sebi, uk sinha, omita paul

eBook - SEBI, UK Sinha, Omita Paul

In a major decision, the Supreme Court of India on September 26, 2012 issued notice to the Central government asking it to file their response to a plea that alleged irregularities in the appointment of SEBI chairman UK Sinha.

According to a news report, "The bench also impleaded the President's Secretary Omita Paul, who was the advisor of the then finance minister when the decision to appoint Sinha as SEBI chairman was taken by the government."

Paul was impleaded after the petitioner of the PIL Arun Agrawal alleged that she had bent rules to facilitate Sinha's appointment as SEBI chairman.

Canary Trap has been reporting on the entire issue since May 2011. This ebook is a compilation of all the articles written by petitioner Arun Agrawal and published on our blog. The PIL filed in the Supreme Court of India starts from page 39 of this book.

© Canary Trap

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Table of Contents

1. Complaint against Omita Paul in a letter addressed to the PM (May 30, 2011)

2. Omita Paul, SEBI, and RIL’s 2000 crore stock market scam. Details of the complaint to the Chief Vigilance Commissioner against Omita Paul, UK Sinha and Reliance Industries (September 11, 2011)

3. UTI AMC, Jitesh Khosla, and Omita Paul. Its a complaint letter to the PM (November 10, 2011)

4. How U K Sinha became SEBI Chairman? (November 24, 2011)

5. Pranab Mukherjee, Omita Paul and corruption in Finance Ministry (July 17, 2012)

6. Copy of PIL filed in the Supreme Court challenging the appointment of SEBI chairman UK Sinha (September 26, 2012)

26/09/12 4:56 PMComplaint against Mrs Omita Paul

Page 1 of 7http://canarytrap.in/2011/06/03/complaint-against-mrs-omita-paul/

Complaint against Mrs Omita Paul

Date: 30/5/2011

The Honorable Prime Minister of India,Government of India,South Block,New Delhi

Complaint against Mrs Omita Paul, Advisor to theFinance Minister with the rank of Secretary.

Dear Hon’ble Prime Minister,

Mrs Omita Paul’s proximity to the present FinanceMinister is too well known to the members of the

Appointment Committee of the Cabinet, as she has been appointed in the rank ofSecretary as Advisor to the Finance Minister, Defence Minister and Foreign Ministerat various times in the government coinciding with the tenure of Shri Pranab Muker-jee in the three ministries mentioned above.

She was also appointed as Information Commissioner in the CIC on 9/5/10 after themodel code came into being under which these appointments were to be kept inabeyance.

Though the then Chief Election Commissioner Naveen Chawla, whose appointmentto the post had been disputed by the Opposition for his proximity to the Congress,subsequently gave a clean chit to the appointment, a retired High Court Judge JusticeQuereshi in his legal opinion on the subject matter thought otherwise.

That she was appointed without there being a panel of other candidate being madeavailable for the post, that the three existing vacancies had not been filled up earlier,and that she was the only person appointed led to the reasonable conclusion that shewas accommodated in a fixed tenure post for five years in case the UPA lost the elec-tions.

The concern shown for Mrs Paul in appointing her to the post of Information Com-missioner as an insurance against UPA losing the election was indeed touching. That



the then leader of the opposition Shri Advani could find time to meet barely oneweek before the election day with other members of the appointment authority(which includes the Prime Minister) to clear the appointment unanimously shows theimportance attached to the appointment of Mrs Omitta Paul.

The suspicion that the appointment of Mrs Paul to the post of Information Commis-sioner was an insurance against the electoral defeat of the UPA was confirmed whenthe UPA came back to power and she was reappointed as advisor to the Finance Min-ister on 26/6/09 on the very day that she resigned as Information Commissioner.

Such prompt resignation and appointment being made by the Appointment Commit-tee of the Cabinet is truly unprecedented in the history of such appointments.

What is worse is that her resignation was not accepted and the note relating to recom-mending her resignation did the rounds of various ministries till November when itwas agreed by the powers that be that the resignation came into effect on the date itwas submitted and need not be accepted.

However, the fact was not known at the time of her appointment as Advisor to theFinance Ministry and the same yardstick was not applied to the reported resignationof the then Chief Information Commissioner who went on to complete his term.

If the appointment of Mrs Paul as Information Commissioner, her subsequent resig-nation and her reappointment as Adviser with the rank of Secretary on the very dayof her resigning as Information Commissioner tells its own tale then the manner inwhich a exemption in the Income Tax Act was given to benefit her husband (and 13to 15 other persons incidentally) was not only unprecedented but a blatant act ofnepotism.

In the budget that followed her appointment as Adviser the following exemption wasgranted to members of the UPSC. Under section 10 (45) of the Income Tax Act.

(45) any allowance or perquisite, as may be notified by the Central Government in the OfficialGazette in this behalf, paid to the Chairman or a retired Chairman or any other member or re-tired member of the Union Public Service Commission;

The exemption was granted in 2011 for the financial year 2007-2008.

Mr KK Paul, the husband of Mrs Omita Paul was appointed a member of the UPSC



on 26/7/2007 and would be eligible for the exemption for the entire period of histenure which he would not have been, had the exemption not been made with retro-spective effect. In that case he would have availed the exemption for only threemonths.

The same exemption was not granted to the members of the Election Commission orthe Information Commission.

It is being alleged that Mrs Paul misused her office to influence the grant to her hus-band this largesse. If in the process, fifteen other individuals (members of UPSC)benefited, it was because the budget could not grant benefit to only the husband ofMrs Paul. The concession being made retrospective is a complete giveaway so thatthe entire period of tenure of Mr Paul could be covered. It was definitely a new lowin the falling standards of public morality and corruption.

The consequence of similar acts of nepotism would have been disastrous in any othermature democracy with either the adviser or the Minister (or both) made to resign.

As this act of nepotism was neither noticed nor acted upon by the government, it em-boldened the concerned officer in another act of nepotism, this time to promote theinterest of her brother. This time at stake was the chairmanship of UTI asset manage-ment company, managing Rs 67,000 crores of public fund.

According to Financial Express dated 9/4/11: While Khosla was rejected after interviewsby the search committee on the grounds that other candidates had solid experience in the fi-nancial services business, the ministry has repeatedly pushed his candidature. Khosla is thebrother of Omita Paul, adviser to finance minister Pranab Mukherjee. Incidentally, Paul hasworked with Mukherjee not only in the finance ministry but also in his earlier stints at the de-fence and external affairs ministries.

The government is intent on appointing Mrs Paul’s brother despite objections fromthe foreign shareholder having a 26 per cent stake in UTI AMC and the recommenda-tion of the search committee.

What is of concern is not the fact that the Advisor, Mrs Paul, is indulging in nepotismas the potential of damage to the nation is limited, but the fact that she is also interfer-ing in the appointment and functioning of functioning of the regulator Securities andExchange Board of India (SEBI). She has no background of finance and no experience



and would never have made it to the level of Secretary in the Finance Ministry ifthere were any objective norms set for her appointment.

Her role has become that of an intermediary on behalf of the lobbyist who havecrores at stake like the Saharas, MCX and Reliance against whom the regulator wastaking action.

Her interference in the affairs of SEBI has been making news in the media for thewrong reasons. The fact is that what is appearing in media is only the tip of the ice-berg.

Her role in the ouster of competent and honest persons has portends of a major disas-ter for the capital market and the economy of the country.

The country cannot afford the luxury of another major stock market scam or a down-turn in the stock market due to loss of confidence by investors, both domestic and for-eign, on regulatory issues due to the interference of Mrs Paul.

It appears that the decision makers have not learnt anything from the debacle of thewall street on account of lax regulators susceptible to corporate lobbying.

Details of press reports are as follows:

Mrs Paul interference in the appointment of SEBI chairman was reported in The Indi-an Express of 23/4/10, the headline is produced below and the article as Annexure A.

“After FM cleared Bhave extension, advisor stepped in to roll it back”

When stock market regulator C B Bhave stepped down as Securities and ExchangeBoard of India chairman on February 17 this year, it was seen as a routine event, theend of his three-year term. Behind the scenes, however, the chain of events was any-thing but routine.

Records available with The Indian Express reveal that more than a year before his termwas to end, Bhave was cleared for another two years by Finance Minister PranabMukherjee. This, after Mukherkee asked for — and got a positive recommendationfrom then Finance Secretary Ashok Chawla — on his performance.

Sources said a section in the Finance Ministry had concerns regarding Bhave’s earlier



stint with National Securities Depository Ltd (NSDL) and his very public spat withMulti-Commodity Exchange of India Ltd (MCX), an electronic exchange that offerstrading services in commodities.

But after the Finance Ministry formally wrote to Bhave seeking his consent, Bhavesent a letter to Chawla saying he was willing to accept a two-year extension. Until theintervention of Omita Paul, Advisor to Finance Minister.

It was her note suggesting that no action was needed so early, records show, whichwas the tipping point: Mukherjee put on hold the process for eight months. The Fi-nance Ministry called back the proposal on tenure extension sent to the AppointmentCommittee of the Cabinet in January 2010.….

When contacted, Paul said she would not like to comment.

Another article on Mrs Paul interference appearing in Times of India dated 25/4/11written by P Vaidyanathan is reproduced below.

Both Handled Sensitive Issues

This signals a dismantling of the team built during Bhaves tenure, said two personswith direct knowledge of the matter. Both Sinha and Bhave declined comment. AjayShah, professor at the National Institute of Public Finance and Policy and a formerconsultant to the finance ministry, said the performance of Sebi in the last couple ofyears was the best in its history. “It would be a tragedy if a top quality team like thisis dispersed, “he said. Two other securities market professionals said the quality offact-finding and orders issued by the regulator had improved considerably duringthe last couple of years.

In its edition dated August 23,2010, Economic Times had reported that Bhave was un-likely to see his term extended beyond three years. On February 17 this year, we revealed thebehind-the scene manoeuvring behind the decision, the crucial element of which was the deci-sion by North Block, in early 2010,to withdraw a recommendation to give Bhave a five-yearterm. The decision on this was to have been taken by the cabinet committee on appointments, agroup of senior ministers, including the prime minister. But in January 2010,the finance min-istry called back the proposal. This ,according to media reports, was prompted by a note fromOmita Paul, an advisor to the finance minister. In that note, Paul is reported to have suggest-ed that there was no need to decide on Bhave’s tenure more than a year before it expired. Abra-



ham, who is from the Indian Administrative Services, Is an MTech from IIT-Kanpur and achartered financial analyst. He holds a PhD from the University of Michigan. He was earlierthe finance secretary of Kerala. Sahoo, who is originally from the Indian Economic Services,quit when he was a director in the finance ministry to take up the assignment in Sebi. Abra-ham handled sensitive issues such as the investigation into the case relating to the alleged vio-lation of portfolio investment rules by ADAG; the proposal of MCX-SX to offer a tradingplatform in equity and derivatives, and several other cases of insider trading. The allegationsagainst ADAG were settled through a process known as consent order ,in which the entity be-ing investigated pays a fee but does not admit or deny guilt. ADAG entities paid Rs 50 crore,arecord amount, for the settlement. The MCX proposal to set up a new stock exchange has vir-tually been rejected by Sebi. Sahoo is currently hearing arguments relating to the charges ofinsider trading raised against RIL.Both Abraham and Sahoo declined to comment. The gov-ernment has approved changes to the rules relating to the terms and conditions of appoint-ment of the Sebi chairman and members, including a five-year term, but is yet to notify thesechanges.

From acts of nepotism having marginal impact on the economy of the country, MrsPaul has progressed into interfering in the affairs of capital market regulator for thebenefit of companies with dubious background.

This will have a major impact on investment decision of the discerning investor andthe economy of the country.

It is requested that her appointment as Advisor in three different ministries with therank of Secretary (she would have remained as a joint secretary in her parent cadre),her appointment as Information Commissioner, her resignation as Information Com-missioner and re-appointment on the same day, her acts of nepotism in favouring herbrother for appointment to a key post and her husband with income tax exemptionand interference in the affairs of SEBI be investigated.

It is also requested that Mrs Paul be restrained from interfering with the appoint-ments and functioning of SEBI, formally or informally, till it is established that shehas not indulged in acts of nepotism or has not been influenced by cash rich powerfulcompanies in interfering with the appointment to and functioning of SEBI.

With sincere regards

Arun Kumar Agrawal



PS: The government has deliberately not given a clean chit to the co-Chairman of theDrafting Committee of the Jan Lokpal Bill. One hopes that the Chairman of the Draft-ing Committee too is subjected to similar scrutiny on his role in the appointment ofhis advisor Mrs Omita Paul, exemption to Mr Paul in the budget and other acts of hisAdvisor.

(Arun Agrawal is the author of the book Reliance: The Real Natwar. The opinionsexpressed by the author and those providing comments are theirs alone, and do notreflect the opinions of Canary Trap or any employee thereof)

http://reliancetherealnatwar.com/

26/09/12 4:57 PMOmita Paul, SEBI, and RIL’s 2000 crore stock market scam

Page 1 of 11http://canarytrap.in/2011/09/11/omita-paul-sebi-and-rils-2000-crore-stock-market-scam/

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

Reports in the media recently has pointed towardsa battle in the country’s financial regulator, Securi-ties and Exchange Board of India (SEBI).

K M Abraham, a whole time member of SEBI wroteto the Prime Minister’s Office and leveled seriousallegations against Finance Minister PranabMukherjee, his advisor Omita Paul and the regula-tor’s chairman U K Sinha.

Abraham, in a letter on June 1, has alleged that “thefinance minister and his advisor pressurized theSEBI chairman to manage some high-profile corpo-

rate cases,” the Indian Express reported.

Now, a complaint filed with the Central Vigilance Commissioner (CVC) on Septem-ber 10, 2011 confirms Abraham’s allegations.

The complaint is filed against Smt Omita Paul, Special Adviser & Secretary, Ministryof Finance; (2) Sri U K Sinha, Chairman, Securities and Exchange Board of India(SEBI); and (3) Sri Mukesh D. Ambani, Chairman & Managing Director, Reliance In-dustries Ltd. The complainant has alleged that all of them are engaged in a crime inprogress to deprive the exchequer of Rs 2000 crores.

The complainant had earlier complained (CVC ref no: 416/09/02) about the 2G scamshowing how Anil Ambani had transferred Swan Telecom as a bribe on the day hewas given the GSM license in Reliance Communication. The complaint has been an-nexed in the pending PIL petition before the Hon’ble Supreme Court.

According to the complainant, “the complaint relates to the mala fide manipulationof appointments to the Securities and Exchange Board of India (SEBI) to the demon-strable benefit of Reliance Industries Ltd (Sri Mukesh Ambani) by over Rs. 2000crores in the pending Fraudulent and Unfair Trading case before SEBI in which thecompany is liable to pay a penalty of up to Rs. 1539 crores along with the disgorge-ment of profit of Rs. 513 crores..”



EXCERPTS FROM THE COMPLAINT LETTER (Reproduced with permission ofthe complainant)

The facts of the scam/fraud:

The following facts relate to violation under Fraudulent and Unfair Trade PracticesRegulations, relating to RIL and its subsidiary,

In November 2007, the company secured an illegal gain of Rs. 513 crores. Underthe law, RIL was liable for a penalty of three times the gain — that is, Rs. 1539crores – and the disgorgement of its profit of Rs 513 crores, taking the totalamount to Rs. 2056 crores. Factoring in interest, this amount would increase byanother Rs. 200 -500 crores. More importantly, the violation could also entailcriminal prosecution under IPC punishable with seven years imprisonment asunsuspecting g investors had been defrauded/cheated of Rs. 513 crores.

A clean (or, more accurately, dirty) profit of Rs. 513 crores earned unlawfully infive days by shorting the market on the basis of information not available to in-vestors is most impressive, even by the standards set by Reliance. It bears notinghere that Rs. 7.85 crores shares were sold for Rs. 210 were the very same sharesallotted for Rs. 10 a year back and that they earned a 20-fold profit (approxi-mately Rs. 1400 crores) to the promoters of RIL in less than a year. In addition, itis relevant to note that RIL had the guts to indulge in this fraudulent practice in2007, when SEBI had been around for 15 years, speaks volumes of their com-plete confidence in the support of the present political dispensation which, inci-dentally, is almost identical to that of 1983 when Fiasco and Crocodile Invest-ment were used as benami foreign fronts by Reliance to bring in money throughChannel Islands. RIL’s confidence is justified: At that time, a leading Englishnewspaper had screamed “Pranab Mukerjee: Minister of Finance or Reliance?”This time around, there has been pin drop silence.

The details of the fraudulent trade:

In the show cause notice to RIL, SEBI had stated that that between Nov 1-5, 2007,some 12 entities acting on behalf of Reliance Industries had created short position ofaround Rs. 7.65 crore shares at Rs. 290 per share.

The market watchdog had then gone on to state that the 12 entities had sold the Re-



liance Petroleum shares heavily in the cash market, amounting to 4.01 percent of thecompany’s equity, and depressed the price to around Rs. 210.

“By artificially depressing the price in the cash market and thereby lowering the set-tlement price of the futures on expiry, Reliance Industries gained on its short posi-tions in the derivatives market,” the SEBI notice had said.

