Sucheta Dalal :The SAT-SEBI Mess
Sucheta Dalal

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The SAT-SEBI Mess  

May 21, 2009

Legal cases in India wind through the judicial system at such a slow and excruciating crawl that the final judgement coming out of the apex court often seems to be in sharp contrast to the situation on the ground. And when the rulings apply to regulators and appellate tribunals, they seem downright confusing.
Consider, for instance, the case of SEBI and the Securities Appellate Tribunal (SAT) – the court of appeal against the regulator’s orders. In the past six months, the SEBI board, led by SEBI’s whole-time members and the finance ministry representative Dr KP Krishnan, have laid great store by a SAT order that quashed SEBI’s action against NSDL. So much so that SEBI has refused to appeal against the SAT order in the NSDL case, although it routinely appeals against most others. In fact, the board has even chosen to suppress the report of a two-member SEBI-appointed committee that was mandated to investigate and dispose off all matters connected with NSDL’s role in what was known as the IPO application scam, because its stand was contrary to that of SAT.
Within weeks of the SEBI board’s dubious decision to suppress the report, we have an order of the Supreme Court that is a blast from the past. It harks back to the time when SEBI used to be frustrated at SAT’s propensity to quash SEBI orders and reduce penalties imposed by the regulator. In one such case, where SAT had chosen to convert the suspension of a broker’s licence into a monetary penalty, the Supreme Court had concurred with the regulator and ruled that the appellate tribunal had no powers to modify the penalty imposed on stockbrokers. This ruling is bound to have an impact on a whole slew of orders that were heard and disposed off by SAT in the past decade, if the regulator chooses to pursue them diligently. But it is no longer clear whether it would be inclined to do so.
Interestingly, the judgement, which renders the tribunal relatively toothless, has come at a time when it is already comatose because the government has not bothered to fill up two long-pending vacancies.

-Sucheta Dalal

-- Sucheta Dalal