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TMI Blog2024 (12) TMI 538X X X X Extracts X X X X X X X X Extracts X X X X ..... rs challenge the show cause notice dated 20 August 2024 issued by the Securities and Exchange Board of India ("SEBI") calling upon them to show cause why suitable directions should not be issued and/or penalty, as deemed fit, should not be imposed on them under Sections 11 (1), 11 (4), 11 (4A), 11B (1), 11B (2) read with Section 15-HA of the Securities and Exchange Board of India Act, 1992 ("SEBI Act") read with Rule 5 of Securities and Exchange Board of India (Procedure for holding Inquiry and Imposing Penalties) Rules, 1995. One of the noticees (Petitioner No. 5) was also called upon to show cause as to why a suitable penalty, as deemed fit, under Section 23A (a) read with Section 24 of Securities Contracts (Regulation) Act, 1956 read with Rule 5 of Securities Contracts (Regulation) (Procedure for Holding Inquiry and Imposing Penalties) Rules, 2005 be not imposed upon him. PETITIONERS' CONTENTIONS 4. The Petitioners challenge the impugned show cause notice mainly upon the following three grounds: - (i) Delay and laches in the issuance of impugned show cause notice; (ii) That SEBI cannot review or revisit its earlier decisions, and such review or revisiting amounts to doub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r principles analogous thereto. 9. Mr Dwarkadas submitted that the impugned show cause notice is vitiated by non-application of mind because SEBI did not consider relevant material before issuing the impugned show cause notice. He submitted that the impugned show cause notice also contains no reasons or justification for its issue. He submitted that relevant material regarding the closure of the complaints made by the Aryas, the decision of SEBI and NSE not to take any precipitative action against the Petitioners, etc., were not considered by the SEBI before issuing the impugned show cause notice. He submitted that such non-consideration of relevant material vitiates the impugned show cause notice, which, therefore, ought to be quashed and set aside. 10. Mr Dwarkadas submitted that the Petitioners had applied for SEBI's file notings and other records concerning the complaints made by Aryas and the conclusion recorded by SEBI regarding such complaints. He submitted that the Petitioners had also requested information on the material placed before the whole-time members of SEBI to decide whether there were sufficient grounds to reopen the matter, enquire or investigate the allegatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to stall or delay the adjudication proceedings. He submitted that the impugned show notice was issued on 20 August 2024; the Petitioners sought an inspection of documents, most of which were furnished. The petitioners attended the hearings and belatedly filed this Petition on 8 November 2024. He submitted that the Petitioners, having acquiesced, could not now challenge the impugned show cause notice. 16. Mr Doctor submitted that the petitioners have also submitted a settlement proposal under the Securities and Exchange Board of India (Settlement Proceedings) Regulations, 2018, possibly to take advantage of the provisions of Regulation 8, which requires the final orders in show cause notices be kept in abeyance until the settlement application is disposed of. He submitted that frivolous objections are now being raised only to delay or stall the impugned show cause notice adjudication. 17. Mr Doctor submitted that there was no delay or laches involved in the issue of the impugned show-cause notice. In any event, he submitted that this is a ground that the Petitioners could always raise in reply to the show-cause notice, and it could be dealt with according to the law. He submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mr Doctor submitted that seeking information referred to in Clause 4(ii) was nothing but embarking upon a fishing expedition or a roving enquiry, and there was no question yielding to the same. 22. Mr Doctor submitted that no case was made out to interfere with the impugned show cause notice, mainly since the Petitioners would be granted the full opportunity to respond to and defend themselves in the proceedings pursuant to the impugned show cause notice. He submitted that even if any adverse order were to be made, the Petitioners would have an alternate and efficacious remedy of appealing such adverse order before the Securities Appellate Tribunal ("SAT"). He, therefore, submitted that this Petition be dismissed with cost. EVALUATION OF THE RIVAL CONTENTIONS 23. The rival contentions now fall for our determination. WAIVER/ACQUIESCENCE 24. The Petitioners have pleaded that the first Petitioner, earlier known as Jindal Steels Limited ("JSL"), was incorporated in 1983 and renamed Nalwa Sons Investments Limited in April 2005. In March 2014, the O.P. Jindal group decided to reorganise or segregate its companies and businesses, which was effectively achieved in 2014. Full disclos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tention about waiver or acquiescence resulting from the Petitioners' response to the show cause notice and participation in the proceedings for inspection of documents. This is more so because we are satisfied that the Petitioners have not made out any case for quashing the impugned show cause notice or for not responding to the impugned show cause notice and participating in the adjudication of the same. PRINCIPLES FOR INTERFERENCE WITH SHOW-CASUSE NOTICES 32. In Whirlpool Corporation Vs. Registrar of Trade Marks, Mumbai and others (1998) 8 SCC 1, the Hon'ble Supreme Court has held that the power of the High Court under Article 226 of the Constitution to issue prerogative writs is plenary and not limited by any other provisions of the Constitution. However, the High Court, having regard to the facts of the case, has discretion to entertain or not to entertain a writ petition. Besides, High Courts have imposed upon themselves certain restrictions, one of which is that if an effective and efficacious remedy is available, the High Court would not normally exercise its jurisdiction. 