TMI Blog2020 (12) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... veil - Insofar as Respondent No.1 herein is concerned, not even a formal show cause notice has been issued. However, the fact remains that the communications addressed by Respondent Nos.1 and 2 herein do give rise to a clear and unequivocal view that it was understood as a notice both to Respondent Nos.1 and 2 herein. - to some extent truth in what has been alleged by the appellants before us, i.e., that Respondent Nos.1 and 2 herein are conveniently playing this game of coming up separately even though they are joined in all purposes. We are conscious of the fact that Respondent No.1 herein is a separate legal entity being a registered company, but the concept of piercing the veil is not unknown to law. By this process, the law either goes behind the corporate personality to the individual members or ignores the separate personality of the company. - We are, thus, not able to hold that there was a failure to serve show cause notice to Respondent No.1 herein merely because no such notice was specifically addressed to it. The directions passed by the SAT for the case to begin with the service of fresh show cause notices would not be an appropriate direction. In the conspectus o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere Respondent Nos.1 and 2 herein to fail in their endeavours, it will not mean that those other proceedings have to start de novo and can continue from the stage where they are, subject, of course, to the nature of directions passed afresh by SEBI. Appeals disposed off. - CIVIL APPEAL No.9037 of 2019 With Civil Appeal No.629/2020 - - - Dated:- 27-11-2020 - HON'BLE MR. JUSTICE SANJAY KISHAN KAUL AND HON'BLE MR. JUSTICE HRISHIKESH ROY For Appellant(s) Mr. Mohit D. Ram, AOR Mr. Pratap Venugopal, Adv. Ms. Surekha Raman, Adv. Ms. Ayushi Gaur, Adv. Ms. Ila Haldia, Adv. Mr. Akhil Abraham Roy, Adv. For M/S. K J John And Co, AOR For Respondent(s) Mr. Abhinav Agrawal, AOR Mr. Rishabh Parikh, Adv. Mr. Pratap Venugopal, Adv. Ms. Surekha Raman, Adv. Ms. Ayushi Gaur, Adv. Ms. Ila Haldia, Adv. Mr. Akhil Abraham Roy, Adv. For M/s. K J John And Co, AOR J U D G M E N T SANJAY KISHAN KAUL, J. 1. A lot of noise but no music! The present case is a classic one where multiple proceedings have been initiated but have resulted in no culmination over a period just short of a decade. And this is not so because of any interdicts from the courts in preventing these l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2018, the Indian Commodity Exchange Limited (for short ICEL ), who is the Appellant before us, emerged as the successor of NMCE. 5. Respondent No. 1 herein, Neptune Overseas Limited (for short NOL ) is a company registered under the Companies Act, 1956 dealing with export/import and trading in various commodities including rubber. This company is the core promoter of NMCE, being its largest shareholder with 30.18% shareholding. The role of Mr. Kailash Ramkishan Gupta, Respondent No.2 herein, was dual in character he was the founder and CEO of NMCE as well as the Managing Director of NOL. The other related development is that the FMC, in view of the said Act being repealed, itself merged with the Securities and Exchange Board of India (for short SEBI ) with effect from 28.9.2015. 6. The genesis of the dispute is a communication dated 28.11.2010, made by a stated independent journalist to the FMC alleging, inter alia, trading irregularities within the NMCE along with an allegation of abuse of position by Respondent Nos.1 2 herein. The proceedings that transpired thereafter, and the related compliance with principles of natural justice form the subject matter of the prese ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered the matter, construed the issuance of the show cause notice to Respondent No.1 to be through Respondent No.2 herein. Thus, in terms of order dated 8.7.2011, it was opined that opportunity of hearing had been and was being provided to Respondent No.1 herein, who could furnish a reply to the show cause notice as well as appear personally with material in its support. The principles of natural justice were observed to have been complied with and Respondent No.1 herein was given liberty to appear before the FMC in pursuance to the show cause notice and produce the material in support thereof. The conclusion was that the final view was yet to be taken by the FMC, and only a show cause notice had been issued. As such, in the absence of any adjudication on merits, it was a premature effort on the part of Respondent No.1 herein to approach the High Court. 