It had added: “The whole manipulative operation was arranged by Reliance Indus-tries and it was aided by the 12 related entities. Reliance Industries earned Rs. 513crore by indulging in these manipulative activities.”

As all with even an elementary knowledge of the capital market in India know onlytoo well, this manipulative and fraudulent transaction was the standard operatingprocedure for the company in the badla days of the eighties. A group of promotercompanies would take short-positions in Reliance Petroleum in the futures marketwith the prior knowledge that the promoters would sell large quantity of shares inthe cash market. In short, they knew the market price would fall when Reliance Petroshares were sold, and that they would be able to make money with this prior knowl-edge by selling in the futures market. This practice, repeated at regular intervals, wasand is in egregious violation of the Prohibition of Fraudulent and Unfair Trade Prac-tices Act.

The matter came into the limelight when it was raised in the Parliament and withSEBI in August 2008 by none other than Sri Amar Singh. Unfortunately for RIL, bythen the new SEBI chief, Sri C B Bhave, a no-nonsense officer, had taken over. He hadimmediately ordered an investigation which had resulted in the finding of the Rs. 513crores in illegal profit and the issuance of a a show cause notice to the company inMay, 2009.

The company had been charged under Prevention of Fraudulent and Unfair TradePractices Regulations Section 15HA of SEBI Act which states:

15HA – Penalty for fraudulent and unfair trade practices: If any person indulges infraudulent and unfair trade practices relating to securities, he shall be liable to apenalty of twenty-five crore rupees or three times the amount of profits made outof such practices, whichever is higher..

The penalty would be three times the profit, that is Rs. 1539 crores. As the fraud was



committed knowingly by a company having the largest market capitalization, thepenalty should have been the maximum under the law. This was more so to instill theconfidence of the Foreign Institutional Investors that the Regulator does not surren-der before corporates enjoying politic patronage but has the will to discipline thelargest and the most influential company listed on the market. There was hardly anyscope for leniency, given the nature of the crime.

Faced with the daunting prospect of losing Rs. 2056 crores and inability to influencethe honest and competent officers at SEBI, a long term conspiracy was hatched be-tween RIL and the Finance Ministry.

The strategy was simple and time tested. Reliance would delay the matter at SEBIfor two years during which years certain key officers in SEBI, would completetheir tenure – the chairman, whole time directors and three executive directors. TheFinance Ministry, on its part, would ensure that the officers were not given an ex-tension. A pliant and obliging SEBI chief would be installed and the case againstRIL would be compromised for a token amount.

Smt. Omita Paul whose only qualification (MSC chemistry, M Phil social science andBA Journalism, retired from Indian Information service) ) to the high office of Advis-er with the rank of Secretary, is her proximity to the Finance Minister, was the pointperson in the Finance Ministry.

She was to ensure that Bhave would not get an extension, and would be replaced by apliant and friendly successor. Other senior officers like Dr Abraham and Mr Sahoo(whole time members) who had performed commendably and would not agree tothe compromise too would not be given an extension.

As a first step towards the objective of removing the key officers, Smt Omita Paul re-fused to put up the file for the approval of the Cabinet for extension of tenure ofBhave by two years by stating that it was premature, even after it had been approvedearlier by the Finance Minister after obtaining the consent of Mr Bhave for the exten-sion. Similar consent of the two whole time members of the Board including DrAbraham had been obtained.

Incidentally the decision to call back the file was contemporaneous with the thoroughinvestigation/ inquiry done by SEBI into the illegal trading in RIL shares resulting inan illegal profit of Rs. 513 crores.



Subsequently, Smt Omita Paul changed the composition of the selection panel for theselection of SEBI Chairman by introducing more members from the Finance Ministryto ensure that Sri C B Bhave was not appointed and that her candidate, the amiableand obliging Sri U K Sinha was selected.

A headline in The Indian Express edition of 23/4/10, is produced below:

After FM cleared Bhave extension, advisor stepped in to roll it back: Records available withThe Indian Express reveal that more than a year before his term was to end, Sri Bhavehad been cleared for an extension in office of another two years by the Finance Minis-ter, Sri Pranab Mukherjee. This, after he had asked for — and obtained — a positiverecommendation from then Finance Secretary, Sri Ashok Chawla, on Sri Bhave’s per-formance.

But after the Finance Ministry formally wrote to Bhave seeking his consent, Sri Bhavesent a letter to Sri Chawla, affirming that he was willing to accept a two-year exten-sion.

Things were proceeding smoothly — until Smt Omita Paul did what she had beenmandated to do by the Finance Minister.

It was her note suggesting that no action was needed so early, records show, whichwas the tipping point. Sri Pranab Mukherjee lost no time in putting on hold theprocess for eight months. The Finance Ministry called back the proposal on tenure ex-tension sent to the Appointment Committee of the Cabinet in January 2010.….

When contacted, Smt Paul said she would not like to comment..

Presumably, she did not want to comment about the ouster of Sri Bhave and her rolein the appointment of her protégé U K Sinha as also in ensuring that Dr Abraham toodid not get an extension/reappointment. Dr Abraham too had to agree to any con-sent order (explained in detail below) to be passed in the case against RIL.

The active involvement of Omita Paul in preventing the then SEBI chief from gettingan extension is proof of her involvement in the conspiracy.

RIL, on its part, had to merely drag its feet to help Smt Omita Paul to oust two key of-ficers who would not compromise their integrity in handing an order to RIL.



Consent Order:

Consent order is a parachute to bail out large corporates from financial crimes. Whilean ordinary man, if caught in a fraud of ten thousand rupees will be jailed, the superrich, for a stock market fraud of Rs. 500 crores, can buy his way out by a device bor-rowed from the west known as consent terms. It is an agreement between the offend-er (RIL) and the regulator (SEBI) by which the company does not admit to the guiltbut agrees to pay a certain amount and SEBI in turn agrees not to prosecute the of-fender or pronounce him guilty, if the mutually agreed amount is paid. It is the pricepaid by the company for not admitting the guilt and also not being prosecuted un-der criminal law!

Consent order is resorted to only when the evidence is weak and there is a doubt thatthe case may not stand in a Court of law. However, when the case is backed by fool-proof evidence (though in law nothing is foolproof) there is no question of the Au-thority agreeing to consent terms .Full penalty is levied. RIL fell in this category.

RIL is the largest company of the country by market capitalization (Coal India over-took it recently). Though a good part lot of the promoters’ wealth has been earned onthe Stock market, (the legal Rs. 1400 crores and the illegal Rs. 500 crores mentionedabove is an example) they cannot afford the stigma of being caught on a violation ofInsider Trading/ Prevention of Fraudulent and Unfair Trade Practices Regulations.The financial consequences would be grave and immediate. It would lead to their be-ing automatically blacklisted the world over by fund managers and their capacityto raise capital would be diminished.

It is the accused party that has to apply for consent orders and to initiate proceedingsfor such an order, a lengthy process.

However, in the case of RIL, it is the company that decides the law that would applyto it and the amount it would pay to hush things up through a consent order. There isno question of finding the company guilty. If officers like Sri Bhave and Dr Abrahaminsisted on coming in the way of Reliance, then Smt Omita Paul, her boss, or otherdubious individuals in government would steamroller them aside.

While Mrs Paul was taking care of the non-renewal of Sri Bhave’s term , RIL wasdoing its little bit to prolong the decision-making beyond Sri Bhave’s term by fil-ing for a consent order and by offering to pay Rs. 2 crores in November, 2009,



knowing fully well that it would be rejected but the process would consume time.

When that was predictably rejected, Reliance file another application for a consent or-der in August, 2010, this time it for a princely sum of Rs. 8 crores or 400% more thanthe previous offer but 0.5% of the Rs. 2056 crores.

These two ridiculously low offers of Rs 2 crores and Rs. 8 crores (as against a totalamount of Rs. 2056 crores gain through fraud of Rs. 513 crores, plus penalty ofRs.1539 crores) are in themselves proof that a deal had been struck between RILand Omita Paul After she had replaced the existing Chairman, the new Chairmanwould ensure that the penalty does not exceed Rs. 50 crores. It was for this reasonalone that RIL offered the meager amount so that it could negotiate from a lowbase of Rs. 8 crores. It would make perfect business sense to spend Rs. 50 crores inconsent order, Rs. 100 crores in bribes/donations (or much less), and pocket Rs.1900 crores. That way RIl would be able to pocket Rs. 350 of the illegal/ fraud mon-ey!

These offers too had to be rejected, again involving a drawn-out process which wouldgive Smt Omita Paul time to oust Sri Bhave through behind- the-scenes manipula-tions and to install her very civil servant, Sri Sinha.

With Sri Sinha duly installed in office, it was expected that things would movesmoothly. Reliance would come back with another settlement for a consent order atRs. 15 crores and the matter would be closed at Rs. 50 or even Rs. 100 crores. RILwould save about Rs. 1900 crores — and ensure that it would be immune from prose-cution on that particular transaction for all time.

Predictably enough, another consent order was filed after Sri Sinha planted himself inthe SEBI chairman’s office in May 2011. The amount offered is not known.

As anticipated, the obliging Sri Sinha, made it his highest priority to deliver the RILconsent order. After all, the company (and the Finance Minister) had waited longenough.

In his letter to the Finance Ministry in response to the accusation of Dr Abraham thatSri U K Sinha had tried to influence him on various vital cases, he wrote with remark-able sagacity and somewhat less clarity:



Consent is another area where there is prevailing perception that it is subjective, pro-vides escape route to offenders and quality of orders is not high and is not trans-parent.. While I have publicly defended the decision of consent proceedings whichare legal and as per law and is practiced in many advance jurisdictions, I do feelthat there is need to bring in uniformity and consistency. All these efforts on mypart may not have gone well with everybody in the organization but by and large theofficers have appreciated my commitment and drive to improve the system in SEBI. Iadvised the executives to have more clarity on when consent orders can be passed,how to improve the quality of orders, how to improve the drafting and to providetraining to the officers so that the quality of their orders can improve. I presume thatthese are efforts to improve systems and procedures within SEBI and are my legiti-mate responsibility and cannot be counted as interfering or influencing the investiga-tion or the quasi – judicial responsibilities of a delegated authority.

Before my joining, SEBI had passed consent orders in January 2011 against RelianceADAG entity imposing settlement charges and restraint. It was in this backgroundthat when briefs were put up regarding Reliance Industries Ltd, I discussed the back-ground of how and in what manner the settlement amount was arrived at in theADAG case and whether any consent petition has been filed in RIL case or not. Ex-cept for the brief that came to me through Dr Abraham, I have not seen any file,passed any orders or given any directions to any employee. The matter is still withthe WTM and to the best of my knowledge no decision has been taken so far.

The plain truth is that Sri Sinha has not written a single order in his life on regulatoryissues. Though he may have concerns as SEBI chief, he simply does not have provenexpertise in drafting or passing quality orders. On the other hand, there are a largenumber of articles available in the public domain in which orders passed by SEBIduring the tenure of Sri Bhave have been hailed as well reasoned and quality orders.

If Sri Sinha was so concerned about transparency as he purports to be, he shouldhave ordered that all consent orders along with the charges and the investigative re-port be posted on the internet.

Further if he believes that consent orders provided an escape route to the offender,it was his bounden duty to pass orders that no consent order would be passed incases where there was sufficient evidence against the offender. This would be up-holding public policy. Consent orders are resorted to only where there is insuffi-



cient evidence.

It is also not true that consent terms are offered to offenders in advance jurisdictionand Sinha may not have heard of Michael Milken, Ivan Boesky, Martha Steward andour own Rajirathanam. He may really not have heard of them or he may be faking ig-norance. All of them would have agreed to a consent order!

The very fact that he clubbed ADAG consent order with that of RIL pending applica-tion (in the letter mentioned above) shows his anxiety to deliver on the deal betweenRIL and Smt Omita Paul. Dr Abraham was a whole time member and not a subordi-nate of Sri Sinha. Could the Chief Justice have similar discussions with his brotherjudges?

The fact of the matter is that, in the consent order relating to ADAG, no profit wasmade and yet it was made to pay Rs. 25 crores in each of the two companies that di-verted the funds to the capital market! RIL, on the other hand, had made illegal prof-its Rs. 513 crores and SEBI should not have provided the “escape route to the offend-er” and should have been fined it Rs. 1539 crores along with interest.

In fact, the two paragraphs quoted above from the correspondence of Sri Sinha to theFinance Ministry show that his overwhelming concern was that liberal consent termsbe offered to RIL — and not that an ‘escape route’ to the offender should be denied.

It was logical for Mr Sinha to try and get Dr Abraham to clear the consent terms be-fore he demitted office and not by a successor chosen by him/his mentor (SmtOmita Paul), so that the stink of the scam would not affect him or his mentor inthe Finance Ministry later on!

The importance of this complaint lies in the fact that it has been filed even as a crimeis in progress. Unlike most complaints, it has been filed before the crime has beencompleted and injury done. If acted upon, injury can be prevented. If ignored, injurywill result.

Thus, it is important that immediate action is taken against the erring conspirators toprevent the impending loss of Rs. 2000 crores to the exchequer. In case the consentterms are agreed to there will be absolutely no future possibility of recovering theloss to the exchequer. The protagonist will claim that the decision was taken by com-mon consensus by various officers as has been the case in the various scams in the



public domain.

It is essential that the following preventive steps are taken to avert the loss:

The investigative report and the show cause notice be put in public domain sothat there is no doubt that the Rs. 513 crores of illegal profit was due to fraudu-lent and unfair trade practice and that the case is on a sound footing.

SEBI is prevented from entering into consent term with RIL.

Policy decision taken that consent terms will not be entertained in cases wherethere is strong evidence to prove the violation of law. In fact that is the publicpolicy.

Penalty of three times the profit is levied. It must be remembered the companymade a profit of Rs. 1400 crores on sale of shares in addition to the Rs. 513 croresof illegal profit.

SEBI should ensure that the disgorged amount of Rs. 513 crores is distributed toinvestors who were defrauded.

Action be taken against the persons in conspiracy to displace officers of integrityin order to make the deal with RIL possible.

The complainant has also alleged that the SEBI Chairman deliberately leaked his re-sponse to the Finance Ministry on Dr Abraham’s letter.

The letter states:

“The Chairman also ensured the exit of three Executive Directors while it is SEBIBoard which decides on the appointment and extension of tenure of EDs. The min-utes of the Board meeting show that no decision was taken by the Board but it wasdecided by the Chairman to issue fresh advertisements and that the existing memberswould have to apply afresh. It is learnt that the Board was deliberately misled by theChairman. It was not surprising that three of the Executive Directors who had per-formed admirably chose not to apply and serve under Sri Sinha. By this clever manip-ulation, three experienced and competent senior officers who are men of high caliberand who worked for SEBI on a salary cut have been lost to the cause of public serviceas they were denied the job satisfaction of serving under an honest dispensation.



Competent and honest people are rare and are not to be insulted by making them re-apply for a post along with others – at least, not by an honest government.”

The letter concludes by requesting the CVC to prevent the scam.

26/09/12 4:58 PMUTI AMC, Jitesh Khosla, and Omita Paul

Page 1 of 4http://canarytrap.in/2011/11/10/uti-amc-jitesh-khosla-and-omita-paul/

UTI AMC, Jitesh Khosla, and Omita Paul

10/11/2011

The Hon’ble Prime Minister of India,

Govt of India,

South Block,

New Delhi

Act of Nepotism: Proposed Irregular and IllegalAppointment of Omita Paul’s brother as Chair-man of UTI MF at over Rs 3 crore per annumsalary.

Kindly refer to my complaints dated 30/5/2011 and 12/9/2011.

One of the issues mentioned in the complaint dated 30/5/11 related to the acts ofnepotism of Ms Omita Paul, Adviser to the Finance Minister and Secretary in theMinister of Finance.

Ms Omita Paul’s husband was favoured by an unprecedented amendment in the ITAct.

The following exemption granted in the year 2011 was notified for being applied ret-rospectively from the year 2007-08 to cover the entire tenure of Mr Paul in the UPSCSection 10 (45) of the Income Tax Act stated:

(45) any allowance or perquisite, as may be notified by the Central Government in theOfficial Gazette in this behalf, paid to the Chairman or a retired Chairman or any oth-er member or retired member of the Union Public Service Commission.

The other issue in the complaint on nepotism, related to the strenuous efforts beingmade by the Finance Ministry to ensure that the brother of Omita Paul, Jitesh Khosla,an IAS officer, be appointed as the Chairman of the UTI Asset Management Compa-ny.

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




What was not mentioned in the complaint was the fact that the emolument of Chair-man of UTI AMC is over three crore per annum (information is not in public do-main). This is more than 15 times than what the three highest constitutional authori-ties of the country get.

