Communication breakdown: SEBI’s unreasoned actions and the SAT’s half-measure
The SAT demands reasons – but only where the label fits.
By Natasha Aggarwal and Bhavin Patel
Welcome to The Bridge! Regulatory orders shape markets, govern disputes, and test the rule of law, yet their quality rarely gets the scrutiny it deserves. The Bridge is TrustBridge’s window into the quasi-judicial work of India’s regulators: how they decide, and how they could decide better.
Introduction
Is executive action immune from the requirement to give reasons?
In July 2026, the Securities Appellate Tribunal (the “SAT”) was presented the opportunity to answer this question in Marwadi Chandarana Intermediaries Brokers Ltd. v. SEBI (the “Marwadi Order”).1 The controversy in the case involved the appellant’s request to withdraw an open offer, which the Securities and Exchange Board of India (“SEBI”) rejected through a ‘communication’. Notably, the communication did not provide any reasons for SEBI’s decision.
The appellant argued that SEBI’s communication “meets the appellant with serious civil consequences”, was “bereft of cogent reasons and without application of mind”, and that the markets regulator “ought to have passed a reasoned order”.
SEBI’s counsel argued, on the other hand, that the communication could not be considered an “order”. This matters because a conjoint reading of Section 15T of the Securities and Exchange Board of India Act, 1992 and National Securities Depository Limited v Securities and Exchange Board of India2 clarifies that only SEBI’s ‘orders’ are appealable.
In the Marwadi Order, the SAT held that it is “imperative that the Regulator conveys its decision with reasons”, and the impugned SEBI ‘communication’ was “akin to an order”. The appeal was allowed, and the matter remitted to the SEBI.
This seems like a good decision at first blush - but it conceals a devil of doctrinal confusion in the details, and is worth unpacking.
Why does the Marwadi Order matter?
For at least a couple of reasons:
First, the Marwadi Order states that since the ‘communication’ could result in “several civil consequences” for the appellant, it should have been reasoned. This makes tremendous sense, and ensures that regulators can be held accountable for their actions. Any decision that affects the rights of parties should be accompanied by reasons, ideally in writing. This speaks to the core rule of law requirements of the knowability and clarity of the law, and is crucial information for appellants, appellate and review fora, and market participants generally.
The Marwadi Order is certainly a step in the right direction in this regard, but on closer scrutiny, we discern a somewhat troubling gap:
The SAT says that the ‘communication’ was “akin to an order”, and should therefore have been reasoned. It does not say that ‘communications’ or other instruments that are not ‘orders’ must also be reasoned. This statement can be interpreted in two ways, each of which lead to differing results:
On one interpretation, this limits the applicability of reason-giving to SEBI’s quasi-judicial order-writing, and leaves its other functions exempt from this requirement. If a ‘communication’ or other instrument is not ‘akin to an order’, the SAT suggests, no reasons need be provided for the decision it contains. So, reason-giving does not apply to executive instruments, only to quasi-judicial ‘orders’. But this is troubling because it goes against the requirements for reason-giving that we have already described - for regulatory accountability, enabling review, and for general awareness of market participants.
On another interpretation, doctrinal confusions compound: are we to think that any regulatory communication or instrument that results in ‘severe civil consequences’ for the affected party is ‘akin to an order’? If yes, then can we think of any regulatory instrument that does not result in such consequences? If not, that means all regulatory instruments are ‘akin to orders’, and so, the requirement of reason-giving extends to all regulatory actions, including purely executive instruments. This collapses the distinction between various regulatory functions, a position that the Supreme Court took as far back as 1969 in A. K. Kraipak & Ors. v. Union Of India,3 and reconfirmed in 2023 in AERA v. Delhi International Airport Ltd.4
The definitions and boundaries of various functions (quasi-legislative, executive, and quasi-judicial) are blurry, at best, in the Indian jurisprudence.5 The Marwadi Order points to an instance in which this distinction is rendered meaningless - that is, if you agree that the use of regulatory power must be reasoned, accountable, and transparent.
Conclusion
We argue that all regulatory action must be accompanied by reasons. This is critical for several reasons - it demonstrates application of mind, and is a safeguard against the arbitrary exercise of power. Distinguishing between executive ‘communications’ and quasi-judicial ‘orders’ is unnecessary and counter-productive in this respect. All regulatory action can result in severe consequences for regulated entities, and hence it is important that the regulator explain why it is taking a particular action or how it arrives at a decision.
Given the lack of doctrinal clarity about the differences between various regulatory functions, and their specific requirements in Indian case law, codifying the requirement for reason-giving as a default position might be a good idea. This is a good time to consider such a move, given that the Securities Markets Code Bill, 2025 is still under consideration. The Marwadi Order is constrained by what the SAT can do as an appellate regulatory tribunal, but it points the way to an important and necessary set of changes in Indian regulatory law.
- The authors are researchers at TrustBridge, and would like to thank Renuka Sane for her feedback.
CITATION
Natasha Aggarwal and Bhavin Patel, 2026. “Communication breakdown: SEBI’s unreasoned actions and the SAT’s half-measure”, The Bridge, TrustBridge Rule of Law Foundation
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References
AERA v. Delhi International Airport Ltd. 2024 SCC OnLine SC 2923.
A. K. Kraipak & Ors. v. Union Of India AIR 1970 SC 150.
Bhavin Patel, Renuka Sane, 2026. “Quasi-judicial function at regulators,” Working Papers, Trustbridge Rule of Law Foundation.
Marwadi Chandarana Intermediaries Brokers Ltd. v. SEBI, Order dated 8 July 2026 in Appeal No. 37 of 2026.
National Securities Depository Limited v Securities and Exchange Board of India (2017) 5 SCC 517.
Order dated 8 July 2026 in Appeal No. 37 of 2026.
(2017) 5 SCC 517.
AIR 1970 SC 150.
2024 SCC OnLine SC 2923.
Bhavin Patel, Renuka Sane, 2026. “Quasi-judicial function at regulators,” Working Papers, Trustbridge Rule of Law Foundation.