TMI Blog2015 (6) TMI 904X X X X Extracts X X X X X X X X Extracts X X X X ..... ortunity to submit consent proposal after perusing documents furnished to the appellant. Since Section 15T(2) is deleted and Section 15JB(4) is inserted to SEBI Act with retrospective effect from April 20, 2007 by Ordinance No. 2 of 2014 which bars appeal against any order passed in consent proceedings. - Appeal dismissed. - Appeal No. 1 of 2013 - - - Dated:- 30-6-2014 - J.P. Devadhar, Jog Singh and A.S. Lamba, JJ For The Appellant : Mr. Janak Dwarkadas, Senior Advocate with Mr. Somasekhar Sundaresan, Mr. Paras Parekh, Mr. Abishek Venkatraman and Mr. Dhaval Kothari, Advocates For The Respondent : Mr. Darius Khambata, Advocate General with Mr. Shiraz Rustomjee, Senior Advocate, Mr. Jayesh Ashar, Mr. Mihir Mody and Mr. Pratham V. Masurekar, Advocates Per: Justice J.P. Devadhar 1. Appellant herein seeks to challenge order of Securities and Exchange Board of India ( SEBI for short) dated January 2, 2013 whereby consent application filed by appellant on April 26, 2011 for settling the dispute raised in show cause notice dated December 16, 2010 has been rejected as not consentable under paragraph 1(ii) of the consent circular dated May 25, 2012. 2. This appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e cash segment with a view to depress the settlement price in the F O segment and thereby made illegal gain of ₹ 513.12 crores on the short positions. On receiving above show cause notice, appellant by letter dated October 12, 2009 sought inspection of documents which were referred to in the said show cause notice/corrigendum. Since there was delay in receiving inspection of documents, appellant filed its reply to the show cause notice/corrigendum under protest. 6. While aforesaid show cause notice/corrigendum was pending, appellant filed consent application on November 5, 2009 seeking settlement of dispute raised in show cause notice dated April 29, 2009. The said consent application was rejected by SEBI on March 8, 2010. 7. Thereafter, SEBI deemed it fit to reinvestigate the matter. On completion of reinvestigation, SEBI in supersession of its earlier show cause notice dated April 29, 2009 issued a fresh show cause notice on December 16, 2010 in relation to the very same transactions which were subject matter of earlier show cause notice dated April 29, 2009 but with certain modifications, such as, dropping the charge relating to insider trading. Vide its reply dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g before IC is scheduled on December 7, 2012. By a letter dated December 3, 2012 appellant requested that since photocopies of documents running into 1300 pages have been given belatedly in the last week of November 2012 i.e., after almost two years of making request and inspection of some material documents were yet to be given, meaningful participation in consent proceedings would be possible only when inspection of all material documents are given and sufficient time is given to the appellant to review photocopies of documents running into 1300 pages. By the said letter appellant further requested that since Senior Counsel of appellant would not be available once the Courts are on vacation from December 17, 2012, meeting before the IC scheduled on December 7, 2012 may be postponed to any date in the third week of January 2013. 12. Internal Committee of SEBI did not accede to the request of the appellant and referred the matter to the High Powered Advisory Committee ( HPAC for short). On December 21, 2012, HPAC after considering seriousness of the charges levelled in show cause notice, recommended that the case may not be settled in view of Clause 1(ii) of SEBI consent circul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resent case, on account of failure on part of SEBI to give complete inspection of all documents referred to and relied upon in the show cause notice, the appellant could not attend IC meetings and without giving an opportunity of hearing before IC/HPAC/WTM to explain as to why the matter needs to be settled, those authorities could not have held that the consent application cannot be settled merely because the dispute falls under Clause 1(ii) of consent circular dated May 25, 2012. Accordingly, counsel for appellant submitted that the impugned decision of SEBI dated January 2, 2013 be quashed and set aside and SEBI be directed to dispose of consent application of appellant dated April 26, 2011 on merit and in accordance with law. 16. As regards applicability of Section 15JB(4) to the facts of present case, counsel for appellant submitted that passing impugned order arbitrarily, capriciously and disregarding due process of law, would render the order a nullity and such an order which suffers from nullity could be challenged before this Tribunal irrespective of insertion of Section 15JB(4) with retrospective effect from June 20, 2007. To hold that appeal is not maintainable even w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs cannot be passed. Thus, stalling proceedings under consent procedure was with a view to stall proceedings under Section 11B of the SEBI Act. 19. Counsel for SEBI further submitted that fact that an officer of SEBI on April 15, 2011 had informed appellant about existence of right to file consent application in relation to show cause notice dated December 16, 2010, does not automatically mean that consent application filed by appellant on April 26, 2011 has to be allowed. In the present case, consent application was examined and on being found that it did not satisfy the requirements of circular dated May 25, 2012, the application was rejected. 20. Relying on a decision of the Bombay High Court in the case of Shilpa Stock Broker Pvt. Ltd. vs SEBI reported in 2012(3) ALL MR 908, counsel for SEBI submitted that the appellant cannot compel SEBI to settle the dispute as the appellant does not have vested right to insist that the dispute should be resolved by way of consensual settlement. Therefore, in the present case, where recommendation of HPAC has been accepted by panel of WTM of SEBI and held that the case is not consentable, appellant is not justified in contending that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o promote orderly and healthy growth of the Securities market and to protect interests of investors, Parliament while establishing SEBI, has conferred power on SEBI to settle disputes under consent mechanism with a view to ensure speedy disposal of cases which otherwise would get entangled in long drawn litigation apart from incurring huge expenditure and also consume time in investigation and in litigation. Although, Section 15T(2) of SEBI Act stipulates that no appeal would lie before this Tribunal from an order of SEBI made with the consent of the parties, it is apparent that the bar is restricted to an order passed on merits of the consent application and would not apply to an ex-parte order passed in breach of the principles of natural justice. In other words Section 15T(2) prohibits appeal against an order which is passed after considering the consent proposal put forth by the applicant during the discussion with the IC of SEBI. Therefore, in the facts of present case, where the impugned order is not an order passed with the consent of the parties but is an ex-parte order, appeal against impugned was maintainable before this Tribunal under Section 15T(1) of SEBI Act. Accordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eview documents running into 1300 pages which were furnished in the last week of November 2012 and thirdly, counsel for appellant would not be available during Christmas vacation. Above request of appellant was rejected and impugned order is passed by SEBI on January 2, 2013. 