Punit Goenka Vs SEBI: Securities Appellate Tribunal Modifies Its Order

The Securities Appellate Tribunal on Thursday modified its July 10 decision in Punit Goenka’s appeal against the Securities and Exchange Board of India.

The appellate tribunal had directed the markets regulator to appoint another 'whole-time member,' not involved in the settlement proceedings, to decide the matter. SAT has now permitted the case to be heard by a WTM or any other authorised officer who is higher in rank, grade, or position than a WTM.

The order was passed on the basis of an application filed by SEBI seeking a modification in the July 10 order to either allow Whole Time Member Ananth Narayan to pass the order or allow any other authorised persons, including the executive director or chief general manager, to do so.

SEBI explained the extenuating circumstances in which such a modification was sought. Currently, there are three whole-time members at SEBI—Ananta Barua, Ananth Narayan G, and Ashwani Bhatia.

Bhatia had passed the order against which Goenka approached the appellate tribunal. Narayan was involved in settlement proceedings, which were dismissed by SEBI. And Barua, the only member free of any alleged bias, is retiring on July 31. As Barua is unable to hear and decide the matter within such a time, and also considering the time taken in the appointment of a new WTM, the modification should be allowed, SEBI had argued.

On July 10, the SAT dismissed a plea by Punit Goenka and Subhash Chandra against a June 12 SEBI order barring them from directorial positions in any listed company for allegedly syphoning the funds of Zee Entertainment Enterprises Ltd. for their own benefit. It had further directed the regulator to fix a date for the hearing within one week of Goenka's response. Goenka and Chandra filed their replies on July 23, after which the present modification was sought.

The counsel representing Goenka and Chandra, however, had objected to these modifications. According to them, SEBI was aware of Barua's retirement even before it passed the June 12 order. Further, no such objection was made when SAT passed its order. Additionally, the modification will be unfair because executive directors and chief general managers report to WTMs in accordance with the regulator's hierarchies, and this may influence their decisions, Goenka’s counsel said.

It was argued that the SEBI General Order on Delegation of Powers itself prevented the tribunal from making such a modification. According to a SEBI General Order on delegation of powers dated July 31, 2019, EDs or CGMs are barred from passing interim confirmatory orders, as in this case.

Considering the objections, SAT refused to modify the order to allow EDs to decide the case. But, considering the time taken in the appointment of a new WTM, the case shall be heard by an authorised person higher in rank than a WTM, including the SEBI Chairperson, the appellate tribunal said.