Case BriefsTribunals/Commissions/Regulatory Bodies

Securities Appellate Tribunal, Mumbai (SAT): The Coram of Justice Tarun Agarwala, (Presiding Officer) and Justice M.T. Joshi (Judicial Member), while dismissing the appeals at the admission stage on not finding any merit, was of the opinion that, there was an application of mind on the basis of which the opinion was so formed to proceed with the inquiry under Rule 4(3) of the Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties) Rules, 1995.

In the present matter, the impugned order of SEBI was challenged stating that SEBI had already formed an opinion prior to the filing of the reply given by the appellants. Therefore, it was contended that before forming an opinion the appellants should have been heard and by not giving an opportunity of hearing the impugned order is erroneous and violative of the principles of natural justice.

Therefore the issues were,

  1. Whether the opinion formed by the adjudicating authority to initiate an inquiry, is an order that is appealable under Section 15T of the SEBI Act.
  2. Whether any opportunity of hearing was required to be given before forming an opinion under Rule 4(3) of the Rules of 1995.

The Coram answering in favour of the Respondent referred to Natwar Singh v. Director of Enforcement, (2010) 13 SCC 255, and quoted the Supreme Court in the order, which stated, 

“…a reasonable opportunity of being heard is to be provided by the adjudicating authority in the manner prescribed for the purpose of imposing any penalty as provided for in the Act and not at the stage where the adjudicating authority is required merely to decide as to whether an inquiry at all be held into the matter. Further, the Court opined, Imposing of penalty after the adjudication is fraught with grave and serious consequences and therefore, the requirement of providing a reasonable opportunity of being heard before imposition of any such penalty is to be met. In contradistinction, the opinion formed by the adjudicating authority whether an inquiry should be held into the allegations made in the complaint are not fraught with such grave consequences and therefore the minimum requirement of a show-cause notice and consideration of cause shown would meet the ends of justice.

While clearing further Chandrakant Amratlal Parekh v. AO, SEBI in Appeal No. 91 of 2007 decided on October 23, 2007, referred to by the Counsel for the Respondent to differentiate between an interlocutory order and an adjudicating order, cleared the possibility since the impugned order was not an order rather an opinion.

The Coram opined,

“This Tribunal held that formation of an opinion is an interlocutory order which is not appealable under Section 15T of the SEBI Act. We beg to differ as in our view the opinion formed is not an order”.

[A.T. Rajan v. SEBI, Misc. Application No. 921 of 2021, decided on 30-08-2021]

Counsel for the Parties:

Mr Ashim Sood, Advocate with Ms Shreya Suri, Ms Vaishnavi Rao, Ms Swati Mittal, Mr Rhythm Buaria, Advocates for the Appellants.

Mr Gaurav Joshi, Senior Advocate with Mr Abhiraj Arora, Ms Rashi Dalmia, Mr Karthik Narayan, Advocates i/b ELP for the Respondent.

Agatha Shukla, Editorial Assistant has reported this brief.

Tribunals/Regulatory Bodies/Commissions Monthly Roundup

Here’s a run-through of all the significant decisions covered in the month of June, 2021 under the Section of Tribunals/Commission/Regulatory Bodies.

Armed Forces Tribunal

♦ AFT | Pension cannot be denied for disability being less than 20% where the disability is assessed at 15-19%“

The assessment of disability to the tune of 15-19% itself is a doubtful assessment and cannot be final for the simple reason that there is no barometer which can assess the disability percentage to the extent of 1% and therefore, the percentage of disability which has been assessed as 15-19% may be 20% also and there may be variation of at least two percent plus also. In case of doubt as the benefit should always be given to the applicant.”

Competition Commission of India

♦ CCI examines if airlines were involved in cartelization resulting in anti-competitive practice during Jat Agitation in 2016 || Synoptic view of Judgment

“…with the use of algorithms, there exists a high possibility of collusion with or without the need of human intervention or coordination between competitors.”

♦ ABFI prohibits State Baseball Associations from joining unrecognised leagues, threatens disciplinary action | CCI to examine such conduct in light of provisions of Competition Act

“ABFI isued communication to its affiliated State Baseball Association requested them no to entertain unrecognized bodies and further by requesting them not to allow their respective State players to participate in any of the tournaments organized by such unrecognized bodies, has violated the provisions of Section 4(2)(c) of the Act as it resulted in denial of market access to other federations.”

♦ CCI | Did Google leverage dominance in Play Store? Director-General to conduct investigation in complaint by smart phone/smart TV users

“ making pre-installation of Google’s proprietary apps conditional upon signing of ACC for all android devices manufactured/distributed/marketed by device manufacturers, Google has reduced the ability and incentive of device manufacturers to develop and sell devices operating on alternative versions of Android and thereby limited technical or scientific development relating to goods or services to the prejudice of consumers in contravention of Section 4(2)(b) of the Act.”

♦ Are Tourist Taxi Unions in State of Goa preventing entry of App-based Taxi Aggregator Companies in Goa? Read a detailed account of CCI’s decision

“..despite the opposition of taxi unions, the State of Goa does not appear to have acceded to or conceded to the demands of the OPs and the policy allowing entry of app based taxi aggregators was eventually notified.”

♦ CCI | Co-location facility of National Stock Exchange is anti-competitive? Is the service an autocratic move against traders? Comprehensive Report

A robust exchange acts as a backbone of the financial system and the provision of co-location facility by exchanges help increase volumes of trades manifold and provides liquidity to investors. This augurs well for the market, the companies and the economy.

Customs, Excise and Services Tax Appellate Tribunal

♦ CESTAT | Assessable Value to include Advertising and Marketing Costs, if relatable to Imported Goods; Tribunal provides relief to Volvo Auto India

Income Tax Appellate Tribunal

♦ ITAT | Whether DTAA protection in respect of taxation of dividend in source jurisdiction, can be extended to ‘dividend distribution tax’ under S. 115-O, Income Tax Act, in the hands of a domestic company? Matter referred to larger Bench

“Whether the protection granted by the tax treaties, under Section 90 of the Income Tax Act, 1961, in respect of taxation of dividend in the source jurisdiction, can be extended, even in the absence of a specific treaty provision to that effect, to the dividend distribution tax under Section 115-O in the hands of a domestic company?”

National Consumer Disputes Redressal Commission

♦ NCDRC | In a case of death insurance claim, can police investigation be replaced by private agency investigation engaged by insurance company? Commission spells out

Inquest is conducted as mandated under the Cr.P.C., Post Mortem is conducted by the concerned government Medical Officer, Investigation is conducted by the Police (a private agency engaged by the Insurance Co. does not substitute for the Police).

