TMI Blog2022 (3) TMI 1226X X X X Extracts X X X X X X X X Extracts X X X X ..... consistently for structural evolution of the sectorial laws. This freedom to evolve and interpret laws must belong to the Tribunal to subserve the Regulatory regime for clarity and consistency. These are policy and functional considerations which the Supreme Court will keep in mind while exercising its jurisdiction under Section 15Z. Whether the advertisements dated 07.04.2005, 20.04.2005, are in violation of Regulations 3 (a), (b), (c), (d) read with Regulation 4 (1), (2) (k) and (r) as amounting to misleading and defrauding the investors? - As per the first advertisement dated 07.04.2005, it was alleged by SEBI that in violation of Regulation 4 (2) (k) and 4 (r) of the PFUTP Regulations, the Company proceeded to announce on 07.04.2005 the launch of the worldwide outbound package tour services. These services were intended to operate across 25 cities in India and were expected to achieve a revenue of ₹ 1000 million with a net profit of ₹ 200 million in its first year. SEBI alleges that this announcement was made for the sole purpose of misleading the investors. This finding is reversed by the Tribunal based on an agreement between the Company and M/s Gem Tours an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal's inferences drawn from the material available on record. The conclusions drawn by the Tribunal do not give rise to any question of law warranting interference of this court under Section 15Z of the Act. This issue is answered against the appellant. Whether there is a right to cross-examine the author of a letter if the SEBI seeks to rely on that letter, adverse to the company? - There is a right of disclosure of the relevant material. However, such a right is not absolute and is subject to other considerations as indicated under paragraph 62(v) of the judgment above referred. In this judgment, there is no specific discussion on the issue of a right to cross-examination but the broad principles laid down therein are sufficient guidance for the Tribunal to follow. There is no need for us to elaborate on this point any further. Coming back to the facts of the present case, we have noticed that the Tribunal has arrived at its conclusions based on independent facts concerning (a) the allegations under Regulation 4 relating to the issuance of misleading advertisements dated 07.04.2005 and 20.04.2005 as well as (b) allegations relating to manipulation of scrip prices ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regulator, SEBI, was drawn to the unusual price movement of the scrip of the Company between January 2005 to September 2005. The Company's shares traded between ₹ 4.25/- to ₹ 43.85/-. This upward spurt resulted in an increase in the average monthly volume of shares to 1,56,22,583 shares. Having observed this activity, the SEBI directed investigation while passing an ex parte ad interim order under Section 11B, 11(4) (b) and 11(D) of the Act against 56 entities, being the Company, its promoter-directors, some of its clients, stockbrokers and depositors. After hearing the objections, the interim orders were confirmed, and a show-cause notice for violation of Regulations 3(a), (b), (c) (d) and 4(1), 4(2)(k) 4(2)(r) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 hereinafter referred to as PFUTP Regulations was issued on 10.10.2007. 3. The show cause notice was premised on the information obtained after investigation on the following: 3.1 The Company made huge profits from undeclared business and sale of scrips and there is uncertainty about the source of income. It is not known whether the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal held: 5.1 The unusual profits, if any, made during the year 2004-05 by itself cannot constitute any transgression of law. The powers vested in the Board are only to ensure that investors are not misled in making investments based on fraud and allurement and that there is nothing unusual about investors being attracted when the Company comes with positive annual reports. The Tribunal held that extraordinary profits in itself cannot be the basis for concluding that the Company's accounts are manipulated with a specific objective to mislead the investors. 5.2 On the issue of public statements in the form of advertisements and notifications dated 07.04.2005 and 20.04.2005, the Tribunal concluded that there is nothing wrong in the advertisements issued for entering into the business of foreign exchange with the launch of Mega Forex Brand and also the announcement relating to tour services based on the agreement with Gems Tours and Travels Private Limited. The Tribunal found that these announcements were in the ordinary course of business, and there was sufficient evidence to that effect. Having considered facts in detail, the Tribunal reversed the findings of the SEB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 8. Shri Vaibhav Gaggar, in his reply, submitted that: 8.1 The appeal has to be dismissed as there is no question of law involved in the case. 8.2 The approach adopted by SEBI in focusing on the sudden spurt in profit of the Company, is itself, is wrong approach. He sought to demonstrate that there is no unusual income in the profit of the Company. 