|
I
MULTI-REGULATORY APPROACH: A BOOM?
1.1 INTRODUCTION
Since independence in 1947, India has followed a socialistic form of governance wherein the emphasis of the government was to regulate and control the economic activity of the country directly in order to create an atmosphere for inclusive growth by protecting its nascent industries and controlling foreign competition. But such a model of growth was marred with problems including problems of slow growth, high production costs, inefficient allocation of resources etc.
Gradually a few changes and relaxations were made in the 1980’s which lead to full scale reforms being made in 1991 due to the balance of payment crisis. The reforms that were made in the sectors of privitisation, liberalisation and globalization reforms aimed at opening the highly controlled Indian economy to private and foreign funding, trade and production. The Indian economy grew at a rate of 5.5% in the financial year of 1992-1993 in comparison to 1.1% in the previous year due to these reforms.
These reforms were made to bring about to bring both the public and private sector on a level playing field wherein both the can approach for the highest amount of growth and the regulatory setup would interfere only when the ultimate results were not optimal or desired.
1. In proceedings of the National conference on regulation in infrastructure services and the way forward, Role of Independent regulation of economic reforms available at https://www.teriin.org/upfiles//pub/papers/ft25.pdf last seen on 23/12/2014.
2. RBI Handbook on Indian economy, RBI available at http://rbidocs.rbi.org.in/rdocs/Publications/PDFs/FHB160913FLS.pdf, last seen on 23/12/2014.
3. Economic regulation in a liberalized economy: relevance and challenges in India, Nathan Associates Inc available at http://www.nathaninc.com/sites/default/files/Economic_Reg_in_India.pdf last seen on 24/12/2014.
The new regulatory setup was to foster economic growth and regulation at the same approach rather than focus on regulation more than economic growth.
1.2 MULTI – REGULATOR SETUP
India since the economic reforms of 1991 has adopted the multi-regulator approach. This approach is in distinct contrast to earlier approaches wherein one single unified body would be making all the regulatory steps and measures. Thereby-India has approached and adopted to divide supervisory work among many institutions in India based on the function, objective and efficiency or super sector body.
For convenience these regulators can be divided into the terms of cross-sector and sector-specific regulators. Cross-sector regulators would cover regulators like Securities and Exchange board of India, Competition commission of India, Reserve bank of India. Sector specific regulators would feature Telecom regulatory authority of India, Insurance regulatory and development authority etc.
1.2.1 CROSS SECTOR REGULATORS
Cross Sector regulators refer to regulators who perform supervisory and regulatory work with respect to all sectors of the economy. They try to foster growth and safety of all sectors of the economy with the idea of promoting and encouraging economic growth. Cross-Sectoral regulators have specified functions which cut across all sectors such as regulation of the competition to a fair equivalent is the function of Competition Commission of India which may look into the complaints of unfair competition across all sectors in India.
SEBI ensures that the securities market is regulated to a transparent functioning with primary focus on investor protection. Like SEBI banned 7 entities and 3 individuals from the securities market for unfair trade practices in 2012 . In 2012 again, SEBI banned 19 entities from the securities market because of price manipulation in mid-cap stocks . Similarly, in 2012 CCI fined 11 cement manufacturers for cartelisation and placed a fine to the tune of 63
4. Taylor M., Peak Practice: How to Reform the UK’s Regulatory System, 8 (1st Ed.,1996).
5. http://www.business-standard.com/article/markets/sebi-bans-7-entities-from-market-for-unfair-trade-practices-112092500198_1.html visited on 24th April 2014
6. Sebi bans 7 entities from market for unfair trade practices, Business Standard, available at http://www.thehindubusinessline.com/markets/stock-markets/sebi-bans-19-entities-for-midcap-stocks-manipulation/article3723372.ece last seen on 23/4/2014.