♦ NCDRC | Builder unilaterally, high-handedly cancels sale agreement on not handing over timely possession: Commission decides builder-buyer dispute, levies interest to be paid by builder

“According to Section 8 of the Maharashtra Ownership of Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act, 1963, if the builder is not able to hand over the possession over the building/flat within the time specified in the agreement then the builder is liable to pay interest to the purchaser of the flat for the period for which the possession has not been handed over.”

National Company Law Appellate Tribunal

NCLAT | Can Banks debit amounts from Corporate Debtor Company after Moratorium Order? Is there an obligation of releasing ‘title deeds’ under Resolution Process? Read on

Banks cannot freeze accounts, nor can they prohibit the ‘Corporate Debtor’ from withdrawing the amount as available on the date of the moratorium for its day-to-day functioning.

Real Estate Regulatory Authorities

Rajasthan Real Estate Regulatory Authority, Jaipur

♦ Is S. 13 of RERA Act a mandatory requirement? Can promoter demand cost of plot more than 10% before registering sale agreement? | Raj RERA decides

Maharashtra Real Estate Regulatory Authority, Mumbai

♦ Can promoter/builder sell covered car parking by charging certain amount? Whether open parking has to be handed to society or can be sold in open market? MahaRERA decides

State Consumer Forums

State Consumer Disputes Redressal Commission, U.T. Chandigarh

♦ Consumer spending hefty amount has right to ask for record of expenditure. Can service provider evade liability? Read on

…every person who is shredding hefty amount from his pocket towards the services being provided to him, has the right to know as to how, where and in what manner, the same has been utilized.”

Consumer Disputes Redressal Commission Gujarat State, Ahmedabad

♦ Consumer Forum | Can complainant raise consumer dispute where excess electricity duty is charged? Is he overriding statutory remedy if he already approached the Collector? Read on

“Section 3 of Consumer Proetction Act cannot be said to be inconsistent with Rule 12 of the Electricity Duty Rules.”

State Consumer Disputes Redressal Commission, Telangana

♦ Can insurance company repudiate claim if insured suppresses fact of suffering from ailment while taking policy? Telangana State Consumer Forum answers

“If the insurer can show that prior to the date of declaration of being healthy, the insured was suffering with ailment which was within her knowledge but was suppressed, then the insurance company is well within its right to repudiate the claim on the ground of suppression veri.”

Securities Appellate Tribunal

♦ Oscillating Independent Director; SAT to determine independency of Pradip K. Khaitan, independent director of Dhunseri Ventures Ltd.

♦ SAT | SEBI exonerated preferential allottees, exit providers and LTP contributors from manipulation | SAT terms it ‘cryptic’

♦ SAT | Franklin Templeton gets interim relief | Gives due consideration to the 2 decades’ reputation

Securities Exchange Board of India

♦ Infosys insider trading | While in possession of Unpublished Price Sensitive Information, 2 employees of Infosys & 6 other entities violated Insider Trading Regulations on Infosys Stock [Detailed Report]

“The liability of acting partners and non-acting partners (collectively known as firm) for the injury to the third party is an outcome of joint and several liability of such partners under IPA, irrespective of whether that the conduct (act of omission or commission of the firm) which gave rise to the loss/injury to the third party is also in violation of any provision under securities law.”

♦ Decoded | SEBI bars Director of Franklin Templeton AMC,  wife from accessing securities markets for 1 yr: Can redemption of units by Director of a mutual fund AMC be titled as fair conduct?

Laws dealing with information asymmetries (PIT Regulations and PFUTP Regulations) essentially seek to address the issues arising out of disparities in access to material information, that is otherwise not legally available to general investors, and to prevent those persons having access to such superior information from exploiting the informational advantage, in order to protect the integrity of the market and maintain investor confidence.

♦ SEBI | Not so “independent” Independent director and a concocted scheme with affinity and consanguinity |SEBI takes on each violation with mordant remarks

“…remuneration and qualification are two crucial criterions to evaluate and adjudge the significance of a position held by a person in an organisation and his importance and status in participating in the management of a company.”

♦ SEBI | Kingfisher’s chopped wings and shrinked wingspan | United Breweries Acquisition | Heineken exempted from the obligation under Takeover Regulations with exceptions

Case BriefsTribunals/Commissions/Regulatory Bodies

Securities Appellate Tribunal (SAT): A Bench of Justice Tarun Agarwala SEBI(Presiding Officer) and M.T. Joshi (Judicial Member) allowed a few appeals and dismissed the others while hearing a group of appeals and termed the order cryptic, in so far as it exonerated the preferential allottees, exit providers and the LTP contributors from the charge of Section 12A(a),(b) and (c) of the SEBI Act read with Regulation 3 and 4 PFUTP Regulations on the ground that they had no role to play in the price manipulation.

The present appeal was against the order passed by the SEBI for restraining the appellants and the six entities from accessing the securities market for a period of five years and further freezing the shares and mutual funds units lying in their Demat accounts for the same period. The group of appeal was divided into two categories. The entities in the first set of appeals being, appeals nos. 102, 44, 85, 235, 246, 247, 571, 572, 573, 575 and 581 of 2020 and were called the ‘appellants’. The entities in the second set of appeals being, appeals nos. 178, 179, 180 and 181 were called ‘six entities’.  Noticing the sharp rise in the trading volume and price in the scrip of the Company, SEBI conducted an investigation in the trading in the scrip of the Company and, based on the investigation, SEBI passed an ex parte ad interim order dated May 8, 2015, against 178 entities. The 178 entities were categorised as:- (i) The Company; (ii) The directors and promoters of the Company; (iii) The promoter related entities; (iv) The preferential allottees; (v) The exit providers; (vi) The LTP contributors.

It was revealed that the entire modus operandi was a scheme devised to provide ill gotten gains to the preferential allottees and promoter related entities, and that the increase in the trading volume occurred after lock in period expired of the preferential allottees. It was further found that there were two sets of entities; one group was primarily involved in pushing up the price when the shares were under the lock in period and the second group was acting as buyers in patch-2 in order to provide an exit opportunity to the preferential allottees. On the basis of which, whole time member found that the appellants had violated the PFUTP provisions.

The Appellate Tribunal was of that opinion that,

“…We find from a perusal of the record that the preferential allottees gained the most of more than Rs. 430 crore but what we find is that the WTM has exonerated, by a cryptic order, the preferential allottees, exit providers and the LTP contributors from the charge of Section 12A(a),(b) and (c) of the SEBI Act read with Regulation 3 and 4 PFUTP Regulations on the ground that they had no role to play in the price manipulation.


