Challenges Against SEBI Orders in SAT Jump 50% in 2024

Rising Backlog of Cases at SAT Amid Regulatory Crackdown

The Securities Appellate Tribunal (SAT) has witnessed a significant increase in the number of pending cases in 2024, with appeals against the Securities and Exchange Board of India (SEBI) rising sharply. As per the latest data from the finance ministry, the total number of pending cases at SAT stood at 1,121 in 2024, marking a 50% surge from 736 cases in 2023. The backlog also surpasses the figures recorded in 2022, which stood at 842 cases.

The sharp rise in appeals comes despite SAT significantly increasing its disposal rate. In 2024, SAT adjudicated 370 cases, nearly doubling the 187 cases disposed of in 2023. However, the surge in regulatory actions taken by SEBI in the past two years has led to an overwhelming influx of appeals. Legal experts suggest that this growing backlog underscores the need for an expansion of the tribunal’s capacity to ensure timely adjudication.

• Total pending cases at SAT rose to 1,121 in 2024, up from 736 in 2023.

• SAT disposed of 370 cases in 2024, nearly double the 187 cases disposed of in 2023.

• Surge in SEBI actions over the past two years has contributed to the rising appeals.

SEBI Orders Dominate Appeals at SAT

The Securities Appellate Tribunal primarily handles appeals against the regulatory actions of SEBI, which accounts for over 95% of its caseload. Of the 1,121 pending cases in 2024, a staggering 1,105 were appeals against SEBI’s rulings. The remaining appeals comprised 16 cases against the Insurance Regulatory and Development Authority of India (IRDAI), while no appeals were filed against the Pension Fund Regulatory and Development Authority (PFRDA).

The predominance of SEBI-related appeals reflects the increasing regulatory scrutiny of financial markets. SEBI has been actively targeting market manipulation, insider trading, and disclosure violations, resulting in a wave of enforcement actions. Many of these cases have been challenged by companies, traders, and investors, leading to a sharp increase in appeals before SAT.

• 1,105 of the 1,121 pending cases at SAT in 2024 are appeals against SEBI.

• SEBI’s focus on tackling market manipulation and insider trading has led to a surge in appeals.

• No cases were filed against PFRDA in 2024.

SAT’s Limited Capacity and Need for Expansion

SAT, based in Mumbai, currently operates with a single bench consisting of a presiding officer and two technical members. Given the surge in appeals, legal experts argue that the tribunal’s existing infrastructure is inadequate to handle the growing caseload. The rising backlog has once again brought into focus the need for additional benches to expedite the disposal of cases.

The idea of expanding SAT’s capacity is not new. In the Union Budget of 2016, the government had proposed the establishment of an additional SAT bench to reduce litigation delays. However, the plan has not yet been implemented. The absence of additional benches has resulted in prolonged delays, impacting companies and investors awaiting verdicts on regulatory disputes.

• SAT currently has only one bench with three members handling all appeals.

• Legal experts emphasize the need for additional benches to manage rising appeals.

• A proposal to expand SAT’s capacity has been pending since the 2016 Union Budget.

Surge in SEBI’s Enforcement Actions Drives Appeals

The growing backlog at SAT is closely linked to SEBI’s intensified enforcement actions over the past few years. The market regulator passed 3,731 adjudication orders in FY23, significantly higher than the 2,369 orders issued in FY22. Historically, SEBI issued around 1,500 adjudication orders annually, but the past two years have seen an unprecedented spike in regulatory interventions.

A large portion of SEBI’s recent enforcement actions has targeted “front running” cases, where traders gain an unfair advantage by executing trades ahead of large transactions. In FY23 and FY22, SEBI passed 5,191 orders, of which 2,452 pertained to front running. Additionally, SEBI has been actively investigating insider trading violations and disclosure lapses by listed companies, further contributing to the surge in appeals.

• SEBI passed 3,731 adjudication orders in FY23, up from 2,369 in FY22.

• Historically, SEBI passed around 1,500 orders per year, but enforcement actions have surged.

• Front running, insider trading, and disclosure lapses are the primary focus of SEBI’s regulatory crackdown.

Legal and Market Implications of Delayed Adjudication

The rising backlog of appeals at SAT has serious implications for the Indian financial markets. Delayed adjudication of cases creates uncertainty for companies and investors, affecting business confidence and market stability. Market participants often have to wait years for resolutions, impacting their ability to raise capital, execute mergers, or continue operations without regulatory overhang.

From a legal standpoint, the delay in case disposal raises concerns over the efficiency of regulatory dispute resolution in India. Prolonged litigation not only increases legal costs for businesses but also undermines the credibility of SEBI’s enforcement actions. Investors and stakeholders have repeatedly called for a more efficient system to handle appeals in a timely manner.

• Delays in SAT adjudication create uncertainty for companies and investors.

• Pending cases impact business decisions, mergers, and fundraising activities.

• Prolonged litigation increases legal costs and affects market confidence.

Calls for Urgent Reforms in Tribunal Framework

With the volume of SEBI-related appeals continuing to rise, experts believe that urgent reforms are required in India’s regulatory tribunal framework. Establishing additional SAT benches could significantly reduce the backlog and improve case disposal rates. Increasing the number of technical members with expertise in securities law and financial markets could further enhance the tribunal’s ability to handle complex cases efficiently.

Additionally, the government could explore alternative dispute resolution mechanisms, such as mediation and fast-track settlements, to reduce litigation burdens. Strengthening SEBI’s internal appeal mechanisms may also help in addressing disputes at an earlier stage, reducing the number of cases reaching SAT.

• Expansion of SAT through additional benches is seen as a necessary reform.

• Increasing technical expertise within SAT could improve efficiency.

• Alternative dispute resolution mechanisms could ease litigation pressures.