Securities & Exchange Board of India Act, 1992 – Securities Laws and Capital Markets Important Questions

Securities & Exchange Board of India Act, 1992 – Securities Laws and Capital Markets Important Questions

Question 1.
Discuss the various powers and functions of SEBI under the SEBI Act 1992. [June 2017 (4Marks)]
Answer:
The function of SEBI [Section 11(2)]: Functions of SEBI are as follows:

  1. Regulating the business in stock exchanges and any other securities markets.
  2. Registering and regulating the working of stockbrokers, sub-brokers, share transfer agents, bankers to an issue, trustees of trust deeds, registrars to an issue, merchant bankers, underwriters, portfolio managers, investment advisers and such other intermediaries who may be associated with securities markets in any manner.
  3. Registering and regulating the working of the depositories, participants, custodians of securities, foreign institutional investors, credit rating agencies, and other intermediaries.
  4. Registering and regulating the working of VCF and CIS, including MFs.
  5. Promoting and regulating self-regulatory organizations.
  6. Prohibiting fraudulent and unfair trade practices relating to securities markets.
  7. Promoting investor’s education and training of intermediaries of securities markets.
  8. Prohibiting insider trading in securities.
  9. Regulating substantial acquisition of shares and takeover of companies.
  10. Calling for information from, undertaking inspection, conducting inquiries and audits of the stock exchanges, mutual funds, other persons associated with the securities market intermediaries and self-regulatory organizations in the securities market.
  11. Calling for information and record from any bank or any other authority or board or corporation established or constituted by or under any Central, State, or Provincial Act in respect of any transaction in securities which is under investigation or inquiry by the SEBI.
  12. Performing functions and exercising powers under the provisions of the SCR Act, 1956 delegated by the Central Government.
  13. Levying fees or other charges.
  14. Conducting research.
  15. Calling from or furnishing to any such agencies, as may be specified by the Board, such information as may be considered necessary by it for the efficient discharge of its functions.
  16. Performing such other functions as may be prescribed.

Power of SEBI to make inspection [Section 11(2A)]: The SEBI may take measures to undertake inspection of any book, or register, or other document or record of

  • Any listed public company, or
  • A public company that is in process of listing its securities on the recognized stock exchange.

Such inspection can be made by the SEBI if it has reasonable grounds to believe that company has been indulging in insider trading or fraudulent and unfair trade practices relating to the securities market.

Power of Civil Court exercisable by SEBI [Section 11(3)]: The SEBI shall have the same powers as are vested in a Civil Court under the Code of Civil Procedure, 1908, while trying a suit, in respect of the following matters:

  • The discovery and production of books of account and other documents, at such place and such time as may be specified by the SEBI
  • Summoning and enforcing the attendance of persons and examining them on oath.
  • Inspection of any books, registers, and other documents of various market intermediaries at any place.
  • Inspection of any book, or register, or other document or record of any listed public company or a public company that intends to get its securities listed on any recognized stock exchange
  • Issuing commissions for the examination of witnesses or documents.

Question 2.
SEBI has been established with the objective of protecting the interest of investors and promoting the development of and regulating the securities market (SEBI Act, 1992). Discuss the composition and initiatives taken by the SEBI for the development and regulation of the securities market. [June 2018 (8 Marks)]
Answer:
Objectives of the SEBI Act, 1992 are as follows:

  • To protect the interests of investors in securities.
  • To promote the development of the securities market.
  • To regulate the securities market.
  • To promote fair dealing by the issuer of securities.
  • To ensure the issuer of securities can raise funds at a relatively low cost.
  • To regulate and develop a code of conduct and fair practices by various intermediaries.
  • To monitor the activities of stock exchanges, mutual funds, and merchant bankers.

Composition of the SEBI [Section 4(1)]: The SEBI shall consist of the following members:

  • A Chairman.
  • Two members from amongst the officials of the Ministry of the Central Government dealing with Finance and administration of the Companies Act, 2013.
  • One member from amongst the officials of the RBI.
  • Five other members of whom at least 3 shall be the whole-time members to be appointed by the Central Government.

Thus, SEBI Board consists of a total of 9 members.

