Officials at the Securities and Exchange Board of India (Sebi) are miffed at the way that the Securities Appellate Tribunal has overruled its order on Sterlite Industries Ltd and are apprehensive that it will trigger off a whole lot of appeals from various aggrieved parties, thus undoing the work put in by the regulator over the last few years and especially in recent months.
The markets regulator would take a decision on moving the high court on Monday next, the official said.
The ruling against Sterlite in the current case also means that its buyback programme can go through. Further BPL, Videocon - who were barred from accessing the capital markets on the same grounds as Sterlite - can now also hope to expect a reprieve. "We are expecting SAT to overturn our ruling in all the cases," a senior Sebi official said.
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However the biggest fear of Sebi arises from the fact that SAT in its observations has noted that the provisions of Section 11(B), under which almost all its actions are taken - "does not even remotely empower Sebi to impose penalties."
The tribunal went so far as to say that Sebi itself had taken the view "that Section 11B is not a penal provision, but preventive and remedial in its application."
A senior official in Sebi fumed, "If that is the case then we cannot mete out punishment to anyone guilty of violations in the stock markets." According to him this interpretation of the section would be taken as a talking point by all those who have thus far been indicted by Sebi as responsible for the market crash in March this year. "We will have no defence against them." The fear is that Anand Rathi, Shankar Sharma, Nirmal Bang, Credit Suisse First Boston, all of whom have been barred from the markets, will again go in appeal before higher courts and cite the current ruling as a precedent.
With regard to SAT's observations that the evidence was not sufficient to establish a link between the Damayanti group and the company or that it had indulged in market manipulation the official pointed out that as a regulator it had to go with the evidence available. "A quasi-judicial authority such as ours can take action based on circumstantial evidence," he said. "If we wait for conclusive evidence then we can never take action."