Sustainability of Orders and Judgments Before Appellate Bodies: Lessons from a SEBI Study

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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  • I am a tad disappointed. You know the saying — Lies, Damned Lies and Statistics. Any regulator will have a whole body of routine actions that will be upheld by SAT — to add them together to make a claim is rather preposterous.
    There are cases wehre SEBI has simply not issued orders forcing the SAT presiding officer to fine the regulator in open court. Of course that order has not yet been signed. But I expected that a blog with contributors from the judiciary would give me some insights rather than banal comments.

  • The comment posted is reportedly based on statistics collected by SEBI. I think we should give some credibility to that. It definitely gives an insight than what we normally read in the newspapers.
    To say that it is “lies and damned lies” I think is like the typical Indian pessimist who says that no progress has been achieved in India since Independence, though we have achieved a lot in various spheres of life.
    I think we should sometime take pride on our institutions whether is Govt or any other institutions for the good work done. We may have opinions on the need to do more.

  • These are figures from the entire database of cases, therefore the suggestion of ‘bias’ seems inappropriate. Such a comment may be relevant if the study was based on a sample rather than the entire database.