The Abbott government rejected the bid by former NSW premier Nick Greiner to become SBS chairman after an independent panel raised concerns about his involvement in an alleged bid-rigging deal between two companies of which he was a director.

A Federal Court judge found last year that Mr Greiner had used his positions on the boards of two firms to help rig a multimillion-dollar deal for the purchase of a Canadian mining parts manufacturer. The judge found Mr Greiner was "evasive and hostile" when asked to give evidence about the deal.

Cabinet instead approved businessman Nihal Gupta to become SBS chairman, with an official announcement expected next week.

Mr Gupta, a Liberal Party donor, is managing director of Digital Electronics Corporation Australia and chairman of the Australian Securities Exchange-listed JCurve Solutions. He is also a member of the NSW government's Multicultural Business Advisory Panel.

Fairfax Media understands the decision came as a surprise to Mr Greiner. He has said privately over recent days that Communications Minister Malcolm Turnbull had led him to believe he would be appointed to the role, sources said.

"I'm not about to comment on discussions with the minister," Mr Greiner said.

"The government is entitled to have whoever they would like to chair SBS."

The appointment comes at a crucial time for the multicultural broadcaster, which is facing deep funding cuts and has been without a chairman for six months.

Mr Gupta and Mr Greiner were shortlisted for the role by a four-person independent nomination panel comprised of businessman David Gonski, former diplomat Ric Smith, newspaper columnist Janet Albrechtsen and former deputy Liberal leader Neil Brown.

Despite reports claiming Mr Greiner's bid was supported by the panel and Mr Turnbull, the panel gave Mr Gupta a stronger recommendation than Mr Greiner.

The panel found Mr Gupta was highly suitable for the role because of his experience in technology, business and multicultural affairs, sources said.

By contrast, the panel was evenly split over Mr Greiner's suitability. The panel advised the government to consider whether Mr Greiner was an appropriate choice following the damning verdict handed down in last year's court bid-rigging judgment.

Fairfax Media understands the cabinet was also divided on Mr Greiner's bid. While some ministers supported his candidature, others had significant reservations.

Mr Gupta was the only candidate presented to Prime Minister Tony Abbott for consideration. It is understood both Mr Turnbull and Mr Abbott agreed he was the best choice for the role.

The Federal Court ordered Bradken, the engineering firm chaired by Mr Greiner, last year to pay investment company Pala $21.6 million in damages.

The parties later settled the case on undisclosed terms and asked the court to set aside its damning orders and declarations. Two Federal Court judges found judge Michelle Gordon, who ruled on the original case, had made "detailed factual findings" in a "comprehensive and careful judgment". Bradken dropped its appeal to the original verdict.

Mr Greiner said he declared the legal dispute in his application for the job.

Labor communications spokesman Jason Clare said the appointment of Mr Gupta – who reportedly donated about $9000 to the NSW Liberal Party before the 2011 state election – was "an outrageous demonstration of 'jobs for the boys' ".

But Liberal Party sources said it was bizarre to suggest Mr Gupta would be a more political appointment than Mr Greiner, who led the NSW Liberal Party for nine years.

Former NSW Community Relations Commission chairman Stepan Kerkyasharian applied for the role of SBS chairman but was not offered an interview because the panel did not believe he had sufficient commercial board experience.

Fairfax Media revealed in February that Mr Turnbull lost a battle with Mr Abbott's office over whether businessman Joseph Skrzynski should be appointed to a second term as SBS chairman.

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