TMI Blog2020 (10) TMI 689X X X X Extracts X X X X X X X X Extracts X X X X ..... ecurities market. A large number of applications are filed before it. It will hamper the functioning of the SEBI if the exercise of its every power is preceded by mandatory personal hearing, whether the regulation provides for it or not. There is no duty on the Board while considering an exemption application under Regulation 29 of the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014, to give a personal hearing to the applicant. Interest of justice to give a personal hearing to the Petitioner - argument of the Petitioner that since SEBI has formed an opinion and the rigid application of the Regulations, it is necessary to give an opportunity of personal hearing - As rightly pointed out by SEBI, there is no such formation of opinion. There were no reasons given in the earlier order. The Petitioner has submitted the relevant material. Petitioner has also been given an opportunity to submit additional written submissions. Once there is no requirement of a personal hearing under Regulation 29, we do not find that there is a special case made out by the Petitioner or any extraordinary circumstances exist to give special direction for the P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... employee benefits schemes; and (e) retirement benefit schemes consequent upon which the existing guidelines have been repealed. The Regulations shall apply to those companies whose shares are listed on any recognised stock exchange in India, and which fulfils the following: (i) has a scheme for the direct or indirect benefit of employees; (ii) involves dealing in or subscribing to or purchasing securities of the company, directly or indirectly; and which has a scheme set up by the company or any other company in its group; the scheme is funded or guaranteed by the company or any other company in its group; the scheme is controlled or managed by the company or any other company in its group. The Regulations of 2014 lay down various regulatory measures regarding such a scheme. The object of the Regulations of 2014 is to check and prevent manipulation of share prices in the larger interest of the investors. 6. The Petitioner, in January 2004, formed an employee welfare trust named JK Paper Welfare Trust. Around ninety seven percent of its assets are shares of the Petitioner and around 4.73% of its share capital. The Trust administers Continuity Facility Assistanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication. The SEBI has filed its reply and has opposed the petition. 12. We have heard Mr. Janak Dwarkadas, learned Senior Advocate for the Petitioner and Mr. Rafique Dada, learned Senior Advocate for the Respondent- SEBI. 13. The Petitioner has founded its prayer on three grounds. First, the proceedings are quasi-judicial, and therefore a personal hearing is necessary. The language of Regulation 29 provides for a personal hearing. Last, whatever may be the nature of the power, considering the consequences, a personal hearing should be given. Besides the legal position, the Petitioner requests that in the facts of the case, it would serve the ends of justice, if a personal hearing is given. 14. The Petitioners have not challenged the applicability of the Regulations of 2014 in this petition, and we proceed on the basis that the Petitioner is governed under the said regulations. 15. Relying upon Regulation 29, the Petitioner sought exemption from the strict compliance of Regulations 1(3), 1(4), 3(1), 26(2) and 31(2)(b)(i) and (ii). It will be useful to reproduce these Regulations. Regulations 1(3) and 1(4) make the Regulations of 2014 applicable to certain schemes and ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peals and savings. (1) .. .. .. .. .. .. .. .. (2) Notwithstanding such repeal, - (a) .. .. .. .. .. .. .. (b) all listed companies having existing schemes to which these regulations apply are required to comply with these regulations in their entirety within one year of the same coming into effect, subject to these exceptions: (i) trusts holding shares, for the purposes of implementing employee benefits schemes of the company, beyond the permissible limits as provided under these regulations, shall have a period of five years to bring down its holding in shares to such limits; (ii) trusts holding shares, for the purposes of implementing GEBS or RBS, which exceed ten per cent. of the total value of the total assets of the trust(s) as provided under these regulations, shall have a period of five years to bring down its holding in shares to such limits; .. .. .. .. .. .. .. The Petitioner has sought exemption from these provisions invoking the power under Regulation 29. Regulation 29 reads thus: 29. Power to relax strict enforcement of the regulations. (1) The Board may suo motu or on an application made by a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorities. Therefore, application of such transparency requirements on the part of quasi-judicial authorities has to be of a much higher order. Petitioner s sole emphasis is on the last line of this paragraph. No other observation is shown to us. Except for a general reference to the quasi-judicial authorities in this sentence, there is no finding by the Appellate Tribunal much less any specific finding interpreting Regulation 29. Therefore, the contention of the Petitioner that because of the finding of the Appellate Tribunal that exercise of power under Regulation 29 being quasi-judicial, personal hearing has to be provided cannot be accepted. We do not need to comment on the interpretation of Regulation 29 by the Appellate Tribunal regarding providing of reasons while not granting the exemption, as the said issue is not debated before us in this petition. 18. The petitioner's second contention is that irrespective of the finding of the Tribunal, this court should hold that the power under Regulation 29 is quasi-judicial power and therefore, a personal hearing is mandated. SEBI contends that Regulation 29 is not a quasi judicial power. 19. The power to grant re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his decision, the Supreme Court has observed that requirement of giving reasonable opportunity of being heard is generally read into the provisions of a statute, particularly when the order has adverse civil consequences and this principle will hold good irrespective of whether the power conferred on the statutory body or the tribunal is administrative or quasi-judicial. In this case, the Supreme Court framed a question as to whether any pre-decisional hearing is required before any direction is issued under section 142(2-A) of the Income Tax Act, 1961 regarding special audit of the accounts of the assessee. It is, in this context, the Bench of three learned Judges observed that pre-decisional hearing should be read into the provision. In the case of The Siemens Engineering Manufacturing Co. of India Ltd., the Supreme Court was considering a question as to what was the correct amount of import duty chargeable on pot motors when imported separately from rayon spinning machines. Having answered this question, the Supreme Court disapproved the hurried manner the Collector in that case had disposed of the proceedings which were quasi-judicial proceedings and stressed on the need to g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the Supreme Court has emphasized that what is required is a just result . Therefore, the purpose, ambit and the measures under the statutory instrument have to be seen. 24. The Regulations of 2014 are a code in itself. They regulate employee stock option schemes in the larger interest of the investors. They incorporate conditions, regulate the activity and provide for consequences. The reason for exemption can be elaborated in the application. If additional material is required, it can be submitted. Based on this material, SEBI will take a decision whether to grant exemption or refuse it. The conditions to be imposed are in the interest of the investors. Thus, it is for the SEBI to deliberate upon the extent and ambit of the conditions. This process can be easily achieved by the Petitioner by submitting submissions in writing. If SEBI finds that exemption need not be granted, it will give reasons for the same which can be tested in appeal. If the conditions are arbitrarily imposed or that the exercise is perverse, the validity can be challenged. The Petitioner s argument proceeds on the footing that the principles of natural justice in all circumstances include personal heari ..... X X X X Extracts X X X X X X X X Extracts X X X X
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