Central Govt. dragged to the High Court over securities tribunal: When will the Govt. learn?

The struggle against the Central Government apathy towards the tribunal system, including the IP tribunals, continues with yet another Public Interest Litigation filed by Delhi based lawyers in the High Court of Delhi questioning, amongst other practices, the functioning of the Securities Appellate Tribunal (SAT) without the presence of a Presiding Officer. The tribunal is a three member tribunal, with two members and one Presiding Officer who is required by the SEBI Act to be a retired judge of the High Court or Supreme Court. In the normal course, the Presiding Officer is the only judicial member, with judicial experience since the other two members are usually civil servants with no judicial experience.

The writ petition filed before the Delhi High Court can be accessed over hereand for an article by Amit Agarwal, the lawyer representing the petitioner, please click hereto read the same on the IndiaCorpLaw blog. The last order of the Delhi High Court can be read over here.

The primary contention of the petitioners in this case is that SAT is currently functioning in contravention of the SEBI Act since it is functioning without the presence of a Permanent Presiding Officer, who is required to be a former judge of the High Court or the Supreme Court. The last such presiding officer, Justice Sondi retired in November, 2011. Since then the tribunal has been functioning with just two technical members who are former civil servants with no judicial experience.  

In addition the petitioner also expresses deep concern about the appointment process to SAT, especially the fact that the entire process appears to be leaning in favour of only civil bureaucrats and that the Executive seems to have overwhelming control of the appointments.  The current rules which allow for SAT to function in the complete absence of a judicial officer are also being challenged by the petitioner.  

Interestingly, the government’s handling of appointments to SAT has already come under scathing attack by a Parliamentary Standing Committee. The report can be accessed over here. In pertinent part the petitioner quotes the following paragraph from the Standing Committee Report, in support of his petition:

“30. There have been instances where the Ministry of Finance (Department of Economic Affairs) took unjustifiably long time for selecting the Members of SAT, owing to which, the incumbents were left with a short term in office, which in turn adversely affected the disposal of cases by the Tribunal. For instance, during the period 16 January to 9 June, 2009 a piquant situation arose when SAT could not function for want of quorum, which was owing to the delay in the selection/appointment process. The Committee desire to be furnished with a detailed report on the reasons for the undue delay in the selection process which led to the stalling of functioning of the Tribunal. Such instances also add credence to the Department of Personnel and Training’s circulars which, with reference to the selection process of Members of various Tribunals and Statutory bodies pointed out inter-alia that lack of wide publicity of the vacancies hinder and delay the selection process of the Members.

31. From the Statement of Objects and Reasons appended to the Bill as well as the submission made by the Ministry of Finance it is seen that selection of Members of SAT is by and large restricted to or weighed towards selecting retired civil servants, or civil servants on the verge of retirement. Moulding the selection process of members of SAT to include and consider younger persons with requisite qualifications and experience from a wider arena of fields will enable greater continuity and efficiency in the functioning of SAT. The Committee thus are of the view that apart from the induction age of Members the question of timely completion of the selection process and widening the arena of choice for selecting the Members also need to be addressed in right earnest by the Government.”

These problems are not new to the Indian tribunal system. Virtually every Indian tribunal, be it SAT or CLB or IPAB, has faced similar problems. Almost like clockwork, every five years, once the terms of the incumbents expires, we can expect a PIL in one of the High Courts by a lawyer requesting directions to the Central Government to speed up the process of the appointments. The Central Govt. then begins to run around like headless chickens with furious judges in the High Courts threatening contempt action. Inevitably, the process leads to at-least some flawed appointments not to mention a terrible backlog. Unfortunately, the Central Govt. never learns from its mistakes. The Supreme Court in the NCLT case had ordered the Central Govt. to streamline the entire process of appointments and delegate all such appointments to one ministry. The Supreme Court’s order is yet to be implemented.

The Delhi High Court has cracked the whip on the Central Govt. in the present case and has ordered it to speed up the appointment process.

While PILs for speeding up the appointment process are usually successful, the larger substantive challenges often get bogged down in the High Courts. The IPAB challenge filed by Shamnad, almost 2 years ago is making almost no headway before the Madras High Court and I for one have lost all hope of it being decided anytime in the next decade. Similarly, the PIL filed by the Madras Bar Association (MBA), challenging virtually the entire tribunal system before the Supreme Court, which we blogged about over here, has not even been responded to by the Central Govt. Contrast this to the judgment of the Supreme Court in the Namit Arora case where the Supreme Court ruled on the constitutionality of the Central Information Commission in a record 2 months. There was a gap of just a few days between the filing of the Namit Sharma petition and the MBA petition. Yet, while one has already been decided the other is yet to even receive a response from the Central Govt.

Clearly in this land of equals some are more equal than the rest.  

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