How the emoluments came to be over three crores is another story but suffice to men-tion that it was on account of clever and illegal manipulation by the erstwhile incum-bent, U K Sinha, who was promoted to the post of SEBI chairman in a bizarre inter-vention by the same Mrs Paul, which is the subject matter of another complaint to befiled shortly. The fact is that not many know that the emoluments on offer is overthree crores per annum and it will come as a surprise to the bureaucrats who mayhappen to read this complaint. For the record, Sinha earned over 10 crores in his fouryear stay at UTI MF. (Please refer to the balance sheet of the fund for the respectiveyears)

The proposed appointment is a blatant act of nepotism and illegal for the followingreasons:

Violates Article 14 of the Constitution.

Violates Article 16 of the Constitution.

The appointment is in gross violation of the crucial policy laid down by the govern-ment and endorsed by the JPC which went into the securities fraud of 2002. The lastpara of the report states:

Government has stated that a professional Chairman and Board of Trustees will man-age UTI-II and that advertisements for appointment of professional managers will beissued. The Committee recommend that it should be ensured that the selection of theChairman and professional managers of UTI-II should be done in a transparent man-ner, whether they are picked up from the public or private sector. If an official fromthe public sector is selected, in no case should deputation from the parent organisa-tion be allowed and the person chosen should be asked to sever all connections withthe previous employer. This is imperative because under no circumstance shouldthere be a public perception that the mutual fund schemes of UTI-II are subject toguarantee by the Government and will be bailed out in case of losses.

The contents of the paragraph show that a specific commitment was made by the



government and the same was endorsed by the JPC. The final recommendation was akey recommendation in the context of preventing future scams.

The accepted policy is being violated on three counts:

Mr Khosla is not a professional of the investment industry. In fact he is not evenan amateur given his degree and zero experience of investment banking.

The post was not advertised

Mr Khosla does not propose to sever his connection with his previous employerbut to join on deputation.

Other IAS officers and professionals in the field of investment too should have beenallowed to compete for the highest salary on offer by an institution controlled by thegovernment through three public sector banks and LIC.

The obscene and undeserved salary approved through dubious and illegal means(the chairman of the Banks and LIC and the heads of the AMC of the mutual fundspromoted by them get emoluments much less than 50 lakh per annum) should not bethe monopoly of the brother of the secretary of the Finance Minister, whose appoint-ment in turn as special advisor in itself is questionable, on account of the personalrecommendation of the concerned minister.

It needs to be mentioned that Mr Khosla was not even on the shortlist of the selectioncommittee. The post of the chairman has been vacant since last ten months so that healone may be selected for the post. During the period UTI has not been able to floatany new scheme of mutual fund due to a SEBI rule that the AMC should have a per-manent head.

One wonders as to what is the limit of manipulating salaries, of nepotism and of thearrogance of power. How many scams will it take for the corrupt to fear the law?

In this context, it may not be surprising that the honest hierarchy of officers at SEBIwere removed to make way for the controversial Sinha so that Khosla could be ap-pointed on emoluments over three crores!

I sincerely hope that the appointment will be halted by timely intervention so that itdoes not become a source of embarrassment to the government.



For the record the corpus with UTI AMC is around Rs 55,000 crores.

With sincere regards

Arun Kumar Agrawal

(Arun Agrawal is the author of the book Reliance: The Real Natwar. The opinionsexpressed by the author and those providing comments are theirs alone, and do notreflect the opinions of Canary Trap)


26/09/12 4:59 PMHow U K Sinha became SEBI Chairman?

Page 1 of 7http://canarytrap.in/2011/11/24/how-u-k-sinha-became-sebi-chairman/

How U K Sinha became SEBI Chairman?

BY ARUN AGRAWAL

One has to admire this former IAS officer for increasing his annual emoluments fromRs 6 lakh per annum to Rs 2.01 crore per annum (a rise of thirty three times) in lessthan a year and then to Rs 4 crore. He earned around Rs 10.5 crore in four years ashead of UTI Asset Management Company (UTI AMC), while the chief justice of thecountry earned less than Rs 50 lakh during the same period. And then became thechairman of SEBI.

First the story in brief

Sinha was a joint secretary in the Finance Ministry. He was appointed to the post ofChairman of UTI AMC in violation of government policy and JPC recommendations.He joined the company on deputation for two years, resigned when the governmentrefused to extend his deputation, then used his position in the company to extend hisappointment and give himself a salary hike with retrospective effect to include theperiod under which he was under deputation as a government servant.

After making over Rs 10 crore he was appointed to the post of SEBI chairman. This isa story of how those who have usurped power through questionable means com-bined to further their cause, irrespective of the colossal damage they do to the institu-tions. What is tragic is that the lessons of the two securities scams which resulted insetting up of JPC have not been learnt. Just when SEBI was gaining credibility due toits series of orders holding the powerful corporates accountable, it was decided tohand over the chairmanship of SEBI to Sinha.

Details on Sinha



1. As joint secretary, Banking and Insurance, U K Sinha ensured that the chairman ofSBI, Bank of Baroda, PNB and LIC (from now on referred as four financial institu-tions) were indebted to him for either their appointments as chairman or cover upsome scam or some favour that they needed from the Finance Ministry.

The above mentioned four financial institutions each owned 25% of the shares of UTIAMC, which manages all the mutual funds of the UTI. They were joint owners of UTIAMC due to the recommendation of the JPC, set up on the collapse of UTI. The JPChad recommended that UTI should no more be owned by the government to dispelthe notion that the government would bail it out in case of a future collapse. That ishow UTI came to be owned jointly by the four financial institutions under an agree-ment with the government.

2. Sinha, IAS and joint secretary (Banking), ensured that he was the only choice of thefour public financial institutions for the post of UTI AMC chairman in January 2006.The appointment was in gross violation of the crucial policy laid down by the govern-ment and endorsed by the JPC which went into the securities fraud of 2002. The ex-tracts from the JPC report:

“Government has stated that a professional Chairman and Board of Trustees willmanage UTI-II and that advertisements for appointment of professional managerswill be issued. The Committee recommend that it should be ensured that the selec-tion of the Chairman and professional managers of UTI-II should be done in a trans-parent manner, whether they are picked up from the public or private sector. If an of-ficial from the public sector is selected, in no case should deputation from the parentorganisation be allowed and the person chosen should be asked to sever all connec-tions with the previous employer. This is imperative because under no circumstanceshould there be a public perception that the mutual fund schemes of UTI-II are sub-ject to guarantee by the Government and will be bailed out in case of losses.”

The above text is the last para of the JPC recommendation. It shows that a specificcommitment was made by the government and the same was endorsed by the JPCand hence was a policy decision. The final recommendation was a key in context ofpreventing future scams.

The accepted policy was knowingly violated by Sinha, the four financial institutions,and all others involved in his appointment on three counts and needs to be enquiredinto.



Sinha was not a professional of the investment industry. In fact he was not even anamateur, given his degree and experience of investment banking. The post was notadvertised and Sinha did not sever his connection with his previous employer butjoined on deputation.

3. All the erstwhile members on the Board of UTI AMC resigned and a new Boardwas reconstituted. These members were handpicked by Sinha to do his bidding. Sin-ha and the new Board took charge from 13/1/2006 with Sinha’s term being limited totwo years, ending on 13/1/2008 on account of his deputation from the IAS.

The remuneration of Sinha at the time of appointment till January 2008 was as fol-lows: Basic pay at the rate of Rs. 23,450 per month with effect from April 29, 2006which is as per the scale advised by the Government of India.

Other perquisites:

Dearness allowance at the rate of 50% of the basic pay received from the Compa-ny

Dearness pay at the rate of 41% of accumulated amount of basic pay and dear-ness allowance

City compensatory allowance at the rate of Rs. 300 per month

Provident fund equivalent to 10% of basic pay

Rent free furnished accommodation with free use of all the facilities and ameni-ties, such as air-conditioners, stove, geysers, gas, electricity, water etc. etc etc.

He will be required to obtain prior permission of the central government beforeaccepting any commercial employment, including directorship of companies,within two years of demitting office on retirement on superannuation, expire oftenure, resignation, or any other reason.

The above disclosures were made in the prospectus filed with SEBI by UTI AMC inJanuary 2008, which shows that till January 2008 there was no increase in salary. Andlater he managed to get salary increase effective December 2006. This retrospect revi-sion of salary raises many question as it is timed at almost the same time when thegovernment had refused him extension and asked him to revert to parent cadre in Bi-



har. Did government refuse extension on salary issue? Or on any other ground? Thisis not in public domain, but either way it shows impropriety.

4. Within a month of his appointment, on 6/2/06, Sinha set up an HR Committee onremuneration payable to Directors and other key management personnel. This com-mittee deliberately included Sinha, whose salary was fixed at the time of deputationso that he could give himself a handsome hike by camouflaging it as industry relatedhike.

5. Sinha got his term extended for two years by a Board resolution on 17/9/2007, thatis four months before his deputation from the central government was to end. The ap-pointment was made well in advance to enable Sinha to defy the government in casethe latter did not extend his deputation. The correct order was to appoint him only ifthe deputation was extended. The Board members and the four financial institutionswere once again guilty of not adhering to the government policy of hiring a profes-sional through an advertisement. This condition was further breached for a third timewhen Sinha was given a further extension.

6. Sinha approached the central government for extension of his deputation. ThePMO put its foot down, denied him the extension as he had been on deputation formore than seven years and asked him to go back to his parent cadre..

7. Sinha, armed with the board resolution extending his appointment for a furthertwo year term, defied the PMO and resigned. Obviously he had the support of the Fi-nance Ministry in his defiance of the government as he had invested in the right peo-ple in the right place.

One of the conditions of his deputation from the IAS was that he would not take updirectorship or commercial employment for two years after resignation without gov-ernment permission. The moment Sinha resigned, the clause kicked in because hewas now in a commercial employment.

And yet when Sinha took advantage of being clever enough of having extended hisappointment through a Board resolution and later on defying the government by re-signing when his deputation was not extended, one wonders why the governmentdid not take any action and allowed him to continue?

One also wonders if the IAS officers have to give advance notice at the time of resign-



ing and if so did Sinha gave notice or the same was waived? But what takes the cakeis that Sinha could squat on a government controlled organization, treat it as his per-sonal fiefdom and the government remained helpless!

8. After resigning from the civil service and getting his term extended through aBoard resolution, Sinha got the new salary structure recommended by the Committeeon remuneration set up in February 2006. Not surprisingly, Sinha got a hike from Rs6 lakh per annum to over Rs 2 crore per annum with retrospective effect from Decem-ber 27, 2006.

This retrospect revision of salary raises many questions as it was timed at almost thesame time when the government had refused him extension and asked him to returnto his parent cadre in Bihar. Did the government refuse his extension on the issue ofhis salary or some other ground? Either way it shows gross impropriety and the prof-it made by Sinha during the period of deputation needs to be disgorged.

It appears that the members of the remuneration committee were blissfully unawareof the JPC recommendation on UTI or the government policy. More importantly, itappears that they did not know that the pay of Sinha was fixed while he was sent ondeputation. They did not even know the pay parity between other IAS officers andSinha. They were also not aware of the salaries of the chairman of SBI, PNB and BOB,or the CEO of the AMC promoted by SBI, BOB, PNB and LIC.

The fact that the HR Committee on remuneration deliberately did not submit its re-port for two years that Sinha was on deputation — so that the government would notcome to know of the hike in salary to crores and disallow it — shows that there wascollusion in the fraud committed on the company.

That Sinha could defy the PMO, retain the chairmanship of the PSU and increase hissalary to Rs 2 crore even for the period for which he was on deputation and for subse-quent years needs to be admired and is worthy of national recognition for being themost clever bureaucrat that the country has ever known.

Sinha also ensured that all information about UTI AMC is not covered under the RTIAct by appealing against the decision of Central Information Commission to theMumbai High Court in September 2008 so that the details of his scandal would notcome into public domain.



That fact of the matter is that government has full control over ownership of UTIAMC as per share sale agreement. It was owned by four PSUs and CIC held that itwas covered under the RTI Act. It is therefore not surprising that at SEBI Sinha pro-fesses transparency and then denies information under RTI on the investigative re-port on the Rs 513 crore Reliance Petroleum trading scam.

His emoluments for three months of financial year 06-07 is Rs 44 lakh, for 07-08 Rs2.12 crore, for 08-09 Rs 2.15 crore, for 09-10 Rs 2.36 crore, and for 10-11 Rs 3.62 crores(upto 13/1/11). There is no disclosure in annual report as to how his salary of Rs 2.36crore in 09-10 became Rs 3.62 crore in 10-11 (10 months only). Was it inflation adjust-ment or performance bonus for UTI having slipped from number one spot to fourthspot?

Sinha was paid Rs 10 cores 69 lakh for less than 50 months whereas the Chief Justiceof India got less than Rs 50 lakh in the same period (the salary of CJI was increasedfrom Rs 33000/per month to Rs 1 lakh/per month in Feb 2009). The above figureshave been sourced from the balance sheet of the company.

If Sinha failed to comply with a major requirement of a scam affected organizationthen should he have been considered to be appointed as SEBI chairman? What thenwas the reason for the appointment of Sinha as chairman of SEBI given his abovementioned manipulations which were definitely in the knowledge of the FinanceMinistry?

Was the emolument of Rs 3.6 crore the reason for his appointment to the post ofSEBI chairman?

Was it because by removing him from the post and rewarding him with thechairmanship of SEBI, Jitesh Khosla, brother of Omita Paul could be appointedto the post of chairman UTI AMC so that he too could earn the same salary?

Or was it because the Reliance Scam of Rs 2000 crore on account of trading fraudhad to be settled for less than fifty crore after his appointment?

Or was it because of the Sahara scam of Rs 27,000 crore?

Or was it because the takeover code was to be manipulated in favour of the pro-moters?



Or was it because the government feared that an independent, fearless, honestand competent SEBI would unearth the money laundering scams in which someof its own members were involved?

Or was it all of the above factors?

The fact remains that the government refused to learn the lessons from the earlierstock market scams (1992, 2002 and 2012?), and choose to dismantle a regulator thatfor the first time was professional and had gained the confidence of the investors (In-dian and foreign).

The capital market is a highly complex subject having huge impact on the economy.It cannot be left to the mercy of amateurs and interlopers posing as experts and to doso is inviting a third scam from which it will be difficult to recover.

The world over the stock markets are getting discredited due to lax regulation. TheOccupy Wall Street Movement has gained global support despite regulators havingprosecuted offenders and put them behind bars for decades. This is in sharp contrastto the cover ups of our market of which Sinha is an example.

For the record, the emoluments of Sinha at SEBI is Rs 36 lakh. Will the governmentconsider giving him parity of Rs 3.6 crore that he earned at UTI?

(Arun Agrawal is the author of the book Reliance: The Real Natwar. The opinionsexpressed by the author and those providing comments are theirs alone, and do notreflect the opinions of Canary Trap)


26/09/12 5:00 PMPranab Mukherjee, Omita Paul and corruption in Finance Ministry

Page 1 of 7http://canarytrap.in/2012/07/17/pranab-mukherjee-omita-paul-and-corruption-in-finance-ministry/

Pranab Mukherjee, Omita Paul and corruption in FinanceMinistry

BY ARUN AGRAWAL

Is the role of Omita Paul, India’s Presidential candi-date Pranab Mukherjee’s confidant over long yearsand the de facto No 2 in every Ministry that the lat-ter has occupied in the last eight years, that of a fix-er?

Does she act on her own behalf or on behalf ofMukherjee? Is she a lobby centre for corrupt corpo-rations? Or is she a buffer to take the heat off anyscandal/wrong doing? And what is the reason forMukherjee’s silence when blatant act of her nepo-

tism and corruption are reported in the press? Is he helpless or being helpless?

Whatever be the reason, the former Finance Minister is constructively responsible forall acts of Omita Paul.

First the obvious question: What is the reason for the appointment of Paul in thenumber two position in the three key Ministries that Mukherjee has been a Minister.

Paul has been continuously appointed as an advisor with the rank of Secretary in thethree key Ministries — Foreign, Defnece and Finance — which has been co-terminuswith the tenure of Mukherjee. Her appointment as Advisor in three different min-istries is without precedent in independent India and it is not because of her special-ized knowledge on the subject matter of any of the three Ministries.

All attempts to get information on the law/guidelines under which she was appoint-ed and the papers relating to her appointment under the RTI have been in vain. Herswas an arbitrary appointment for arbitrary goals. Even the Secretary of the Ministrywas subordinate to her.

Though there have been extra-constitutional authorities and power centres in thepast, the country has not known an official power centre like that of Paul. It may bementioned that Paul was also appointed as Information Commissioner at the time of



election between UPA-I and UPA-II and that the then Leader of Opposition L K Ad-vani and the Prime Minister on May 9, 2012 found time to select her as InformationCommissioner for five years. The post of Information Commissioner was an insur-ance cover in case the Congress lost the election. She worked for eight days and dis-posed a total of 58 cases before re-joining as Advisor-cum-Secretary in the Ministry ofFinance once UPA came back to power.

That Paul was an independent power centre, and worked for the benefit of herself,her family members and the corporate lobby and in the process compromised nation-al interest is obvious from the incident relating to appointment of SEBI chief.

Did she not manipulate the entire system in order to have her candidate, U K Sinha,appointed to the post of Chairman of SEBI so that he would favour companies likeReliance and Sahara? It would also enable her to have her brother appointed to thepost vacated by Sinha at UTI AMC, which has emoluments of four crores per annum.This despite the fact that her brother did not have required qualification to be ap-pointed to the post.