8.3 On the issuance of advertisements, Shri Gaggar showed us the factual background leading to the advertisements and stated that there is no indication of any intention to mislead the public or lure the investors on the statements made therein. He submitted that the findings of the Tribunal that the advertisements were not in violation of the Regulations are based on the correct facts as evidenced by the material placed before the Board. Reliance was placed on the judgment of the Tribunal in M/s Vijay Textile. M/s Vijay Textile v. Securities and Exchange Board of India (2011) SCC Online SAT 50. 8.4 Shri Gaggar submitted that the conclusions drawn by the Board on the assumption that the sales were orchestrated through artificial purchase and sale are incorrect. He endeavoured to establish that the assumed link between ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rections. In exercise of its powers under Section 30 the SEBI made the PFUTP Regulations, of which, we are concerned with Regulations 3(a), (b), (c), (d) and Regulations 4(1), 4(2)(k) and 4(2)(r). ISSUE 1: What is the scope and ambit of statutory appeal to the Supreme Court under Section 15Z of the Act against an order passed by the Securities Appellate Tribunal? 12. The power and jurisdiction of the Supreme Court to consider the decisions of the Tribunal is provided in Section 15Z of the Act. The said provision is as under: 15Z. Appeal to Supreme Court. Any person aggrieved by any decision or order of the Securities Appellate Tribunal may file an appeal to the Supreme Court within sixty days from the date of communication of the decision or order of the Securities Appellate Tribunal to him on any question of law arising out of such order; Provided that the Supreme Court may, if it is satisfied that the applicant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. In Videocon International Videocon International Ltd. v. Securities Exchange Board of India (2015) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ussions of this chapter proceeds on the basis that the distinction between a question of law and a question of fact is self-evident. But this is not so; the boundary is often elusive. H.R.W. Wade C.F Forsyth, Administrative Law, Chapter 8 (Oxford University Publication, United Kingdom, 11th Edn, 2014) 16. Phrases such as, question of law , are open textual expressions, used in statutes to convey a certain meaning which the legislature would not have intended to be read in a pedantic manner. When words of the Sections allow narrow as well as wide interpretations, courts of law have developed the art and technique of finding the correct meaning by looking at the words in their context. In Reserve Bank of India v. Peerless General Finance Investment Company Ltd. Ors. Reserve Bank of India vs. Peerless General Finance Investment Company Ltd. Ors. (1987) 1 SCC 424 , Justice O. Chinnappa Reddy, observed: 33. Interpretation must depend on the text and the context. They are the bases of interpretation. One may well say if the text is the texture, context is what gives the colour. Neither can be ignored. Both are important. That interpretation is best which makes the tex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gulatory regime for clarity and consistency and it is with this perspective that the Supreme Court will consider appeals against judgment of the Tribunals on questions of law arising from its orders. 19. It is in this very context that the UK Supreme Court in the case of Jones v. First Tier Tribunal, Jones v. First Tier Tribunal [2013] UKSC 19. Para 16; followed in Regina (Privacy International) v. Investigatory Powers Tribunal [2019] UKSC 22, para 134; See also, Administrative Law by Paul Craig (8th Ed. 2016 at p.492 and H.R.W. Wade C.F Forsyth, Administrative Law, Chapter 8 (Oxford University Publication, United Kingdom, 11th Edn, 2014) formulated certain principles for appellate courts to interfere against the orders of Tribunals on the ground of existence of questions of law. The Court held as under: 16 It is primarily for the tribunals, not the appellate courts, to develop a consistent approach to these issues [of law and fact], bearing in mind that they are peculiarly well fitted to determine them. A pragmatic approach should be taken to the dividing line between law and fact, so that the expertise of tribunals at the first tier and that of the Upper Tribunal ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ckage tour services. These services were intended to operate across 25 cities in India and were expected to achieve a revenue of ₹ 1000 million with a net profit of ₹ 200 million in its first year. SEBI alleges that this announcement was made for the sole purpose of misleading the investors. This finding is reversed by the Tribunal based on an agreement between the Company and M/s Gem Tours and Travels Private Limited to establish a subsidiary company called Mega Holidays Ltd. to handle the tour services. The Tribunal also noted the bank statement supporting the Company's transaction with M/s Gem Tours and Travels Private Limited. 