Corporate Aug 8, 2012
A day before the presidential election, Prime Minister Manmohan Singh managed to deliver a private snub to Pranab Mukherjee.
On 18 July, once Mukherjee had no chance of returning to the finance ministry, the PMO rejected his request to take action against former Sebi Director KM Abraham.
Abraham had, in a confidential complaint to the PM on 1 June 2011, alleged that Sebi chairman UK Sinha had told him he was under pressure from the finance minister and his advisor, Omita Paul, to "manage" certain corporate cases. Among them were cases involving Reliance, the Sahara Group, the Tayals of Bank of Rajasthan and MCX.
But when the PM passed on these complaints to Mukherjee, a stung finance minister demanded action against Abraham on three grounds. According to The Indian Express, these three grounds were: writing directly to the PM and allegedly making unsubstantiated allegations against a senior Cabinet Minister and some senior officers; contracting the media with his grievances; and acquiring a flat in Mumbai without the government's knowledge.
The ministry's letter to the PM, sent this March, claimed that Abraham had "committed serious misconduct and exhibited conduct unbecoming of a member of the service".
That the PM just sat on Mukherjee's complaint for more than four months shows what he really thought about his former senior colleague and finance minister. That he completely rejected Mukherjee's complaint finally confirms his lack of faith in him.
According to the Express, the PM rejected all three charges, which, if upheld, would have resulted in the dismissal of Abraham from service. In his 18 July reply, Singh said the charge of writing directly to the PM is hardly a serious one. As head of a quasi-judicial authority like Sebi his misdemeanor should be considered minor.
The PM dismissed the second charge - that Abraham contacted the press - as having no concrete evidence backing it. As for the third charge, that he acquired a flat in Mumbai without telling the government, the PM saw no merit in it since Abraham had apparently reported the transaction in his immoveable property return.
The questions that need asking are these:
Why did the PM not take a decision when Mukherjee was finance minister?
Why take a decision even now, now that the complaint does not matter?
The answers lie in the PM-FM equation. It is clear that as FM, Mukherjee did not see Manmohan Singh as his real boss (Reason: Mukherjee was minister when Manmohan Singh was still a bureaucrat in the 1980s). He did not listen to Manmohan Singh on the Vodafone tax, for example. The PM could not have asked Sonia Gandhi to take a call on Mukherjee since the latter was very useful to the party as a trouble shooter.
Secondly, Abraham and the previous Sebi boss, CB Bhave, were P Chidambaram's appointments - and both had done much to clean up Sebi and deliver great judgments against corporate wrongdoing. Abraham is the author of a path-breaking judgment on the Sahara OFCD issue, where two companies were found guilty of planning to raise nearly Rs 40,000 crore by bypassing Sebi. He is also author of the consent order against Anil Ambani and three of his group executives that cost them Rs 50 crore in an unfair trade practices case.
Under Mukherjee, both Bhave and Abraham were denied extensions that they were entitled to. With Chidambaram back, Manmohan presumably understands that his final action and snub to Mukherjee will not face opposition.
In his letter to the PM last year, Abraham emphasised that "the regulatory institution is under duress and under severe attack from powerful corporate interests, operating concertedly to undermine Sebi."
Says Abraham: "The admission of the chairman in his own words about the need to 'manage' some of the cases now live in Sebi about the interest that the Union finance minister has in some of them, the admission that Smt Omita Paul is behind what is happening, the difficulty that he (Sinha) is experiencing in interacting with key ministry officials - suggest to me that Shri Sinha is being pressured to intervene in several cases that are currently being dealt with in Sebi." (Read: the O factor)
He concluded: "What I see happening now is a calculated assault on the regulatory framework in Sebi. A message is now spreading that cases against the influential and the powerful might put officers in Sebi to undue risk and scrutiny...This will, in no time, incapacitate the investigative machinery in Sebi. Needless to say, it does not bode well for the safety and integrity of the markets and for investors."
The finance ministry under Mukherjee reacted sharply to this attack. Apart from dismissing Abraham's allegations as a "complete distortion of facts which are defamatory and devoid of truth", it claimed that there were several complaints against Abraham, ranging "from abuse of power to corruption and purchase of a flat at a concessional rate from an entity that had benefited from the sale of office space to NSE which is regulated by Sebi and of which Abraham was a whole-time member with the jurisdiction to decide on many issues of critical importance to NSE."
The PM's final response essentially debunks these allegations. Abraham stands vindicated. Though belatedly.
More From R Jagannathan.