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SC upholds Sebi supremacy over unregistered cos

Posted on 22 April 2009,    
 10428 Views   Share Report

Author : Rakesh Bhatnagar/DNA

Says SAT has no discretionary power on issues under Sec 12(1) of Sebi Act

The Securities and Exchange Board of India (Sebi) won a crucial judgment in the Supreme Court against the Securities Appellate Tribunal (SAT), which has many a time set aside its orders.
The SC on Tuesday held that the tribunal cannot set aside orders passed by Sebi under section 12(1) of the Sebi Act. The section provides for the compulsory registration of stock brokers, sub-brokers and other entities dealing with the securities markets.
Following this judgment, if Sebi cancels the license to trade issued to a broker on the charge of violations of the Sebi Act or imposes a heavy penalty under this provision, SAT can't modify or quash the decision.
The apex court's decision came in a Sebi appeal against SAT orders over two cases involving dealing of registered brokers with certain unregistered entities.
Sebi had invoked section 12(1) in these cases. The penalty provided for violation of this section is either suspension or cancellation of the certificate of registration. The section does not provide for monetary penalty or any other smaller punishment.
SAT had modified Sebi's orders in both the cases and awarded lesser penalty. The tribunal held that the proved charges against the respondents were not serious enough to warrant suspension.
Sebi moved the apex court raising the question of whether SAT is empowered to modify the penalty imposed by it in such cases.
Allowing Sebi's appeal, a bench of Justices Arijit Pasayat and Lokeshwar Singh Panta held that the tribunal had no business setting aside these orders. "No power is conferred on the tribunal to travel beyond the areas covered by Section 12 and Rule 3. When something is to be done statutorily in a particular way, it can only be done that way. There is no scope for taking shelter under a discretionary power," held the bench.
The judgment could have far reaching importance beyond the specific cases pertaining to which Sebi had appealed.


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