“…We are of the opinion that the appellants stands on a better footing than that of the preferential allottees and if the preferential allottees have been let off on the ground that they have not manipulated the price nor had any role to play in the price manipulation, then all the more reasons to hold for the appellants that they had no role to play in the manipulation of the price and are therefore liable to be exonerated…”.

And it thus states that,

“… In our opinion this finding is perverse. We are of the opinion that the respondents are adopting dual standards. The issue of weak fundamentals would equally apply to the preferential allottees who were allotted the shares at rate of Rs. 10/- per share but these preferential allottes have been let off. Therefore the standard of weak fundamentals cannot be applied in the case of the appellants especially when on the same footing the preferential allottees have been let off. And, “…in our opinion, the order of the WTM insofar as the six entities are concerned does not suffer from any manifest error of law…”.

[Umang Dhanuka v. SEBI, 2021 SCC OnLine SAT 158, decided on 08-06-2021]

Case BriefsTribunals/Commissions/Regulatory Bodies

Securities Appellate Tribunal: The Bench of Justice Tarun Agarwala (Presiding Officer) and Justice M. T. Joshi (Judicial Member), reserved its order on the controversial issue of the dubious role of the Pradip Kumar Khaitan (respondent 4) as an independent director in Dhunseri Ventures Ltd.


The Dhunseri Ventures Ltd. is a Company incorporated at Kolkata under the laws of India holding CIN No. L15492WB1916PLC002697 and is listed on the BSE (BSE Code 523736) and the NSE (NSE Symbol COMPANY). The Appellant, one of the supportive shareholders of the company for over a period of 20 years, had filed a complaint before the SEBI pointing out change in designation of respondent 4 from being a Non-Independent Director (Year 2010 to 2014) of the company to an Independent Director (22-05-2014 to 03-07-2015) and thereafter, being designated as a Non- Independent Director again (03-07-2015 to 17-12-2019) despite having familial relations with the Promoters of the company.

The Appellant had highlighted that despite the relationship which could never qualify respondent 4 as independent and despite being non-independent’ director prior to being designated as an independent director, he had acted as an Independent Director and actively participated in functioning of the company for a period before reverting to the Non- Independent Status and finally resigning from the designation of Non-Independent Director in 2019. The Appellant had also pointed out that apart from being non-independent on account of the relationship with the Promoters, respondent 4 also had material pecuniary relationship with the company which further established his non-independence and raised serious doubts on his functioning as an independent director.

The appellant alleged that in spite of detailed representations from the Appellant before SEBI and BSE, a computer-generated Order was passed by the SEBI disposing his complaint on the SCORES platform in a cryptic, unreasoned and mechanical manner. While the Order acknowledged that the information furnished by the Appellant pointed to allegation of violation of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations) it simply refused to register any formal complaint against the company without assigning any reason for the same in complete violation of the principles of natural justice apart from being self-contradictory.

The appellant contended that SEBI had closed his detailed complaint in a perfunctory manner by treating the furnished information as a mere “market Intelligence” and at the same time also stating that appellant would not be able to ascertain the status of information furnished by it before SEBI though the information would be kept confidential and analysed by it (SEBI). The order further stated that the existence of any examination of the information furnished by the appellant would neither be confirmed nor denied by it (SEBI).

Submissions before SAT

The Appellant had challenged the order dated 11-11-2020, communicated by SEBI to the appellant with respect to Complaint bearing No. SEBIE/MH20/0006790/1 (BSE reference No. 20200700003) filed by the Appellant on 07-07-2020 pointing out inter alia the non independent and dubious role of respondent 4 in the company and consequential violation of provisions of the Listing Agreement, Companies Act 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR Regulations) and interest of the shareholders.

The appellant argued that the Impugned Order was illegal and had been passed without any application of judicial mind as it did not take into consideration that respondent 4 had been appointed as a non-independent director, despite having familial relations with the Promoters of the company. It was contended by the appellant that the promoter group of the company is the Dhanuka Family in Kolkata. Respondent 5 (C. K. Dhanuka) is the Non-Independent Promoter chairman of the company while respondent 4 was one of the Directors till the date of his resignation on 17-12-2019.

The fundamental question raised by the appellant was to establish the role of Independent Directors as representatives of minority shareholders’ interests vis-à-vis the promoters. The appellant alleged that this was a peculiar case where respondent 4 had tried to outsmart the regulator, SEBI, and impersonated as an “Independent” director in the company. It was further contended by the appellant that there was an overreliance on the submissions made by the company and a complete lack of independent judgement by the SEBI; as it (SEBI) claimed that Mrs. Tarulika Khaitan (daughter of respondent 5) as not related to respondent 4 by virtue of being his “son’s wife” since respondent 4 was her “father-in-law” and reciprocal relationship is not prescribed under SEBI.

Contending that such a dichotomy would defeat the principles of natural justice, especially when Clause 49 reads, “Independent director shall mean a non-executive director of the company who…” clearly display that no relationship should exist from the proposed independent director’s point of view, the appellant argued that respondent 4 was clearly a “relative” in as much as “Son’s wife” is included in the List of relatives in terms of Clause 77 of Section 2 of Companies Act, 2013 which disqualified him as an Independent Director in terms of Clause 49 – I. (A) (iii) (b) of the Listing Agreement. Therefore, respondent 4 could never have been lawfully appointed as an “Independent Director” in company and that he kept juggling between “Independent” and “Non-Independent” directorships in other listed companies. Hence, the appellant urged the Tribunal to take corrective action and bar respondent 4 from acting as a “Director” in any listed company for the protection of minority and public shareholders.

Having heard the appellant in person and noticing that respondent 4 had not made appearance of filed any reply; the tribunal had reserved the order.[Arvind Parasramka v. SEBI, Appeal No. 70 of 2021, order dated 10-05-2021]

Kamini Sharma, Editorial Assistant has reported this brief.

Appearance before the Tribunal:

For the Appellant: Mr. Keshav Parasramka, Appellant in Person.

For SEBI: Adv. Vishal Kanade with Adv.  Anubhav Ghosh and Adv. Ravishekhar Pandey

For BSE: Adv. Abhiraj Arora with Adv. Karthik Narayan and Adv. Rashi Dalmia

For Dhunseri Ventures Ltd.: Adv. Mainak Bose with Adv. Nikhil Jhunjhunwala

Case BriefsTribunals/Commissions/Regulatory Bodies

Securities Appellate Tribunal, Mumbai (SAT): The Coram of Justice Tarun Agarwala (Presiding Officer) and Justice M.T. Joshi (Judicial Member) held that Bench constituting the Presiding Officer and Judicial member can proceed to hear and decide the appeals, etc. which are filed before the SAT and non-availability of Technical member is not defective.

