2006 (9) TMI 602 - AT - SEBI

SEBI Circular Appeal Decision: Investor Protection Upheld

National Securities Depository Versus Securities And Exchange Board Of India

The Tribunal held that the circular dated November 9, 2005, issued by SEBI is appealable under Section 15T of the SEBI Act, 1992. It concluded that the ... - Issues Involved:1. Whether an appeal lies under Section 15T of the Securities and Exchange Board of India Act, 1992 against the circular dated November 9, 2005.2. Whether the said circular is in the interest of the investors.Issue-wise Detailed Analysis:1. Appeal under Section 15T of the SEBI Act, 1992:The primary issue was whether the circular dated November 9, 2005, issued by the Securities and Exchange Board of India (SEBI), is appealable under Section 15T of the SEBI Act, 1992. The learned Advocate General argued that the circular, being administrative in nature and issued under Section 11(1) of the Act, is not appealable. He contended that the circulars and policy decisions taken by SEBI are beyond the appellate jurisdiction of the Tribunal.The Tribunal examined Section 15T, which allows any person aggrieved by 'an order' of SEBI to prefer an appeal. The term 'order' was interpreted broadly, encompassing every order or decision taken by SEBI, whether administrative, legislative, or judicial/quasi-judicial. The Tribunal rejected the restrictive interpretation proposed by the Advocate General, emphasizing that the right of appeal is a statutory right governed by the language of the statute. The Tribunal concluded that the legislature did not limit the right of appeal to only judicial/quasi-judicial orders and that the language of Section 15T is of the widest amplitude, making every order passed by SEBI appealable.The Tribunal further noted that even administrative decisions and policy decisions of SEBI are subject to appeal. The argument that the circular is legislative in nature and therefore not appealable was also rejected. The Tribunal held that the circular was an administrative decision taken by SEBI to protect the interests of investors and regulate the securities market, and thus, it falls within the scope of appeal under Section 15T.2. Interest of the Investors:The second issue was whether the circular dated November 9, 2005, reviewing dematerialization charges, was in the interest of investors. The circular aimed to make entry into the demat environment free except for applicable statutory charges and to prohibit depositories and their participants from levying transaction charges when investors transfer their securities from one participant to another or to another depository.The Tribunal examined the functioning of depositories and their participants, noting that they levy charges on opening new demat accounts, custody charges, and transaction charges. The Board issued the circular to encourage more investors to hold securities in demat mode and to protect their interests by making it easier and cost-free for investors to switch participants or depositories if they were dissatisfied with the service.The Tribunal found that the circular was issued to address the unfair and unreasonable practice of charging investors for closing their accounts and transferring securities due to unsatisfactory service. The Tribunal held that the circular would promote competition among depositories and participants, leading to better services for investors. The Tribunal concluded that the circular was in the interest of investors and upheld SEBI's decision.Conclusion:The Tribunal dismissed the appeal, upholding the circular dated November 9, 2005, issued by SEBI. It held that the circular is appealable under Section 15T of the SEBI Act, 1992, and that it is in the interest of investors, promoting competition and better services in the securities market. The appeal was dismissed with no order as to costs.