Supreme Court of India
ARUN KUMAR AGRAWALversusUNION OF INDIA & ORS.
- Citation
- 2013 INSC 744
- Decided
- 1 November 2013
- Disposal
- Dismissed
- Bench
- S S NIJJAR
Holding
The appointment of U.K. Sinha as Chairman of SEBI is valid; the petitioner failed to prove any lack of integrity, mala fide, or conspiracy, and the petition is dismissed.
Summary
The petitioner challenged the appointment of U.K. Sinha as Chairman of SEBI on grounds that he failed to satisfy the statutory requirement of "high integrity" under Section 4(5) of the SEBI Act, alleging mis‑representation, irregular deputation, false declarations, and a conspiracy to secure his selection. The Court examined the statutory provisions, the procedural history of the selection, the petitioner’s evidence, and the standards of proof for allegations of mala fide and conspiracy. It held that SEBI is an institution of high integrity and that the statutory requirement of integrity is satisfied by the respondent, and that the petitioner failed to produce specific, credible evidence to prove mala fide, mis‑statement, or conspiracy. The Court also found the petition was not a bona‑fide public‑interest litigation, as the petitioner did not meet the test of uberrimae fide. Consequently, the appointment was upheld and the writ petition dismissed.
Issues considered
- Whether the appointment of U.K. Sinha as Chairman of SEBI violates Section 4(5) of the SEBI Act requiring a person of high integrity.
- Whether the petitioner has established allegations of mala fide, mis‑representation, false declarations, and conspiracy in the selection process.
- Whether the procedural changes to the Search‑cum‑Selection Committee and the deputation of the respondent were illegal or colourable.
- Whether the writ petition is maintainable as a public‑interest litigation under Article 32.
- Who bears the burden of proof for allegations of mala fide and conspiracy.
Legislation cited
- All India Services (Death-cum-Retirement Benefits) Rules, 1958s. Rule 26
- Companies Act, 1956s. 617
- IAS Cadre Rules, 1954s. Rule 6(2)(i), s. Rule 6(2)(ii)
- Indian Penal Code, 1860s. 120-B
- SEBI (Terms and Conditions of Service and Members) Rules, 1992s. Rule 3, s. Rule 5
- Securities and Exchange Board of India Act, 1992s. 4(5)
Subjects
SEBIChairman appointmentIntegrity requirementPublic interest litigationArticle 32Mala fideConspiracyWrit petitionSelection committeeDeputationIAS
Judgment
[2014} 3 S.C.R. 861
ARUN KUMAR AGRAWAL A
v.
UNION OF INDIA & ORS.
(Writ Petition (Civil) No. 374 of 2012)
NOVEMBER 01, 2013
B
[SURINDER SINGH NIJJAR AND
PINAKI CHANDRA GHOSE, JJ]
CONSTITUTION OF IND/A, 1950:
c
Art.32 - Writ petition challenging appointment of
Chairman, SEBI - Held: Section 4(5) of SEBI Act inter alia
stipulates that Chairman and other Members of SEBI shall
be persons of "ability, integrity and standing who have shown
capacity in dealing with problems relating to securities market" 0
- Thus, statutorily, a person cannot be appointed as
Chairman/Member of SEBI unless he or she is a person of
high integrity - Therefore, selection and appointment of
Chairman, SEBI could be challenged before Supreme Court
in a writ petition under Art. 32 of the Constitution on the E
ground that he does not satisfy the statutory requirements of
a person of high integrity - Securities and Exchange BoarrJ
of India Act, 1992 - s. 4(5).
SECURITIES AND EXCHANGE BOARD OF /NOIA
ACT, 1992: F
s.4(5) - Appointment of Chairman of SEBI - Challenged
on the ground of integrity, ma/a fides, conspiracy etc. - Held:
SEBI is an institution of high integrity -- The functions
performed by it are such that any malfunctioning in G
performance of such functions can disturb economy of the
country - Therefore, only persons of high integrity would be
eligible to be appointed as Chairman/Member of SEBI - This
is imperative - There is no substance in the alleged
861 H
862 SUPREME COURT REPORTS [2014] 3 S.C.R.
A irregularities regarding deputation of fourth respondent, the
alleged misstatement/non-disclosure about his pay scale/
sanctioned emoluments as disclosed -- There is nothing
which would render him a person of not high integrity - SEBI
(Terms and Conditions of Service and Members) Rules, 1992
B - r.3(5) -- /AS Cadre Rules - rr.6(2)(i) and 6(2)(ii).
Appointment of Chairman, SEBI - Allegation of ma/a fide
- Held: If the a/legations of ma/a fide are established, it would
vitiate the selection procedure, recommendation and
C appointment of fourth respondent as Chairman, SEBI - But,
burden of proving the allegations of ma/a fide. would lie very
heavily on petitioner - It was incumbent on petitioner not only
to make specific allegations, but also to produce very strong
evidence to lead to a clear conclusion that the selection was
actuated by ma/a fide - Petitioner has not made out a case
D of ma/a fide to vitiate the selection process and appointment
of fourth respondent as Chairman, SEBI.
Appointment of Chairman, SEBI - Allegation of
conspiracy - Held: The charge of conspiracy has to be taken
E seriously as it involves commission of very serious criminal
offence uls 120-B, /PC - Such a charge of criminal intent and
conduct had to be clearly pleaded and established by
evidence of very high degree of probative value - No notice
of such allegations can be taken based only on pure
F conjectures, speculations and interpretation of notings in the
official files -Appointment of fourth respondent is strictly in
conformity with the procedure prescribed - Petitioner has not
placed on record any material to establish that any
conspiracy was hatched to ensure the selection of fourth
G respondent as Chairman, SEBI - All India Services (Death-
cum-Retirement Benefits) Rules, 1958 - rr.16 and 26.
PUBLIC INTEREST LIT/GA TION:
Writ petition challenging appointment of Chairman, SEBI
H - Held: In the instant case, petitioner has unjustifiably attacked
ARUN KUMAR AGRAWAL v. UNION OF INDIA & 863
ORS.
integrity of the entire selection process - The petition does not A
satisfy the test of utmost good faith which is required to
maintain public interest litigation -- On facts, petitioner could
not justify invoking the jurisdiction of the Court under Art. 32.
The instant writ petition was filed by the petitioner 8
purporting to be in public interest, challenging the
appointment of respondent no. 4 as Chairman of the
Securities Exchange Board of India (SEBI) on the
grounds: (a) that respondent no. 4 failed to fulfill one of
the eligibility condition as laid down in sub-s. (5) of s.4 C
of the Securities and Exchange Board of India Act, 1992
(SEBI Act), as well as the qualification contained in
Government communication, which required that the
Chairman should be a person of high integrity; (b) that
appointment of respondent No.4 was the result of
manipulation, misrepresentation and suppression of vital D
material before the Search-cum-Selection Committee and
the Appointment Committee of the Cabinet 'ACC'; (c) that
the appointment of respondent No.4, was mala fide; and
{d) that a conspiracy was hatched to ensure selection of
respondent no. 4 as Chairman, SEBI. The petitioner E
alleged that respondent no. 4 was wrongly sent on
deputation to Unit Trust of India Asset Management
Company Ltd. (UTI AMC) and further, the deputation was
in violation of the policy of not allowing deputation to an
officer who had overseen the organisation to which he F
was being deputed; that there was suppression of
material facts relating to remuneration of respondent no.
4 as CMD, UTI AMC before the Search-cum-Selection
Committee and the ACC. As regards the mala tides, it was
stated by the petitioner, that the earlier Chairman of SEBI G
was denied extension in tenure and in order to facilitate
the selection of respondent no. 4, there was illegal and
arbitrary change in composition of Search-cum-Selection
Committee.
On behalf of the respondents, besides contesting the H
864 SUPREME COURT REPORTS [2014] 3 S C.R.
A petition on merits, a preliminary objection was raised as
to the maintainability of the writ petition as the same was
alleged not to have been filed in public interest, but as a
surrogate litigation on behalf of an individual who was
anxious to continue as Chairman, SEBI; and that the writ
B petition did not disclose all the facts relevant for
adjudication of the issues raised.
Dismissing the writ petition, the Court
C HELD: 1.1 SEBI is an institution of high integrity.
Therefore, the Chairman of SEBI has to be a person of
high integrity. This is imperative. The wide sweep of the
powers of SEBI leaves no manner of doubt that it is the
supreme authority for the control and regulations and
orderly development of the securities market in India. It
D would not be mere rhetoric to state that in this era of
globalisation, the importance of the functions performed
by SEBI are of paramount importance to the well being
of the economic health of the nation. [para 29) [897-B, F-
H; 898-A]
E
Sahara India Real Estate Corporation Ltd. & Ors. Vs.
Securities and Exchange Board of India & Anr. 2012 (12)
SCR 1 = 2013 (1) SCC 1 • referred to.
1.2 The functions performed by SEBI are such that
F any malfunctioning in the performance of such functions
can disturb the economy of the country. Therefore, only
persons of high integrity would be eligible to be
appointed as Chairman/Member of the SEBI. Section 4(5)
of SEBI Act inter alia stipulates that the Chairman and
G other Members of the SEBI shall be persons of "ability,
integrity and standing who have shown capacity in
dealing wlt.h problems relating to securities market."
Statutorily, therefQre, a person cannot be appointed as
Chairman/Member of the SEBI unless he or she is a
H person of high integrity. [para 30) [899-B-E]
ARUN KUMAR AGRAWAL v. UNION OF INDIA & 865
ORS.
1.3 Therefore, selection and appointment of A
respondent No.4 could be challenged before this Court
in a writ petition under Art. 32 of the Constitution of India
on the ground that he does not satisfy the statutory
requirements of a person of high integrity. [para 30) [899-
E-F] B
Centre for PIL & Anr. Vs. Union of India & Anr. 2011 (4)
SCR 445 = 2011 (4) SCC 1 - referred to.
DEPUTATION : Was it irregular, illegal or vitiated by
colourable exercise of power? C
2.1 It is a matter of record that respondent No.4 was
on deputation with UTI AMC since the year 2005. His
deputation was duly approved by the Ministry of Finance,
DOPT and the Government of Bihar, wherever applicable. o
Respondent No.4 was first appointed as CEO, UTI AMC
by order dated 30.10.2005. He was initially on deputation
under r.6(2)(ii) and subsequently under r.6(2)(i) of the IAS
Cadre Rules. The terms and conditions of service of
respondent No.4 at UTI AMC were settled on 16.4.2007. E
This was in conformity with the letter dated 31.10.2005
written by the DOPT accepting the request made by the
Government of Bihar in its letter dated 28.10.2005 for
approval of deputation of respondent No.4 with UTI AMC
for a period of two years under r.6(2)(ii) of IAS Cadre F
Rules. The letter further indicated that terms and
conditions applicable in the said deputation were under
examination and would be communicated shortly. The
deputation was converted from r.6(2)(ii) to r.6(2)(i), upon
clarification of the applicability of the appropriate rule.
[para 35) [901-D-H] G
2.2 Therefore, it cannot be said that respondent No.4
was in any manner responsible for being sent on
deputation initially under r.6(2)(ii) and subsequently
under r.6(2)(i) or that his deputation under r.6(2)(ii) was H
866 SUPREME COURT REPORTS [2014] 3 SC.R
A approved in colourable exercise of power. [para 35] (902-
B-C, D]
"False Declaration in Form L"
2.3 A perusal of Office Memorandum dated 1.5.2008 sent
B by the Department of Economic Affairs in reference to the
letter sent by DoP&T seeking comments of DEA under r.26
(3) of All India Services (Death-cum-Retirement Benefits)
Rules, 1958 would show that necessary facts relating to the
service of respondent No.4 in the six years prior to the
c response dated 1.5.2008 had been faithfully set out.
Therefore, it cannot be said that the petmoner has made any
false declaration in 'Form L', Clause 9 read with r.26(3) of
All India Services (Death-cum-Retirement Benefits) Rules,
1958, while working in his previous job as Chairman, UTI
D AMC. [para 36-37] (902-E-F; 904-H; 905-A]
2.4 The respondents have rightly pointed out that
respondent No.4 was on deputation in UTI AMC when he
filled up Form 'L'. At that time, he held lien on the post of
Additional Secretary, Government of India. His
E application for voluntary retirement had been processed.
He was, however, required to obtain approval under r.26
for commercial employment-post retirement. Sr.No.5 of
Form 'L' requires the person seeking approval to state
the pay scale of the post and pay drawn by the Officer at
F the time of retirement. Undoubtedly, respondent No.4 was
drawing the pay scale of Rs.22400-525-24500. He also
stated his pay to be Rs.23,450/-. There is no legal infirmity
in the said statement by respondent No.4. It is a settled
proposition of law that deputationist would hold the lien
G in the parent department till he is absorbed on any post.
[para 38] [905-E-H]
State of Rajasthan & Anr. Vs. S.N. Tiwari & Ors. 2009 (4)
=
SCR 448 2009 (4) SCC 700; and Triveni Shankar Saxena
Vs. State of UP. & Ors. 1991 (3) Suppl. SCR 534 = 1992 (1)
H Suppl. SCC 524 - referred to.
ARUN KUMAR AGRAWAL v. UNION OF INDIA & 867
ORS.
2.5 In response to Column No.7 Form L, respondent A
No.4 has quite clearly mentioned that he has been
offered a fixed pay of Rs. 1.00 crore per annum alongwith
performance related payment and other usual perks. It
must be noticed that respondent No.4 had sought
retirement from the IAS w.e.f. 15.5.2008 to enable him to B
join UTI AMC on a regular basis as its CMD. Therefore, it
cannot be said that at the time when he filled the Form
for seeking VRS, respondent No.4 was not drawing the
pay scale stated by him. The Board of UTI AMC by
resolution dated 12.4.2008 approved that the CMD can c
draw revised compensation w.e.f. 27.12.2006. Till that
date, he was still placed in the scale of Additional
Secretary, Government of India. The fact that emoluments
were paid to respondent No.4 w.e.f. 27.12.2006 would not
affect the statement made by respondent No.4 in Form 0
'L' filled on 15.4.2008. Therefore, it cannot be said that
respondent No.4 had deliberately suppressed the
information regarding his salary. [para 40] [906-F-G; 907-
A-D]
2.6 Respondent No.4 in his capacity as a Joint E
Secretar~/Additional Secretary to Government of India
was required to state whether he was privy to any
sensitive information in his official capacity. The
information would be required if the Officer was in receipt
of information whilst working as Officer in the F
Government and is aware of the sensitive proposals or
other decisions which are not otherwise known to others
and which can be used for giving undue advantage to the
Organization in which he is seeking a future position. In
the case of respondent No.4, he was already working as G
CMD-cum-CEO in the UTI AMC. Therefore, there was no
question of respondent No.4 having been privy to any
sensitive information with regard to UTI AMC at the time
when he was posted as Joint Secretary/Additional
Secretary in the Government of India. In fact, respondent H
868 SUPREME COURT REPORTS [2014] 3 S.C.R.
A No.4 in the same Form No. Lat Sr.No.7-C had stated that
he was earlier working as Director in UTI AMC and was
appointed as CEO cum MD from 3.11.2005 and CMD from
13.1.2006. The declaration is in fact in conformity with the
3rd proviso to Rule 26 of All India Service (DCRB) Rules
B which envisages that an Officer in deputation of an
Organization under Cadre rules can be absorbed in the
same Organization post VRS. The word "Service" in Sr.
No. 9(ii) in Form L is in contrast to the work of proposed
Organization. [para 41] [907-E-H; 908-A-B]
c
2.7 It can also not be said that the deputation was in
violation of policy of not allowing deputation to an Officer
who has over-seen the Organization to which he was
being deputed. Respondent No.4 had no role to play in
D the grant of approval of deputation, once he fully
disclosed that he had been working as Joint Secretary
Banking. It can also not be accepted that whilst
respondent No.4 worked as Joint Secretary Banking he
can be said to have over-seen the Organization of UTI
E AMC. [para 42] [908-C-D]
2.8 UTI AMC cannot be said to be a Government
company. It was for this very reason that respondent
No.4 had to make a request for VRS to seek re-
employment in a Commercial Organization. The Central
F Government transferred its entire share holding in UTI
AMC to Life Insurance Corporation, Punjab National
Bank, Bank of Baroda and SBI. The entire consideration
for the aforesaid transfer was received by the Central
Government. Therefore, it becomes quite evident that UTI
G AMC is not a "Government Company" u/s 617 of the
Companies Act. In the affidavit filed, this has been the
consistent stand taken by the Central Government and
the CAG in various writ petitions filed by the petitioner.
