SEBI cannot forfeit proceeds from completed securities transactions without express statutory authority and prior hearing.

The High Court held that territorial jurisdiction existed because a part of the cause of action arose at Ahmedabad, including investigation, receipt of documents, the petitioners' office connection, and service of the impugned orders. It further held that SEBI's powers under the SEBI Act, 1992 and the 1995 Regulations did not authorise impounding or forfeiture of consideration already accrued on completed securities transactions; those provisions permitted regulatory directions and restoration of status quo ante, not deprivation of property without express statutory authority. The Court also found the orders invalid for breach of natural justice because no prior hearing was given, and post-decisional hearing could not cure that defect. Unjust enrichment did not bar relief.

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Issues: (i) whether the High Court had territorial jurisdiction because part of the cause of action, including investigation and service of the impugned orders, arose at Ahmedabad; (ii) whether SEBI had authority under the Securities and Exchange Board of India Act, 1992 and the 1995 Regulations to impound or forfeit consideration already accrued on completed securities transactions; (iii) whether the impugned orders were vitiated for breach of natural justice and whether relief could be denied on the ground of unjust enrichment.

Issue (i): whether the High Court had territorial jurisdiction because part of the cause of action, including investigation and service of the impugned orders, arose at Ahmedabad.

Analysis: The jurisdictional inquiry turned on the pleaded bundle of facts, not on the defence. The investigation into the petitioners' transactions, the recording of statements, the receipt of documents, the petitioners' registered office, and the service of the impugned orders were all linked to Ahmedabad. Since the impugned orders themselves were required to be served on the affected parties and their effect fell on the petitioners there, a part of the cause of action arose within the territorial jurisdiction of the Court.

Conclusion: The objection to territorial jurisdiction was rejected in favour of the petitioners.

Issue (ii): whether SEBI had authority under the Securities and Exchange Board of India Act, 1992 and the 1995 Regulations to impound or forfeit consideration already accrued on completed securities transactions.

Analysis: The decision examined Article 300A and held that deprivation of property requires pre-existing authority of law in the form of positive statutory law or valid subordinate legislation. The Court found that section 11 and section 11B confer regulatory and directional powers, but do not themselves authorise forfeiture or impounding of consideration from completed transactions. The 1995 Regulations were read as permitting directions to ensure compliance and restore status quo ante, not to expropriate sale proceeds or transfer them to an investor protection fund. The statutory scheme also separately provided for penalties and offences, which reinforced the absence of any express power to effect such deprivation.

Conclusion: SEBI had no authority of law to impound or forfeit the monies recovered on completed transactions, and the impugned orders were unsustainable.

Issue (iii): whether the impugned orders were vitiated for breach of natural justice and whether relief could be denied on the ground of unjust enrichment.

Analysis: The impugned orders were made without prior hearing, although the governing statute and regulations contemplated a reasonable opportunity of hearing before directions affecting rights were issued. Post-decisional hearing could not cure the defect because the statutory scheme required pre-decisional hearing. The Court also held that unjust enrichment did not justify retaining the petitioners' money, because the amounts represented consideration lawfully accruing on concluded transactions and the Board was attempting an exaction rather than a refund-prevention measure.

Conclusion: The orders were void for breach of natural justice, and the doctrine of unjust enrichment did not bar relief.

Final Conclusion: The impugned directions could not stand because they lacked statutory authority and were made in breach of mandatory fair procedure, so the petitioners were entitled to quashing of the impounding orders.

Ratio Decidendi: Property or accrued monetary rights cannot be taken away by an administrative direction unless the statute or valid subordinate legislation expressly authorises such deprivation, and where the governing law requires a reasonable hearing, post-decisional review cannot replace a mandatory pre-decisional hearing.

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