In the present matter, a piquant situation arose due to the vacancy of a Technical member in the Securities Appellate Tribunal.

SEBI’s Position

SEBI raised the question of the composition of the Bench of Tribunal hearing the appeals, etc. filed before the tribunal.

SEBI stated that in terms of Section 15L(2)(b) of the Securities and Exchange Board of India Act, 1992, the Bench constituted should include at least one Technical Member and without the said member the appeal should not be heard.


SAT was functioning with a Presiding Officer, a Judicial Member and Technical Member. But since 31st March, 2021, the tribunal was working with Presiding Member and Judicial Member as the Technical Member had demitted the office.

Originally the Tribunal was a one Member Bench as per Section 15L of the SEBI Act, but the same was amended in the year 2002 to form a 3-Member Bench.

“15L. Composition of Securities Appellate Tribunal.

A Securities Appellate Tribunal shall consist of a Presiding Officer and two other members, to be appointed, by notification, by the Central Government: 

Provided that the Securities Appellate Tribunal, consisting of one person only, established before the commencement of the Securities and Exchange Board of India (Amendment) Act, 2002, shall continue to exercise the jurisdiction, powers and authority conferred on it by or under this Act or any other law for the time being in force till two other Members are appointed under this section.”

 Question to be answered

Whether the vacancy in the office of the Technical Members is fatal to the constitution of the Tribunal?

In Tribunal’s opinion, legislature’s intention has never been to stall or render the Tribunal non-functional in the absence of a Technical Member and therefore, a harmonious construction had to be given.


Coram opined that Tribunal would continue to function even if there was a vacancy in the office of the Presiding Officer. Tribunal will not become non-functional or headless. Hence, if a vacancy of a member occurs whether it is Judicial Member or Technical member and if there is a coram inspite of a vacancy, the Tribunal can proceed and hear the matters.

Rule 5 also provides that in the absence of a Presiding Officer the Government can appoint one of the members to preside over the sitting of the Tribunal, meaning thereby, that even in the event of a vacancy the Tribunal will not become non functional and will continue to discharge its functions from the remaining members.

Can Tribunal’s proceedings be questioned on the basis of any defect in SAT’s constitution?

Section 15R provides that any proceedings taken before the Tribunal cannot be questioned in any manner on the ground of any defect in the constitution of SAT. This provision protects the legality and validity of the orders passed by the Tribunal even if it is found that there was a defect in the constitution of the Tribunal. This provision clearly indicates that Section 15L(2)(b) and its proviso are the only directory in nature and cannot be mandatory.

Harmonius Construction

Upon a harmonious construction of the provisions of Section 15L read with Section 15P, Section 15-PA and Section 15R it would be clear that the Tribunal does not come to a grinding halt whenever there is an absence or vacancy of a Member. When there is no Technical Member, a Bench would have to be constituted by the Presiding Officer from amongst the Members who have been appointed.

Coram expressed that where the Presiding Officer is functional he alongwith the other Member/Members shall conduct the proceedings and where a vacancy occurs in the office of the Presiding Officer, then the senior most Judicial Member shall act as a Presiding Officer till the date on which a new Presiding Officer is appointed.

Recently, in the International Association for Protection of Intellectual Property (India Group) v. Union of India, 2021 SCC OnLine SC 89, decided on 12th February, 2021 Supreme Court held that in the absence of Technical Member the Chairperson can discharge the functions of a Judicial Member or Technical Member of the Bench to which he is appointed and can discharge the functions of a Judicial Member, or as the case may be, of a Technical Member, of any other Bench. The Supreme Court held that in the absence of a Member, the Chairperson may, if the occasion so arises, act as a Technical Member or a Judicial Member.

Tribunal performs judicial functions.

 It was elaborated that it is an essential requirement under the SEBI Act that the Presiding Officer is a Judicial Member. A Presiding Officer can never be appointed from a Technical Member. The Technical Member cannot replace a Judicial Member. 

Further, the Coram in view of the question of the presence of a technical member stated that a Technical member is an aid to assist the Bench requiring technical expertise on an issue and, thus, it cannot be said that if a Technical Member is not available the Bench comprising of two Judicial Members cannot function.

In view of the Supreme Court decision in L. Chandra Kumar v. Union of India, (1997) 3 SCC 261 and upon harmonious construction of the SEBI Act, Tribunal opined that the functioning of the Tribunal presently comprising of a Presiding Officer and a Judicial Member is not defective on account of non-availability of Technical member.

Hence SEBI’s objection in view of the above was rejected.

Tribunal’s Parting words

Can this Tribunal face such crisis of non-functioning due to non-filling up of the vacancies by the Central Government?

Tribunal stated that Central Government should expedite and fill up the vacancy.

A fourth post of Technical Member was created vide notification dated 16th May 2019. No steps have been taken by the Central Government to fill up this vacancy, even though two years have elapsed. Further, the government knew that the only Technical Member was going to retire on 31st March, 2021. Till date, no steps have been taken to fill up the post whereas such steps should have been taken at least a couple of months before the retirement of the Technical Member.

Coram requests the Central Government to fill the vacancies at the earliest along with necessary amendment to solve the discrepancy in the charging section to the proviso under Section 15L(2)(b).


Registrar of this Tribunal is directed to send a certified copy of this order to the Secretary, Ministry of Finance, Department of Economic Affairs, with a request to fill up the vacancies at the earliest and consider making appropriate amendments.

Registrar is also directed to send a certified copy of this order to the Secretary General of the Supreme Court of India with a request to place our order before the Chief Justice of India and, if desired, to treat this order as a PIL and resolve the issue on the judicial side so that the matter is resolved once and for all from the highest Court in India. [Axis Bank Ltd. v. NSE, 2021 SCC OnLine SAT 135, decided on 17-05-2021]

Advocates before the Tribunal:

Mr. Gaurav Joshi, Senior Advocate with Mr. Neville Lashkari, Mr. Chaitanya D. Mehta, Ms. Sonali Aggarwal and Ms. Drishti Gudhaka, Advocates i/b. M/s. Dhruve Liladhar & Co.

Mr. Rafique Dada, Senior Advocate with Mr. Anubhav Ghosh and Mr. Ravishekhar Pandey, Advocates i/b. The Law Point and Mr. Fredun De Vitre, Senior Advocate with Mr. P.N. Modi, Senior Advocate, Mr. Somasekhar Sundaresan and Mr. Suraj Chaudhary, Advocates.