In a company like the UTI AMC, it is for the shareholder
H on the Board to decide what process to follow and whom
ARUN KUMAR AGRAWAL v. UNION OF INDIA & 869
ORS.
to appoint. When the selected candidate is not a A
government employee having a lien on a government job,
then the government would have nothing to do with the
selection process. [para 43] [908-G-H; 909-A-E]
2.9 As regards the grievance of the petitioner that
respondent No.4 had made a mis-statement in Column 8
No.7F of Form 'L' whilst giving information as to whether
the post which has been offered to him was advertised,
it is significant to note that in reply to the said question,
respondent No.4 categorically stated that such higher-
leve.1 posts are generally not advertised. The statement C
made by respondent No.4 that such higher posts are
generally not advertised, cannot be said to be a
misleading or a false statement. Keeping in mind the
contribution made by him and the needs of the Company,
the shareholders had made the offer to him. In any event, D
it would be the decision to be taken by the Board of
Directors. Respondent No.4 would clearly have no say
in the matter. [para 45-46] [910-D-E; 911-A-B, E]
2.10 The Government of India never adopted the
policy of not sending IAS Officer on deputation to UTI E
AMC and informed the Parliament in its 3rd action taken
report submitted in December, 2004. The decision to
grant approval of commercial employment post
retirement under r.26 was taken by the Government of
India. The post was filled up by Board of Directors and F
shareholders of UTI AMC. It was entirely for them to
adopt such policy of appointment as they deem fit.
Respondent No.4 has complied with all the conditions of
deputation, and as such, there is nothing which would
render him a person of not high integrity. The G
Appointment Committee of the Cabinet (ACC) had
approved the extension of tenure of respondent no.4 as
CMD UTI AMC till 31.5.2008. [para 48] [914-B-D]
2.11 Therefore, there is no substance in the alleged
irregularities regarding deputation of respondent No.4, H
870 SUPREME COURT REPORTS (2014] 3 S.C.R.
A the alleged misstatement/non-disclosure about his pay
scale/sanctioned emoluments as disclosed in the letter
dated 16.4.2007; the alleged appointment of respondent
No.4 so as to be contrary to recommendations made by
the AAPTE Committee on July, 2007; the alleged false
B declaration under r.26(3)(ii) of AIS Death-cum-Retirement
Rules that in the last three years of his career he had not
been privy to sensitive and strategic information of UTI
AMC; the alleged false statement about advertisement of
higher-level posts. [para 49] [914-E-G]
C Was the recommendation and appointment of
respondent no. 4 as Chairman, SEBI vitiated by MALA
FIDE exercise of powers?
3.1 Undoubtedly, if the allegations of mala fide are
established, it would vitiate the selection procedure,
D recommendation and the appointment of respondent no.
4 as the Chairman, SEBI. But the burden of proving the
allegations of mala fide would lie very heavily on the
petitioner. It was incumbent on the petitioner not only to
make specific allegations, but to produce very strong
E evidence to lead to a clear conclusion that the selection
was actuated by mala fide. [para 50 and 61) [914-H; 915-
A-B; 923-E]
Purushottam Kumar Jha Vs. State of Jharkhand & Ors.,
F 2006 (1) Suppl. SCR 215 = 2006 (9) SCC 458; Indian Railway
Construction Co. Ltd. Vs. Ajay Kumar, 2003 (2) SCR 387 =
2003 (4) SCC 579; and Saradamani Kandappan Vs. S.
Rajalakshmi & Ors. 2011 (8) SCR 87 4 = 2011 (12) SCC 18;
S. Partap Singh Vs. State of Punjab 1964 SCR 733 and E.P.
=
G Royappa Vs. State of T.N. 1974 (2) SCR 348 1974 (4) SCC
3 - referred to.
3.2 This Court holds that there was no mala fides
involved in denying the extension to the earlier Chairman.
It has been rightly pointed out that no illegality was
H committed in making the amendment in the rules
ARUN KUMAR AGRAWAL v. UNION OF INDIA & 871
ORS.
pertaining to the selection of Chairman/WTM of SEBI. It A
is borne out from the record that prior to 23.7. 2009, there
was no rule on the procedure to be followed in the
selection of Chairman/whole time Member of SEBI. The
selection procedure for the Chairman of SEBI in 2008 was
approved by the Finance Minister on 2.11. 2007. This B
procedure envisaged that the selection has to be made
on the recommendation of the high powered Search
Committee. The composition of the Search Committee
was changed on the orders of the Finance Minister. It has
also been pointed out that the amendment of the rules c
had no relevance to the consideration of recommendation
of respondent no. 4 to be appointed as Chairman of the
SEBI. [para 54-55) [916-F; 917-F-H; 918-A]
3.3 The amendment in r.3 of the SEBI (Terms and
Conditions of Service and Members) Rules, 1992 was to D
provide for more participation by the expert members.
Therefore, sub-r. (5) of the aforesaid rules was
incorporated which requires that recommendation of
Search-cum-Selection Committee will consist of Cabinet
Secretary, Department of Economic Affairs, Chairman, E
SEBI for selection of WTM and two eminent expert from
relevant field. The record indicates that respondent No.4
was unanimously placed at Sr.No.1 by the Search-cum-
Selection Committee.[para 55) [918-C-D, G)
F
3.4 The petitioner has falsely contended that rules
concerning the constitution of Search-cum-Selection
Committee amended through notification dated 7.10.2010
were to ensure the selection of respondent no. 4. The
rules were amended in exercise of the powers conferred
on the Finance Minister u/s 29 of the SEBI Act. The said G
notification issued by the Finance Ministry has not been
challenged by the petitioner. It is also significant to note
that prior to the amendment, the procedure for selection
of Chairman, SEBI was determined by the Finance
Minister. From perusal of the entire record, it cannot be H
872 SUPREME COURT REPORTS (2014] 3 S.C.R.
A said that the petitioner has made out a case of mala fide
to vitiate the proceedings of the Search-cum-Selection
Committee. [para 56] [919-8-D]
3.5 Applications for filling the post of Chairman were
8 invited on 10.9.2010. Respondent no. 4 did not apply in
response to the said invitation. Out of the 19 applicants,
in the first meeting of the Committee held on 2.11.2010,
five were short listed. In addition, the Search-cum-
Selection Committee also decided to invite respondent
C no. 4 for interaction, who at the relevant time, was CMD,
UTI AMC. The Search-cum-Selection Committee based on
the qualification, experience and personal interaction with
the short listed candidates, recommended the names of
respondent no. 4 and another person in that order of
merit, for being considered for appointment as Chairman
D SE81. There is no illegality in the procedure adopted by
the Search-cum-Selection Committee. The Finance
Minister proposed the appointment of respondent no. 4
as Chairman, SE81, for an initial period of three years from
the date he resumes the charge or till he attain the age
E of 65 years, whichever is earlier. The proposal was sent
to the ACC on the express approval of the then Finance
Minister. It is therefore evident that respondent no. 4 had
not role to play in the whole procedure except for
accepting the invitation of the Search-cum-Selection
F Committee for interaction. [para 56-57] [919-8-C; 920-C-
H; 921-A]
4.1 The charge of conspiracy has to be taken
seriously as it involves the commission of very serious
G criminal offence u/s 120-8 of the IPC. Such a charge of
criminal intent and conduct had to be clearly pleaded and
established by evidence of very high degree of probative
value. No notice of such allegations can be taken based
only on pure conjectures, speculations and interpretation
H of notings in the official files. [para 60] [923-C-D]
ARUN KUMAR AGRAWAL v. UNION OF INDI~ & 873
ORS.
4.2 The appointment of respondent no. 4 is strictly A
in conformity with the procedure prescribed by service
rules, i.e, rr. 16 and 26 of the AIS (DCRB) Rules, 1958. The
official record discloses that the Chairman, SEBI is
appointed by the Central Government by following an
established process_ by the ACC headed by the Prime B
Minister. This is done on the basis of Search-cum-
Selection Committee of the Government of India. The
opinion of other independent arid reputed experts in the
field of Economics, Finance and Management is also
taicen through an institutional mechanism approved by c
the DOPT. The petitioner has not placed on record any
material to establish that any conspiracy was hatched to
ensure the selection of respondent No.4. [para 61-62]
{923-F-H; 924-E-F] ..
State of Madhya Pradesh Vs. Narmada Bachao Ando/an D
=
& Anr. 2011 (6) SCR 443 2011 (7) SCC 639; and K.D.
Sharma Vs. Steel Authority of India Limited & Ors. 2008 (10)
SCR 454 = 2008 (12) SCC 481 - referred to.
5. As regards the maintainability of the writ petition E
as a public interest litigation, the petitioner has
unjustifiably attacked the integrity of the entire selection
process. The petition does not satisfy the test of utmost
good faith which is required to maintain public interest
litigation. In the facts of the instant case, the petitioner F
cannnot justify invoking the jurisdiction of this Court
under Art. 32 of the Constitution of India. [para 63] [926-
H; 927-A, D, E-F]
Case Law Reference:
G
2011 (4) SCR 445 referred to para 13
2011 (6) SCR 443. referred to para 26
2008 (10) SCR 454 referred to para 26
2012 (12) SCR 1 referred to Para 29
H
874 SUPREME COURT REPORTS [2014] 3 S.C.R.
A 2009 (4) SCR 448 referred to Para 39
1991 (3) Suppl. SCR 534 referred to Para 39
2006 (1) Suppl. SCR 215 referred to Para 50
2003 (2) SCR 387 referred to Para 50
B 2011 (8) SCR 87 4 referred to Para 50
964 SCR 733 referred to Para 51
1974 (2) SCR 348 referred to Para 51
CIVIL ORIGINAL JURISDICTION : Writ Petition (Civil) No.
c 374 of 2012.
Under Article 32 of the Constitution of India.
Goolam E. Vahanvati, AG, Mohan Parasaran, SG, Paras
Kuhad, ASG, Harish Salve, Altaf Ahmed, Harish N. Salve,
D Prashant Bhushan, Rohit Kumar Singh, Prashant Kumar,
Anurag Sharma, Joseph Pookkatt (for Ap & J Chambers),
Rupesh Kumar, Jitin Chaturvedi, Shalaj Mridul, Sushma Suri,
Rajesh lnamdar, Saniya Hasani, Suruchi Suri, Devdatt Kamat,
Chanchal Kumar Ganguli, Bhargava V. Desai, Shreyas
E Mehrotra, Gopal Singh, Manish Kumar, Chandan Kumar, T.A.
Khan, Syed Tanweer Ahmed, B.V. Bairam Das for the
appearing Parties.
The Judgment of the Court was delivered by
F SURINDER SINGH NIJJAR, J. 1. This writ petition has
been filed by one Mr. Arun Kumar Agrawal under Article 32 of
the Constitution of India; seeks the issuance of a writ of quo
warranto or any other direction against Mr. U.K. Sinha,
Chairman of the Securities and Exchange Board of India
G (hereinafter referred to as 'SEBI') and his consequential
removal from the post of Chairman.
2. Stated concisely, the petitioner challenges the
appointment of respondent No.4 on the following grounds :-
H
ARUN KUMAR AGRAWAL v. UNION OF INDIA & 875
ORS. [SURINDER SINGH NIJJAR, J]
(a) Mr. Sinha failed to fulfill one of the eligibility A
condition as laid down in sub-section (5) of Section
4 of the Securities and Exchange Board of India
Act, 1992 (hereinafter referred to as 'SEBI Act'), as
well as the qualification contained in Government
communication, which required that the Chairman B
shall be a person of high integrity.
(b) The appointment of respondent No.4 is the result
of manipulation, misrepresentation and
suppression of vital material before the Search- C
cum-Selection Committee and the Appointment
Committee of t:;e Cabinet (hereinafter referred to
as 'ACC').
(c) The appointment of respondent No.4, a Chairman
of SEBI, is mala fide. D
3. Mr. Prashant Bhushan, learned counsel appearing for
the petitioner, has made detailed submissions with regard to
the manipulations and the maneuvers indulged in by the
petitioner with the active connivance of some other persons to E
successfully mislead the Search Committee as well as the
ACC. He has highlighted that the petitioner does not fulfill the
requirements of Section 4(5) of SEBI Act which provides as
under:-
"(5) The Chairman and the other members referred to in F
clauses (a) and (d) of sub-section (1) shall be persons of
ability, integrity and standing who have shown capacity in
· dealing with problems relating to securities marker or have
special knowledge or experience of law, finance,
economics, accountancy, administration or in any other G
discipline which, in the opinion of the Central Government,
shall be useful to the Board."
4. Giving the factual background, he referred to the
communication dated 10th September, 2010 of the Department H
870 SUPREME COURT REPORTS [2014] 3 S.C.R.
A of Economic Affairs inviting the application for the post of
Chairman SEBI. In paragraph 3 of the aforesaid
communication which provided that "keeping in view the role
and importance of SEBI as a regulator, it is desirable that
person with high integrity. eminence and reputation preferably
B with more than 25 years of professional experience and in the
age group of 50 to 60 years may apply". Learned counsel
submits that Mr. Sinha lacks integrity which is well illustrated
by a reference to events leading to his appointment.
5. He points out that Mr. Sinha was Joint Secretary,
c Banking till May, 2002. He became Joint Secretary, Ministry
of Finance in June, 2002. Thereafter, he held the post of Joint
Secretary, Capital Market, Ministry of Finance from 1st July,
2003. Whilst working as such he was appointed as Additional
D Director on the Board of Unit Trust of India Asset Management
Company Ltd. (hereinafter referred to as 'UTI AMC').
Thereafter, on 3rd November, 2005 Mr. Sinha was appointed
as CEO and MD of UTI AMC on deputation for two years.
According to Mr. Bhushan, Mr. Sinha was wrongly sent on
deputation under Rule 6(2)(ii) of th~ IAS (Cadre) Rules, 1954,
E which is applicable in case of deputation in an international
organization, NGO or body not owned by the Government.
Since the equity share capital in UTI AMC is held by the State
Bank of India, Life Insurance Corporation, Bank of Baroda and
Punjab National Bank, each holding 25% of the shares, it could
F not be said that UTI AMC was not controlled by the Government.
According to Mr. Bhushan, Mr. Sinha ought to have been sent
on deputation under Rule 6(2)(i) of the IAS (Cadre) Rules, 1954
which is applicable for deputation of an IAS officer "under a
company, association or body of individuals, whether
G incorporated or not, which is wholly or substantially owned or
controlled by the State Government, Municipal Corporation or
a local body by the State Government on whose cadre she/he
is borne." According to Mr. Bhushan, Mr. Sinha was
deliberately sent on deputation under Rule 6(2)(ii) for ulterior
H motive. He points out that the deputation of Mr. Sinha was
ARUN KUMAR AGRAWAL v. UNION OF INDIA & 877
ORS. [SURINDER SINGH NIJJAR, J.]
against the accepted assurance given to the J.P.C. on the A
appointment of CMD of UTI AMC. Mr. Sinha as Joint Secretary,
Capital Market and member of the Board of UTI AMC was
aware of the recommendation of JPC. He deliberately violated
the recommendations. According to Mr. Bhushan, the
deputation was also in violation of policy of not allowing B
deputation to an officer who had overseen the organization to
which he was being deputed. Deputation of Mr. Sinha was also
in conflict of interest as he was Joint Secretary, Banking till May
2002 and the ownership of UTI AMC was with the SBI, Bank
of Baroda, PNB and UC. According to Mr. Bhushan, Mr. Sinha c
was privy to sensitive information. Under the rules, Mr. Sinha
was required to file affidaviUundertaking that person sent on
deputation was not privy to any sensitive information.