10. On the day of the aforesaid order being passed, once again, a grievance of entire documentation not being supplied was raised by Respondent No.2 herein. This request was rejected by the FMC with the reasoning that all documents were either available in the public domain or not relevant. The subsequent endeavour of Responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the FMC by Government Notification S.O. Nos.1162 and 928 dated 4.4.1960 and 12.3.1964 respectively. On examination of merits, the attitude and the approach of Respondent No.2 herein was found to be non-cooperative. On the basis of the documents gathered and statements recorded during the course of inquiry, Respondent No.2 herein was held to be in complete breach of his fiduciary responsibility to the NMCE by systematically defrauding, misusing and misappropriating its property and committing a series of crimes under various laws for benefiting himself. Directions were issued to the NMCE to take appropriate legal action against Respondent No.2 herein and his family members who benefitted from his acts. 13. In the meantime, the parallel proceedings in the High Court before the learned Single Judge discussed aforesaid, resulted in an intra court appeal filed by Respondent No.1 herein, once again, through Respondent No.2 herein, in LPA No.1039/2011 filed on 15.7.2011. Interestingly, now Respondent No.2 herein filed an impleadment application to implead himself in his personal capacity, which was allowed. The appeal was also amended to raise a challenge to the order dated 23.7.2011 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore the SAT, which passed the order dated 18.10.2019. It appears that the substratum of the pleas raised by Respondent Nos.1 and 2 herein was the lack of adequate and proper opportunity of hearing given to them, before passing of the order dated 23.7.2011.The requests for provision of further documents which had been denied earlier and the lack of jurisdiction of the FMC to issue the show cause notice under the said Act were re-agitated. The order dated 18.10.2019 of the SAT, impugned before this Court is predicated on the absence of any show cause notice to Respondent No.1 herein. This aspect was noted to have been conceded by the FMC before the Division Bench of the High Court along with an assurance to carry out the same. The relevant extract in this behalf is as under: 9. The aforesaid contentions raised by the learned counsel for the appellants is vehemently contested by Mr. P.S. Champaneri, learned Assistant Solicitor General of India and learned Advocate Mr. Navin Pahwa, appearing for respondent No.3 and 7, however, they have agreed that no show cause notice has been issued either to the appellant No.1 and/or respondent No.3-NMC by respondent No.1-Commission. At this s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agged with this matter. There are other appeals also but it was agreed that these two appeals should be taken up first as they may have ramifications on the result of those appeals. This was recorded in order dated 11.9.2020. Thus, these two appeals were heard and judgment reserved on 5.11.2020 after hearing learned counsels for the parties. 21. We have gone through the record before us and perused the synopses placed before us apart from the submissions made in Court. 22. The stand of the ICEL becomes relevant to the extent that the order of the SAT is predicated on ICEL not being served the show cause notice. This really does not withstand scrutiny, for the reason they had not sought so and, in fact, are themselves in appeal before us. Thus, the denial of opportunity to be heard is really being claimed only by Respondent Nos.1 and 2 herein. In fact, what has been urged before us by the ICEL is that, while the challenge before the Gujarat High Court was laid only by Respondent No.1 herein, it is Respondent No.2 herein who was simultaneously seeking adjournments before the FMC on one pretext or the other. This is despite the fact that Respondent Nos.1 and 2 herein were addres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i.e., adjournment is not a birthright. 3. Dharampal Satyapal Ltd. v. Deputy Commissioner of Central Excise, Gauhati and Ors. (2015) 8 SCC 519: Principles of natural justice cannot be applied in a straitjacket formula and at times the futility of giving relief is a matter of consideration. It all depends upon the extent to which a person is likely to be affected. Not every case where there is a violation of principles of natural justice, would the action be struck down and the matter referred back to the authorities to take a fresh decision after complying with the procedural requirement. Therefore, every violation of a facet of natural justice may not lead to the conclusion that order passed is always null and void. The validity of the order has to be decided on the touchstone of prejudice. The ultimate test is always the same, viz., the test of prejudice or the test of fair hearing. 