The court also issued notice to Sinha.

The apex court bench of Justice S.S. Nijjar and Justice H.L. Gokhale the issued notice on a petition by Arun Kumar Aggarwal alleging Sinha's appointment as the head of markets regulator was vitiated due to several irregularities and malafide.

Sinha, the petition said had failed to fulfil one of the eligibility conditions as laid down in Sub-section (5) of Section 4 of the SEBI Act as well as in the government communication that requires the chairman to be a person of high integrity.

The petition said that Sinha before becoming the SEBI chief was sent as the chairman and managing director of the Asset Management Company of UTI (UTI AMC). He first went to UTI AMC for two years in November 2005 on deputation when he was joint secretary in the finance ministry. He was also on the board of UTI.

Sinha was appointed chief executive of UTI AMC, by overlooking the policy of not sending a person on deputation in an organisation which he had overseen while serving in the finance ministry.

The court was told that there were joint parliamentary committee recommendations to that effect that had been accepted by the government. Sinha's first stint with UTI AMC ended Nov 2, 2007, but he was given extension till April 31, 2008.

On March 10, 2008, the Appointments Committee of the Cabinet had told the finance ministry that Sinha, after completing his extended term with UTI AMC, should revert back to his parent cadre of Bihar, the petition alleged.

Instead of abiding by it, Sinha took voluntary retirement. The personnel department, disregarding all the rules, including post-retirement waiting period, permitted his request for accepting "commercial employment" with UTI AMC, the petition said.

The petition further said within a period of a month in his post-retirement stint as chairman and managing director of UTI AMC, Sinha's emoluments increased from around Rs.600,000 per annum to Rs.10 million per annum.

Later, these emoluments were made over Rs.20 million and then Rs.40 million. His total emoluments for 2010-11 were at over Rs.40 million per annum, the petition added.

Not only this, the petition said, Sinha "gave to himself emoluments of over Rs.20 million per annum for the period of his deputation from the Indian Administrative Service to the public sector undertaking retrospectively."

The petition has also pleaded for an investigation by an independent agency into the manner in which Sinha was appointed.

The bench however confined its notice to asking under what authority Sinha had been appointed to head the market regulator.

The court said that it would consider the plea for investigation by an independent agency at a later stage.