Goldman Sachs gets SC notice

SEBI-SAT BATTLE

The Supreme Court on Monday issued a notice to investment banker Goldman Sachs on a petition filed by the Securities and Exchange Board of India (Sebi), questioning whether the Securities Appellate Tribunal (SAT), a quasi-judicial body, has the powers to impose penalty on the market regulator.

While staying the SAT judgement imposing a cost of Rs 1 lakh on Sebi, a bench headed by Justice S H Kapadia asked Goldman Sachs to explain why the same should not be set aside. Besides, the bench also asked the banker to explain why remarks against the adjudicating officer of Sebi should not be expunged.

The then adjudicating officer of the market regulator, Amit Pradhan had imposed a penalty of Rs 1 crore on Goldman Sachs Investment (Mauritius) for furnishing false declarations, citing violation under Sebi’s (Foreign Institutional Investors) Regulations, 1995.

Solicitor General G E Vahanvati and P Venugopal, appearing for Sebi, said, “We are not challenging the judgement as a whole but only two questions of law — one is the remarks like ‘over bearing, sheer arrogance, without applying mind etc.’ used in the ruling against the officer and the second is the imposition of penalty… Such remarks are generally demoralising. Besides, there are violations on Goldman’s part and the company had given wrong declarations before the officer.”

Vahanvati said that there were no explicit or implicit provisions authorising SAT to impose costs on Sebi.

The market regulator has challenged the SAT order that set aside the impugned Sebi order imposing a penalty of Rs 1 crore on Goldman Sachs for failing to submit the information about issuance of offshore derivatives instruments (ODIs) to an overseas corporate body (OCB) in a prescribed format and with requisite declarations.

According to Sebi, the penalty of Rs 1 crore on Goldman Sachs Investment (Mauritius), was in keeping with the circular that made bi-weekly disclosure of FIIs’ overseas direct investment mandatory so that they did not enter into offshore derivatives with NRIs and OCBs.