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2020 (1) TMI 523 - AT - SEBIEx-parte ad-interim order passed by the Whole Time Member ("WTM") of SEBI - HELD THAT:- SEBI has power to pass ex-parte ad-interim order pending investigation under Sections 11 & 11B of the SEBI Act. What has been disputed is, that considering the facts and circumstances in the instant case, there was no urgency to pass an ex-parte ad-interim order. There is no doubt that an ex-parte ad-interim order can be passed only when there is an urgency. In Liberty Oil Mills v. Union of India [1984 (5) TMI 236 - SUPREME COURT], the Supreme Court held that the urgency must be infused by a host of circumstances and further held that the regulatory agency must move quickly in order to curb further mischief and take action immediately in order to instill and restore confidence in the capital market. There is no doubt that only under emergent circumstances and spelling out a case of urgency that an ad-interim ex-parte orders can be passed. Such exercise of regulatory measures in the form of ad-interim ex-parte orders can only be done upon the existence of circumstances warranting such a drastic measure. Applying the aforesaid test, we find that considering the allegations spelled out in the ex-parte ad-interim order which we need not refer on merits at this stage, we find that upon the examination of the evidence, a prima facie opinion was correctly arrived at by the WTM based on objective facts indicating diversion of funds from a listed Company which was not in the interest of its shareholders. It was thus extremely necessary that an action on urgent basis was required to stop further defalcation/ diversion/ siphoning of the funds of the Company and to protect the interest of the investors and its shareholders and to instill confidence in the securities market. Such measures if not taken while the iron was hot would defeat the regulatory measures that has been provided to SEBI under the SEBI Act. We are of the opinion that, in the instant case, there was ample evidence to show urgency and, considering the material that has been brought on record, the matter being serious, warranted an inference by the regulator. Whether such transactions indicated in the ex-parte ad-interim order was dully authorized or not by the RAC or whether such transactions were approved by a resolution of the Board of Directors is a matter to be considered on merit by the appropriate authority and it is not appropriate for this Tribunal to consider such documents at this stage as consideration of these documents may prejudice not only the investigation but also the parties. We are of the opinion that the contention of the appellants that no case was made out for grant of an ad-interim ex-parte order is misconceived and cannot be accepted. Appellants are entitled for supply of documents from the Company so that they may file an appropriate reply before SEBI. Denial of such documents by the Company or by SEBI would be in violation of principles of natural justice as embodied in Article 14 of the Constitution of India. Without going into the controversy as to whether requisite documents were supplied or not, we are of the opinion that, if any, document is requested by the appellants either from the Company or from SEBI the same would be supplied in accordance with law. Order - The appellants shall file a reply before the WTM of SEBI on or before October 15, 2019. In the event the appellants want further time then appropriate application will be filed before the WTM of SEBI which will be considered and appropriate orders would be passed. In the event any document is required by the appellants either from Company or from SEBI a formal request to that effect shall be made by the appellants which document(s) shall be supplied in accordance with law within three working days.
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