Refusing to quash the petition, the three-member Supreme Court bench questioned if there was any public interest involved in the issue
The Supreme Court of India has refused to quash the candidature of justice Dalveer Bhandari, the third senior-most judge of the apex court, to the International Court of Justice (ICJ). A petition was filed stating that the nomination of a sitting judge has compromised the independence of the judiciary.
PTI reported that bench of justices Altamas Kabir, J Chelameswar and Ranjan Gogoi initially wanted to outrightly dismiss the plea for quashing justice Bhandari’s nomination for ICJ, but later allowed counsel Prashant Bhushan, for the petitioner, to withdraw it, treating it as “dismissed as withdrawn”.
The bench also questioned the petitioner’s locus standi and wondered if there was any public interest involved in the issue. “What is the interest of public? He (petitioner) is not a contender so what is the public interest involved here,” the bench asked.
Adv Bhushan, however, persisted with his argument and cited the nine-judge constitution bench ruling in the Advocate-on- Record Association case, wherein it was ruled that appointment to the judiciary shall not be influenced by any executive interference. He also contented that in case Justice Bhandari fails to get elevated to the ICJ, he will have to come back and join as a judge which would impinge upon his judicial independence.
According to PTI, the bench was not impressed with the argument and said the international posts have different set of rules and it would have been more appropriate if the petitioner had questioned the legalities of the rules framed by the Government of India in nominating a person to the post. “You should have questioned the vires of the rules in choosing a person. This is purely a question connected with international and not municipal laws,” the bench remarked.
Attorney General GE Vahanvati, in his brief intervention, sought dismissal of the petition on the ground that it was frivolous and deliberately filed a day before the nomination and argued that justice Bhandari’s nomination to the ICJ was a matter of prestige to the entire country.
According to news reports, petitioner, Rahul Srivastava, a law student, in his petition had stated that, “As a matter of principle, selection of a sitting judge of the highest court of the land by the government creates a grave situation of conflict of interest and compromises the independence of the judiciary. The independence of the judiciary is part of basic structure of the Constitution of India. Selection to post like that of a judge of the ICJ, by its very nature, involves heavy lobbying on part of the government,” the petition said. “Many of the important cases dealt by a judge of this court involve the Union of India as either the petitioner/appellant or as a respondent.”
The petitioner also stated that the government in its reply to a RTI (Right to Information) query has refused to divulge any information about the selection process of justice Bhandari as nominee for ICJ.
Delhi-based RTI activist, Subhash Agrawal, had filed an RTI application with ministry of external affairs (MEA) seeking information on the rules and procedures to elect nominee made by India to the post of ICJ.
The MEA, in its reply, revealed that, “The Government of India does not recommend candidates for nomination to the ICJ. However, Government of India is at liberty to forward names of potential candidates for the consideration of Indian National groups in Permanent Court of Arbitration. However, Government of India is at liberty to forward names of potential candidates for the consideration of the Indian National Group in the Permanent Court of Arbitration.”
In another query raised by Mr Agrawal asking whether the PMO’s approval has been sought in the selection process, the ministry said that, “As the elections to the vacancy in the ICJ have only been announced in the United Nations on 19th January, and the elections would be held on 27th April, the procedure for canvassing support for the Indian candidate to the election is presently going on. Canvassing for support for the elections involves sensitive dealings with the governments of foreign countries. Our lobbying efforts and electoral strategy is essentially a confidential process.
Consequently, the process of decision making of the Government of India, if revealed even before the elections are held, might seriously compromise our ability to lobby strongly and effectively for the choice of Indian National Group.”
The selection of ICJ Judge will be held, tomorrow—27 April 2012.
The bench also pointed out that the issue of nomination was in public domain since December 2011 but the petitioner chose to approach the court only at the last hour.
Close above the previous day’s high may result in a rally
The expiry day induced volatility saw the market fluctuating in and out of the green for a major part of the trading session. While selling pressure in post-noon trade pushed the market lower, a minor recovery in late trade helped the indices pare their losses. Yesterday we had mentioned that the Nifty may see a reversal if the index closes above its previous day’s high, we continue to maintain that trend. The National Stock Exchange (NSE) saw a huge volume of 72.52 crore shares.
The market opened with a marginal uptick on upbeat global cues. US stocks closed higher on positive earnings report from Apple and assurances from the Federal Reserve that it would take necessary steps, as and when necessary, to boost the economy. The optimism supported gains in Asia in morning trade today. The Nifty opened 13 points higher at 5,215 and the Sensex rose 40 points to resume trade at 17,191.
