Banking

Ex-CAG Vinod Rai’s Appointment as Bank Board Head Raises Debate on Propriety

Vinod-Rai-PTINew Delhi: The appointment of former comptroller and auditor general Vinod Rai as the first chairman of the Banks Board Bureau has opened a new front in the battle of wits between the Narendra Modi government and the opposition Congress, with the latter accusing BJP leaders of using “the lure of post-retirement jobs” to weaken the independence of constitutional functionaries who are meant to function at arms length from the executive.

On Sunday, the government said that it was setting up an autonomous Banks Board Bureau to improve the governance of public sector banks. The BBB – with a mandate to select the heads of public sector banks and financial institutions, and “help banks in developing strategies and capital raising plans” – will be headed by Rai as chairman. The press release noted that the chairman’s position “will be part time”.

The press release is silent on the tenure and remuneration involved. Last year, when rail minister Suresh Prabhu roped in Rai to head a one-man committee to suggest improvements in the functioning of the railways, the former CAG made it clear he was not charging a fee.

The CAG’s position is one of those whose incumbents are constitutionally barred from accepting any future government employment. Article 148(4) of the constitution states:

“The Comptroller and Auditor General shall not be eligible for further office either under the Government of India or under the Government of any State after he has ceased to hold his office.”

Citing this rule, Congress spokesperson Randeep Surjewala attacked the government for selecting Rai for the banking board job.

Given the major embarrassment Rai caused the erstwhile UPA government of Manmohan Singh with his audit reports on the 2G and coal scams, the Congress was quick to accuse the BJP and former CAG of engaging in a quid pro quo:

Surjewala also reminded finance minister Arun Jaitley of his own words from 2010 when, as an opposition leader, he had attacked the UPA for asking another former CAG, V.K. Shunglu, to head the probe into the Commonwealth Games scam:

“I have long held the belief that all such posts that require a higher degree of autonomy and independence should be insulated from the prospect of future employment with the government. The lure of post- retirement jobs blunts the edge of probity that should be the prerequisite for offices such as the CAG, the Central Vigilance Commissioner, the Central Election Commissioner and even the higher judiciary.”

Shunglu had responded to questions at the time by noting that he was not drawing a salary. “I am not taking any salary, therefore the provisions of … Article 148(4) of the constitution do not apply,” he said.

Lawyers and constitutional experts The Wire spoke to said the constitutionality and propriety of Rai’s appointment to the BBB would depend on the terms of his appointment and the statutory status of the bureau.

“The issue is whether the BBB will be considered an ‘office under the Government of India,’  senior Supreme Court lawyer and former additional solicitor general Indira Jaising said. Noting that it would be difficult to comment on this aspect without knowing the actual terms of appointment, she said: “Considering the appointment is made on the recommendation of the prime minister, and the function of the BBB is to advise the Government, in all likelihood it will be considered as ‘office under the government’. This is also because it is replacing the appointments board and will perform the functions that the appointments board would otherwise discharge,” she added.

Former attorney general Ashok H. Desai too noted that the terms of Rai’s appointment would be crucial in determining its legality. “We have to first see if he has been technically appointed by the government. The description under job and appointment is crucial in this. But that can only be known after going through the statute.”

Broadening the debate, former chief election commissioner N. Gopalaswami said, “You cannot look at the mere appointment being made. The key is if the new position is bound by the directions given by the government. Is the former CAG required to report to the government on a day to day basis about his functioning? If he is, then in that sense [the chairmanship of the BBB] can be deemed to be an office directly controlled by the government.”

Drawing a parallel with the case that came up before the Supreme Court on the 1978 appointment of a former former Union Public Service Commission chairman, A.R. Kidwai as governor of Bihar. The court held that the governor held a “constitutional office” and was an employee of the government. “This is parallel to the present issue because both the CAG and UPSC chairman are bound by the same restrictions on being appointed by the Union or state governments after they cease to occupy office,” he said

Thus “one has to see under what provision of law the banking board been constituted. If the BBB is like an institution which has been given powers, then they are not under the government of the day and report to the president of India. One has to look at the small print in order to see if it can be considered an office under the government. Constitutional provisions [like 148(4) are framed in an overarching or large way. One has to read the official statutes.”

As CAG, Rai was attacked by Congress ministers for accusing the Manmohan Singh government of causing massive losses to the exchequer in the non-transparent allocation of spectrum and coal. Though the CAG audit findings have since been corroborated by the criminal investigations and auctions that followed, Congress leaders believe the former CAG presented exaggerated figures for those losses out of political considerations. At the time, Rai gently hit back, urging his critics to debate the quantum of the loss but not deny the fact that there had been a loss.