INSIGHT TO THE PROCEDURE OF THE SECURITIES APPELLATE TRIBUNAL BY: PALLAVI NAYYAR
AUTHORED BY:
PALLAVI NAYYAR
Email:
pallavinayar1304@gmail.com
Phone Number:
9911288361
Qualification:
LLM (BL)
Year: 2022-
2023
College: AMITY INSTITUTE OF ADVANCED LEGAL
STUDIES, NOIDA
Address:
430-Dhruva Apartment, 4-I.P.Extension, Delhi - 110092
ABSTRACT
Under the provisions of
Section 15K of the Securities and Exchange Board of India Act, 1992 a statutory
body was established by Securities Appellate Tribunal. This statutory body was
establishedto hear and also to dispose of appeals against the orders which was passed
by the Securities and Exchange Board of India or by an adjudicating officer
under the Act and to exercise jurisdiction, powers and authority conferred on
the Tribunal by or under are Act or any other law for the time being in force.
The scope of this
research article is to study and understand the procedure of the Securities
Appellate Tribunal and identify the problems in some cases. This research article
will cover limitation for filing the appeal, presentation and scrutiny of the
appeal, a notice of appeal to the respondent, date of hearing, the publication
of orders and communication of orders.
INTRODUCTIONOF SECURITIES APPELLATE
TRIBUNAL
a)
Establishment
Securities
Appellate Tribunal is the appellate authority for capital market decisions
taken by the SEBI.Under section 15K in the SEBI Act, 1992, the first Securities
Appellate Tribunal was established by the notification issued by the Central
Government. If more Securities Appellate Tribunal’s are needed then the Union
Government has the right to issue the notification in this regard.
According to section 15K[1] of
this Act :
·
Through
notification of Central Government, one or more Appellate Tribunals can be
established which will be known as the Securities Appellate Tribunal. It will
exercise the jurisdiction, powers and authority conferred under this Act or any
other law for the time being in force.
·
In
the notification, the Central Government will refer to the matter and places in
regards to which Securities Appellate Tribunal may exercise jurisdiction.
b)
Composition
According to section 15L[2] of
this Act, there will be
·
One
presiding officer
·
Two
other members – one should be a judicial member and the other a technical
member.
c)
Powers of Securities Appellate
Tribunal
Securities
Appellate Tribunal have the same powers that civil code is vested with under
Code of Civil Procedures, 1908.
·
To
enforce and summon the attendance of any person
·
To
examine him on oath
·
To
give order related to discovery and production of documents
·
To
obtainevidence on affidavits
·
To
issue commissions for examining the documents or witnesses
·
To
review Tribunal’sdecisions passed
·
To
dismiss an application for default
·
To
decide an application as ex-parte
·
Set
any order aside or dismiss any application for default or any order passed by
it ex-parte
·
Any
other matter which may be prescribed
d)
Procedure For filing appeals
1. A Memorandum of appeal shall be
presented in the form annexed to the rules by the Appellant either in person to
the registrar of the Appellate Tribunal within whose jurisdiction the person’s
case falls or can be sent by the registered post addressed to registrar.
2. Where the appellant is the company, a
memorandum may be preferred, -
§ By either one or more than one legal
practitionerswho are authorized by such company or
§ By any of the officers of such
company to act as a Presenting Officers and every person so authorized may
present the appeal before the Appellate Tribunal.
3. Where the appellate is other than a
company he may appeal in person or by his agent or by a duly organized legal
practitioner.
4. An appeal under sub-rule(1) sent by
post will be deemed to have been presented on the same day to the Registrar on
which it is received in the office of the Registrar.
5. The Appeal under sub-rule(1) must be
presented in four sets in a Paper Book.The Paper Book should be along with an envelope
bearing the full address of the respondent which is of the size of an empty
file and where the number of respondents is more than one, the sufficient
number of extra paper books together with empty file size envelope baring full
address of each respondent shall be furnished by the appellant. Presentation
and scrutiny of the memorandum of appeal.[3]
6. (1)The Registrar shall endorse on
every appeal the date on which it is presented under that rule and shall sign the
endorsement.
(2)If the appeal is found to be in
order on scrutiny, then it will be duly registered and will be given a serial
number.