Billion INR on the cement manufacturers . Therefore, cross regulators perform functions across various sectors
1.2.2 SECTOR SPECIFIC REGULATORS
Sector specific regulators are specialised bodies created to supervise and regulate a specific sector of the economy. Examples of some sector specific regulators in India are Telecom regulatory authority of India which regulates the telecom sector and Insurance regulatory and development authority which specifically regulates the insurance sector in India. These bodies have been established as it is believed that a body having detailed technical knowhow of the sector can solve the complex and inherent problems localised to the sector itself.But, this has lead to an inherent conflict of jurisdiction between sector specific regulators and cross-sector regulators like SEBI. Such problems arise due to poorly framed statutes which on one hand provide sector specific regulators with expansive powers to regulate each and every aspect of the sector for which they were created and on the other hand allow similar powers across sectors to cross-sector regulators. This in essence leads to a conflict of jurisdiction between such bodies. SEBI having expansive powers across sectors has encountered such a turf-war on numerous occasions (some of which are explained later) in which both SEBI and the sector specific regulator have questioned the jurisdictional capability of each other to regulate the sector on specific issues. Cross-sector regulators like SEBI therefore encounter jurisdictional conflicts between other cross sector regulators and sector specific regulators. But the need of such sector specific regulators cannot be undermined as certain features are common across sectors which inhibit market efficiency and welfare, and provide a need for sector specific regulators which cannot be handled by overarching cross-sector regulators like SEBI. Some of the essential reasons which warrant creation of sector specific regulators with vast powers are:
1. High Initial fixed Cost for infrastructure
High Investment Sectors such as the oil and gas industry provide a first movers advantage to the investor wherein he can create a monopoly. Eg. In high investment sector like oil, an
7. Builders association of India v. Cement manufacturers Association and other, Case No. 29 of 2010 (Competition Commission of India, 20/06/2012)
8. Economic regulation in a liberalized economy: relevance and challenges in India, Nathan Associates Inc, available at http://www.nathaninc.com/sites/default/files/Economic_Reg_in_India.pdf last seen on 24/4/2014.
investor who lays down the first pipeline can service the entire market and create barriers to entry through a monopoly.
2. Scarce inputs
Consumer welfare is severely affected in industries where resources are scare and owned by one or a small group of industries. Eg. Telecom spectrum in India, if owned by one company in a circle can lead to massive exploitation of consumers
3. Vertical integration
In an industry where the same group of companies owns both the downstream and upstream market, it may lead to monopolistic tendencies. Eg. Electricity generation and distribution
Sector specific regulators have 2 objectives;The first objective is to service and regulate the economic growth and inherent problems such as cash flows, liquidity etc of the sector. The second objective overlaps with the cross-sector regulators in protecting investors/consumers and fair competition within the sector or adhering to the requirements of financial statements all of which may be regulated by other cross-sector regulators.
1.3 SECURITIES AND EXCHANGE BOARD OF INDIA
This Paper deals with the jurisdiction based conflicts for Securities exchange board of India (SEBI). It will try to highlight the jurisdiction of SEBI, recent conflicts regarding SEBI and other regulators, which regulator has power to adjudicate in case of overlap and possible solutions to curb this problem in the future.
Securities and Exchange Board of India (SEBI) was incorporated by setting up the SEBI Act 1992 after a government of India regulation was passed creating such a body in 1988. This body was created to promote the orderly and healthy growth of the securities market and investor protection as per the preamble of the Act.
9. Ibid.
It is pertinent to know that SEBI is a quasi-judicial body having its own adjudication tribunals. The jurisdiction of a separate panel, appellate and provision to appeal to the Supreme Court is provided independent of any civil court in the country.
Section 15Y bars civil courts to take cognizance of any matter which is to be adjudicated by an officer or body as created under this Act. Furthermore, Section 20A of the Act provides that no appeal shall lie to any civil court from the orders of the board or Securities Appellate tribunal unless provided in the Act. Lastly, Section 15K creates an appellate body (Securities Appellate Tribunal) for hearing appeals from decisions of the board and an appeal under Section 15Z lies to the Supreme Court from the Securities Appellate Tribunal. Therefore, we can observe that SEBI is a quasi-judicial body which bars the jurisdiction of any civil court.
