TMI Blog2020 (6) TMI 742X X X X Extracts X X X X X X X X Extracts X X X X ..... s an ex-parte interim order especially during the pandemic period. There is no doubt that SEBI has the power to pass an interim order and that in extreme urgent cases SEBI can pass an ex-parte interim order but such powers can only be exercised sparingly and only in extreme urgent matters. In the instant case, we do not find any case of extreme urgency which warranted the respondent to pass an ex-parte interim order only on arriving at the prima-facie case that the appellant was an insider as defined in the SEBI (Prohibition of Insider Trading) Regulations, 2015 ( PIT Regulations‟ for short) without considering the balance of convenience or irreparable injury. The impugned order cannot be sustained and the same is quashed at the admission stage itself without calling for a counter affidavit except the show cause notice. The appeal is allowed. We further direct that the appellant to file a reply to the show cause notice within four weeks from today. The respondent will decide the matter finally after giving an opportunity of hearing to the appellant either through physical hearing or through video conference within six months thereafter. During the interim period, in order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any drastically went down. It was alleged that the appellant had inside information of the price sensitive information and, being a connected person had sold the shares and thus made a notional gain or averted a notional loss. 3. In this regard, the sales made by the appellant was investigated in 2017 and that the investigation team only asked information from the appellant for the first time on November 28, 2019 and thereafter the WTM passed the impugned exparte order on June 15, 2020. 4. The contention of the appellant is, that there was no urgency in passing an ex-parte order with regard to a trade done by the appellant more than three and half years ago and especially during the pandemic period. It was urged that the action of the respondent in freezing the accounts of the appellant during these time was wholly arbitrary. It was further urged that an ex-parte order cannot be sustained in as much as the same is violative of the principles of natural justice. The appellant contended that the shares were sold on account of a loan agreement entered by the company with a consortium of banks and that appellant was required to reduce its pledge holdings for the purpose of disbur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und prima-facie, that the person is indulging in manipulation of the securities market, it would be obligatory for SEBI to pass an interim order or for that matter an ex- parte interim order in order to safeguard the interests of the investors and to maintain the integrity of the market. Normally, while passing an interim order, the principles of natural justice has to be adhered to, namely, that an opportunity of hearing is required to be given. Procedural fairness embodying natural justice is to be applied whenever action is taken affecting the rights of the parties. At times, an opportunity of hearing may not be pre-decisional and may necessarily have to be post-decisional especially where the act to be prevented is imminent or where action to be taken brooks no delay. Thus, pre- decisional hearing is not always necessary when ex- parte ad-interim orders are made pending investigation or enquiry unless provided by the statute. In such cases, rules of natural justice would be satisfied, if the affected party is given a post- decisional hearing. 14. However, it does not mean that in every case, an ex-parte interim order should be passed on the pretext that it was imminent to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itiation of the proceedings. Further, no order of the like nature can be passed without recording its satisfaction and cannot be based on the basis of possibility. 10. In this regard, we may refer to the provisions of Order 38 Rule 5 to 13 of the Code of Civil Procedure, 1908 which lays down the parameters for attachment before judgment. The said principles are fully applicable in the instant case. The object of attachment before judgment is to prevent any attempt on the part of the appellant to defeat the realization of the final order on disgorgement that may be passed against the appellant. But this principle applies only when it is found that the appellant is about to dispose of the property in question. Further, this principle can only be applied when there is evidence to show that the appellant has acted, or is about to act with the intent to obstruct or delay the adjudication of the proceedings that may be passed against him. We are of the opinion that there is no finding that the appellant will remove the property or will dispose of all the property or that he would obstruct the proceedings or that he would delay the proceedings pursuant to the show cause notice. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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