6. Continuing further, Mr .. Bhushan pointed out that on
appointment as CMD, UTI AMC on 13th January, 2006, Mr. D
Sinha continued to get pay scale of Joint Secretary, even
though he had an option under Rule 6(2)(ii) of drawing the pay
of the UTI AMC or the scale of pay of the Government which is
beneficial. There was no separate pay scale for CMD of UTI
AMC and the same needed to be created in view of the option E
under Rule 6(2)(ii). On 29th January, 2007, Mr. Sinha made
representation to the Government claiming that his batch cadre
IAS Officer has been empanelled as Additional Secretary,
therefore, his salary be fixed accordingly in the pay scale of
Additional Secretary to the Government of India i.e. 22400-525- F
24500. On 1st March, 2007, the salary of Mr. Sinha was -fixed
in the aforesaid scale, with effect from 10th February, 2007. A
communication was also sent c;>n 16th April, 2007 enclosing
the terms and conditions of the deputation of Mr. Sinha. It was
pointed out that the member of service may opt for his grade G
pay or the pay of the post, whichever is more beneficial to him.
It was also pointed out that the terms and conditions will be
applicable with effect from 27th December, 2007. Mr. Bhushan
thereafter laid considerable emphasis on the fact that on 27th
September, 2007 the Board UTI AMC approved the H
878 SUPREME COURT REPORTS [2014] 3 S.C.R.
A remuneration package of Mr. Sinha keeping in view the
remuneration package of CEO in the industry, ro~es and
responsibilities of the CMD, UTI AMC and the current surge of
the salary structure in the market, as follows :-
B • Fixed Pay Rs. 10 million per annum
• Variable Pay upto 100% of Fixed pay subject
to performance and as may be
approved by the Board on
yearly basis.
c
7. According to Mr. Bhushan, this decision was taken on
the basis of the recommendation made by the Aapte
Committee in July, 2007. This Committee had been set up to
recommend the compensation to be paid to CMD, UTI AMC.
o This Committee had recommended the compensation to be
paid to CMD, UTI AMC on the basis that the compensation
should be market competitive to attract appropriate talent from
the market.
E 8. According to Mr. Bhushan, the actual fact situation would
show that the recommendation to appoint CMD, UTI AMC from
the market was given a complete go by at the time of the
appointment of Mr. Sinha in 2008, when his extension to
deputation was denied. Therefore, in order to continue as
CMD, UTI, AMC Mr. Sinha took voluntary retirement. Mr.
F Bhushan states that on 6th November, 2007 though a proposal
for extension of deputation of Mr. Sinha for a period of two years
was made, he was only granted an interim extension of three
months till 2nd February, 2008. This was because some general
issue regarding deputation under Rule 6(2)(ii) was being re-
G examined. On 28th November, 2007, the Consolidated
Deputation Guidelines for All India Services was circulated by
the Ministry of Personnel and under the Guidelines the
deputation of Mr. Sinha was determined to be under Rule 6(1).
He points out that under Rule 6(1) there is no option of getting
H remuneration as per the scheme of the organization to which
ARUN KUMAR AGRAWAL v. UNION OF INDIA & 879
ORS. [SURINDER SINGH NIJJAR, J.]
an officer is sent on deputation. On 12th December, 2007, the A
Finance Ministry, Department of Economic Affairs requested
the Department of Personnel and Training (DOPT) to extend
the deputation of Mr. Sinha for the remaining one year and nine
months under Rule 6(1 ). On 10th March, 2008, the ACC
advised the Finance Ministry (Department of Economic Affairs) B
that extension of tenure as CMD of UTI AMC has been granted
to Mr. Sinha till 31st May, 2008 under Rule 6(1 ). It was
indicated that upon completion of the aforesaid term he would
return to his parent cadre (Bihar). A direction was issued to the
Department of Economic Affairs to identify a suitable c
replacement of Mr: Sinha by that date. Mr. Bhushan points out
that in the meantime on 25th March, 2008, the shareholders
approved the emoluments of Mr. Sinha as recommended with
effect from 27th December, 2006. This, according to Mr.
Bhushan, was not permissible since 28th November, 2007 or
0
at best since February, 2008 the deputation of Mr. Sinha was
no longer under Rule 6(2)(ii). Mr. Bhushan points out that inspite
of the recommendation of the ACC on 10th March, 2008, a
recommendation was made by the Chairman of SBI on behalf
of other shareholders proposing that Mr. Sinha should continue
as CMD of UTI AMC even beyond 31st May, 2008. In the E
recommendation letter, it was proposed to offer four years
tenure to Mr. Sinha as CMD of UTI AMC with effect from 1st
June, 2008 or earlier without break of continuity. The letter also
notices that under the existing Government Rules Mr. Sinha will
be able to take this offer only if he takes voluntary retirement F
from the Government Service. A formal letter for extension of
tenure was issued to Mr. Sinha on 11th April, 2008 by the UTI
AMC. On 12th April, 2008 the Board of UTI AMC approved that
the CMD can draw revised compensation with effect from 27th
December, 2006. G
9. Mr. Bhushan had laid considerable amount of emphasis
on these faCtl? to support the submission that although the words
in the aforesaid letters give the impression that the approval
of the shareholders of the pay package and the bonus was for H
880 SUPREME COURT REPORTS [2014] 3 S.C.R.
A the future but in reality the resolution enhanced the emoluments
with effect from 27th December, 2006. Mr. Sinha in fact drew
emoluments on that basis with effect from 27th December,
2006. This fact, according to Mr. Bhushan, is evident from the
annual return of UTI AMC for the year 2007-2008. The annual
B return shows his salary for the year ended 31st March, 2008
as Rs.20.12 million. The return also shows that Mr. Sinha has
also been paid Rs. 4.40 million as an arrear of his salary from
27th December, 2006 to 31st March, 2007 consequent to his
salary restructured with effect from 27th December, 2006.
C Being fully aware of all the facts and having received
compensation in crores of rupees, Mr. Sinha did not disclose
the same while making an application for VRS on 15th April,
2008. Whilst giving the answer to column No.5 in the form of
application to accept the commercial appointment, Mr. Sinha
D stated Rs.22,400-Rs.525-Rs.24,500/- as his pay scale and Rs.
23,450/- as his present basic pay.
10. Mr. Bhushan pointed out that this information was
necessary for getting the no-objection from the Cadre
Controlling Authority and from the office from where the officer
E retired. Mr. Bhushan further pointed out that not only Mr. Sinha
gave false information in the application for seeking voluntary
retirement; he repeated the same in the counter affidavit, in
response to the writ petition in this Court. According to Mr.
Bhushan, the averments made in paragraph 18 of the counter
F affidavit are contrary to the Balance Sheet of the UTI AMC for
the year 2007-2008. Mr. Bhushan emphasized that it is
apparent from the annual report of UTI AMC for the year 2008-
2009, 2009-2010 and 2010-2011 (10% months), Mr. Sinha got
remuneration of Rs.2.15 crores, Rs. 2.36 crores and Rs.3.62
G crores, respectively. According to Mr. Bhushan again in
paragraph 21 of the affidavit Mr. Sinha has tried to mislead this
Court. Mr. Sinha had stated that the excessive payment of Rs.
4 crores for the year 2010-2011 was on account of severance
payment. He submits that the severance payment is payable
H only when the concerned organization asks the CEO to leave.
ARUN KUMAR AGRAWAL v. UNION OF INDIA & 881
ORS. [SURINDER SINGH NIJJAR, J.]
In the case of Mr. Sinha, UTI AMC did not ask him to leave. In A
fact, Mr. Sinha did not even give the mandatory three months
notice, and relinquished the charge without giving any
opportunity to the organization to appoint another CEO. Mr.
Bhushan submits that Mr. Sinha wrongly received benefits of
retirement when in fact he had only resigned. He reiterated that B
Mr. Sinha has given false information repeatedly. He gives a
false declaration under Rule 26(3)(ii) of All India Services
Death-cum-Retirement Benefit Rules to the effect that in the last
three years of his official career he has not been privy to
sensitive or strategic information of UTI AMC. Mr. Bhushan c
pointed out that this statement is patently false as Mr. Sinha
was already on deputation in the same organization at the time
of taking YRS.
11. Mr. Bhushan also pointed out that the third deliberate
mis-statement made by Mr. Sinha in the application to accept D
the post of CEO of UTI AMC, was to the effect that such higher
level post are generally not advertised. This statement was in
answer to the question whether the post on which the
appointment is sought was advertised and, if not, how was the
offer made. Mr. Sinha had stated that keeping in mind the E
contribution made by him and the needs of the company, the
shareholders have made the offer to him. Mr. Bhushan submin>
that the statement about such higher level post not generally
being advertised was against the Aapte Committee's direction.
In fact, after Mr. Sinha relinquished the post, an advertisement F
was issued to fill the post Of CMD, UTI AMC on 4th June, 2012.
On the basis of the aforesaid facts, Mr. Bhushan submits that
manipulation of deputation under Rule 6(2)(ii), extension of
deputation, concealment of emoluments, misrepresentation and
distortion of facts in the application for voluntary retirement and G
re-employment clearly reflect that respondent No.4 is not a man
of integrity.
12. Mr. Bhushan has also made a reference to a very
lengthy letter, written by one Dr. K.M. Abraham, a former Whole H
882 SUPREME COURT REPORTS [2014] 3 S.C.R.
A Time Member of SEBI, dated 1st June, 2011, to the Prime
Minister of India. In this letter, the Whole Time Member has
complained that the Chairman, SEBI, Mr. U.K. Sinha is being
directly influenced by the Union Minister of Finance or Smt.
Omita Paul, Adviser to Finance Minister. Mr. Bhushan
B reiterated that the letter by Dr. Abraham contains unbiased
information. The former Whole Time Member was only
expressing his concern that under the leadership of Mr. U.K.
Sinha the institutional integrity of SEBI is being compromised.
C 13. Another ground of attack on the appointment of the
respondent No.4 pertains to the suppression of material facts
relating to the remuneration of Mr. Sinha as CMD, UTI AMC
before the Search-cum-Selection Committee and the ACC. Mr.
Bhushan points out that the application form for the post of SEBI
D Chairman required the applicant to disclose scale of pay and
basic pay of the post presently held along with service of the
petitioner. The first meeting of the Search-cum-Selection
Committee was held on 2nd November, 2010. The SSC short
listed five candidates out of nineteen. Mr. Bhushan then points
out that the second meeting of the Committee was held on 13tl'I
E December, 2010, wherein the names of Mr. U.K. Sinha and Mr.
Himadri Bhattacharya were recommended for the post of
Chairman, SEBI in the order of merit. Mr. Bhushan further
submitted that the selection of Chairman of SEBI required the
approval of the ACC. The appointments recommended to the
F ACC have to be sent along with a standard Performa and
annexures which are to be filled in by the Ministry
recommending the appointment. The proposal for the
appointment of Mr. Sinha was put up to the ACC by the Finance
Ministry vide its confidential letter No.D.O.No.2/23/2007-RE
G dated 13th December, 2010. Blatantly false information is given
against the column requiring details about the pay scale
presently enjoyed by the applicant. In reply to this column, it is
stated "not available". Against Column 6(ii), scale of pay of the
post it is stated that "the chairman shall have an option to
H
ARUN KUMAR AGRAWAL v. UNION OF INDIA & 883
ORS. [SURINDER SINGH NIJJAR, J.]
receive pay (a) as admissible to a Secretary to the Government A
of India; or (b) a consolidated salary of Rs.3,00,000 per month.
It was also submitted that in between the first and the second
meeting of the Search-cum-Selection Committee, there were
40 days for the officials to ensure that the particulars of Mr.
Sinha are verified before filling up the application form. The B
officials could have ascertained the particulars of his
emoluments as CMD, UTI AMC. Mr. Bhushan submits that in
order to mislead this Court, Mr. Sinha in paragraph 10 of the
counter affidavit has given a totally false explanation that the
Finance Secretary was aware of his market-bench-marked c
salary as CMD, UTI AMC. This, according to Mr. Bhushan, is
a bald assertion without any material to substantiate the same.
Mr. Bhushan submits that the other explanation g;ven by Mr.
Sinha that information relating to emoluments of 1.;MD, UTI
AMC was in public domain as full disclosure is made in the 0
Balance Sheet of UTI AMC. It is submitted by Mr. Bhushan that
such an explanation cannot possibly be accepted. Th.e question
before this Court, according to Mr. Bhushan, is not whether the
person who filled up the form knew or could have known the .
correct emoluments drawn by Mr. Sinha. The issue is that the E
applicant had failed to disclose the correct particulars about
his emoluments and the pay scale before the Search
Committee. This misinformation was also placed before the
ACC. According to Mr. Bhushan, such a manipulative person
cannot be said to be a man of integrity. Mr. Bhushan, as
noticed earlier, submitted that the Committee in its second F
meeting had recommended two names. However, the Finance
Minister forwarded only the name of Mr. Sinha to the ACC for
approval. Even the document which was placed before the
ACC seeking approval for the appointment of Mr. Sinha
mentions "not available" against the present scale of pay. Mr. G
Bhushan further pointed out that Mr. Sinha's total emoluments
for the year 2010-2011 were over 4 crores per annum. This
amount was probably more than what the bureaucrats senior
to him and involved in the selection process were paid by the
Government in their entire career. Mr. Bhushan, therefore, H
884 SUPREME COURT REPORTS [2014) 3 S.C.R.
A submits that it was for this reason that Mr. Sinha manipulated
that there should be no advertisement and the selection should
be made through the Search route. In the case of
advertisement, he would have to reveal the emoluments
received by him. Relying on the aforesaid facts, Mr. Bhushan
B submits that since vital pieces of information was withheld from
the Search Committee as well as ACC, Mr. Sinha clearly cannot
be said to be a man of high integrity. The post of the Chairman,
SEBI is a very important position having a bearing on the flow
of investment, Indian and Foreign, economic growth and the
c safety of funds invested by large and small investors. Therefore,
according to Mr. Bhushan, it was important that the complete
facts particularly those having direct bearing on deciding the
question of integrity should have been placed before the
Search-cum-Selection Committee and the ACC. In support of
D the submission learned counsel has relied on the judgment of
this Court in Centre for PIL & Anr. Vs. Union of India & Anr. 1
14. The next ground of challenge of the petitioner to the
appointment of Mr. Sinha as the Chairman of SEBI is that it is
vitiated by mala fide. Mr. Bhushan pointed out that to
E accommodate Mr. Sinha the earlier Chairman of SEBI was
denied extension in tenure. The SEBI (Term and Condition of
Service of C~airman and Members) Rules were amended on
23rd July, 2od9 not to extend the term of the Chairman and the
WTM from three to five years. The Director of Capital Market
F Division put up a proposal on 2nd September, 2009 for aligning
the terms of the Chairman and WTM by giving two years
extension and the same was endorsed by the Finance
Secretary. After following the due procedure, consent for the
extension of the concerned persons was taken and the
G proposal for extension of tenure was recommended to the
DOPT by the Director, Capital Market Division by letter dated
16th November, 2009. According to Mr. Bhushan, from that
stage manipulation started with the active cooperation of Ms.
Omita Paul, the then Advisor in the Finance Ministry. On 25th
H 1. (2011 l 4 sec 1.
ARUN KUMAR AGRAWAL v. UNION OF INDIA & 885
ORS. [SURINDER SINGH NIJJAR, J.]
November, 2009, she called for the file relating to the A
recommendation for extension, in the term of the Chairman and
the Whole Time Member. The file was sent to her by the
Finance Secretary on 27th November, 2009 and was seen by
her on 30th November, 2009. It was again sent to the Advisor
for her perusal on 16th December, 2009 and noting was made B
by her on 21st December, 2009 drawing the attention of the
Finance Minister to Page 22 regarding the composition of the
SEBI Board and the present tenure of the Board. Mr. Bhushan
submits that the note was written in such a way by Ms. Omita
Paul, the then Finance Minister reversed his earlier decision c
to accord extension to the then Chairman. Subsequently, the
orders were issued to start the selection process for the
Chairman on 10th August, 2010. Suggestion of giving further
extension to the existing officers was overruled. Mr. Bhushan
submits that the justification given by the respondents in the D
counter affidavit for non grant of the extension is wholly
fallacious. He submits that the justification that earlier Chairman
was not granted extension as his name was reported in
newspapers of being involved in NSDL Scam. According to Mr.