(3)If the appeal is found to be
defective on scrutiny and the defect notice is formal in nature then the
Registrar in his presence willpermit the appellant to rectify the defect and if
the defect is informal in nature then the Registrar may allow the appellant to
rectify the defect at the specified time as he may deem fit.
(4)If the concerned appellant fails
to rectify the defect within the time allowed in sub-rule(3), the Registrar may
by order or for reasons to be recorded in writing, decline to register such
memorandum of appeal.
(5) An appeal under sub-rule(4), against
the order of the Registrar shall be made to the Presiding Officer concerned in
his chamber within 15 days of making such order, whose decision shall be
thereon final.
7. The memorandum of appeal shall be
filed with the Registrar of the Appellate Tribunal having jurisdiction in the
matter by the appellant.
SECURITIES APPELLATE TRIBUNAL
(PROCEDURE) RULE, 2000
a)
Limitation for filing the appeal
·
Within
the period of 45 days appeal should be filed before the tribunal.
·
The
45 days start from the day when the appellant will receive a copy of the order
against which the appeal is filed.
·
If
the appeal is not filed within 45 days, then Appellate Tribunal may if it
thinks that there exists a justified reason for not filing the appeal within 45
days, allow that appeal.
b)
Form and procedure of appeal
· A memorandum of appeal which shall be
presented in the Form can be presented by any aggrieved person in the registry
of the appellate tribunal.
· The memorandum of appeal must be
presented in the Appellate Tribunal within whose jurisdiction the concerned
case falls or shall be sent by registered post addressed to the Registrar.
· In case a memorandum of appeal is
sent through the post by the appeal, then it shall be deemed to have been presented
in the registry on the day it was received in the registry.
c)
Sittings of Appellate Tribunal
·
The
sitting of the Appellate Tribunal will be at the place where its office is
situated or some other place where the jurisdiction of the Appellate Tribunal falls.
·
When
the Presiding Officer is temporarily absent, the Government of India can
authorize either of the 2 other members to preside over the sitting of the
Tribunal either at its office where it is situated or at some other place where
the jurisdiction of the Appellate Tribunal falls.
d)
Appeal to be writing
·
Every
appeal, application, reply, representation or any document file before the
Appellate Tribunal should be typewritten, cyclostyled or printed neatly and
legibly.
·
It
should be typewritten on good quality paper of foolscap size in double space
and separate sheets should be stitched together. Every page should be
consecutively numbered and filled in a manner provided in sub-rule(2).
·
The
Appeal under sub-rule (1) shall be presented in 5 sets in a papers book along
with an empty file size envelope. This envelope should bear the full address of
the particular respondent, in case the respondent is more than one. It should
be provided along with asufficient number of extra books together with an empty
full-size envelope.
e)
Presentation and scrutiny of
memorandum appeal
·
The
Registrar will endorse the date on every appeal and will sign the endorsement.
The date mentioned will be one on which appeal was presented under rule 4 or deem
to have been presented under that rule.
·
On
scrutiny, ifthe appeal is found to be in order, it will be duly registered and
a serial number will be given.
·
The
defect can be rectified by the appellant in the presence of the Registrar if
permitted in the caseconcerning defect is formal and in nature but if the defect
is not formal in nature, the Registrar may give the appellant some time to
rectify the defect as he may deem fit.
·
If
the appeal has been sent by post and found to be defective, the Registrar may
communicate the defects to the appellant and give the appellant some time to
rectify the defect as he may deem suitable.
·
If
the appellant fails to rectify the defect within the time allotted by the
Registrar in sub-rule (3), the Registrar will pass an order which will provide
for reasons to be recorded in writing and may decline to register such
memorandum of appeal and communicate the order to the appellant within 7 days
from declining.
·
An
appeal under sub-rule (4), can be made within 15 days of receiving the
declining of the appeal by the Registrar. The appeal will be made to the
Presiding Officer or in his temporary absence, to the member authorized under
sub-rule (2) of rule 5 whose decision will be considered as final.
f)
Contents of the memorandum of the
appeal
·
Every
memorandum of appeal filed under rule 4 will be put down concisely under
different heads.
·
The
grounds of appeal will be passed without any argument or narrative.
·
The
concerned ground shall be numbered consecutively and shall be the manner
provided in sub-rule (1) of rule 7.
