A public interest litigation (PIL) filed in Madras high court has challenged the constitutional validity of the fresh promulgation of the Securities Laws (Amendment) Second Ordinance. The first bench admitted the petition and called for Sebi's respose in three weeks time. 

 

The new rules which provided wide ranging investigative and enforcement powers to markets regulator -- Securities Exchange Board of India (Sebi) had lapsed and had been subsequently reintroduced by the UPA government on March 28. 

In his PIL, Prashaanth Balasubramaniam of Besant Nagar said the ordinance was introduced on July 18, 2013. The ordinance was repromulgated on September 16, 2013 with largely similar provisions. It again lapsed and was reintroduced as an ordinance on March 28, 2014 with retrospective effect from July 18, 2013. 

However according to the Indian constitution, an ordinance could only be promulgated only twice. As this was the third instance of promulgation of ordinance, it could well be "a constitutional anomaly ." Also, it had been reintroduced under the legislative power of the President without sanction from both the houses of the parliament. 

"Promulgation of an ordinance by a government that does not enjoy sufficient strength or the support required to the pass the ordinance will have dangerous consequences," said the PIL. 

According to the ordinance, SEBI could regulate any investment contract with a corpus fund of Rs 100 crore or more. In case of noncompliance, SEBI could attach assets. Also, it is empowered to check records of individuals, banks, corporation and boards SEBI could also lay down its own procedures for the investigating officers who were conducting the raid. Such power was even wider than those under Code of Criminal Procedure(CrPC), said the PIL. 

The new rules provided overarching power to SEBI. to check illicit investment schemes and other market manipulation. The reintroduction would result in `untrammeled powers being given to SEBI," said the PIL requesting the court to annul it.(Times of India)