Sebi 'flouts' CVC guidelines in appointment for key post

A major controversy has arisen in the capital markets watchdog Securities and Exchange Board of India (Sebi) over the appointment process for the key post of chief vigilance officer (CVO) and executive director (ED) investigation.

RK Padmanabhan, who is both the CVO and ED investigation has been approved for the post again despite three complaints lodged against him with the Central Vigilance Commission (CVC). Padmanabhan is an IPS officer on deputation at Sebi, and his three-year term will end in September. Eyebrows are also being raised as CVC guidelines clearly state that officials in sensitive posts should be rotated every two or three years in order to avoid the development of vested interests and scope for corruption.

Mail Today has accessed an official reply of the CVC which states that "three complaints were received against Sri RK Padmanabhan during the period April 1, 2011, to April 1, 2014." A vigilance complaint was lodged against Padmanabhan in dealing with a case pertaining to purchase of shares in the erstwhile Bank of Rajasthan just before it was amalgamated with ICICI Bank.

The complaint alleges that the case was deliberately weakened and the accused allowed to get away with a much lower penalty than what should have been levied to "disgorge the ill-gotten gains."

Sebi chairman UK Sinha neither responded to repeated requests from Mail Today nor replied to an email sent to him last Friday. Subsequently, another two emails were sent to him this week with several telephonic reminders. Sinha's office kept referring Mail Today to another Sebi official Hariharan, who was also sent copies of the emails. Hariharan neither responded to the e-mails nor did he come on the phone. Padmnabhan was not available for comments with his office saying he is on leave till Monday.

A senior finance ministry official told Mail Today that the issue of CVC guidelines had been flagged by North Block and Sinha was intimated.

"Mr. Sinha has got directly in touch with the Central Vigilance Commission for advice in the matter," the official said. Since Sebi is an autonomous organisation, it handles its appointments on its own, the official added.

The CVC has issued standing instructions for rotational transfer of officials in sensitive posts in government organisations and public sector banks and CVOs are expected to identify these sensitive posts and organisations. The CVC has pointed out in its circular that such transfers are not being effected in many organisations.

The Sebi controversy also comes at a time when its four senior officials have been booked by the Central Bureau of Investigation (CBI) under the Prevention of Corruption Act in the MCX-SX case involving Financial Technologies (India) Limited Jignesh Shah.

The CBI has given clean chit to former Sebi chairman CB Bhave in the case, which relates to grant of sanction to MCX-SX to function as a full-fledged private stock exchange.