Officials of the Central Board of Direct Taxes (CBDT) have confirmed that an inquiry was conducted about the Income-Tax (I-T) returns of whole-time members of the Securities and Exchange Board of India (Sebi) but downplayed it by calling it "routine scrutiny".
These raids on C.B. Bhave, the recently retired Sebi chairman, and his team follow a pattern and indicate a threat to the independence of financial sector regulators. This kind of brazen vindictiveness by a ministry concerning serving and retired regulators was rare in the past.
K.M. Abraham, a whole-time Sebi member wrote to the Prime Minister after the IT department inquiry about flats bought by him, alleging that he and another whole-time member M.S. Sahoo were harassed in the name of making inquiries.
This complaint against the way the finance ministry attempts to throw its weight around comes in the backdrop of T Rowe Price, the largest shareholder of UTI Mutual Funds, alleging that the ministry was backing IAS officer Jitesh Khosla, who is the younger brother of Union finance minister Pranab Mukherjee's advisor Omita Paul.
There were reports that the ministry was not happy with Sebi as the market regulator led by Bhave was not budging on several corporate issues, including the granting of equity licence to MCX-SX and manipulation of shares of the erstwhile Reliance Petrochemicals Ltd (since merged with Reliance Industries Ltd).
Mail Today was the first to publish a report in the last week of March on the drastic changes in the higher echelons of Sebi that were likely to lead to a change of perception of the regulator on several critical issues. Between December 2010 and July 2011, there would be four fresh faces on the board of the market regulator. The other critical issues on which Sebi was not allowed to arrive at a decision before Bhave's retirement include the Bimal Jalan Committee recommendations on market infrastructure institutions (MIIs) and the makeover of the Takeover Code based on the Achutan committee recommendations.