Sebi asks empanelled law firm to return most briefs given to it

The Sebi action came after ELP represented Subhash Chandra and Punit Goenka, founder-promoters of Zee Entertainment (ZEE) in the securities appellate tribunal (SAT). The Zee founders had challenged Sebi’s June 12 interim order that restrained them from holding directorships or key managerial positions in listed entities on account of alleged diversion of funds.

“An email was sent to ELP by a senior official from the legal department of Sebi to return all the briefs given to the firm except those in advanced stages,” said one of the persons cited above. “As per Sebi rules, empanelled solicitors’ firms or advocates, except senior counsels, cannot take any brief against the regulator before any judicial forums including SAT.” ELP has been a Sebi-empanelled firm for almost a decade and represented the regulator in several cases in the SAT, high courts, and the Supreme Court.

An e-mailed query to Sebi did not elicit any response.

“As you may be aware, Sebi is serviced by a panel of law firms of its own choice. Just one aspect I would like to highlight – it is the client’s absolute prerogative to appoint a lawyer of its choice,” said Suhail Nathani, managing partner, ELP. “Clients and lawyers are mutually free to set their own standards of engagement within the confines of professional rules.” Sebi has spent nearly ₹36 crore on professional and legal expenses in the financial year ended March 31, 2022.

Tough Stance
“Sebi wanted to send a firm message to all its empanelled law firms and advocates not to take any brief against the regulator, and if they do so, they will lose the flow of business from it,” said a Mumbai-based senior securities lawyer, who asked not to be named. “Empanelling or revoking the empanelment of law firms and advocates at Sebi is not done through a public process. There are guidelines issued by the department of legal affairs, ministry of law & justice.”

Lawyers and law firms have a professional responsibility to represent their client’s interests even when they are in potential conflict with regulators, said a section of the legal community.

“The decision to terminate or revoke a law firm’s briefs, if true, would raise questions about the independence and impartiality of Sebi. It is generally expected that legal professionals should be free to take up cases and advocate for their clients, regardless of the nature of the case or the parties involved, if there is no conflict of interest,” said Sumit Agrawal, partner, Regstreet Law Advisors and a former Sebi officer.

“Conflict of interest is always in a specific matter or an issue and not universal; else, it does not even make economic sense for a quality law firm to represent a regulator having a wide jurisdiction.”

On June 12, Sebi issued an interim order restraining Subhash Chandra and Punit Goenka from holding any key managerial position until further notice and gave both individuals 21 days to file their replies.