Bhushan, there is no such noting in the official files. Mr. Bhushan
also emphasized that the real reason for denial of extension to E
the former chairman is that it was at. his insistence that
investigations were being held against the Sahara and RIL.
There was a complaint pending with regard to insider trading
relating to RIL and Reliance Petroleum in which over Rs.500
crores were made in four days of trading in September, 2007. F
Mr. Bhushan then submits that in order to facilitate the selection
of Mr. Sinha there was illegal and arbitrary change in
composition of Search-cum-Selection Committee. Ms. Omita
Paul ordered two new names of her own to be appointed as
experts of eminence on the Selection Committee. She also G
suggested Secretary (Financial Services) over and above the
two experts. Thus, according to Mr. Bhushan, three of the five
members of the Search-cum-Selection Committee were hand
picked by Ms. Paul. In order to include Secretary (Financial
Services) in the Search Committee, Rule 5 of the Rules, 2010 H
886 SUPREME COURT REPORTS (2014] 3 S.C.R.
A was amended to include clause (e) under which two nominees
of the Finance Minister were included. In such a way, primacy
was given to the Finance Minister. Mr. Bhushan submits that
the record clearly shows that the object of the entire exercise
of changing the Rules was to ensure that the Committee
B desired by the Advisor Ms. Omita Paul remains unchanged. It
was also done probably to ensure that the ex-officio Chairman,
the Cabinet Secretary, remains the only member unconnected
with the Finance Minister. Mr. Bhushan submits that Ms. Omita
Paul in the reply affidavit has admitted that her role was merely
c advisory. Mr. Bhushan submits that in spite of the admitted
position that her role was merely advising without having any
authority to process the matter or take a decision, the files
relating to further extension or composition of Search-cum-
Selectio n Committee were regularly sent to her. The
0 composition of the Search Committee was changed at her
behest. Mr. Bhushan then submitted that the respondents have
sought to justify the selection of Mr. Sinha on the basis that he
was earlier unanimously selected by the Search-cum-Selection
Committee in 2008, on the same post. If that was so, it is
E surprising that the Government, in fact. appointed Mr. C.B.
Shave as the Chairman, SEBI, who had neither applied for the
post nor appeared in the interview. He had in fact informed the
Committee that he did not want to be considered for t~e post
of Chairman, SEBI. According to Mr. Bhushan, this can hardly
be a fact relevant to judge the integr~ty of Mr. Sinha.
F
15. To further establish the ground of a mala fide, Mr.
Bhushan submits that the post of CMD of UTI AMC was kept
vacant for 17 months to accommodate the brother of
respondent No.6 Ms. Omita Paul. He points out that shortly after
G the appointment of Mr. Sinha in mid-February reports started
appearing in the press from April, 2011, that the brother of Ms.
Omita Paul, Jitesh Khosla, was the front runner for the post of
UTI AMC because he had the backing of the Finance Minister.
These reports also stated this was being resisted by a foreign
H investor and whose consent was necessary. Thus, the post of
ARUN KUMAR AGRAWAL v. UNION OF INDIA & 887
ORS. [SURINDER SINGH NIJJAR, J.]
CMD UTI AMC continued to remain vacant for 17 months A
because the brother of Omita Paul could not be appointed to
the post. According to Mr. Bhushan, the whole episode of
appointment of Mr. Sinha as CMD, UTI AMC and the proposed
appointment of Mr. Jitesh Khosla was adversely commented
upon by the Joint Parliamentary Committee, because the B
recommendations of the Committee were ignored. The Joint
Parliamentary Committee had gone into the entire UTI Scam
as a result of which massive losses were incurred by the
Government investors and tax payers. The report in paragraph
5 made the following recommendations :- c
"(V) Government has stated that a professional Chairman
and Board of Trustees will manage UTl-11 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 D
professional managers of UTl-11 should be done in a
transparent manner, whether they are picked up from the
public or private sector. If an official from the public sector
is selected, in no case should deputation from the parent
organization be allowed and the person chosen should be E
asked to sever all connections with the previbus employer.
This is imperative because under no circumstance should
there be a public perception that the mutual fund schemes
of UTl-11 are subject to guarantee by the Government and
will be bailed out in case of losses." F
16. Mr. Bhushan submits that the aforesaid
recommendations were blatantly ignored in the selection of Mr.
Sinha. He further pointed out that neither Mr. Sinha nor Mr.
Jitesh Khosla were professionals. Neither of them met any of
the four criteria in the advertisement inserted for the post of UTI G
CMD in newspaper dated 4th June, 2012. In fact, the entire
manipulation and mala fide exercise, according to Mr. Bhushan,
is exposed by the advertisement ,that was released after the
brother of Ms. Omita Paul, Advisor ·opted out of the race
H
888 SUPREME COURT REPORTS (2014] 3 S.C.R.
A because the tenure of Ms. Omita Paul, Advisor was coming to
an end on account of it being co-terminus with that of Finance
Minister. He emphasized that it was only then the advertisement
was released fulfilling the commitment given to the JPC by the
Government in 2002.
B
17. In reply to the preliminary objection raised by the
respondents in the counter affidaviUreplies, he submits that they
deserve to be ignored. According to Mr Bhushan, the
respondents including the Government have made concerted
C attack on the public spirited attitude of the petitioner. He is
wrongly labeled as a person who has been set up by persons
or entities having vested interests. It is also wrongly alleged that
the petitioner had similarly challenged the appointment of
another past Chairman of SEBI which was decided against him
with imposition of costs. The respondents have also wrongly
D stated that this is the 4th similar petition on a similar issue. Re-
enforcing high credentials of the petitioner, Mr. Bhushan
submits that he has filed several notable public interest
litigations that have unearthed corruption and financial
irregularities. The appointment of the petitioner as Advisor to
E Prasar Bharti benefited the organization by about Rs. 20
Crores. He was the original complainant in the 2G spectrum
scam which eventually led to the registration of the FIR by the
CBI. This fact has been noted by this Court in the 2G case. On
the basis of the above, Mr. Bhushan submits that the petitioner
F has given his time and forgone earnings selflessly in the true
spirit of Article 51A of the Constitution and continues to unravel
financial scams because of the paucity of people who both
unaerstand and are willing to take risks and make sacrifices.
Mr. Bhushan then points out that the petitioner had previously
G challenged the appointment of a previous SEBI Chairman, but
it was not related to the integrity of the then Chairman. In fact,
the then Chairman was a person with high integrity and
compassion. However, his leniency in trusting the sharp players
in the market resulted in lot of scams in the first three years of
H his tenure. Therefore, the petitioner has challenged the
ARUN KUMAR AGRAWAL v. UNION OF INDIA & 889
ORS. [SURINDER SINGH NIJJAR, J.]
extension that had been given to the then Chairman SEBI on A
the ground that the Government should reassess his
performance after three years. The writ petition was dismissed.
The Chairman was given yet another extension in 2000 to make
him the longest serving Chairman. What followed was the
largest stock market scam in which the investors and the B
government lost tens of thousands of crores and the entire JPC
report is the testimony to the scam. The Government and tax
payer lost over Rs.10,000 crores in the UNIT 64 scam. Similarly
Mr. Bhushan submits that the respondents have wrongly taken
the preliminary objection that earlier two writ petitions having c
'been filed by the petitioner challenging the appointment of
respondent No.1 having been dismissed as withdrawn. He
further submits that the respondents have wrongly leveled
allegations that this petition is at the behest of some other
· person who is interested to continue as the Chairman of SEBI.
0
The petitioner has not prayed for the reinstatement of any of
the previous incumbents. The petitioner only prays for
appointment of a person as the Regulator who should be a
person of high integrity functioning in a transparent manner. Mr.
Bhushan submits that although the respondents claim that the
petitioner has suppressed material facts, the suppression of E
1facts by respol'!dent No.4 is not treated with the same amount
of concern.
Respondents' Submissions:
F
18. In response to the submission made, learned Attorney
General Mr. G.E. Vahanvati, appearing for the Union of India,
has submitted that public interest litigation jurisdiction is based
on the principle of Uberrimae fide which means 'utmost good
faith'. Therefore, before the petitioner can attack the integrity G
of respondent No.4, he would have to establish his own good
faith in filing the present writ petition. He further submits that this
is a very unfair petition. Documents have been presented
before the Court in a very selective manner. The petitioner has
_ admitted the suppression of earlier petition but he has tried to H
890 SUPREME COURT REPORTS (2014] 3 S.C.R.
A explain it by giving some excuses. The submission of the
petitioner that the petition was dismissed on the pleadings has
been contended by Mr. Vahanvati to be totally without any
basis. This is evident from his letter to the Registrar sent in
August, 2000. He stated that Writ Petition (C) No.69 of 2012
B deals with Cairn-Vedanta deal and it has nothing to do with the
present writ petition. Then it is stated that there is one similar
matter filed by some other person which is pending before this
Court which is W.P. (C) No.246 of 2012. The petitioner never
mentioned the earlier petitions filed by him which were
c dismissed. The objection taken is that the petition deserves to
be dismissed for suppression of earlier petition. The letter given
to the Registrar gives the totally distorted version. Similarly, the
petitioner has distorted the entire sequence of events with
regard to the deputation of Mr. Sinha.
D 19. Mr. Vahanvati points out to paragraph 34 of the petition
and the emphasis placed by the petitioner that "within a period
of a day the emoluments too increased from around six lacs
per annum to one crore per annum". It is submitted that the
deputation of respondent No.4 commences on 3rd November,
E 2005 he became CEO, UTI AMC on 27th December, 2006.
The letter dated 16th April, 2006 which is very relevant to the
issue has been withheld by the petitioner. Referring to the
affidavit of Mr. Sinha, he submits that all other information has
been given according to law. The terms and conditions for
F deputation clearly show that Mr. Sinha was permitted to opt for
his grade of pay or pay scale whichever is more beneficial for
him. The recommendations made by the Aapte Committee
were taken into notice when extension of tenure of Mr. Sinha
was approved by the Board of Directors UTI AMC on 17th
G September, 2007. Actual sanction came on 11th April, 2008,
as the approval of the Bank of Baroda did not come till 29th
March, 2008. Therefore, there was no approval prior to 11th
April, 2008 of the compensation of Rs.1 crore per annum
alongwith the related payment of bonus of Rs. 1 crore. Similarly,
H it is stated by Mr. Vahanvati that submission of the application
ARUN KUMAR AGRAWAL v. UNION OF INDIA & 891
ORS. [SURINDER SINGH NIJJAR, J.]
for voluntary retirement was done four days after the approval A
on 15th April, 2008. Until then, the petitioner had been in
receipt of pay scale which was duly sanctioned on the post held
by him in the Government. Therefore, the petitioner has
unnecessarilylried to create an impression that there has-been
any deliberate misrepresentation or concealment of fact by B
respondent No.4. In the form of application to accept commercial
appointment, respondent No.4 had clearly stated that he has
been working as the Director/CEO UTI AMC since 3rd
November, 2005 till date. Respondent No.4 had to state the pay
scale of the post and the pay drawn by the officer at the time c
of the retirement which in his case was of Rs.22,400-535-
24,500. Respondent No.4 had clearly mentioned his present
basis pay as Rs.23,450/-.
20. Learned Attorney General submitted that the petitioner
has wrongly alleged that respondent No.4 had given a false D
declaration that he was not privy to any sensitive information.
This would clearly only indicate that the respondent No.4 has
to disclose that he was not privy to any sensitive information
received in his official capacity. Learned Attorney General
submits that the petitioner in fact has an absurdity of facts with E
regard to compensation which were placed before the Ministry
of Finance on 1st May, 2008. The Finance Minister approved
the proposal. It was specifically observed that there is no conflict
of interest between the Government of India and UTI AMC. On
17th April, 2008, Department of Personnel and Training sent a F
comprehensive note with regard to the application of respondent
No.4 in the prescribed format to seek permission under Rule
26 of the All India Services (DCRB) Rules, 1958 to join the
Company i.e. UTI Asset Management Company Ltd. on regular
basis, post voluntary retirement. The proposal was thoroughly G
examined and duly approved by all the authorities. Learned
Attorney General drew our attention to paragraph 30 of the
petition and submitted a list of documents. The petition has
given a twist in the tale. This has been done, according to
learned Attorney General, to give the same controversy a new H
892 SUPREME COURT REPORTS [2014] 3 S.C.R.
A flavour. He submits that the allegations about the pattern of JPC
directions are false. The same petitioner had challenged Mr.
Mehta's appointment earlier. It is the submission of learned
Attorney General that public interest litigation cannot be filed
irresponsibly. It has to be handled very carefully. It cannot be
B used as an AK-47 with the hope that some bullets will hit the
target. The allegations of the petitioner that the rules were
deliberately amended to hand pick Mr. Sinha are without any
basis. In fact, there was no illegality committed in changing the
composition of Search-cum-Selection Committee. Prior to 23rd
c July, 2009 there was no rule on the procedure to be followed
for the selection of Chairman/WTM of SEBI. Therefore, before
July, 2009 selections were made as decided by the Finance
Minister from time to time. However, for the selection of the
SEBI Chairman in 2008 the then Finance Minister had
D approved on 2nd November, 2007 that the High Powered
Search Committee (later notified as the Search Committee)
which had four members and one Chairman. The Finance
Minister noted that there should be one more outside expert.
Accordingly, Dr. S.A. Dave, Chairman CMIE, was nominated
as the Member. Therefore, to say that the amendment of the
E rules has been made just to ensure that balance was tilted in
favour of the Finance Minister is without any basis.
21. Learned Attorney General also pointed out that the
Search-cum-Selection Committee in its meeting held on 29th
F January, 2008 had unanimously short listed two names in the
following order: (1) Mr. U.K. Sinha and (2) Mr. J. Bhagwati.
However, notwithstanding the recommendation of Mr. Sinha by
the Selection Committee, Shri Bhave was appointed as
Chairman, SEBI on 15th February, 2008. In 2009, a statutory
G system was established for selection of Chairman/Whole Time
Member of the SEBI. The proposal was also placed to amend
Rule 3 of the Securities & Exchange Board of India (Terms and
Conditions of Service of Chairman and Members) Rules, 1992
to include the provision relating to procedure to be followed for
H the selection of Chairman/WTM of SEBI. This was done by
ARUN KUMAR AGRAWAL v. UNION OF INDIA & 893
ORS. [SURINDER SINGH NIJJAR, J.)
incorporating sub-rule (5) which required the recom·mendation A
of the Search-cum-Selection Committee consisting of Cabinet
Secretary, Department of Economic Affairs, Chairman, SEBI
for selection of WTM and two experts of eminence from the
relevant field. When it was decided in 2010 to initiate action
for the fresh selection for the post of Chairman, SEBI two B
experts of eminence from the relevant field were Shri Suman
Bery, Director General, National Council of Applied Economic
Research (NCAER) and Prof. Shekhar Choudhary, former
Director, llM Calcutta. The composition of the Search-cum-
Selection Committee was sent to the Department of Personnel c
& Training for approval. However on 23rd September, 2010,
Department of Personnel and Training pointed out that inclusion
of the Secretary Financial Services was not within the Rules as
amended on 23rd July, 2009. Therefore, the matter was again
referred to the Ministry of Law & Justice. During the discussion D
that was held with the Ministry of Law, it was suggested that
there could be an amendment to the rule based on the Income
Tax Appellate Tribunal Members (Recruitment and Conditions
of Service) Rules, 1963. Under these rules, the Selection Board
inter alia consists of a nominee of the Ministry of Law as well E
as such other persons if any, not exceeding two, as the Law
Minister may appoint. It was in these circumstances that the
proposal to amend the 1992 Rules was approved.
22. The Search-cum-Selection Committee after scrutinizing
the qualification and experience of the short listed candidates F
unanimously placed respondent No.4 first in the order of merit.
The impression sought to be given wrongly by the petitioner is
that respondent No.4 was placed at No.2 and Mr. Bhattacharya
was at No.1. This is a deliberate distortion by the petitioner.
G
23. With regard to the role played by Ms. Omita Paul,
learned Attorney General submitted that in fact the present
petition is a mala fide attempt to resurrect the challenge earlier
rejected by this Court. The petition is a sheer abuse of the
. process of law. The petitioner is guilty of making reckless H
894 SUPREME COURT REPORTS (2014) 3 S.C.R.
A allegations against two highly respected dignitaries who were
appointed expert members of the Selection Committee.
