The Securities Appellate Tribunal (SAT) has said that its bench consisting of the presiding officer and a judicial member has the powers to hear matters even in the absence of a technical member.
The two-member bench has ruled that it has the authority to run the Tribunal, hear matters and pass orders, even in the absence of a technical member.
The issue came up after the Securities and Exchange Board of India (SEBI) raised objections to the absence of a technical member in the SAT. SEBI’s contention is that the Tribunal should not hear appeals till such time a technical member is appointed by the Central government.
SAT, which comprises judicial and technical members, hears appeals against decisions that SEBI takes as securities market regulator.
The Tribunal functions with a presiding officer, a judicial member and a technical member. However, the technical member demitted office on 31 March 2021. Since then, the bench of the Tribunal consists of the presiding officer and the judicial member.
The government had appointed CKG Nair (who has a doctorate in economics and market regulation) as a technical member with effect from 1 April 2016, and his five-year term ended recently. The other two members of the tribunal are former judges — former Bombay High Court justice MT Joshi and former Meghalaya High Court chief justice Tarun Agarwala who is the presiding officer.
“A reply has been filed by SEBI and one of the points urged is that this (tribunal)...is not properly constituted. A very serious ground has been taken and, therefore, it is necessary for the respondent to argue on this issue before we proceed to hear this matter on merits and any other appeals. We direct the matter to come up for consideration on this point on 7 May 2021,” said the order dated 6 May 2021.
SEBI has been emphatic that every SAT bench must have at least one technical member and since there is no technical member now, the constitution of the bench is defective and orders passed by the bench would be 'coram non judice'.
The contention of the regulator was driven primarily by the proviso to Section 15L(2)(b) of SEBI Act which stipulates that every bench must have at least one technical member as a mandatory provision.
SEBI raised a similar objection while filing their replies in other appeals. Hence, the bench said it has become imminent to decide this issue. Consequently, this Tribunal is now enjoined to rule its own jurisdiction, SAT said in the order.
"We are of the confirmed opinion that the functioning of the tribunal presently comprising of a presiding officer and a judicial member is not defective on account of non-availability of technical member and that the bench constituting the presiding officer and judicial member can proceed to hear and decide the appeals, etc which are filed before the SAT," the SAT order said.
Additionally, the Tribunalsaid it has resolved the issue but the permanent solution is that Central government should expedite and fill up the vacancy.
A fourth post of a technical member was created through a notification in May 2019. However, no steps have been taken by the Central government to fill up this vacancy, even though two years have elapsed.
SAT noted that the government was aware that the only technical member was going to retire on 31 March 2021. Despite this, no steps have been taken to fill up the post whereas such steps should have been taken at least a couple of months before the retirement of the technical member, it added.
While making amendments in the Act, care should be taken to resolve the discrepancy that may arise in the charging provision, the Tribunal said.
The Tribunal has requested the Central government"to fill the vacancies at the earliest and also recommend to make necessary amendments and resolve the discrepancy in the charging section to the proviso under Section 15L(2)(b)".
"Today, SEBI has raised an objection. Tomorrow, a private litigant would raise a similar objection. It would be a never ending process. This issue needs to be resolved on the judicial side as well," SAT highlighted in its order.
In a rare instance, SAT has directed its registrar to send a certified copy of this order to the secretary, ministry of finance, department of economic affairs, with a request to fill up the vacancies at the earliest and consider making appropriate amendments.
Further, a copy of the order will be sent to the secretary general of the Supreme Court of India with a request to place the order before the chief justice of India and, if desired, to treat this order as a public interest litigation (PIL) and resolve the issue on the judicial side so that the matter is resolved once and for all from the highest court.