2020 (7) TMI 90 - AT - SEBI

Appellate Tribunal quashes SEBI penalties due to unreasonable delay in proceedings.

Ashlesh Gunvantbhai Shah Versus Securities and Exchange Board of India, Mumbai

Ashlesh Gunvantbhai Shah Versus Securities and Exchange Board of India, Mumbai - TMI Issues:1. Challenge against penalties imposed by SEBI for violation of SEBI regulations.2. Allegation of inordinate delay in issuance of show cause notice.3. Appellants' contention of delay versus respondent's explanation.4. Legal arguments regarding delay raised by both parties.5. Consideration of delay issue by the Appellate Tribunal.6. Applicability of delay issue to all appellants collectively.7. Decision on penalty imposition due to delay in proceedings.Issue 1: Challenge against Penalties:The appellants challenged penalties imposed by SEBI for violating SEBI regulations related to fraudulent and unfair trade practices in the securities market. The violations included creating artificial volumes and misleading appearances through matched trades, reversal trades, and self trades.Issue 2: Allegation of Inordinate Delay:The appellants argued that there was an inordinate delay in issuing the show cause notice for violations dating back to 2010, as the notice was issued in 2017, after seven years. They contended that such delay prejudiced them.Issue 3: Contention and Explanation on Delay:The respondent explained the delay in issuing the show cause notice, citing changes in investigation department officers and procedural delays. The appellants relied on previous tribunal decisions to support their claim of delay impacting the proceedings.Issue 4: Legal Arguments on Delay:The respondent argued that the SEBI Act does not specify a limitation period, and delay alone cannot quash proceedings. The appellants emphasized the impact of delay on their defense and relied on previous judgments to support their position.Issue 5: Consideration by Appellate Tribunal:The Appellate Tribunal reviewed the delay issue, noting a delay of seven years in issuing the show cause notice. It found the respondent's explanation lacking urgency and criticized the delay in moving the proceedings forward.Issue 6: Collective Applicability of Delay Issue:The Tribunal held that the delay issue raised by one appellant applied collectively to all appellants, even if not explicitly raised by each, especially when it pertained to a fundamental legal question affecting all parties.Issue 7: Decision on Penalty Imposition:Considering the inordinate delay in initiating proceedings, the Tribunal ruled that the penalty order could not be sustained. It quashed the penalties imposed by the AO, allowing all appeals and deciding against penalty imposition due to the unreasonable delay in the proceedings.This detailed analysis covers the issues raised, legal arguments presented, and the final decision of the Appellate Tribunal regarding the challenges against penalties and the allegation of inordinate delay in the issuance of the show cause notice.