Ex parte regulatory restraint requires demonstrated urgency; prima facie concern alone cannot override fair hearing safeguards.

Ex parte regulatory restraint on a time-sharing business under the SEBI Act was found unsustainable because no demonstrated urgency or imminent danger justified bypassing a pre-decisional hearing. The record showed prior engagement with the regulator, no material change in the business model, and no emergent circumstance warranting immediate coercive action while CIS applicability remained under enquiry. A mere prima facie view, pending investigation, and alleged non-cooperation could not replace natural justice or justify shutting down the business before merits were decided. The matter was remitted for fresh decision after hearing the appellants.

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Issues: (i) Whether the ex parte interim order restraining the appellants' time-sharing business could be sustained without a pre-decisional hearing or demonstrated urgency. (ii) Whether the respondent could justify the impugned order on the basis of a mere prima facie view, pending enquiry, and alleged non-cooperation by the appellants.

Issue (i): Whether the ex parte interim order restraining the appellants' time-sharing business could be sustained without a pre-decisional hearing or demonstrated urgency.

Analysis: The power under Sections 11(1), 11(4) and 11B of the SEBI Act is not unbounded and can be invoked ex parte only where urgency and imminent danger are shown. The appellants had been in communication with SEBI for years, the business model had not materially changed, and the record did not disclose any emergent circumstance warranting immediate restraint without hearing. The order had serious civil consequences and was passed in a setting where the main question of CIS applicability was still under enquiry.

Conclusion: The ex parte interim order was not justified and could not be sustained.

Issue (ii): Whether the respondent could justify the impugned order on the basis of a mere prima facie view, pending enquiry, and alleged non-cooperation by the appellants.

Analysis: The respondent itself had earlier taken a view that the appellants' time-sharing activity did not attract CIS provisions, and the later change of stance did not dispense with the duty to follow natural justice. The show-cause process was already underway, and the materials showed substantial cooperation by the appellants, with only some particulars furnished belatedly. A tentative regulatory view could not be converted into coercive directions shutting down the business before adjudication on merits.

Conclusion: The respondent could not rely on the prima facie view or alleged non-cooperation to uphold the impugned order.

Final Conclusion: The appeals succeeded to the extent that the impugned ex parte interim order was set aside, and the respondent was directed to decide the matter afresh after hearing the appellants.

Ratio Decidendi: An ex parte regulatory restraint with grave civil consequences can be sustained only on a clearly demonstrated urgency, and a tentative prima facie view cannot displace the requirement of fair hearing where the main controversy remains pending for adjudication.

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