SAT has a hard rap for SEBI's Whole Time Member, Asks another WTM to decide case
The Securities Appellate Tribunal (SAT) delivered a hard and embarrassing rap to a Whole Time Member (WTM) of the Securities and Exchange Board of India (SEBI) for its apathy and giving a run around to the appellant. SEBI has been also directed to pay Rs1 lakh as cost to the appellant. Although the SAT order does not mention the WTM's name, it is clear that the order was that of Rajeev Kumar Agarwal. He is one of the two WTMs at SEBI. "This appeal reveals the shoddy manner in which the directions of this Tribunal are dealt with by the WTM of SEBI," the Bench said says the order.
In its order on 15 July 2016
, the SAT Bench of Justice JP Devadhar, Jog Singh and Dr CKG Nair said, “If for any administrative constraints it was not possible to pass an order within the stipulated time, then the WTM of SEBI ought to have sought extension of time, which the WTM of SEBI has failed to do. Instead, the WTM of SEBI resorted to a totally impermissible mode of representing that an order has been passed when in fact no order was passed by him. In such a case, informing the party that an order disposing of the representation is already passed, without actually passing an order, is nothing but an attempt to mislead in the matter. We strongly condemn the irresponsible approach adopted in the matter”.
Kolkata-based Adventz Finance Pvt Ltd had filed a fresh appeal before the SAT, after being made to run around by SEBI and for not following directions from the Tribunal.
Earlier on 6 May 2016, the SAT had asked SEBI to hear representations of Adventz Finance and dispose the matter within seven weeks or by 24 June 2016. On 21 June 2016, the WTM gave an opportunity to Adventz Finance to be heard, but did not pass any order, as directed by the SAT.
When the matter came up for hearing on 7 July 2016, the counsel for SEBI orally requested an extension of time to pass an order, which was rejected by the SAT. The Tribunal then asked the appeal to be placed for admission on 12 July 2016.
During the hearing on 12th July, the counsel for SEBI submitted a letter dated 8 July 2016 and told the Bench that "the said letter contains the reasons on the basis of which the competent authority viz the WTM of SEBI has rejected the representation of the appellant."
On perusal of the letter, SAT found that it was not an order passed by the WTM of SEBI but only a communication issued by the Chief General Manager (CGM) of SEBI recording the gist of the order allegedly passed by the WTM. To allow SEBI to submit copy of order passed by the WTM, SAT adjourned the matter and posted it after lunch on the same. When no copy of the order was submitted, the SAT adjourned the matter to 13 July 2016.
On 13th July, the counsel of SEBI told the SAT that there is no order passed by the WTM of SEBI. The counsel for SEBI submitted that the letter dated 8 July 2016 was issued by the CGM based on the endorsement made by the WTM of SEBI on the office note put up by a junior officer (AM) of SEBI on 23 June 2016. The SAT then adjourned the matter to 15th July.
During the hearing on 15th July, the counsel for the market regulator submitted an affidavit filed by the CGM of SEBI. In the affidavit, the CGM stated, "...the WTM had instructed that a note be prepared and accordingly, a note was prepared and put up for approval of WTM on 23 June 2016. Along with the said note, draft letters to be sent out to the appellant were also placed before the WTM of SEBI. The note, as also draft letters, was approved by the WTM on 27 June 2016 and, accordingly, letter dated 8 July 2016 was issued to the appellant, thereby communicating the decision of the WTM of SEBI disposing off the representation of the appellant."
When asked by the SAT, the counsel for SEBI admitted that there was no order passed by the WTM in this matter. The Bench said, "Thus, it is evident that the WTM of SEBI permitted the Chief General Manager to issue a letter to the appellant that the representation made by the appellant has already been disposed off by the WTM of SEBI, when in fact no order was passed by the WTM of SEBI. Since the WTM of SEBI has not passed any order, we would have directed the WTM of SEBI who had heard the appellant on 21 June 2016 to pass an order immediately. However, we are informed that the said WTM of SEBI is travelling."
"In these circumstances, we quash the letter issued by the CGM on 8 July 2016 and direct SEBI to assign the matter to any other responsible WTM of SEBI who shall pass an order on the representation of the appellant within two weeks from today after giving an opportunity of hearing to the appellant. It would be open for such WTM of SEBI to hear the representation of the appellant as also the representation made by the Respondent No2 (Jai Annanya Investments Pvt Ltd) together and pass appropriate order," the SAT says.
The Tribunal further said, "Since we are distressed with the manner in which the WTM of SEBI has discharged his quasi-judicial duties which is highly detrimental to the interests of the securities market, we direct the registry to forward a copy of this order to the Finance Minister and also to the Chairman of SEBI for information."
The order seems to suggest that SEBI's senior most officials are operating without understanding the responsibility and gravity of their role as regulatory body and a quasi-judicial authority. It is surely a matter that needs the attention of the finance minister, the law ministry and the judiciary.