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No beating about the bush.
Justice JS Verma says such quasi-judicial orders can only be reviewed and quashed “by a judicial forum with requisite jurisdiction, at the instance of a petitioner with standing to seek relief.”
Justice JS Verma, former Chief Justice of India and one of the most respected names in the judicial world, has said that the SEBI (Securities and Exchange Board of India) board of directors cannot simply declare the order of the Mohan Gopal-V Leeladhar bench as ‘non est’ or null and void and the orders will continue to stand, unless challenged in a judicial forum by the appropriate petition. Such quasi-judicial orders, he said, can only be reviewed and quashed “by a judicial forum with requisite jurisdiction, at the instance of a petitioner with standing to seek relief.”
This refers to SEBI’s indictment of the National Securities Depository's (NSDL) role in the IPO scam of 2006 when NSDL was headed by the current SEBI chairman, CB Bhave. This was followed by a one-year effort to bury the orders of the Gopal-Leeladhar bench. Finally, under pressure from a public interest litigation filed in the Andhra Pradesh High Court, the SEBI board met and was forced to release the three orders of the Bench into the public domain; but the Board sought to kill the application by declaring that two of the orders were void or 'non est' since the Bench had gone beyond its brief in criticising the regulator itself. It also decided at the same meeting that the full SEBI board will review the NSDL issue and decide on it.
The opinion by Justice Verma is an important development, just as the SEBI board is set to meet on 22nd December under the chairmanship of Infosys director Mohandas Pai and will, in all probability, give SEBI a clean chit. Justice Verma is not known to give legal opinions or arbitration matters commercially; this opinion is hence a reflection of his strong views on the issue. According to him, “The recent decision of the SEBI board to review and declare as 'non-est' two quasi judicial orders of SEBI violates established legal and Constitutional principles. These quasi judicial orders may be reviewed only by a judicial forum with requisite jurisdiction, at the instance of a petitioner with standing to seek relief.”
Justice Verma further says, "The decision to declare these quasi judicial orders as void is meaningless in any absolute sense. Its meaning is relative, depending upon the courts' willingness to grant relief in any particular situation. Even if a decision is 'void' or a 'nullity', it remains in being unless and until some steps are taken before courts to have it declared void. Lord Radcliff said in Smith v/s East Ellse, 1956 A.C. 736 at 769."
In fact, according to the learned judge, "An order, even if not made in good faith, is still an act capable of legal consequences. It bears no brand of invalidity upon its forehead. Unless the necessary proceedings are taken at law to establish the cause of invalidity and to get it quashed or otherwise upset, it will remain as effective for its ostensible purpose as the most impeccable of orders.
“The necessity of recourse to the court has been pointed out repeatedly in the House of Lords and Privy Council, without distinction between latent and patent defects. Supreme Court of India has taken the same view.
“The order would be presumed to be valid unless the presumption was rebutted in competent legal proceedings by a party entitled to sue.
“The court will invalidate an order only if the right remedy is sought by the right person in the right proceedings and circumstances. The order may be hypothetically a nullity, but the court may refuse to quash it because of the plaintiff's lack of standing … or for some other legal reason. In any such case, the 'void' order remains effective and is, in reality, valid. (see pg. 341-344, Administrative Law, 7th Edn., by Wade and cases in footnote).
“All official decisions are presumed to be valid until set aside or otherwise held to be invalid by a court of competent jurisdiction (de Smith, 5th Edn.- See Chapter 5-048 at pg. 259-260 and cases in footnotes 17&18).” (emphasis is Justice Varma's)
On a broader note, Justice Verma starts his succinct two-page opinion by expressing concern at "executive interference in the independence and integrity of the judicial process" which, he says, is a "central requirement for upholding the rule of law".
Justice Verma further says, "The rapid expansion of the power and jurisdiction of quasi judicial bodies raises new challenges in this regard. Great caution is called for on the part of the Government, the judiciary and society to ensure that the independence of quasi judicial bodies is fully protected and that executive power is not misused to interfere with their decision-making, their independence and their integrity. It is essential to ensure that quasi judicial orders should not be subject to review or interference by executive authorities that have neither the power nor the requisite expertise to review, alter or nullify quasi judicial orders. Quasi judicial orders should be subject to review only by lawfully authorised tribunals or by courts, based on well established principles of law."
Moneylife Digital broke the news last week that SEBI was all set to hold a board meeting on 22nd December at which the NSDL had been called for a hearing. Incidentally, SEBI's actions are apparently based on a legal opinion by C Achuthan, former presiding officer of the Securities Appellate Tribunal (SAT), who is a director on the board of the National Stock Exchange (NSE)—a SEBI-regulated entity which is the promoter and major shareholder of the NSDL.
For the text of Justice Verma's opinion Click Here
There would be more efficiency in the listing process, if the time taken for processing an IPO application can be reduced
In a bid to bring in more efficiency in the primary market, market regulator Securities and Exchange Board of India (SEBI) on Wednesday said that it wants to bring down the time required for initial public offer (IPO) processing to seven days from 20 days at present over the next one year, reports PTI.
This would mean that the time taken for processing an application for an IPO will be lesser, which will bring in more efficiency to the listing process.
"The listing time should come down from 20 days to seven days. The primary market is somewhat inefficient compared to the secondary market," SEBI chairman CB Bhave said at a conference in Mumbai.
However, while doing so, the timely settlement of transactions will become the biggest bottleneck to the system, which needs to be addressed, Mr Bhave said.
SEBI has requested the Reserve Bank of India (RBI) to allow clearing entities to have an account with the central bank, Mr Bhave said.
With a view to bring in more transparency, SEBI had introduced Application Supported by Blocked Amount (ASBA) process in the IPO process and is looking at making it applicable to retail investors as well, Mr Bhave said.
The ASBA allows releasing an applicant's money only if the allocation is made. If ASBA process becomes popular, SEBI would like to reduce the IPO allotment period to five days, Mr Bhave had said earlier.
Earlier in August, the market regulator had issued a circular that said that changes in sections like any material development in risk factors, an aggregate increase of 5% or more of the shareholding of promoters, change of more than 10% in the estimated issue size or estimated means of finance, change of more than 10% in estimated deployment of funds, among others, as reasons required for fresh filing of draft offer document with the board. According to media reports, some merchant bankers felt that the directives from SEBI related to updations in the offer documents for initial public offerings, would make the process as tedious as filing a fresh offer document.
The move came after SEBI observed that in some cases material changes informed by merchant bankers resulted in major deviations from the draft offer document that was available in the public domain and called for fresh scrutiny and processing of the draft offer document by the SEBI board.
At present, it takes around two weeks for allocation of public issues and around three weeks for them to be listed after they close.
-Yogesh Sapkale [email protected]
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