A longstanding criticism of the Securities and Exchange Board of India (SEBI) has been that its orders were subject to reversal by its appellate body the Securities Appellate Tribunal (SAT) in an unduly large number of cases. However, in a startling revelation, the results of an internal research conducted by SEBI’s Enforcement Department published on SEBI’s website (here) present a diametrically opposite conclusion. The results indicate that out of a total of 630 appeals preferred to SAT during the period between 2000 and 2006, SEBI’s orders were upheld in 246 cases and its orders upheld but penalty reduced in 260 cases, while appeals were allowed in 124 cases. Based on these figures, the research shows that SEBI has a success rate of 80% before SAT (inclusive of cases where the order was upheld but penalty reduced).
There could be criticisms against such a research on several counts, particularly because it goes contrary to conventional wisdom about SEBI’s success rate thus far. Analysts may well delve deep into the methodologies used in the study and other matters of minutiae and raise questions about conclusions arrived at (which is quite common with studies such as this). At a more fundamental plane, one may even attribute an element of bias to the results because the study represents a regulatory body judging its own performance.
However, on a positive note, SEBI’s effort emits a much large message – which is that it is important for regulatory authorities and other judicial or quasi-judicial bodies to conduct periodic soul-searching exercises to determine the quality of their own performance. It seems extremely rare for either administrative bodies or courts (both the lower judiciary as well as the High Courts) to analyse all orders passed by them and then determine how they have been dealt with by appellate bodies.
In this context, SEBI’s study is a good example for administrative authorities and judicial bodies to follow. Not only is it important to determine the success rate (in terms of percentage), but studies should include a detailed analysis of reasons why orders were overturned by appellate bodies. It is not uncommon to find that substantively robust orders by administrative and judicial bodies are set aside on procedural grounds (due to the oft-invoked failure to follow principles of natural justice). Detailed studies of orders would enable decision-making bodies to put in place systems and procedures to ensure that orders are not revoked on procedural grounds.
In order to preempt any allegations of bias, it may even be prudent for such studies to be outsourced to independent third parties. For instance, a law school or even a group of law students can be commissioned to undertake such a project. Studies should, as far as possible, be published (as in SEBI’s case) so that transparency is embedded into the process. However, there could be practical difficulties in cases where findings of studies are adverse, in which case there may be tendency to avoid publication – nevertheless, even in absence of publication, there needs to be proper processes whereby results are properly recorded and changes implemented to improve the sustainability of orders of the authority concerned.
Measures such as this would ensure efficient functioning of decision-making authorities (judicial and quasi-judicial) and would not only bring about certainty in the legal system, but also reduce cost and delays in the judicial system.
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