Learned Attorney General also submitted that the submissions
with regard to the non extension of tenure of Mr. Shave are
totally baseless and need to be ignored. He makes a reference
S to a detailed explanation given in the affidavit filed by the UOI.
The term of Mr. Shave was not extended to avoid the
Government being unnecessarily involved in a scandal. In the
earlier petition (W.P. No. 340 of 2012), the petitioner has
sought an extension to continue the tenure of Mr. Shave for 5
c years which was withdrawn. Prayer No.2 in the W.P.(C) No.340
of 2011 was as follows :
"Issue a writ of mandamus or any other appropriate writ,
order or, direction to quash and declare void constitution
of sub-committee of the Search-cum-Selection Committee
D
under Shri U.K.Sinha, Chairman SESI for conducting
interview to the post of whole time members and
proceedings/recommendation thereof."
24. This would clearly ensure that as soon as Mr. Sinha's
E appointment was declared void, Mr. Shave would continue as
a Chairman. This is evident from Prayer 5 which is as under:
"Issue a writ of mandamus or any other appropriate Writ,
order or direction to direct Respondent Nos.1 & 2 to act
in accordance with the Government of India Notification
F
No.2/106/2006-RE, dated 23rd July, 2009 which stipulates
enhancement of the tenure of existing Chairman and Whole
Time directors of SEBI from three (3) to five (5) years."
25. Similarly, Writ Petition (C) No.392 of 2011 again
G repeats the prayer which was made in the earlier writ petition.
It was submitted by the learned Attorney General that the
present writ petition is a camouflage for the earlier writ petitions
which were dismissed. Learned Attorney General submitted that
the submission of Mr. Shushan that why a person, who was
H earning crores, would expect a position on which he was only
ARUN KUMAR AGRAWAL v. UNION OF INDIA & 895
ORS. [SURINDER SINGH NIJJAR, J.]
to be paid lacs, is too absurd to be even taking cognizance A
of. Respondent No.4 accepted the Chairmanship of SEBI as
a matter of national duty and as a matter of honour. Finally,
learned Attorney General submitted that in the interest of justice
the tendency among the petitioners to make wild allegations
in public interest litigation needs to be curbed. B
26. Mr. Harish Salve, learned senior counsel and Mr.
Rajesh Dwivedi appearing for respondent t-Jo. 4 have also
raised a preliminary objection on the ground of maintainability.
According to Mr. Salve, the writ petition is not maintainable
because it is not filed in public interest. In fact, the writ petition C
has been filed as surrogate litigation on behalf of an individual
who was very anxious to continue as Chairman, SEBI, namely
Mr. C.B. Bhave. Secondly, Mr. Salve submits that the writ
petition is liable to be dismissed as it does not make a candid
disclosure of all the facts which are relevant for the adjudication D
of the issues raised. Learned senior counsel submits that a
litigant is duty bound to make full and true disclosure of the facts
without any reservation, even if they seem to be against them.
In support of this proposition, he relies on State of Madhya
Pradesh Vs. Narmada Bachao Ando/an & Anr. 2 and K.D. E
Sharma Vs. Steel Authority of India Limited & Ors. 3 . The
factual basis for the aforesaid submission is that the petitioner
had filed a writ petition in the Delhi High Court against the then
Chairman, SEBI, Mr. D.R. Mehta, which was dismissed with
cost. A Special Leave Petition against the same was F
dismissed. However, this Court reduced the cost. This fact is
deliberately suppressed. Writ Petition No. 340 of 2011 on the
same issue was dismissed by this Court. Dismissal of these
petitions has also been suppressed by the petitioner. Mr. Salve
reiterates the submissions of the Attorney General that public G
interest litigation is founded on the principle of uberrima fide,
i.e., the utmost good faith of the petitioner. To buttress his
submission, learned senior counsel relied on S.P. Gupta's
2. (2011) 7 sec 639.
3. (2008) 12 sec 481. H
896 SUPREME COURT REPORTS [2014] 3 S.C.R.
A case. This petition is motivated by ill will, and the moving spirit
behind the petition is Mr. C.S. Shave. He reiterated the
submissions of the Attorney General that Mr. C.S. Shave and
the Whole Time Member Dr. K.M. Abraham were aggrieved by
the non-grant of extension to them, on the posts occupied by
s them, in the light of change in the rules. In fact, the petitioner,
in his submission, has made detailed reference to the
motivated complaint made by the Whole Time Member Dr.
K.M. Abraham about the functioning of the new Chairman, i.e.,
Mr. U.K. Sinha. This was only because Mr. Shave and Mr.
c Abraham were upset about the non-extension of tenure of Mr.
Shave. Apart from the change of rules, the extension was not
granted to Mr. Shave for his lapses in dealing with the IPO
Scam of 2005 when he was the Chairman of NSDL.
Conclusions:
D
27. We have considered the submissions made by the
learned counsel for the parties. Although all the respondents
have raised the preliminary issue about the maintainability of
the writ petition, we shall consider this submission after we have
E considered the issue on merits. The foremost issue raised by
the petitioner and emphasized vehemently by Mr. Parshant
Shushan is that respondent No.4 lacks the integrity and does
not meet the eligibility conditions laid down in sub-section (5)
of Section 4 of the SESI Act. Additionally, respondent No.4
F does not fulfil the conditions contained in communication of the
government dated 10th September, 2010 which emphasizes,
keeping in view the role and importance of SESI as a regulator,
that it is desirable that only a person with high integrity and
reputation should be appointed as Chairman of SESI.
G 28. We have narrated the sequence of events relied upon
by the petitioner to establish that respondent No.4 is not a man
of high integrity. We have also narrated how the respondents
have, with equal vehemence, countered the submissions made
on behalf of the petitioner. All the respondents have submitted
H that the writ petition filed by the petitioner ought to be dismissed
ARUN KUMAR AGRAWAL v. UNION OF INDIA & 897
ORS. [SURINDER SINGH NIJJAR, J.]
A
on the ground of maintainability alone. As noticed earlier, we
shall consider the preliminary objections later.
29. We agree with Mr. Bhushan that SEBI is an institution
of high integrity. A bare perusal of the SEBI Act makes it
apparent that SEBI was established to protect the interests of 9
investors in securities and to promote the development of, and
to regulate the securities market. In fact, the SEBI Act gives
wide ranging powers to the Board to take such measures as it
thinks fit to perform its duty to protect the interests of investors
in securities and to prqmote the development of, and to regulate c
the securities market. These measures may provide for
regulating the business in stock exchanges and any other
securities markets. Further measures are set out in Sections
11 (1 ), (2)(a to m) to enable SEBI to perform its duties and
functions efficiently. Section 11 (2)(a) provides that the Board o
may take measures to undertake inspection of any book,
register, or other document or record of any listed public
company or a public company which intends to get its securities
listed on any recognised stock exchange. The Board can
exercise its power where it has reasonable grounds to believe E
that such company has been indulging in insider trading or
fraudulent and unfair trade practices relating to securities
market. To enforce its directions, the Board has powers under
Section 11 (4) to issue any suspension/restraint orders against
the persons including office bearers of any stock exchange or
self regulatory organisation. It can impound and retain the F
proceeds or securities in respect of any transaction which is
under investigation. The wide sweep of the powers of SEBI
leaves no manner of doubt that it is the supreme authority for
the control and regulations and orderly development of the
securities market in India. It would not be mere rhetoric to state G
that in this era of globalisation, the importance of the functions
performed by SEBI are of paramount importance to the well
being of the economic health of the nation. Therefore, Mr.
Bhushan is absolutely correct in emphasising that the Chairman
H
898 SUPREME COURT REPORTS (2014] 3 S.C.R.
A of SEBI has to be a person of high integrity. This is imperative
and there are no two ways about it. The importance of the
functions performed by SEBI has been elaborately examined
by this Court in the case of Sahara India Real Estate
Corporation Ltd. & Ors. Vs. Securities and Exchange Board
B of India & Anr. 4 Justice Radhakrishnan, upon examination of
the various provisions of the SEBI Act, has observed that it is
a special law. a complete code in itself containing elaborate
provisions to protect interest of the investors. The paramount
duty of the Board under the SEBI Act is tc protect the interest
c of the investors and to prevent unscrupulous operators to enter
and remain in the securities market. It is reiterated in paragraph
67 that SEBI is also duty bound to prohibit fraudulent and unfair
trade practice relating to securities markets. Similarly, Justice
Khehar in the concurrent judgment has emphasised the
0 importance of the functions performed by SEBI in exercise of
its powers under Section 11. In paragraph 303.1, it is observed
as follows :-
"303.1. Sub-section (1) of Section 11 of the SEBI Act casts
an obligation on SEBI to protect the interest of investors
E in securities, to promote the development of the securities
market, and to regulate the securities market, "by such
measures as it thinks fit". It is therefore apparent that the
measures to be adopted by SEBI in carrying out its
obligations are couched in open-ended terms having no
F prearranged limits. In other words, the extent of the nature
and the manner of measures which can be adopted by
SEBI for giving effect to the functions assigned to SEBI
have been left to the discretion and wisdom of SEBI. It is
necessary to record here that the aforesaid power to adopt
G "such measures as it thinks fit" to promote investors'
interest, to promote the development of the securities
market and to regulate the securities market, has not been
curtailed or whittled down in any manner by any other
provisions under the SEBI Act, as no provision has been
H 4. 2013 (1) sec 1.
ARUN KUMAR AGRAWAL v. UNION OF INDIA & 899
ORS. [SURINDER SINGH NIJJAR, J.]
given overriding effect over sub-section ( 1) of Section 11 A
of the SEBI Act."
In sub-paras 303.2, 303.3 and 303.4, the powers of SEBI
under Section 11 (2), 11 (3) and 11 (4) have been analysed and
elaborately explained.
B
30. It becomes clear from the above that the functions
performed by SEBI are such that any malfunctioning in the
performance of such functions can disturb the economy of our
country. Keeping in view the aforesaid scope and ambit of the
discretionary powers conferred on the Members of the SEBI C
Board, there is little doubt in our mind that only persons of high
integrity would be eligible to be appointed as Chairman/
Member of the SEBI. Section 4(5) inter alia stipulates that the
Chairman and other Members of the SEBI shall be persons of
"ability, integrity and standing who have shown capacity in · D
dealing with problems relating to securities market." Statutorily,
therefore, a person cannot be appointed as Chairman/Member
of the SEBI unless he or she is a person of high integrity. We,
therefore, have no hesitation in accepting the submission of Mr.
Bhushan that the selection and appointment of respondent E
No.4 could be challenged before this Court in a writ petition
under Article 32 of the Constitution of India on the ground that
he does not satisfy the statutory requirements of a person of
high integrity.
31. Since Mr. Bhushan has relied on the judgment of this F
Court in Centre for PIL & Anr. (supra), it would be appropriate
to notice the observations made in that judgment by S.H.
Kapadia, G.J. in paragraph 2 of the judgment, it has been
observed as follows :-
G
"2. The Government is not accountable to the courts in
respect of policy decisions. However, they are
accountable for the legality of such decisions. While
deciding this case, we must keep in mind the difference
between legality and merit as also between judicial review H
900 SUPREME COURT REPORTS [2014] 3 S.C R.
A and merit review ..... If a duty is cast under the proviso to
Section 4(1) on the HPC to recommend to the President
the name of the selected candidate, the integrity of that
decision-making process is got to ensure that the powers
are exercised for the purposes and in the manner
B envisaged by the said Act, otherwise such
recommendation will have no existence in the eye of the
law."
In our opinion, these observations are relevant as the
C procedure prescribed for the appointment of Chairman, SEBI
is similar to the procedure which was prescribed for the
selection on the post of Central Vigilance Commissioner. This
apart, it has been emphasised that eve is an integrity
institution. The reasons for the aforesaid view are stated in
paragraph 39, it has been observed as follows :-
0
"39. These provisions indicate that the office of the Central
Vigilance Commissioner is not only given independence
and insulation from external influences, it also indicates that
such protections are given in order to enable the institution
E of the CVC to work in a free and fair environment. The
prescribed form of oath under Section 5(3) requires the
Central Vigilance Commissioner to uphold the sovereignty
and integrity of the country and to perform his duties without
fear or favour. All these provisions indicate that the CVC
F is an integrity institution. The HPC has, therefore, to take
into consideration the values, independence and
impartiality of the institution. The said Committee has to
consider institutional competence. It has to take an
informed decision keeping in mind the abovementioned
G vital aspects indicated by the purpose and policy of the
2003 Act."
32. Elaborating further, Kapadia, C.J., has further
observed:
H "43. Appointment to the post of the Central Vigilance
ARUN KUMAR AGRAWAL v. UNION OF INDIA & 901
ORS. [SURINDER SINGH NIJJAR, J.]
Commissioner must satisfy not only the eligibility criteria A
of the candidate but also the decision-making process of
the recommendation ... "
33. In paragraph 44, it was clarified that "we should not
be understood to mean that personal integrity is not relevant.
8
It certainly has a co-relationship with institutional integrity."
34. Keeping in view the aforesaid observations and the
ratio of the law laid down, let us now examine the issue with
regard to the validity of the recommendation made for the
appointment of Mr. Sinha together with the issue as to whether C
Mr. Sinha does not fulfil the statutory requirement to be
appointed as the Chairman of SEBI.
DEPUTATION : Was it irregular. illegal or vitiated by
colourable exercise of power? o
35. It is a matter of record that respondent No.4 was on
deputation with UTI AMC since the year 2005. His deputation
was duly approved by the Ministry of Finance, DOPT and the
Government of Bihar, wherever applicable. Respondent No.4
was first appointed as CEO, UTI AMC by order dated 30th E
October, 2005. He was initially on deputation under Rule 6(2)(ii)
and subsequently under Rule 6(2)(i) of the IAS Cadre Rules.
The terms and conditions of service of respondent No.4 at UTI
AMC were settled on 16th April, 2007. This was in conformity
with the letter dated 31st October, 2005 written by the DOPT F
accepting the request made by the Government of Bihar in its
letter dated 28th October, 2005 for approval of deputation of
respondent No.4 with UTI AMC for a period of two years under
Rule 6(2)(ii) of IAS Cadre Rules. The letter further indicated that
terms and conditions applicable in the aforesaid deputation G
were under examination and would be communicated shortly.
The deputation was converted from Rule 6(2)(ii) to Rule 6(2)(i),
upon clarification of the applicability of the appropriate rule. This
fact is noticed by the petitioner himself whilst stating that
although on 6th November, 2007, the proposal for extension of H
902 SUPREME COURT REPORTS [2014] 3 S.C.R.
A deputation of Mr. Sinha was for two years, but the extension
was granted only for a period of three months until 2nd
February, 2008, as an interim measure. This, according to the
petitioner himself, was because some general issue regarding
deputation under Rule 6(2)(ii) of IAS (Cadre) Rules, 1954 was
B being examined. Therefore, we are unable to accept the
submission of Mr. Bhushan that respondent No.4 was in any
manner responsible for being sent on deputation initially under
Rule 6(2)(ii) and subsequently under Rule 6(2)(i). The "Final
Consolidated Deputation Guidelines for All India Service"
c issued on 28th November, 2007 would also indicate that
respondent No.4 cannot be said to be, in any manner,
responsible for being sent on deputation under Rule 6(2)(ii).
Nor can it be said that any individual officer aided Mr. U.K.
Sinha to gain any unfair advantage. Therefore, it cannot be said
D that his deputation under Rule 6(2)(ii) was approved in
colourable exercise of power.
"False Declaration in Form L"
36. A perusal of Office Memorandum dated 1st May, 2008
E sent by the Department of Economic Affairs in reference to the
letter sent by DoP&T seeking comments of DEA under Rule
26(3) of All India Services (Death-cum-Retirement Benefits)
Rules, 1958 would show that necessary facts relating to the
service of respondent No.4 in the six years prior to the
F response dated 1st May, 2008 had been faithfully set out. The
Memorandum records the following facts:-
"Shri U.K. Sinha had been working as Joint Secretary
(Capital Markets) in DEA from 2nd June, 2002 to 29th
October, 2005. Before joining DEA (Main) he had been
G Joint Secretary in the erstwhile Banking Division (presently
Department of Financial Services) from 30th October,
2000 to 1st .June, 2002.
