Business Today

Shadow boxing

Rajiv Bhuva        Print Edition: Dec 11, 2011

That's a closed chapter. The finance minister and the home minister have already spoken on that matter and that should be the end of that subject," said Prime Minister Manmohan Singh on October 19, summoning a most sombre expression from his past life as a professor at the Delhi School of Economics. The trouble is that he was not talking about two of his errant students. And the men in question here, the aforementioned ministers, Pranab Mukherjee and P. Chidambaram, have carried their public feud, which broke out over the issue of 2G spectrum allocation, into a new realm.

A public interest litigation, or PIL, filed in the Supreme Court in November alleging interference by the finance ministry in the functioning of the Securities Exchange Board of India, or SEBI, and the rebuttal of those charges by the ministry signalled the beginning of a fresh round of sparring between the current and former finance minister.

The PIL, filed by former Chief of Air Staff S. Krishnaswamy, former police officer Julio Ribeiro, and former Central Bureau of Investigation Joint Director B.R. Lall, challenged the appointment of SEBI Chairman U.K. Sinha, alleging that the finance minister had managed to get Sinha and two whole-time members of SEBI appointed by placing two of his own men in the searchcum-selection committee. "It is now possible for people with no expertise in the area to be handpicked at the whims and fancies of those empowered to do so," the petitioners said, adding that the ministry had denied extension to former SEBI chief C.B. Bhave even though he had agreed to have his term extended by two years.

To bolster their case, the petitioners cited a letter written by former SEBI member K.M. Abraham to the prime minister in June, in which Abraham had accused Omita Paul, advisor to the finance minister, of trying to influence some corporate cases before the market regulator.

The ministry refuted these allegations in an affidavit filed in the apex court. "The petitioners are looking for an indirect way to get extension for the former chairman and two whole-time members who relinquished theirs offices in SEBI in 2011," it countered.

The two whole-time members were Abraham and M.S. Sahoo. It pointed out that then finance minister P. Chidambaram had appointed Bhave as chairman ignoring the recommendation of a selection committee that had been set up with his approval in 2007. The panel had unanimously recommended Sinha, one of the two shortlisted candidates, for the job. The affidavit said that a "statutory system" was established for key appointments to SEBI only after Mukherjee took over as finance minister in 2009.

The ministry further clarified that Bhave was denied extension because of a complaint filed against him by Mohan Gopal, a member of a SEBI-appointed panel that probed the role of the National Securities Depositary Limited, or NSDL, in the IPO scam, in which individuals used multiple dematerialsation, or demat, accounts in NSDL to benefit from the initial public offer of shares by companies. The scam had originated when Bhave was NSDL chairman. It said Gopal had accused SEBI of "ring-fencing" Bhave even though there was ample evidence of his complicity in the case.

The person immediately hurt by this political shadow boxing is Bhave. "I am being maligned in a proceeding to which I am not a party…The NSDL issue referred to in the affidavit was decided by the SEBI board at the end of 2009 or the beginning of 2010. The affidavit clearly mentions that I did not participate in the proceedings.

What is not mentioned is that the government nominees were party to the decision to declare those orders as non-est," the former SEBI chief was reported by a media outlet as saying. When contacted by Business Today, he expressed ignorance about the shadow boxing, though. "I have no idea about the PIL. Since my name came up in the affidavit I had to be heard somewhere… I don't follow these things after retirement. I am relaxing now."

The controversy is still far from retiring, though. We may have witnessed just the first two rounds of a fresh bout, and many more may be in store as the petitioners and the ministry come face to face in the Supreme Court.

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