1.3.1 JURISDICTION OF SEBI
SEBI jurisdiction and boundaries is defined within the SEBI Act 1992 and a few provisions of the Companies Act. SEBI Act, provides the powers and functions of the SEBI board under Section 11, 11A, 11B, 11C, 12 and 12A. Section 11 (1) provides for the function of the board in generality and in specifics in further sections in Section 11. Section 11 (1) states that:
Subject to the provisions of this Act, it shall be the duty of the Board to protect the interests of investors in securities and to promote the development of, and to regulate the securities market, by such measures as it thinks fit.
Under Section 11 C the board has the power to investigate where the Board has reasonable ground to believe that –
(a) the transactions in securities are being dealt with in a manner detrimental to the investors or the securities market; or (b) any intermediary or any person associated with the securities market has violated any of the provisions of this Act or the rules or the regulations made or directions issued by the Board thereunder,
It may, at any time by order in writing, direct any person (hereafter in this section referred to as the Investigating Authority) specified in the order to investigate the affairs of such intermediary or persons associated with the securities market and to report thereon to the Board.
Furthermore, Section 11 B provides the board to issue directions if:
in the interest of investors, or orderly development of securities market; or (ii) to prevent the affairs of any intermediary or other persons referred to in section 12 being conducted in a manner detrimental to the interest of investors or securities market; or (iii) to secure the proper management of any such intermediary or person, it may issue such directions,-
(a) to any person or class of persons referred to in section 12, or associated with the securities market; or (b) to any company in respect of matters specified in section 11A, as may be appropriate in the interests of investors in securities and the securities market
Furthermore, more powers with respect to specific provisions, cease and desist, functioning and regulation of stock brokers is given to the SEBI Board.
We can observe that the SEBI board has been given a large array of powers under the SEBI Act to regulate the securities and financial markets. These powers are much too broad for a cross-sector regulator. Due to such reasons, there have been many conflicts which have arisen between various regulators either sector specific or cross-sector regulators. These conflicts are not easily resolved leading to tensions between the consumers, investors and other market operators. Such situations cause many problems for regulators as investors; consumers etc have to follow two different regulators which may be contradictory in their approach.
Recent examples of tussles between SEBI and other regulators are:
1. SEBI V. IRDA
In 2010, a whole time member of SEBI passed an order under the Section 11, 11B and 12(1B) of the SEBI Act, passed a sou moto order against 14 insurance companies under the discretionary power of SEBI of investigation. They disbarred all the stated 14 companies from “any offer document, advertisement, brochure soliciting money from investors or raise money from investors by way of new and/or additional subscription for any product (including ULIPs) having an investment component in the nature of mutual funds, till they obtain the requisite certificate of registration from SEBI.” Unit linked insurance plan (ULIP) refers to are investments made on behalf of policy holders in the capital markets where the
10. ULIP Order, SEBI, available at http://www.sebi.gov.in/cmorder/ULIPOrder.pdf last visited on 05/09/2014
11. Warring Regulators in an undefined world, Rediff Business, available at on http://business.rediff.com/column/2010/apr/26/guest-warring-regulators-in-an-undefined-world.htm last seen 24/4/2014.
entire risk in the investment portfolio is borne by the policy holder.This order was passed by SEBI taking a standn that the ULIP Schemebeing providedby these companies was similar to mutual funds for which prior sanction has to be taken from SEBI. SEBI has the power under the SEBI Act, to allow for mutual funds to operate once they have obtained permission and have been registered with SEBI.Therefore as per Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 and Securities and Exchange Board of India (Collective Investment Scheme) Regulations, 1999 any person running a scheme about mutual funds has to be first registered and procure prior permission from SEBI which according to SEBI these insurance companies had not taken. Prima Facie the matter looks like a clear violation of already set rules and regulations.
But another sectoral market regulator the IRDA (Insurance regulator and development authority) created by the IRDA Act 1999 under Section 14 has powers to regulate the business of insurance companies and re-insurance. It stated that SEBI does not have powers or jurisdiction in the above matter and ULIP’s had been approved by IRDA therefore were valid and outside the purview of SEBI.
