The Securities and Appellate Tribunal (SAT) may well be functioning without a presiding officer for nearly eight months, but it has not stopped the tribunal from coming out with strongly-worded orders against the capital market regulator.
The recent past has seen quite a few judgments in which the Securities and Exchange Board of India (Sebi) has been pulled up for various reasons like undue long delays in passing orders, issuing vague show cause notices and lack of proper due diligence on the part of Sebi officials.
In the matter of M G Capital Services, the tribunal set aside the Sebi order and directed the regulator to initiate fresh proceedings after issuing a show cause notice ?clearly mentioning the provision of law which stands violated?.
?It is settled legal position that show cause notice is the foundation of any inquiry proceedings and, therefore, it must bring out clearly the charge against the appellant and evidence ? documentary or oral, on which the charge is based… We notice that these basic requirements have not been complied with while holding inquiry against the appellant,? said SAT in the matter of M G Capital Services.
Legal experts attribute this to a lack of qualified manpower at Sebi at the junior and middle level from where many of the adjudicating officials are chosen to investigate the alleged offenders.
They say that while not all Sebi orders are over-ruled by the tribunal, there seems to an increasing trend wherein SAT feels that proper procedures have not been followed by the regulator. Incidentally, Sebi is facing a manpower crisis even at the board level with only one whole-time member against the sanctioned strength of three.
In another instance, SAT reduced the monetary penalty on Hanumesh Realtors from R1.87 crore to R10 lakh while highlighting that the regulator could have passed certain directions if it was convinced that the entity violated norms related to open offers.
?If (Sebi) felt that non-compliance on the part of appellant will lead to loss to the investors, it could have very well issued a direction to the appellant to come oaut with an open offer… There is nothing on record to show that any such step was taken by (Sebi),? notes SAT.
In the case of Subhkam Securities, the tribunal minced no words while highlighting the fact that Sebi took 12 years to complete an investigation related to market manipulation.
?This is not the way to conduct proceedings against entities who are charged with serious allegations like market manipulation or insider trading,? said SAT. We hope that (Sebi) will take necessary steps to ensure that inquiry proceedings against market manipulators are completed expeditiously and guilty persons are punished in a time bound manner,? it added.
Currently, PK Malhotra (former additional secretary of the law ministry) and SSN Moorthy (former chairman of the Central Board of Direct Taxes) are the two members of SAT. Justice NK Sodhi retired as the presiding officer in November 2011 and the government has not yet named a successor.
