Paving the way for CCI to probe cartelisation by debenture trustees in fixing fees, SEBI has filed an affidavit before the Bombay High Court acknowledging the jurisdiction of CCI in investigating the collusive conduct of debenture trustees in charging high fees for issuing debt and due diligence. Based on SEBI’s stand, CCI has moved an application before the Bombay Court for vacation of stay on its probe.

A Division Bench of Bombay High Court comprising Justice S. V. Gangapurwala and Justice S. G. Dige on Thursday posted the plea filed by CCI for hearing on December 1.

In a brief hearing on Thursday, Somasekhar Sundaresan, senior advocate representing CCI argued before the Bombay High Court that the interim stay granted by the High Court on the CCI probe, was to allow SEBI to arrive at its prima facie view in the matter. As SEBI has submitted its report,  Sundaresan contended that there was no occasion to continue the stay and urged the court to vacate the same.

Cartelisation by debenture trustees

Earlier this year, CCI ordered a probe against debenture trustees and their association for suspected cartelisation on fees. The regulations framed by SEBI mandate that companies raising debt appoint a ‘debenture trustee’ to protect the interests of investors. The trustees charge a fee from the companies issuing the debt and make due-diligence checks on them. A leading non-banking finance company from South India had complained to both SEBI and CCI, alleging that leading debenture trustees were cartelising the debenture issuance market and charging exorbitant fees.

Turf war

The debenture trustees challenged CCI’s order, initiating an investigation by moving the Bombay High Court and seeking a stay on the CCI proceedings on the ground that SEBI was the sectoral regulator and hence ihad sole jurisdiction to act against them. The Bombay High Court asked CCI not to take any coercive action against debenture trustees and their association till SEBI concludes its enquiry.

Inter-regulatory coordination

The Competition (Amendment) Bill 2022, recently introduced in the Parliament, seeks to widen the scope of consultations between CCI and sectoral regulators, Ashok Kumar Gupta, former Chairperson, CCI said in a recent interview to businessline. The existing statutory framework already provides an inter-regulatory coordination mechanism where CCI and sectoral regulators can interact and seek each other’s opinion on a non-binding basis. The problem with this mechanism is that the threshold for triggering such mechanism for consultation is high, Gupta added.

Lack of mechanism  

Legal experts are, however, divided on the issue of the Bill solving all issues around inter-regulatory coordination. Though they agreed that the proposed amendments are steps in the right direction, they pointed out that they are not sufficient to solve the conflicts. 

In case of divergence of opinion between CCI and sectoral regulator, there is no body like a Financial Stability and Development Council (FSDC) which can deliberate on such conflicts. 

The proposed Bill only enhances cooperation and exchange of thought between CCI and sectoral regulators and, in the absence of a body like FSDC to resolve actual conflicts, the amendments may not be sufficient, legal experts said.

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