25. Mr. C.U. Singh, learned senior counsel canvassing the case of the SEBI supported the plea raised by ICEL. He laid emphasis on the fact that the judgment of this Court in the earlier proceedings being SLP No.10225-10227 of 2012 dated 7.3.2018, had put a quietus to the issue of any plea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ICEL, it was stated that it had no locus to file the appeal as the issue related only to Respondent Nos.1 and 2 herein. But we negate this contention at the threshold itself. ICEL had to approach this Court, as failure to serve show cause notice to it was one of the grounds which weighed with the SAT, even though ICEL was not making any such claim. 28. Learned counsel strongly relied on the fact that the counsel for FMC had conceded before the Division Bench that no show cause notice was ever served upon Respondent No.1 herein and NMCE (which fact, as aforesaid, is no longer relevant). Insofar as the direction of this Court in terms of the order dated 7.3.2018 is concerned, it was submitted that the direction to the SAT to decide the matter on merits would encompass every aspect, including the one about the plea of violation of principles of natural justice. 29. Learned counsel contended that the common thread of the arguments of both Respondent Nos.1 and 2 herein was that there has been a violation of the principles of natural justice qua both of them. In case of Respondent No.1 herein, the show cause notice was never issued but the shares it held in NMCE numbering 29,32, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a sense, that chapter closed with the supply of documents on 5.7.2011 even though some more documents were sought thereafter. 33. We fail to appreciate why there should have been a cussedness in handing over mere copies of documents when serious allegations and serious consequences which would flow to the respondents herein. Not only that, the endeavour to conclude the proceedings within a span of two weeks thereafter cannot, in our view, be said to be an adequate opportunity as has been found by the SAT. An opportunity of hearing is not a mere nicety but a valuable right. That it does not fall in a straitjacket formula is no doubt the accepted legal position [Dharampal Satyapal Ltd. (Supra)]. The question is whether there was substantial compliance of the principles of natural justice [Chairman, Board of Mining Examination (Supra)] and whether there were unnecessary adjournments being sought, which were declined [Titaghur Paper Mills Co. Ltd. and Anr. and Cement Workers Karamchari Sangh (Supra)] 34. We do feel that there was an endeavour to some extent by Respondent No.2 herein to prolong the proceedings but then looking into the enormity of the contents of the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at High Court by the counsel for the FMC. Be that as it may, we are of the view that it would be a hyper technicality now to say that Respondent No.1 herein should be served a fresh show cause notice, more so in view of the directions which we are proceeding to pass in the present judgment. 36. We now come to the plea based on the directions passed by this Court on 7.3.2018 in the earlier appeal. No doubt the findings of the Division Bench of the High Court based on the violation of the principles of natural justice were set aside. But this setting aside will have to be read in the context of the fact that it was felt that Respondent Nos.1 and 2 had an adequate alternative remedy of appeal before the SAT. Not too much can be read into the use of the expression that the appeal had to be decided on merits. The merits of a case include of factual and legal pleas. A plea of lack of opportunity to defend its case is also a legal plea. The order read as a whole only gives rise to the conclusion that the hearing was shifted to the SAT instead of before the High Court, in view of it being the competent body. 37. Similarly, the continuation of the interim order passed earlier in tho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 2 herein and these proceedings are to go on, on a day-to-day basis and no request for adjournment will be entertained in this behalf from either respondents.. v. The SEBI would take a final view on the subject matter thereafter. vi. Needless to say, if Respondent Nos.1 and 2 herein are aggrieved by the same, the remedy against the same lies before the SAT. vii. We make it clear that all pleas as raised by Respondent Nos.1 and 2 herein would be considered by the SEBI, legal or factual including but not confined to aspects of jurisdiction. In fact, this is the very purpose of relegating the proceedings before the SEBI and not to SAT as the right of appeal is a valuable right to be exercised after adequate opportunity at the first adjudication stage level. 40. The effect of the aforesaid direction is that the order of the FMC dated 23.7.2011 has been set aside and a fresh order has to be passed. The different proceedings initiated, still pending almost at a nascent stage, are in pursuance of that order. The natural consequence, thus, would be that those proceedings would have to be kept in abeyance for the time being, till a view is taken by SEBI in pursuance of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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