The Supreme Court on Friday decided to hear a petition challenging the procedure adopted by the finance ministry for the appointment of the Sebi chief and whole-time members.

Attorney general GE Vahanvati told a bench headed by chief justice SH Kapadia that the Centre will file an affidavit within two weeks in response to the PIL filed by former Air Marshal S Krishnaswamy, former DG police (Punjab) Julio Ribeiro and former CBI joint director BR Lall. The trio had challenged the amendments to the Sebi (Terms and Conditions of Servce of Chairman and Members) Rules, 1992, that govern the appointment of members to the market regulator.

Vahanvati’s offer on behalf of the Centre came even before former solicitor general Gopal Subramanium started to argue the PIL.

The petition has challenged the composition of a search-cum-selection committee set up to choose the chairman and full-time members of the market regulator, especially the subsequent changes introduced to allow the finance minister to appoint his own nominees in the committee. Subramaniam said that it was a matter of great concern as the market regulator must not only be fair but also be independent of the government.

The issue has been in the news for sometime after former Sebi board member KM Abraham wrote to Prime Minister Manmohan Singh alleging that the finance ministry had interfered with the appointments to dilute charges against some companies.

In his letter, Abraham had mentioned four cases ? Sahara Group, Reliance Industries, Bank of Rajasthan and MCX Stock Exchange ? handled by him, in which he was apparently asked to be lenient since these cases were of interest to the finance ministry.

According to the Krishnaswamy’s petition, the amendment allowed finance minister Pranab Mukherjee to appoint two members ?of his own choosing?.

Stating that this would compromise Sebi?s functioning as its top officials need to be experts, which were not prescribed by the amendment, Subramanium said that the amended Rule 3(5) added clause (e) authorising the finance minister and not the Central government to appoint any two persons on search-cum-selection committee to appoint the Sebi chairman and members would subvert the process of selection.

It said that the minister has been allowed to nominate two persons in the selection committee, and hence, the market regulator?s independence is taken away as any person who does not even have expertise in the area could be handpicked.

?All this takes away the independence of Sebi and its status as a watchdog,? the petition stated, adding that the functioning of Sebi is hampered by political interference and unholy nexus between corporate houses and political bigwigs. ?There are clear indications that there is a nexus between the ministry of finance and major corporate players and that the free and fair functioning of Sebi is no longer possible,? it said.