Case BriefsTribunals/Commissions/Regulatory Bodies

Securities Appellate Tribunal (SAT): A Coram of Tarun Agarwala, J., (Presiding Officer) and M.T. Joshi, J., (Judicial Member) while dismissing an appeal held that separate penalties by the stock exchanges could be imposed.

In the present matter, BSE and NSE separately imposed a penalty of Rs 12 lakh for violation of Regulation 17 and 19 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations), in two consecutive quarters. The stock exchanges suspended the trading activities of the appellant considering the non-payment of penalty amount.  The appellant contended that the default was made only in the first quarter. Further, contended that, separate penalties for the same offence cannot be imposed by the two stock exchanges separately.

The Coram resultantly found defaults in both consecutive quarters. While relying on the SEBI’s conscious decision in W.S. Industries (India) Limited v. BSE Ltd. (Appeal No. 8 of 2019 decided on 19.09.2019) held that, separate penalties by the stock exchanges could be imposed.[PVP Ventures Ltd. v. Bombay Stock Exchange Ltd., 2021 SCC OnLine SAT 90, decided on 17-03-2021]

Case BriefsTribunals/Commissions/Regulatory Bodies

Securities Appellate Tribunal (SAT):The Bench of Justice Tarun Agarwala (Presiding Officer), Justice M. T. Joshi and Dr C. K. G. Nair Member dismissed the appeal on the ground that the trading strategy used by the appellants was violative of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to the Securities Market) Regulations), 2003 i.e. PFUTP Regulations, 2003.

The facts of the case are such that the appellants have unilaterally manipulated the price of the scrip of Blue Blends by employing/adopting a strategy of trading called “Advancing the Bid”. According to this strategy, a person on one side of the trade places orders above or below the last traded price (LTP) resulting in an adverse impact on the market.  The Whole Time Member of Securities and Exchange Board of India i.e. SEBI debarred the appellants for a period of four weeks and vide order dated May 5, 2020, passed by the Adjudicating Officer of SEBI whereby a joint and several penalties of Rs 5 lacs have been imposed on the appellants. Aggrieved by the same, instant appeals was filed before the Securities Appellate Tribunal i.e. SAT.

Counsel for the appellants submitted that selling in minuscule quantity below the LTP itself does not prove manipulation. It was further submitted that appellants are big traders/jobbers dealing in several hundred scrips worth several crores; appellants trades resulted in both positive and negative LTP but SEBI cherry-picked some trades only to show negative impact; appellants followed a strategy called “momentum trading” i.e. being a big trader taking advantage of the movement in prices by placing a large number of orders and no meeting of the mind has been established and no other party has been debarred from the market.

Counsel for the respondents submitted that the strategy employed by the appellants in manipulating the market/price of the scrip is a unique one called “Advancing the Bid” which is found to be manipulative not only in the Indian jurisdiction but also in foreign jurisdictions like the European Union (EU). It was further submitted that selling below the LTP and that too on a large number of occasions is contrary to the normal market behavior and therefore, it stands on its own legs as violative of the stated provisions of Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003.

The Tribunal observed that the nature/pattern of trading adopted by the appellants is not in the nature of what a rational investor would do. A large number of sell orders were placed repeatedly on several trading dates at less than the LTP; it is illogical. Therefore, the contention of the appellants that it was following momentum trading has no meaning as by placing a large number of orders below the LTP the appellants themselves were creating a momentum.  When such trades are done on a large number of occasions, such as 166 times, one cannot but come to the conclusion that such trades are manipulative in nature.

The Tribunal thus held that the strategy of momentum trading adopted by the appellants was creating its own momentum inimical to the interest of the securities market. Even if it affected only about 10 % of the market volume in the scrip of Blue Blends, as contended by the appellants, it is no consolation since influencing 10% of the market by 2 entities is a significant deviation from market equilibrium. Therefore, dehors the connectivity issue itself, the appellants are in violation of the PFUTP regulations by the very nature of their trading strategy and trading pattern. It was further held “4 weeks restrain from the securities market as directed by the WTM and Rs. 5 lakhs joint and several penalty imposed by the AO are not harsh or disproportionate in the given facts and circumstances for us to interfere with the impugned orders. However, if the appellants so desire they may pay Rs 2.5 lakh each.”

 In view of the above, appeal failed and was dismissed.[B.P. Comtrade (P) Ltd. v. SEBI, 2020 SCC OnLine SAT 251, decided on 20-11-2020]

Arunima Bose, Editorial Assistant has put this story

Case BriefsHigh Courts

Securities Appellate Tribunal (SAT): Justice Tarun Agarwal quashed the order under challenge in the present appeal as Adjudicating Officer has no power to proceed under SEBI Act, 1992 inspite of a moratorium having come into effect under Section 14 of the Insolvency and Bankruptcy Code, 2016 (IBC).

The present appeal has been filed questioning the legality and validity of the order dated 29-05-2020 passed by the Adjudicating Officer under Section 15-I of the Securities and Exchange Board of India Act, 1992 (‘SEBI Act’) whereby the authority has imposed a penalty of for a sum of Rs 20 lakhs under Section 15A (b) and 15HB of the SEBI Act on the appellant which is a housing finance company undergoing corporate insolvency resolution process. The adjudicating officer while imposing the penalty held that the moratorium declared under Section 14 of the IBC would not prevent the adjudicating officer from determining the liability of the corporate debtor and that the moratorium declared under the IBC would be applicable to the enforcement/recovery of the determined liability and that the instant proceedings are in the nature of determining the liability for the alleged non-compliance of the LODR Regulations and other Rules.

Counsel for the appellant relied on judgments titled Alchemist Asset Reconstruction Company Ltd. v. Hotel Gaudavan Pvt. Ltd. (2018) 16 SCC 94 and Rajendra K. Bhuta v. Maharashtra Housing and Area Development Authority 2020 SCC Online 292 and submitted that the provisions of Section 14 of IBC is patently clear and explicit and is not vague which requires use of external aid. It was submitted that when the provision is clear and there is a direct decision of the Supreme Court it was not open to the adjudicating officer to use external aid in interpreting the provisions of Section 14 of the IBC.

Counsel for the respondent submitted that the ambit of the word ‘proceedings’ under Section 14(1) (a) of the IBC needs to be given a wider meaning and if one considers the Insolvency Law Committee Report of March, 2018 one would find that the IBC Act and moratorium prescribed under Section 14 of IBC was basically for the creditors and not for the regulators/statutory authorities, namely, the respondent. It was further submitted that the moratorium declared under Section 14 of the IBC does not prevent the adjudicating officer from determining the liability of the corporate debtor and that the moratorium declared under IBC would be applicable only to the enforcement/recovery of the determined liability.

