The Supreme Court on the SAT’s jurisdiction over SEBI Circulars

[Guest post by Amitabh Robin Singh, who is a corporate lawyer practising in Mumbai]
Last month, the Supreme Court of India (“SC“) in the case of National
Securities Depository Limited v. Securities
and Exchange Board of India
ruled that the administrative and
legislative orders made by the Securities and Exchange Board of India (“SEBI“) are not assailable before
the Securities Appellate Tribunal (“SAT“).
This controversy spawns from an administrative circular
which SEBI had issued in 2005 relating to the levy of dematerialization charges
by depositories and depository participants.
The SAT, by it judgement of September 2006, held that the
word “order” as used in section 15T of the SEBI Act, 1992 (“Act“) has not been defined and is
very wide and would include all orders of SEBI, regardless of the nature of the
relevant order.
Section 15T of the Act is reproduced below:
(1) Save as
provided in sub-section (2), any person aggrieved,-
(a) by an order of the Board made,
on and after the commencement of the Securities Laws (Second Amendment) Act,
1999, under this Act, or the rules or regulations made thereunder, or
(b) by an order made by an
adjudicating officer under this Act,
may prefer an appeal to a
Securities Appellate Tribunal having jurisdiction in the matter.
(2) ***
(3) Every appeal under sub-section
(1) shall be filed within a period of forty-five days from the date on which a copy of the order made by the Board
or the adjudicating officer, as the case may be, is received by him and it
shall be in such form and be accompanied by such fee as may be prescribed:
Provided that the Securities
Appellate Tribunal may entertain an appeal after the expiry of the said period
of forty-five days if it is satisfied that there was sufficient cause for not
filing it within that period.
(4) On receipt of an appeal under
sub-section (1), the Securities Appellate Tribunal may, after giving the
parties to the appeal, an opportunity of being heard, pass such orders thereon
as it thinks fit, confirming, modifying or setting aside the order appealed
(5) The Securities Appellate
Tribunal shall send a copy of every order made by it to the Board, the parties to the appeal and
to the concerned adjudicating officer.
(6) The appeal filed before the
Securities Appellate Tribunal under subsection (1) shall be dealt with by it as
expeditiously as possible and endeavour shall be made by it to dispose of the
appeal finally within six months from the date of receipt of the appeal.
The SC went on to analyse various subsections of
section 15T and other sections of the same chapter (VIB) of the Act in a light
which reflect that the legislature intended for this section to only permit
appeals from orders of SEBI which are passed in the exercise of its
quasi-judicial functions. A few of these are discussed below.
First, the SC referred to section 15M of the Act
which mandates that the presiding officer of the SAT be either a sitting or
retired SC Judge or a sitting or retired High Court Judge with at least 7 years
on the bench of a High Court. The SC inferred that these criteria indicate that
the intention was for the SAT to only hear appeals in relation to quasi-judicial
matters, due to the fact that the SAT will be under the charge of a member or an
erstwhile member of the higher judiciary.
The argument, which in my opinion, carries the
most force is the reading given by the SC to section 15T(3) of the Act. Section
15T(3) lays down that an appeal is required to be filed within 45 days from the
date on which a copy of the order is received by such person. The
SC here pauses and points out that administrative orders and legislative
regulations are not received personally by the particular aggrieved party. This
reading of the SC throws a great deal of light on what the legislature may have
been intending when it contemplated the appeal of “orders” passed by
The SC also went on to refer to section 15T(5) of
the Act which the requires that a copy of each order made by the SAT be
provided to SEBI, the parties to the appeal, and the concerned adjudicating
officer. The SC read the use of the terms “concerned adjudicating officer” and “parties to the appeal” to “obviously” only refer to
parties to a quasi-judicial proceeding. Hence the appeal can only lie from a
quasi-judicial proceeding and not from a matter stemming from an administrative
order or regulatory legislation.
Further, the SC went on to contemplate two similar
precedents: the first being PTC India Limited v. Central Electricity Regulatory Commission.
In this case, it was held that Appellate Tribunal for Electricity had no
jurisdiction to sit in appeal over regulations framed under the Electricity
Act, 2003. However, the order did go on to say that these are open to challenge
under the writ jurisdiction granted to High Courts under article 226 of the
Constitution of India.
Similarly, in the second case of Bharat Sanchar Nigam Limited v. Telecom Regulatory Authority of India and
it was held that the Telecom Disputes Settlement and Appellate
Tribunal had no jurisdiction to assail regulations framed by the Telecom
Regulatory Authority of India (“TRAI“)
under the TRAI Act, 1997, as they are legislative in nature.
The SC then discussed the case of Clairant International Limited and
Anr. v. SEBI
, and quoted the
following text:
Board is indisputably an expert body. But when it exercises its quasi judicial
functions; its decisions are subject to appeal. The Appellate Tribunal is also
an expert Tribunal.
Through this paragraph, it may
be implied that appeals from matters which are not in exercise of SEBI’s quasi-judicial
functions, will not be maintainable.
Looking at the above, the SC
concluded that administrative orders (such as in this case) are not within the
appellate jurisdiction of the SAT, however there is full liberty to challenge
the impugned circular in accordance with law.
This judgement of the SC will reduce the volume
of cases pending before the SAT by eliminating certain classes of cases
altogether. However, concerns have been raised as to whether the grey area
between administrative and quasi-judicial decisions may result in difficulties
for parties to appeal certain orders passed by SEBI.
Towards this end, the SC, its judgement, has
discussed what constitutes a quasi-judicial order. The SC relied on cases[1] that contemplated three
tests laid down to determine a quasi-judicial action in which are as follows:
(1) There must be
legal authority;
(2) This authority
must be to determine questions affecting the rights of subjects; and
(3) There must be a duty
to act judicially.
The SC then laid down that even if there is no lis between the parties, as long as the
three tests mentioned above are followed, the power conferred or exercised will
be quasi-judicial.
To shed further light upon the delineation between
administrative and quasi-judicial decisions by referring to the case of Shankarlal Aggarwala v. Shankarlal Poddar. While in this
judgement it was admitted that it is not always easy to distinguish between an
administrative and judicial order, it did opine that an order which is directed
to the regulation of or supervision of matters will be administrative, while an
order which decides the rights of parties, and requires the exercise of
discretion will be a judicial order.
Hence, as it can be seen, the SC has attempted
to throw light on the difference between administrative and
judicial/quasi-judicial orders as to minimize any disputes as to the nature of
an order. Such disputes may naturally arise now that certain classes of orders
have been precluded altogether from being assailed before the SAT. While this
decision should reduce the burden of cases brought before the SAT, it will be
interesting to observe how the jurisprudence on this further develops.
Robin Singh

About the author

Umakanth Varottil

Umakanth Varottil is an Associate Professor at the Faculty of Law, National University of Singapore. He specializes in corporate law and governance, mergers and acquisitions and cross-border investments. Prior to his foray into academia, Umakanth was a partner at a pre-eminent law firm in India.

1 comment

  • Dear Sri Umakanth
    I am indeed very happy to read to this information on ‘securities law’ very useful to me in my class rooms teaching of the subject. Long back I already had the same opinion about distinction between merely ‘administrative and judicial orders’ of the Courts. Thank you
    C. S. Raghu Raman, Asst. Professor Law Faculty, Hyderabad
    Telangana State

Top Posts & Pages


Recent Comments


web analytics

Social Media