• With the approval of the competent authority, he
H has been on deputation to Unit Trust of India Asset
ARUN KUMAR AGRAWAL v. UNION OF INDIA & 903
ORS. [SURINDER SINGH NIJJAR, J.)
Management Company (UTI AMC) as its CMD A
since 3rd November, 2005, and his term there
expires on 31st May, 2008. Going by his
experience and qualifications, the name of Shri
Sinha had been unanimously shortlisted by the
Chairmen of the sponsors of UTI AMC [State Bank B
of India (SBI), Life Insurance Corporation of India
(UC), Bank of Baroda (BoB) and Punjab National
Bank (PNB)). The Government has approved his
deputation to UTI AMC, in public interest.
• UTI AMC is a company formed by SBI, PNB, BoB C
and UC, each having equal shareholding. It is
registered with Securities and Exchange Board of
India (SEBI) and is engaged in activities pertaining
to mutual fund, portfolio management, venture fund
management, pension fund and offshore fund D
management. The UTIAMC is managing the
'financial assets of over Rs. 50,000/- crores.
• Considering the challenges that UTI AMC faces in
the prevailing market conditions and the need for E
continuity necessitated by the structural changes
undertaken in the Company, the Chairman of SBI,
in consultation with other stakeholders of UTI AMC
(viz. UC, BoB and PNB) has offered to Shri Sinha
a four. year tenure as CMD of UTIAMC w.e.f. 1st F
June, 2008, or earlier without break of continuity on
the understanding that Shri Sinha will take voluntary
retirement from Government service and that Shri
Sinha will be entitled for salary and perquisites
decided by the Compensation Committee of the G
Board of the Company from time to time. Hon'ble
Finance Minister has approved this proposal.
2. The Department of Economic Affairs supports the
request of Shri U.K. Sinha for post retirement commercial
· employment with UTI AMC as its CMD and certify the H,
904 SUPREME COURT REPORTS [2014] 3 S.C.R.
A following:
The proposed employment of Shri U.K. Sinha with
UTIAMC as its CMD is in public interest and has
the approval of Hon'ble Finance Minister.
B • There is no conflict of interest between the
Government of India and the UTIAMC.
• UTIAMC, formed by SBI, PNB, BoB and UC, is
neither involved in activities prejudicial to India's
c foreign relations, national security and domestic
harmony nor is undertaking any form of intelligence
gathering prejudicial to India.
• In the prevailing financial markets condition, the
fixed pay of Rs. 1 crore per annum, along with
D
performance related payouts and other usual perks,
offered by UTIAMC to Shri Sinha is considered
reasonable.
• As per the information available in DEA, the
E service record of Shri U.K. Sinha is clear,
particularly with respect in integrity and dealings
with NGOs.
3. Department of personnel &, Training is accordingly
F requested kindly to grant requisite permission to Shri U.K.
Sinha, under intimation to this Department.
4. This issues with the approval of Hon'ble Finance
Minister.
G (S.K. Verma)
Director to the Government of India ... "
37. Keeping in view the aforesaid, we are not satisfied that
the petitioner has made any false declaration in 'Form L', Clause
H 9 read with Rule 26(3) of All India Services (Death-cum-
ARUN KUMAR AGRAWAL v. UNION OF INDIA & 905
ORS. [SURINDER SINGH NIJJAR, J.]
Retirement Benefits) Rules, 1958, while working in his previous A
job as Chairman, UTI AMC. Mr. Bhushan has pointed out the
following mis-statements and opinions :-
i. In Serial-5, pay scale for the post of Addi. Secretary
was mentioned although respondent No.4 was B
drawing the higher pay scale approved by UTI
AMC.
ii. In Serial 9, the 2nd declaration was false as
respondent No.4 was working as CEO cum CMD
of UTI AMC during the last 3 years on deputation C
and therefore he was privy to sensitive or strategic
information relating to areas of interest or work of
UTI AMC.
iii. A mis-statement had been made that generally D
such posts are not advertised and that was against
the JPC Recommendation.
38. In our opinion, the respondents have rightly pointed out
that respondent No.4 was on deputation in UTI AMC when he E
filled up Form 'L'. At that time, he held lien on the post of
Additional Secretary, Government of India. His application for
voluntary retirement had been processed. He was, however,
required to obtain approval under Rule 26 for commercial
employment-post retirement. Sr.No.5 of Form 'L' requires the
person seeking approval to state the pay scale of the post and F
pay drawn by the Officer at the time of retirement. Undoubtedly,
respondent No.4 was drawing the pay scale of Rs.22400-525-
24500. He also stated his present pay to be Rs.23,450/-. There
is no legal infirmity in the aforesaid statement by respondent
No.4. It is a settled proposition of law that deputationist would G
hold the lien in the parent department till he is absorbed on any
post. The position of law is quite clearly stated by this Court in
State of Rajasthan & Anr. Vs. S.N. Tiwari & Ors. 5
5. (2009) 4 sec 700. H
906 SUPREME COURT REPORTS [2014] 3 S.C.R.
A "18. This Court in Ramlal Khurana v. State of Punjab
observed that: (SCC p. 102, para 8)
"8 .... Lien is not a word of art. It just connotes the
right of a civil servant to hold the post substantively
B to which he is appointed."
19. The term "lien" comes from the Latin term "ligament"
meaning "binding". The meaning of lien in service law is
different from other meanings in the context of contract,
common law, equity, etc. The lien of a government
c employee in service law is the right of the government
employee to hold a permanent post substantively to which
he has been permanently appointed."
39. Similarly, in the case of Triveni Shankar Saxena Vs.
o State of U.P. & Ors. 6, it has been held as under:-
"24. A learned Single Judge of the Allahabad High Court
in M.P. Tewari v. Union of India following the dictum laid
down in the above Paresh Chandra case and
distinguishing the decision of this Court in P.L. Dhingra
E v. Union of India has observed that "a person can be said
to acquire a lien on a post only when he has been
confirmed and made permanent on that post and not
earlier", with which view we are in agreement."
F 40. In response to Column No.7 of the same Form,
respondent No.4 has quite clearly mentioned that he has been
offered a fixed pay of Rs. 1.00 crore per annum alongwith
performance related payment and other usual perks. The letter
containing the offer was enclosed with the Form. The letter
G clearly states that the Board of Directors, UTI AMC, after going
through the prevailing practice in the Industry, has fixed a
compensation of Rs.1.00 crore per annum alongwith
performance related perks and other usual prerequisites. The
shareholders of the UTI AMC have also indicated their
H e. 1992 supp. (1) sec 524.
ARUN KUMAR AGRAWAL v. UNION OF INDIA & 907
ORS. [SURINDER SINGH NIJJAR, J.]
concurrence to the above compensation. It must be noticed that A
respondent No.4 had sought retirement from the IAS w.e.f. 15th
May, 2008 to enable him to join UTI AMC on a regular basis
as its CMD. Therefore, it cannot be said that at the time when
he filled the Form for seeking VRS, respondent No.4 was not
drawing the pay scale stated by him. We do not find much B
substance in the allegation· that respondent No.4 had
deliberately suppressed the information regarding his salary.
The fact that emoluments paid to respondent No.4 w.e.f. 27th
December, 2006 would not affect the statement made by
respondent No.4 in Form 'L' filled on 15th April, 2008. The c
Board of UTI AMC by resolution dated 12th April, 2008
approved that the CMD can draw revised compensation w.e.f.
27th December, 2006. Till that date, he was still placed in the
scale of Additional Secretary, Government of India.
41. The next submission of Mr. Bhushan is that Mr. Sinha D
had wrongly stated in reply to Sr. No. 9(ii) in Form 'L' that he
was not privy to any sensitive or strategic information in the last
three years of service. This submission of the petitioner is
based only on assumption and cannot be accepted without any
supporting material. Respondent No.4 in his capacity as a Joint E
Secretary/Additional Secretary to Government of India was
required to state whether he was privy to any sensitive
information in his official capacity. The information would be
required if the Officer was in receipt of information wnilst working
as Officer in the Government and is aware of the sensitive F
proposals or other decisions which are not otherwise known to
others and which can be used for giving undue advantage to
the Organization in which he is seeking a future position. In the
case of respondent No.4, he was already working as CMD-
cum-CEO in the UTI AMC. Therefore, there was no question of G
respondent No.4 having been privy to any sensitive information
with regard to UTI AMC at the time when he was posted as Joint
Secretary/Additional Secretary in the Government of India. In
fact, respondent No.4 in the same Form No. Lat Sr.No.7-C had
stated that he was earlier working as Director in UTI AMC and H
908 SUPREME COURT REPORTS [2014] 3 S C.R.
A was appointed as CEO cum MD from 3rd November, 2005 and
CMD from 13th January, 2006. The declaration is in fact in
conformity with the 3rd proviso to Rule 26 of All India Service
(DCRB) Rules which envisages that an Officer in deputation of
an Organization under Cadre rules can be absorbed in the
B same Organization post VRS. The word "Service" in Sr. No.
9(ii) in Form L is in contrast to the work of proposed
Organization.
42. We are also not much impressed by the submission
...,
on behalf of the petitioner that the deputation was in violation
v of policy of not allowing deputation to an Officer who has over-
seen the Organization to which he was being deputed. As
noticed earlier, respondent No.4 had no role to play in the grant
of approval of deputation, once he fully disclosed !hat he had
been working as Joint Secretary Banking. He had no further
D role to play. It is a too farfetched submission that whilst
respondent No.4 worked as Joint Secretary Banking that he
can be said to have over-seen the Organization of UTI AMC.
The petitioner had unnecessarily and without any basis tried to
confuse that respondent No.4 would be disqualified for
E deputation in UTI AMC as he would have been privy to receiving
some sensitive information with regard to its functioning. As
noticed earlier, Rule 36 of All India Service (DCRB) Rules
envisages that an Officer on deputation to an Organization can
be absorbed in the same Organization after seeking voluntary
F retirement.
43. We may also notice here that even the petitioner has
not pleaded that UTI AMC is a Government owned Company
under Section 617 of the Companies Act. Mr. Bhushan tried
G to establish that it is a Government controlled company as the
shares are all held by instrumentalities of the State. In our view,
UTI AMC can not be said to be a Government company. It was
for this very reason that respondent No.4 had to make a request
for VRS to seek re-employment in a Commercial Organization.
H We are also not much impressed by the objection of the
ARUN KUMAR AGRAWAL v. UNION OF INDIA & 909
ORS. [SURINDER SINGH NIJJAR, J.]
petitioner that the deputation of respondent No.4 was contrary A
to the recommendation of JPC. Subsequent to the
recommendation of JPC, the Parliament had passed UTI
(Transfer of Undertaking and Repeal) Act, 2002 which was
gazetted on 17th December, 2002 and came into force w.e.f.
29th October, 2002. Under the Act, UTI was bifurcated into B
SUUTI and UTI Mutual Fund, managed by UTI AMC. The
Central Government transferred its entire share holding in UTI
AMC to Life Insurance Corporation, Punjab National Bank,
Bank of Baroda and SBI. The entire consideration for the
aforesaid transfer was received by the Central Government. c
Therefore, it becomes quite evident that UTI AMC is not a
"Government Company" under Section 617 of the Companies
Act. In the affidavit filed, this has been the consistent stand
taken by the Central Government and the CAG in various writ
petitions filed by the petitioner. In a company like the UTI AMC, 0
it is for the shareholder on the Board to decide what process
to follow and whom to appoint. When the selected candidate
is not a government employee having a lien on a government
job, then the government would have nothing to do with the
selection process. In this case, the shareholders made a
request to the Government for the deputation of respondent E
No.4. They again made a request for extending his deputation
beyond two years. In April 2008, respondent No.4 was offered
commercial employment provided he took VRS. At each stage,
permission was duly granted by the competent authority after
duly following the prescribed procedure as per the rules of F
executive business. Therefore, we do not find any justifiable
reason to doubt the legality of the manner in which respondent
No.4 continued to work in UTI AMC since he initially came on
deputation in October, 2005.
G
44. Mr. Bhushan has vehemently argued that respondent
No.4 had deliberately concealed or distorted the information in
his application for voluntary retirement. We have already noticed
that in filling up the Form · L', respd{ident No.4 had correctly
stated the pay scale of the post at the 'time of seeking voluntary H
910 SUPkEME COURT REPORTS (2014] 3 S.C.R.
A retirement. We have also earlier held that respondent No.4
cannot be said to have been privy to any sensitive information
relating to areas of interest of work of UTI AMC whilst he was
holding the post of Joint Secretary. In fact in reply to Column
No. C of Form 'L' i.e. "Whether the Officer had during the last
B three years of his official career, any dealing with the Firm/
Company/Cooperative Society etc?" Respondent No.4 had
clearly stated that in his capacity as Joint Secretary in the
Department of Economic Affairs, Capital Market of his Division,
he was also inducted as a Director on the Board of UTI AMC.
c In the meanwhile, he was appointed as MDMCU and CMD
w.e.f. 3rd November, 2005 and 13th January, 2006, respectively
by the Board of Directors of UTI AMC.
45. The next grievance of the petitioner is that respondent
No.4 had made a mis-statement in Column No.7F of Form 'L'
D whilst giving information as to whether the post which has been
offered to him was advertised, if not, how was offer made? In
reply to the aforesaid question against, respondent No.4
categorically stated that such higher-level posts are generally
not advertised. Keeping in mind the contribution made by him
E and the needs of the Company, the shareholders had made the
offer to him. Alongwith this reply, respondent No.4 had attached
copy of the letter dated 3rd April, 2008. We have already
noticed that UTI AMC is a company incorporated under the
Companies Act. As such all the decisions are made by the
F Board of Directors. The shareholders are Life Insurance
Corporation, PNB, BOP and SBI. We have earlier noticed that
respondent No.4 was initially on deputation with UTI AMC since
2005. In 2008, he was offered the post of CMD on contractual
basis. Consequently, according to the service rules, he sought
G his voluntary retirement from the parent cadre, Bihar. This was
duly processed by the State of Bihar and approved by the
Central Government. UTI AMC is managed on a commercial
basis. Therefore, in a commercial company as a part of good
governance, it is the responsibility of the Board to ensure
H succession planning at the top. As a normal practice,
ARUN KUMAR AGRAWAL v. UNION OF INDIA & 911
ORS. [SURINDER SINGH NIJJAR, J.]
nominations are made by the Board and share-holders, either A
directly or through a search firm and the post is rarely
advertised. In any event, it would be the decision to be taken
by the Board of Directors. Respondent No.4 would clearly have
no say in the matter.
B
46. We are also of the opinion that there is nothing so
outlandish or farfetched in the statement made by respondent
No.4 that "such higher-level posts are generally not advertised".
It is a matter of record that previously Shri M. Damodaran, an
IAS Officer of the rank of Additional Secretary, the post was
not advertised. Subsequently also, the appointment of Mr. S.B. C
Mathur and Administrator Mr. K.N. Tripathi Raj was made
without any advertisement. In fact, both the appointments were
made without even resorting to the Search-cum-Selection
Process. The erstwhile Chairman of SEBI was also appointed
without any advertisement. It is also a matter of common D
knowledge that the posts such as the Government of Reserve
Bank of India are hardly ever advertised. Similarly, the post of
Chairman, SEBI was advertised for the first time in 2008. Prior
to that, it was not advertised. The statement made by
respondent No.4 that such higher posts are generally not E
advertised, cannot be said to be a misleading or a false
statement. It is a statement setting out general practice of
appointments in the commercial world on such posts.