The Court relied Rajendra K. Bhuta v. Maharashtra Housing and Area Development Authority, 2020 SCC Online 292 which held

“4. The mandate of the new Insolvency Code is that the moment an insolvency petition is admitted, the moratorium that comes into effect Under Section 14(1)(a) expressly interdicts institution or continuation of pending suits or proceedings against corporate debtors.

  1. This being the case, we are surprised that an arbitration proceeding has been purported to be started after the imposition of the said moratorium and appeals under Section 37 of the Arbitration Act are being entertained. Therefore, we set aside the order of the District Judge dated 6.7.2017 and further state that the effect of Section 14(1) (a) is that the arbitration that has been instituted after the aforesaid moratorium is non est in law.”

 Thus the Court observed that after bare perusal of Section 14 of IBC it is clear that pursuant to a moratorium declared under Section 14 the institution of suits or proceedings against the corporate debtor is prohibited or continuation of a suit or proceedings. Further, execution of any judgment or order in any court of law, tribunal, arbitration panel or other authority is also prohibited. It was further observed that where a moratorium has been declared under Section 14 of IBC, the authority which in the instant case is SEBI/AO will have no jurisdiction to institute any proceedings. Where a proceeding has already been instituted and during the pendency of the proceedings a moratorium order is passed under section 14 then the authority is prohibited from continuing with the proceedings.

The Court held that in the instant case the moratorium kicked in when the petition was filed on November, 2019 under Rule 5(a)(i) of the Insolvency and Bankruptcy (Insolvency and liquidation proceedings of financial service provider and application to Adjudicating Authority) Rules, 2019 and thereafter it was admitted on 3-12-2019. The adjudicating officer issued notice subsequently on 24-12-2019. It is quite clear that the proceedings were initiated by the adjudicating officer after the moratorium had come into effect.

In view of the above, the impugned order of penalty is quashed and appeal allowed.[Dewan Housing Finance Corporation Ltd. v. SEBI, 2020 SCC OnLine SAT 162, decided on 09-10-2020]

Arunima Bose, Editorial Assistant has put this story together

Case BriefsTribunals/Commissions/Regulatory Bodies

Securities Appellate Tribunal (SAT): Justice Tarun Agarwal allowed the appeal and substituted the penalty imposed by the impugned order with a warning.

The facts of the case are such that the appellant in the instant case is National Highway Authority of India i.e. NHAI an autonomous body set up by the Parliament under ‘NHAI Act’. It is also listed on the Bombay Stock Exchange and National Stock Exchange and is subject to the provisions of the (Listing Obligations and Disclosure Requirements) Regulations, 2015 i.e. LODR Regulations, 2015. Regulation 52(1) of the LODR Regulations, 2015 mandates filing of the unaudited half-yearly financial results within 45 days from the end of the half financial year. An extension application under Regulation 102 of LODR Regulation 2015 was filed on two occasions with a  procedural fee of Rs 1 lakh pursuant to which SEBI asked for certain clarification which were given therewith yet the request was rejected. The appellants failing which, as there was a delay in filing the half-yearly financial results for the period ending 30-09- 2018 and 31-03-2019, has been slapped with a penalty of Rs 7 lakh by SEBI Board vide order dated 26-05-2020. Being aggrieved by the said order present appeal has been filed.

Counsel for the petitioners Rajesh Ranjan and Neeraj Matta submitted that the delay was a procedural delay which was beyond the control of the officers of NHAI as the NHAI body constituted under the NHAI Act mandates the composition to be from among the high level secretaries from the Union Ministries which makes it difficult for regular meetings to be convened due to lack of adequate quorum and it is also mandated under Regulation 4 of NHAI (Transaction of Business) Regulations, 1997 that no meeting of the Board would be legal or valid unless it was approved by two-third of the members failing which even after the financial results being ready on time it could not been signed and submitted/ furnished. It was further submitted that in view of Section 27 of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as the ‘SEBI Act’) no proceedings could have been initiated for imposing penalty under Section 15A of the SEBI Act unless and until the Officers in default were identified and prosecuted under Section 27 of the Act. It was also submitted that the extension application was rejected without giving proper reasons for doing so and hence is against principles of natural justice and Section 15 J was not taken into consideration before imposing penalty.

Counsel for the respondents Abhiraj Arora and Rashi Dalmia opposed the submissions by petitioners stating that the penalty has been imposed as per Regulation 52 of the LODR Regulations and there being no provision for relaxation, relaxation has not been granted and penalty imposed keeping in mind that such callousness has been shown by NHAI on previous 7 instances and thereby 7 Lakh has been imposed.

Regulation 52(1) “Financial Results.

52(1) The listed entity shall prepare and submit un-audited or audited financial results on a half yearly basis in the format as specified by the Board within forty five days from the end of the half year to the recognised stock exchange(s).”

 Regulation 102 “Power to relax strict enforcement of the regulations. 102.The Board may in the interest of investors and securities market and for the development of the securities market, relax the strict enforcement of any requirement of these regulations, if the Board is satisfied that: (a) any provision of Act(s), Rule(s), regulation(s) under which the listed entity is established or is governed by, is required to be given precedence to; or (b) the requirement may cause undue hardship to investors; or (c) the disclosure requirement is not relevant for a particular industry or class of listed entities; or (d) the requirement is technical in nature; or (e) the non-compliance is caused due to factors affecting a class of entities but being beyond the control of the entities.”

 The Tribunal stated that in the instant case penalty became leviable under Section 15A (b) of the SEBI Act as the unaudited half-yearly financial results were not filed within the stipulated period. The Tribunal observed that prosecution under Section 27 of the SEBI Act can be initiated against the Company and its Directors/Officers and persons responsible for the default but penalty proceedings can be initiated under Section 15A for non-filing of the financial results without taking recourse to Sec. 27 of the Act. However, there is an exception to the rule and exemption can be granted by extending the time to comply with the provisions Regulation 102 of the LODR Regulations. It was further observed that the Appellate Authority consists of senior government functionaries who are entrusted with multifarious functions in the Union Government and hence strict compliance must be subject to consideration for the extension of time under Regulation 102 of the LODR Regulations.

The Tribunal held that imposing 7 lakh as penalty without assigning reasons as well as the reason cited by the authorities that the amount so fined is due to his default 7 times is wholly arbitrary as not filing the financial results for the financial years 2015-2016 to 2018-2019 cannot be taken into consideration as a ground for imposition as the violation was only for non-filing of the unaudited half-yearly financial results for the year ending 30-09-2018 and 31-03-2019. The delay in the filing of the returns for the earlier financial years stood exempted and condoned by the respondent themselves which cannot be taken as a mitigating circumstance for the imposition of penalty.

