Dr SD Israni, advocate & partner, SD Israni Law Chambers, is one of India’s leading authority on corporate, commercial and securities laws. According to him, at present, the authorities at SEBI are given wide discretion for deciding on consent terms, which shows an urgent need to lay down the parameters for deciding the consent terms and the kind of cases that can be taken for consent orders
Moneylife (ML): The Securities and Exchange Board of India (SEBI) circular on consent orders has now been challenged in the Delhi High Court and its very validity is in doubt. Do you think the consent mechanism at SEBI works? Are there any corrective measures that you would suggest to ensure that consent is transparent, acts as a deterrent and does not seem to let off the guilty for a small price?
Dr SD Israni (SDI): Yes, the consent order mechanism of SEBI has been challenged in the Delhi High Court. It is an alternative mechanism for resolving the disputes. Despite the shortcomings, SEBI should be complimented for having introduced this scheme. The scheme has been established with the philosophy that any violation committed by a company or an individual, which is not of a high degree can be settled through consent orders. There is no point in going through long drawn litigation because in India, going through litigation itself is a punishment. However, there are no parameters laid down. Consent terms for same offences are determined on different scales by different officers.
Also consent terms can be filed at any point of litigation. There was a case filed using the provision of special leave petition (SLP) and was admitted by the Supreme Court (SC). The SLP was appealing on an order given by Securities Appellate Tribunal (SAT). Even at this stage, i.e. even after the case was being admitted by SC, a consent order was issued.
This shows an urgent need to lay down the parameters for deciding the consent terms and the kind of cases that can be taken for consent orders. At present, the authorities are given wide discretion for deciding the consent terms.
ML: Would you agree that there is dissatisfaction with SEBI's grievance redressal mechanism? There was a system earlier, which has recently been replaced by SCORES - another online redressal mechanism. But the feedback from investors and users about the new system remains negative. Would you agree with this perception?
SDI: There is a sense of dissatisfaction amongst a section of the aggrieved investors. SCORES is a new online redress mechanism put in place for solving disputes. But it is still in its nascent stage. We need to give it more time before we comment about its efficienacy.
ML: SEBI has often toyed with the idea of an Ombudsman, one the lines of the Banking Ombudsman and Insurance Ombudsman (both of which are working fairly well). Given the dissatisfaction with SEBI's grievance redressal mechanism, would you say that SEBI needs an ombudsman too?
SDI: Not really. Because in securities market the Ombudsman would have a limited role to play, unlike the insurance and banking industry. Reason being there are very limited issues that an investor can have. Perhaps an Ombudsman may be appointed to deal with matters like where dividends were not paid in due time. This may reduce the litigation and would be an efficient and an expeditious way to solve disputes.
ML: As someone who has studied SEBI regulations very closely, do you think that its investigation processes work? What is your view on the two lines of investigation/enforcement action that SEBI pursues a) Civil or Administrative actions and b) Criminal actions?
SDI: A lot is said about the investigation process of SEBI. In many cases, it has been observed that they remain silent on the investigations and have not taken a stand for years. This need to be mended, particularly in cases where an interim order is passed disallowing a person to do any transaction till the investigation is done suffers the most. To worsen the situation when there is no order there is no recourse to appeal as the investigation is not yet completed and no order is passed. At the most, an application may be made, which too may not be replied in many cases.
ML: Would you have any specific suggestions for improving investor confidence in the market?
SDI: SEBI needs to create a transparent grievance redressal mechanism. There is a perception that perhaps because of pressure from others it has dealt with same issues in a different manner. A uniform and transparent mechanism is urgently required. As a market regulator, SEBI should be more open and communicative.
ML: Have you had an opportunity to study the arbitration processes of stock exchanges? Why do you think most arbitration go against the retail investor?
SDI: We would need specific statistics to comment on this.
ML: Any other issues that you would like to highlight in the context of resolving disputes and building investor confidence in the capital market.
SDI: A lot can be done and needs to be done to improve the present mechanism for resolving disputes. Technology needs to be used at its best. It would reduce a lot of litigation if the companies credit the dividends directly into the investors’ account.
The initiative also needs to be taken by the investors. They should inform the companies in case if there is any change in their address.
SEBI should take an initiative to respond to the investigations as soon as possible and not only in the consent orders but also in its other order mechanisms like Adjudicating Officer's order or the Whole Time Member's order, there need to be parameters set so that orders issued are on same lines for similar cases.
(Dr Israni has over 36 years of experience in the field of corporate, commercial and securities laws. He was a member of the Naresh Chandra Committee for simplification of Company Law relating to private and small companies. He has been a member of the Legal Affairs Committee of the Bombay Chamber of Commerce and Industry, Indian Merchants’ Chamber and the Indian Council of Arbitration.)
In a notification addressed to all state and central co-operative banks, RBI said they are free to determine their savings bank deposit interest rate subject to conditions. Till now, co-operative banks were mandated to give 4% interest rates on such deposits. The rate was increased from 3.5%
Mumbai: The Reserve Bank of India (RBI) on Monday deregulated interest rate on savings accounts in all state and central co-operative banks, a move that will fetch better returns for depositors, reports PTI.
The apex bank had freed these rates for the scheduled commercial banks in October.
In a notification addressed to all state and central co-operative banks, RBI said they are free to determine their savings bank deposit interest rate subject to two conditions.
Under the first condition, the notification said, “Each bank will have to offer a uniform interest rate on savings bank deposits up to Rs1 lakh, irrespective of the amount in the account within this limit”.
The other condition states that for savings bank deposits over Rs1 lakh, a bank may provide differential rates of interest, if it so chooses.
This would, however, be subject to the condition that banks will not discriminate over the interest paid on such deposits, between one deposit and another of similar amount accepted on the same date, at any of its offices, it said.
Till now, co-operative banks were mandated to give 4% interest rates on such deposits. The rate was increased from 3.5%.
It also said interest rate on Non-Resident (External) accounts scheme and Ordinary Non-Resident Deposit under savings account, which has been prescribed at 4% per annum at present, will continue to be regulated until further review.