33. The Court has explained that the rule/practice of exhaustion of the alternate remedies would no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the private or public wrongs were so inextricably mixed up, and the prevention of public injury and the vindication of public justice require that recourse may be had to Article 226 of the Constitution. But even then, the Court must have good and sufficient reason to bypass the alternative remedy provided by statute. The Court held that surely, matters involving the revenue where statutory remedies are available are not such matters. 37. This Court also referred to its earlier precedent in United Bank of India Vs. Satyawati Tondon and Others (2010) 8 SCC 110 in which it was observed that judicial notice to be taken of the fact that a vast majority of Petitions under Article 226 of the Constitution were filed only for obtaining interim orders and thereafter prolonging the proceedings. 38. The grounds urged on behalf of the Petitioners do not meet the parameters suggested in Whirlpool Corporation (supra). Apart from such parameters, no good ground exists to interfere with the impugned show-cause notice. The principles and the ratio of the above-referred decisions apply, and based on the same, this petition is not required to be entertained. DELAY AND LACHES 39. The argument a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, this plea can always be raised in response to the impugned show cause notice, and there is no reason to assume that the SEBI would not consider the same. REVIEW/ RES JUDICATA 42. The argument about review, revisit, double jeopardy and res judicata, again involves investigation into factual aspects. Besides, it is doubtful whether the principles of double jeopardy or even the res judicata can be seriously invoked in such matters. In any event, the 1st Petitioner, who was furnished with a copy of the complaint dated 12 August 2014, has not bothered to enclose the complaint with the Petition or even to transcribe the allegations in the said complaint in the Petition. This was necessary to compare whether the contents and the scope of the complaint and the complaint based on which the present show cause notice is issued were the same or substantially the same. The Hon'ble Supreme Court has held the pleas of res judicata involve examination and comparison of the pleadings and issues in the two matters. Therefore, such a plea cannot ordinarily decided at the threshold in an application under Order 7 Rule 11 of the CPC. 43. In any event, the impugned show-cause notice was not issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n ATR by a listed company or SEBI-registered intermediary with respect to a complaint does not mean that the complaint is not pending against them. 48. From the material placed before us, it is difficult to say that Arya's complaint was thoroughly examined and closed. There is no clarity on whether Arya's complaint contained substantially the same allegations as in the 2019 complaint. There is no material about thorough investigation as claimed by the Petitioners. Therefore, at this stage, it is too premature to quash the impugned show notice based upon such pleas or the Petitioners' understanding of Clause 12 of SEBI's circular dated 18 December 2014. 49. Again, the petitioners are free to raise all permissible pleas in response to the impugned show-cause notice, and there is no good reason to assume the SEBI cannot or will not consider such pleas. In this petition, we are only to consider whether the Petitioners have made out a case to secure the quashing of the impugned show-cause notice or nip the proceedings in the bud. Upon considering the material placed and the contentions advanced, no such extraordinary case is made out. NON-FURNISH OF DOCUMENTS 50. Mr Doctor is justi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... August 2014. Mr Doctor, on instruction but without prejudice, agreed to provide that information to the Petitioners within 2 weeks of uploading this order. The statement is accepted, and the SEBI will have to abide by the same. Upon receipt of this material, the Petitioners must not further delay in filing a response to the impugned show cause notice if they wish to file a response. Response must be filed within 4 weeks of the receipt of the information/documents which the SEBI has now agreed to furnish to the Petitioner. 55. Regarding the information/documents in paragraph 4(ii) of the proceedings for inspection of documents dated 4 October 2024, at least prima facie, we think that the Petitioners are only trying to create a base so that, in future, they can allege failure of natural justice. This is only a prima facie opinion; therefore, it is open to the Petitioners to complain about the non-furnish of this documents/material, demonstrate prejudice, if any, and urge failure of natural justice. However, exercising our extraordinary jurisdiction, we do not think that we should or could assist the Petitioners in unnecessarily prolonging the adjudication of the impugned show cause ..... X X X X Extracts X X X X X X X X Extracts X X X X
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