Management of the SEBI [Section 4(2)]: The general superintendence, direction, and management of the affairs of the SEBI shall vest in a Board of members, which may exercise all powers and do all acts and things which may be exercised or done by the SEBI.

Power of Chairman of SEBI [Section 4(3)]: The Chairman shall also have powers of general superintendence and direction of the affairs of the SEBI. He may exercise all powers and do all acts and things which may be exercised or done by the SEBI.

Appointment of Chairman [Section 4(4)]: The Chairman and members shall be appointed by the Central Government. The members shall be nominated by both Central Government and RBI.

Who can be a member of SEBI [Section 4(5)]: The Chairman and other members shall be persons of ability, integrity, and standing who have shown capacity in dealing with problems relating to the securities market or have special knowledge or experience of law, finance, economics, accountancy, administration or in any other discipline which, in the opinion of the Central Government, shall be useful to the SEBI.

Duties of SEBI [Section 11(1)]: It shall be the duty of the SEBI

  • To protect the interests of investors in securities.
  • To promote the development of the securities market.
  • To regulate the securities market.

In order to discharge the above duties, SEBI may take such measures as it thinks fit.

Question 3.
State the measures that can be taken by the SEBI either pending investigation or inquiry or on completion of investigation or inquiry.
Answer:
Power of SEBI where an inquiry or investigation is ordered [Section 11(4)]: The SEBI may take any of the following measures, either pending investigation or inquiry or on completion of investigation or inquiry:

  • Suspend the trading of any security in a recognized stock exchange.
  • Restrain persons from accessing the securities market and prohibit any person associated with the securities market to buy, sell or deal in securities.
  • Suspend any office-bearer of any stock exchange or self-regulatory organization from holding such a position.
  • Impound and retain the proceeds or securities in respect of any transaction which is under investigation.
  • Direct any intermediary or any person associated with the securities market in any manner not to dispose of or alienate an asset forming part of any transaction which is under investigation.

Conditions for passing orders: SEBI shall give an opportunity of hearing to such intermediaries or persons concerned either before or after passing such orders.

Question 4.
State the circumstances under which SEBI may pass cease and desist orders in respect of any listed company.
Answer:
Cease and desist proceedings [Section 11D]: After inquiry, SEBI can issue cease and desist order to any person who has violated or is likely to violate any provisions of the Act or any rules or regulations.

However, in the case of a listed public company or a public company that intends to get its securities listed on any recognized stock exchange, such an order can be passed only if such a company has indulged in insider trading or market manipulation.

Question 5.
SEBI has been given the necessary autonomy and authority to regulate and develop an orderly market. Elucidate the statement in the light of statutory powers vested with SEBI. [June 2019 (4 Marks)]
Answer:
SEBI is vested with the following powers under the SEBI Act, 1992 to regulate and develop an orderly market:

  • Power to make an inspection of a listed public company or public company which is in process of listing its securities. [Section 11(2A)]
  • Power of civil court [Section 11(3)]
  • Power to take necessary measures where an inquiry or investigation is ordered. [Section 11 (4)]
  • Power to issue directions. [Section 11 B]
  • Power to issue cease and desist orders to any person who has violated or is likely to violate any provisions of the Act or any rules or regulations. [Section 11 D]
  • Power to impose a penalty for violation of provisions of the Act.

Question 6.
What is the penalty under the SEBI Act, 1992 for failure to redress investor’s grievances?
Answer:
Penalty for failure to redress investors grievances [Section 15C]: If any listed company or registered intermediary fails to redress grievances of investors within the time specified by the SEBI, such company or intermediary shall be liable to a penalty which shall not be less than ₹ 1 lakh but which may extend to ₹ 1 lakh for each day during which such failure continues subject to a maximum of ₹ 1 Crore.

Question 7.
What is the penalty under the SEBI Act, 1992 for insider trading?
Answer:
Penalty for insider trading [Section 15G]: For the following defaults, an insider shall be liable to a penalty which shall not be less than ₹ 10 lakhs but which may extend to ₹ 25 Crores or 3 times of profits out of insider trading, whichever is higher:
(a) Where he deals in securities of a body corporate listed on any stock exchange on the basis of any unpublished price-sensitive information.
(b) Where he communicates any unpublished price-sensitive information to any person except as required in the ordinary course of business or under any law.
(c) Where he counsels or procures for any other person to deal in any securities of any body corporate on the basis of unpublished price-sensitive information.

