The Hindu Business Line : This SAT can't stand

IT IS reported that the two-member board of the Securities Appellate Tribunal (SAT), comprising Dr B. Samal and Mr N. L. Lakhanpal, has started taking up appeal matters and passing orders, including interim ones, despite clear-cut legal provisions to the effect that SAT must consist of two members and a presiding officer, all of whom must pass an order either concurring or differing with the views of the presiding officer. In this context, a little backgrounder should be of interest.

Section 15K empowers the Central Government to establish SAT to exercise the jurisdiction, powers and authority conferred on such tribunal by or under the SEBI Act.

The Central Government has issued two notifications, GSR 854 (E) and GSR 855 (E) of October 30, 2003, appointing Dr B. Samal and Mr N. L. Lakhanpal respectively as SAT members. These appointments, however, suffer from some serious legal infirmities.

Section 15L talks of composition of SAT. It clearly spells out that "SAT shall consist of a presiding officer and (emphasis provided) two other members. Proviso to the said section empowers the single member SAT to continue to exercise the jurisdiction, powers and authority conferred on it till two other members are appointed" under this section.

It does not require any legal acumen to understand the the language used. It is abundantly clear that the constitution of SAT has to necessarily have a presiding officer and two other members. Any appointment of members without a presiding officer is, therefore, outside the purview of the Act. This view is further strengthened by the fact that the scheme of the Act does not have any provision for appointing benches consisting of lesser members nor is there any provision for a minimum quorum. Therefore, it was clearly the intention of the legislature to have a three-member panel for taking up appeals against the orders passed by SEBI. Such a position cannot be diluted.

Qualification not satisfied

Another ground to support the improper constitution of SAT is the contravention of Section 15M. Whilst the presiding officer has to be a sitting or retired judge of the Supreme Court or a sitting/retired Chief Justice of a High Court, the members should be persons of ability, integrity and standing who have shown capacity in dealing with problems relating to the securities market and who have qualification and experience in corporate laws, securities laws, finance, economics or accounting.

The notification says that one is a retired banker and the other is a retired secretary in the Ministry of Home Affairs. It will be far-fetched to suggest that the two persons, by virtue of their previous postings, have shown capacity in dealing with problems relating to securities market

Shelter

It may be argued, on the other hand, that under Section 15R no order appointing any person as presiding officer or member of SAT shall be called in question in any manner, and no act nor proceedings before SAT shall be called in question on the grounds merely of any defect in the constitution of SAT. On a plain reading of this section it is clear that this alibi will not be available, as the Section 15H requirement was ab initio not fulfilled, not by an act of omission or commission but with full knowledge.

Mockery of justice

Under Section 15 Z of the Act, persons aggrieved by the orders/decisions of SAT will have a right to appeal before the Supreme Court. It will be a travesty of justice if the apex court were to adjudicate a decision/order passed by a tribunal comprising solely of non-judicial members. The apex court has, on the very same grounds, already passed strictures against the Central Government order appointing a chairman of the Competition Commission who is not a judicial member.

Paradoxically, this is in violation of Sub-rule (2) to Rule 5, which permits "in the temporary absence of the presiding officer, the government may authorise one of the two other members to preside over the sittings of the tribunal."

In the instant case, presiding officer has not been appointed at all, nor is one aware of any government notification to the effect. Rule 18, as amended by notification dated October 31, 2003, mandates that every order of SAT shall be signed and dated by the presiding officer and the two other members. Under the said Rule, powers are conferred only on the presiding officer to pass an interim order or injunction. Conversely, SAT, constituted without a presiding officer, can in no way pass an interim order or injunction. The acts of SAT are, therefore, without legal backup.

In sum, the constitution of SAT is in disregard of Section 15L. The two members appointed under the said section are not legally competent to pass any order, not to speak of interim orders. Will those charged with powers to administer the Act sit up and take notice.