New Delhi: An inordinate delay in filling up two vacancies on the three-member panel that hears appeals against decisions passed by market regulator Securities and Exchange Board of India (Sebi) has led to a logjam of cases since January.
The Securities Appellate Tribunal (SAT) now has only one member—and hence cannot rustle up the minimum number of members needed to deliver final verdicts against Sebi orders on subjects raging from takeovers to initial public offerings (IPOs).
According to V. Maniyan, registrar at SAT, since mid-January, pending appeals have increased by almost one-third, to 128 on 1 April.
The matter is expected to come to a head, after the filing of a public interest litigation (PIL) by a securities lawyer in Mumbai, asking the Bombay high court to direct the finance ministry to set right the problem. The PIL is to be heard on 9 April.
According to a senior finance ministry official, who did not want to be identified, the ministry had shortlisted people to fill up the vacancies at SAT by the third week of November. Since then, the progress on the shortlist has been slow on account of hair-splitting over the selection process by bureaucrats in the Union government’s department of personnel and training (DoPT), which is overseen by Prime Minister Manmohan Singh.
Officials at DoPT, which falls under the ministry of personnel, public grievances and pensions, weren’t immediately available for comment.
Arun Bhargava stepped down from the SAT panel in mid-October on retirement, followed by Utpal Bhattacharya in mid-January. Currently, the panel has only one member— presiding officer N.K. Sodhi.
The age of retirement for SAT officers is 62. The SAT selection committee comprises the Reserve Bank of India governor and the Union finance secretary, with the SAT presiding officer as its chairman.
“The vacancies have led to a gross delay in justice and adversely affected the capital markets, as the entire appellate machinery in the Indian capital markets has come to a grinding halt,” said the PIL filed by Mumbai-based lawyer Somasekhar Sundaresan. “The interests of various investors and shareholders associated with the securities market, including the practitioners before SAT, are affected by the denial of the appellate remedy,” the plea added.
The pending cases include some significant matters involving offences under the Sebi takeover code, scams relating to IPOs and some involving price manipulation.
They include HB Stockholding Ltd’s appeal related to its takeover of DCM Shriram Industries Ltd, Padmini Polymers Ltd’s appeal against price manipulation allegations and an appeal by broker Shankar Sharma, who was banned by Sebi from trading in the stock markets for at least one year for violating norms during the 2001 stock market swindle using fictitious trading accounts.
Maniyan explained that SAT cases occur in two stages. The first stage is admission of cases and grant of interim orders and the second involves the final hearing where arguments are heard and appeals are disposed of with final orders. “Since only the presiding officer is available now, presently orders in the first stage alone are being passed. For final disposals, the quorum must be at least two. So, naturally now no final disposals are going on,” Maniyan said.
Akil Hirani, managing partner at law firm Majmudar and Co., said the vacancies have caused delays in the system. “But the impact of the incomplete panel has not been so badly felt like how it would have been been a year-and-a-half ago when the markets were buoyant. We expect this will be resolved soon and things will be back to normal.”
The plea asks the high court to direct the finance ministry and the registrar of SAT to fill up the vacancies so the body can start functioning at the earliest.
Moreover, it asks the court to review administrative records on the filing up of vacancies and formulate a succession policy and a plan so that SAT can “work in a manner that minimizes such periods of inaction” due to vacancies in its panel.
Karan Singh, partner at law firm Trilegal who heads the firm’s securities and banking law practice, said: “PIL is a good move, but the appointments to SAT have to be approved by the cabinet. It is a fair expectation that this will not happen until the elections are over.”
Appointments to SAT are cleared by the appointments committee of the cabinet (ACC). In this case, the ministers who make up ACC have not yet had a chance to consider the shortlist as it has not been put up to them, the finance ministry official said.