The opening figure of the Nifty was its intraday high while the Sensex’s high was at 17,193, seen in initial trade. Volatility associated with the expiry day was evident since the opening bell, keeping on both sides of the neutral line.
Strong selling pressure, as the European indices were mostly in the negative, pushed indices to their day’s lows at around 2.40 pm. At the lows, the Nifty fell to 5,179 and the Sensex went back to 17,084.
While the benchmarks recovered from the lows, they closed in the negative for the second day in a row. The Nifty settled 13 points down at 5,189 and the Sensex lost 21 points to end the session at 17,131.
The advance-decline ratio on the NSE was 627:1029.
The broader indices underperformed the Sensex today; the BSE Mid-cap index dropped by 0.31% and the BSE Small-cap index declined by 0.41%.
In the sectoral space, BSE IT (up 0.41%); BSE Fast Moving Consumer Goods (up 0.25%); BSE TECk (up 0.22%) and BSE Metal (up 0.05%) were the gainers. The main losers were BSE Power (down 1.46%); BSE Realty (down 0.89%); BSE Auto (down 0.84%); BSE PSU (down 0.57%) and BSE Bankex (down 0.43%).
The top gainers on the Sensex were Coal India (up 2.79%); Jindal Steel (up 2.04%); TCS (up 1.68%); Reliance Industries (up 1.24%) and ITC (up 1.02%). The laggards were led by GAIL India (down 3.62%); Hero MotoCorp (down 3.16%); Hindalco Industries (down 2.96%); Tata Power (down 2.74%) and Bajaj Auto (down 2.67%).
The Nifty was led by Kotak Mahindra Bank (up 3.16%); TCS (up 2.33%); ACC (up 1.87%); Coal India (up 1.76%) and ITC (up 1.55%). The key losers were Tata Power (down 3.73%); GAIL India (down 3.66%); Hero MotoCorp (down 3.10%); BPCL (down2.95%) and IDFC (down 2.76%).
Markets in Asia received a boost from the Fed assertion to take necessary steps to help the economy grow. The gains were also supported by better-than-expected earnings reports. Meanwhile, Jiang Jianqing, chairman of China’s largest lender Industrial and Commercial Bank of China (ICBC) said that the monopoly of state-owned banks in the country needs to be dismantled in order to provide liquidity to private banks.
The Hang Seng advanced 0.79%; the Jakarta Composite gained 0.40%; the KLSE Composite added 0.02%; the Nikkei 225 rose 0.01%; the Straits Times was up 0.06% and the Seoul Composite rose 0.10%. On the other hand, the Shanghai Composite fell 0.09% and the Taiwan Weighted declined 0.55%. At the time of writing, the key European indices were in the red and the US stock futures were in the negative.
Back home, foreign institutional investors continued to be net sellers of equities on Wednesday, selling stocks totalling Rs340.84 crore. On the other hand, domestic institutional investors were net buyers of shares aggregating Rs40.70 crore.
Sesa Goa will begin exploration later this week at its Liberian iron ore project that is estimated to hold reserves of over 1 billion tonnes, a top company official said. Last year, the company had acquired 51% stake in Western Clusters, which is developing the project for about $90 million (Rs 411 crore). This was the first overseas acquisition of the Vedanta group miner. The stock declined 0.56% to Rs184.95 crore on the NSE.
Adhunik Metaliks plans to sell the entire stake in its subsidiary Neepz V Forge (India), the company said in a filing to the BSE. The subsidiary has forging and machining facilities at Aurangabad in Maharashtra to manufacture automotive products. It supplies to Tata Motors, Ashok Leyland, Mahindra & Mahindra, John Deere, Escorts, Dana Spicer among others. Adhunik settled at Rs44 on the NSE, up 1.15% over its previous close.
Kalpataru Power Transmission has formed a 50:50 joint venture with Gestamp Solar Steel SL of Spain to manufacture solar steel structures. The joint venture company, Gestamp Kalpataru Solar Steel Structures, is setting up a manufacturing and galvanizing plant with planned capacity of 50,000 MTs per annum for solar steel structures in Mehsana district, Gujarat. Kalpataru Power fell 3.28% to close at Rs98.85 on the NSE.
AMFI chief HN Sinor has admitted that SEBI and AMFI had made a costly error in banning entry load for mutual funds. Remember, fund companies had welcomed the ban, as had mainstream media
In a recent interview with Economic Times the Association of Mutual Funds of India (AMFI) chairman HN Sinor has admitted that Securities Exchange Board of India (SEBI) made serious a policy mistake of banning entry loads on mutual funds. He said, “One mistake SEBI made was to implement the entry load ban in a cut-and-dry manner.” Moneylife foresaw the mutual fund industry decline, especially with distribution largely getting affected. (Mutal Fund turmoil: Can SEBI be held accountable?).