But first her role in removing honest officials from SEBI to install Sinha:

The decision to give extension to the existing Chairman and members of SEBI by theSecretary and the Minister (approved on 19/10/09) was canceled at her behest (21-22/12/09), the existing members were never considered later for extension (10/8/10),she changed the composition of the committee to select the Chairman, had her ownexperts nominated to the Committee (25/8/10), ensured that the candidature U KSinha is by the so-called search route.

The search route was taken to conceal the illegal emoluments of Rs 4 crores (Per An-num) drawn by Sinha in a Public Sector Enterprise (PSE). If his emoluments were re-vealed he would not have been selected on grounds of lacking integrity as the ceilingof pay for PSE is Rs 1.25 lakh per month. Concealment of emoluments was also neces-sary for Paul to push the candidature of her brother for the vacant post at UTI AMCso that he could enjoy the lavish salary without others knowing the real reason forthe appointment.

After having Sinha selected as Chairman, Paul ensured that even the AppointmentCommittee of the Cabinet (ACC) does not come to know about the emoluments ofSinha while confirming his appointment. (Refer confidential letter DO no 2/23/2007-



RE dated 13/12/2010 of Dr Thomas Mathew, to Est Officer Annexure -1 item 4 (ii)Scale of pay: Not available)

It is obvious that the concealment of Sinha’s emoluments was deliberate and de-signed to mislead the selection committee and the ACC to presume that he was beingpaid the maximum pay payable to a PSE chief of Rs 1.25 lakh per month.

Sinha’s emoluments were over Rs 4 crores per annum (Rs 3.62 crores for 10.5 monthsas per balance sheet of UTI AMC) which is not possible in a public sector organiza-tion like UTI AMC. The Establishment Officer vide his order dated 4/1/08 had statedthat the deputation was covered under Rule 6 (1) and not 6 (2) (ii) of IAS Cadre Rules.Sinha not only got his emoluments increased after the decision of the EstablishmentOfficer in 2008, but also increased it with retrospective effect from December 2006and raked in a bonanza of over Rs 10 crores in the process.

Was the purpose of appointing such a person to the sensitive post of SEBI chairmanto settle issues of thousands of crores in favour of the concerned companies whichhad lobbied with Paul?

The allegation of Paul acting on behalf of the corrupt companies is borne by the factthat Dr Abraham as a WTM (Whole Time Member) of SEBI Board had leveled allega-tion in a letter written on 1/6/2011 to the Prime Minister that Sinha tried to influencehim on four cases. One of the cases related to securities fraud of Reliance group andothers related to Tayals of Bank of Rajasthan, Sahara, and MCX. While trying to influ-ence him Sinha had stated that these were “engaging the attention of Union Ministerfor Finance or Mrs Omita Paul, Advisor to the Finance Minister”.

The denial of extension to the then Chairman and members of SEBI by Paul, the factthat extension was stopped when SEBI recommended action against the Reliancegroup to the Finance Ministry on an eight year complaint by Gurumurthy involvingover Rs 25,000 crores of benefit to the promoters, the extraordinary interest taken byPaul in having Sinha appointed as SEBI chairman by suppressing his illegal salaryfrom the selection committee and the Appointment Committee, and the subsequentactions of Sinha all show that Paul was involved in harming national interest by pro-moting corporate interest of the respective companies.

Sahara was a company taking deposits from small un-bankable people. From 2008onwards, during the tenure of Mukherjee, it violated the deposit norms under section



58A of Companies Act which allowed it to collect unsecured deposits from deben-tures for 10% of its own fund. By doing that it could have collected only Rs 230 croresbut went on to collect over Rs 20,000 crores. Almost the entire money collected wassiphoned out and there were virtually little assets in the company in whose name de-posits were taken so that the group could not be compelled to refund the amount. Itwas the largest ponzi scheme involving two crore poor people.

Dr Abraham had passed orders on the company which were contested by Sahara inthe High Court. But by a freak chance the matter came before him for adjudication be-cause the CJI referred the matter to SEBI. He adjudicated the matter at the fag end ofthe tenure (23/6/11) directing the group to refund the entire money to the investors.His order was upheld by the Tribunal and is likely to be upheld by the SupremeCourt also. The order of Dr Abraham is proof of his competency and honesty, whilethe shenanigans of Sinha at UTI AMC are proof of his cleverness and manipulativeskills.

The second case that interested Paul was the securities fraud of Rs 513 crores of Re-liance group (Mukesh Ambani group). Reliance Petroleum shares were short sold forRs 290 by the group and later bought back when there was a hefty fall in price whenthe group sold the shares in the cash segment. The Reliance group made Rs 513crores in five days .The securities fraud took place in November 2007. Such a blatantact of securities fraud by the promoter was unprecedented.

The penalty under the law is three times the amount of the fraud and the totalamount involved was Rs 2000 crores along with criminal prosecution.

Reliance tried to settle the matter by paying a fine of only Rs 2 crores and then Rs 8crores through consent order. It was not even willing to pay back the fraud amount ofRs 513 crores. These meager offers of settlement were made by Reliance to buy timeso that the honest officers of SEBI could be replaced by more pliant ones.

Sinha changed the circular on the consent order (25/5/2012) in a manner that favoredReliance group and continue the settlement of the criminal offence through a consentorder. This is in sharp contrast with the case of Rajat Gupta whose offence was muchless but then he did not have an Omita Paul or U K Sinha to bail him out.

The third case is about the Tayals of Bank of Rajasthan in whose favour the outgoingmember Prashant Saran passed a favourable order so that he could be re-appointed.



The order only confirmed the allegation of Dr Abraham. Similar conclusion wasmade by the media. Kindly refer links in Financial Express and Mint on Saran’s order.

The fourth case is related to MCX which wanted to open a parallel stock exchange.The Ministry ensured that Dr Bimal Jalan Committee report is taken up by SEBI afterSinha became the Chairman so that the portion relating to not listing of the shares ofthe stock exchange company is rejected. This would enable MCX to list the shares ofthe stock exchange and help in giving market value to the MCX license. Further theterms of complying with other norms too have been diluted.

Other related scandals

On the slot vacated by by Sinha at UTI AMC, Paul wanted her brother to be appoint-ed and though the four financial institutions under her were agreeable the foreignshareholder was not. As a result the post of the CMD remained vacant for fifteenmonths because Paul wanted to have her brother appointed. Great harm to public in-terest was done because UTI has around Rs 60,000 crores invested in the financialmarket and large part of the money comes from government sources.

It was only when the candidature of Mukherjee was considered seriously for the postof President that Paul’s brother withdrew from the race for the post of CMD of UTIAMC. The advertisement released subsequently for the post thereafter shows thatneither Paul’s brother nor Sinha had the qualification to take up the post because itstates that the person should be a seasoned financial service professional with mini-mum 20 years of experience. He should also have a degree of MBA from a top univer-sity or a CA. Both of them are neither financial service professional nor do they havea day’s experience. In fact, the advertisement which was released for the first time ho-nours the commitment given by the government to the JPC II on securities scam thata professional would be appointed through an advertisement.

Sinha, who had increased his emolument through a rubber stamp Board on thegrounds of industry parity, conveniently forgot that he was appointed to an execu-tive post and industry parity is given to persons in non-executive posts like pilots etc.He did not disclose that his deputation was covered under Rule 6(1) of the cadrerules and that the organization was a PSE where the maximum pay that could bedrawn was Rs 1.25 lakh per month. It was for this reason he appealed to the HighCourt against the order of the Information Commission that UTI AMC is covered un-der the RTI Act. Both Sinha and Paul wanted the illegal emoluments to be a secret for

http://www.financialexpress.com/news/what-is-sebi-thinking/929811/

http://www.livemint.com/2012/04/02202250/Sebi8217s-arguments-in-%20Taya.html



their respective reasons.

The other act of nepotism involved Paul’s husband, who was favored by an unprece-dented amendment in the IT Act. The following exemption granted in the year 2011was notified for being applied retrospectively from the year 2007-08 to cover the en-tire tenure of Paul in the UPSC Section 10 (45) of the Income Tax Act stated:

(45) Any allowance or perquisite, as may be notified by the Central Gov-ernment in the Official Gazette in this behalf, paid to the Chairman or aretired Chairman or any other member or retired member of the Union Pub-lic Service Commission.

Retrospective amendment to undo a judgment or wrong has been known but neverto pass on a benefit like the one above. The amendment was sought to be justified onthe basis of sixth pay commission report but there no such recommendation in the re-port.

Paul, out of sheer vindictiveness, used her influence to initiate disciplinary proceed-ings of major penalty against an honest officer like Abraham who exposed her cor-ruption and refused to compromise. His order against Sahara is in sharp contrast tothe manipulations of Paul and Sinha. In fact there is sufficient material to charge herfor offences committed by her under PCA and IPC. Answers are needed on whetherall these actions of Paul narrated above were within the knowledge of Mukherjee?Some of them were also covered in the press. He gave official approval whenever thesame was required.

Which brings us to the original question: Is he helpless or being helpless?

Paul is the responsibility of Mukherjee. The latest extension given to her on15/6/2012 states that her tenure is “co -terminus with the tenure of Shri PranabMukherjee as Finance Minister”. Speculation is already rife about her being given aposition higher than that of Secretary to the President.

(Arun Agrawal is the author of the book Reliance: The Real Natwar. The opinionsexpressed by the author and those providing comments are theirs alone, and do notreflect the opinions of Canary Trap or any employee thereof)

Also Read:




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

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

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

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

http://canarytrap.in/2011/06/30/ministers-in-the-lokpal-panel-involved-in-sahara-scam/


IN THE SUPREME COURT OF INDIA

[CIVIL WRIT JURISDICTION]WRIT PETITION (CIVIL) No. ___________of 2012

IN THE MATTER OF:

Arun Kumar Agrawal … Petitioner

//Versus//

Union of India & Ors …Respondents

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

PAPER BOOK(FOR INDEX KINDLY SEE INSIDE)

PRASHANT BHUSHAN: COUNSEL FOR THE PETITIONER

I N D E X

SL.

NO. PARTICULARS PAGE NO.

1. Limitation Report

2. Listing Performa

3. Synopsis & List of dates

4. Writ Petition under article 32 with

Affidavit

5. Annexure

P1-Copy of the notification dated

23/7/2009

amending the rules for term and

condition of

service of the Chairman and members

of SEBI.

6. Annexure

P2-Copy of the proposal of the director

of capital

market division dated 02/09/09

7. Annexure

P3- Copy of the noting dated 08/09/09

of the then

Finance Minister.

8. Annexure

P4- Copy of the noting dated 08/10/09

of the

Finance Secretary

9. Annexure

P5- Copy of the letter dated 16/11/09

by the

Director, Capital Market Division.

10. Annexure

P6- Copy of the relevant pages

of the file

notings from 25.11.09 to 21.12.09

11. Annexure P7- Copy of the relevant file noting dated

22/12/09 of the then Finance Minister

12. Annexure

P8 (colly)-Copies of the relevant

pages of the

notings and final order regarding

fresh

selection of new Chairman SEBI.

A. Notings from 11/01/10 to 22/01/10

B. Noting dated 06/08/10

C. Noting dated 10/08/10

C. Final order dated 10/08/10

of the

Finance Minister

13. Annexure P9 (Colly)-Copies of the letter and file noting

A. Copy of the letter dated 18/08/10 by the director

(PM & RE)

B. Copy of the file noting dated 20/08/10

14. Annexure P10 (Colly)-Copies of the file notings

A. Copy of the noting dated 24/08/10 of the

DG (Doc)

B. Copy of the noting dated 25/08/10 of the

then

advisor to the FM.

15. Annexure P11- Copy of the amendment notification

dated 07/10/10 making change in the composition

of the selection committee.

16. Annexure P12 – Copy of the communication dated

10/09/10 of the Department Of Economic Affairs

Inviting applications for the post of chairman SEBI.

17. AnnexureP13 - Copy of the application form for

The post of Chairman, SEBI dated nil

18. Annexure P14 (Colly)- Copy of the minutes of the first

Meeting and document showing pay scale

Minutes of the first meeting of the

search-cum-selection committee

dated 02.11.2010.

(B) Documents showing pay scale of other invitees

19. Annexure P15- Copy of the relevant page of the

notes forming part of the accounts for the year

ended march 31, 2011 showing Shri Sinha’s remuneration in

UTI AMC.

20. Annexure P16 (Colly) Copies of the minutes

of the second meeting along with the approval

of the then Finance Minister

A. Copy of the minutes of the search-cum-selection

committee dated 13.12.2010

B. Copy of the approval dated 13.12.10 of the then

Finance

Minister

21. Annexure P17- Copy of the letter dated 13.12.2010

of the Joint Secretary, capital markets along with annexures

22. Annexure P18 (Colly)- Copy of the DPE OM No

DPE/11(47)2006-Fin dated 4thDecember 2007

23. Annexure P19 - Copy of the relevant extracts

of the prospectus dated 09.01.2008 of UTI.

24. Annexure P20- Copies of the representation

and letters

Copy of the representation dated 29.01.2007 of

Shri Sinha to the Special Secretary, DOPT

B. Copy of the letter dated 01.03.2007 of the

desk officer in DOPT to Shri Sinha

25. Annexure P21- Copy of the guideline and

file noting

Copy of letter dated 28.11.2007 of the Director (Service)

enclosing guideline

Copy of noting relating to extension of deputation of Mr

Sinha.

26. Annexure P22- Copy of the OM dated 12/12/2007

regarding extension of deputation

27. Annexure P23 (Colly)- Copies of the note and noting

A. Copy of the note dated 02/01/2008

prepared by the DOPT.

B. Copy of the noting dated 04.01.2008 of the

Establishment Officer

28. Annexure P24- Copy of the letter dated 10/3/2008

by the ACC.

29. Annexure P25 (Colly)-Copies of letters, application

and OM

A. Copy of the letter dated 03.04.08 of the

SBI chairman to the Finance Secretary

B. Copy of the letter of the Company

Secretary dated 11.04.2008 to Shri Sinha

C. Copy of the letter dated 15.04.2008 of Shri Sinha

to the Chief

Secretary, Govt. Of Bihar for VRS

D. Copy of the application dated 15.04.08 of

Shri Sinha seeking VRS in the prescribed

Format under Schedule L

E. Copy of the Letter dated 30.03.08 from Secretary

Personnel, Bihar to DOPT regarding sanction of

Shri Sinha’s VRS

F. Copy of the OM dated 01.05.08 regarding

Shri Sinha’s VRS

G. Copy of the letter dated 17.06.08 from DOPT to

Chief Secretary Bihar conveying permission for

commercial employment with UTI AMC.

30. Annexure P26 (Colly)- Copy of the note and rules.

A. Copy of the note dated 17.04.08 prepared

by the section officer in the DOPT

B. Copy of the Note of Section Officer dtd

09/05/08 containing rule 26 (3) (ii) of AIS

Death cum Retirement Benefit Rules and

Also note of MoS dated 17/06/08

31. Annexure P27- Copy of the relevant page of

the balance sheet dated 31/03/2008 of UTI

32. Annexure P28 (Colly)- Copies of the balance sheets

Of UTI

A. Copy of the relevant pages of the balance sheet of

the year ended march 31, 2009.

B. Copy of the relevant pages of the balance sheet of

the year 2009-2010.

C. Copy of the relevant pages of the balance sheet of

the year 2011 -2012.

33. Annexure P29 (Colly)- Copies of articles

A. Copy of the article dated 09/06/2011

published in India Express.

B. Copy of the article 13/06/2011 published

in the Economic Times.

C. Copy of the article dated 23/01/2012

published in the first post.

34. Annexure P30 (Colly)-Copies of the complaints

filed by the Petitioner with the Prime Minister

Copy of the complaint dated 30/5/2011

Copy of the complaint dated 12/9/2011

Copy of the complaint dated 10/11/2011.

35. Annexure P31- Copy of the Para 21.9 (v) of the report

Of Joint Parliamentary Committee.

36. Annexure P32- Copy of an advertisement for the

post of UTI CMD in newspaper dated 04/06/2012.

37. Annexure P33- Copy of the Times Of India

report dated 07/05/2012.

38. Annexure P34- Copy of the letter dated 1/6/12

Of the WTM to the Prime Minister.

39. Annexure P35- Copy of the relevant portion of the

balance sheet of of Sahara year 1/7/10 to 30/6/11

40. Annexure P36 (Colly)-Copies of the circular

along with the complaints filed by the petitioner

A. Copy of the circular dated 25.05.12

B. Copy of the complaint dated 10/09/2011 filed by

the petitioner with CVC

C. Copy of the complaint dated 28.05.2012 filed by

the petitioner with CVC

D. Copy of the complaint dated 21/06/2012 to the

Cabinet Secretary regarding Shri Sinha’s

Appointment.

41. Annexure P37 (Colly)-Copies of articles

A. Copy of the article in Mint dated 02/04/2012.

B. Copy of the article in Financial Express

dated 22/07/2012.

