The Finance Ministry will have to work quickly, if the Securities Appellate Tribunal is to be kept alive. The three member quasi-judicial body is, by law, composed of a presiding officer and two other members, However, with the retirement of Justice Sodhi in November 2011, the Tribunal lost a Judicial Presiding Officer. Since then, the Tribunal has heard over 200 cases, including some high profile ones like the dispute between Sahara and SEBI, with member PK Malhotra holding officiating charge.
However, the lack of a Judicial Presiding Officer has cast a cloud over the validity of SAT judgments - the subject matter of an already pending public interest litigation.
Now, Malhotra has been appointed secretary of Legislative Department at the Law Ministry and to make matters worse, SSN Moorthy, the second tribunal member, will retire on December 27. This means there will be no one left to hear cases.
PR Ramesh, senior consultant, Eco Laws Practice says, "Now there are two members, and if one is leaving, under the rules, every order has to be signed by a PO and a member. Without two members, SAT cannot function. Procedurally every order has to be passed by the PO and the member. A one member tribunal will not be able to pass any orders."
The situation has capital market participants worried, but experts say aggrieved parties could seek recourse at the High Court.
Sandeep Parekh, founder, Finsec Law Advisors opines, "One could go to the HC and file a writ against SEBI orders. Since there is no statutory appeal, the HC would consider it for the simple reason that there is a vacuum at SAT. Therefore, there is no alternate or efficacious remedy available to the litigants."
New members will not solve the problem entirely. Experts say it could take months for the new officers to come to terms with the complexity of crime in the capital markets.
Parekh adds, "These posts are filled by people who don't have much experience. These gentlemen learn on the job how the markets work, how the crooks work. There is some learning that takes place over the first six to eight months, an upward learning curve even for the litigant because there is a person adjudication over the matter who doesn't quite understand the situation. It is clearly not the happiest situation with all three members being new to the tribunal."
New members will have to be appointed within a month, if the Tribunal is to keep functioning. Also, SAT already has a backlog of 50-60 cases. With the new consent process framework, SAT will have to hear more cases of insider trading and front-running, meaning the backlog could mount rapidly.
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