Now we can see the catch 22 situation arising here, as it is settled law that a matter which is illegal and beyond the jurisdiction of a body is binding over the subject of that matter. Therefore, all 14 insurance companies were bound by the order of SEBI and even if it is considered illegal by IRDA can only be set aside by the appropriate appellate body being either the Securities Appellate tribunal (SAT) or the Supreme Court of India as per the SEBI Act. IRDA cannot nullify and negate the direction as given by SEBI as it is bound by its powers contained in its statute.
This means that all agreements made by insurance companies as part of their ULIP scheme was void as an agreement in violation of Section 23 of the contract Act is void.
On 18th June 2010 the Parliament of India passed an ordinance ‘Securities and Insurance Laws (Amendment and Validation) Ordinance, 2010’ (later passed as an Act) having retrospective effect from 9th April 2010 (the date of the SEBI order). This ordinance reversed the decision of SEBI and put ULIPS out of the jurisdiction of SEBI. Although this
12. ULIPS back on Shelves as SEBI-IRDA call cease fire, Economic Times,available at http://articles.economictimes.indiatimes.com/2010-04-13/news/28395144_1_ulips-sebi-and-irda-j-hari-narayan last seen on 23/4/2014.
ordinance was within the purview of the Supreme Court of India , the Supreme Court upheld this ordinance and Act to put a rest to the matter.
2. SAHARA CASE
In the ongoing Sahara case, the issue arose about the jurisdiction of SEBI and whether SEBI had jurisdiction over unlisted companies. Sahara Housing Investment Corporation Limited (SHICL) and Sahara India Real Estate Corporation Limited (SIRECL)are unlisted companies and had issued Optionally fully convertible debentures (OFCD’s) to 3 Million subscribers raking upto 26,000 Crore Rupees INR with a paid up capital of Rs. 10,00,000 and no assets.
SEBI tookcognizance of the matter and issued a show cause notice to both the companies under Section 67 (3) of the companies Act. SEBI by an order of a whole time member of SEBI on 23 June 2011 giving directions to both the companies had given orders under Section 11 to regulate and deposit information.SHICL appealed to SAT and then the Supreme Court claiming that an unlisted company does not come under the purview of SEBI and is regulated by Unlisted Public Companies (Preferential Allotment) Rules 2003 by the Registrar of Companies and not SEBI.
The Supreme Court taking into consideration Section 55A of the Companies Act 1956 stated that any public offer by an unlisted company for more than 49 individuals would come under the purview of SEBI . The court used the concept of harmonious interpretation of Section 55A of the companies Act and the SEBI Act to come to such a conclusion . Hence, the conflict of jurisdiction between SEBI and the registrar of companies are contested by SHICL was resolved by the Supreme Court of India.
3. CHIT FUNDS
The Saradha Chit fund scam was a ponzi scheme run under the guise of a collective investment scheme by the Saradha group along with 200 private companies in Eastern India . It affected more than a million depositors to the tune of 4-6 Billion USD.
13. A.K. Roy v. Union of India, AIR 1982 SC 710.
14. Sahara India Real Estate, SEBI, available at http://www.sebi.gov.in/cmorder/SaharaIndiaRealEstate.pdf last seen on 05/09/2014.