42. Application for interim direction

SYNOPSIS AND LIST OF DATES

That the present writ petition under Article 32 of the Constitution of India

is being filed challenging the appointment of Shri U. K. Sinha as Chairman

of SEBI on mainly following grounds:

(i) Shri Sinha failed to fulfill one of the eligibility conditions as laid down

in Sub-section (5) of Section 4 of the SEBI Act as well as in the govt.

communication which requires that the Chairman shall be a person of

high integrity. Shri Sinha is not a person of high integrity is apparent

from the following facts:

(a) Shri Sinha before joining SEBI was working as the CMD of a

Public Sector Enterprises, Asset Management Company Private

Ltd. (UTI AMC). Mr Sinha was first sent in UTI AMC on

deputation in Nov. 2005 for two years when he was posted as Joint

Secretary in the Finance Ministry overlooking affairs of UTI and

was also on the Board of UTIAMC. He was appointed to the post

of CEO of UTI AMC by overlooking the policy of not seeking

deputation in an organization which he had overseen in the Ministry

and also the JPC recommendation accepted by the government. The

first deputation was for a period of two years ending on 2/11/07.

(b)Thereafter, he was given extension upto 31/05/08. The

Appointment Committee of the Cabinet vide its letter dated

10/3/2008 advised the Finance Ministry (Department of Economic

Affairs) that after 31/5/2008 Shri Sinha would return to his parent

cadre (Bihar) and directed the Ministry to identify a suitable

replacement of Shri Sinha by that date.

(c) Instead of accepting the order of the ACC, Mr. Sinha took

voluntary retirement and thereafter, he sought permission for post-

retirement commercial employment in UTI AMC as CMD. The

DOPT waived the post retirement waiting period before accepting

the commercial employment inspite of the provision in Rule 26 of

AIS(D&RB) Rules stating that PSUs which were substantially

owned or controlled by the government would not mean

commercial appointment and also apparently ignored the fact that

the declaration given by Shri Sinha under Rule 26 (3) (ii) of AIS

Death cum Retirement Benefit Rules that in the last three years of

his official career he has not been privy to sensitive or strategic

information of UTI AMC could not be true as he was already on

deputation in the same organization at the time of taking VRS.

(d) Shri Sinha remained in the same position and the organization

remained the same, but the character of the employment changed

from that of a government servant on deputation to a PSU to that

of a retired bureaucrat having taken up commercial employment.

(e) Within a period of a month the emoluments too increased from

around six lacs per annum to one crore per annum. Later on these

emoluments were made over two crores and then four crores. Mr

Sinha’s total emoluments for the year 2010-11 were at over 4

crores per annum while working in a PSE (3.62 crores for 10.5

months). Mr Sinha also gave himself emoluments of over Rs 2

crores per annum for the period of his deputation from the IAS to

the PSU retrospectively. The pay scale and the pay drawn by him at

the time of his retirement was 22400-525-24500 and Rs23,450

respectively.

(f) All the aforementioned crucial facts were suppressed before the

Search-cum-Selection Committee. Mr Sinha did not fill the column

relating to pay which was mandatory data for the post. Facts were

deliberately suppressed from the Appointment Committee of the

Cabinet also. Against the column for scale of pay it was mentioned

not available.

(g) Further, the manner in which the facts regarding his deputation to

the UTI AMC was suppressed and when denied extension, how he

took VRS and immediately thereafter illegally joined UTI AMC

and got his salary increased to Rs. 4 Crores per annum also raise

serious question about his integrity.

(ii) The appointment of Shri Sinha as Chairman of SEBI is malafide and a

result of deep rooted conspiracy which is apparent from the following

facts:

(a) The then advisor to the Finance Minister ensured that the earlier

Chairman could not get further extension though he was entitled to

get extension of two years as per the amended notification.

(b)Further, the composition of Search-cum- Selection Committee for

selecting the SEBI Chairman and WTMs was changed arbitrarily to

give primacy to the Finance Ministry so that Shri Sinha’s

appointment could be ensured. It was probably also done to reduce

the Cabinet Secretary, who was ex officio Chairman of the

Committee, to a minority as he was aware of the deputation history

of Shri Sinha. Mr Sinha was the only candidate who did not apply

for the post but was handpicked through the search route.

(c) The developments subsequent to Shri Sinha’s appointment show

that it was done to benefit some of the big corporates like Reliance,

Sahara against whom action after investigation was pending before

the SEBI. One Whole Time Member of SEBI in his complaint to

the Prime Minister made serious charges against the then Advisor to

the Finance Minister and Mr. Sinha of acting on behalf of the

corrupt companies in the cases related to securities fraud of

Reliance group, Tayals of Bank of Rajasthan, Sahara, and MCX.

(d)Shortly after the appointment of Mr Sinha as Chairman of SEBI,

all out efforts were made by the Finance Ministry to appoint the

brother of the then Advisor as the CMD of UTIAMC, and the post

remained vacant for sixteen months as his appointment was

objected to by a foreign shareholder who had bought a 26% stake

because he was not suited for the post. Ultimately when the

advertisement for the post was released it became clear that neither

Mr Sinha nor his proposed successor, the brother of the then

Advisor to the Finance Minister met any of the eligibility

conditions. The post of UTI AMC managing around Rs 60,000

crores of public money lay vacant for sixteen months because the

brother of the Advisor could not be appointed to the post having

emoluments of four crores.

1998 The Government gave Rs 3000 crore as bailout programme for

UTI appointed Deepak Parikh Committee whose report

has not been implemented.

August 2001 Issues relating to UTI were referred to the existing JPC

on stock scam.

31/8/2002 Government announces a RS 14,500 crore bailout for UTI,

after it is found to be involved in Ketan Parekh stock

scam. Investors loss is an additional Rs 8000 crores.

29/8/02 UTI Act was repealed.

Dec 2002 JPC’s 450 page report was tabled in the House.

15/1/2003 A notification bearing No. SO 40(E), dated 15-1-2003, in

exercise of the powers conferred by sub-section (h) of

section 2 of the Unit Trust of India (Transfer of

Undertaking and Repeal) Act, 2002 (‘the Act’), the State

Bank of India, the Punjab national Bank, the Bank of

Baroda and the Life Insurance Corporation of India are

made equal subscribers to the share capital of UTI

Trustee Company Private Limited as trustee of the UTI

Mutual Fund and UTI Asset Management Company

Private Ltd. (UTI AMC), a company sponsored by the

same set of subscribers to which all the employess of the

erstwhile company were transferred. The Mutual Fund

would comply with the SEBI Mutual Fund Regulations.

03/02/2003-

19/12/2004 Mr K Damodaran IAS was appointed as CMD of UTI AMC.

He was paid Rs 6,37,901 as annual remuneration. Dr R

H Patil took over as Chairman from 13/1/05 but he was

not paid remuneration, he got sitting fees till Nov 2005.

01/07/2003 Mr U K Sinha, Joint Secretary, Capital Market, Ministry of

Finance, appointed as additional Director on the Board

of UTI AMC.

03/11/2005 Mr Sinha was appointed as CEO and MD of UTI AMC on

deputation overlooking the fact that professionals were

to be appointed through advertisement (JPC report).

13/01/2006 Mr Sinha was appointed as Chairman and Managing Director

and the entire Board of UTI AMC was replaced to suit

the Chairman.

01/03/2007 DOPT releases the pay of Additional Secretary to Shri U K

Sinha on his representation dated 29/1/07.

09/04/2007 DOPT advised that Mr Sinha’s deputation was under Rule 6(2)

(ii) of the IAS cadre Rules

06/11/2007 The Prime Minister approved a short extension in tenure of Mr

U K Sinha for a period of three months instead of the

proposed 2 years till the issue related to deputation of

IAS officers under rule 6(2)(ii) is finalized, according to

the note signed by Cabinet Secretary.

28/11/2007 The consolidated Guidelines with respect to Rule 6 of the IAS

cadre Rules were published

12/12/07 The Office Memorandum of the Ministry of Finance to DOPT

requesting the extension of tenure for the balance period

of 1 year 9 months beyond 2 Feb 2008 under Rule 6 (1)

1,2,3 Posts to Central PSUs of the DOPT’s policy

guideline dated 27/1/107. The request for further

extension of tenure under Rule 6 (1) had the approval of

the Finance Minister.

02/01/2008 The Note prepared by the Section officer for further extension

under Rule 6(1) was moved and though the Director

Services recommended that the approval should be under

Rule 6(2) (ii) because it was initially so approved, the

same was turned down by the Establishment Officer on

the ground that according to the latest instruction further

deputation would come under Rule 6(1).

09/01/2008 The prospectus for public issue was filed with SEBI making

various disclosures.

10/03/2008 The Appointment Committee of the Cabinet approved the

extension of tenure of Mr Sinha as CMD, UTIAMC till

31/5/08 after which he was to return to his cadre and the

Department of Economic Affairs was directed to identify

a suitable replacement by then.

03/04/2008 The SBI Chairman’s letter to the Finance Secretary, on behalf

of other shareholders, misrepresenting that the tenure of

Mr Sinha was not extended due to rules of deputation

and the only alternative for Mr. Sinha to continue under

existing government rules was to take voluntary

retirement. Further he was given to understand that as

per government instruction, Mr. Sinha would be entitles

to salary according to the decision of compensation

committee. He therefore, proposed a term of four years

four years after voluntary retirement. No rules or

government instructions were referred to by the

Chairman of SBI.

11/04/2008 The company secretary of UTI made an offer on behalf of

shareholders of UTI AMC to Mr Sinha of a salary of Rs

one crore with performance related payments and

perquisites on his continuance in the post after taking

voluntary retirement.

15/04/2008 Mr Sinha wrote to Bihar government seeking voluntary

retirement with effect from 15/5/2008 to enable him to

join UTI AMC on a regular basis as its CMD.

Mr Sinha wrote to the DOPT seeking permission to join

the company post retirement. The application is in

Schedule L under Rule 26(1) (2) of All India Services

(Death-cum-Retirement Benefits) Rules, 1958. Under

item no 5 Mr Sinha stated that the pay scale of the post

and the pay drawn by him at the time of retirement as

23,450 and also that such high level posts are not

advertised and that the remuneration offered are a fixed

pay of one crore per annum with performance related

payouts.

17/04/2008 The matter was sent to department of Economic Affairs,

Ministry of Finance for comments.

30/04/2008 The Bihar government sanctioned Mr Sinha’s voluntary

retirement w.e.f. 15 May 2008.

17/05/2008 Mr Sinha signed the balance sheet of UTI which shows that he

has taken remuneration of Rs 2 crores for the year 07-08

for the period of deputation and an additional amount of

44 lacs for three months for the year 06-07.

17/06/2008 The note of section officer dated 9/5/08 of approving the

appointment of Mr Sinha under Rule 26(1) (2) of All

India Services (Death-cum-Retirement Benefits) Rules,

1958 by designating as a commercial employment was

advised to the Bihar government after obtaining the

approval of the Minister of State.

2009-2011 Mr Sinha’s remuneration according to the balance sheet for

08-09 was 2.15 crores, for 09-10 was 2.35 crores and for

and 2011 -12 over 4 crores ( 3.62 crores for 10.5

months).

23/07/2009 The Terms and Condition of Services of Chairman and

Members Rules 1992 amended to increase the tenure of

Chairman and Whole Time member from 3 years to 5

years

08/09/2009 On the extension of tenure suggested by the Finance Secretary

in accordance with the above amendment, the Finance

Minister stated that before offering extension in tenure

of the Chairman/WTM their performance should be

appraised.

19/10/2009 The Finance Secretary approved the extension on the appraisal

of the concerned officers by the Finance Secretary.

20/11/2009 The letter from the Secretary, Department of Economic Affairs

was written to the Establishment Officer, DOPT for

obtaining approval of the ACC for the extended tenure

of Chairman and WTM of SEBI.

30/11/2009 The then Advisor to the Finance Minister saw the file after

desiring to do so on 25/11/09.

21/12/2009 After desiring to see the file again on 5/12/09, the then Advisor

to the then Finance Minister drew the attention of the

then Minister to the tenure of the officers.

22/12/2009 The then Finance Minister ordered that the extension be

considered six months before the present tenure comes to

an end.

17/01/2010 The Finance Secretary confirmed that the recommendation

made to DOPT is to be withdrawn.

10/08/2010 On the query as to by the Director as to whether the existing

Chairman/WTM were to be given extension in tenure or

fresh recruitment made, the Minister clarified that the

process for selection of SEBI chairman be initiated.

20/08/2010 The Finance Secretary suggested the names of four experts

(two from the earlier committee) for selecting two

experts for the Search cum Selection Committee to select

the SEBI chairman and marked the file to the then

Finance Minister.

23/08/2010 The file was sent to the then Advisor who asked the DG (DOC)

to discuss on 23/8, the DG (DOC) after reiterating the

existing Rules marked the file to the Advisor who in turn

suggests her own experts and Secretary Financial

Services for the selection of the post on 25/8 and the

same is approved by the then Minister on 26/8/08.

18/09/2010 An advertisement was issued in newspapers for the post of

SEBI chairman. Earlier communication was sent to all

Secretaries and Chief Secretaries relating to the vacancy

of the post and the job profile.

07/10/2010 Rule 3 of SEBI (Terms and Conditions of Service of Chairman

and Members) Rules was amended to give the Finance

Minister the discretion to appoint two other persons

(apart from two experts) so as to ensure that the

recommendation of the Advisor to include Secretary,

Financial Services in the Search cum Selection

Committee was given effect to.

2/11/10 First Meeting of the Search cum Selection Committee held.

Five candidates from the nineteen applicants are short-

listed. The Committee also decided to invite Shri U K

Sinha as a candidate.

13/12/10 The second meeting of the Search and Selection Committee

took place and the Committee interacted with the six

candidates including Mr Sinha and recommends the

names of Mr Sinha and Mr Himadri Chaterjee in that

order for the post. The Minister selected the name of Mr

U K Sinha for a period of three years and directed that

the same may be put up for the approval of the ACC.

13/12/10 The Joint Secretary, Capital Market forwarded the candidature

of Shri Sinha to the Establishment Officer, DOPT for

the approval by the ACC and concealed the scale of pay

of Mr Sinha by stating it to “Not Available” in the

relevant column. The total emoluments were around four

crores per annum for the year 2010-11.

Feb 2011 The ACC approved the appointment and Mr Sinha took charge

from 18/2/10.

1/6/2011 The Whole Time Member of the SEBI sent a complaint to the

Prime Minister against Mr Sinha and others in the

Finance Ministry trying to influence decisions on matters

relating to corporate like Sahara, Reliance, MCX and

Tayals of Bank of Rajasthan.

23/6/11 The WTM passed the order against Sahara on the matter being

referred by the Supreme Court.

From

March 2011 The post of CMD UTIAMC remained vacant with

reports in the press appearing from April 2011 that the

vacancy could not be filled up because the Finance

Ministry wanted the brother of the Advisor in the

Finance to be appointed even though he was not short

listed as a suitable candidate.

10/9/11 The Complaint was addressed by the Petitioner to the CVC on

the Rs 2,000 crore Reliance case.

7/05/12 The Times of India reported that the brother of the Advisor has

opted out of the race for the post of UTI AMC.

25/5/12 The consent order circular of the SEBI was revised.

28/5/12 The complaint was filed by the Petitioner to the CVC on the

Consent Order circular to help Reliance in the Rs 2000

crores case.

4/6/12 An advertisement was issued in newspapers for the recruitment

of CMD of UTI AMC.

21/6/12 A complaint was sent by the Petitioner to the Cabinet Secretary

on the appointment of Mr Sinha as SEBI Chairman. But

the govt. has not responded so far to the complaints of

the Petitioner.

/08/12 Hence, the instant writ petition.


(CIVIL WRIT JURISDICTION)

WRIT PETITION (CIVIL) No. OF 2012

(Under Article 32 of the Constitution of India)

IN THE

MATTER OF::Arun Kumar Agrawal T8 Eagleton Golf Village30km Bangalore Mysore HighwayBidadiBangalore-562109

Versus

….Petitioner

1(a) Union of Indiathrough its Secretary, Ministry of FinanceDepartment of Economic AffairsIES Cadre Controlling AuthorityNorth Block, New Delhi-110 001

1(b) Union of IndiaThrough its Secretary Ministry of Personnel, Public Grievances & Pensions,Through its Secretary (Personnel),Department of Personnel & Training,Govt. of India,Sardar Patel BhavanSansad MargNew Delhi- 110 001.

2. Securities Exchange Board of India,Through its ChairmanPlot No. C4-A,'G' Block, Bandra Kurla Complex, Bandra (East), Mumbai 400051

3. Central Vigilance CommissionThrough The Chief Vigilance Commissioner,S a t a r k a t a Bhawan New Delhi

4.

5.

Shri U. K. Sinha,Chairman,SEBI,Plot No. C4-A,'G' Block, Bandra Kurla Complex, Bandra (East), Mumbai 400051

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

A WRIT PETITION UNDER ARTICLE 32 OF THE

CONSTITUION OF INDIA

To,

The Hon’ble the Chief Justice of India and His Companion Justices of the

Hon’ble Supreme Court of India.

