Daily Answer Writing
28 April 2021

QUE) Does the power to make regulations, conduct investigations, and inflict punishments, go against the principle of separation of powers? Discuss in the context of the various statutory regulatory bodies. (250 Words)

Source <https://www.business-standard.com/article/opinion/judicial-regulation-at-sebi-121042701363_1.html>

GS2: `Statutory, regulatory and various Quasi-Judicial bodies.

Approach Answer:

Introduction: Statutory regulatory bodies are those public organization or government agencies that are set up to exercise a regulatory function by an act of the legislature. This involves imposing requirements, conditions or restrictions, setting the standard for activities, and enforcing in these areas or obtaining compliance.

 

Such statutory regulatory authorities in India include:  RBI – Reserve Bank of India, SEBI – Securities and Exchange Board of India, IRDAI – Insurance Regulatory and Development Authority of India, PFRDA – Pension Fund Regulatory & Development Authority, NABARD – National Bank for Agriculture and Rural Development, SIDBI – Small Industries Development Bank of India, CBFC – Central Board of Film Certification, FSSAI – Food Safety and Standards Authority of India, BIS – Bureau of Indian Standards etc.

 

These are set up through Parliamentary legislations and are often given powers like a Civil court apart from regulatory powers. Thus they act as a supervisory authority and can conduct investigations as well as adjudge specific cases of misconduct.

 

Importance of such wide range of powers

              1. Protection of interests of the weaker parties: Such as RBI defends the interests of depositors and SEBI of the investors.

              2. Constant monitoring and inspection: These bodies are empowered to collect evidence and conduct investigation in order to fulfil their duties. For Example detection of NPAs by RBI.

              3. Enforcement: These can take punitive actions. Such as Moratorium by RBI, or banning of a food like 'maggi' item by FSSAI.

              4. Sectorial Governance: India liberalised industries in the 1990s and handed over sectoral governance to regulatory bodies. These bodies played a constructive role in ensuring the free and fair market.

              5. Incentivisation of investment: The 'Regulator' ise the 'nurturer' and 'parent' of its sector. The regulators incentivised private investment by giving them functional autonomy and shielding them from interference.

              6. Reducing burden from Judiciary: Many of the cases are solved by the in house hearing. There often is a provision of appellate tribunal. For example Cases from SEBI are appealed in Securities appellate tribunal.

 

Disadvantage of such concentration of powers:

              1. Subjective application of powers: Often organizations like film certification board, SEBI etc are accused of partiality.

              2. Populist pressure: In India political populism often overtakes the economic agenda. This casts a shadow on regulation. Ex: Interventions of government in the RBI functioning

              3. Independence: the appointments in the regulatory bodies is done by the government. Further they depends on the government for the funding.

              4. Selection of non- experts: The selection of non-experts to lead the regulatory bodies may bring lack of efficiency in the functioning of such bodies. Ex: former Finance secretary was appointed as RBI chairman.

              5. Inefficient review mechanism: The review mechanism of the functioning of the regulatory bodies under the aegis of parliamentary committees is not very robust.

This raises questions over the concentration of powers in the executive bodies. Through this the government can take over the adjudication function in the economy, which not only goes against the principle of separation of power but also has authoritarian tendencies.

 

Conclusion: the concentration of regulatory, judicial and executive powers in the hands of regulatory bodies is a challenge for the governance. However, there are certain safeguards in the system such as, all matters can be appealed ultimately in the higher judiciary. Also since all the regulations are in public, the stakeholders cast a continuous shadow on the quality of regulations and adjudications.

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