SAT's commendable role in finetuning the capital market
In the cases involving acquisition of Indian companies by foreign parties, the Tribunal clearly laid down that only the Indian law should apply and not the foreign law as was contended by SEBI. THE RETIREMENT of C. Achuthan, presiding officer of the Securities Appellate Tribunal (SAT), earlier last week brings to an end a period that saw continuous fine tuning of the operations of the capital market. This period also witnessed several initiatives being taken to provide a definite direction to the market regulator and the incoming team of SAT. When the Securities and Exchange Board of India (SEBI) Act was brought into force in 1992 the forum where SEBI's orders could be challenged was an appellate authority comprising government officers in the Finance Ministry. In 1995, when SEBI was given the power to impose monetary penalty, the SAT was set up to decide on appeals against SEBI imposed monetary penalties, leaving the appellate powers in other matters still with the Central Government. It was in February 2000 that even the remaining appellate powers of the Central Government were transferred to the SAT. The SEBI Act was amended in 2002 restructuring the constitution of the Tribunal to a three-member set-up though the prevailing one-member set-up was to continue till two more members were appointed. Mr. Achuthan was appointed presiding officer for a five-year period from November 1997. His term, extended by a year, expired on November 3 this year. After the amendment in 2000 the pressure and scope of work of the Tribunal increased substantially as many cases involving market manipulations and flouting of takeover regulations came up for consideration and Mr. Achuthan was single handedly deciding these appeals. Some of the more sensitive cases that came before him during this period were the appeals by Sterlite Industries, BPL, Videocon, Anand Rathi (stock broker), Grasim (Land T takeover), Wimco, Clariant, Gujarat Ambuja (on ACC shares), Herbertsons and the latest, Seamec. In most of these cases the SAT clearly laid down the law. The decisions in the cases of Herbertsons and Gujarat Ambuja have helped investors when SEBI had narrowly interpreted the provisions of the law or ignored the provisions of the law. Mr. Achuthan interpreted that Section 11(B) of the Act could not be used by SEBI for penalising market intermediaries. Virtually, this interpretation was accepted by the Government which suitably amended the law in 2002 empowering SEBI to issue directions having penal consequences. In the cases involving acquisition of Indian companies by foreign parties, the Tribunal clearly laid down that only the Indian law should apply and not the foreign law as was contended by SEBI. Thanks to the application of this principle in Seamec's case, the Indian shareholders became eligible to get around Rs. 250 per share as against Rs. 42 per share awarded by SEBI. While the market intermediaries and the investor public had no grievances against the SAT orders, SEBI was uncomfortable with many of the orders which criticised SEBI's approach. It is in this context the present SEBI Chairman's recent statement that ''every other order passed by SEBI is set aside by the Securities Appellate Tribunal and as such the SAT should be immediately restructured to make it a three member body'' assumes significance. According to SEBI's statistics, during 2002-03, the SAT had allowed 26 appeals filed against SEBI's orders and an equal number upholding the latter's orders. But against the 26 adverse orders SEBI opted to appeal against only three while there were two appeals against the 26 orders favourable to SEBI. Perhaps SEBI felt its appeals could not be sustained. Instead of blaming the SAT, SEBI should try to improve its own orders. In fact, market participants feel that the SAT with all its limitations has developed jurisprudence in securities market regulations. The market perception is that Mr, Achuthan looked at things from a practical point of view and decisions were made without fear or favour.There is hardly any topic of importance which Mr. Achuthan has not dealt with. He has given weightage to transparency in the functioning of the Tribunal. Certainly this will help the incoming team of tribunal members also. It appears from an analysis of Mr. Achuthan's orders that he was more concerned about the genuine interests of investors than SEBI. The fact that he had entertained appeal after appeal from individual investors aggrieved by SEBI decisions on substantial acquisition of shares or control of companies goes to show his concern for investors. Some of the Tribunal's orders were challenged in the Bombay High Court. In all those cases _ some of them related to BP plc, BP Amoco, Foseco, K.K.Modi and Harinarain Bajaj _ the court upheld the Tribunal's decisions. In the case of Nirmal Bang (stock broker) also, the Tribunal had exposed SEBI's sloppy investigation. Oommen A. Ninan in Mumbai