The Humble petition of the petitioner above-named

MOST RESPECTFULLY SHOWETH:

That the present writ petition is being filed in public interest under Article

32 of the Constitution of India to challenge the appointment of Respondent

No. 4, Mr U K Sinha as Chairman of SEBI on the grounds of his not being

a person of integrity which was one of the eligibility conditions as laid

down in Sub-section 5 of Section 4 of the SEBI Act as well as in

government communication and also for fraud committed on the Search and

Selection Committee and the Appointment Committee of the Cabinet. The

fraud relates to concealing from the Committees the unheard emoluments of

over Rs four crores per annum which he wrongfully earned while working

for a PSU by declaring the post of the CMD, UTI AMC as commercial

appointment. The information relating to emoluments was mandatory

information and it had a material bearing on the selection to a post of high

integrity that Shri Sinha failed to fulfill.

Moreover, the facts regarding Shri Sinha’s illegal appointment as the

CMD of the UTI AMC (i.e. the post which he held before joining the

SEBI), after his extension to the deputation in UTI AMC was denied

by the ACC, by taking VRS from the govt. and immediately

thereafter joining the UTI AMC as a commercial appointment was

not placed before the Search-cum-Select Committee. Mr Sinha

illegally also gave himself emoluments of over Rs 2 crores per annum

for the period of his deputation from the IAS to the UTI AMC

retrospectively.

The developments subsequent to the appointment of Shri Sinha as the

Chairman SEBI show that it was done for extraneous consideration to

benefit some of the big corporates like Reliance, Sahara against

whom action after investigation was pending before the SEBI. The

Petitioner is, therefore, also seeking an investigation into the entire

process of the appointment of Shri Sinha as CMD, UTI AMC as well

as Chairman, SEBI.

The Petitioner herein is a financial expert and a lawyer. He has filed several

notable public interest petitions that have unearthed corruption and financial

irregularities. His PIL against Cogentrix prevented a loss worth

approximately rupees 30,000 crores to the exchequer, and one against

Prasar Bharti benefited the organization by about Rs. 20 crores. He was the

complaint of the petitioner in the 2G spectrum scam that eventually led to

the registration of the FIR by the CBI, as has been noted by this Hon’ble

Court in the 2G case. He has filed several notable PILs against the

Karnataka mining scam in the Karnataka High Court. This Hon’ble Court

has recently admitted his PIL against the Cairn-Vedanta deal.

The Petitioner has obtained the enclosed documents through the RTI

Act. He has also complained to the concerned authorities at various

points of time which are placed as Annexure P30 & P36.

Facts of the case:

Illegality in not granting extension as per the amended notification in

the Rules to the earlier Chairman and then members of the SEBI

The Chairman and Whole Time Members of the SEBI are appointed by the

Central Government under section 4 (4) SEBI Act 1992. Rules framed

under section 29 of the SEBI Act titled as SEBI (Term and Condition of

Service of Chairman and Members) Rules lay down the pay, tenure,

allowances leave of the Chairman and the WTM.

The SEBI (Term and Condition of Service of Chairman and Members)

Rules were amended vide notification no. 2/106/2006-RE dated 23/7/2009

to extend the term of the Chairman and the WTM from three to five years.

Copy of the notification dated 23/7/2009 amending the Rules for term and

condition of service is annexed hereto as Annexure P1 (From Page NOs.

______to _______). The Director of Capital Market Division put up a

proposal on 2/9/09, for aligning the terms of the Chairman and WTM by

giving two years extension and the same was endorsed by the Finance

Secretary. Copy of the proposal of the Director of Capital Market Division

dated 02/09/09 is annexed hereto as Annexure P2 (From page nos.

_______to ________). The then Finance Minister stated that before the

extension is offered the performance of the concerned officers should be

appraised. Copy of the noting dated 08/09/09 of the then Finance Minister

is annexed hereto as Annexure P3 (From page nos. _______to

________).

The Finance Secretary vide his noting dated 8/10/09 justified the decision

for proposing the extension as the performance of the concerned officers

was considered good in terms of the extent of the activities SEBI had

undertaken and the quality of delivery of those activities and the same was

approved by the Finance Minister on 19/10/09. Copy of the noting dated

08/10/09 of the Finance Secretary is annexed hereto as Annexure P4

(From page nos. _______to ________). Thereafter, consent for the

extension of the concerned persons was taken and the proposal for extension

of tenure was recommended to the DOPT by the Director Capital Market

Division vide his letter dated 16/11/2009. Copy of the letter dated 16/11/09

for the proposal of extension by the Director Capital Market Division is

annexed hereto as Annexure P5 (From page nos. _______to ________).

It was at this point that Ms Omita Paul, the then Advisor in the Finance

Ministry desired to see the file on 25/11/09. The file was sent to her by the

Finance Secretary on 27/11/09, and was seen by her on 30/11/09. The file

was once again sent to the Advisor for her perusal on 16/12/09 and noting

was made by her on 21/12/09 drawing the attention of the Finance Minister

to page 22 regarding the composition of the SEBI Board and the present

tenure of the Board. Copy of the relevant pages of the file notings of the

aforementioned dates is annexed hereto as Annexure P 6 (From page nos.

_______to ________). This document was already there on the file and was

brought to the attention of the then Finance Minister at the time the

extension was proposed on 2/2/09.

It was on the noting of the then Advisor that the then Finance Minister

reversed his earlier decision to accord extension to the then Chairman and

the Whole time Members by stating that the tenure of the then Chairman

was upto Feb 2011 and the ACC was to be moved for extension six months

before the tenure came to an end. Copy of the relevant file noting dated

22/12/09 of the then Finance Minister reversing earlier decision of the

extension is annexed hereto as Annexure P7 (From page nos. _______to

________).

The sole reason for the then Advisor intervening was to ensure that senior

officers who were discharging their duties commendably were denied

further extension and they are not reappointed. This would create a vacancy

shortly and enable her to have her candidate to the post of Chairman

appointed in a year’s time. This unmistakable conclusion is supported by

the fact that extension was never considered at the appropriate time.

As the then incumbent were denied extension on the intervention of the then

Advisor Ms Omita Paul, the letter for extension of tenure proposed for the

then Chairman and WTM to be placed before the ACC was ordered to be

withdrawn, and subsequently orders were issued to start the selection

process afresh for the Chairman on10/8/10. Copies of the relevant pages of

the notings from 11/01/10 to 22/01/10 withdrawing the proposal for

extension and noting the Director dated 06/08/10 seeking clarification

regarding extension and the final order dated 10/08/10 of the Finance

Minister ordering for fresh selection of the SEBI Chairman are annexed

hereto as Annexure P8 (Colly) (From page nos. _______to ________)

Suggestion of giving further extension to the existing officers made by the

junior officers, was overruled.

II. Illegal and arbitrary change in the composition of Search-cum-

Selection Committee for selecting the SEBI chairman and WTM

Under the Rules there is a Search-cum- Selection Committee for selecting

the SEBI chairman and WTM. As per relevant Rules the members of the

Committee were the Cabinet Secretary, Secretary Financial Services,

Chairman SEBI (for whole Time member) and two experts. At the time of

initiation of the process for the selection of a new Chairman of SEBI in

place of the existing incumbent, the Director General suggested the names

of four persons as experts and the Finance Secretary endorsed the names

and stated that any two names could be selected. Two of these experts were

from the earlier Selection Committee. Copies of the letter dated 18/08/10

by the Director (PM & RE) as well as file noting dated 20/08/10 are

annexed hereto as Annexure P9 (Colly) (From Page nos. ____to _____).

Though the file was marked to the Finance Minister by the Finance

Secretary, the file was sent to the then Advisor.

After discussing the matter with the then Advisor, the DG (DOC) apprised

the Advisor about the composition of the Committee for the selection of the

SEBI Chairman under the Rules and marked the file to the Advisor, Ms

Omita Paul. The Advisor, in her noting added the Finance Secretary to the

Committee, did not select any of the four experts (of which two were

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

new names of her own to be appointed as experts on the selection

committee. Thus three of the five members of the Search cum Selection

Committee were hand picked by Ms Paul. Copies of the noting dated

24/08/10 of the DG (DOC) and the noting dated 25/08/10 of the then

Advisor to the FM are annexed hereto as Annexure P10 (colly) (From

page nos. ______to ___).

The fact that no reasons were given for the rejection of the four experts

suggested by the Finance Secretary/DG (DOC) and selecting both the

members herself clearly establishes that Advisor had some interest in the

composition of the committee which would select the Chairman of SEBI.

The Finance Minister appended his signature to the Committee suggested by

the Advisor.

The Committee nominated by Ms Paul violated Rule 5 of the SEBI (Terms

and Conditions of Service of Chairman and Members) Rules. The records

show that the officers of the Ministry went to great length to amend the

Rules in a manner to accommodate all the members nominated by her. This

was done by giving the Finance Minister the discretion to nominate two

members to the Search cum Selection Committee. In doing so, permanent

primacy was given to the Finance Minister in the choice of the members of

Search cum Selection Committee, by amending the rules in a manner to

give him powers to nominate two more members at his discretion. Thus

four persons would be nominees of the Finance Minister and two/ three

members ex officio members as against the earlier ratio of two experts and

two/three ex officio members. Thus the impartiality of the selection process

was compromised to the extent that the majority of the members of the

selection committee will be the nominees of the Finance Ministry. The

amendment notification dated 07/10/10 making change in the composition

of the Selection Committee is placed as Annexure P11 (From Page Nos.

_______to ______).

The documents show that the object of the entire exercise of changing the

Rules was to ensure that the Committee desired by the Advisor Ms Paul

remains unchanged. It was also done probably to ensure that the ex officio

Chairman, the Cabinet Secretary remains the only member unconnected

with the Finance Ministry. The noting of the Deputy secretary that the

amendment at this stage would send “undesirable signals” was ignored.

Subsequent to the notification of the amended Rules, the Finance Minister

was asked to nominate one more member to the Selection Committee and

he nominated Mr Devidayal an ex-bureaucrat who had joined the Congress

Party after retirement.

III Introduction of Mr Sinha’s candidature through search route

and Suppression of emoluments of Sinha’s from the Selection

Committee and ACC.

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

annexed hereto as Annexure P12 (From page nos.

________to__________), invited application for the post of Chairman

SEBI and one of the criterion among other criteria was:

“Keeping in view the role and importance of SEBI as

a regulator, it is desirable that persons with high

integrity, eminence and reputation preferably with

more than 25 years of professional experience and in

the age group of 50 to 60 years may apply.”

The application form for the post at item no. 5 had asked the

applicants to file the present pay and scale of pay while item no. 8

had column no. 4 for filling in the pay scale with each of the earlier

assignment shown in the experience column. A copy of the

application form for the post of Chairman SEBI dated nil is placed as

Annexure P13 (From Page Nos. _______to ______).

The first meeting of the Search cum Selection Committee was held on

2/11/10. There were a total of 19 application received through

advertisement. These included Secretary, Ministry of Corporate Affairs and

other senior officials. All the serving officers had filled the pay column. Of

these five candidates were short-listed. These persons with their salary were:

Shri G P Singhal, Principal Secretary, Madhya Pradesh( 79,000pm); Shri R

Bandhopadhyay, Secy. to the Govt of India(, Ministry of Corporate Affairs,

Rs80,000pm); Shri Sidhartha Pradhan, Additional Secretary, Department of

Disinvestment(67,000-79,000pm); Shri Himadri Bhattacharya, Executive

Vice President, Tata Capital Limited (2.37 lacs pm) and Shri R Sridharan

MD of SBI ( 77,765-80,000pm). The highest pay scale was that of a senior

official working with in the private sector with the Tatas. His pay scale was

2.37 lacs which would be around 30 lacs per annum. One candidate, Mr U

K Sinha, was invited by the Committee. The minutes do not mention the

name of the member who suggested the name of U K Sinha CMD UTI

AMC. Copy of the minutes of the first meeting of the Search-Cum-

Selection Committee dated 02.11.2010 along with the document showing

pay scales of other candidates are placed at Annexure P 14 (Colly) (From

Page nos. ______to _____).

The second meeting of the Committee was held on 13th December 2010.

There were forty days for the officials to have the particulars of U K Sinha

filled up as per the application form. In particular the emoluments or the

pay scale of Mr Sinha for the present and earlier assignments could have

been ascertained and filled in. The emoluments of Mr U K Sinha, which

could have been very easily found by either asking him, or found from the

four government companies which held majority stake in UTI AMC, or by

looking it up on the web site. This omission was not by accident but by

design.

Mr Sinha’s total emoluments for the year 2010-11 were at over 4 crores per

annum while working in a PSE (3.62 crores for 10.5 months) Copy of the

relevant page of the Notes forming part of the Accounts for the year ended

march 31, 2011 showing Shri Sinha’s remuneration in UTI AMC is

annexed hereto as Annexure P15 (From page nos. ______to ______).

The emoluments also had to be concealed because UTI AMC was a PSU

and could not pay the emoluments that were being paid to Mr Sinha. The

emoluments paid to Mr Sinha was almost 30 times more than paid to those

occupying very high position in the government. It was also more than what

the bureaucrats senior to him and involved in the selection process were

paid by the Government in their entire career.

It appears that it was for this reason that Mr Sinha did not apply through the

advertisement route because had he done so he would have to reveal his

salary. It was for the same reason that his name was proposed through the

search route, so that his salary need not be revealed. It was for this reason

that the Selection Committee was hand picked by the Advisor, Ms Omita

Paul.

The Committee at its second meeting recommended two names, that of Shri

Himadri Bhattacharya, Executive Vice President, Tata Capital Limited the

only candidate from the private sector, and Mr U K Sinha (supposedly from

the Public Sector). Mr U K Sinha’s name was selected by the then Finance

Minister, and his name was directed by the Minister to be sent to the ACC

for approval. Copies of the minutes of the second meeting of the Search-

Cum-Selection Committee dated 13.12.2010 along with approval of the

then Finance Minister Dated 13.12.2010 are placed at Annexure P16

(Colly) (From page nos. ______to ________).

The selection of Chairman of SEBI requires the approval of the

Appointment Committee of the Cabinet (ACC). The appointments

recommended to the ACC have a standard performa and annexures which

are to be filled in by the Ministry recommending the appointment. The

recommendation is routed through the Establishment Officer of the DOPT.

The proposal for the appointment of Mr U K Sinha was put up to the ACC

by the Finance Ministry vide its confidential letter no D.O. No 2/23/2007-

RE dated 13/12/2010 wherein the Performa for the ACC was filled up. In

Annexure 1 item no. 4, it was shown that the post presently held was that of

CMD UTI AMC and against the scale of pay it was mentioned: “Not

Available”. Copy of the letter dated 13.12.2010 of the Joint secretary,

Capital Markets along with Annexures is placed at Annexure P 17 (From

page nos. ______to ______).

For reasons mentioned above this was done deliberately as the facts of the

salary/emoluments were not to be revealed, and a false impression was to be

created that Mr Sinha was getting the normal pay that a CMD of any PSU

gets, the highest being Rs1.25 Lacs as per the recommendation of the

second pay commission.

V Illegality in the deputation and appointment of Mr. Sinha as the

CMD of UTI MAC

The Department of Public Enterprise vide its DPE OM No DPE/

11(47)2006-Fin dated 4th December 2007 clarified the “Public Sector

Mutual Fund” means the Mutual Fund registered with and regulated by

SEBI where the Government of India, its financial institutions and public

sector banks holds/hold individually or collectively more than 50% of

equity/shares in the Asset management Company of the Mutual Fund.”

Copy of the DPE OM No DPE/11(47)2006-Fin dated 4th December 2007 is

annexed hereto Annexure P 18 (From page nos.________ to ______)

The UTI MF had filed a prospectus with SEBI for a public issue. At various

places it had claimed to be a government controlled entity. The relevant

extracts of the prospectus dated 09.01.2008 of UTI is placed as Annexure

P19 (From page nos.________ to ______). The document is dated January

9, 2008 and shows the salary of Mr Sinha, the CMD as on January 2008

with basic pay as Rs 23,450 per month etc.

Mr Sinha’s history of his deputation to UTIAMC dated back to the period

when he was posted as Joint Secretary in the Finance Ministry overlooking

affairs of UTI and was also on the Board of UTIAMC. He got appointed to

the post of CEO of UTI AMC by concealing the recommendation of the

JPC mentioned below (Para 44, Annexure P 31), and also by overlooking

the policy of not seeking deputation in an organization which he had

overseen in the Ministry. The first deputation was for a period of two years

ending on 2/11/07.

The deputation was wrongly approved as being under section 6 (2) (ii) of

the IAS cadre rules from 27/12/2206 to 2/11/ 07. A deputation under Rule

6 (2) gives the choice to the deputed person the option to draw the pay of

the organization to which he is deputed or his cadre pay. However, Mr

Sinha continued to draw the pay scale to which he was entitled and got his

pay revised to that of additional secretary in the pay scale of Rs

22400-525-24500 with effect from 10/2/2007, the date of appointment of

his junior as Additional Secretary. Copy of the representation dated

29.01.2007 of Shri Sinha to the Special Secretary, DOPT regarding his

terms and conditions as CMD, UTI AMC and copy of the letter dated

01.03.2007 of the Desk Officer in DOPT to Shri Sinha are annexed hereto

as Annexure P 20 (Colly) (From page nos. ______to _______). His

predecessor too had drawn the salary of an IAS officer for the entire period

that he was on deputation.

