The Securities Appellate Tribunal (SAT) has reprimanded the market regulator for suggesting that the former does not have any jurisdiction in matters related to the National Company Law Tribunal.

This was in the matter of LML, a company which is under liquidation and whose shares in VCCL, a company in which LML is a promoter, were frozen by BSE.

SEBI’s senior counsel submitted that the liquidator has a right to proceed under Section 52 of the IBC to recover and realise any company security under liquidation and that IBC would prevail over SEBI laws. However, he contended that the appropriate forum for adjudication of the present dispute was before NCLT and that no other forum had jurisdiction to entertain or dispose of any such application by or against a corporate debtor.

“SEBI is taking a technical or rather hyper-technical objection in urging that this Tribunal does not have any jurisdiction... We find it very strange that the intention of the respondent is not to resolve the issue but to keep it lingering and waste time of the courts and money of the public exchequer,” Presiding Officer Justice Tarun Agarwala said in the 13-page order dated August 29.

Given the interpretation of Section 60(5) of the IBC and the Supreme Court decision in Gujarat UrjaVikas Nigam (supra), the jurisdiction of the Tribunal is not ousted, the order said.

SAT unhappy

This is the third instance in less than two months where SAT has passed adverse remarks against the regulator. SAT recently expressed its dissatisfaction over the eight-month long period for investigation in the Zee Entertainment matter. In July, SAT levied a penalty of ₹10 lakh on SEBI for not registering and hearing the complaint of an investor despite its earlier 2021 order.

“SEBI, while carrying out it’s quasi-judicial functions, should take off its regulatory hat and presume that the entity it is adjudicating upon is innocent,” said Anil Choudhary, Partner, Finsec Law Advisors.

He believes SEBI needs to hire officials who only carry out quasi-judicial functions, and are not given any other functional role in the organisation. “This would go a long way in providing more independent and balanced decisions,” he said.

“SEBI should avoid unnecessary delays in taking action on violations brought to its notice and in complying with directions given by SAT. It needs to ensure that the action taken by it does not appear disproportionate to the violation alleged,” said Pradyuman Dubey, Partner, DSK Legal.

Last financial year, SAT took note of the backlog of cases pertaining to illiquid stock options at SEBI and issued directions to devise a scheme to settle such cases. This prompted the regulator to introduce Settlement Scheme-2022, which resulted in the settlement of proceedings by 10,981 entities.

“SAT, as an appellate body, has always attempted to keep checks and balances on the powers of SEBI. SEBI should focus on following the settled principles of law and adopt practices to create a subordinate legislation governing its enforcement,” said Utsav Trivedi, Partner, TAS Law.

An email sent to SEBI did not get an immediate response.

New appeals up

The number of new appeals filed against SEBI before SAT rose to 1,192 at the end of FY23 — 53 per cent higher than the 780 appeals filed the previous year.

The number of disposals by SAT rose to 1,131 from 715 the previous year. Of this, 606 appeals were dismissed (ruled in favour of SEBI), 178 appeals were allowed (ruled against SEBI) and 201 appeals were remanded for fresh consideration.

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