group (Mukesh Ambani group). Reliance Petroleum shares were short sold for Rs 290 by the group and later bought back when there was a hefty fall in price when the group sold the shares in the cash segment. The Reliance group made Rs513 crores in five days .The securities fraud took place in Nov 2007. Such a blatant act of securities fraud is by the promoter was unprecedented


and only the Reliance group could have committed it. The penalty under the law is three times the amount of the fraud and the total amount involved was 2000 crores along with criminal prosecution. Reliance tried to settle the matter by paying a fine of only Rs two crores and then eight crores through consent order. It was not even willing to pay back the fraud amount of Rs 513 crores. These meager offers of settlement were made by Reliance to buy time so that the honest officers of SEBI could be replaced by an amenable Chairman like Mr Sinha. Mr Sinha has changed the circular on the consent order

(25/5/2012) in a

manner to favour Reliance group and continues the settlement of the criminal offence through a consent order. The circular was issued without the consent of the Board and seeks to undo the provisions of the ACT and would not stand legal scrutiny. Deliberate loophole was left in clause 25 of the circular to give relief to the group. Copies of the circular on consent order dated 25.12.12 along with the two complaints dated 10/09/2011 & 28.05.2012 filed by the petitioner with the CVC on the Rs 2000 crore scam as well as complaint dated 21/06/2012 to the Cabinet Secretary regarding Shri Sinha’s appointment are placed as Annexure 36 (Colly) (From Page Nos. ______to ______). The attempts to get information under RTI have been denied and even an application to reveal the names of the thirteen entities which were involved in the scam was turned down in Appeal by


SEBI. The third case related to the Tayals of Bank of Rajasthan in whose favour the outgoing member Prashant Saran passed a favourable order so that he could be re appointed. The order only confirmed the allegation of Dr Abraham. Similar conclusions were made by the media. Copies of the Articles in Mint dated 02/04/2012 and Financial Express dated 22/07/2012 on Mr Saran’s order are enclosed as Annexure 37 (From page Nos. ______to _______). The fourth case related to MCX which wanted permission to trade in securities (cash and derivatives) in its stock exchange. The previous regime of SEBI had denied the permission and had passed an order against MCX. The issues relating to operations of Stock Exchnages were referred to a committee by the then management of SEBI. The committee was headed by Dr. Bimal Jalan, former governor RBI. The committee submitted its report, however the Ministry ensured that Dr Bimal Jalan Committee report is taken up by SEBI only after Mr. Sinha became the Chairman so that it can ensure that only those recommendations, which suits MCX and others are accepted, and other recommendations are rejected. This would enable MCX to operate as a full fledged stock exchange list the shares of the proposed stock exchange and help in giving market value to the MCX license. Further the terms for complying with as this other norms too have been diluted after


Mr. Sinha took charge. Further damage was done to the institution of SEBI in that when two of the three WTMs of SEBI along-with with three Executive Directors refused to apply afresh on Mr Sinha’s appointment, reportedly on integrity issues, as stated by one of the WTMs in his letter to the Prime Minister. These posts remained unfilled for quite some time and the post of one WTM for over a year. It could also be on account of giving Mr. Sinha greater powers in selecting WTM of his choice so that they would not pose problems in ruling in favour of corporates. The Selection Committee had formed a sub committee under the Chairmanship of Mr Sinha to select WTM. There is every reason to believe that the purpose of appointing Mr Sinha through a fraud was not only wrong but was motivated by extraneous factors which were not in public interest or in keeping with the object of SEBI. That the Petitioners have not filed any other petition before this Hon’ble Court or any High Court, seeking the same or similar relief. The Petitioners have no other equally efficacious alternative remedy than to approach this Hon’ble Court by way of this petition.

Grounds Because the act of the Respondents in appointing Shri Sinha as the


Chairman SEBI is arbitrary and hence, in violation of Article 14 of the Constitution. The information regarding Shri Sinha’s getting about Rs. 4 Crores per annum as emoluments as the CMD of UTI AMC and also the facts regarding his deputation in the UTI AMC and when denied extension how he took VRS and immediately thereafter illegally joined UTI AMC and got his salary increased to Rs. 4 Crores per annum were not placed before the Search-cum-Select Committee. This Hon’ble Court in the case relating to the challenge to the appointment of Shri P. J. Thomas as the CVC in CPIL Vs. UOI & Ors. (2011) 4 SCC 1 held “The decision to recommend has got to be an informed decision keeping in mind the fact that the CVC as an institution has to perform an important function of vigilance administration. If a statutory body like the HPC, for any reason whatsoever, fails to look into the relevant material having nexus to the object and purpose of the 2003 Act or takes into account irrelevant circumstances then its decision would stand vitiated on the ground of official arbitrariness (see State of A.P. v. Nalla Raja Reddy5). 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, it was important that the complete facts particularly those