Mr Sinor hopes there will be a ‘review’ for rolling back the entry load ban. This a volte face by the fund industry. In a conversation with Moneylife, several AMCs had welcomed the move made in August 2009. Mr Sinor now says, “In those days SEBI and AMFI felt the Indian enterprise was very smart and would find a way to come around it. But after two years, I realise, we’ve not been able to adjust our business model to the entry load ban. We need to dispassionately review the (entry load ban) decision once again. We have to expand this industry, and for doing that if we have to bite the bullet, we should bite the bullet.” So, at least the AMFI chief has admitted to what Moneylife has been pointing for so long. Will SEBI take heed, especially since its current chief, UK Sinha was against the ban when he was heading UTI Mutual Fund.
The resultant entry load ban has claimed many causalities, most notably the small distributors and even a reputed asset management company—Fidelity. With one single swipe in August 2009, without much discussion, SEBI changed the mutual fund industry, for the worse. Mr Sinor has admitted that Fidelity’s exit has posed a dilemma for the regulators. He said that the confidence level is very low in the industry. “After Fidelity’s decision to move out and the quick exit of four CEOs, even we’re a little worried. If officials desert the industry like this, we have a big problem at hand”, the AMFI chief openly admitted.
All this QED for us. Moneylife had written about the implications of SEBI’s actions on Fidelity, and what it means for the industry (Fidelity’s exit, a slap on SEBI’s face). We had also pointed out that with the ban on entry-load, small distributors have got squeezed out (Can relationship managers of banks replace independent financial advisors?), and because of this, banks have monopolised distribution of MF schemes. We had written recently in Moneylife magazine, citing recent data from Computer Age Management Services (CAMS) which showed that over the 11-month period (from April 2011-February 2012), banks have managed to corner 40% of SIP accounts and 30% of non-SIP accounts, when compared to Independent Financial Advisors (IFAs) who could manage only 8% of SIP accounts and 11% of non-SIP accounts. Mr Sinor pointed out that out of the 16,000 odd advisors, only 185 (independent distributors) are earning reasonable amount of money. He further says, “If you look at the commission pay-outs of distributors, there are just about 200 distributors who draw gross revenue of over Rs 1 crore. Of the 200, the top-20 are institutions and banks.” He even admits that mis-selling has happened because of the entry load ban. He adds, “This environment is pushing them (distributors) to do something which is not right.” Despite banks cornering the distribution market, mis-selling did not stop and they continued to indulge in questionable practices in mutual fund selling which Moneylife as been pointing out. (Banks receive NFO commission under the garb of ‘bank charges’) and (Now, banks blamed for continuous equity mutual fund outflows!).
According to Mr Sinor, “Distributors are not finding it worthwhile to sell mutual funds. Manufacturers are finding it difficult to expand or penetrate beyond 20 cities. It does not make a business case for manufacturers to go and sell the product in Timbuktu to collect just Rs 5-Rs10 lakh of investments.” The entry load ban has further accelerated the decline of equity culture and number of investors. In order to tackle this, our regulators and the government have come up with the half-baked Rajiv Gandhi Scheme, instead of tackling the root problem of the issue: distribution. We had written about the Rajiv Gandhi scheme here (Budget measures will leave small investors cold).
Without much empathy for the small distributor, the National Institute of Securities Markets (NISM), a certification provider which was set up by SEBI, has gone further and doubled the certification fees required by advisors to distribute mutual funds, thus increasing their costs of doing business. We had written about this here (Revised mutual funds requirements will hurt independent distributors, enrich NISM. SEBI is not really bothered about the small distributor, even after all these years.
Moneylife was the first to come up with a position paper addressing the issues facing investors in India, especially the decline in investor population. Position Paper on Issues faced by Retail Investors: an insight into declining participation of the retail investor
It may be remembered that the fund industry too was to blame for charging huge upfront costs to the unit holders including, foreign junkets, in order to sell funds. Instead of controlling these practices, SEBI has gone to the other extreme by banning upfront commissions and dozens of concomitant rules, which were hailed as pro-investor by the mainstream media, putting a halo around the head of CB Bhave when he retired. Will SEBI review the entry load ban now that Mr Sinor has spoken up, possibly with the tacit encouragement by the SEBI top brass? Or will it come up with another half-baked scheme as Mr UK Sinha did sometime last year?