The Supreme Court has done well to question an unwritten rule: the top regulatory jobs are reserved for career bureaucrats.
While dismissing public interest litigation (PIL) about alleged irregularities in appointments to the Securities and Exchange Board of India (Sebi), the court on Monday said the petitioners could come back - one last time - to focus on the larger issues of ”regulatory independence”, thereby potentially expanding the scope of the case across all sectors.
Chief Justice S. H. Kapadia also observed that the PIL should include constitutional questions of law, including one which would challenge the practice of appointing only bureaucrats to regulatory office: “Regulatory independence - it is a very important issue. Why should only bureaucrats be appointed (to regulators)? Why not consider a wider circle?”
Kapadia’s observations indicate that the court is inclined to look into the outdated practice of appointing retired or retiring government officials to top posts in regulators such as Sebi, the Competition Commission of India, the Petroleum and Natural Gas Regulatory Board, Telecom Regulatory Authority of India, the proposed Biotech Regulatory Authority of India, the Insurance Regulatory and Development Authority, Central Electricity Regulatory Commission, the proposed National Legal Services Board, Airport Economic Regulatory Authority, etc.
The bench said appointments to the top regulatory jobs in the country should be based on ”domain expertise”, rather than as an exit option for government officials. This opens the possibility of professionals from the private sector being allowed into the regulatory realm. If the court takes up a fresh petition which has these broader goals, it will give the bench scope to lay down guidelines for regulatory appointments.
Although regulators have statutorily prescribed methods of appointments, even the Acts which determine eligibility criteria, largely draw from the pool of central government officials. A Supreme Court decision in this area will fundamentally alter the landscape of appointments based on the principles of independence from government and separation of powers.
A well-functioning market economy needs regulators who are independent of both the government and the companies they regulate. The way regulators are staffed right now is clearly inadequate. It is good the Supreme Court has raised this very important issue.