ARUN KUMAR AGARWAL Vs. UNION OF INDIA

JUDGEMENT

(1.) The controversy involved in this petition is in a narrow compass. The petitioner has challenged the appointment of D.R. Methra, respondent No. 2 as Chairman of the Securities and Exchange Board of India (for short SEBI) vide notification issued by the Government of India and published in the official gazette on 17th February, 1995. Respondent No. 2 assumed office with effect from 21st February 1995. SEBI was constituted vide an Act of Parliament, namely, Securities and Exchange Board of India Act, 1992. As per, its preamble the Act was meant to provide for establishment of a Board to promote interest of investors in securities and to promote the development of and to regulate the security market and for matters connected therewith Chapter II of the Act deals with establishment of the Board. The Board is to consist of a Chairman and Members. According to Section 4(4) the Central Government has the power to appoint Chairman and the Members. It is in exercise of this power that respondent No. 2 was appointed by the Central Government as Chairman of the Board for a term of five years.

(2.) The challenge to appointment of respondent No. 2 is mainly on two grounds. The first objection is based on Rule 3, sub-rule (2) of the Securities and Exchange Board of India (Terms and Conditions of Service of Chairman and Members) Rules, 1992 (hereinafter referred to as the Rules). According to this sub-rule the Chairman and every while time Member holds office for such period, not exceeding three years as may be specified in the order of appointment. The person concerned is however, eligible for re-appointment. The sub-rule further provides that the Chairman will not hold office after he attains the age of 65 years. For Members the outer age limit is 62 years. Respondent No. 2 was appointed for a term of five years. According to the petitioner this was clearly violative of the aforesaid rule, according to which the term cannot exceed three years. The other point raised by the petitioner is that though the rules contained a relaxation provision under which the Central Govt. is empowered to relax the provisions of any of the rules, there is nothing to show that this power was exercised in the case of respondent No. 2 and, therefore, the respondents cannot fall back upon the relaxation provision to justify the appointment of respondent No. 2 for a period of five years. Related issues raised in this connection are that there could not be a deemed relaxation nor there could be relaxation in favour of an individual, i.e. respondent No. 2 because the relaxation rule refers to relaxation in respect of class or category of persons. At this stage it will be appropriate to reproduce the relevant rules.

(3.) At the outset we would like to note that though in the writ petition the petitioner has made allegations against respondent No. 2 regarding the manner of his functioning as Chairman of the Board, no arguments were addressed on this aspect and we have not gone into this aspect.