The Securities Appellate Tribunal (SAT) has never had such good luck. Last month, the presiding officer Justice N K Sodhi was granted an extension of ten-ure until he turns 68 years of age – effectively until end of November next year. Just prior to that, the SAT also got a new member P K Malhotra, former additional secretary, law ministry, which filled up a vacancy of nearly one and half years.
However, from the perspective of policy formulation, the government has squandered a great concurrent opportunity. At a time when the government is grappling with regulatory jurisdictional ambiguity, it could have used the SAT as a first step towards resolving role ambiguity by converting the SAT into a “financial sector appellate tribunal”, which could have become a quasi-judicial forum to resolve disputes between regulators.
The difference of opinion between the Securities and Exchange Board of India (SEBI) and the Insurance Regulatory and Development Authority (IRDA) over whether SEBI has jurisdiction over unit-linked insurance products (ULIPs) brought to the fore the policy challenges before the government. The government first took an embarrassing position by admitting in public that it was incapable of getting the two regulators to sit across the table and resolve issues, and announced that the regulators would approach an “appropriate court” to interpret the law. Later, in an even more embarrassing move, the government promulgated an ordinance that seems to have decided the issue of jurisdiction over ULIPs squarely in favour of the IRDA.
In doing so, the government had to rope into the scope of the resolution, a generic conceptual coverage of all regulators. Swift and firm opposition to the ordinance came from the Reserve Bank of India (RBI), which asserted its autonomy and argued that the government was encroaching upon its independence through this new law.
After much speculation about whether the government would let the ordinance lapse, the government has now tabled a Bill to convert the ordinance into an Act of Parliament.
In this very law, the government could have easily converted the SAT into a tribunal with wider powers and appellate oversight over various regulators. Instead of the government and its bureaucrats sitting in judgement over regulators who ought to be as autonomous as possible, a quasi-judicial body would have served the purpose better, and could have interpreted various legislation taking a holistic view – clearly the intent behind the ordinance.
The SAT is one of the best tribunals in the country, and right from its first member C Achuthan, it has enjoyed an excellent reputation of being a well-informed, reasonable and judicious tribunal. This tribunal could have easily been converted into a financial sector regul-atory appellate tribunal to hear appeals against regula-tory orders and decisions of the RBI, SEBI, IRDA and such other regulators in the financial sector.
Spats between regulators such as the stand-off between IRDA and SEBI could easily be resolved by exclusive reference to such a tribunal, providing an efficacious appellate remedy that could reduce the burden on writ courts all over the country. Appeal from the tribunal could lie directly in the Supreme Court on questions of law, as is currently the case under the SEBI Act.
In fact, not too long ago, the government had promulgated another ordinance ame-nding the Forward Contracts Regulation Act, which oversees commodity trading, to provide for appeals from decisions of the Forward Markets Commission, the commodities regulator, before the SAT.
This was a mature mea-sure, disregarding the difference in the ministry administering the two sectors and represented an attempt to leverage appellate knowledge of market regulation in one type of market and deploying it in another type of market. However, that ordinance was indeed allowed to lapse.
Installing a new appellate tribunal for every financial sector regulator too is avoidable since it would lead to multiplicity of appellate forums, each of which would act in a silo like the regulators under their jurisdiction.
Besides finding people to man so many tribunals can be a daunting task. The SAT itself has been languishing without a full strength since February last year when the last of its members retired. For several months, the tribunal was left with only the presiding officer holding office.
The force in the argument in favour of converting the SAT into a wider appellate forum is underlined by yet another factor. It is reported that government was keen to have Justice Sodhi as the Chairman of the Financial Sector Legislative Reforms Commission that is being constituted to reform various financial sector laws thanks to the experience and knowledge of the financial sector developed at the SAT. His extension as the SAT presiding officer having been notified, he chose to stay at the SAT. Enlarging the SAT into a financial sector tribunal would have been a wiser move.
(The author is a partner of JSA, Advocates & Solicitors. The views expressed herein are his own.) Email: somasekhar@jsalaw.com