Question 8.
Explain the procedure to be adopted by the SEBI for adjudication of penalties under the SEBI Act, 1992. Also, state the factors that must be taken into accounts by the Adjudicating Officer while determining the quantum of | penalty in such case.
Answer:
Power to adjudicate [Section 15-I(1)]: For the purpose of adjudging j under sections 15A, 15B, 15C, 15D, 15E, 15F, 15G, 15H, 15HA, and 15HB, the j SEBI shall appoint any officer not below the rank of a Division Chief to be j an Adjudicating Officer for holding an inquiry in the prescribed manner after giving any person concerned a reasonable opportunity of being heard for the purpose of imposing any penalty.

Power of Adjudicating Officer [Section 15-I(2)]: While holding an inquiry the Adjudicating Officer shall have the power to summon and enforce the attendance of any person acquainted with the facts and circumstances of the case to give evidence or to produce any document which in the opinion of the Adjudicating Officer, may be useful for or relevant to the subject-matter of the inquiry. If on such inquiry, he is satisfied that the person has failed to comply with the provisions of any of the specified sections, he may impose such penalty as he thinks fit in accordance with the provisions of any of those sections.

Enhancement of quantum of penalty in case of erroneous order by Adjudicating Officer [Section 15-1(3)]: The SEBI may call for and examine the record of any proceedings under this section and if it considers that the order passed by the adjudicating officer is erroneous to the extent it is not in the interests of the securities market, it may, after making or causing to be made such inquiry as it deems necessary, pass an order enhancing the quantum of penalty if the circumstances of the case so justify.

However, no such order shall be passed unless the person concerned has been given an opportunity of being heard in the matter.

It is to be noted here that provisions of passing order enhancing the penalty in case of erroneous order by Adjudicating Officer are not applicable after expiry of a period of 3 months from the date of the order passed by the Adjudicating Officer or disposal of the appeal u/s 15T, whichever is earlier.

Factors to be taken into account by Adjudicating Officer [Section 15J]: While adjudging quantum of penalty u/s 15-1, the Adjudicating Officer shall have due regard to the following factors, namely:

  • Amount of disproportionate gain or unfair advantage, wherever quantifiable, made as a result of the default.
  • Amount of loss caused to an investor or group of investors as a result of the default.
  • Repetitive nature of the default.

Crediting sums realized by way of penalties to Consolidated Fund of India [Section 15JA]: All sums realized by way of penalties under this Act shall be credited to the Consolidated Fund of India

Question 9.
What actions lie against registered intermediary in case of defaults or violation under the SEBI Act, 1992? [June 2009 (4 Marks)]
Answer:
Following actions can be taken by the SEBI in case of defaults or violation under the SEBI Act, 1992 by a registered intermediary like merchant bankers:
1. Investigation: As per Section 11C, the SEBI may appoint any person (Investigating Authority) to investigate the affairs of intermediary if the SEBI has reasonable ground to believe that any intermediary has violated any of the provisions of the SEBI Act, 1992 or Rules or Regulations made or directions issued by the SEBI.

2. Cease and desist order: As per Section 1 ID, after inquiry, SEBI can issue cease and desist order to a registered intermediary who has violated or is likely to violate any provisions of the Act or any rules or regulations.

3. Imposition of penalty: The Adjudicating Officer of SEBI can also impose penalties under sections 15A to 15HB for violating any of the provisions of the SEBI Act, 1992 or Rules or Regulations made thereunder.

4. Cancellation of registration certificate: SEBI can also cancel the registration certificate of the intermediary after giving the opportunity of being heard.

