To repeatan oft-repeated cliché: this regulatory watchdog needs more teeth.

By Roshni Jayakar

The Ghostbusters they are not, but anyone in trouble makes that first call to the Securities & Exchange Board of India (SEBI). Recently, Tata Group's Ratan Tata and M&M's Keshub Mahindra dropped in at SEBI Chairman D.R. Mehta's place to put in a word for friend Nusli Wadia of beleaguered Bombay Dyeing. It's ironical then while the SEBI does have a final say in matters pertaining to takeovers, the Company Law Board continues to lord over a parallel jurisdiction. This raises a pertinent question: with many SEBI actions and decisions being challenged, can it act to protect investors' interests?

Sample SEBI's briefcase of limited powers:

• The SEBI has no power to impound share certificates. The power to investigate duplicate share certificates fall under the jurisdiction of the Companies Act. Nor does it have any provisions for providing damages to the investor.

• Similarly, in the case of vanishing companies, prosecution can only be launched by the Department of Company Affairs, since the powers to seek winding up of companies is covered by the Companies Act.

• The SEBI had to file public interest litigations to ensure that the promoters of collective investment schemes (aka plantation schemes) did not sell the land. It does not have powers to direct freezing of assets.

• Finally, when the SEBI impounded the profits of Rupangi Impex and Magan Industries-for cases dealing with price-rigging-the decision was challenged in the Gujarat High Court on grounds that the order was without legal sanction. The SEBI lost to a single judge, appealed, and finally got the verdict in its favour. The point is that while the sec in the US and the RBI Act are empowered to impound profits, the SEBI is not allowed to do so.

Usually, the SEBI exercises powers under Section 11B, which enables it to issue directions in the interests of the investors. Unfortunately, SEBI's diktats are challenged, day after day. Sure, the Justice D.R. Dhanuka Committee Report-which recommended strengthening SEBI's regulatory powers-has been forwarded to the Centre for 'appropriate' action. That was on November 10, 1998.

It's not that the report doesn't have merit: if accepted, it would empower the SEBI to investigate and enforce along the lines of other agencies. In other words, the SEBI would have the power to cross-examine, search, and seize. At present, these powers vest with the Company Affairs Department. Interestingly, of the 658 sections of the Companies Act, SEBI has powers under three sections and four sub-sections. If the report gets accepted in toto, the SEBI will have powers to take over the management, freeze assets, appoint directors, and even seek the winding up of collective investment schemes.

The funny thing is that no one disagrees that the SEBI should be given more powers. But when will the parliament clear the report? SEBI's Mehta, who once again made a strong pitch for more powers at the Finance Ministry's standing committee meeting in October, 2000, doesn't seem very optimistic about the status quo changing. What a pity.

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