The relationship between the finance ministry and the market regulator is never cozy, but with the recent complaint made by former Sebi member KM Abraham against the finance ministry's growing influence over the market regulator, it has now reached an all-time low.
The finance ministry on Tuesday dismissed all allegations made by former whole-time Sebi member KM Abraham against Finance Minister Pranab Mukherjee and his advisor Omita Paul as 'defamatory,' contending that Abraham was making the allegations because he had been denied an extension of his term.
Abraham, who retired only last month after three years of service at Sebi, had alleged that his family was at a grave risk after his letter complaining against Mukherjee and his advisor Omita Paul were leaked.
The ministry, in a hard-hitting statement, not only rubbished these allegations as "complete distortion of facts which are defamatory and devoid of truth", but accused Abraham of attempting to continue as whole-time director for another two years.
The ministry has accused Abraham of several wrongdoings. "The complaints ranged 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 ministry said.
The ministry not only accused Abraham of purchasing a flat in a building where office space was rented to the NSE, but also alleged that he tried to interfere, influence and delay the Supreme Court order in trying to save NSDL from the IPO scam that led to a loss of Rs 115 crore.
Failing in his efforts to continue as Sebi member, the ministry alleged, he tried to secure a position at National Institute of Securities Markets (NISM) on the basis of a recommendation made by the former Sebi Chairman CB Bhave without submitting a panel of names as was required under the relevant rules.
Having failed in getting an extension, Abraham wrote to the prime minister "alleging interference by the Ministry of Finance in the affairs of Sebi in a host of cases through the present Chairman, Sebi," the ministry said.
Details of Abraham's letter to the Prime Minister, alleging the interest of the finance minister's officer on special duty Omita Paul in several high-profile cases being looked into by Sebi, were first published in The Economic Times in early August, along with a response from Sebi chairman UK Sinha dismissing Abraham's allegations for "having no substance" in them.
Late on Tuesday, Mint newspaper reported that Abraham had, in fact, written three letters to the Prime Minister, alleging increasing interference from the Finance Ministry in the stock market regulator's handling of cases. The second letter (dated 1 June), which explicitly made allegations against Finance Minister Pranab Mukherjee, was forwarded to the Finance Ministry, alerting the very ministry and people Abraham was complaining against.
In his third letter sent to the Prime Minister, dated 24 June, Abraham said that he was advised by TKA Nair, adviser to Prime Minister Manmohan Singh, to meet Paul.
In that letter, Abraham had this to say to the Prime Minister: "The frightening realisation that dawned on me from all this was that at the highest levels in government, there seemed to be an awareness of misuse of power by the office of the finance minister. But there was a clear unwillingness or reluctance to prevent it or take any remedial action. It was then I decided to address (the Prime Minister)... because I knew that I had nowhere else to go."
There have been reports that Abraham in his letter to the Prime Minister, expressed concern about security of his family members in the wake of his complaints having come into public domain.
The ministry noted that Sebi Chairman UK Sinha has rejected all the allegations made by Abraham as false and has has characterised the allegations as "a figment of imagination", "unfounded" and "motivated".
Sinha apparently wrote to the Finance Ministry on 8 July that Abraham was worried about the safety of his family members and exhibited a strong element of insecurity.
Sinha had also written that "Abraham was frustrated as he was not neither given extension as SEBI, Whole-Time Member, nor given the post of Director, NISM which he canvassed with the Chairman to the state of embarrassment."
There have been reports that Abraham has again written to the Prime Minister, expressing concern about security of his family members in the wake of his complaints having come into public domain.
While Abraham may have a case on that with regard to protecting his identity, the fact is as far as the finance ministry is concerned, it has said in this statement that it has not chosen to act against several complaints that have been made against Abraham in the past, notes CNBC TV 18's Siddharth Zarabi.
Watch video:KM Abraham's charges defamatory; devoid of truth: Fin Min
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Updated Date: Dec 20, 2014 04:15:55 IST