Topic 1 : Shielding SEBI: On Supreme Court’s ruling and SEBI probe
Context: SC should have pushed it to do more while not reviewing policy actions
Introduction
- The Supreme Court of India’s ruling on a batch of petitions, filed in the wake of a U.S.-based short seller’s allegations of malfeasance including stock price manipulation at the Adani group of companies, has squarely tossed the ball back to the markets regulator’s court.
- The Court has opted to subordinate petitioners’ entreaties to protect larger public interest to its chariness to substitute “its own wisdom over the regulatory policies” of the Securities and Exchange Board of India.
Securities and Exchange Board of India (SEBI)
- Securities and Exchange Board of India (SEBI) was first established in 1988 as a non-statutory body for regulating the securities market.
- It became an autonomous body on 30 January 1992 and was accorded statutory powers with the passing of the SEBI Act 1992 by the Parliament of India.
- SEBI has its headquarters at the business district of Bandra Kurla Complex in Mumbai and has Northern, Eastern, Southern and Western Regional Offices in New Delhi, Kolkata, Chennai, and Ahmedabad respectively. It has opened local offices at Jaipur and Bangalore and has also opened offices at Guwahati, Bhubaneshwar, Patna, Kochi and Chandigarh in Financial Year 2013–2014.
Functions of SEBI:
- Regulatory Framework: SEBI formulates and enforces rules and regulations to govern the securities market, promoting fair practices and transparency.
- Investor Protection: It safeguards investor interests by regulating entities like stock exchanges, brokers, and other intermediaries, aiming to create a secure investment environment.
- Market Development: SEBI works to enhance the efficiency and competitiveness of the securities market through constant reforms and innovations.
- Enforcement and Adjudication: The organization has the authority to investigate and take enforcement actions against market participants involved in malpractices.
Supreme Court’s observation (Current issue)
- In its 46-page order, the Bench headed by Chief Justice of India D.Y. Chandrachud is emphatic in observing that “SEBI has prime facie conducted a comprehensive investigation” that “inspires confidence”, and that “the facts of this case do not warrant a transfer of investigation from SEBI” given that “prima facie no deliberate inaction or inadequacy” was found in the regulator’s conduct of its probe.
- Strikingly, the Bench has completely skirted the fundamental questions that the Court-appointed Expert Committee in its May 2023 report had opted to leave as a ‘matter between SEBI and the Court’ — the determination of possible violations pertaining to minimum public shareholding and related party transactions.
- The Bench denied SEBI’s amendments to the Foreign Portfolio Investors Regulations and Listing Obligations and Disclosure Requirements, which were the basis of petitioners’ regulatory failure submissions, stating that there was no illegality or the norms were not “capricious, arbitrary, or violative of the Constitution”.
Little assuage to investors.
- The ruling has also done little to assuage investors’ concerns about SEBI’s approach to getting to the bottom of the allegations raised by Hindenburg Research in its January 2023 report.
- Without elaboration on any of the regulator’s findings, the Court has blandly observed that “SEBI has completed 22 out of the 24 investigations into the Adani group” and that completion of the remaining two “are pending due to inputs being awaited from foreign regulators”.
- The Bench has directed SEBI to complete these “expeditiously”. While the Court’s reluctance to review the policy actions of a ‘specialised regulator’ is understandable, the decision to leave the crucial question of SEBI’s perceived tardiness in investigating allegations of corporate malfeasance and market manipulation by a large conglomerate back to the remit of the very same watchdog hints at a degree of judicial abstinence that may only undermine the larger public good.
Conclusion
The Court is surely aware of past instances where it has found SEBI wanting in alacrity of enforcement, a facet flagged by the experts’ panel appointed in this case as well. After all, ‘justice must not only be done, but it must also be seen to be done’.
Topic 2 : Civil society under siege, in India
Context: The last bastion for India’s democracy is being targeted, with the anti-communal and progressive civic space under the most serious attack by the state.
