The Supreme Court on Monday allowed the petitioners to withdraw their public interest litigation (PIL) challenging the new procedure for appointing the chairman and whole-time members of the capital market regulator SEBI.

However, it gave the petitioners -- including former chief of air staff Mr S. Krishnaswamy and two former top police officers including Mr Julio Ribeiro -- the liberty to file afresh a petition raising Constitutional issues regarding appointment of regulators and on the concept of regulatory independence.

The petition had made the Finance Ministry, the Finance Secretary, the SEBI and its chairman, the Centre and the Cabinet Secretary as respondents.

“After hearing the parties and heeding to the request (of Mr Gopal Subramaniam, counsel for the petitioners) we allow the petitioners to withdraw the petition. The writ petition is dismissed as withdrawn,” a Bench headed by the Chief Justice of India, Mr S.H. Kapadia, said.

‘PUBLICITY STUNT’

The court observed that, "We find that the basis of the writ petition was not involving the points which the petitioners want to argue before the court. What is being argued before us (by the petitioners) is on concepts arising out of Constitutional law.”

“We expect proper pleadings in the matter where Constitutional doctrines are sought to be invoked particularly with respect to regulatory independence... If so advised, petitioners may file afresh a fresh petition raising the points which were argued before us," it directed.

The court also observed that there are certain allegations in the petition that is directed against some individuals and added that these cannot be done under the garb of raising Constitutional issues. “We feel it may be going towards publicity,” it said.

This is the second time that a petition of this nature has been ‘dismissed as withdrawn’.

‘FINANCE MINISTRY-CORPORATE NEXUS’

Appearing for the petitioners, the former Solicitor-General, Mr Gopal Subramaniam, contended that this matter involves a larger issue of the appointment of the chiefs and members of all regulatory bodies. He said that petitioner has nothing against any particular person.

The amended rule for appointment of the SEBI chief and whole-time members of the capital market regulator gives “unbridled power to the Finance Minister” in the selection process, the petition said. The amended rule “militates against the very object and purpose of creating SEBI as an independent body and therefore deserves to be struck down by the Supreme Court,” it added.

The petition 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.

“Therefore, the status as a watchdog enjoyed by the SEBI stands to be compromised and its independence taken away,” it 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 also alleged that "There are clear indications that there is a nexus between the Ministry of Finance and major corporate players and that the free and fair functioning of the SEBI is no longer possible.”

“Hence, the petition is being filed to protect the interest of the common investor from the workings of the tainted machinery,” it added. It alleges that the former SEBI chairman, Mr C.B. Bhave, was denied a five-year term.

‘DISGRUNTLED EX-SEBI OFFICERS’

In response, the Finance Ministry, in an affidavit filed before the apex court, had said the petition is “entirely misconceived and devoid of any merit.” Denying all the allegations, the Ministry 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.

It added that even though the earlier writ petition was permitted to be withdrawn by the court to remove allegations against the Finance Minister, all that seems to be done was to delete the name of Finance Minister as the respondent.

The Finance Ministry also defended the appointment of Mr U.K. Sinha as the SEBI chief and said no undue favour was shown to him.

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