15. Sahara India Real Estate Exchange Corpn. Ltd. v. SEBI, (2013) 2 SCC 733.
16. Sundaram Pillai & Ors. v. V.R. Pattabiraman & Ors., AIR 1985 SC 582.
17. Chitti Chitti Bang Bang, The Telegraph, available at http://www.telegraphindia.com/1130501/jsp/bengal/story_16847319.jsp #.VAWh6PmSySp last seen on 2/09/2014
SEBI on the onslaught of the Saradha Chit fund scam had explained its inability to investigate and regulate the Chit fund scam as it was outside the purview of its jurisdiction . SEBI was heavily criticised for not being able to regulate and check the ongoing Ponzi scheme. SEBI formally replied to the Parliamentary standing committee formulated to submit reports on chit funds in India stating that it has been constrained to look into such malpractices due to jurisdictional inability . SEBI did not have jurisdictional authority to regulate and create checks upon collective investment schemes under the old law. An amendment under Section11AA of the SEBI Act, 1992 was made to incorporate collective investment schemes under the purview of SEBI jurisdiction to avoid any further disputes between regulators by the legislature. SEBI has furtheradvised the parliamentary committee to expand its jurisdiction where companies mobilise money from depositors directly or indirectly. Thus, removal of jurisdictional approach to cross sector regulators may also lead to undesirable consequences.
4. ETIHAD AIRWAYS – JET AIRWAYS TRANSACTION
The Indian Aviation industry was liberalised in September 2012, allowing for 49% FDI in Indian aviation industry . Etihad Airways, wished to buy a share of 24% in the domestic airline carrier Jet Airways, and certain formal transactional documents were signed subject to approval of the various regulators in India. The transaction required various approvals from Competition Commission of India, SEBI, Foreign Investment Promotion Boardand Cabinet Committee on Economic Affairs .
The compliance requirements of the Government of India (Foreign investment Promotion Board and Cabinet Committee on Economic Affairs) was granted on July and October 2013 as both the Parties were in accordance with the FDI Policy of India. The jurisdictional clash came up between the Competition Commission of India and SEBI. Both the regulatory
18. Saradha raised deposits from 1.7 mn people, probe finds, Live Mint, available at http://www.livemint.com/Specials/TQWJ1auPZMCYnZqC4tK7VN/Saradha-raised-deposits-from-17-million-people-probe-finds.html last seen on 2/09/2014
19. SEBI cant curb chit fund due to jurisdictional issues, Business Today, available at http://businesstoday.intoday.in/story/sebi-says-cannot-curb-chit-funds/1/195080.html last seen on 23/04/2014.
20. Ibid.
21. Cabinet allows up to 49% FDI in aviation by foreign carriers, The Economic Times, available at http://articles.economictimes.indiatimes.com/2012-09-14/news/33844179_1_foreign-airlines-indian-carriers-foreign-carriers last seen on 2/09/2014
22. India: SEBI Clears Jet-Etihad Deal, Aviation Law Experts, available at http://www.aviation-lawexperts.com/india-sebi-clears-jet-etihad-deal/ last seen on 02/09/2014
23. Ibid.
authorities in this present situation had bona-fide jurisdiction over different parts of the transaction and no one was binding over the other.
The Competition Commission of India approved of the Combination in accordance with the Competition Act 2002 taking into consideration that Etihad was in a business of transport services and other requisite approvals such as pricing, joint airport handling etc had been satisfied. The Competition Commission observed:
“It is observed that the Parties have entered into a composite combination comprising inter alia the IA, SHA and the CCA, with the common/ultimate objective of enhancing their airline business through joint initiatives. The effect of these agreements including the governance structure envisaged in the CCA establishes Etihad’s joint control over Jet, more particularly over the assets and operations of Jet.”
In light of the above observations, SEBI sent Jet Airways a notice stating that if the control of the combination was being transferred, it will have violated regulation 4 of the SEBI (Substantial Acquisition of Shares and Takeovers Regulations), 2011.The notice was criticised as it was contended that SEBI should not rely on observations of CCI due to it being a different regulatory body providing for decisions under its own legislation. SEBI eventually gave an order in favour of the transaction stating that control as stated in Competition Act 2002, was broader than the Takeover Code. The control as stipulated under the Takeover code had not been breached due to the specifics of the transaction:
- Etihad’s right to nominate only 2 out 12 directors;
- Promoters being able to nominate the chairman of the board of Jet, who shall have a casting vote;
- Etihad not having any quorum rights at the board or general meeting;
- Lack of any veto/ affirmative voting rights with Etihad;
- Any pre-emptive/ tag along rights with Etihad.
