Recorded opinion is mandatory before appointing an adjudicating officer; insider-trading inquiry does not bar separate penalty adjudication.

Formation of an express opinion by the authority was a jurisdictional precondition for appointing an Adjudicating Officer under Chapter VIA, and a bare appointment without recorded application of mind was insufficient. The appointment was therefore vulnerable for want of the requisite satisfaction on record. The insider-trading regulations were treated as a separate, self-contained inquiry mechanism that did not have to be completed before statutory adjudication for penalty could begin, so no prior order under Regulation 14 was required.

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Issues: (i) Whether the appointment of the Adjudicating Officer was invalid for want of a recorded opinion by the Whole Time Member that there were grounds for adjudging under Chapter VIA of the Securities and Exchange Board of India Act, 1992; and (ii) whether the Board was required to first complete the procedure under the Prohibition of Insider Trading Regulations, 1992, including an order under Regulation 14, before initiating adjudication under the Act.

Issue (i): Whether the appointment of the Adjudicating Officer was invalid for want of a recorded opinion by the Whole Time Member that there were grounds for adjudging under Chapter VIA of the Securities and Exchange Board of India Act, 1992.

Analysis: The power to appoint an Adjudicating Officer under Rule 3 is conditioned on the Board being of the opinion that there are grounds for adjudging under Chapter VIA. That opinion is a jurisdictional prerequisite and must be independently formed by the authority vested with the power. The record showed only a notation appointing the officer and did not state that such opinion had been formed. A bare appointment, without an express indication of application of mind, was insufficient and could not be treated as an inferred satisfaction.

Conclusion: The appointment of the Adjudicating Officer was jurisdiction and the proceeding founded on it could not stand.

Issue (ii): Whether the Board was required to first complete the procedure under the Prohibition of Insider Trading Regulations, 1992, including an order under Regulation 14, before initiating adjudication under the Act.

Analysis: The insider trading regulations contain a self-contained scheme for inquiry, inspection and directions, but that scheme operates without prejudice to the Board's separate power to take action under Chapter VIA of the Act. The existence of a regulatory investigation mechanism does not postpone or condition the statutory power to initiate adjudication for penalty under the Act. Accordingly, completion of proceedings under Regulation 14 was not a necessary precondition for invoking the adjudicatory process under Section 15-I.

Conclusion: No prior order under Regulation 14 was required before initiating adjudication under Chapter VIA of the Act.

Final Conclusion: The impugned notice and the resulting adjudication proceedings were set aside because the requisite jurisdictional opinion for appointment of the Adjudicating Officer had not been shown on record; the separate insider trading regulatory process did not bar independent action under the penalty provisions of the Act.

Ratio Decidendi: Where a statute makes formation of opinion a condition precedent to the exercise of power, the authority must expressly and independently record that opinion on the basis of application of mind; a bare mechanical appointment does not satisfy the jurisdictional requirement.

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