The SEBI Board has decided that member and Infosys Director, Mohandas Pai will decide on whether or not to implement the order passed by a two member committee of V. Leeladhar and Mohan Gopal. Former Chief Justice of India, Justice Verma, has in his letter to the media, condemned the action of SEBI in declaring the two orders as 'non est'.
The SEBI Board has decided that member and Infosys Director, Mohandas Pai will decide on whether or not to implement the order passed by a two member committee of V. Leeladhar and Mohan Gopal, on December 22 (the 'Order').
Pai has an outstanding record as the Chief Financial Officer and member of the Infosys Board, he has been responsible in taking the company to great heights. A graduate of law, he was a member of the Kelkar Committee, constituted by the Ministry of Finance, for reforming direct taxes, the Non-Resident Taxation Committee, the High Powered Committee on e-Commerce and Taxation. He is currently a member of the SEBI Accounting Standards Sub-committee and the Empowered Committee for setting up the Tax Information Network.
Despite his impeccable record, two issues crop up about him deciding on the legality of the quasi judicial orders. Firstly, however clean or complaint Infosys is, it is still governed and regulated by SEBI and the Board of Directors of Infosys are liable to SEBI. Consequently, Pai may be conflicted, especially when the two member committee has been critical about NSDL's role and the role of the then Chairman of NSDL and incumbent Chairman of SEBI, C.B. Bhave. Secondly, Pai's qualification to decide the implementation of the Order is unclear.
The entire matter is not bereft of controversy. Law stipulates an appeal to the Securities Appellate Tribunal in the event of disagreement with an order. It must be pointed out that there is no statutory basis to review the validity of a quasi judicial order. Despite a lack of statutory approval, SEBI's decision to review puts their credibility under doubt.
C. Achuthan, who opined declaring the Order as 'non est', is also on the board of the National Stock Exchange (NSE), promoter and is a significant shareholder of NSDL. When Achutan opined on the issue, there were no disclosures that he is on the Board of NSE. Without questioning the credibility of C. Achutan, ideally SEBI ought to have approached the Attorney General or the Solicitor General on such an important issue.
Former Chief Justice of India, Justice Verma, has in his letter to the media, condemned the action of SEBI in declaring the two orders as 'non est'. In his letter to the media, Justice Verma says, "the recent decision of the SEBI Board to review and declare as "non-est" two quasi judicial orders of SEBI violates established legal and Constitutional principles. These quasi judicial orders may be reviewed only by a judicial forum with requisite jurisdiction, at the instance of a petitioner with standing to seek relief. The decision to declare these quasi judicial orders as void' is meaningless in any absolute sense. Its meaning is relative, depending upon the courts' willingness to grant relief in any particular situation. Even if a decision is 'void' or a 'nullity', it remains in being unless and until some steps are taken before courts to have it declared void".
Petitions questioning SEBI's actions filed by V. Narayana Reddy and Srinivas Podichety are currently pending before the High Court at Hyderabad. Under pressure, the SEBI had released to the public the Order passed by the Committee, but also rejected the same on frivolous grounds.
Recently, several members of the higher judiciary have, in matters of probable conflict, recused themselves from hearing the concerned matter. Be it Justice Raveendran in the Reliance matter, Justice Katju, because his wife held Reliance shares or Justice Mudgal, for inheriting shares.
While Pai may be of impeccable reputation, and may be incapable of compromise, he is also responsible for the operations of Infosys. The adage 'Justice must not only be done, it must also be seen to be done', holds good. While SEBI is out to circumvent the Order of the committee in a convoluted manner, even surprising is the brash and arrogant manner in which they are setting about doing it.