In such a situation Etihad did attain substantive control to trigger the provisions of the Takeover Code. Furthermore, no violation or open offer was to be provided due to the transfer of shareholding being under 26% and no control being transferred. Thus, this
24. Etihad Airways PJSC and Jet Airways, Combination Registration No. C-2013/05/122 (Competition Commission of India, 12/11/2013)
25. Ibid.
26. Tail Winds Limited and Ors. v. Securities and Exchange Board of India, (Secuties and exchange board of India Tribunal, 08/05/2014)
27. Supra 21.
conflictwas resolved quickly and amicably but it leads to raising of an alarming issue wherein due to overlapping jurisdictions of various regulatory bodies a commercial transaction could have been stalled or even annulled as per the Apex Court .
We can see the various cases and issues that have come with respect to the jurisdiction of regulators with emphasis on SEBI and other regulators which must be resolved at a policy making level to ensure no future clashed occur. In the second part we shall look at methods to ensure such jurisdictional clashes can be minimized.
II
HARMONIZING REGULATORY CONFLICTS
2.1 RECOMMENDATORY MODELS
The problem of jurisdictional conflicts is a plague in a multi-regulatory set up wherein multi regulatory agencies encroach upon the jurisdiction of other regulatory agencies causing essential problems to the investor, consumer and other supports in each sector. Due to such issues, the jurisdictional turf problems between SEBI and other regulators must be resolved at the earliest. Given below are a few models which can be followed to resolve the issue of jurisdiction.
2.1.1 SINGLE SUPER REGULATORY AUTHORITY
An approach that can be adopted by the Indian legislature is to create a super regulatory body over and above all the regulatory bodies in India. Although India follows a multi-regulatory body approach, many nations have in the recent past started an approach to create one regulatory authority. 12 nations in the field of competition laws in the recent past with the likes of Singapore in 1984, Denmark in 1988, Korea in 1998, and more recently Japan and UK have made a shift towards a single super regulatory authority for each sector of the economy . This has ensured that no confusion, turf wars, delay or harassment occurs to the eventual consumers/investors. But this idea has to be treaded carefully by any government as it not properly executed it can backlash leading to no regulation, delay and inefficiency. The
28. Etihad Airways and Jet Airways move ahead with stratergic alliance following final approvals, BSE India available at http://www.bseindia.com/xml-data/corpfiling/AttachHis/Jet_Airways_(India)_Ltd2_201113.pdf last seen on 02/09/2014
29. Single Regulator versus Multiple regulators, Dr. Narendra Jhadav available at http://www.drnarendrajadhav.info/newversion/drjadhav-data_files/Published%20papers/Single%20versus%20Multiple%20Regulator.pdf last seen on 23/04/2014.
arguments against a single super regulator is that it would have the advantage of economies of scale, it could result into a moral hazard under inefficient management and gains such as specialists in each sector would not be present focussing on that specific sector. Hence, the model of India can be refined to become more efficient, and it would take a mammoth effort to converge all regulatory bodies into a single unified body in India.
2.1.2 CONCURRENT JURISDICTION
Another approach as followed by Brazil can be adopted in India, wherein only the sector specific regulator would have jurisdiction on all issues of the sector, comprising of functions of the cross-sector regulator also. The approach has been followed in some sectors in the UK wherein specific sectors have greater power and can regulate on the issues of the cross-sector regulator such as competition regulatory disputes etc.
This approach provides that in a situation a sector-specific regulator has been created for a sector and he has direct jurisdiction according to the creating statute over the sector, only this sector specific regulator would exercise jurisdiction over all regulatory issues over the sector including the powers of the cross sector regulators. This means creating of a holistic specific sector body which would also exercise powers of a cross sectoral regulator for its particular sector. This would ensure that in case there is a conflict between the two agencies the sector specific body would prevail and take up cognizance of the matter.
Thus the specialised body created to have specific jurisdiction over the sector would have principle jurisdiction in all disputes and only appeals can be heard by the cross sectoral regulator like SEBI. This would ensure harmony and peaceful adjudication of disputes between regulators. But, in case the cross sector regulator believes he has appropriate jurisdiction over the matter, they can call the dispute in sou moto reference in the appeal stage to address any turf war.