Question 10.
XYZ Ltd. issued 12.5% debentures amounting to ₹ 150 Crore on a private placement basis during the financial year 2013. Later on, it was found that these debentures were issued to 73 persons. A Sessions Court in Mumbai took cognizance of the same and Suo Motu initiated the proceedings against XYZ Ltd. The company pleaded that the Court has no locus stand in this regard and therefore, it cannot initiate any proceedings against it.
As per the SEBI Act, 1992 and other relevant laws, discuss whether the company’s pleading is tenable and whether the Court should drop the proceedings against the company. [June 2014 (5 Marks)]
Answer:
As per section 26 of the SEBI Act, 1992, no Court shall take cognizance of any offense punishable under the Act or any rules or regulations made thereunder except on a complaint made by the SEBI. I

Thus, action initiated by Sessions Court in Mumbai is not valid.

Question 11.
A stockbroker or sub-broker shall not be liable for prosecution under the SEBI Act, 1992 for any violation. Comment. [Dec. 2014 (4 Marks)]
Answer:
Penalty for default in case of stockbrokers [Section 15F]: A registered stockbroker shall be liable to a penalty which shall not be less than ₹ 1 lakh but which may extend to ₹ 1 lakh for each day subject to a maximum of ₹ 1 Crore if it fails
(a) To issue contract notes in the form and manner specified by the stock exchange;
(b) To deliver any security or fails to make payment of the amount due to the investor in the manner within the period specified in the regulations;
(c) Charges an amount of brokerage which is in excess of the brokerage specified in the regulations.

Question 12.
Mr. DB Is a member of RPA Ltd. He obtains an order against the company for redressal of his grievances against the company. But the company fails to redress the grievances of DB within the time fixed by the SEBI. The SEBI thereafter imposed a penalty upon the company u/s 15C of the SEBI Act, 1992. RPA Ltd. seeks your advice on whether it has any remedy against the order of SEBI.
Answer:
Section 15C lays down that if any listed company or any person who is registered as an intermediary, after having been called upon by the SEBI in writing, to redress the grievances of investors, fails to redress such grievances within the time specified by the board, such company or intermediary shall be liable to a penalty of ₹ 1 lakh for each day during which such failure continues or ₹ 1 Crore, whichever is less.

RPA Ltd. was penalized under the provisions of the above-mentioned section. No two remedies are available to RPA Ltd. in this matter:
1. Appeal to the Securities Appellate Tribunal: Section 15T provides that any person aggrieved by an order of the SEBI may prefer an appeal to SAT. Such appeal shall be filed within a period of 45 days from the date on which a copy of the order is received. However, the SAT may entertain an appeal after the expiry of 45 days if it is satisfied that there was sufficient cause for not filing it within that period. On receipt of an appeal, the SAT may pass orders as it thinks fit, confirming, modifying, or setting aside the order appealed after giving an opportunity of being heard to the parties.

2. Appeal to the Supreme Court: Section 15Z provides that any person aggrieved by any decision or an order of the SAT may file an appeal to the Supreme Court within 60 days from the date of communication of the decision or order to him on any question of law arising out of such order. The Supreme Court may allow it to be filed within a further period not exceeding 60 days if it is satisfied that the appellant was prevented by sufficient cause.

Question 13.
Write a short note on the Role of Company Secretary under the SEBI Act, 1992
Answer:
1. Right to Legal Representation: Any person aggrieved (the appellant) may either appear in person or authorize one or more chartered accountants or company secretaries (PCS) or cost accountants or legal practitioners or any of its officers to present his or its case before the Securities Appellate Tribunal (SAT).

2. The SEBI also recognizes the Company Secretary as the Compliance Officer and authorizes practicing company secretaries to issue various certificates under its Regulations. Further, practicing Company Secretaries are also authorized to certify compliance of conditions of corporate governance in the case of listed companies.

Question 14.
Write a short note on Securities Appellate Tribunal (SAT) [June 2009 (5 Marks)]
Answer:
Establishment of Securities Appellate Tribunals [Section 15K]: The Central Government shall establish Securities Appellate Tribunal by issuing a notification.

The Central Government shall also specify in the notification the matters and places in relation to which the SAT may exercise jurisdiction.

Composition of Securities Appellate Tribunal [Section 15L]: A SAT shall consist of a Presiding Officer and two other members, to be appointed by the Central Government by notification.

Qualification for appointment as Presiding Officer or Member of SAT [Section 15M]: Following person can be appointed as Presiding Officer of the SAT:
(a) A person who is a sitting or retired Judge of the Supreme Court or a sitting or retired Chief Justice of a High Court.
(b) A person who is a sitting or retired Judge of a High Court who has completed 7 years of service as a Judge in a High Court.