The Tribunal also relied on judgment titled Adjudicating Officer, SEBI v. Bhavesh Pabari, (2019) 5 SCC 90 which held that the conditions stipulated in clause (a), (b), and (c) of Section 15-J SEBI Act, 1992 are not exhaustive and, in a given case, the AO can take note of other factors which are not specified in clause (a), (b), and (c) of Section 15-J of the Act. The Adjudicating Officer also could have taken into consideration the mitigating circumstances in addition to the factors mentioned under Section 15J while considering the imposition of penalty.

The Tribunal held that the Adjudicating Officer failed to take into consideration the mitigating circumstances as a factor under Section 15-J while considering the imposition of penalty.

In view of the above, the Court allowed the appeal and found the imposition of Rs 7 lakhs as unsustainable.[National Highway Authority of India v. Securities Exchange Board of India, 2020 SCC OnLine SAT 158, decided on 27-08-2020]

Arunima Bose, Editorial Assistant has put this story together

Case BriefsHigh Courts

Bombay High Court: A Division bench of Nitin Jamdar and Milind Jadhav, JJ., observed that there is no duty on the SEBI Board while considering an exemption application under Regulation 29 of the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014, to give a personal hearing.

Petitioner requested respondent– SEBI for a personal hearing regarding exemption application filed by it under a regulation governing employee stock options. Though SEBI Board refused the rest fro personal hearing.

Question in the present petition is:

Whether the Board is obliged to grant a personal hearing to the petitioner while considering an exemption application under the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014?

Answer for the above-stated question is — NO.

Facts and reasons in regard to the above-stated have been laid down.

An employee welfare trust named JK Paper Welfare Trust was formed by the petitioner.

On an earlier date in the year 2018, petitioner sought clarification regarding the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014. SEBI informed that the Regulations 2014 apply to the petitioner.

Petitioner sought relaxation from the applicability of Regulations under Regulation 29 of the Regulations of 2014, the SEBI empowered to grant relaxation for the strict compliance of the Regulations.

Securities Appellate Tribunal held that the SEBI had to give reasons in the order rejecting exemption application and hence tribunal directed the SEBI to pass a reasoned order within the set time limit.

Since the request for a personal hearing was refused, the Petitioner has approached this Court with a prayer that SEBI be directed to give an opportunity of hearing to the Petitioner in respect to its exemption application.

Counsel for the petitioner, Senior Advocate, Janak Dwarkadas and Rafique Dada, Senior Advocate for respondents — SEBI.

High Court’s decision

Relying upon Regulation 29, petitioner sought exemption from the strict compliance of Regulations 1(3), 1(4), 3(1), 26(2) and 31(2)(b)(i) and (ii).

Regulation 3 specifies the manner of implementation of the schemes.

Regulation 26 mandates certain conditions regarding the position of shares of the company.

Regulation 31 specifies certain compliances.

Regulation 29: Power to relax strict enforcement of the regulations

(1) The Board may suo motu or on an application made by a company, for reasons recorded in writing, grant relaxation from strict compliance with any of these regulations subject to such conditions as the Board deems fit to impose in the interests of investors in securities and the securities market.

(2) A company making an application under sub-regulation (1), shall pay a non-refundable fee of rupees one lakh by way of direct credit in the bank account through NEFT/RTGS/IMPS or any other mode allowed by RBI or by way of a banker’s cheque or demand draft payable at Mumbai in favour of the Board.”

The Petitioner’s first contention is that the Appellate Tribunal in its order dated 11 August 2020 held that the power under Regulation 29 is a quasi-judicial power and since it is a finding rendered in the litigation between the parties the same is binding on SEBI.

High Court rejected the above contention of the petitioner.

The second contention of the petitioner was that irrespective of the finding of the Tribunal, this Court should hold that the power under Regulation 29 is quasi-judicial power and therefore, a personal hearing is mandated.

Bench stated that the power to grant relaxation under Regulation 29 is a discretion to be exercised by the SEBI, and the conditions to be imposed are in the interest of the investors.

Refusal to grant an exception under Regulation 29 is not the origin of liability. Grant of exemption is a matter of exception from the general rule contained under the Regulations. In view of the said, the second contention was also rejected.

Next limb argument of the Petitioner was that, on looking at the consequences that would follow, whatever may be the nature of Regulation 29, in requirement of fairness, transparency and principles of natural justice, personal hearing be read into these provisions.

In Supreme Court’s decision of Sahara India (Firm), Lucknow v. Commissioner of Income Tax, Central-I, (2008) 14 SCC 151, it was observed that the requirement of giving reasonable opportunity of being heard is generally read into the provisions of a statute, particularly when the order has adverse civil consequences and this principle will hold good irrespective of whether the power conferred on the statutory body or the tribunal is administrative or quasi-judicial.

In the above-cited case, the Supreme Court observed that reading of requirement of personal hearing in a statute when there are consequences cannot be applied as a rule. It was also stated that no general rule of universal application can be laid down to the applicability of principle audi alteram partem in addition to the provision.

Regulations of 2014 are a code in itself. They regulate eployee stock option schemes in the larger interest of the onvestors.

Court stated that,

If SEBI finds that exemption need not be granted, it will give reasons for the same which can be tested in appeal. If the conditions are arbitrarily imposed or that the exercise is perverse, the validity can be challenged.

Petitioner’s argument which proceeds on the footing that the principles of natural justice in all circumstances include personal hearing which is not a correct position of law.

Power in question is a discretionary power and the use of this discretion can be challenged in appeal within the well-settled parameters. Full transparency is maintained by permitting written submissions providing reasons and the right to appeal.

The apprehension expressed by the SEBI that by reading duty to give personal hearing in this Regulation would have adverse ramifications on its working cannot be said to be unwarranted.

Functioning of SEBI will be hampered if the exercise of its every power is preceded by mandatory personal hearing, whether the regulation provider for it or not.

[JK Paper Ltd. v. SEBI,  2020 SCC OnLine Bom 1378, decided on 06-10-2020]

Case BriefsSupreme Court

Supreme Court: A Division Bench of Arun Mishra and Indira Banerjee, JJ., diluted certain adverse observations made by the Securities Appellate Tribunal (“SAT”) against the Securities and Exchange Board of India (“SEBI”) in para 20 of its order passed in Ashok Dayabhai Shah v. SEBI (Appeal No. 428 of 2019, dt. 14-11-2019).    

