Achecks and balances challenge

Parliament's oversight of statutory regulatory authorities is weak. Strengthening it is both necessary and desirable

- AARTHIKAM CHINTANAM

Parliamentary oversight of the workings of statutory regulatory authorities (SRAs) is an established norm in many democracies. It is an essential feature of the checks and balances required for SRAS, which work at an arm's length from the executive.

Indian SRAs like the Securities and Exchange Board of India (Sebi) fuse all three branches of the state. They have the power to make binding regulations (the legislative function), the ability to enforce these regulations (the executive function), and the authority to adjudicate and sanction violations of regulations by the regulated entities (the judicial function). This departure from the separation of powers makes Indian SRAS unique, both in comparison with SRAS abroad, and other Indian government organisations.

Given this unique design of SRAS in India, a sui generis and comprehensive set of accountability mechanisms is required. The Sebi Act, 1992, and subsequent amendments to it have ttempted to provide for such an accountability mechanism. Over the years, we now know that these mech- KP KRISHNAN anisms have not been very effective.

Let's start by summarising the existing checks and balances. By its very nature, Sebi's judicial function cannot be supervised by Parliament. Parliament, therefore, provided (in Chapter VI B of the Sebi Act) for a multi-member Securities Appellate Tribunal (SAT) to hear appeals against the quasi-judicial orders of Sebi (and some other financial sector SRAS). Though this multi-member SAT mechanism took time to evolve, over the years, SAT has been a powerful source of checks and balances against Sebi, demanding that punishments be backed by proof, and striking down Sebi's excesses.