NISM Professor

Securities Appellate Tribunal

Also written SAT · Securities Appellate Tribunal (SAT)

The statutory tribunal established under the SEBI Act that hears appeals from orders of SEBI and of its adjudicating officers, which must be filed within 45 days of receipt of the order.

In plain language

SEBI investigates, SEBI adjudicates and SEBI passes the order. Left there, the regulator would be prosecutor and judge in the same matter. The Securities Appellate Tribunal is the answer to that objection: a separate forum, established under the SEBI Act, that hears the appeal of any person aggrieved by a SEBI order.

Section 15K(1) of the SEBI Act, 1992 empowers the Central Government to establish SAT to exercise the jurisdiction, powers and authority conferred by the Act or by any other law in force.

How it works

Who sits on it. A presiding officer and two other members, appointed by the Central Government. The qualification for appointment is that the person should be a sitting or retired judge of the Supreme Court, or a retired Chief Justice of a High Court — the bench is judicial, not regulatory.

What may be appealed. Two things:

  1. an order of SEBI made on or after the commencement of the Securities Laws (Second Amendment) Act, 1999, under the SEBI Act, 1992 or the rules and regulations under it; or
  2. an order made by an adjudicating officer under the Act.

The gate. An appeal lies only if the aggrieved person had not granted his consent to the order being appealed. Settle with SEBI by consent and the appellate door closes on that order.

The clock. The appeal must be filed within a period of 45 days from the date on which a copy of the order is received — received, not passed, and not posted.

How it runs. Under Section 15U(1), SAT is not bound by the procedure laid down by the Code of Civil Procedure, 1908, but is guided by the principles of natural justice, and subject to the Act and rules it has the power to regulate its own procedure. That combination is deliberate: quick and flexible on form, strict on the right to be heard.

A worked example

An adjudicating officer finds that a merchant banker allowed a SEBI observation on a draft prospectus to recur in a later issue. No separate penalty is provided for that failure, so the residual penalty provision applies — not less than Rs 1,00,000, up to Rs 1,00,00,000 — and the officer imposes Rs 35,00,000.

The order is passed on 8 August and the merchant banker receives its copy on 12 August.

Appeal window  = 45 days from 12 August
                 19 days remaining in August + 26 days of September
Last date      = 26 September

Two details decide whether the appeal is even competent:

  • The clock runs from 12 August, the date of receipt, not 8 August, the date of the order. Anchoring to the wrong date costs four of the forty-five days.
  • Had the merchant banker settled the proceeding by consent, no appeal would lie at all, whatever the amount. A Rs 35 lakh consent order is final in a way a Rs 35 lakh adjudication order is not — which is the real commercial question when the firm chooses between them.

If the appeal succeeds, the penalty goes; if it is filed on 27 September, the Rs 35 lakh stands because of one day.

Why NISM asks about it

Chapter 2 (Introduction to the Merchant Banking), in the section on the regulatory framework, carries SAT under "Role of Appellate Authority". The examinable facts are short and countable: 45 days, from the date of receipt of a copy of the order, a bench of three (presiding officer plus two members), drawn from the Supreme Court or a retired High Court Chief Justice, not bound by the CPC 1908 but guided by natural justice, and no appeal where consent was given.

A very common question form is the numerical one — "an appeal to SAT must be filed within ____ days" — and the distractors are 30, 60 and 90.

Common exam traps

  • 45 days, from receipt. Not 30, not 60, and not from the date the order was passed.
  • A consent order cannot be appealed. The bar is on the person who granted consent to the order, not on the subject matter.
  • SAT hears appeals from SEBI and from adjudicating officers — it is not a first forum. An investor grievance goes to SCORES, not to SAT.
  • Not bound by the CPC does not mean not bound by fairness. Section 15U(1) replaces civil procedure with the principles of natural justice, and SAT regulates its own procedure within that.
  • Three members, judicially qualified. The presiding officer is a sitting or retired Supreme Court judge or a retired Chief Justice of a High Court — not a SEBI official.
  • The residual penalty band of Rs 1 lakh to Rs 1 crore applies only where the Act, rules or regulations provide no separate penalty for the failure. Where a specific penalty exists, that one governs.

Check yourself

  1. 1.Within what period must an appeal be filed with the Securities Appellate Tribunal against an order of SEBI?

    1. a)45 days from the date the copy of the order is received
    2. b)30 days from the date of the order
    3. c)60 days from the date the copy is received
    4. d)90 days from the date of the order
    Show the answer

    Answer: (a) 45 days from the date the copy of the order is received

    The appeal must be filed within a period of 45 days from the date on which a copy of the order is received.

    And there is a precondition: the appeal lies provided the aggrieved person had not granted his consent to the order against which the appeal is being made.

    What may be appealed: an order of SEBI made on or after the commencement of the Securities Laws (Second Amendment) Act, 1999, under the SEBI Act 1992, or related rules and regulations OR an order made by an adjudicating officer under the Act.