However, this approach has seldom resulted in any power conflict between sector regulators . We can look at this approach from the Jet Airways- Etihad Airways transaction wherein only the sector specific regulator (SEBI) would have control over all regulatory functions of commissions like Competition Commission of India etc. This would have
30. Ibid.
ensured that no conflict would have arisen between the two regulatory bodies and the functions of both regulators would have been carried out by one. However, this approach has also been criticised as it assumes that one regulatory body can perform functions of anotherregulatory body effectively and efficiently, which may not be the case on many occasions.
An example of the same can be seen in the Enterprise Act 2006 in the UK, where each sector regulator has been given power of Office of fair trading under the competition Act of 1998 in the UK. Thereby, once a body under this Act has taken cognizance, the other body is barred due to the matter being sub-judice under another body having the same power.
2.1.3 COLLABORATIVE APPROACH
Collaborative powers under cross-sectors can be given to sector specific regulators. This model is followed in Mexico, wherein for the Competition commission, the judgement or adjudication of fair competition or not is done by the cross-sector and only penalties are decided by the sector specific sectoral regulator . But this approach cannot be followed in India looking at the recent jurisdictional clashes which are beyond the jurisdiction of cross-sector and question about which authority has jurisdiction rather than who is to exercise jurisdiction in case of cross-sectoral provisions.
2.1.4 MANDATORY CONSULTATION
As per the practice in Argentina according to their Law No. 25.156 for example, the competition regulator has to mandatorily consult about the issues in a preliminary manner by the sectoral regulator before it can take cognizance of the matter or pass any order. This kind of a law would create that all cross-sector regulators have to communicate with the sector specific body and take preliminary consultation on the matter. This can be a plausible solution to remove all defects from such jurisdictional matters and ensure some technical input is also given by the sectoral regulator. But, this may cause huge delays to take any action in case of no solution arising out of the preliminary consultation. In India, the regulators are already marred by delays and this may be a policy decision to further the same. Such delays may be imperative if the sectoral regulator refuses to co-operate or provides information in an inefficient manner which may require further consultations to weed out
31. Concurrency Regulations 2004, UK Legislations available at http://www.legislation.gov.uk/uksi/2004/1077/contents/made last visited on 23/04/2014.
32. Supra 16.
unnecessary information. Furthermore, this method raises the hypothetical problem wherein if one regulator states that it has regulatory jurisdiction and raises a conflict (SEBI – IRDA conflict as stated above), it would again lead to a catch 22 situation with no immediate solution resulting in large unforeseen delays.
2.1.5 COURT INTERPRETATION
This should be the last resort with the regulatory agencies in the case of a conflict of jurisdiction. Sectoral or cross-sector regulators are created to remove and curb the jurisdiction of the civil courts in essence of technical input and quick redressal of matters. In case such matters are brought before the court again it might ensure, a long delay and inefficiency to creep in the economy of India. This should be kept as a last resort but the one at the highest pedestal by any nation.
CONCLUSION
The jurisdictional clashes between regulators in a multi-regulatory environment in India are increasing in frequency and we need to understand the need of the moment. Cases with SEBI such as the IRDA jurisdictional turf war have been solved by prompt action by the Indian legislature but it has highlighted an important question about resolving such disputes in India. To conclude I can state that India needs to adopt one of the recommendations as provided in this paper, keeping the courts as the last resort for all authorities. The jurisdiction, powers and authority of SEBI is too wide and can incorporate a large array of activities and therefore, boundaries need to set up with respect to the jurisdiction of SEBI.
A single regulatory body may not be the best approach to be considered in India due to the structure which has become so entrenced, in which the best possible solution that can be adopted is one of concurrent jurisdiction or mandatory consultation. This would ensure no jurisdictional clashes occur between the different regulatory agencies and SEBI in the future. But the same have to be implemented with much caution to ensure that the objective and purpose of stating such jurisdictions by the legislature is not lost.
|
