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MUMBAI : The Securities Appellate Tribunal (SAT) has pulled up a Securities and Exchange Board of India (Sebi) adjudicating officer and imposed a fine on the regulator for “inordinate delay" in initiating a quasi-judicial process against Shriram Insight Share Brokers Ltd, after the brokerage moved SAT. In its order passed on 4 January, SAT imposed a penalty on Sebi as the officer took nearly 7.5 years to issue a show-cause notice to the brokerage.

“In our view, the view taken by the adjudicating officer is patently ‘erroneous’ and cannot be allowed to stand," a SAT bench led by Justice Tarun Agarwala said in its 12-page order, adding that the officer’s order cannot be sustained and therefore has been quashed.

The tribunal also said that matters that were “old and stale" should not be brought before it. Sebi is likely to file an appeal against the order.

This is the second instance where a Sebi adjudicating officer was pulled up by SAT. In December, the tribunal had ruled that the conduct of another Sebi officer was casual and amounted to ‘judicial dishonesty’ and directed him to file a reply and appear in person before the SAT.

The 4 January judgement is one of the rare instances where SAT has levied costs on the regulator due to the conduct of an adjudicating officer. In 2019, SAT had levied costs of 50,000 on the regulator.

In the present case, Chennai-based Shriram Insight filed an appeal with the SAT against a June 2020 Sebi order, wherein the officer imposed a penalty of 10 lakh on the broking firm.

In a show-cause notice issued on 19 December 2019, Sebi had said that the company was found to have committed various violations during an audit of its accounts relating to stock broking between January and February 2012.

On 7 May 2012, the brokerage firm had received a copy of the inspection report, and had filed a response within a month on 14 June. Subsequently, a show-cause notice was issued on 12 December 2019 asking the firm why it should not be penalized for the alleged violations.

Taking cognizance of the proceedings of the case, the tribunal said since no further action was taken on the matter, Sebi seemed to have accepted the broking firm’s contention and, therefore, the order be quashed.

“Such orders by the SAT in appeal will definitely have significant impact on Sebi’s future rulings. There are several instances where Sebi has sent show-cause notice after inordinate delay and all those matters when gone further into appeal, such inordinate delay on the part of Sebi has been taken into consideration by SAT," Utsav Trivedi, partner, TAS Law, said.

Last week, Sebi had filed an appeal with the Supreme Court after another adjudicating official was found guilty in a similar case, which became a sore point between the two institutions.

In its appeal, the markets regulator told the apex court that SAT’s “unreasonable and negative statements" will obstruct its ability to act fearlessly and independently.

In another case, SAT on 7 January quashed a Sebi order that had imposed a 6 crore penalty on the NSE for allegedly investing in firms unrelated to the stock exchange business. The tribunal said all investments were made by NSE prior to the enforcement of the stock exchange and clearing corporations norms in 2018.

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