47. We also do not find much substance in the submission F
of Mr. Bhushan that in order to facilitate the appointment of
respondent No.4, the recommendations of the JPC that the
post should be advertised, was deliberately concealed. A
perusal of paragraph 21.9 of the recommendations dated 12th
December, 2002 would show that the Government had stated G
that a professional Chairman and Board of Trustees would
manage UTI II. It was also stated that advertisement for the
appointment of professional Manager will be issued. The
Committee also recommended that it should be ensured that
the selection of the Chairman and Professional Managers of H
912 SUPREME COURT REPORTS [2014] 3 S.C.R.
A UTI should be done in a transparent manner whether they are
picked up from the public or private Sectors. It was further
pointed out that if an official from the public sector is selected,
in no case the deputation from the parent organization be
allowed and the person chosen should be asked to severe all
B connections with the previous employer. This, according to the
Government, was imperative because under no circumstances
should there be any public perception that the mutual fund
scheme of UTl-11 are subject to guarantee by the Government
and would be bailed out in case of losses. In the affidavit filed
c · by UOI, the entire service history of respondent No.4 has been
set out from the time he joined erstwhile banking division of the
Department of Economic Affairs (DEA) as Joint Secretary
w.e.f. 30th October, 2000. Thereafter, he was posted as DEA
(Main) on 2nd June, 2002; he was assigned the charge of CM
D Division and was relieved by DEA on 28th October, 2005 on
completion of his Central Deputation. At that time a proposal
was received in DEA from Chairman, SBI on behalf of the
shareholders of UTI AMC regarding initial appointment of
respondent No.4 as. CEO, UTI AMC for a period of two years.
This was forwarded by the DEA to the Department of Personnel
E and Training (DOPT) with the approval of the then Finance
Minister. The deputation of respondent No.4 was considered
under Rule 6(2)(ii) which provides for deputation of a cadre
Officer under an international organization, an autonomous body
not controlled by the Government or a private body. The
F aforesaid deputation can be made only in consultation with the
State Government on whose cadre the Officer is borne. We had
earlier noticed that due procedure was followed when
respondent No.4 was sent on deputation. However, at the risk
of repetition, since the petitioner has made such a grievance
G about the same, it will be apt to notice that DOPT had agreed
with the proposal of DEA with the consent of Government of
Bihar for deputation of respondent No.4 for a period of two
years under Rule 6(2)(ii) and conveyed to the Government of
Bihar, Department of Economic Affairs through Letter
H No.14017/26/2005-AIS-(ll) dated 31st October, 2005. As
ARUN KUMAR AGRAWAL v. UNION OF INDIA & 913
ORS. [SURINDER SINGH NIJJAR, J.]
noticed earlier, the deputation of respondent No.4 as CEO, UTI A
was conveyed to UTI vide DOPT letter dated 16th April, 2007.
The terms and conditions clearly provided that the Officer could
draw the pay of the organization or the government pay scale
which was beneficial to respondent No.4. Respondent No.4 had
made a representation to DOPT vide his application dated 29th B
January, 2007 requesting to allow him to draw the pay in the
scale of Additional Secretary to the Government of India as he
had already been empanelled to the said post or the pay of
CMD of UTI AMC whichever is beneficial to him. The competent
authority approved the release of pay of Additional Secretary c
to respondent No.4 w.e.f. 1oth February, 2007, the information
was duly communicated to UTI. Furthermore, DEA by its letter
dated 19th July, 2007 had requested DOPT for extension of
deputation of respondent No.4 as CMD of UTI AMC for a further
period of two years beyond 2nd November, 2007 under Rule
0
6(2)(ii) of the IAS Cadre Rule 1954 on the same terms and
conditions. However, the deputation was extended only for a
period of three months beyond 2nd November, 2007, as an
interim measure till the issue of deputation of IAS Officer under
Rule 6(2)(ii) of IAS Cadre Rules 1954 was finalized. Therefore, E
the deputation was extended upto 2nd February, 2008.
Thereafter the matter was again taken up by the DEA, DOPT
for consideration of the case of respondent No.4 under Rule
6(1) of the IAS Cadre Rules under which an Officer may be
deputed to service under the Central Government or under
State Government or under a Company, Organization, Body of F
Individuals whether incorporated or not, which is wholly
substantially owned or controlled by the Central Government or
by any other State Government. Therefore, ultimately, according
to the consolidated guidelines, the deputation of respondent
No.4 was covered under Rule 6(1 )(i) of the IAS Cadre Rules. G
48. There is not much substance in the submission that just
for the sake of accommodating respondent No.4, the
recommendations of the JPC were concealed from the
Government. This submission is fallacious on the face of it as H
914 SUPREME COURT REPORTS [2014) 3 S.C.R.
A the recommendations of the JPC were placed before the
Parliament and Government of India directly. Respondent No.4
had no role to play in that procedure. In fact, the Government
of India submitted action taken report in context of the
recommendations from time to time and was fully aware of it.
B The Government of India never adopted the policy of not
sending IAS Officer on deputation to UTI AMC and informed
the Parliament in its 3rd action taken report submitted in
December, 2004. The decision to grant approval of commercial
employment post retirement under Rule 26 was taken by the
c Government of India. The post was filled up by Board of
Directors and shareholders of UTI AMC. It was entirely for them
to adopt such policy of appointment as they deem fit. We fail
to understand that even upon respondent No.4 complying with
all the conditions of deputation, it would render him a person
D of not high integrity. We may notice here that the Appointment
Committee of the Cabinet (ACC) tiad approved the extension
of tenure of respondent no.4 as CMD UTI AMC till 31st may,
2008.
49. This takes us past the alleged irregularities regarding
E deputation of respondent No.4, the alleged misstatement/non-
disclosure about his pay scale/sanctioned emoluments as
disclosed in the letter dated 16th April, 2007; the alleged
appointment of respondent No.4 is contrary to
recommendations made by the AAPTE Committee on July,
F 2007; the alleged false declaration under Rule 26(3)(ii) of AIS
Death-cum-Retirement Rules that in theJast three years of his
career he had not been privy to sensitive and strategic
information of UTI AMC; the alleged false statement about
higher-level posts are generally not advertised.
G
Was the recommendation and appointment of Mr. U.K.
Sinha vitiated by MALA FIDE exercise of powers?
50. Mr. Bhushan submitted that the appointment of Mr.
Sinha, as Chairman, SEBI was made mala fide. Undoubtedly,
H
ARUN KUMAR AGRAWAL v. UNION OF INDIA & 915
ORS. [SURINDER SINGH NIJJAR, J.]
if the allegations of mala fide are established, it would vitiate A
the selection procedure, recomm~ndation and the appointment
of Mr. U.K.Sinha as the Chairman, SEBI. But the burden of
proving the allegations of mala fide would lie very heavily on
the petitioner. The law in relation to the standard of proof
required in establishing a plea of mala fide has been repeatedly B
stated and restated by this Court. Mr. Salve had relied on the
three judgments of this Court viz., Purushottam Kumar Jha Vs.
State of Jharkhand & Ors., 7 Indian Railway Construction Co.
Ltd. Vs. Ajay Kumar, 8 and Saradamani Kandappan Vs. S.
Rajalakshmi & Ors. 9 The law concerning the aforesaid issue c
is so well settled that it was hardly necessary to make any
reference to previous precedent. We may, however, notice the
observations made by this Court in the aforesaid three cases.
In Purushottam Kumar Jha's case (supra), this court held that
D
"23. It is well settled that whenever allegations as fo mala
tides have been levelled, sufficient particulars and cogent
materials making out prima facie case must be set out in
the pleadings. Vague allegation or bald assertion that the
action taken was mala fide and malicious is not enough. .E
In the absence of material particulars, the court is not
expected to make "fishing" inquiry into the matter. It is
equally well established and needs no authority that the
burden of proving mala tides is on the person making the
allegations and such burden is "very heavy''. Malice cannot F
be inferred or assumed. It has to be remembered that such
a charge can easily be "made than made out" and hence
it is necessary for the courts to examine it with extreme
care, caution and circumspection. It has been rightly
described as "the)ast refuge of a losing litigant". (Vide G
Gu/am Mustafa v. State of Maharashtra; Ajit Kumar Nag
v. GM (PJ), Indian Oil Corpn. Ltd.)"
.7. (2006) 9 sec 458.
8. c2003) 4 sec 579.
9. (2011) 12 sec 18. H
916 SUPREME COURT REPORTS [2014] 3 S.C.R.
A 51. In Indian Railway Construction Co. Ltd. Vs. Ajay
Kumar (supra), this court reiterated the law laid down in S.
Partap Singh Vs. State of Punjab and E.P. Royappa Vs. State
of T.N. on the standard of proof required to establish the plea
of mala fide in the following words:-
B
"lt cannot be overlooked that the burden of establishing
mala tides is very heavy on the person who alleges it. The
allegations of mala tides are often more easily made than
proved, and the very seriousness of such allegations
demands proof of a high order of credibility. As noted by
c this Court in E.P. Royappa v. State of T.N. courts would
be slow to draw dubious inferences from incomplete facts
placed before it by a party, particularly when the
imputations are grave and they are made against the
holder of an office which has a high responsibility in the
D administration."
52. Further, in Saradamani Kandappan's case (supra).
this court again emphasized that the contention of fraud has to
be specifically pleaded and proved.
E
53. Keeping in mind the aforesaid observations, we shall
now examine the material placed before us by the petitioner
to establish the allegations of mala fide exercise of power.
54. The first instance of mala fide relied upon by Mr.
F Bhushan that number of steps were taken deliberately to deny
extension to the earlier Chairman. According to Mr. Bhushan,
the moving spirit in the strategic plan to deny the extension to
Mr. C.B. Bhave was respondent No.6. The allegations made
by the petitioner have been emphatically denied by UOI, Mr.
G Sinha, respondent No.4 and Ms. Omita Paul, respondent No.6.
As far as the grievance of the petitioner that Mr. C.B. Shave
was denied extension just to accommodate respondent No. 4
is concerned, we are inclined to accept the submission of Mr.
Mohan Parasaran, learned Solicitor General, that there was no
H mala fides involved in taking that decision. Learned Solicitor
ARUN KUMAR AGRAWAL v. UNION OF INDIA & 917
ORS. [SURINDER SINGH NIJJAR, J.]
General pointed out that in 2009 when the name of Mr. Bhave A
was being considered for an extension, serious controversies
came to be unearthed with regard to the entire NSDL issue
relating to the IPO scam during which Mr. Bhave was the CMD
of NSDL. A two member "Special Committee" consisting of Dr.
G. Mohan Gopal and Mr. V. Leeladhar that was appointed by B
SEBI to look into the matter passed three orders. In one of
these orders, there was a serious indictment of NSDL. The
media reports published in connection with this controversy
adversely commented upon the role of Mr. Bhave as CMD of
NSDL. Even Mr. J.S. Verma, former CJI, had voiced his c
concern about possible shielding of Mr. Bhave by SEBI. Dr. G.
Mohan Gopal wrote a letter dated 8th April, 2009, wherein he
criticized the action of SEBI on the role played by Mr Bhave.
According to Mr. Parasaran, the then Finance Minister perused
some of the relevant documents cited above before making the D
note on 22nd December, 2009, that led to denial of extension
to Mr. Bhave. In these circumstances, the noting made by the
Finance Minister that led to denial of extension to Mr. Bhave
cannot ever be considered unreasonable, let alone mala fide.
Thus, we are inclined to accept the submission of Mr.
Parasaran that there is no mala tides involved in denying an E
extension of Mr. Bhave.
55. The learned Attorney General, in our opinion, rightly
pointed out that no illegality was committed in making the
amendment in the rules pertaining to the selection of Chairman/ F
WTM of SEBI. It is borne out from the record that prior to 23rd
July, 2009, there was no rule on the procedure to be followed
in the selection of Chairman/whole time Member of SEBI. The
selection procedure for the Chairman of SEBI in 2008 was
approved by the Finance Minister on 2nd November, 2007. This G
procedure envisaged that the selection has to be made on the
recommendation of the high powered Search Committee. The
composition of the Search Committee was changed on the
orders of the Finance Minister. The learned Attorney General
also pointed out that the amendment of the rules had no H
918 SUPREME COURT REPORTS [2014] 3 S.C.R.
A relevance to the consideration of recommendation of Mr. Sinha
to be appointed as Chairman of the SEBI. The Attorney General
had also pointed out that in spite of the change in the Selection
Committee and in spite of Mr. Sinha having been short-listed
at No.1 by the Search-cum-Section Committee in its meeting
B held on 29th November, 2008, it was Shri C.B. Bhave who was
appointed Chairman, SEBI on 15th February, 2008. We also
find substance in the submission of learned Attorney General
that the amendment in Rule 3 of the Security Exchange Board
of India (Terms and Conditions of Service and Members) Rules,
c 1992 was to provide for more participation by the expert
members. Therefore, sub-rule (5) of the aforesaid rules was
incorporated which requires that recommendation of Search-
cum-Selection Committee will consist of Cabinet Secretary,
Department of Economic Affairs, Chairman, SEBI for selection
0 of WTM and two expert eminent from relevant field. We have
also been taken through the necessary correspondence for the
inclusion of Shri Suman Berry and Shekhar Chaudhary, two
experts of eminence from the relevant filed for the selection of
Chairman, SEBI in 2010. But it was noticed that inclusion of
E Secretary Finance Services was not within the rules as
amended on 23rd July, 2009. Upon discussion with the Ministry
of Law, it was decided that the amendment in the rules could
be made in line with the rule prevalent for the selection made
to the Income Tax Appellate Tribunal. In view of the record
produced in this court, we are of the opinion that the submission
F made on behalf of the petitioner is not correct. Learned
Attorney General submitted that the Search-cum-Selection
Committee, after scrutinizing the qualification and experience
of the short-listed candidates unanimously placed respondent
No.4 first in the merit list. We have also perused the record and
G it appears that respondent No.4 was unanimously placed at
Sr.No.1 by the Search-cum-Selection Committee. It has wrongly
been submitted on behalf of the petitioner that respondent No.4
was placed at No.2 and yet he was appointed ignoring the
person who was placed at No.1.
H
ARUN KUMAR AGRAWAL v. UNION OF INDIA & 919
ORS. [SURINDER SINGH NIJJAR, J.]
56. Mr. Salve has made very detailed submissions on A
behalf of respondent No.4. Giving us the entire sequence of
how the rules were amended. Mr. Salve has rightly pointed out
that the petitioner has falsely contended that rules concerning
the constitution of Search-cum-Selection Committee amended
through notification dated 7th October, 2010 were to ensure the B
selection of Mr. Sinha. The applications for filling up the post
of SEBI Chairman were invited on 10th September, 2010. It is
noteworthy that Mr. Sinha did not apply in response to the
invitation. Further more, the rules were amended in exercise
of the powers conferred on the Finance Minister under Section c
29 of the SEBI Act. The aforesaid notification issued by the
Finance Ministry has not been challenged by the petitioner. We
also notice here that prior to the amendment, the procedure for
selection of Chairman, SEBI was determined by the Finance
Minister. Having perused the entire record, we are not satisfied 0
that the petitioner has made out a cas~ of mala fide to vitiate
the proceedings of the Search-cum-Selection Committee. The
first meeting of the Search-cum-Selection Committee was held
on 2nd November, 2010. Upon deliberations, the Committee
decided to invite Mr. Sinha alongwith five others. We may E
notice here that Shri Suman Bery did not attend the m~eting.
The suitability of respondent No.4 had to be determined by the
Search-cum-Selection Committee. We are unable to discern
any illegality in the •procedure adopted by the Search-cum-
Selection Committee. We also find substance in the submission
of Mr. Salve that the petitioner has made much a do about the F
non-mention of the pay scale of the petitioner in the Performa
sent to the ACC which was enclosed with the Confidential
•
Letter No. DO.No.2/23/2007-RE dated 13th December, 2010.
The letter clearly mentions that Search-cum-Selection
Committee was constituted under Rule 3 of the SEBI Rules, G
1992. The Search-cum-Selection Committee consisted of :-
1. Shri K.M.Chandrasekhar, Cabinet Secretary - Chairman
2. Shri Ashok Chawla, Finance Secretary - Member
H
920 SUPREME COURT REPORTS [2014] 3 S.C.R.
A 3. Shri R.Gopalan, Secretary (DFS) - Member
4. Shri Devi Dayal, Former Secretary (Banking) - Member
5. Prof. Shekhar Chaudhuri, Director, llM Kolkata - Member
B 6. Dr. Suman K.Bery, Director General, NCAER - Member
57. Applications were invited by circulating the vacancy
position to all cadre controlling authorities in the Government
of India and States on 10th September, 2010. The vacancy was
C simultaneously put on the Website of the Ministry of Finance,
Department of Personnel and Training. It was also advertised
in three largest circulating English Newspapers of the country
on 18th September, 2010. It is clearly mentioned that out of the
19 applicants, who were respondents to the advertisement in
the first meeting of the Committee held on 2nd November,
D 2010, five were short listed. In addition, the Search-cum-
Selection Committee also decided to invite Mr. Sinha CMD,
UTI AMC for interaction. The Search-cum-Selection Committee
based on the qualification, experience and personal interaction
with the short listed candidates, recommended the names of
E Mr. U.K. Sinha and Mr. Himadri Bhattacharya in that order of
merit, for being considered for appointment as Chairman SEBI.
