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Monday, 14 November 2011 03:04
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Rights issues problems

Finmin’s Sebi affidavit raises uncomfortable questions


Another finance ministry note, this time an affidavit in the case of the writ petition filed against the appointment of UK Sinha as Sebi chairman, has raised more questions than it has answered—and this time too, as in the case of the 2G office memorandum, the note involves finance minister Pranab Mukherjee and former finance minister P Chidambaram. Ostensibly, the affidavit is supposed to be answering the charge that there was mala fide in the way former Sebi chairman CB Bhave was not given an extension even though the finance ministry had earlier moved a proposal to this effect and that UK Sinha was appointed in an underhand manner. So the affidavit says the NSDL controversy and the results of the investigation into it were the reasons why Bhave was not given an extension and then goes on to give details of the selection committee that chose Sinha unanimously.

So far, so good. But while doing so, it goes on to say that when a similar committee was set up under the previous finance minister, that committee also recommended Sinha as the first choice and J Bhagwati as the second choice—the affidavit says Bhave was not even a contender as he had told the committee he did not want to be considered for the job (since Sebi was investigating NSDL of which he was chief) but yet he was appointed Sebi chief. In which case, what’s not clear is how and why Bhave was selected—from the affidavit, it would appear, whatever that process was, it didn’t meet the present finance minister’s approval. A more detailed explanation is required since the markets regulator’s job is a critical one and the selection process cannot be so ad hoc—which is what the ministry’s affidavit suggests when it says “after the present Finance Minister took over in 2009, a statutory system was established for the selection of Chairman/Whole-time Members of SEBI”.

The ministry’s affidavit has interesting ramifications for the appointment of the next UTI chief. The finance ministry’s candidate, Jitesh Khosla, was not on UTI’s search committee’s original list, but that is the point raised by the ministry’s affidavit in the case of Bhave’s appointment. While the affidavit mentions the complaints against whole-time Members KM Abraham and MS Sahoo, and the alleged links between Abraham and NSE and NSDL, it doesn’t give details of what the result of the investigation into these has been—given how important a Member’s job is, the delay doesn’t speak too well of the oversight process. All in all, an unhappy state of affairs.



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