Complaint against Mrs Omita Paul

Date: 30/5/2011

The Honorable Prime Minister of India,
Government of India,
South Block,
New Delhi

Complaint against Mrs Omita Paul, Advisor to the Finance Minister with the rank of Secretary.

Dear Hon’ble  Prime Minister,

Mrs Omita Paul’s proximity to the present Finance Minister is too well known to the members of the Appointment  Committee of the Cabinet, as she has been appointed in the rank of Secretary as Advisor to the Finance Minister, Defence Minister and Foreign Minister at various times in the government coinciding with the tenure of Shri Pranab Mukerjee in the three ministries mentioned above.

She was also appointed as Information Commissioner in the CIC on 9/5/10 after the model code came into being under which these appointments were to be kept in abeyance.

Though the then Chief Election Commissioner Naveen Chawla, whose appointment to the post had been disputed by the Opposition for his proximity to the Congress, subsequently gave a clean chit to the appointment, a retired High Court Judge Justice Quereshi in his legal opinion on the subject matter thought otherwise.

That she was appointed without there being a panel of other candidate being made available for the post, that the three existing vacancies had not been filled up earlier, and that  she was the only person appointed led to the reasonable conclusion that she was accommodated in a fixed tenure post for five years in case the UPA lost the elections.

The concern shown for Mrs Paul in appointing her to the post of  Information Commissioner as an insurance against UPA losing the election was indeed touching. That the then leader of the opposition Shri Advani could find time to meet barely one week before the election day with other members of the appointment authority (which includes the Prime Minister) to clear the appointment unanimously shows the importance attached to the appointment of Mrs Omitta Paul.

The  suspicion that the appointment of Mrs Paul to the post of Information Commissioner was an insurance against the electoral defeat of the UPA was confirmed when the UPA came back to power and she was reappointed as advisor to the Finance Minister  on 26/6/09 on the very day that she resigned as Information Commissioner.

Such prompt resignation and appointment being made by the Appointment Committee of the Cabinet is truly unprecedented in the history of such appointments.

What is worse is that her resignation was not accepted and the note relating to recommending her resignation did the rounds of various ministries till November when it was agreed by the powers that be that the resignation came into effect on the date it was submitted and need not be accepted.

However, the fact was not known at the time of her appointment as Advisor to the Finance Ministry and the same yardstick was not applied to the reported resignation of the then Chief Information  Commissioner who went on to complete his term.

If the appointment of Mrs Paul as Information Commissioner, her subsequent resignation and her reappointment as Adviser with the rank of Secretary on the very day of her resigning as Information Commissioner tells its own tale then the manner in which a exemption in the Income Tax Act was given to benefit her husband (and 13 to 15 other persons incidentally)  was not only unprecedented but a blatant act of nepotism.

In the budget that followed her appointment as Adviser the following exemption was granted to members of the UPSC. Under section 10 (45) of the Income Tax  Act.

(45) any allowance or perquisite, as may be notified by the Central Government in the Official Gazette in this behalf, paid to the Chairman or a retired Chairman or any other member or retired member of the Union Public Service Commission;

The exemption was granted in 2011 for the financial year 2007-2008.

Mr KK Paul, the husband of Mrs Omita Paul was appointed a member of the UPSC on 26/7/2007 and would be eligible for the exemption for the entire period of his tenure which he would not have been, had the exemption not been made with retrospective effect. In that case he would have availed the exemption for only three months.

The same exemption was not granted to the members of the Election Commission or the Information Commission.

It is being alleged  that Mrs Paul misused her office to influence the grant to her husband this largesse. If in the process,  fifteen other individuals (members of UPSC) benefited, it was because the budget could not grant benefit to only the husband of Mrs Paul. The concession being made retrospective is a complete giveaway so that the  entire period of tenure of Mr Paul could be covered. It was definitely a new low in the falling standards of public morality and corruption.

The consequence of similar acts of nepotism would have been disastrous in any other mature democracy with either the adviser or the Minister (or both) made to resign.

As this act of nepotism was neither noticed nor acted upon by the government, it emboldened the concerned officer in another act of nepotism, this time to promote the interest of her brother. This time at stake was the chairmanship of UTI asset management company, managing Rs 67,000 crores of public fund.

According to Financial Express dated 9/4/11: While Khosla was rejected after interviews by the search committee on the grounds that other candidates had solid experience in the financial services business, the ministry has repeatedly pushed his candidature. Khosla is the brother of Omita Paul, adviser to finance minister Pranab Mukherjee. Incidentally, Paul has worked with Mukherjee not only in the finance ministry but also in his earlier stints at the defence and external affairs ministries.

The government is intent on appointing Mrs Paul’s brother despite objections from the foreign shareholder having a 26 per cent stake in UTI AMC and the recommendation of the search committee.

What is of concern is not the fact that the Advisor, Mrs Paul, is indulging in nepotism as the potential of damage to the nation is limited, but the fact that she is also interfering in the appointment and functioning of functioning of the regulator Securities and Exchange Board of India (SEBI). She has no background of finance and no experience and would never have made it to the level of Secretary in the Finance Ministry if there were any objective norms set for her appointment.

Her role has become that of an intermediary on behalf of the lobbyist who have crores at stake like the Saharas, MCX and Reliance against whom the regulator was taking action.

Her interference in the affairs of SEBI has been making news in the media for the wrong reasons. The fact is that what is appearing in media is only the tip of the iceberg.

Her role in the ouster of competent and honest persons has portends of a major disaster for the capital market and the economy of the country.

