Though SEBI has prosecuted HLL and its directors, the Appellate Authority of the finance ministry, headed by the then finance secretary, M S Ahluwalia has exonerated the multinational saying that the regulatory body has no powers to award penalties.

Chief Justice M B Shah and Justice Y S Jagirdar on Monday clubbed two separate petitions filed by the Investors Grievances Forum and SEBI and posted next hearing for admission of the petitions.

In its petition, SEBI said the appellate authority's order has a crippling impact on its powers and authority. ``It is absolutely imperative that pending the hearing and final disposal of the petition, the impugned order including the decision on the jurisdiction of SEBI be stayed and SEBI be allowed to filecriminal complaints against HLL and its respondent directors,'' SEBI prayed.

SEBI also prayed for issuing interim directions requiring HLL to deposit Rs 3.04 crore in the court. In the event of it being held that SEBI has no jurisdiction in ordering HLL to compensate UTI to the extent of Rs 3.04 crore, the court should direct HLL to pay the amount or any other such amount, to the statutory fund, constituted under the SEBI Act or any such investor protection fund, it said.

``This will prevent HLL from enjoying the benefits of wrongful gain/advantage from the said transaction. The regulatory body said that the balance of convenience is in its favour and the public interest also dictates that the interim relief be granted,'' SEBI added.

``The findings by the appellate authority that SEBI lacks the jurisdiction to issue directions as done in case of HLL, is contrary to law and unsustainable,'' SEBI said.

On the other hand, the IGF petition says that though the appellate authority has confirmed SEBI'sstance that insider trading did take place in HLL-BBLIL merger deal, the authority added that SEBI has no power to make any direction for compensation to the Unit Trust of India (UTI) or direct prosecution.

``This has been held by the appellate authority ostensibly because the then merger between HLL and Brooke Bond Lipton was widely reported in several newspapers, SEBI does not have power to direct the payments to be made and the Unit Trust of India should have made due diligence,'' IGF added.

The IGF prayed for quashing the appellate authority's order and initiate fresh investigation into Unilever's buying 51 per cent stake in BBLIL. The Forum also asked for a compensation of Rs 9.76 crore alongwith interest to the Unit Trust of India which has suffered a loss in its sale of BBLIL shares to HLL just prior to the merger. IGF prayed that appellate authority must constitute impartial persons instead of bureaucrats.

According to SEBI, the section 11 (1) of the SEBI Act provides that it shall be the dutyof the Board to protect the interest of investors in securities and to promote the development of... and to regulate the securities market `by such measures as it thinks fit.'

``Section 11 (2) expressly provides that without prejudice to the generality of the powers conferred under section 11 (1), SEBI may take measures that may provide for the enumerated subjects including the prohibition of insider trading,'' it said.

It further contends that section 11B confers on the Board a power to issue a wide range of directions after conducting an investigation. "The language of sections 11 and 11B of the SEBI Act is broad enough to include within its ambit the directions issued by SEBI in respect to compensation to UTI", SEBI states.

"The original order containing the direction of awarding compensation to the investor was not a penalty but restoration of the loss suffered by the investor", the SEBI petition states.