The letter further mentions that the Finance Minister proposed
the appointment of Mr. U.K. Sinha as Chairman, SEBI, for an
initial period of three years from the date he resumes the charge
F or till he attain the age of 65 years, whichever is earlier. It is
noted that willingness of Mr. Sinha has been obtained and was
enclosed with the letter. On this basis, it was requested that
approval of the ACC be obtained for the appointment of Mr.
Sinha as Chairman, SEBI. The letter also notes that the
G prescribed Performa, duly filled in, is also enclosed. We fail to
see what role Mr. Sinha had to play in the whole procedure
except for accepting the invitation of the Search-cum-Selection
Committee for interaction. Even if the pay scale has not been
mentioned, it cannot cast a shadow on the integrity of the
H proceedings held by the Search-cum-Selection Committee. It
ARUN KUMAR AGRAWAL v. UNION OF INDIA & 921
ORS. [SURINDER SINGH NIJJAR, J.]
is also to be noticed that the proposal was sent to the ACC on A
the express approval of the then Finance Minister. It is
noteworthy that the then Finance Minister was Mr. Pranab
Mukherjee. He is renowned for his transparency in the
performance of his official functions. He is at present the
President of India. B
58. Mr. Salve, in our opinion, has also rightly submitted that
there is nothing surprising in respondent No.4 accepting the
post of Chairman, SEBI which carried much lesser emoluments
than he enjoyed as Chairman, UTI AMC. It is not abnormal for
people of high integrity to make a sacrifice financially to take C
up the position of honour and service to the nation. In any event,
we are of the opinion, the acceptance by Mr. Sinha of lesser
salary as Chairman of SEBI cannot ipso facto lead to the
conclusion that he accepted the position for the purpose of
abusing the authority of Chairman, SEBI. Adverting to the D
allegation of non-disclosure of ESOP; in our opinion, Mr. Salve
has rightly submitted that it was not done to avoid any
investigation by the ACC into the question as to why respondent
No.4 would wish to join Chairman, SEBI when he was drawing
much higher emoluments as Chairman, UTI AMC. This non- E
mention cannot lead to the conclusion that if the same had been
m~ntioned, respondent No.4 would not have been selected as
Chairman, SEBI on the ground that it would have been illogical
for a person drawing higher emoluments on one post to join
another post having lesser emoluments. Mr. Salve has rightly F
reiterated that there was nothing abnormal; in the course
adopted by respondent No.4. No material has been placed on
· record to show that respondent No.4 was in receipt of ESOP
illegally. It has been pointed out that under ESOP, an employee
is given an option by the company to buy its shares upto the G
given quantity allotted to him which can be exercised after a
specified time. In the case of UTI AMC, the stock option was
to vest after a period of three years. Secondly, an employee
could not exercise 100% of the option in one go. It was spread
over four years, 10% in the 4th year, 20% in the 5th year, 30% H
922 SUPREME COURT REPORTS [2014] 3 S.C.R.
A in the 6th year and last 40% in the 7th year. After vesting of
each trench, the employee had one year to make up his mind
whether to exercise his option or to let it go by. In UTI AMC,
ESOP was approved by the shareholders. The HR Committee
of the Board and the Board, the decision by the Board was
B taken on 27th December, 2007. The minutes of the meeting of
the Board dated 12th April, 2008 clearly shows that the stock
option was exercised by respondent No.4 in accordance with
due procedure. However, even though the decision had been
taken by the Board of Directors on 17th September, 2007 to
c grant respondent No.4 market based compensation, the matter
was pending with the share holders. It was only on 12th April,
2008 that the Board took a decision to release the market
based compensation to respondent No.4. The actual allocation
of ESOP was made to respondent No.4 on 17th May, 2008
D through the letter of head of HR Committee of the Board. In fact
in 2011 after respondent No.4 got appointment in SEBI and had
to leave UTI AMC on 31st January, 2011, he surrendered his
entire ESOP and rescinded all his rights to exercise his option
in future. We, therefore, find no substance in the submission of
the petitioner that there was any ulterior motive involved in non-
E disclosure of the information with regard to ESOP to the ACC.
59. This brings us to the issue whether there was a
<:onspiracy hatched to ensure the selection of respondent No.4
as Chairman, SEBI. The petitioner stated that the conspiracy
F involved taking seven steps, namely:-
i. Mr.Sinha would seek voluntary retirement from IAS.
ii. SBI Chairman would move to make a fresh offer.
G iii. Mr.Sinha would seek approval for post retirement
commercial employment.
iv. Ministry of Finance would recommend commercial
employment.
H v. DOPT would approve the same and waive the
ARUN KUMAR AGRAWAL v. UNION OF INDIA & 923
ORS. [SURINDER SINGH NIJJAR, J.]
waiting period. A
vi. All concerned persons in the decision making
process would designate the employment with UTI
AMC as commercial employment.
vii. File would not be sent to the PMO/ACC for B
information or approval.
60. We have already considered all the points raised by
the petitioner in the earlier part of the judgment. Therefore, it
is not necessary to repeat the same. This, apart, the charge of C
conspiracy has to be taken seriously as it involves the
commission of very serious criminal offence under Section 120-
B of the IPC. Such a charge of criminal intent and conduct had
to be clearly pleaded and established by evidence of very high
degree of probative value. No notice of such allegations can
be taken based only on pure conjectures, speculations and 0
interpretation of notings in the official files.
61. The observations made by this Court in the judgments
noticed earlier make it clear that it was incumbent on the
petitioner not only to make specific allegations, but to produce E
very strong evidence to lead to a clear conclusion that the
selection' was actuated by mala fide. The 7 steps relied upon·
by the petitioner to establish conspiracy per se do not amount
to conspiracy to mislead the ACC. It is unbelievable to expect
such a coordinated overt and covert operation to have been F
even conceived, let alone successfully executed just to have Mr.
U.K. Sinha appointed as Chairman, SEBI. The appointment of
Mr. Sinha is strictly in conformity with the procedure prescribed
by service rules, i.e~ Rules 16 and 26 of the AIS (DCRB) Rules,
1958. The files were sent to PMO as and when required by G
rules of business. In matter of VRS and post retirement
commercial employment, there is no requirement under the
rules of business of sending the file to PMO/ACC. We find
substance in the submission of Mr. Salve that the petitioner has
not placed on record any material to establish that any H
924 SUPREME COURT REPORTS [2014] 3 S.C.R.
A conspiracy was hatched to ensure the selection of respondent
No.4.
62. The submissions made by the learned Attorney
General and Mr. Salve have also been supported by learned
Solicitor General appearing on behalf of respondent No.6. Mr.
8
Prasaran submitted that baseless allegations have been made
against respondent No.6. She was neither the recommending
authority nor the appointing authority for the post of SEBI. She
was appointed as Advisor to the Finance Minister on 26th June,
2009. Mr. Prasaran, in our opinion, has rightly made a
C grievance that all the actions taken by respondent No.6 in the
execution of her duty have been deliberately warped and
distorted to unnecessarily involve her in the trumped up
controversy. Her role as Advisor was limited to advising/
assisting the Finance Minister on the work assigned to her. The
D nature of work was, therefore, different from the role of a
functionary who performed an assigned line of functions. She
could have neither recommended respondent No.4 for
appointment nor negated any recommendation. By making a
detailed reference to the official record, Mr. Prasaran has
E pointed out that the Chairman, SEBI is appointed by the Central
Government by following an established process by the ACC
headed by the Prime Minister. This is done on the basis of
Search-cum-Selection Committee of the Government of India.
The opinion of other independent and reputed experts in the
F field of Economics, Finance and Management is also taken
through an institutional mechanism approved by the DOPT. We
are inclined to accept the submission of the learned Solicitor
General that the allegations made against respondent No.6 are
imaginary and based on a distorted interpretation of the official
G notes appended with the writ petition. With regard to the non-
extension of Mr. C.B. Shave, the learned Solicitor General
relied upon the averments made in the counter affidavit filed
by the UOI in Writ Petition No.391 of 2011. The aforesaid
affidavit has been attached as Annexure R-4 to the counter
H affidavit filed by respondent No.6 in the present writ petition. In
ARUN KUMAR AGRAWAL v. UNION OF INDIA & 925
ORS. [SURINDER SINGH NIJJAR, J.]
the aforesaid affidavit, it has been set out that prior to July, A
2009; selections were made by the Committee as decided by
the Finance Minister from time to time. As noticed earlier, the
name of Dr. S.A. Dave, Chairman, CMIE was added as an
expert member of the high powered Selection Committee
constituted by the Finance Minister for the selection of B
Chairman, SEBI in 2008. Even at that time, Mr. Sinha was
short-listed and placed at Sr.No.1. Out of the two names short
listed as noticed by us earlier in spite of the recommendations,
it was C.B. Bhave who was appointed. In 2009, a statutory
system was established for the selection of Chairman/Whole c
time Member of SEBI. In this back-ground, Rufe 3 was
amended by introducing sub-rule (5) which provided that the
Chairman and every whole time member shall be appointed by
the Central Government on the recommendation of the
Selection-cum-Search Committee consisting of the (i) Cabinet D
Secretary as the Chairman, (ii) Secretary, Department of
Economic Affairs, (iii) Chairman, SEBI (for selection of whole
time members) (iv) two experts of eminence from the relevant
field to be nominated by the Central Government. In 2010, it ·
was decided to initiate action for a fresh selection for the post E
of Chairman, SEBI. Therefore, a note was initiated on 18th July,
2010 for the constitution of a Committee. Various names were---
suggested for inclusion as experts. While approving the
constitution ·of the Selection Committee, the Finance Minister
also observed that going by earlier precedent, the Committee
should have composition that includes Secretary, Finance F
Services, who functionally deals with special critical aspects of
the capital market. Thus, with the addition of the Secretary
Finance Services, the number of nominees in the Search-cum-
Selection Committee became five. Unlike in the past, the
composition of the Selection Committee was sent to the DOPT G
for approval. However, on 23rd September, 2010, DOPT
pointed out as noticed earlier that inclusion of Secretary
Finance Services was not within the rules amended on 23rd
July, 2009 which led to the amendment of the rules. To rectify
this shortcoming, the amendment of the rules became H
926 SUPREME COURT REPORTS [2014] 3 S.C.R.
A necessary. It was within the powers of the Central Government
to make the aforesaid amendment, which was carried out in
accordance with the rules. It is, therefore, difficult to accept the
submission of the petitioner that the amendment in the rules
was made to ensure the noncextension of Mr. C.B. Bhave as
B Chairman, SEBI. In fact, Mr. Bhave was not granted the
extension for the reasons which have been given in detail by
Mr. Prasaran in his submission, the same need not be
reiterated. We are also unable to take the allegations made by
Dr. Abraham seriously, as the same seem to be actuated by
C ulterior motive. It is a direct attack on the integrity of respondent
No.4. The opinion expressed by Dr. Abraham, in his lengthy
letter, cannot be given much credence unless it is supported
by very convincing material. We are also not much impressed
by the submission of Mr. Bhushan that the constitution of the
D Search-cum-Select.ion Committee was changed at the instance
of respondent No.6. As narrated by the Solicitor General, tne
ultimate selection was made by a Selection Committee
consisting of Members who were all serving Officers in the
Government. Therefore, it is difficult to accept the submission
that 3 out of 5 members were hand-picked by respondent No.6
E to select Mr. Sinha. We are also unable to see any merit in the
submission of the petitioner that the post of CMD, UTI AMC
was kept vacant for 17 months to accommodate the brother of
respondent No.6. In our opinion, the allegations are malicious
and without any basis, and therefore, cannot be taken into
F consideration.
63. This now brings us to the preliminary objections raised
by the respondents that the writ petition deserves to be
dismissed on the ground that it is not a bona fide petition.
G According to the respondents, the petitioner has been set up
by interested parties. We entirely agree with the submissions
made by the learned Attorney General that the first requirement
for the maintainability of a public interest litigation is the
uberrimae fide of the petitioner. In our opinion, the petitioner
H has unjustifiably attacked the integrity of the entire selection
ARUN KUMAR AGRAWAL v. UNION OF !NOIA & 927
ORS. [SURINDER SINGH NIJJAR, J.]
process. It is virtually impossible to accept the submission that A
respondent No.6 was able to influence the decision making
process which involves the active participation of the ACC, a
high powered Search-cum-Section Committee with the final
approval of the Finance Minister and the Prime Minister. The
proposition is so absurd that the allegations with regard to mala B
fide could have been thrown out at the threshold. We have,
however, examined the entire issue not to satisfy the ego of the
petitioner, but to demonstrate that it is not entirely inconceivable
that a petition disguised as "public interest litigation" can be
filed with an ulterior motive or at the instance of some other c
person who hides behind the cloak of anonymity even in cases
where the procedure for selection has been meticulously
followed. The respondents have successfully demonstrated how
the petitioner has cleverly distorted and misinterpreted the
official documents on virtually each and every issue. In our
0
opinion, the petition does not satisfy the test of utmost good
faith which is required to maintain public interest litigation. We
have been left with the very unsavoury impression that the
petitioner is a surrogate for some powerful phantom lobbies.
Respondent No.2-SEBI in its affidavit has stated that the
petitioner is a habitual litigant. He files writ petitions against E
individuals to promote vested interest without any relief to the
public at large. We are at a loss to understand as to how in
the facts of this case, the petitioner can justify invoking the
jurisdiction of t~is court under Article 32. This is not a petition
to protect the Fundamental Rights of any class of down trodden F
or deprived section of the population. It is more for the
protection of the vested interests of some unidentified business
lobbies. The petitioner had earlier filed writ petition in which
identical relief had been claimed and the same had been
dismissed. The aforesaid writ petition is sought to be G
distinguished by the petitioner on the ground that three
successive writ petitions were withdrawn as sufficient pleadings
were not made for the grant of necessary relief. Even if this
preliminary objection is disregarded, we are satisfied that the
present petition is· filed at the behest of certain interested H
928 SUPREME COURT REPORTS [2014] 3 S.C.R.
A powerful lobbies. The allegations made in the letter written by
Dr. Abraham are without any basis and clearly motivated.
Further, a perusal of the record clearly reveals that several
complaints were filed against Dr. Abraham, wherein some
serious allegations have been made against him in relation to
B his tenure as the Whole Time Member (WTM), SEBI. Also, it
was only after the Ministry of Finance decided not to extend his
tenure as WTM, SEBI and advertisements for new
appointments were issued that Dr. Abraham started
complaining about interference of the Ministry of Finance in
c SEBI through the present Chairman. We may also notice here
that the letter dated 1st June, 2011 written by Dr. Abraham to
the Prime Minister, that the Petitioner seeks reliance upon, was
written merely a month and a half before Dr. Abrham's tenure
was to end. From the above, it is manifest that the letter written
by Dr. Abraham was clearly motivated and espouses no public
D interest. The affidavit also narrates the action which has been
taken by SEBI against very influential and powerful business
Houses, including Sahara and Reliance. It is pointed out that
the petitioner is a stool pigeon acting on the directions of these
Business Houses. We are unable to easily discard the
E reasoning put forward by respondent No.4. It is a well known
fact that in recent times, SEBI has been active in pursuing a
number of cause celebre against some very powerful Business
Houses. Therefore, the anxiety of these Business Houses for
the removal of the present Chairman of SEBI is not wholly
F unimaginable. We make the aforesaid observations only to put
on record that the present petition could have been dismissed
as not maintainable for a variety of reasons. However, we have
chosen to examine the entire issue to satisfy our judicial
conscience that the appointment to such a High Powered
G Position has actually been made fairly and in accordance with
the procedure established by law.
64. We find no merit in this petition which is accordingly
dismissed.
H R.P. Writ Petition dismissed.
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