    Option C names the next stage. Section 15Z of the SEBI Act, 1992 states that any person aggrieved by any decision or 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 of the SAT to him, on any question of law arising out of the order.

    45 days to SAT; 60 days to the Supreme Court, and only on a question of law.

    SAT's composition: a SAT shall consist of a presiding officer and two other members, to be appointed by the Central Government. The qualification for appointment is that the person should be a sitting or retired judge of the Supreme Court or a retired Chief Justice of a High Court.

    Its procedure is flexible but its powers are judicial. The SAT shall not be bound by the procedure laid down by the Code of Civil Procedure, 1908, but shall be guided by the principles of natural justice — yet every proceeding before the SAT shall be deemed to be a judicial proceeding and SAT shall be deemed to be a civil court.

    Who may appear: the appellant may either appear in person or authorize one or more chartered accountants or company secretaries or cost accountants or legal practitioners or any of its officers.

    And civil courts are excluded: no civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which SAT... is empowered to decide upon.

  2. 2.Registration fees payable by a merchant banker on grant of the certificate should be made by demand draft in favour of:

    1. a)Securities and Exchange Board of India, payable at Mumbai or the respective regional office
    2. b)The Association of Investment Bankers of India, payable at Mumbai
    3. c)The Reserve Bank of India
    4. d)The stock exchange on which the merchant banker is registered
    Show the answer

    Answer: (a) Securities and Exchange Board of India, payable at Mumbai or the respective regional office

    The fees specified shall be payable by the merchant banker by way of direct credit in the bank account through NEFT/RTGS/IMPS or any other mode allowed by RBI or by a demand draft in favour of Securities and Exchange Board of India payable at Mumbai or at the respective regional office.

    AIBI is the industry body, not the fee collector. As Chapter 2 explained, the industry body for merchant bankers in India that acts as a self-regulatory organisation is known as the Association of Investment Bankers of India (AIBI) — recognised by SEBI, but not a regulator and not a recipient of statutory fees.

    The amounts: every Merchant Banker is required to pay a fee of Rs. 20 lakh as registration fees, preceded by a non-refundable application fee of Rs. 50,000/- with the Form A application.

    And to keep it alive: a merchant banker who has been granted a certificate of registration, to keep its registration in force, shall pay a fee of nine lakh rupees every three years from the sixth year, from the date of grant of certificate of registration.

    The timing: on being intimated of the grant of this certificate the merchant banker is required to pay the requisite fees... within 15 days of receipt of such intimation from SEBI.

    And non-payment has two consequences, not one: the merchant banker shall not undertake any new activity till such time the fees is paid by the merchant banker, and shall also be liable to pay interest at 15% per annum for each month of delay or part thereof.

    Paying fees is itself a condition of registration: the merchant banker shall pay the fees for registration in the manner as provided in these regulations.

  3. 3.Does SCORES deal with complaints falling under the purview of other regulatory bodies such as IRDAI and PFRDA?

    1. a)No — such complaints are not dealt with by SEBI
    2. b)Yes, SEBI forwards them and monitors redressal
    3. c)Yes, if the respondent is a SEBI-registered intermediary
    4. d)Only where the complainant is a retail investor
    Show the answer

    Answer: (a) No — such complaints are not dealt with by SEBI

    Among the complaints not dealt with by SEBI are complaints falling under the purview of other regulatory bodies viz. RBI, IRDA, PFRDA, CCI, etc., or under the purview of other ministries viz., MCA, etc.

    The other two exclusions in the same list: complaints against unlisted/delisted/wound up/liquidated/sick companies and complaints that are sub-judice (relating to cases which are under consideration by court of law, quasi-judicial proceedings etc.).

    What SEBI does handle: complaints arising out of issues that are covered under SEBI Act, Securities Contract Regulation Act, Depositories Act and Rules and Regulation made there under and provisions that are covered under section 26 of Companies Act.

    A separate list covers items that are not complaints at all, whoever the regulator: complaints that are incomplete or not specific · allegations without supporting documents · offering suggestions or seeking guidance/explanation · seeking explanation for non-trading of shares or illiquidity of shares · not satisfied with trading price of the shares of the companies · non-listing of shares of private offer · disputes arising out of private agreement with companies/intermediaries.

    What SCORES is: a system for processing of investor complaints against listed companies called SEBI Complaints Redress System (SCORES). This is a centralised web based complaints redress system, introduced by Circular No. CIR/OIAE/2/2011 dated June 3, 2011.

    Its four features: centralised database of all complaints · online movement of complaints to the concerned listed companies · online upload of Action Taken Reports (ATRs)... and · online viewing by investors of actions taken on the complaint and its current status.

    And the merchant banker's duty: log in on a daily basis and submit an Action Taken Report (ATR) in respect of each such complaint — with redressal not later than twenty-one calendar days from the date of receipt of the grievance.

Where this is taught

Free preparation for NISM Series IX

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