SAT: The menace of parallel proceedings under the SEBI Act

The Securities Appellate Tribunal (SAT) in a recent order dated December 30, 2009 in the matter of Opee Stock Link Limited and another v. SEBI has highlighted the menace caused by parallel proceedings under the Securities and Exchange Board of India Act, 1992 (Act).

The Act enables the Securities and Exchange Board of India (Board) to initiate parallel proceedings on the same set of facts against an offender for issuing directions by the Board under Section 11B of the Act on the one hand and adjudication proceedings by an adjudicating officer under Chapter VIA of the Act for the imposition of monetary penalty on the other. An adjudicating officer, in an adjudication proceeding under Chapter VIA of the Act, is a subordinate officer of the Board. As both sets of proceedings are independent of each other, there is a possibility of conflicting views on the same set of facts. For example, in the Opee Stock Link Limited case, while the Board had come to the conclusion that the unlawful gain made by the appellant was approximately Rs. 12 lakhs, the adjudicating officer had come to the conclusion that it was Rs. 24 lakhs.

In the Opee Stock Link Limited case, SAT has observed that such an anomalous situation, where conflicting views are arrived at, is not in public interest. It went on to observe that if only one enquiry is held against the offender and on the basis of the findings recorded therein, the same body is given the power to issue directions and impose monetary penalty as well, it would expedite the matter and resolve the anomaly. For this to happen, an amendment to the Act would be required.