It was decided by the four public sector entities which owned UTIAMC and

the government to give another extension of two years to Mr Sinha, and the

recommendations were sent to DOPT with the approval of the Finance

Ministry. When the matter of deputation was put up to the Prime Minister,

Mr Sinha was given interim extension for three months upto 2/2/08 on the

grounds that his deputation was coming to an end and general matter of

policy regarding deputation of IAS officers under section6(2)(ii) were to be

decided. The Consolidated Deputation Guidelines for All India Services was

circulated by the Ministry of Personnel on 28/11/07 and under the

Guidelines the deputation of Mr Sinha was determined to be under Rule

6(1) and not under Rule 6(2)(ii) as was wrongly decided earlier. UTI AMC

was a central PSU as per clause 1.2- 1.2.3 of the Guideline. Copy of the

letter dated 28.11.2007 of the Director (Service) enclosing guideline and

the noting of the Cabinet Secretary dated 6.11.2007 relating to extension

of deputation by three months by the Prime Minister are placed

at Annexure P 21 (Colly) (From page nos.________ to ______).

The Finance Ministry, Department of Economic Affairs vide its OM dated

12/12/2007 requested the DOPT to extend the deputation by the balance one

year and nine months under Rule 6 (1). Copy of the OM dated 12/12/2007

regarding extension of deputation is placed at Annexure P22 (From page

nos.________ to ______). In the note prepared by the section officer

of DOPT, it was stated that the recommendation of the Department of

Economic Affairs for further deputation under section 6(1) be referred to

the EO Division. The Establishment officer ordered that in view of the

latest instructions his ( Mr Sinha’s) further deputation will come under Rule

6(1) and a note be prepared for the Cabinet Secretary for extension under

Rule 6 (1) mentioning the cooling off period between the two

deputation. Copy of the note dated 2/1/08 of the Section Officer along with

noting of the Establishment Officer dated 4/1/08 is annexed hereto

as Annexure P23 (From Page NOs. _______to _______).

The Appointment Committee of the Cabinet vide its letter dated 10/3/2008

advised the Finance Ministry (Department of Economic Affairs) that

extension of tenure as CMD of UTI AMC to Mr Sinha had been granted

till 31/5/2008 and thereafter he would return to his parent cadre (Bihar) and

directed the Ministry to find a replacement by then. Copy of the letter dated

10/3/2008 by the Appointment Committee of the Cabinet is placed at

Annexure P 24 (From Page NOs. _______to _______).

Instead of accepting the order of the Appointment Committee of the

Cabinet, and conceding that there was no way out but to comply with the

orders of the ACC, a conspiracy was hatched between Mr Sinha, the SBI

chairman, Finance Ministry officials and the DOPT to defy the Cabinet

committee in a manner that Mr. Sinha could continue in the post without

either informing or taking approval of the ACC in the following manner:

Mr. Sinha would seek voluntary retirement,

SBI Chairman would make a fresh offer.

Mr. Sinha would seek permission for post retirement commercial

employment,

The Ministry of Finance would recommend the re- employment as

commercial employment,

The DOPT would approve it and waive the post retirement waiting period

before accepting the commercial employment.

All the concerned persons in the decision making process would ignore the

meaning of commercial employment as stated in the section and designate

employment with the PSE as commercial employment.

The file would not be sent to the PMO or the ACC for information or

approval.

Copy of the letter dated 03.04.08 of the SBI Chairman to the Finance

Secretary requesting the govt. to approve the proposal of extension

for two years, copy of the letter of the Company Secretary dated

11.04.2008 to Shri Sinha regarding compensation in case of his

continuing in UTI AMC after taking VRS, copy of the letter dated

15.04.2008 of Shri Sinha to the Chief Secretary, Govt. of Bihar for

VRS, copy of the application dated 15.04.08 of Shri Sinha seeking

VRS in the prescribed format under Schedule L, copy of the letter

dated 30.04.08 regarding Sinha’s sanction of VRS w.e.f. 15.05.08,

copy of the OM dated 01.05.08 regarding Shri Sinha’s reemployment

in the same position after VRS and copy of the letter dated 17.06.08

of DOPT to of the Chief Secretary, Bihar granting permission for

post VRS commercial employment with UTI AMC are annexed

hereto as Annexure P25 (Colly) (From Page Nos. ______ to

______).

This omission was not accidental but deliberate as it was the only way out

for Mr Sinha and those interested in his continuation for reasons unsaid to

retain him as CMD of UTI AMC inspite of the orders of the ACC headed

by none other than the Prime Minister. The note prepared by the Section

Officer in the DOPT was approved by every authority right upto the

Minister even though Rule 26 was reproduced in its entirety in the note.

Further, the DOPT also apparently ignored the fact that the declaration

given by Shri Sinha under Rule 26 (3) (ii) of AIS Death cum Retirement

Benefit Rules that in the last three years of his official career he has not

been privy to sensitive or strategic information of UTI AMC could not be

true as he was already in deputation in the same organization at the time of

taking VRS. The text of the relevant portion of Rule 26 is reproduced

which states as to what commercial employment means:

`Commercial Employment’ means: -

(i) an employment, whether paid or honorary, in any

capacity including that of an agent under a company, firm,

co-operative society, body or individual engaged in trading,

commercial, industrial, financial or professional business,

and includes a directorship of such company or partnership

of such firm but does not include employment under a body

corporate, wholly or substantially owned or controlled by

Government.”

Copies of the note dated 17.04.08 and Note of Section Officer dtd

09/05/08 containing Rule 26 (3) (ii) of AIS Death cum Retirement

Benefit Rules and note of MOS dated 17/6/08 are annexed hereto as

Annexure P26 (Colly) (From Page Nos. ______ to ______).

Mr Sinha in column 5 of his application to the Special Secretary, DOPT,

dated 15/4/2008 filed in Schedule L under Rule 26 for seeking permission

for taking commercial employment post retirement stated that the pay scale

and the pay drawn by him at the time of his retirement was

22400-525-24500 and present pay as Rs23,450. In column 7(f) relating to

the details of the commercial appointment, against the question as to

whether the post was advertised, and if not as to how the offer was made;

Mr Sinha wrote that such high level posts are not advertised. This assertion

was wrong in light of the assurance of the government given to the JPC as

mentioned below (para 44). Further the application under Rule 26 was in

violation of the meaning of commercial employment.

The records show that the proposal for further extension of deputation of

Mr Sinha as CMD UTIAMC was denied on 10/3/2008. His application for

voluntary retirement and permission for commercial employment is dated

15/4/2008. His retirement was accepted from 15/5/2008 but the permission

of the Central Government for the post retirement commercial employment

to take up employment with UTI AMC was given only on 17/6/08. Though

he was reemployed in the same organization he was occupying the post

illegally for a period of one month. The illegal increase in emoluments with

retrospective effect and the signing of the balance sheet of UTI AMC on

17/5/08 took place on dates on which he should not have been office. The

implication of this mischief of illegal commercial re-employment of Mr

Sinha was that he could draw full pension for over 30 years of service as an

IAS officer and rake in crores while working for the same PSU to which his

deputation was denied by the ACC headed by the Prime Minister.

Though Shri Sinha remained in the same position and the organization

remained the same, the character of the employment changed from that of a

government servant on deputation to a PSU to that of a retired bureaucrat

having taken up commercial employment. Within a period of a day the

emoluments too increased from around six lacs per annum to one crore per

annum. Later on these emoluments were made over two crores and then

four crores. Mr Sinha also gave himself emoluments of over Rs 2 crores per

annum for the period of his deputation from the IAS to the PSU

retrospectively on a date on which he could not be occupying the office of

CMD UTI AMC. Mr Sinha’s voluntary retirement was with effect from

15/5/08 while the permission for commercial employment under Rule 26(1)

of the AIS (DCRB) was given on 17/6/08 and hence he could not be

occupying the office from 16/5/5/08 to 16/6/08. The fact that the

emoluments were in crores, were with retrospective effect and was done

when he was not entitled to be in office or sign the balance sheet reflects

adversely on his integrity. He also put in his papers for voluntary retirement

and got himself re-employed in the same PSU when the extension of his

deputation was turned down by the ACC. His re-employment was against

the relevant Rules. All this crucial information, having a bearing on his

integrity, had to be concealed from the Chairman of the Selection

Committee who as Cabinet Secretary was aware of the deputation history of

Mr Sinha in 2007-2008.

It is undisputed through various documents, the filing of prospectus,

performa of his application for post retirement employment etc, that Sh.

Sinha was drawing a pay in the scale of Rs 23,450 per month till the point

of his retirement, and was to draw one crore thereafter, that is from

17/6/2008 according to offer made to him by the Company Secretary and

approved by other authorities. In the form filled on 15/4/2008, Shri Sinha

had shown his pays scale as Rs 23450.

Mr Sinha’s commercial employment commenced from 17/6/2008. His

voluntary retirement was from 15/5/2008. The balance sheet for the year

ending 31st March 2008 dated 17th May 2008 (a Saturday) shows that the

remuneration in the form and salary and allowances (including perquisites)

paid to Mr Sinha by UTI AMC was Rs 2 crores for 2007-08, and in

addition he was paid a sum of Rs 44 lacs for three months and three days in

the previous year (2006-2007) Copy of the relevant page of the balance

sheet dated 31/03/2008 is annexed hereto as Annexure P 27 (From Page

Nos. ______ to ______). The first act that Mr Sinha did on 16/05/08,

when he should have been in retirement and not the CMD, as the CMD was

to give himself a handsome pay hike many more times than every other

person of the government be it in the executive, the judiciary, the PSU or in

any other position. Even a promoter of a privately owned company does not

act in the manner Mr Sinha did of giving himself a raise of 30 times with

retrospective effect. This hike pertained to the period for which he was on

deputation as an IAS officer in the employ of the government, and for

which he had shown his remuneration in various documents as linked to a

basic of Rs 23,450.

The approval was for emoluments of one crore per annum from

17/06/2008. Mr. Sinha increased his emoluments to four crores in

2010-2011, 2.36 crores, for the year 09-10, and 2.15 crores for 08-09.

Copies of the relevant pages of the balance sheet of the year ended March

31, 2009, balance sheet of 2009-10 and 2011 -12 are annexed hereto as

Annexure P28 (Colly) (From page nos. _______to ________). Mr Sinha

paid himself an excess of over 7.5 crores even after considering his pay of

Rs one crore per annum for the post retirement period from May 2008 as

legitimate.

It is for this reason that the emoluments of Mr Sinha had to be concealed

from the Cabinet Secretary, the Chairman of the Search cum Selection

Committee who also had knowledge of Mr Sinha’s history of deputation, of

extensions, of it being under Rule 6(1) and of it having come to an end.

The Cabinet Secretary had not changed between November 2007 to

February 2011. As the papers of Mr Sinha’s appointment to the ACC would

also go through him, hence the emoluments had to be concealed from him

and the members of the ACC and the Cabinet Secretary. It was also

probably for this reason that the composition of the Selection Committee

was changed by amending the relevant Rule so that the Cabinet Secretary,

the Chairman of the Selection Committee is reduced to the minority of one.

The history of Mr Sinha’s deputation to UTI AMC and the manner in

which he increased his emoluments cannot be described as acts of a person

of integrity, much less of high integrity, expected from a person to be

appointed as chief of SEBI.

The purpose of denying extension to the then incumbents and appointing a

manipulative person with questionable integrity to the sensitive post of

SEBI chairman by committing fraud on the ACC could not be without a

purpose. Mr Sinha forgoing emoluments of Rs 4 crores to serve on a post of

Rs36 lacs and losing the pension paid to him as CMD of UTI AMC, too

could not be without reason. The promoters of companies who were under

investigations by SEBI and who had thousands of crores on stake could be

expected to lobby and replace the intransigent officers with more pliable

and amenable ones.

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

Shortly after the appointment of Mr. Sinha in mid February reports started

appearing in the press from April 2011, that the brother of Ms Paul, Jitesh

Khoshla, though not considered suitable for the post of CMD by a

Committee was nevertheless the front runner for the post of UTI AMC

because he had the backing of the Finance Ministry and the state owned

financial institution, which owned the majority shares of UTI AMC. These

reports stated that the Finance Ministry was insistent that Mr Khosla be

appointed as CMD but this was being resisted by a foreign investor who had

26% shares in UTIAMC (due to a subsequent divestment through a

controversial private placement) and whose consent was necessary. Copy of

the article dated 09/06/2011 published in India Express, the article

13/06/2011 published in The Economic Times and the article dated

23/01/2012 published in the First Post are placed as Annexure P 29 (colly)

(From Page Nos. ____to _____). Specific complaints were filed by the

petitioner with the Prime Minster on 30/5/2011, 12/9/2011 and 10/11/2011,

which are placed at Annexure P 30 (colly) (From Page Nos. ____to

_____), against Omita Paul. The practice of forwarding the complaint to

the Ministry for their comments would have been followed but it too did

not have any effect.

The post of CMD UTIAMC continued to remain vacant for seventeen

months because the brother of Ms Omita Paul could not be appointed to the

post and the government remained indifferent to the fact that the fund had

a corpus of around Rs 60,000 crores and a large part of it came from

government sources and pension schemes.

The massive losses incurred by the government, the investors and the tax

payers in the two UTI scams leading to setting up of JPC and its

recommendations accepted by the government were ignored by those having

their petty interests in the post of CMD of UTI AMC. The overriding

public interest of the government and the PSU which had invested its funds,

the pension funds and investors who too had invested their money

amounting to Rs 60,000 crores was ignored for the sake of the massive

illegal emoluments that IAS officers could milk the organization while on

deputation/commercial employment by treating it as their fiefdom.

UTI had been involved in a major scam in which ordinary investors lost

huge sums of money. In 1998 when the fund crashed a Rs 3500 crore

government bailout plan rescued it. Then it crashed again in 2001 due to a

political appointee being made its head and the fund lost almost half of its

money, asset value of Unit 64 became Rs 8 instead of Rs 14 (the traded

value) and the government agreed to make it Rs 10 so that the investors

would incur only a 30% loss. The government announced a Rs 14,500 crore

bailout programme, which was paid for by the tax payer. A Joint

Parliamentary Committee went into the entire scam and submitted its

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

Page Nos. _______to ______) and is reproduced below:

“(v) Government has stated that a professional Chairman

and Board of Trustees will manage UTI-II and that

advertisements for appointment of professional managers

will be issued. The Committee recommended that it should

be ensured that the selection of the Chairman and

professional managers of UTI-II should be done in a

transparent manner, whether they are picked up from the

public or private sector. If an official from the public sector

is selected, in no case should deputation from the parent

organisation be allowed and the person chosen should be

asked to sever all connections with the previous employer.

This is imperative because under no circumstance should

there be a public perception that the mutual fund schemes of

UTI-II are subject to guarantee by the Government and will

be bailed out in case of losses.”

Neither Mr U K Sinha, the ex CMD of UTI AMC nor Mr Jitesh

Khoshla were professionals nor were proposed to be recruited as

professionals through an advertisement. Yet they wanted to enjoy the

fantastic salaries which they did not merit. Neither of them met any

of the five criteria in the advertisement inserted recently for the post

of UTI CMD in newspaper dated 04/06/2012 placed at Annexure P

32 (From Page Nos. ____to _____).

The advertisement was released only after the brother of Ms Omita

Paul/Advisor opted out of the race because the tenure of Ms Paul/

Advisor was coming to an end on account of it being co terminus

with that of the Minister. Copy of the Times of India report dated

07/05/2012 is annexed hereto as Annexure P 33 (From Page Nos.

_______to _______). It was then and only then the advertisement

was released, fulfilling the commitment given to the JPC by the

government in 2002. The petitioner had brought to the above

mentioned assurance of the government to the JPC to the notice of

the Prime Minister and placed it in public domain.

VI Complaint of the then Whole Time Member Dr. Abraham

against Mr. Sinha and Ms. Paul to the Prime Minister of

lobbying for companies against whom the complaints were being

examined by the SEBI

The allegation of Ms Paul acting on behalf of the corrupt companies and

how Mr Sinha was lobbying for them with the WTM was revealed by Dr

Abraham as a WTM (Whole Time Member) of the SEBI Board, in a letter

written by him on 1/6/2011 to the Prime Minister, after Mr Sinha became

the Chairman of the SEBI. The letter is a telling expose on extraneous

forces influencing the functioning of the regulator of the capital market. In

the letter the WTM alleged that Mr Sinha tried to influence him on four

cases and invoked the name of Advisor while doing so. One of the cases

related to securities fraud of Reliance group, and others related to Tayals of

Bank of Rajasthan, Sahara, and MCX. While trying to influence him, Mr

Sinha had stated that these matters were “engaging the attention of Union

Minister for Finance, or Mrs Omita Paul, Advisor to the Finance

Minister,”. This letter dated 1/6/12 came in the public domain through a

RTI query and is placed at Annexure P 34 (From page nos. ____ to

_____). The events subsequent to the writing of the letter to the Prime

Minister show that there was great substance in the allegations and given the

credibility of the WTM as against that of Sinha and Ms Paul, the former

was speaking the truth.