having direct bearings in deciding the question of integrity should have been placed before the Search-Cum- Selection Committee. The consent of the ACC too was obtained through fraud by suppressing the information relating to the emoluments. Because the appointment of Shri Sinha as the Chairman of the SEBI is not only arbitrary but also illegal as he failed to fulfill one of the eligibility conditions as laid down in Sub-section 5 of Section 4 of the SEBI Act as well as the advertisement. Sub-Section (5) of Section 4 of the Act provides that the Chairman shall be person of integrity. Further, the advertisement provided that the person should be of high integrity. In the present case, the manner in which the facts regarding Shri Sinha’s getting about Rs. 4 Crores per annum as emoluments as the CMD of UTI AMC were suppressed before the Selection Committee and also the facts regarding his deputation in the UTI AMC and when denied extension how he took VRS and immediately thereafter illegally joined UTI AMC and got his salary increased to Rs. 4 Crores per annum clearly raise serious question about his integrity. Moreover, Mr Sinha illegally also gave himself emoluments of over Rs 2 crores per annum for the period of his deputation from the IAS to the UTI AMC retrospectively after . Because the appointment of Shri Sinha as the Chairman SEBI is not only arbitrary but also malafide considering the manner in which the advisor to


the Finance Minister ensured that the earlier Chairman could not get further extension though he was entitled to get extension of two years as per the amended notification and also the manner in which the composition of Search-cum- Selection Committee for selecting the SEBI Chairman and WTMs was changed illegally to give primacy to the Finance Ministry so that Shri Sinha’s appointment could be ensured. It was probably also done to reduce the Cabinet Secretary, who was ex officio Chairman of the Committee, to a minority as he was aware of the deputation history of the candidate to be selected and the emoluments drawn by him would have shocked him and alerted him to the illegalities involved. Because the appointment of Shri Sinha as the Chairman SEBI was done by abusing the official position for extraneous consideration as it was the result of deep conspiracy to benefit some of the big corporates against whom the complaints were pending before the SEBI. One of the earlier WTMs in his complaint to the Prime Minister made serious charges against the Advisor to the Finance Minister and Mr. Sinha of acting on behalf of the corrupt companies. The letter is a telling expose on extraneous forces influencing the functioning regulator of the capital market. In the letter the WTM alleged that Mr Sinha tried to influence him on four cases and invoked the name of Advisor while doing so. One of the cases related to securities fraud of Reliance group, and others related to Tayals of Bank of Rajasthan,


Sahara and MCX. Because shortly after the appointment of Mr Sinha as Chairman of SEBI, all out efforts were made by the Finance Ministry to appoint the brother of the Advisor as the CMD of UTIAMC, and the post remained vacant for sixteen months as he could not be appointed. His appointment was objected to by a foreign shareholder who had bought a 26% stake because he was not suited for the post. The post continued to remain vacant till such time it became clear that the Advisor will not be continuing in the post and it was only then that the post was advertised and according to the advertisement the brother of the Advisor did not meet even one of the five the criterion for selection. Thus, the manner in which the post of the CMD UTI AMC where Shri Sinha was last working and getting Rs. 4 crores per annum as emoluments was kept vacant for 16 months to appoint the brother of the Advisor of the Finance Minister, though ultimately could not be done, also shows arbitrariness and malafide. Because the deputation to UTI AMC had been approved earlier under section 6(1) of the IAS Cadre Rules. Extension too was sought under section 6 (1) by the Finance Ministry and was approved for part of the period by the ACC through the DOPT. UTI AMC was held to be a Central PSUs by all the authorities in the Finance Ministry, Ministry of Personnel and the Cabinet Secretariat and the Department of Public Enterprise. The


employment under UTI AMC could not become a commercial employment as defined under the Rules. The deputation to UTIAMC could not be a 6(1) deputation as well as a commercial employment at the same time. Further, the DOPT also apparently ignored the fact that the declaration given by Shri Sinha under Rule 26 (3) (ii) of AIS Death cum Retirement Benefit Rules that in the last three years of his official career he has not been privy to sensitive or strategic information of UTI AMC could not be true as he was already in deputation in the same organization at the time of taking VRS. Because the manner in which Mr Sinha increased his emoluments was illegal for a PSU as no CMD or a person can receive the emolument that Mr Sinha gave himself. The two crores that Mr Sinha took as emoluments on 16/5/2008 for the financial year 07-08 and Rs 44 lacs for three months in the previous year for the period that he was under deputation was an act of corruption and misuse of office. These excess emoluments needs to be disgorged as the wrong doer cannot profit from his wrongs, nor can crores be paid by wrong interpretation of law. The disgorgement is necessary in order to set an example that public interest is paramount and cannot be sacrificed for personal welfare of an individual officer. PRAYERS In the interest of justice and for the facts and circumstances stated herein


above it is most respectfully prayed that this Hon’ble Court may graciously be pleased to:

issue a writ of quo warranto or any other direction against Respondent No. 4 (Shri U K Sinha) to remove him from the post of Chairman, SEBI; issue a writ of mandamus or any other direction to initiate criminal investigation into the entire selection process of Respondent No. 4 as the Chairman, SEBI; issue a writ of mandamus or any other direction to initiate criminal investigation into the appointment of Respondent No. 4 as the CMD of UTI AMC and to take consequent action thereupon; and pass such other order or further orders as this Hon’ble Court may deem fit in the facts and circumstances of the case;