24. We are mentioning these facts only to indicate that the Tribunal has reversed the findings of SEBI on the basis of its own inferences drawn from the documents on record. The decision of the Tribunal is fact-based and does not give rise to any question of law for invoking the jurisdiction of the Supreme Court under Section 15Z. For this reason, we are not inclined to interfere with the finding of fact, which must rest with the conclusions drawn by the Tribunal. 25. So far as the second announcement dated 20.04.2005 is concerned, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the inferences drawn from the facts, the Tribunal rendered the following findings: There is no evidence in support of any definite sustainable link between the appellant company and any of the traders who allegedly traded in the appellant company's scrip with the purpose of generating volumes and thereby raising its price. The charge of manipulative trading in its own shares by the appellant company, therefore, fails. . But it is another matter to say that a company has manipulated its accounts with that specific object in view because there can be a multitude of reasons why an unscrupulous management may want to show inflated financial results in its accounts. In the present case, no material has been produced by the Respondent to establish that the manipulation is the annual accounts of the appellant for the year 2004-05, if any, had been resorted to with the objective of luring investors to buy the scrip of the company. Given the lack of any definite evidence, this charge against the appellant also fails. 29. It is evident from the above that the findings are based on the Tribunal's inferences drawn from the material available on record. The concl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... while SEBI exercises its jurisdiction. In support of his submissions, he has referred to the cases as indicated earlier. He has also argued that there is no prejudice caused to the Company as an opportunity was given by handing over the material relied on by the Board against which the Company gave its reply. He also referred to judgments of this Court in Aligarh Muslim University Aligarh Muslim University v. Mansoon Ali Khan (2000) 7 SCC 529 and A.S Motors A.S Motors Private Limited v. Union of India (2013) 10 SCC 114 to press the point that the Court will not insist on examination of witnesses merely as an empty formality. 33. On the other hand, Shri Gaggar submitted that the ground that principles of natural justice would clearly be violated if opportunity to cross-examine is not granted. 34. Immediately after the parties were heard, and the judgment was reserved on 17.02.2022, on the very next day, another Bench of this Court delivered its judgment in T. Takano T. Takano v. Securities and Exchange Board of India (2022) SCC OnLine SC 210 . The case relates to proceedings that arose under this very same Act and in fact concerning allegations of fraudulent and unfair t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the securities market. The onus then shifts to the appellant to prove that the information is necessary to defend his case appropriately; and (vi) Where some portions of the enquiry report involve information on third-parties or confidential information on the securities market, the respondent cannot for that reason assert a privilege against disclosing any part of the report. The respondents can withhold disclosure of those sections of the report which deal with third-party personal information and strategic information bearing upon the stable and orderly functioning of the securities market. 35. As per the principles laid down in the above referred case, there is a right of disclosure of the relevant material. However, such a right is not absolute and is subject to other considerations as indicated under paragraph 62(v) of the judgment above referred. In this judgment, there is no specific discussion on the issue of a right to cross-examination but the broad principles laid down therein are sufficient guidance for the Tribunal to follow. There is no need for us to elaborate on this point any further. 36. Coming back to the facts of the present case, we have noticed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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