The matter relates to the disposal of the complaints filed by the minority shareholders of Bharat Nidhi Ltd. (“BNL”), PNB Finance & Industries Ltd. (“PNBF”) and Camac Commercial Co. Ltd. (“Camac”). These three entities together hold 47% shares in Bennett Coleman & Co. Ltd. (“BCCL”) commonly known as the Times Group, one of India’s largest media conglomerate. Vineet Jain and Samir Jain (“the Jains”) are the Managing Directors of BCCL. 

The minority shareholders had alleged that BNL, PNBF and Camac are under effective control of the Jains who also exercise control over BCCL by virtue of their ownership of the three above named entities and eight other entities who are shareholders of BCCL. The minority shareholders had filed approached SAT against SEBI alleging that since 2013, some of them have jointly or individually filed several complaints before SEBI urging it to investigate and take action in respect of two violations, namely: 

(i) Incorrect disclosures being made by BNL, PNBF and Camac regarding their promoter shareholding thereby failing to disclose the true promoters; and 

(ii) Consequently, failure by these companies to comply with Minimum Public Shareholding norms prescribed under applicable securities laws.    

The minority shareholders, in appeal before SAT, alleged that SEBI had time and again taken varying stands wherein it had either not responded to the complaints at all or adopted a position that investigation in the matter is underway or treated the complaints as market intelligence, without concluding such investigations or passing any reasoned order while disposing of the complaints filed by them. It was alleged that their complaints remained unaddressed except the complaints filed on the SCORES platform. The last complaint filed on 3-8-2019 on SCORES platform was disposed of by the order of SEBI against which the minority shareholders had preferred the appeal before SAT. 

Disapproving of the approach of SEBI, the SAT has held that the disposal of the complaints by SEBI on SCORES platform was no disposal in eyes of law. The written complaints made to SEBI from 2013 onwards had not been disposed of as yet but complaints filed on the SCORES platform had been disposed of without deciding/settling the issue that was raised in the complaints. This, according to SAT, was merely an eye wash. 

SCORES (SEBI Complaints Redress System) is an online platform designed to help investors to lodge their complaints pertaining to the securities market. These complaints are filed online with SEBI against listed companies and SEBI registered intermediaries. All complaints received by SEBI against listed companies are dealt through SCORES.

By the order against which appeal was filed by the minority shareholders before SAT, the SEBI had intimated to the minority shareholders that the information provided by the complainants would be treated as market intelligence and would also be treated as confidential. Why would the complaint be treated as market intelligence or be treated as confidential was not known, nor in SAT’s view the complaint was such which required SEBI to treat it as market intelligence or confidential. According to SAT, it was not a price-sensitive matter which required SEBI to keep such matters under wraps or confidential in nature. 

Finally, SAT had set aside the order passed by SEBI and directed the minority shareholders to file a consolidated complaint before SEBI which would then decide the matter by a reasoned and speaking order. 

However, while disapproving of the SEBI’s approach and setting aside the order passed by it, SAT made certain observations casting aspersions on the role of SEBI in disposing of the complaints. These observations were made in para 20 of SAT’s order, which is reproduced below:

20. We find the approach adopted by the respondents to be a strange one. Such computer-generated disposal of a serious complaint speaks volume on the conduct of the respondents in treating the minority shareholders in this shabby manner. It seems that the respondents have lost sight of the mandate provided to them under Section 11 of the SEBI Act which mandates SEBI to safeguard the interest of the investors. Disposal of the complaint in this manner in the instant case indicates non-application of mind and non-consideration of the interest of the investors. We have no hesitation in stating that the SEBI as a regulator in the instant case has not performed its duties and has kept the complaint pending for more than six years which speaks volumes by itself. The Tribunal fails to fathom as to why the complaint could not have been decided unless SEBI officials had a vested interest in not deciding the matter.” 

SEBI, aggrieved by the order of SAT, approached the Supreme Court. The Court heard Senior Advocate Chander Uday Singh appearing for SEBI and Senior Advocates C.A. Sundaram and Maninder Singh for the minority shareholders. 

The Supreme Court was of the opinion that certain observations made in para 20 of the impugned order passed by SAT were not called for, such as “the computer-generated disposal of a serious complaint speaks volume on the conduct of the respondents as well as the part of the order relating to “vested interest in not deciding the matter were not at all called for. It was observed by the Supreme Court that maybe there was some remiss on the part of SEBI to act as a regulator, but casting aspersion was not warranted in the facts and circumstances of the case. 

As such, the adverse observations against SEBI made by SAT in para 20 of its order passed in Ashok Dayabhai Shah v. SEBI (Appeal No. 428 of 2019, dt. 14-11-2019) were diluted. However, as the complaints were to be dealt by SEBI, the Court did not made any observation on the remaining part of the merits of the order passed by SAT in view of the limited relief pressed. [SEBI v. Ashok Dayabhai Shah,  2020 SCC OnLine SC 82, decided on 27-01-2020]

Op EdsOP. ED.

Supreme Court: The Court has ruled that administrative circulars issued by the Securities and Exchange Board of India (SEBI) cannot be challenged before the Securities and Appellate Tribunal (SAT).

The Supreme Court passed this judgment when it was hearing an appeal filed by SEBI against a SAT order in a case relating to National Securities Depository Ltd. (NSDL).


NDSL and SEBI were at odds over an administrative circular captioned ‘review of dematerialization charges’ issued in 2005, debarring the depository from levying fees/charges on rendering service to the investors who hold Demat accounts with the depository.  The grievance of the appellant (NDSL) was that it is a company and the law permits it to make profits and distribute the dividend to its shareholders. SEBI, without any justification, interfered with its functioning, NSDL had argued.

SAT in September 2006 had ruled that the term “order” in SEBI Act is extremely wide, and can be applied in all three types of orders— administrative orders, legislative orders, and quasi-judicial orders. Thus, it ruled in favour of NSDL.


SEBI challenged SAT’s verdict in the Supreme Court and secured a reversal. The Supreme Court, in the order passed on March 7, said that only “quasi-judicial” orders and decisions are a “subject of SAT”.

“Administrative orders such as circulars issued under the SEBI Act are obviously outside the appellate jurisdiction of the tribunal,” said the SC order.


The clarification and restriction to the scope of SAT will clearly bring down the number of cases before the Tribunal. One cannot approach SAT cause the same will now have jurisdiction only over orders passed by SEBI in a quasi-judicial capacity. [National Securities Depository Ltd. v. SEBI, 2017 SCC OnLine SC 256, decided on 07.03.2017]