SEBI can delegate quasi-judicial functions to its member, officer: Kerala High Court

The Kerala High Court recently held that under Section 19 of the Securities and Exchange Board of India Act (SEBI Act), all powers and functions including the quasi-judicial powers of the SEBI Board (except the rule-making power under Section 29) can be delegated to any member, officer, or any other person [BRD Securities Ltd v Union of India & Anr.]..Justice VG Arun held so while considering a plea challenging the delegation of the quasi-judicial powers to the officers and workers of the SEBI."In the Indian context, a delegation of quasi-judicial functions is permissible if the statute provides for such delegation. A plain reading of Section 19 of the SEBI Act shows that all powers and functions of the Board (except the rule-making power under Section 29) can be delegated to any member, officer, or any other person," the Court stated in its order..Relying on the judgment of the Supreme Court in Sahni Silk Mills (P) Ltd. v ESI Corpn, the Court observed that in light of the colossal amount of work before statutory bodies, extreme aversion to delegation of powers is no longer practical. "As observed in Sahni Silk Mills (P) Ltd (supra), in the present administrative set up judicial aversion to delegation cannot be carried to an extreme. A public authority is at liberty to employ agents to exercise its powers. That is why in many statutes, delegation is authorised either expressly or impliedly. Due to enormous rise in the nature of activities to be handled by thestatutory authorities, the maxim 'delegatus non potest delegare' can no longer be applied blindly," the Court said..The petition was filed by BRD Securities, a Non-Banking Finance Company (NBFC) registered with the Reserve Bank of India (RBI) and carrying out the business of asset financing.BRD Securities was served a show cause notice by the SEBI for violation of the Companies Act, SEBI Regulation (Issue and Listing of Debt Securities) 2008, and SEBI (Disclosure and Investor Protection) Guidelines while issuing debentures and bonds during the period from 2003 to 2017.BRD Securities refuted the allegations and asserted that it has not contravened any statutory provision, regulations, or guidelines and therefore, requested a personal hearing.A meeting was scheduled twice, initially with the whole time member of the SEBI Board and then with chief general manager. However, both times, the meeting was adjourned and BRD Securities was not heard..This prompted them to approach the High Court..Senior Advocate EK Nandakumar, appearing for BRD Securities, contended that the proposed proceedings being quasi-judicial in nature can be conducted only by the SEBI Board as per the SEBI Act and cannot be delegated to an officer of the SEBI.Although Section 19 of the SEBI Act provides for delegation of the Board's powers and functions (except the powers under Section 29) to any member or officer of the Board, or any other person, the provision does not envisage delegation of quasi-judicial functions of the Board, he contended.He argued that the SEBI (Delegation of Statutory and Financial Powers) Order, 2019, issued in purported exercise of power under Section 19, provides for the delegation of the Board's function, including those under Sections 11(1), 11(4A), 11B(1), 11B(2), 11B of the SEBI Act or any regulations framed by SEBI to the Chief General Manager, are ultra vires (error of law) of the SEBI Act, to the extent the quasi-judicial functions of the Board is delegated..However, Senior Advocate Raju Joseph, appearing for SEBI, contended that Section 19 of the SEBI Act allows delegation of such powers and functions to a member or officer of SEBI.He further contended by the amendment of the Delegation of Powers Order in 2022 the quasi-judicial functions of the Board under Sections 11(1), 11(4), 11(4A), 11B(2), 11D, or any regulations framed by SEBI (where no interim, confirmatory or revocation order is envisaged in the matter) can be delegated to the officials of the Board holding the office of Chief General Managers (CGMs) and Executive Directors (EDs) of the Board..After going through the provisions of the SEBI Act and various precedents on the subject, the Court held that delegation of quasi-judicial functions is permissible where the statute provides for such delegation..Therefore, the Court rejected the plea, to the extent it challenged the order delegating quasi-judicial functions to an employee/officer of SEBI..The petitioner was represented by Senior Advocate EK Nandakumar and advocates M Gopikrishnan, K John Mathai, Joson Manavalan, Kuryan Thomas, Paulose C Abraham, Raja Kannan and Pranoy Harilal.The respondents were represented by Senior Advocate Raju Joseph, Latha Prabhakaran, KM Jamaludheen and S Vaidyanathan..[Read Judgment]