The country cannot afford the luxury of another major stock market scam or a downturn in the stock market due to loss of confidence by investors, both domestic and foreign, on regulatory issues due to the interference of Mrs Paul.

It appears that the decision makers have not learnt anything from the debacle of the wall street on account of lax regulators susceptible to corporate lobbying.

Details of press reports are as follows:

Mrs Paul interference in the appointment of SEBI chairman was reported in The Indian Express of 23/4/10, the headline is produced below and the article as Annexure A.

“After FM cleared Bhave extension, advisor stepped in to roll it back”

When stock market regulator C B Bhave stepped down as Securities and Exchange Board of India chairman on February 17 this year, it was seen as a routine event, the end of his three-year term. Behind the scenes, however, the chain of events was anything but routine.

Records available with The Indian Express reveal that more than a year before his term was to end, Bhave was cleared for another two years by Finance Minister Pranab Mukherjee. This, after Mukherkee asked for — and got a positive recommendation from then Finance Secretary Ashok Chawla — on his performance.

Sources said a section in the Finance Ministry had concerns regarding Bhave’s earlier stint with National Securities Depository Ltd (NSDL) and his very public spat with Multi-Commodity Exchange of India Ltd (MCX), an electronic exchange that offers trading services in commodities.

But after the Finance Ministry formally wrote to Bhave seeking his consent, Bhave sent a letter to Chawla saying he was willing to accept a two-year extension. Until the intervention of Omita Paul, Advisor to Finance Minister.

It was her note suggesting that no action was needed so early, records show, which was the tipping point: Mukherjee put on hold the process for eight months. The Finance Ministry called back the proposal on tenure extension sent to the Appointment Committee of the Cabinet in January 2010.….

When contacted, Paul said she would not like to comment.

Another article on Mrs Paul interference appearing in Times of India dated 25/4/11 written by P Vaidyanathan  is reproduced below.

Both Handled Sensitive Issues

This signals a dismantling of the team built during Bhaves tenure, said two persons with direct knowledge of the matter. Both Sinha and Bhave declined comment. Ajay Shah, professor at the National Institute of Public Finance and Policy and a former consultant to the finance ministry, said the performance of Sebi in the last couple of years was the best in its history. “It would be a tragedy if a top quality team like this is dispersed, “he said. Two other securities market professionals said the quality of fact-finding and orders issued by the regulator had improved considerably during the last couple of years.

In its edition dated August 23,2010, Economic Times had reported that Bhave was unlikely to see his term extended beyond three years. On February 17 this year, we revealed the behind-the scene manoeuvring  behind the decision, the crucial element of which was the decision by North Block, in early 2010,to withdraw a recommendation to give Bhave a five-year term. The decision on this was to have been taken by the cabinet committee on appointments, a group of senior ministers, including the prime minister. But in January 2010,the finance ministry called back the proposal. This ,according to media reports, was prompted by a note from Omita Paul, an advisor to the finance minister. In that note, Paul is reported to have suggested that there was no need to decide on Bhave’s tenure more than a year before it expired. Abraham, who is from the Indian Administrative Services, Is an MTech from IIT-Kanpur and a chartered financial analyst. He holds a PhD from the University of Michigan. He was earlier the finance secretary of Kerala. Sahoo,  who is   originally from the Indian Economic Services, quit when he was a director in the finance ministry to take up the assignment in Sebi. Abraham handled sensitive issues such as the investigation into the case relating to the alleged violation of portfolio investment rules by ADAG; the proposal of MCX-SX to offer a trading platform in equity and derivatives, and several other cases of insider trading. The allegations against ADAG were settled through a process known as consent order ,in which the entity being investigated pays a fee but does not admit or deny guilt. ADAG entities paid Rs 50 crore,a record amount, for the settlement. The MCX proposal to set up a new stock exchange has virtually been rejected by Sebi. Sahoo is currently hearing arguments relating to the charges of insider trading raised against RIL.Both Abraham and Sahoo declined to comment. The government has approved changes to the rules relating to the terms and conditions of appointment of the Sebi chairman and members,  including a five-year term, but is yet to notify these changes.

From acts of nepotism having marginal impact on the economy of the country, Mrs Paul has progressed into interfering in the affairs of capital market regulator for the benefit of companies with dubious background.

This will have a major impact on investment decision of the discerning investor and the economy of the country.

It is requested that her appointment as Advisor in three different ministries with the rank of Secretary (she would have remained as a joint secretary in her parent cadre), her appointment as Information Commissioner, her resignation as Information Commissioner and re-appointment on the same day, her acts of nepotism in favouring her brother for appointment to a key post and her husband with income tax exemption and interference in the affairs of SEBI be investigated.

It is also requested that Mrs Paul be restrained from interfering with the appointments and functioning of SEBI, formally or informally,  till it is established that she has not indulged in acts of nepotism or has not been influenced by cash rich powerful companies in interfering with the appointment to and functioning of SEBI.

With sincere regards

Arun Kumar Agrawal

PS:  The government has deliberately not given a clean chit to the co-Chairman of the Drafting Committee of the Jan Lokpal Bill.  One hopes that the Chairman of the Drafting Committee too is subjected to similar scrutiny on his role in the appointment of his advisor Mrs Omita Paul, exemption to Mr Paul in the budget and other acts of his Advisor.

(Arun Agrawal is the author of the book Reliance: The Real Natwar. The opinions expressed by the author and those providing comments are theirs alone, and do not reflect the opinions of Canary Trap or any employee thereof)