The Presiding Officer shall be appointed by the Central Government in consultation with the Chief Justice of India or his nominee.

A person can be appointed as a member of SAT if he is a person of ability, integrity, and standing who has shown capacity in dealing with problems relating to the securities market and has qualification and experience of corporate law, securities laws, finance, economics or accountancy.

A member of the SEBI or any person holding a post at senior management level equivalent to Executive Director in the SEBI shall not be appointed as Presiding Officer or Member of SAT during his service or tenure or within 2 years from the date on which he ceases to hold office as such in the SEBI.

Tenure of office of Presiding Officer and other Members of SAT [Section 15N]: The Presiding Officer and every other Member of an SAT shall hold office for a term of 5 years from the date on which he enters upon his office and shall be eligible for re-appointment.

No person shall hold office as the Presiding Officer after he has attained the age of 68 years.

No person shall hold office as a Member after he has attained the age of 62 years.

Orders constituting Appellate Tribunal to be final and not to invalidate its proceedings [Section 15R]: No order of the Central Government appointing any person as the Presiding Officer or a Member of SAT shall be called in question in any manner, and no act or proceeding before SAT shall be called in question in any manner on the ground merely of any defect in the constitution of SAT.

Question 15.
Write a short note on Securities Appellate Tribunal (SAT) [Dec. 2009 (5 Marks)]
Answer:
Establishment of Securities Appellate Tribunals [Section 15K]: The Central Government shall establish Securities Appellate Tribunal by issuing a notification.

The Central Government shall also specify in the notification the matters and places in relation to which the SAT may exercise jurisdiction.

Composition of Securities Appellate Tribunal [Section 15L]: A SAT shall consist of a Presiding Officer and two other members, to be appointed by the Central Government by notification.

Qualification for appointment as Presiding Officer or Member of SAT [Section 15M]: Following person can be appointed as Presiding Officer of the SAT:
(a) A person who is a sitting or retired Judge of the Supreme Court or a sitting or retired Chief Justice of a High Court.
(b) A person who is a sitting or retired Judge of a High Court who has completed 7 years of service as a Judge in a High Court.

The Presiding Officer shall be appointed by the Central Government in consultation with the Chief Justice of India or his nominee.

A person can be appointed as a member of SAT if he is a person of ability, integrity, and standing who has shown capacity in dealing with problems relating to the securities market and has qualification and experience of corporate law, securities laws, finance, economics or accountancy.

A member of the SEBI or any person holding a post at senior management level equivalent to Executive Director in the SEBI shall not be appointed as Presiding Officer or Member of SAT during his service or tenure or within 2 years from the date on which he ceases to hold office as such in the SEBI.

Tenure of office of Presiding Officer and other Members of SAT [Section 15N]: The Presiding Officer and every other Member of an SAT shall hold office for a term of 5 years from the date on which he enters upon his office and shall be eligible for re-appointment.

No person shall hold office as the Presiding Officer after he has attained the age of 68 years.

No person shall hold office as a Member after he has attained the age of 62 years.

Orders constituting Appellate Tribunal to be final and not to invalidate its proceedings [Section 15R]: No order of the Central Government appointing any person as the Presiding Officer or a Member of SAT shall be called in question in any manner, and no act or proceeding before SAT shall be called in question in any manner on the ground merely of any defect in the constitution of SAT.

Question 16.
Write a short note: Powers of Securities Appellate Tribunal (SAT) [Dec. 2013 (4 Marks)]
Answer:
Procedure and powers of the SAT [Section 15U]: The SAT is not bound by the procedure laid down by the Code of Civil Procedure, 1908 but shall be guided by the principles of natural justice. SAT has powers of Civil Court in respect of:

  • Summoning and enforcing the attendance of any person and examining him on oath.
  • Requiring the discovery and production of documents.
  • Receiving evidence on affidavits.
  • Issuing commissions for the examination of witnesses or documents.
  • Reviewing its decisions.
  • Dismissing an application for default or deciding it ex parte.
  • Setting aside any order of dismissal of any application for default or any order passed by it ex parte.
  • Any other matter which may be prescribed.

