31 May 2021
The Securities Appellate Tribunal (SAT) passed an order (Order)[1] recently, ruling that it is empowered to hear and decide appeals even in the absence of a Technical Member. The Order was prompted by an objection raised by the Securities and Exchange Board of India (SEBI) regarding the constitution of SAT’s Bench, in light of the earlier technical member of SAT having demitted office on March 31, 2021, and the ensuing vacancy of such office.
Broadly, SEBI’s objection finds its basis in the proviso to Section 15L(2)(b) of the Securities and Exchange Board of India Act, 1992 (SEBI Act), which provides that every SAT Bench constituted should include at least one technical member. Accordingly, SEBI contended that since the current Bench consisted only of Judicial Members, the constitution of the Bench is defective, and orders passed by such a Bench would be coram non judice i.e., without jurisdiction. The requirement of having at least one technical member on the SAT bench arises from the amendment of Section 15L(2)(b) in 2017,[2] prior to which the SEBI Act only required the appointment of a Presiding Officer (PO) and “two other members”.
Provisions of the SEBI Act to be Interpreted Harmoniously
In the above circumstances, the SAT had the opportunity to consider and interpret Section 15L(2)(b), which was argued to be seemingly inconsistent with other provisions of the SEBI Act. The SAT found that the proviso to Section 15L(2)(b) relied on by SEBI was “creating a mischief” and had to be interpreted harmoniously with other provisions of the SEBI Act. In this regard, the Order identifies two provisions of the SEBI Act, which directly militate against the sum and substance of SEBI’s contention:
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first, Section 15-PA, which provides that in the event of a vacancy occurring in the office of the PO, then the senior most judicial member will act as the PO until a new PO is appointed. Thus, the tribunal would continue to function (and will not become headless) even if there is a vacancy in the office of the PO.[3] As a corollary, the absence of a Technical Member also does not cause any defect in the functioning of the SAT’s bench; and
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second, Section 15R, which provides that any proceedings before the SAT cannot be challenged in any manner on the ground of any defect in the SAT’s constitution. This provision protects the legality and validity of the orders passed by SAT even if it is found that there was a defect in its constitution, and proves to be a key component in its toolkit as a sole direct appellate forum under the SEBI Act. In light of the same, in the event the office of the Technical Member remains vacant, it does not preclude the SAT from hearing matters and passing orders.
Accordingly, the Order harmonises the provisions by stating that Section 15R would have the effect of qualifying the word “shall” in the proviso to Section 15L(2)(b) to mean “may” i.e., the sanctity of the SAT’s Bench would be maintained. The SAT held that so long as:
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there is at least one Judicial Member and one Technical Member in every Bench, where such members are available; or
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where such members are not available, the PO would be mandated by law to constitute a Bench as deemed fit from the members available,
there is no defect in the constitution of the SAT’s bench.
Other Considerations in the Matter
Going further, the SAT also touched upon the larger debate regarding the contrast in the expertise brought to the Bench by Judicial and Technical Members respectively, and opined that while the latter brings specialised knowledge as an aid to the Bench on technical issues, it does not mean a Judicial Member can be substituted completely or that a Bench comprising two Judicial Members cannot function, otherwise it would dilute and encroach upon the independence of judiciary.[4]
In conclusion, the SAT lamented on vacancies of SAT officers, which may pave the way for objections similar to SEBI’s, ultimately hindering access to justice for litigants. The SAT observed that although it has interpreted the provisions of the SEBI Act and resolved the present crisis, the permanent solution is that the filling up of the vacancies in the offices should be expedited and the harmonised provisions of law be crystallised by way of amendments to the SEBI Act.
Implications for Tribunalisation and Access to Justice
The Order underscores two important facets of tribunalisation, within the wider hierarchy of the justice system – application of specialised expertise and the need for ensuring access to justice. Tribunals were constituted in light of the need for expediency and finality to effectively administer justice.[5] Thus, tribunals in specialised fields such as, amongst others, administrative, taxation, company and environment laws were constituted in India as alternate institutional mechanisms, consisting of both judicial and technical members – judicial members to ensure ‘impartiality, fairness and reasonableness in consideration’ and technical members to ensure ‘the availability of expertise and experience related to the field of adjudication’.[6] The inclusion of technical members in the composition of tribunals is, therefore, aimed at ensuring that the adjudicatory authority is equipped with the technical knowledge required to comprehend and decide issues involving specialised subjects.[7]
While the Order recognises that the need for technical members in certain disputes is indispensable, it also cautions that the unavailability of a technical member (for instance, due to delays in appointment) cannot be a reason for a tribunal to be prevented from effectively administering justice, the very reason for the creation of tribunals in the first place. The Order relies on the observation of the Supreme Court in The International Association for Protection of Intellectual Property (India Group) v. Union of India (UOI)[8] that pursuant to Section 84(3)(a) of the Trademarks Act, 1999, in the absence of a Member, the Chairperson may, if the occasion so arises, act as a Technical Member or a Judicial Member.
The Order is crucial since it recognises that the non-functioning of SAT, being the sole adjudicatory authority before which first appeals lie under the SEBI Act, due to a “crisis” such as vacancy in the office of the technical member would gravely prejudice all litigants. While the Order proceeds on the basis that the prejudice caused due to non-functioning of SAT will be greater than any prejudice that may be caused on account of unavailability of expertise that a technical member brings to the Bench, it also requests the Central Government to fill the vacancies at the earliest. Whether the Order results in the process of tribunal appointments generally being streamlined remains to be seen.[9] In the meantime, it is business as usual before the SAT even without a technical member.
P.S. : CAM Team represented the National Stock Exchange of India Limited in the above proceedings.
For further information, please contact:
Adarsh Saxena, Partner, Cyril Amarchand Mangaldas
adarsh.saxena@cyrilshroff.com
[1] Axis Bank Limited v. National Stock Exchange of India Ltd. (order dated May 17, 2021 in Appeal No. 140 of 2021)
[2] See, the Finance Act, 2017 (No. 7 of 2017), Section 148 (c).
[3] In light of the Bombay High Court decision in Sandeep Jain v. Union of India (Writ Petition No. 5847 of 2017) that the temporary absence of the PO so contemplated means that the arrangement under which one of the two Members is to preside over the sitting of the SAT is temporary in nature and not observed on a regular basis and, consequently, there was no impediment to the functioning of the SAT.
[4] Relying on Union of India v. R. Gandhi President, Madras Bar Association, (2010) 11 SCC 1. See also, Rojer Mathew v. South Indian Bank Ltd. and Ors., (2020) 6 SCC 1.
[5] Rojer Mathew (supra).
[6] Id.
[7] For instance, it was indicated in M.C. Mehta v. Union of India, 1986 (2) SCC 176, that a dedicated Tribunal with both judicial and technical experts is necessary to hear environmental disputes. Consequently, this decision led to the formation of the National Green Tribunal to deal with disputes in the field of environmental law.
[8] Order dated February 12, 2021 in Miscellaneous Application No. 2219 of 2020 in W.P. (C) No. 1431 of 2019.
[9] The delays in appointment of members in Tribunals is not particular to the SAT. The National Company Law Tribunal and Appellate Tribunal Bar Association has filed a Writ Petition before the Supreme Court inter alia for expediting the filling up of vacancies of offices in the NCLAT and NCLT. The Supreme Court on the last occasion has inter alia directed that such vacancies be filled up at the earliest (See, order dated May 24, 2020 in Writ Petition (C) No. 510 of 2021, National Company Law Tribunal and Appellate Tribunal Bar Association through its Secretary v. Ministry of Corporate Affairs & Ors.)