Filed by Drawn by: (Prashant Bhushan) Drawn on : Filed on :

Advocate for the Petitioner -08-2011


IN THE SUPREME COURT OF INDIA [CIVIL WRIT JURISDICTION] WRIT PETITION (CIVIL) No. ___________of 2012 IN THE MATTER OF:: Arun Kumar Agrawal

… Petitioner //Versus//

Union of India & Ors

…Respondents

AFFIDAVIT I, Arun Kumar Agarwal, S/o Late Sh. R. S. P. Agrawal, aged about 55 yrs, r/o, T 8 Eagleton Golf Village, 30 km Bangalore, Mysore Highway, Bidadi, Ramnagara 562109, Karnatka, do hereby solemnly state and affirm as under:

That I am the Petitioner in the aforementioned writ petition and being familiar with the facts and circumstances of the case am competent to swear this Affidavit on its behalf.

That I have read and understood the contents of the abovementioned Writ Petition from page no. ______to _______and Synopsis & List of dates


from pages B to _____ and application for interim from page no. _____ to _____and I state that the same are believed to be true and correct to the best of my knowledge on the basis of information received by me and believed to be true. That the Annexures annexed to the Writ Petition are true copies of their respective originals.

DEPONENT VERIFICATION: I, the above named Deponent, do hereby verify that the contents of the above affidavit are true and correct to my knowledge, no part of it is false and nothing material has been concealed therefrom. Verified at ________________on this _______day of July 2012.


DEPONENT


IN THE SUPREME COURT OF INDIA [CIVIL WRIT JURISDICTION] WRIT PETITION (CIVIL) No. ___________of 2012 IN THE MATTER OF:: Arun Kumar Agrawal

… Petitioner //Versus//

Union of India & Ors

…Respondents

APPLICATION FOR INTERIM DIRECTION To, The Hon’ble the Chief Justice of India and His Companion Justices of the Hon’ble Supreme Court of India. The Humble petition of the petitioner above-named

MOST RESPECTFULLY SHOWETH:

That the present writ petition is being filed in public interest under Article 32 of the Constitution of India to challenge the appointment of Respondent No. 4, Mr U K Sinha as Chairman of SEBI on the grounds of his not being a person of integrity which was one of the eligibility conditions as laid down in Sub-section 5 of Section 4 of the SEBI Act as well as

in

government communication and also for fraud committed on the Search and


Selection Committee and the Appointment Committee of the Cabinet. The fraud relates to concealing from the Committees the unheard emoluments of over Rs four crores per annum which he wrongfully earned while working for a PSU by declaring the post of the CMD, UTI AMC as commercial appointment. The information relating to emoluments was mandatory information and it had a material bearing on the selection to a post of high integrity that Shri Sinha failed to fulfill. Moreover, the facts regarding Shri Sinha’s illegal appointment as the CMD of the UTI AMC (i.e. the post which he held before joining the SEBI), after his extension to the deputation in UTI AMC was denied by the ACC, by taking VRS from the govt. and immediately thereafter joining the UTI AMC as a commercial appointment was not placed before the Search-cum-Select Committee. The developments subsequent to the appointment of Shri Sinha as the Chairman SEBI show that it was done for extraneous consideration to benefit some of the big corporates like Reliance, Sahara against whom action after investigation was pending before the SEBI. The Petitioner is, therefore, also seeking an investigation into the entire process of the appointment of Shri Sinha as CMD, UTI AMC as well as Chairman, SEBI. From the facts set out in the accompanying petition, it is clear that the Petitioner has an excellent case and has every hope of succeeding in the petition. It is submitted that irreparable injury would be done to the public interest, if Respondent No. 4 is allowed to continue to function as the Chairman of SEBI which is a statutory regulatory body of the Capital market particularly when there is serious doubt about his integrity which is one of the eligibility criteria for the said post. Moreover, his appointment


is in total breach of rule and hence, illegal. Even otherwise, public interest would be first casualty if person like Respondent No.4 whose integrity is questionable is permitted to cling on to such an important post. Further, it is essential that an immediate enquiry is ordered into the entire selection process of Respondent No. 4 as the Chairman, SEBI as it was done by misusing official position for extraneous considerations and also to initiate criminal investigation into the appointment of Respondent No. 4 as the CMD of UTI TMC and to take consequent action.

In view of the abovementioned facts it is respectfully submitted that this Hon’ble Court may be pleased to pass the following orders during the pendency of the accompanying writ petition:

PRAYERS

restrain Respondent No. 4 from functioning as the Chairman of the SEBI; direct an immediate enquiry into entire selection process of Respondent No. 4 as the Chairman, SEBI; direct the criminal investigation into the appointment of Respondent No. 4 as the CMD of UTI TMC; and pass any other or further orders, as this Hon’ble Court may deem fit and


proper.

Petitioner

(Prashant Bhushan) Through: Counsel for the Petitioner New Delhi Dated:

PAGE \* MERGEFORMAT 69


SEBI, UK Sinha, Omita Paul