·
It
will not be required to present a separate memorandum of appeal to get an
interim order or direction if the above-mentioned ground is prayed for in the memorandum
of appeal
g)
Plural remedies
Relief
or reliefs not sought against memorandum of appeal against more than one order
unless the reliefs are prayed for are in consequence.
h)
Notice of appeal to the respondent
A
copy of the memorandum of appeal and the paper book should be given by the
Registrar to the respondent after they are registered in the registry. The copy
can be served by hand delivery or by registered post or speed post.
i)
Date of hearing to be notified
·
A
notification will be sent by the Appellate Tribunal to the parties regarding
the date ofhearing of the appeal.
·
It
will be done in a particular manner which will be provided by the Presiding
Officer.
·
By
passing a general or special order directed by the Presiding Officer.
j)
Hearing of Appeal
·
The
appellant will be heard in support of the appeal file, on the day fixed or any
other day to which the hearing may be adjourned.
·
After
this, the Securities Appellate Tribunal will, then, if it thinks necessary,
hear the Board or the representative authorized by the Board against the
appeal.
·
During the hearing of the Board or its
authorized representative presenting the arguments against the appeal, the
appellant will be entitled to reply.
·
The
written argument should be supplemented by a time-bound oral argument, during
the proceedings of the hearing of the appeal.
·
In
case the appellant is not present in person or through an authorized
representative when the appeal is set for hearing, the Securities Appellate
Tribunal may dispose of the appeal on the merits.
k)
Order to be signed and dated[4]
·
Each
and every order will be signed with the date by the Presiding Officer and 2
other members of the Appellate Tribunal.
·
The
authority and power to pass the interim orders or injunctions arepossessed by the
Presiding Officer.
·
In
the interest of justice, it is necessary for the interim orders or injunctions to
be subject to reasons, to be recorded in writing.
l)
Publication of orders
·
The
orders of the Appellate Tribunal will be released for publication if Appellate
Tribunal thinks that it is fit for publication in any authoritative report or
the press.
·
It
will be released for publication on certain terms and conditions laid down by
the Presiding Officer.
m)
Communication of orders
To
the following members a certified copy of each and every order passed by the
Appellate Tribunal shall be communicated:
Ø Board
Ø Adjudicating Officer
Ø Parties
CASES CONCERNING OF THE SECURITIES
APPELLATE TRIBUNAL
a)
Satyam Scandal of 2009[5]
In
September 2019, in the Satyam Scandal of 2009, the Securities Appellate
Tribunal turn down the ban that SEBI put on PwC for the global audit firm’s
role in the decade-old Satyam Scandal.
Facts:
Ø On January 7, 2009, the then Chairmen
of Satyam Computer Service, resigned confessing that he had manipulated the
various accounts in different forms.
Ø The global corporate company was also
part of the scandal. When the news of the Satyam Scandal spread,
PricewaterhouseCoopers (PwC) and the auditor of Satyam Computer Service, also
served as an independent auditor. The Indian arm of PwC in the US was also
sanctioned with a fine of $6 million by the US Securities and Exchange
Commission for not obeying the Code of Conduct.
SEBI put a ban on PwC as it provided
a helping hand in this scandal. But the Securities Appellate Tribunal ordered
SEBI to remove it because it had no authority or jurisdiction to ban PwC from
practising and the authority regarding it rests with the ICAI.
Critical Analysis: B. Ramalinga Raju
hid the true financial position to ensure that his business runs smoothly and
take over are at bay. He wanted to get more funds and built an estate. For this
purpose, he siphoned those funds in other areas like land holdings which were
estimated to about 7 crores and held in Matyas firm. He also did the same with
companies in Benami or in his own name. The gap between the fictitious assets
of Satyam and the real assets of Matyas was bridged by him. Some senior
management allowed certain employees to fake bills of the company which gave a
wrong scenario. The invoices warranted in companies system and was found around
5 crores worth of them were fake. The false invoices were forged as cash
receipts and hence they were false bank statements. Excel Portal was used for
hiding fake invoices, Satyam Project Repository was used to create project ids,
Project Bill Management System for generating Bills, operational real-time for creating
and managing fake receipts, invoice management system for creating fake
invoices all of these apps were used for fraud.
b) SEBI V. Sahara India Real Estate[6]
This case is regarded as the landmark
case with reference to the power and jurisdiction of SEBI in the case of
corporate fundraising. SEBI claimed that in the form of Optionally Fully
Convertible Debentures, Sahara India Real Estate Corporation Limited and Sahara
Housing Investment Corporation Limited claim to have collected deposit from the
public. 23 million people from villages and towns invested about 24,000 crores
rupees. In July 2015, in this case, SEBI cancelled Sahara MF’s registration
with the reasoning that it was not ‘fit and proper to carry out the business.
