Why Securities Appellate Tribunal needs to sort out its vacancy issues

The day was February 29, 2016. Then Finance Minister Arun Jaitley rose to deliver the Budget speech. As he reached the part focussed on financial sector reforms, he touched upon the subject of the Securities Appellate Tribunal (SAT)—the tribunal that has been set up to hear appeals against orders passed by key
regulatory bodies like the Securities and Exchange Board of India (Sebi), Insurance Regulatory and Development Authority of India (Irdai) and the Pension Fund Regulatory and Development Authority (PFRDA).

“I also propose to amend the Sebi Act, 1992, in the coming year to provide for more members and benches of the Securities Appellate Tribunal,” said the late Jaitley who was finance minister from 2014 to 2019. More than seven years have passed since the statement was made but till date no progress has been made on the announcement. There is just one bench of SAT in Mumbai that is manned by a presiding officer—a retired judge—and two members, one judicial and one technical. In fact, data shows that filling up vacancies at SAT has not always been high on the government’s priority list.

Currently, the tribunal is one member short as the tenure of Justice M.T. Joshi ended on February
3 and his replacement has not been announced yet. The bench currently has the presiding officer, Justice Tarun Agarwala, and technical member Meera Swarup, who belongs to the 1988 batch of the Indian Audit & Accounts Service.

Incidentally, the tribunal has remained headless for an extended period in the past. When presiding officer, Justice N.K. Sodhi, retired in November 2011, it took around 20 months for the tribunal to get a new presiding officer; Justice J.P. Devadhar assumed office in July 2013. Again, when Justice Devadhar’s
tenure came to an end in July 2018, his successor—the current presiding officer—was appointed only in
December that year.

Experts, meanwhile, believe that staff shortage at SAT—that, at times, leads to issues related to quorum—affects the pace of dispute resolution, which is also an important parameter for many foreign and global investors looking to invest in India.

“An efficient dispute resolution system with regulators like Sebi and Irdai is a key criterion for foreign
investment and regulatory registrations in India. The Ministry of Finance, and specifically its Department of Economic Affairs, needs to urgently address the challenges being faced by the SAT, including the
acute shortage of human resources and infrastructure,” says Sumit Agrawal, Founder, Regstreet Law
Advisors.

Despite these limitations, the SAT has maintained the quality of its judgements and efficiency, he says. “However, strengthening SAT’s functioning is crucial to properly regulating the securities market and protecting investor interests,” says Agrawal, a former law officer of Sebi. Incidentally, the vacancies at SAT and the ensuing issues that the tribunal faces have not gone unnoticed by the highest court of the land. In September 2018, the Supreme Court, while hearing an appeal filed by Quantum Securities, noted the fact that the tribunal was being manned by just a member with both the presiding officer and the other member missing. That was when only C.K.G. Nair, the technical member, was on the bench. “Unfortunately, a single technical member seems to be manning the Securities Appellate Tribunal, Mumbai. Section 15L of the Securities and Exchange Board of India Act, 1992 specifically states, in the proviso to sub-section 2(b), that every Bench constituted shall include at least one judicial member and one technical member,” stated
the apex court order.

More importantly, it made the government a party to the matter to know the status of appointments. “This Court wants to know as to when other Judicial and Technical Members will be appointed, which we hope will be done as quickly as possible,” it said while issuing a notice to the then Attorney General.

While establishing new benches of SAT might take time due to the various factors involved, the government might well speed up the appointment process and put in place a system so that there are no transitionary vacancies as the tenure details of all—presiding officers and members—are known well in advance.

The three-member bench being reduced to two has become a recurring affair and experts say it is time that the current regime that prides itself in improving the overall ease of doing business ecosystem in the country expedites and smoothens the process at SAT.

@ashishrukhaiyar