Finance Ministry dismisses allegations made by former whole-time member of SEBI as distortion of facts
Moneylife Digital Team 02 September 2011

As the tussle between KM Abraham and the Securities and Exchange Board of India gets more bizarre, the finance ministry has gone one step further, saying it has received serious complaints against the former member of SEBI of abuse of power and corruption

The Abraham-SEBI saga is getting more bizarre day by day. In a very unusual move, the finance ministry has issued a strongly-worded statement saying that recent allegations made by Dr KM Abraham, a former whole-time member (WTM) of the Securities and Exchange Board of India (SEBI), are defamatory, devoid of any truth and a complete distortion of the facts.

The ministry has said that it received complaints from several sources against Dr Abraham, ranging from abuse of power to corruption and the purchase of a flat at a concessional rate from an entity, which had benefitted from a deal on the sale of office space to the National Stock Exchange (NSE).

While the NSE is regulated by SEBI, Dr Abraham as WTM had jurisdiction to decide on many critical issues related to the exchange, the ministry said. NSE's purchase of land in Kohinoor City, at Kurla, in suburban Mumbai, is also an interesting story, that Moneylife had reported in August 2009. (Read, 'The Mystery of NSE's land acquisition at Kohinoor City'.)

In addition, the finance ministry said it received references on the alleged links between Dr Abraham, the NSE and the National Securities Depository Ltd (NSDL), on the matter of the role of SEBI in trying to protect NSDL in the initial public offers (IPO) scam, which led to a loss of Rs115 crore. (Read, 'Moneylife stand on SEBI-NSDL vindicated.) 

According to the statement, since January 2010 it has also been receiving letters on the conduct of Dr Abraham. The Central Vigilance Commission (CVC) and the Department of Personnel & Training (DOPT) also referred a complaint received from a member of parliament (MP) to the finance ministry.

"All this while Dr Abraham was making efforts to continue as a whole-time member for another two years. Failing in his efforts, he tried to become the head of the National Institute of Securities Markets (NISM) on the basis of a recommendation made by CB Bhave, the previous chairman of SEBI, without submitting a panel of names as was required under the relevant rules. The ministry in a fair and transparent process advertised the posts for the selection of WTMs. The last date for the receipt of applications was 18 April 2011."
"Thereafter, Dr Abraham sent the letter to the prime minister (PM) alleging interference by the Ministry of Finance in the affairs of SEBI, in a host of cases, through the present chairman, SEBI (UK Sinha). The allegations made against the Union finance minister (Pranab Mukherjee) or his advisor (Omita Paul) that they put pressure on Shri Sinha to manage any case whatsoever, or that the Regulator's integrity has been undermined are false, vexatious and defamatory," the statement from the ministry said.

Mr Sinha reacted with an equally hard-hitting letter (read, 'The stink coming from SEBI-1')  which Moneylife has reviewed. The letter exposes the murky goings-on in the past three years under CB Bhave, whose allies in the process were two key members of SEBI. Remember, that during that period, Mr Bhave had positioned himself as a champion of the small investor and a crusader against corporate malpractices. Moneylife alone has been reporting with persistence the real murky practices inside SEBI.

Dr Abraham's credibility, or the lack of it, has to be seen from his own utterances regarding Mr Sinha, the current SEBI chairman. After a conference on 4th May, Dr Abraham praised Mr Sinha. However, within a month he changed tack and wrote a letter to the PM accusing the income-tax department of harassing him over the purchase of an apartment in Mumbai (we will come to the details later).

Dr Abraham also accused finance ministry officials of interference in his work "with the knowledge of finance minister Pranab Mukherjee". And as it turned out, his sharpest and most specific allegations were reserved for UK Sinha, his new boss, for interfering in several high-profile cases!

According to the statement, the finance ministry has all along taken a dispassionate view in the complaints against Dr Abraham that have even been referred to it by MPs. It has refused to intervene in the cases where even Dr Abraham was alleged to have acted in a partisan manner and told the aggrieved parties that they should take recourse of the existing legal mechanisms to redress their grievances.

"The minister (Mr Muikherjee) has strictly respected the integrity and independence of SEBI. As the advisor of the finance minister has said, 'She did not know Mr Abraham and she had never spoken to him'. Equally, nobody from the ministry, much less the finance minister, has ever tried to in any way to interfere with any case pending with SEBI at any level," the finance ministry said.

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