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The bill, which has included some of the provisions of the Jan Lokpal Bill proposed by Team Anna Hazare, gives permission to Lokpal to probe any Union Minister or officials of Group A and above without any sanction.
At the meeting, Prime Minister Manmohan Singh insisted that his office be included in the legislation, but the Cabinet decided otherwise, Information and Broadcasting Minister Ambika Soni told reporters after the meeting.
She said the Prime Minister was heard with "great respect" but the ministers discussed the "pitfalls" of such a proposal including its possible adverse effect on the stability of a government and creation of uncertainty.
The bill will be introduced in Parliament in the first two days of the Monsoon session beginning August one.
The Lokpal consisting of Chairperson and eight members, half of them judicial, will have its own prosecution and investigation wing with officers and staff necessary to carry out its functions.
While the Chairperson would be a sitting or retired Chief Justice of India, the members would include former or sitting judges of Supreme Court or Chief Justices of the High Court, Law Minister Salman Khurshid, who was also present with Soni and Minister of State in PMO V Narayanaswamy, said.
Persons with "impeccable integrity", with 25 years of experience in administration who has dealt with corruption and vigilance, would also form part of the Lokpal, he said.
The institution would inquire into allegations of corruption in respect of the Prime Minister "only after he demits office".
Besides, it would also take up corruption matters allegedly involving Ministers, MPs, Group `A` officers and others equivalent to this grade in any body, Board, authority, corporation, trust, society or autonomous body set up by an Act of Parliament.
The Lokpal would not require sanction or approval under Section 197 of the Code of Criminal Procedure, 1973 or Section 19 of the Prevention of Corruption Act, 1988, in cases where prosecution is proposed.
The Lokpal will also have powers to attach the property of corrupt public servants acquired through corrupt means.
Claiming credit for bringing in the much-debated legislation, Soni said the issue was part of the manifestos of the Congress party and the UPA-I government as was the Right to Information and the rural employment guarantee scheme.
"With this, another major commitment is being fulfilled."
The time limitation of a corruption case would be seven years from the date it is registered, Khurshid said, adding that there was no time-bar so far as Prevention of Corruption Act was concerned.
"This is a special and important provision that has been made. It would ensure accountability and transparency and will not adversely affect" governance and administration.
"We don`t want to give people unlimited protection, neither do we want to throw them to the wolves," he said.
To questions on the selection of the Lokpal, the Law Minister said a nine-member selection panel, headed by the Prime Minister, would be created. It would include, among others, the Speaker, the Leaders of Opposition of Rajya Sabha and Lok Sabha, one Minister and eminent jurists.
Lokpal, which would have a five-year tenure, would not have the power to prosecute. It would recommend prosecution to the Supreme Court, he said.
Regarding accountability in judiciary, Khurshid said the judicial standards and accountability bill was already before the Standing Committee and the government expected to table it in the House in this session itself.
The issue of accountability in judiciary has to be dealt with separately keeping in mind the autonomy of judiciary, the Minister said.
Legislations on protection of whistleblowers and Chief Vigilance Commission would also be tabled in the Monsoon Session, he said.
Asked how would a Lokpal be removed or impeached, Narayanswamy said it would be done by the President on a reference to the Supreme Court.
To questions on a section of the civil society rejecting the bill approved today, Khurshid said there were several points in the government bill which were as suggestions made by Team Anna Hazare, with Narayanswamy saying these were accepted as they were "good for the nation".
"But I am surprised that they don`t recognise the good work they have done themselves, but criticise us," Khurshid said, adding that 34 of the 40 principles suggested by them were accepted.
Asked why their draft was also not placed before the Cabinet, he said "all members knew what they wanted. What we presented (to the Cabinet) was the government draft". The Law Minister also lamented the "way in which they (Hazare and others) ended their relations with us".
To questions, Khurshid said some "fine-tuning" of the draft bill was done in consultation with some Opposition leaders like BJP leader Arun Jaitley. Several civil society organisations and many individuals also "agreed with us".