Introduction
- A free civic space regulated under constitutionally guaranteed principles is the essence of democracy. India is lucky to have an unusually diverse and vibrant civil society. However, constitutional freedoms are themselves under siege.
- It will be important to recognise and protect these freedoms by social and political forces who repose their faith in the Constitution.
Functions of Civil Society:
- Advocacy and Representation: Civil society acts as a voice for citizens, advocating for their rights and interests. It represents diverse perspectives and engages with policymakers to influence decision-making processes.
- Social Service Delivery: Many civil society organizations (CSOs) are involved in providing essential services such as healthcare, education, and community development. They often address gaps in public services.
- Monitoring and Accountability: Civil society monitors government and corporate actions, holding them accountable for their policies and practices. This includes scrutinizing public spending, ensuring transparency, and promoting good governance.
- Community Empowerment: Civil society fosters community engagement and empowerment. It encourages active participation of individuals and communities in decision-making processes that affect their lives.
- Human Rights Protection: CSOs play a crucial role in advocating for and protecting human rights. They work to eliminate discrimination, promote equality, and address issues such as gender equality, freedom of speech, and social justice.
- Bridge between Citizens and Government: Civil society acts as a bridge between citizens and the government, facilitating dialogue and collaboration. It helps in articulating public concerns and facilitates constructive engagement with policymakers.
- Environmental Advocacy: Many civil society organizations are actively involved in environmental conservation and sustainable development. They raise awareness about environmental issues, advocate for policies that promote sustainability, and engage in conservation efforts.
Civil space under attack
- The anti-communal and progressive civic space is under the most serious attack by the state.
- This is also the section of society that will unite against Hindu nationalism under any party that offers the prospect of secularism, interpreted assarva dharma sama bhava (equal respect for all religions), and citizen well-being with economic growth.
The scale of attack
- State uses various instruments to restrict civic space of 15 organizations, both small and large, relying on domestic and foreign donations.
- These organizations include Amnesty International, the Centre for Equity Studies, Citizens for Justice and Peace, Lawyers Collective, Centre for Promotion of Social Concerns, and Act Now for Harmony and Democracy (ANHAD).
- These organizations are categorized as neutral, moderate, or strong in their views on minority rights, Dalit rights, Adivasi rights, and equity promotion.
- Activist organizations fighting against communalism are most significantly under attack.
- Moderately attacked institutions include the Centre for Policy Research (CPR) and a significant NGOs with American funding.
- Low-level attacks often impact organizations not actively involved in anti-communal areas, such as Navsarjan and Save The Children.
- We also found that the disciplining instruments deployed by the state can impact organisations.
- Greenpeace, for example, has transitioned from one that faced high intensity attack to one that now faces a low level of attack by our definition.
- In the process, Greenpeace had to change its identity from one that was strong on its rights-based mobilisation towards advancing environmental concerns and Adivasi rights to one that has become much more lukewarm in that regard.
Various Instruments Used in NGOs’ Attacks
- Charges of money laundering and investigations are the primary instruments used.
- Amendments to the Prevention of Money Laundering Act, 2002 in 2019 have led to attacks on NGOs and Opposition politicians.
- The Foreign Contribution (Regulation) Act, 2010 (FCRA) was stringent under the United Progressive Alliance and Bharatiya Janata Party (BJP) governments.
- The FCRA has weakened the impact on foreign funding of political parties but still has a lethal effect on NGOs.
- Foreign donors are intimidated by a Prior Reference Category List of around 80 internationally reputed donors.
- The Central Bureau of Investigation (CBI) is empowered to investigate NGOs and their personnel, with potential penal consequences.
Conclusion
- The 2020 amendments to the Income-Tax Act, which provide tax exemptions for NGOs and donors, have made renewals of these certificates’ mandatory every five years. This has allowed the state to intimidate domestic donors who oppose communalism and crony capitalism.