Further,on the order of SEBI, the operations were transferred to another fund
house. It also directed to cancel the registration of Sahara MF’s when the 6
month period had expired.
Sometime before SEBI cancelled the license
of portfolio management of Sahara. In pursuance of an order issued by SEBI,
Sahara MF approach the Securities Appellate Tribunal. The appellants were, the
Sahara Asset Management Co, Sahara Mutual Fund and Sahara India Financial
Corporation.
Securities Appellant Tribunal granted
6 weeks to the appellants to approach the Supreme Court.
After this, the Sahara MF filed an
appeal in the Supreme Court which was dismissed in October 2017 by the apex
court. Sahara MF was directed by SEBI to strictly obey the specified timelines
in the order passed in July 2015. But the Securities Appellant Tribunal allowed
Sahara to withdraw its appeal and to file a fresh appeal as it has the liberty
to do so.
The decision of the case: The Hon’ble
Supreme Court ordered Sahara to refund the entire deposits collected by it
through Red Hearing Prospectus at an interest rate of 15% till the date of
refund. It also authorized SEBI to take legal recourse in case the appellant
i.e. Sahara fails to comply with the said order.
Critical Analysis: As per my
observation the Supreme Court is justified from all perspectives as it
emphasized the fact that how Sahara tried to defeat the provisions of various
acts like SEBI Act, 1992, Companies Act, 2013 and jeopardized the lives of
investors of lower strata of society who barely earned amount to keep their
body and soul together. It gambled with lives of illiterate people who
practically have no or little idea of the financial position of a company and
so are ambiguous about harnessing the opportunity to make benefit out of
schemes like OFCD which needs knowledge about the performance of the company
and also about the basic knowledge regarding proper time to turn debentures
into shares which will be profitable to them. These investors are not aware of
the risk which comes along with these schemes and due to ignorance invest
money. The decision of the Supreme Court in every respect will major precedent
which will act as a deterrent for them not to involve themselves in such
schemes.
CONCLUSION
SEBI is the prime regulator of the
Securities Market and if it fails to satisfy the company or organization
through its regulation, then the person can file an appeal in the Securities
Appellant Tribunal. Securities Appellant Tribunal works to mitigate the
problems arising out of the orders of SEBI since 1995. In many cases,
Securities Appellant Tribunal has proved to check for the accountability and
answerability of SEBI.
In stock markets, the
exchange of shares is taking place. In total in India there are 23 stock
exchanges which are being regulated by the Securities and Exchange Board of
India (SEBI). In India, SEBI is the principal regulator of the stock exchange.
Any suit or proceedings can
not be entertained in Civil Court which has jurisdiction to, in respect of any
manner which an Adjudicating Officer appointed under this act is empowered or
under this Act to determine and no injection shall be granted by any court or
other authority in respect of any function taken or to be taken in accordance
with any power conferred by or under this act.
For insurance and all
instruments traded on the stock or commodity exchanges, the Government is
considering a common appellateauthority. It comes after the formation of the
Financial Stability Development Council, which is a statutory body coordinating
the functioning of financial market regulators.
[1]Section 15K of SEBI Act, 1992 is
dealing with establishment of Securities Appellate Tribunal [https://indiankanoon.org/doc/1583906/]
[2]Section 15L of SEBI Act, 1992 is
dealing with composition of Securities Appellate Tribunal [https://indiankanoon.org/doc/765466/]
[3]CHARTERED
SECRETARY, VOL XLIII (NOVEMBER 2013) www.icsi.edu/WebModules/LinksOfWeeks/CS_NOV2013.pdf
[4]Substituted by the Securities
Appellate Tribunal (Procedure)(Amended) Rules, 2003 w.e.f. 31-10-2003.
[5]CS
Alok Singh , Investor Project : A Critical analysis with Satyam Fraud (November
26, 2009) https://www.caclubindia.com/articles/investor-protection-a-critical-analysis-with-satyam-fraud-3763.asp