Every proceeding before SAT shall be deemed to be a judicial proceeding and the SAT shall be deemed to be a Civil Court.

Question 17.
“Securities Appellate Tribunal shall have the same power as are vested in a Civil Court while trying a suit.” In the light of this statement, state the powers vested in SAT as a Civil Court. [Dec. 2014 (5 Marks)]
Answer:
Procedure and powers of the SAT [Section 15U]: The SAT is not bound by the procedure laid down by the Code of Civil Procedure, 1908 but shall be guided by the principles of natural justice. SAT has powers of Civil Court in respect of:

  • Summoning and enforcing the attendance of any person and examining him on oath.
  • Requiring the discovery and production of documents.
  • Receiving evidence on affidavits.
  • Issuing commissions for the examination of witnesses or documents.
  • Reviewing its decisions.
  • Dismissing an application for default or deciding it ex parte.
  • Setting aside any order of dismissal of any application for default or any order passed by it ex parte.
  • Any other matter which may be prescribed.

Every proceeding before SAT shall be deemed to be a judicial proceeding and the SAT shall be deemed to be a Civil Court.

Question 18.
Hon’ble Justice A, a retired Chief Justice of a High Court, attained the age of 62 years on December 31, 2017. The Central Government had appointed him as the Presiding Officer of the Securities Appellate Tribunal (SAT) with effect from January 1, 2018. You are required to state with reference to SEBI Act, 1992, (a) the term for which he may be appointed as Presiding Officer of the SAT (b) Whether he can be re-appointed as such and remains as Presiding Officer of the Securities Appellate Tribunal?
Answer:
As per Section 15M of the SEBI Act, 1992, a retired High Court Judge can be appointed as Presiding Officer of the SAT if he has completed 7 years of service as a Judge in a High Court.

As per Section 15N, no person shall hold office as the Presiding Officer after he has attained the age of 68 years.

Keeping in view the above provisions, Mr. A can be appointed as Presiding Officer of SAT since at the date of the appointment he has attained the age of 62 years. However, on the attainment of the age of 68 years, Mr. A shall have to vacate the office of Presiding Officer and he shall not be re-appointed as Presiding Officer.

Question 19.
What is Securities Appellate Tribunal (SAT)? Explain the procedure for appeal to SAT. [June 2011 (6 Marks)]
Answer:
An appeal shall lie to SAT against the following orders:

  • An order made of an Adjudicating Officer imposing a penalty.
  • Any order of SEBI made under the SEBI Act, 1992 or the rules or regulations made thereunder.

Every appeal to SAT shall be filed within a period of 45 days from the date on which a copy of the order. However, the SAT may entertain an appeal after the expiry of 45 days if it is satisfied that there was sufficient cause for not filing it within that period.

On receipt of an appeal, the SAT may pass orders as it thinks fit, confirming, modifying, or setting aside the order appealed after giving an opportunity of being heard to the parties.

The SAT shall send a copy of every order made by it to the SEBI, parties to the appeal, and to the concerned Adjudicating Officer.

The appeal should be decided by the SAT expeditiously and possibly within 6 months.

Question 20.
What do you mean by Securities Appellate Tribunal (SAT)? What is its composition? As a Company Secretary, advise the aggrieved party about the appeal procedure and powers of SAT. [June 2016 (6 Marks)]
Answer:
Establishment of SAT [Section 15K of the SEBI Act, 1992]: The Central Government shall establish Securities Appellate Tribunal by issuing a notification.

The Central Government shall also specify in the notification the matters and places in relation to which the SAT may exercise jurisdiction. SAT is located in Mumbai.

Composition of Securities Appellate Tribunal [Section 15L]: A SAT shall consist of a Presiding Officer and two other members, to be appointed by the Central Government by notification.

Appeal to the Securities Appellate Tribunal [Section 15T]: An appeal shall lie to SAT against the following orders:

  • An order made of an Adjudicating Officer imposing a penalty.
  • Any order of SEBI made under the SEBI Act, 1992 or the rules or regulations made thereunder.

Every appeal to SAT shall be filed within a period of 45 days from the date on which a copy of the order. However, the SAT may entertain an appeal after the expiry of 45 days if it is satisfied that there was sufficient cause for not filing it within that period.

