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NEW DELHI (Reuters) - The Supreme Court on Thursday quashed the government's appointment of a top anti-graft official for involvement in a palm oil import scam, delivering another blow to Prime Minister Manmohan Singh's coalition.
The rejection of P.J. Thomas's appointment as central vigilance commissioner comes as Singh's government is trying to defend itself against a series of graft scandals, including a $39 billion telecoms licensing scam.
The opposition Bharatiya Janata Party (BJP), aiming to ride a wave of popular anger over the corruption scandals, seized on the verdict, demanding Singh accept responsibility and resign.
"It is a rebuke to the prime minister and the home minister. Governance with transparency and accountability has completely been lost," said BJP spokeswoman Nirmala Sitharaman.
Singh has faced increasingly harsh questions about his leadership despite a reputation for personal integrity. But for the moment many analysts see his resignation as unlikely as it would probably lead to an early election and the defeat of the Congress party.
Singh, who headed a panel that chose Thomas as central vigilance commissioner last September, told reporters in parliament he accepted the court decision.
The ruling Congress party sprang to the prime minister's defence, saying the decision was not a reflection on Singh.
"The PM is not directly involved in any corruption. There is no question of him needing to resign," B.K. Hariprasad, a Congress general secretary, said.
The latest rebuke from the Supreme Court underlined the disarray in government and Singh's inability to govern effectively Asia's third-largest economy, which has seen foreign direct investment fall sharply as investor confidence saps.
"The prime minister comes across as a rubber stamp, not only in this case but in several others. This further dents his image and standing and is pushing him further into embarrassment," N. Bhaskara Rao, head of New Delhi-based Centre for Media Studies, said.
Last month, the prime minister was forced to defend himself against accusations that he was a "lame duck" leader, soon before the government gave in to an opposition demand to set up a parliamentary investigation into the telecoms scam, considered to be independent India's biggest corruption scandal.
Regulatory concerns in India, combined with the global economic slowdown, have hit foreign direct investment and contributed to making the Mumbai stock exchange the worst performing of the world's major share markets.
The Supreme Court said the appointment of Thomas as central vigilance commissioner was made last year without taking into account a 1992 case in which he, as a state official, had been accused of signing a deal to import palm oil from Malaysia at inflated prices.
Thomas had rejected calls from the opposition to resign, saying the charges against him in the palm oil case were baseless. However, he submitted his resignation following the court decision, a government official said.
The court decision was the latest from an assertive Supreme Court which is looking into a raft of corruption cases spanning irregularities in telecoms licensing to a housing scam for war widows.
It also comes ahead of a clutch of state elections beginning next month, the first since the Congress became embroiled in the scandals.
Writing by Sanjeev Miglani; Editing by Miral Fahmy and Sugita Katyal