MUMBAI: For every one new case that the Securities and Exchange Board of India (Sebi) initiated during FY16, at least three cases were pending with the capital markets regulator. While it initiated 535 new proceedings and disposed of 723 cases, it still had a pile of 1,769 pending cases involving 6,779 entities and persons as of March 2016.
Worried over the long wait list, the Securities Appellate Tribunal (SAT) had pulled up Sebi recently and the Rs 1,000-crore penalty – the largest in Sebi’s 20-year history – on Reliance Industries only reflects the pace at which the regulator is going after violators under its new chairman Ajay Tyagi.
“Sebi has been aggressive in passing orders, but the pendency has been large as it takes time to resolve cases depending on information and manpower availability. Yet, it passed significant orders like in the Sahara case,” Pranav Haldea, managing director of Prime Database, told Express.
While the sensational Reliance order rankled market participants, sources say the recovery will get mired in litigation and procedural delays. For instance, during FY16 alone, 360 fresh court cases against Sebi were filed in different courts. Another 591 appeals were made before SAT.
However, the silver lining is the success rate of SAT judgments ruled in Sebi’s favour -- measured in terms of the number of appeals dismissed, modified or withdrawn as a percentage of the total number of cases disposed by SAT – stands at 94 per cent as on FY16. It means, out of 10 cases, at least nine cases are ruled in favour of Sebi.
Reliance will move SAT and appeal against Sebi’s order soon, and in case of an unfavourable judgment, it can still stall the recovery proceedings moving the Supreme Court, where 150 other appeals are already pending.
Meanwhile, though 614 attachment notices were issued against bank accounts/lockers, demat accounts and others during the fiscal, recovery proceedings were completed in only 80 cases with Sebi recovering a measly Rs 224.6 crore and Rs 4.42 crore towards settlement/legal administrative disgorgement charges.
Perhaps this is the reason why some feel that Sebi should have taken an even tougher stance on Reliance. “It took 10 years for this order, which doesn’t have any penalty.
Banning the company from the F&O (futures & options) segment will not have any affect the company.
Apart from the disgorgement amount, there has to be a penalty to serve as a deterrent to all market participants,” observed Shriram Subramanian, founder, InGovern Research Service, a proxy advisory firm.