Advocate seeks to be impleaded in the SEBI appointment case  

November 15, 2011

Mumbai based advocate had filed a petition requesting the SC to include him in the SEBI chairman’s appointment case as he wants to highlight the regulator’s alleged failure in addressing insider trading matters

Moneylife Digital Team

In an interesting twist to the writ filed by S Krishnaswamy (former Chief of the Indian Air Force) and other eminent citizens, a Mumbai based advocate has filed an intervention petition seeking to implead himself in the case (writ no 392 of 2011). The writ alleges that the finance ministry has changed the composition of the search-cum-selection committee for appointment of the chairman and whole time members of the Securities & Exchange Board of India (SEBI) in order to be able to influence the selection process. The writ also questions a decision to drop a proposal to extend the term of ex-Chairman CB Bhave and the two members from three years to five years.

Interestingly, Advocate Debashish Nath, who practices in the Mumbai High Court wants to intervene, allegedly to highlight how SEBI does not act against ‘insider trading’ by certain corporate houses – specifically, India’s biggest private sector company Reliance Industries Ltd (RIL). SEBI has been conducting an investigation into the alleged insider trading by Reliance Industries and from time to time there have been media reports suggesting that the company may file consent proceedings and end up paying the biggest ever payment under SEBI’s settlement terms.
 
The advocate has attached correspondence under the Right to Information (RTI) Act that he had filed to seek information on insider trading. He says that SEBI had rejected his request for information and also dismissed an appeal filed against the decision.
 
The impleadment application goes back to the year 2000 when S Gurumurthy, had complained to SEBI about insider trading and a preferential issue by Reliance (prior to the division of assets between the Ambani brothers). The application then fast-forwards to 2011 and the letters written by Dr KM Abraham alleging that the incumbent SEBI chief UK Sinha was under pressure from the finance minister to go easy on investigation into specific corporate houses.

Adv Nath refers to a news report in The Economic Times dated 16 October 2010 which reported that Reliance made a profit of Rs500 crore through the sale of 18.04 crore Reliance Petroleum shares in November 2007. He goes on to point out that, the SEBI act provides for criminal prosecution and a fine of Rs25 crore going up to three times the illegal profit earned from insider trades.

He then cites the insider trading action against Raj Rajarathnam who was tried and sentence to a prison term and fine for insider trading. Adv Nath’s claim for impleading himself in the writ petition is the allegation that the present SEBI chairman UK Sinha is protecting corporate houses, by not discharging his duties and is protecting “corporate houses” who indulged in insider trading.

It remains to be seen if the Supreme Court is willing to entertain this intervention petition and allow Nath to be party to the case. Nath was not immediately available for comments.