Sebi circulars cannot be challenged in SAT, rules Supreme Court

In a move that might ease the judicial load on the market regulator, the Supreme Court has ruled that the circulars issued by the Securities and Exchange Board of India (Sebi) cannot be challenged before the Securities and Appellate Tribunal (SAT).

Circulars, which could be administrative orders, were not necessarily quasi-judicial and hence could not be appealed in SAT, the apex court said, while pronouncing an order in the case between Sebi and National Depository Services Ltd (NDSL).

SAT is a quasi-judicial body that hears appeals against orders given by Sebi.

“Administrative orders such as circulars issued under the present case referable to Section 11(1) of the (Sebi) Act are obviously outside the appellate jurisdiction of the tribunal … the preliminary objection taken before the SAT is sustained. The judgment of the SAT is, accordingly, set aside,” said the Supreme Court in the order on March 7.

NDSL and Sebi were in dispute over an administrative circular of 2005. The circular — captioned ‘review of dematerialisation charges’ — had asked the depository to amend its regulations. The circular was challenged by the depository in 2007. NSDL’s contention was that it was a company and could make profits and distribute dividends to shareholders within the bounds of the law. 

Sebi, “without any justification”, interfered in its functioning, NSDL had argued.  Moreover, NSDL had been debarred from levying fees or charges when it was giving service to investors who held demat accounts with it, it had stated.

Sebi has objected to NDSL’s position and contended that the “impugned circular” was “administrative in nature” and had been issued under Section 11(1) of the Sebi Act to protect the interests of investors.

SAT, however, turned down the regulator’s objection and said “the expression ‘order’ is extremely wide and there is being nothing in the act to restrict the appeal only against quasi-judicial order, as appeals would lie against all three types of orders under the Sebi Act, i.e. administrative orders, legislative orders as well as quasi-judicial orders”.