Natural justice in insider trading proceedings requires supply of relied-upon documents before penalty can be sustained.

Penalty under the insider trading regulations could not be sustained where the adjudicating officer relied on material not supplied to the appellant during the show-cause or adjudication process. Denial of the NSE e-mail and related documents deprived the appellant of a fair opportunity to meet the case and violated natural justice, vitiating the adjudication. The SAT set aside the impugned order and remanded the matter for fresh consideration after furnishing the documents, obtaining a reply, and granting a reasonable hearing.

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Issues: Whether the penalty order could be sustained when the documents relied upon against the appellant were not supplied during the show-cause and adjudication proceedings, thereby violating natural justice, and whether the matter required remand for fresh consideration.

Analysis: The Tribunal found that the adjudicating officer had relied on material such as the NSE e-mail and connected documents to hold the appellant liable for violation of the insider trading regulations, but those documents had admittedly not been furnished to the appellant either with the show-cause notice or during adjudication. The appellant was therefore denied a fair opportunity to confront the material and to present an effective defence. The Tribunal held that this omission offended the principles of natural justice and vitiated the adjudication.

Conclusion: The impugned order was set aside and the matter was remanded to the respondent for fresh consideration after supplying the documents, seeking a reply, and granting reasonable opportunity of hearing; the appeal was allowed in favour of the appellant.

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