Sebi accelerates proceedings on pending cases to clear massive backlog

Moneycontrol News

The Securities and Exchange Board of India (Sebi) is fast-tracking the process of passing adjudicating orders to clear backlog of pending cases, the Business Standard reported.

Most of the cases have piled up owing to the regulatory body’s uncertainty regarding its power to enforce discretionary penalty. But the Finance Bill 2017 has been a catalyst for Sebi to start passing orders.

As part of fast-tracking the resolution of cases, Sebi has also increased the number of adjudicating officers (AOs) from 5 to 11, a source told the newspaper.

RS Loona, Managing Partner of Alliance Law, said additional AOs would help in clearing the backlog created in the Roofit case.

In the Roofit Industries case, the Supreme Court had said in November 2015 that Sebi had no discretionary power under Section 15J of the Sebi Act, 1992, to reduce penalties imposed on companies.

The SC judgment led Sebi to pass several judgements imposing penalties worth crores of rupees. This caused the Securities Appellate Tribunal (SAT) to remand a number of matters back to the market regulator and several appellants to withdraw appeals fearing higher penalties.

Although, additional AOs could also accelerate the procedure of passing orders, the process of disposal would only get a push if Sebi stressed on settlement of proceedings too, Loona added.

Sebi itself had filed for a review of the Roofit judgment before the apex court last year. But the two-judge bench disagreed on the matter and referred it to a larger SC bench while escalating the ambiguities. Finally, the 2017 Finance Bill cleared the confusion regarding Sebi’s power over deciding the quantum of penalty imposed on companies.

The backlog of pending cases is conjured up mostly by offences committed between October 2002 and September 2014, as parts of the Sebi Act were amended and came into effect in September 2014.

According to experts, Sebi should recruit even more AOs. Some suggest that the regulatory body could also disclose showcause notice date along with hearing dates on the Sebi website, so that the adjudicial proceedings follow a strict time period.