Securities Appellate Tribunal overturns SEBI order for lack of natural justice

The Securities Appellate Tribunal set aside SEBI's order prohibiting a stockbroker from new assignments for six months due to a violation of natural justice principles. SEBI relied on a statement without allowing the stockbroker to cross-examine the witness, prompting the Tribunal to quash the order and remand the matter for a fresh decision, directing SEBI to expedite the process within four months. The appeal was disposed of without costs.

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Issues: Violation of principles of natural justice in SEBI order

The judgment by the Securities Appellate Tribunal dealt with an appeal challenging an order by the Whole Time Member of Securities and Exchange Board of India (SEBI) prohibiting the Appellant, a stockbroker, from taking up new assignments for six months. The Appellant raised a preliminary issue regarding the violation of principles of natural justice. The dispute arose from violations allegedly committed by the Appellant between 2003-2005, leading to SEBI suspending the Appellant's registration as a member of various stock exchanges. Upon appeal, the Tribunal had set aside SEBI's previous order and directed SEBI to pass a fresh order on merits. In the current appeal, SEBI relied on the statement of Mr. Devi Dutt, Chief Manager of a bank, which the Appellant had requested to cross-examine during the investigation. SEBI had not relied on Mr. Dutt's statement in the earlier order but did so in the impugned order, prompting the Tribunal to rule that the Appellant should have been given the opportunity to cross-examine Mr. Dutt before relying on his statement. The Tribunal quashed SEBI's order and remanded the matter back to SEBI for a fresh decision after allowing the Appellant to cross-examine Mr. Dutt if his statement was to be considered. The Tribunal directed SEBI to expedite the new decision within four months due to the time elapsed since the alleged violations. The appeal was disposed of with no order as to costs.

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