TMI Blog2020 (7) TMI 386X X X X Extracts X X X X X X X X Extracts X X X X ..... ply of documents upon which no reliance has been placed by the AO, nor even the principles of natural justice require supply of such documents which has not been relied upon by the AO. We are of the opinion that we cannot compel the AO to deviate from the prescribed procedure and supply of such documents which is not warranted in law. In our view, on a reading of the Act and the Rules we find that there is no duty cast upon the AO to disclose or provide all the documents in his possession especially when such documents are not being relied upon. Practice of filing a compilation of judgments without citing during the course of arguments is not an accepted practice and consequently we are not required to consider such decisions which were no cited at the Bar. The request of the appellant for supply of the documents in possession of the authority is misconceived and cannot be accepted. Prima facie, the only object in making such demand is to obstruct the proceedings. We accordingly do not find any merit in the appeal and is dismissed. - Appeal No. 28 of 2020 - - - Dated:- 12-2-2020 - Tarun Agarwala, Presiding Officer, Dr. C.K.G. Nair, Member And M.T. Joshi, Judicial Member ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the appellant was informed that in law only the documents relied upon by the AO in the show cause notice could be inspected and only those documents could be supplied which have been provided to the appellant. 5. The appellant, being aggrieved by the said communications issued by the AO has filed the present appeal. 6. We have heard Shri Kunal Katariya, the learned counsel for the appellant and Shri Shyam Mehta, the learned senior counsel for the respondent. 7. The learned counsel for the appellant contended that a duty is cast upon the AO to disclose and supply copies of all the documents that may be available with the AO to enable the appellant to effectively defend and rebut the allegations mentioned in the show cause notice. It was urged that the appellant is not only entitled to the documents referred in the show cause notice but to all such other documents which are in the possession of the AO. It was urged that one who is facing an enquiry can only effectively meet the charges only when copies of the relevant statements and documents used against the delinquent are made available to him. In the absence of such copies, the delinquent cannot prepare his defence and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd purchase. SEBI has been given the power to take action which are not only remedial in nature but could impose monetary penalties in addition to other penalties of suspension or cancellation of certificate of registration, etc. 10. Chapter VI-A of the SEBI Act provides for penalties for violation of various provisions of the Act, Rules and Regulations. Section 15G of the SEBI Act provides for penalty for insider trading. For facility, the said provision is extracted here under:- Penalty for insider trading. 15G. If any insider who,- (i) either on his own behalf or on behalf of any other person, deals in securities of a body corporate listed on any stock exchange on the basis of any unpublished price-sensitive information; or (ii) communicates any unpublished price-sensitive information any person, with or without his request for such information except as required in the ordinary course of business or under any law; or (iii) counsels, or procures for any other person to deal in any securities of any body corporate on the basis of unpublished price-sensitive information, shall be liable to a penalty which shall not be less than ten lakh rupees but which ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred by clause (da) of sub-section (2) of section 29 of the SEBI Act, the Central Government made the following Rules for holding inquiry for the purpose of imposing penalty under Chapter VI-A of the Act, namely, Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995 ('Rules of 1995' for short) . 14. Rule 4 of the said Rules prescribes the procedure for holding an inquiry for the purpose of adjudication under Chapter VI-A of the Act whether any person has committed any violation of any provision of the Act. For facility, Rule 4 which is material for the present purpose is extracted here under:- Holding of inquiry. 4.(1) In holding an inquiry for the purpose of adjudging under sections15A, 15B, 15C, 15D, 15E, 15F, 15HA and 15HB whether any person has committed contraventions as specified in any of sections 15A, 15B, 15C, 15D, 15E, 15F, 15G, 15HA and 15HB the adjudicating officer shall, in the first instance, issue a notice to such person requiring him to show cause within such period as may be specified in the notice (being not less than fourteen days from the date of service thereof) why ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quiry while adjudicating under Chapter VI-A of the SEBI Act. The AO can only hold inquiry in the prescribed manner after giving the person concerned a reasonable opportunity of being heard for the purpose of imposition of any penalty. The Rules provide that where any person has committed any contravention, the AO shall issue a notice to such person requiring him to show cause as to why an inquiry should not be held against him. Such issuance of notice at this stage is not for the purpose of making any adjudication into the alleged violation but is only for the purpose of deciding whether an inquiry should be held against him or not. If a response is made by person concerned against a notice the AO is required to consider the response and form an opinion as to whether an inquiry is required to be held into the allegations of the contravention of the provisions of the Act, Rules or Regulations. It is only then that substantial inquiry into allegations of contravention begins. Under section 15-I (2) of the Act read with Rule 4(6) of the rules the AO while holding an inquiry has the powers of a civil court under the Code of Civil Procedure in respect of summoning and enforcing the atte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the notice enabling him to show a proper cause as to why an inquiry should not be held against him though the Rules do not provide for the same. Such a fair reading of the provision would not amount to supplanting the procedure laid down and would in no manner frustrate the apparent purpose of the statute. 18. In the light of the aforesaid, we are of the opinion that concept of fairness and principles of natural justice are in-built in Rule 4 of the Rules of 1995 and that the AO is required to supply the documents relied upon while serving the show cause notice. This is essential for the person to file an efficacious reply in his defence. 19. The contention that the appellant is entitled for copies of all the documents in possession of the AO which has not been relied upon at the preliminary stage when the AO has not formed any opinion as to whether any inquiry at all is required to he held cannot be accepted. A bare reading of the provisions of the Act and the Rules as referred to above do not provide supply of documents upon which no reliance has been placed by the AO, nor even the principles of natural justice require supply of such documents which has not been relied u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal order and therefore the said report is required to be made available to the delinquent. In the instant case, the show cause notice relies upon certain documents which have been made available. Thus the investigation report is not required to be supplied. 23. The learned counsel has also placed reliance upon a minority view of this Tribunal in Price Waterhouse v. Securities and Exchange Board of India decided by this Tribunal in Appeal No. 8 of 2011 on June 1, 2011 wherein it was observed that fairness demands that the entire material collected during the course of investigation should be made available for inspection to the person whose conduct was in question and that said material should also be supplied. In our opinion, the said minority view is directly against the decision of the Supreme Court in Natwar Singh case (supra). 24. We may also observe that the practice of filing a compilation of judgments without citing during the course of arguments is not an accepted practice and consequently we are not required to consider such decisions which were no cited at the Bar. 25. In view of the aforesaid, the request of the appellant for supply of the documents in possessi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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