TMI Blog2020 (9) TMI 1304X X X X Extracts X X X X X X X X Extracts X X X X ..... n ex-parte interim order. We find that the trades were done in the year 2017. Nothing has come on record as to when the Respondent became aware of these transactions. However, we find that the proceedings were initiated in February, 2019 which continued till 11th March, 2020 and, thereafter, it took the Respondents another 4 months to pass the impugned order. This by itself indicates that there was no extreme urgency in passing the impugned order. We, therefore, are of the opinion that merely by arriving at a prima facie case that the Appellants were an insider as defined under the PIT Regulations, 2015 cannot be made the sole basis for passing the impugned order without considering the balance of convenience or irreparable injury. Only reason given for passing the interim order has been provided in para 34 of the impugned order namely that the illegal gains should be impounded otherwise it would result in irreparable injury to the interest of the securities market and investors. In our view, illegal gains are yet to be adjudicated and, therefore, in the absence of adjudication it will not be proper to impound the so called illegal gains especially when there is no assertion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the escrow account. The Whole Time Member also directed the appellants to provide details of all the bank accounts, demat account, holdings in shares and securities and details of companies in which the Appellants have a substantial or controlling interest. 2. By the impugned order, the Appellants were further directed to show cause as to why the illegal gains should not be disgorged and an order under Section 11B(2), 11A and 15G of the Securities and Exchange Board of India Act, 1992 read with Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015 (hereinafter referred to as PIT Regulations ) should not be passed. 3. The aforesaid ex-parte directions have been passed for violation of the PIT Regulations, 2015 on the ground that the Appellants had executed trades in violation of the PIT Regulations and that the Appellants had participated in the preferential allotment of shares in Infibeam Avenues Ltd. ( hereinafter referred to as the Company ) and was in possession of a price sensitive Information namely, the news relating to the stock split of the shares of the Company. The Whole Time Member further found the Appellants to be connected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut to any loss. It was contended that if a reply is filed the matter would be decided within a short period. The learned senior counsel contended that there is no laches in issuing the impugned order and the same was passed at the earliest opportune moment. It was urged that pursuant to a report of NSE dated 22.5.18, the Adjudicating Officer was appointed on 31.01.19 and the order was passed in August 2020.It was also urged that the decision of this Tribunal in the matter of Dr. Malhoutra is not applicable and that the principles of O38 R5 to 13 of CPC are not applicable and that the respondent has the powers to pass an impounding order under Sec. 11(4)(d) of the SEBI Act. 8. Having heard the learned counsel for the parties at some length, we are of the opinion that the controversy involved in the present case is squarely covered by a decision of this Tribunal in Appeal no.80 of 2019 North End Foods Marketing Pvt. Ltd. vs. SEBI decided on 12th March, 2019 and in Appeal no.145 of 2020 Dr. Udayant Malhoutra vs. SEBI decided on 27th June, 2020. 9. In North End Foods Marketing Pvt. Ltd. (supra) this Tribunal held as under:- 13. Having heard the learned senior counsel at leng ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the urgency must be infused by a host of circumstances, viz. large scale misuse and attempts to monopolise or corner the market. In the said decision, the Supreme Court further held that the regulatory agency must move quickly in order to curb further mischief and to take action immediately in order to instill and restore confidence in the capital market. 10. In Dr. Udayant Malhoutra (supra) this Tribunal held: 9 .In our opinion, the reasoning given by the WTM justifying its action to pass an exparte interim order is patently erroneous and cannot be sustained. On one hand, we find that only a show cause notice has been issued and the matter has not been adjudicated on merits but the appellant, on the other hand, has been directed to deposit the possible disgorgement amount in advance. We are of the opinion that no amount towards disgorgement can be directed to be deposited in advance unless it is adjudicated and quantified unless there is some evidence to show and justify the action taken. An order of the like nature can only be passed during the pendency of the proceedings and such orders cannot be passed at the time of initiation of the proceedings. Further, no ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese transactions. However, we find that the proceedings were initiated in February, 2019 which continued till 11th March, 2020 and, thereafter, it took the Respondents another 4 months to pass the impugned order. This by itself indicates that there was no extreme urgency in passing the impugned order. We, therefore, are of the opinion that merely by arriving at a prima facie case that the Appellants were an insider as defined under the PIT Regulations, 2015 cannot be made the sole basis for passing the impugned order without considering the balance of convenience or irreparable injury. We further find that the only reason given for passing the interim order has been provided in para 34 of the impugned order namely that the illegal gains should be impounded otherwise it would result in irreparable injury to the interest of the securities market and investors. In our view, illegal gains are yet to be adjudicated and, therefore, in the absence of adjudication it will not be proper to impound the so called illegal gains especially when there is no assertion that the Appellants are disposing of the property in question or they are obstructing or delaying the proceedings. 13. In the l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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