Natural justice in securities enquiries requires cross-examination of disputed witness statements; refusal was treated as an appealable order.

In a quasi-judicial securities enquiry, statements recorded during investigation and relied upon against the noticee could not be used without allowing cross-examination where those statements were recorded behind his back and were disputed. Denial of that opportunity offended natural justice because cross-examination was necessary to test the truth of the material relied upon. The communication refusing cross-examination also finally determined a substantive issue in the enquiry and was therefore an appealable order under section 15T. The refusal was set aside and the enquiry officer was directed to permit cross-examination of the six persons concerned.

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Issues: (i) whether an enquiry can proceed on statements recorded during investigation without permitting cross-examination of the persons whose statements are relied upon; (ii) whether the communication declining cross-examination is an appealable order under section 15T of the Securities and Exchange Board of India Act, 1992.

Issue (i): whether an enquiry can proceed on statements recorded during investigation without permitting cross-examination of the persons whose statements are relied upon.

Analysis: The statements sought to be used against the appellant were recorded behind his back and were directly disputed by him. Where findings in a quasi-judicial enquiry are sought to be founded on such statements, denial of an opportunity to cross-examine the witnesses offends the basic requirements of natural justice. The purpose of the enquiry is to ascertain the truth, and cross-examination is the proper means to test the veracity of the material relied upon. The Board's own guidelines also contemplated cross-examination in such a situation.

Conclusion: The appellant was entitled to cross-examine the six persons whose statements were relied upon, and refusal of that opportunity was unsustainable.

Issue (ii): whether the communication declining cross-examination is an appealable order under section 15T of the Securities and Exchange Board of India Act, 1992.

Analysis: A decision which finally determines an issue affecting the substantive rights of a party during the enquiry is an order within the meaning of section 15T. The refusal to permit cross-examination conclusively decided a matter that directly affected the appellant's rights in the enquiry, and was therefore not a merely procedural step.

Conclusion: The communication was an appealable order under section 15T.

Final Conclusion: The appeal succeeded, the refusal to permit cross-examination was set aside, and the enquiry officer was directed to allow cross-examination of the six named persons.

Ratio Decidendi: In a quasi-judicial enquiry where reliance is placed on witness statements recorded behind the noticee's back and disputed by him, the noticee must be afforded cross-examination before those statements can be used against him, and a refusal deciding that question finally is an appealable order if it affects substantive rights.

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