27. First question therefore to be considered is, whether SEBI is justified in rejecting the request of the appellant for postponement of the meeting scheduled on December 7, 2012 to third week of January 2013 and by ex-parte order dated January 2, 2013 reject consent application of the appellant dated April 26, 2011. 28. Immediately after issuance of show cause notice dated December 16, 2010, appellant by letter dated December 28, 2010 had demanded inspection of all documents referred to and relied upon in the show cause notice dated December 16, 2010. Even in the consent application filed on April 26, 2011, appellant had specifically requested for inspection of the documents referred and relied upon in the show cause notice dated December 16, 2010. Though request for inspection was rejected by SEBI on December 7, 2011, in fact partial inspection was given voluntarily on November 2, 2012, substantial in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -parte order January 2, 2013, even before agreeing to give inspection of 8 documents demanded by the appellant. Therefore, in the facts of present case, request of appellant in seeking postponement of the meeting before IC scheduled on December 7, 2012 till third week of January 2013 could not be said to be unreasonable especially when SEBI took more than two years to give full inspection of documents demanded by the appellant. Undue haste shown by the officers of SEBI in disposing of the consent application even before disposal of Appeal No. 224 of 2012 and thereafter agreeing to give inspection of documents demanded by the appellant voluntarily at the hearing of Appeal No. 224 of 2012 shows total highhandedness on part of SEBI in handling the present case. 30. Argument of SEBI that the appellant was seeking inspection of wholly irrelevant documents with a view to stall proceedings under Section 11B is without any merit. If SEBI was of the opinion that the appellant was seeking inspection of irrelevant documents, then after rejecting the request for inspection, there was no reason for SEBI to give inspection of documents voluntarily after lapse of more than two years. In any ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13 has caused prejudice not only to appellant but also to investors at large. Instead of rejecting the consent application even before giving full inspection if SEBI had considered the consent application after giving full inspection no prejudice would have caused at all. Therefore, inordinate delay on part of SEBI to give inspection of documents and thereafter disposing of the consent application even before giving full inspection of documents has not only caused prejudice to appellant but also led to miscarriage of justice. 33. Consent application of the appellant is held to be un-consentable on ground that dispute set out in show cause notice is covered under paragraph 1(ii) of consent circular dated May 25, 2012. Fact that the default/dispute raised in the show cause notice dated December 26, 2011 was covered under un-consentable category specified in paragraph 1(ii) of consent circular dated May 25, 2012 was known from inception. Since consent circular dated May 25, 2012 specifically provided that notwithstanding anything contained in the said circular, based on facts and circumstances of each case the HPAC/Panel of WTM may settle any of the defaults set out therein, appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order of the Supreme Court which is impermissible. In the present case, show cause notice issued by SEBI against the appellant is yet to heard on merits and hence above decision of Bombay High Court has no bearing on the facts of present case. Similarly, decisions of the Apex Court in the case of Syndicate Bank (supra) and Haryana Financial Corporation (supra) are also distinguishable on facts as the appellant herein has demonstrated that failure on part of SEBI to give inspection of all documents referred to and relied upon in the show cause notice before rejecting consent application has caused prejudice to the appellant. It is relevant to note that in respect of transaction that took place in 2007, appellant is made to face litigation in the year 2014 which according to appellant could have been avoided in public interest by giving an opportunity to the appellant to pursue consent application provided inspection of all documents were given before rejecting the consent application instead of giving it after disposal of consent application. Accordingly, we hold that SEBI was not justified in rejecting the consent application without giving an opportunity to the appellant to pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15T against any order passed by the Board or adjudicating officer, as the case may be, under this section. Thus, by promulgating aforesaid Ordinances from time to time, legislature has made it clear that although under Section 15T(2) of SEBI Act appeal against an order passed with the consent of parties was not maintainable before this Tribunal, by omitting Section 15T(2) and by inserting Section 15JB to SEBI Act with retrospective effect from April 20, 2007 and by inserting Section 30A to SEBI Act it is made clear that no appeal would lie before this Tribunal against any order passed in settlement proceedings. In other words, by deleting Section 15T(2) and inserting Section 15JB as also Section 30A, legislature has sought to make partial bar under Section 15T(2) into complete bar under Section 15JB with retrospective effect from April 20, 2007 in relation to appeals against orders passed in consent/settlement proceedings. Since Section 15JB(4) expressly bars appeal against any order passed in settlement proceedings from April 20, 2007, in our opinion it would not be open to this Tribunal to entertain present appeal against impugned order passed in consent proceedings, even tho ..... X X X X Extracts X X X X X X X X Extracts X X X X
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