Sahara was a company taking deposits from small un bankable people.

From 2008 onwards, it violated the deposit norms under section 58 A of

Companies which allowed it to collect unsecured deposits from debentures

up to 10% of its owned fund. By the Acceptance of Deposit Rules, it could

have collected only Rs 230 crores but went on to collect over Rs 20,000

crores. Copy of the relevant portion of the balance sheet of Sahara year

01/07/2010 to 30/06/2011 is placed as Annexure P 35 (From page nos.

____ to _____). Almost the entire money collected was siphoned out and

virtually there were negligible assets in the company in whose name

deposits were taken from the public so that the group could not be

compelled to refund the amount. It was the largest ponzi scheme involving

2 crore poor people. These deposits were being shown as OFCD (optionally

fully convertible debentures) and no public issue had been made though the

inflated number of depositors were said to be two crores. The WTM had

detected the scam in a public issue proposed by the group for a real estate

company and showed great courage in taking on the group as the ongoing

scam was going on for decades and no authority dared to cross swords with

the Sahara group.

The WTM had passed orders against the company which was contested by

Sahara in the High Court at the time he wrote the letter to the Prime

Minister. However, by a freak chance the matter came before him for

adjudication because this Hon’ble Court referred the matter to SEBI. He

adjudicated the matter at the fag end of the tenure (23/6/11). In a well

reasoned order, he directed the group to refund the entire money to the

investors. His order was upheld by the Securites Appellate Tribunal and an

appeal against the said order is pending before this Hon’ble Court. In fact,

the matter has been heard and judgment is reserved.

The second case that interested the Advisor to the Finance Minister and Mr

Sinha was the securities fraud of Rs 513 crores of Reliance group (Mukesh

Ambani group). Reliance Petroleum shares were short sold for Rs 290 by

the group and later bought back when there was a hefty fall in price when

the group sold the shares in the cash segment. The Reliance group made

Rs513 crores in five days .The securities fraud took place in Nov 2007.

Such a blatant act of securities fraud is by the promoter was unprecedented

and only the Reliance group could have committed it.

The penalty under the law is three times the amount of the fraud and the

total amount involved was 2000 crores along with criminal prosecution.

Reliance tried to settle the matter by paying a fine of only Rs two crores and

then eight crores through consent order. It was not even willing to pay back

the fraud amount of Rs 513 crores. These meager offers of settlement were

made by Reliance to buy time so that the honest officers of SEBI could be

replaced by an amenable Chairman like Mr Sinha.

Mr Sinha has changed the circular on the consent order (25/5/2012) in a

manner to favour Reliance group and continues the settlement of the

criminal offence through a consent order. The circular was issued without

the consent of the Board and seeks to undo the provisions of the ACT and

would not stand legal scrutiny. Deliberate loophole was left in clause 25 of

the circular to give relief to the group. Copies of the circular on consent

order dated 25.12.12 along with the two complaints dated 10/09/2011 &

28.05.2012 filed by the petitioner with the CVC on the Rs 2000 crore scam

as well as complaint dated 21/06/2012 to the Cabinet Secretary regarding

Shri Sinha’s appointment are placed as Annexure 36 (Colly) (From Page

Nos. ______to ______). The attempts to get information under RTI have

been denied and even an application to reveal the names of the thirteen

entities which were involved in the scam was turned down in Appeal by

SEBI.

The third case related to the Tayals of Bank of Rajasthan in whose favour

the outgoing member Prashant Saran passed a favourable order so that he

could be re appointed. The order only confirmed the allegation of Dr

Abraham. Similar conclusions were made by the media. Copies of the

Articles in Mint dated 02/04/2012 and Financial Express dated 22/07/2012

on Mr Saran’s order are enclosed as Annexure 37 (From page Nos.

______to _______).

The fourth case related to MCX which wanted permission to trade in

securities (cash and derivatives) in its stock exchange. The previous regime

of SEBI had denied the permission and had passed an order against MCX.

The issues relating to operations of Stock Exchnages were referred to a

committee by the then management of SEBI. The committee was headed by

Dr. Bimal Jalan, former governor RBI. The committee submitted its report,

however the Ministry ensured that Dr Bimal Jalan Committee report is

taken up by SEBI only after Mr. Sinha became the Chairman so that it can

ensure that only those recommendations, which suits MCX and others are

accepted, and other recommendations are rejected. This would enable MCX

to operate as a full fledged stock exchange list the shares of the proposed

stock exchange and help in giving market value to the MCX license. Further

the terms for complying with as this other norms too have been diluted after

Mr. Sinha took charge.

Further damage was done to the institution of SEBI in that when two of the

three WTMs of SEBI along-with with three Executive Directors refused to

apply afresh on Mr Sinha’s appointment, reportedly on integrity issues, as

stated by one of the WTMs in his letter to the Prime Minister. These posts

remained unfilled for quite some time and the post of one WTM for over a

year. It could also be on account of giving Mr. Sinha greater powers in

selecting WTM of his choice so that they would not pose problems in ruling

in favour of corporates. The Selection Committee had formed a sub

committee under the Chairmanship of Mr Sinha to select WTM. There is

every reason to believe that the purpose of appointing Mr Sinha through a

fraud was not only wrong but was motivated by extraneous factors which

were not in public interest or in keeping with the object of SEBI.

That the Petitioners have not filed any other petition before this Hon’ble

Court or any High Court, seeking the same or similar relief. The Petitioners

have no other equally efficacious alternative remedy than to approach this

Hon’ble Court by way of this petition.

Grounds

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

Chairman SEBI is arbitrary and hence, in violation of Article 14 of the

Constitution. The information regarding Shri Sinha’s getting about Rs. 4

Crores per annum as emoluments as the CMD of UTI AMC and also the

facts regarding his deputation in the UTI AMC and when denied extension

how he took VRS and immediately thereafter illegally joined UTI AMC

and got his salary increased to Rs. 4 Crores per annum were not placed

before the Search-cum-Select Committee. This Hon’ble Court in the case

relating to the challenge to the appointment of Shri P. J. Thomas as the

CVC in CPIL Vs. UOI & Ors. (2011) 4 SCC 1 held

“The decision to recommend has got to be an informed decision

keeping in mind the fact that the CVC as an institution has to

perform an important function of vigilance administration. If a

statutory body like the HPC, for any reason whatsoever, fails to

look into the relevant material having nexus to the object and

purpose of the 2003 Act or takes into account irrelevant

circumstances then its decision would stand vitiated on the ground

of official arbitrariness (see State of A.P. v. Nalla Raja Reddy5).

The post of the Chairman, SEBI is a very important position having a

bearing on the flow of investment, Indian and Foreign, economic

growth and the safety of funds invested by large and small investors.

Therefore, it was important that the complete facts particularly those

having direct bearings in deciding the question of integrity should

have been placed before the Search-Cum- Selection Committee. The

consent of the ACC too was obtained through fraud by suppressing

the information relating to the emoluments.

Because the appointment of Shri Sinha as the Chairman of the SEBI is not

only arbitrary but also illegal as he failed to fulfill one of the eligibility

conditions as laid down in Sub-section 5 of Section 4 of the SEBI Act as

well as the advertisement. Sub-Section (5) of Section 4 of the Act provides

that the Chairman shall be person of integrity. Further, the advertisement

provided that the person should be of high integrity. In the present case, the

manner in which the facts regarding Shri Sinha’s getting about Rs. 4 Crores

per annum as emoluments as the CMD of UTI AMC were suppressed before

the Selection Committee and also the facts regarding his deputation in the

UTI AMC and when denied extension how he took VRS and immediately

thereafter illegally joined UTI AMC and got his salary increased to Rs. 4

Crores per annum clearly raise serious question about his integrity.

Moreover, Mr Sinha illegally also gave himself emoluments of over Rs 2

crores per annum for the period of his deputation from the IAS to the UTI

AMC retrospectively after .

Because the appointment of Shri Sinha as the Chairman SEBI is not only

arbitrary but also malafide considering the manner in which the advisor to

the Finance Minister ensured that the earlier Chairman could not get further

extension though he was entitled to get extension of two years as per the

amended notification and also the manner in which the composition of

Search-cum- Selection Committee for selecting the SEBI Chairman and

WTMs was changed illegally to give primacy to the Finance Ministry so

that Shri Sinha’s appointment could be ensured. It was probably also done

to reduce the Cabinet Secretary, who was ex officio Chairman of the

Committee, to a minority as he was aware of the deputation history of the

candidate to be selected and the emoluments drawn by him would have

shocked him and alerted him to the illegalities involved.

Because the appointment of Shri Sinha as the Chairman SEBI was done by

abusing the official position for extraneous consideration as it was the result

of deep conspiracy to benefit some of the big corporates against whom the

complaints were pending before the SEBI. One of the earlier WTMs in his

complaint to the Prime Minister made serious charges against the Advisor to

the Finance Minister and Mr. Sinha of acting on behalf of the corrupt

companies. The letter is a telling expose on extraneous forces influencing

the functioning regulator of the capital market. In the letter the WTM

alleged that Mr Sinha tried to influence him on four cases and invoked the

name of Advisor while doing so. One of the cases related to securities fraud

of Reliance group, and others related to Tayals of Bank of Rajasthan,

Sahara and MCX.

Because shortly after the appointment of Mr Sinha as Chairman of SEBI,

all out efforts were made by the Finance Ministry to appoint the brother of

the Advisor as the CMD of UTIAMC, and the post remained vacant for

sixteen months as he could not be appointed. His appointment was objected

to by a foreign shareholder who had bought a 26% stake because he was not

suited for the post. The post continued to remain vacant till such time it

became clear that the Advisor will not be continuing in the post and it was

only then that the post was advertised and according to the advertisement

the brother of the Advisor did not meet even one of the five the criterion

for selection. Thus, the manner in which the post of the CMD UTI AMC

where Shri Sinha was last working and getting Rs. 4 crores per annum as

emoluments was kept vacant for 16 months to appoint the brother of the

Advisor of the Finance Minister, though ultimately could not be done, also

shows arbitrariness and malafide.

Because the deputation to UTI AMC had been approved earlier under

section 6(1) of the IAS Cadre Rules. Extension too was sought under

section 6 (1) by the Finance Ministry and was approved for part of the

period by the ACC through the DOPT. UTI AMC was held to be a Central

PSUs by all the authorities in the Finance Ministry, Ministry of Personnel

and the Cabinet Secretariat and the Department of Public Enterprise. The

employment under UTI AMC could not become a commercial employment

as defined under the Rules. The deputation to UTIAMC could not be a 6(1)

deputation as well as a commercial employment at the same time. Further,

the DOPT also apparently ignored the fact that the declaration given by

Shri Sinha under Rule 26 (3) (ii) of AIS Death cum Retirement Benefit

Rules that in the last three years of his official career he has not been privy

to sensitive or strategic information of UTI AMC could not be true as he

was already in deputation in the same organization at the time of taking

VRS.

Because the manner in which Mr Sinha increased his emoluments was

illegal for a PSU as no CMD or a person can receive the emolument that Mr

Sinha gave himself. The two crores that Mr Sinha took as emoluments on

16/5/2008 for the financial year 07-08 and Rs 44 lacs for three months in

the previous year for the period that he was under deputation was an act of

corruption and misuse of office. These excess emoluments needs to be

disgorged as the wrong doer cannot profit from his wrongs, nor can crores

be paid by wrong interpretation of law. The disgorgement is necessary in

order to set an example that public interest is paramount and cannot be

sacrificed for personal welfare of an individual officer.

PRAYERS

In the interest of justice and for the facts and circumstances stated herein

above it is most respectfully prayed that this Hon’ble Court may graciously

be pleased to:

issue a writ of quo warranto or any other direction against Respondent No.

4 (Shri U K Sinha) to remove him from the post of Chairman, SEBI;

issue a writ of mandamus or any other direction to initiate criminal

investigation into the entire selection process of Respondent No. 4 as the

Chairman, SEBI;

issue a writ of mandamus or any other direction to initiate criminal

investigation into the appointment of Respondent No. 4 as the CMD of UTI

AMC and to take consequent action thereupon; and

pass such other order or further orders as this Hon’ble Court may deem fit

in the facts and circumstances of the case;

Filed by

Drawn by:

(Prashant Bhushan)

Drawn on : Advocate for the Petitioner

Filed on : -08-2011

IN THE SUPREME COURT OF INDIA [CIVIL WRIT JURISDICTION]

WRIT PETITION (CIVIL) No. ___________of 2012

IN THE MATTER OF::


//Versus//


AFFIDAVIT

I, Arun Kumar Agarwal, S/o Late Sh. R. S. P. Agrawal, aged about 55 yrs,

r/o, T 8 Eagleton Golf Village, 30 km Bangalore, Mysore Highway, Bidadi,

Ramnagara 562109, Karnatka, do hereby solemnly state and affirm as

under:

That I am the Petitioner in the aforementioned writ petition and being

familiar with the facts and circumstances of the case am competent to

swear this Affidavit on its behalf.

That I have read and understood the contents of the abovementioned Writ

Petition from page no. ______to _______and Synopsis & List of dates

from pages B to _____ and application for interim from page no. _____

to _____and I state that the same are believed to be true and correct to

the best of my knowledge on the basis of information received by me and

believed to be true.

That the Annexures annexed to the Writ Petition are true copies of their

respective originals.

DEPONENT

VERIFICATION:

I, the above named Deponent, do hereby verify that the contents of

the above affidavit are true and correct to my knowledge, no part of it is

false and nothing material has been concealed therefrom.

Verified at ________________on this _______day of July 2012.

DEPONENT


[CIVIL WRIT JURISDICTION]WRIT PETITION (CIVIL) No. ___________of 2012

IN THE MATTER OF::


//Versus//


APPLICATION FOR INTERIM DIRECTION

To,

The Hon’ble the Chief Justice of India and His Companion Justices of the

Hon’ble Supreme Court of India.

The Humble petition of the petitioner above-named

MOST RESPECTFULLY SHOWETH:

That the present writ petition is being filed in public interest under Article

32 of the Constitution of India to challenge the appointment of Respondent

No. 4, Mr U K Sinha as Chairman of SEBI on the grounds of his not being

a person of integrity which was one of the eligibility conditions as laid

down in Sub-section 5 of Section 4 of the SEBI Act as well as in

government communication and also for fraud committed on the Search and

Selection Committee and the Appointment Committee of the Cabinet. The

fraud relates to concealing from the Committees the unheard emoluments of

over Rs four crores per annum which he wrongfully earned while working

for a PSU by declaring the post of the CMD, UTI AMC as commercial

appointment. The information relating to emoluments was mandatory

information and it had a material bearing on the selection to a post of high

integrity that Shri Sinha failed to fulfill.

Moreover, the facts regarding Shri Sinha’s illegal appointment as the

CMD of the UTI AMC (i.e. the post which he held before joining the

SEBI), after his extension to the deputation in UTI AMC was denied

by the ACC, by taking VRS from the govt. and immediately

thereafter joining the UTI AMC as a commercial appointment was

not placed before the Search-cum-Select Committee. The developments subsequent to the appointment of Shri Sinha as the Chairman SEBI show that it was done for extraneous consideration to benefit some of the big corporates like Reliance, Sahara against whom action after investigation was pending before the SEBI. The Petitioner is, therefore, also seeking an investigation into the entire process of the appointment of Shri Sinha as CMD, UTI AMC as well as Chairman, SEBI.

From the facts set out in the accompanying petition, it is clear that the Petitioner has an excellent case and has every hope of succeeding in the petition. It is submitted that irreparable injury would be done to the public interest, if Respondent No. 4 is allowed to continue to function as the Chairman of SEBI which is a statutory regulatory body of the Capital market particularly when there is serious doubt about his integrity which is one of the eligibility criteria for the said post. Moreover, his appointment

is in total breach of rule and hence, illegal. Even otherwise, public interest would be first casualty if person like Respondent No.4 whose integrity is questionable is permitted to cling on to such an important post.

Further, it is essential that an immediate enquiry is ordered into the entire

selection process of Respondent No. 4 as the Chairman, SEBI as it was done

by misusing official position for extraneous considerations and also to

initiate criminal investigation into the appointment of Respondent No. 4 as

the CMD of UTI TMC and to take consequent action.

In view of the abovementioned facts it is respectfully submitted that this

Hon’ble Court may be pleased to pass the following orders during the

pendency of the accompanying writ petition:

PRAYERS

restrain Respondent No. 4 from functioning as the Chairman of the SEBI;

direct an immediate enquiry into entire selection process of Respondent No.

4 as the Chairman, SEBI;

direct the criminal investigation into the appointment of Respondent No. 4

as the CMD of UTI TMC; and

pass any other or further orders, as this Hon’ble Court may deem fit and

proper.

Petitioner

(Prashant Bhushan)Through: Counsel for the Petitioner

New DelhiDated:

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