The Appointments Committee of the Cabinet (ACC) approved Sarrafs name, who at present is the MD of ONGC's overseas arm, ONGC Videsh.
Sarraf replaces Vasudeva, who turned 60 on and is due to superannuate on Friday.
Sources in the oil ministry said the ACC, whose members include the Prime Minister, home minister and the minister of the concerned ministry, approved the appointment of Sarraf based on August 30 recommendation of the Government headhunter Public Enterprises Selection Board (PESB).
The appointment of Sarraf, 56, comes even as Moily was keen on getting Vasudeva one-year post-retirement extension on the plea that his appointment was delayed by eight months due to false complaints. Also, ONGC needed his presence to complete ongoing strategic initiatives.
The ministry, they said, had forwarded to ACC a proposal containing two sets of options give Vasudeva an extension or appoint Sarraf as the next chairman and MD of ONGC.
While Sarraf had all clearances, Vasudeva did not have approval of anti-corruption watchdog CVC which on February 10 had told the ministry that there were "a total number of six complaints/cases against Vasudeva which are pending in the ministry and are yet to be taken to their logical conclusion".
The ministry, which in the proposal to the ACC, stated that CVC approval for Vasudeva might be taken post-facto, in a statement said the extension of Vasudeva was recommended by Moily "purely on merit and in the interest of the organisation
Sarraf, 56, was director (finance) in ONGC before moving to ONGC Videsh (OVL) in September, 2011. He transformed OVL into an aggressive overseas firm, stitching 4 deals worth over $11 billion since taking charge of the company.
Vasudeva took over as chairman of ONGC on October 3, 2011."On advice of the department of personnel and training (DoPT) the proposal was submitted in the prescribed format for consideration of the ACC.
"DoPT also advised to obtain comments from the CVC and the matter was accordingly forwarded to CVC. Certain observations/ queries were raised by CVC regarding the pending complaints against Vasudeva.
On November 4, 2013, Moily wrote to Prime Minister Manmohan Singh seeking one-year post-retirement extension for Vasudeva. Sources said while the Prime Minister's Office (PMO) asked the oil ministry to submit a proper proposal, government headhunter PESB selected Sarraf to succeed Vasudeva on February 28. Sarraf, who was previously Director (Finance) in ONGC, got CVC clearance, but the same for Vasudeva could not be obtained.