The Supreme Court on Friday issued notice to the Centre on a plea challenging the Finance Minister’s power to nominate two members in the selection committee for appointing SEBI’s chairman and whole-time members.
However, the court declined to stay the specific provision in the SEBI Rules that gives the Finance Minister the power to make such a nomination.
The court was hearing an application filed by former top police officer Mr Julio Ribeiro and some other civil society leaders.
The plea claimed that the amended rule for appointment of the SEBI chief and whole-time members should be struck down as it was against the law (SEBI Act). It said the powers given to the Finance Minister in the selection process affects the functioning of SEBI as an independent body.
Earlier also the petitioners had moved the Supreme Court on similar grounds, but then they made some pointed allegations that the former SEBI chairman, Mr C.B. Bhave, was denied a five-year term and sought the removal of Mr U.K. Sinha as the SEBI chief.
The petitioners had to withdraw their public interest litigation (PIL) twice as the court declined to entertain the petition on the ground that the allegations -- directed against an individual -- were ‘vague’ and made “under the garb of raising Constitutional issues.”
However, the court had given them the liberty to file afresh a petition raising Constitutional issues regarding appointment of regulators and on the concept of regulatory independence.
The petition had said that according to the new rule, the Finance Minister – and not the Centre – has the power to nominate two persons in the selection committee. The selection committee was thereby, made comprising five members instead of the earlier three and this had some ulterior motive, the petition had alleged.
“The status as a watchdog enjoyed by the SEBI stands to be compromised and its independence taken away,” it had said, adding that “new members were duly appointed, thereby, subverting the process of selection and eliciting persons who would not necessarily have any expertise in the area would be handpicked.” The petition had also alleged “a nexus between the Ministry of Finance and major corporate players” in this.
The Finance Ministry had denied all allegations. It defended Mr Sinha’s appointment as the SEBI chief and said no undue favour was shown to him. The Ministry also claimed that the petition does not appear to have been filed bona fide but seeks to espouse the cause of certain disgruntled ex-officers of SEBI.
Following the apex court order on November 21 last year, the petitioners moved a new PIL avoiding personal allegation. They have now focused on the amended norms, its impact on the regulatory independence.