Was the Tribunal right in bailing out Gujarat CM Vijay Rupani?

As the clamour grows for Gujarat chief minister Vijay Rupani to step down after being fined ₹15 lakhs for manipulation by the Securities and Exchange Board of India (SEBI), the Securities Appellate Tribunal came to his rescue by setting aside the SEBI order on seemingly questionable grounds.

The Tribunal took the plea made by the appellant, Akash Harishbhai Desai, that he and others were not given a fair hearing and were not given a ‘personal hearing’by SEBI at face value. In the process it chose to overlook SEBI’s order that said that the matter was investigated in 2015 and the process of adjudication began in July that year. As late as in May, 2016 show cause notices were served on Vijay Rupani and 21 other entities fined ₹6.9 Crore for manipulative trading in shares of M/S Sarang Chemicals.

Not only did Vijay Rupani fail to respond to the notices, he in fact sought eight weeks’ time last year to ‘recover’ from a medical condition. In August, 2016 he took over as the chief minister of Gujarat.

The HUF and 21 other entities, including individuals, were fined a total of ₹6.9 Crore for manipulative trading in the shares of a firm Sarang Chemicals. While the chief minister’s HUF was accused of price manipulations, the others including two stock brokers were found guilty of manipulating the volume of stocks of the firm.

On Thursday, the Gujarat chief minister tried to respond to critics by taking the moral high ground. He claimed that the order by SEBI had been set aside and tweeted the following:

What he failed to mention was that the SEBI counsel “on instruction” agreed to give another opportunity to the parties to defend themselves. He also failed to mention that the case is far from over and that SEBI has been asked to pass a fresh order after hearing the parties again. It is not clear why the Tribunal indulged the appellant and acceded to its request after they had disregarded SEBI’s notices and failed to reply for over a year.

The Tribunal’s order read, “It is the case of the appellant that the order is passed without giving an opportunity to the appellant and other parties to file their reply and the said order is passed without giving an opportunity of personal hearing.”

“Counsel for SEBI on instruction states that SEBI is ready and willing to pass appropriate order after giving an opportunity of hearing to the parties provided the parties file their respective reply within the time stipulated by the Tribunal.”

It is worth recalling that the Government in March this year appointed a 1984 batch IAS officer of Himachal Pradesh cadre, Ajay Tyagi, as the SEBI chairman.

While Rupanis are clearly stalling for time and would like to defer the fresh order of SEBI till after the Gujarat election, observers are keenly watching if the same Adjudicating Officer, Rachna Anand, who imposed the fine on October 27, 2017 in the first place, is allowed to hear the reply and pass the fresh order.

As per the Tribunals’ order, the HUF headed by the Gujarat chief minister is to file its response by November 29, 2017.

The ball is thus back in SEBI’s court. Not surprisingly, opposition leaders have capitalised on the misdemeanour and asked for Rupani’s resignation.