On receipt of an appeal, the SAT may pass orders as it thinks fit, confirming, modifying, or setting aside the order appealed after giving an opportunity of being heard to the parties.

The SAT shall send a copy of every order made by it to the SEBI, parties to the appeal, and to the concerned Adjudicating Officer.

The appeal should be decided by the SAT expeditiously and possibly within 6 months.

As per Section 15T, any person aggrieved by an order of SEBI or by an Adjudicating Officer may prefer an appeal to an SAT. Such appeal has to be filed as per SAT (Procedure) Rules, 2000.

Following are the important provisions relating to SAT (Procedure) Rules, 2000. Limitation for filing appeal: Every appeal shall be filed within a period of 45 days from the date on which a copy of the order against which the appeal is filed, is received by the appellant. However, SAT may entertain an appeal after the expiry of the said period of 45 days if it is satisfied that there was sufficient cause for not filing it within that period.

Form and procedure of appeal: A memorandum of appeal can be filed with SAT or shall be sent by registered post addressed. A memorandum of appeal sent by post shall be deemed to have been presented in the registry on the day it was received in the registry.

Appeal to be in writing: Every appeal filed before the SAT shall be typewritten, cyclostyled, or printed neatly.

Presentation and scrutiny of memorandum of appeal: If on scrutiny, the appeal is found to be in order, it shall be duly registered and given a serial number. If an appeal on scrutiny is found to be defective and the defect noticed is formal in nature, the Registrar may allow the appellant to rectify the same in his presence and if the said defect is not formal in nature, the Registrar may allow the appellant such time to rectify the defect as he may deem fit.

Fee: Every memorandum of appeal shall be accompanied by a prescribed fee.

Contents of memorandum of appeal: Every memorandum of appeal shall set forth concisely under distinct heads, the grounds of such appeal without any argument or narrative, and such ground shall be numbered consecutively.

Documents to accompany memorandum of appeal: Every memorandum of appeal shall be in triplicate and shall be accompanied by a certified copy of the order.

Plural remedies: A memorandum of appeal shall not seek relief or reliefs therein against more than one order unless the reliefs prayed for are consequential.

Date of hearing to be notified: The SAT shall notify the parties of the date of hearing of the appeal as the Presiding Officer may by general or special order direct.

Hearing of appeal: On the day fixed or on any other day to which the hearing may be adjourned, the appellant shall be heard in support of the appeal. The SAT shall, then, if necessary, hear the SEBI or its authorized representative against the appeal, and in such case, the appellant shall be entitled to reply. During the course of the hearing of the appeal, the written arguments could be supplemented by time-bound oral arguments.

In case the appellant does not appear in person or through an authorized representative when the appeal is called for hearing, the SAT may dispose of the appeal on merits.

Question 21.
Fortune Ltd. is a registered stockbroker of the Bombay Stock Exchange. SEBI levied a penalty of ? 2 Crore on the company for violation of the provisions of SEBI (Prohibition of Fraudulent and Unfair Trade Practice:? relating to the Securities Market) Regulations, 2003. Fortune Ltd. is contemplating challenging the SEBI’s order before the Securities Appellate Tribunal (SAT) in an appeal. Explain the procedure for making an appeal before the SAT. [Dec. 2016 (8 Marks)]
Answer:
Procedure and powers of the SAT [Section 15U]: The SAT is not bound by the procedure laid down by the Code of Civil Procedure, 1908 but shall be guided by the principles of natural justice. SAT has powers of Civil Court in respect of:

  • Summoning and enforcing the attendance of any person and examining him on oath.
  • Requiring the discovery and production of documents.
  • Receiving evidence on affidavits.
  • Issuing commissions for the examination of witnesses or documents.
  • Reviewing its decisions.
  • Dismissing an application for default or deciding it ex parte.
  • Setting aside any order of dismissal of any application for default or any order passed by it ex parte.
  • Any other matter which may be prescribed.

Every proceeding before SAT shall be deemed to be a judicial proceeding and the SAT shall be deemed to be a Civil Court.

Securities Laws and Capital Markets Questions and Answers

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