The Securities Appellate Tribunal (SAT) has rapped the market regulator for the poor handling of investor complaints on its online complaints platform called SCORES (SEBI Complaints Redressal System) platform is a mere eyewash.
A set of investors had complained to the appellate body that the Securities and Exchange Board of India (SEBI) had simply converted their complaint into ‘market intelligence’ and refused to investigate or provide satisfactory information on action taken.
A SAT bench comprising Justice Tarun Agarwala, Dr CKG Nair and Justice MT Joshi, says, "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."
"We find the approach adopted by the respondents (SEBI) 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," the bench said.
The case is related with complaints filed by 22 minority shareholders of Bharat Nidhi Ltd, which held 24.41% stake in Bennett, Coleman & Co Ltd (BCCL) that runs Times of India newspaper among other publications and TV channels. PNB Finance and Industries Ltd (PNBF) and Camac Commercial Co Ltd, also own 9.29% and 13.30% stake in BCCL.
Several times, the minority shareholders filed complaints with SEBI and stock exchanges about incorrect disclosures on promoter shareholding by BCCL, PNBF and Camac.
SEBI 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.
The minority shareholders contended that BNL, PNBF and Camac are companies, which are owned and controlled by Vineet Jain, Samir Jain and their family members, who are the managing directors of BCCL, more commonly known as the Times Group. These shareholders also contended that the minimum public shareholding of 25% by a listed company was not followed by these three companies.
The minority shareholders further contended that both the Jain brothers "exercise total control over these three companies and are the ultimate beneficial owners of the company and have wrongly classified themselves as public shareholders of these companies which facts are so glaring but for the reasons best known, SEBI has turned a blind eye and has disposed of the complaints in a cursory manner".
In its submission, the Calcutta Stock Exchange told the bench that "this issue was submitted to SEBI, which prima facie showed that the three companies had violated the SEBI Listing Obligations and Disclosures Requirements (LODR), which provides for requirement of maintaining minimum public shareholding of 25% by a listed company (MPS Norms) and the company wrongly had shown it as public shareholders."
The respondents objected on using an order or communication from SCORES platform for filing an appeal. The bench, however, says, "If the complainants are aggrieved by the disposal of the complaint on the SCORES platform the said complainants have a right to file an appeal under Section 15T of the SEBI Act. We are further of the opinion that the computer generated communication by the respondent on the SCORES platform, even though it may be an administrative communication is nonetheless an order since it disposes of the lis (litigation) between the parties and disposes of the complaint and the issues raised by the complainants."
The bench observed that since 2013, these shareholders were filing complaints before SEBI and on the SCORES platform. While the complaints filed with SEBI are still pending, those on SCORES were disposed without deciding or settling the issue raised in the complaint. "...disposal of the complaints by the respondents on the SCORES platform is no disposal in the eyes of law. It is merely an eye wash without disposing of the complaints and without settling the controversy involved in the complaints," the SAT says.
According to the bench, complaints filed by the shareholders were of serious matter about incorrect disclosures made by three companies regarding their promoter shareholding and consequently failure of these three companies from complying with the minimum public shareholding requirement.
However, SCORES disposed the complaints by saying, "The information provided by you will be treated as market intelligence. This information shall be treated as confidential. This information will be analysed and if found necessary, further action will be taken. The status of information cannot be ascertained as SEBI conducts the investigations confidentially in a holistic manner. In order to aid SEBI to carry out its surveillance activity, you are encouraged to provide correct and complete information. SEBI will neither confirm nor deny the existence of any investigation. Any regulatory actions taken by SEBI are published at SEBI website."
The SAT bench was not too happy with this type of disposal of complaints by SCORES. It says, "Why would the complaint of the appellants be treated as market intelligence or be treated as confidential is not known nor in our view the complaint is such which requires SEBI to treat it as market intelligence or confidential. It is not a price sensitive matter which requires SEBI to keep such matters under wraps or confidential in nature."
"We also find it strange to note that SEBI in the said order / communication states that the information submitted by the appellants would be analysed and investigation would be made in a holistic manner but, on the other hand, in the same breath states that SEBI would neither confirm nor deny the existence of any investigation conducted by them. We find that before the Delhi High Court, SEBI informed that the matter is under investigation by them. We find it strange that while disposing of the complaint SEBI would neither confirm nor deny as to whether investigation in the complaint is going on or not," the SAT bench said.
While setting aside the SEBI orders on SCORES, the SAT asked the shareholders to file a consolidated representation before the market regulator within four weeks.
After that, the SAT says, "SEBI will consider and decide the matter by a reasoned and speaking order within six weeks from the date of the presentation of the complaint along with the certified copy of our order".
