2020 (10) TMI 689 - HC - SEBI

SEBI not required to grant personal hearing for exemption applications under Share Based Employee Benefits Regulations

The court held that SEBI is not obligated to grant a personal hearing when considering an exemption application under the Securities and Exchange Board of ... Whether the Board obliged to grant a personal hearing to the petitioner while considering an exemption application under the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 - HELD THAT:- It is a settled position that the requirement of compliance with the principle of natural justice can vary in different situations and conditions. Even where situations where principles of natural justice require an opportunity of hearing, it does not in all circumstances mean a personal hearing. A “reasonable opportunity of being heard” to the applicant before deciding exemption application. Therefore whenever it is found necessary to provide for an opportunity, SEBI has expressly incorporated it in such provisions. No such stipulation is found in the Regulation at hand. Apprehension expressed by the SEBI that by reading duty to give personal hearing in this Regulation would have adverse ramifications on its working cannot be said to be unwarranted. The SEBI has framed several regulations on various aspects of the securities market. A large number of applications are filed before it. It will hamper the functioning of the SEBI if the exercise of its every power is preceded by mandatory personal hearing, whether the regulation provides for it or not. There is no duty on the Board while considering an exemption application under Regulation 29 of the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014, to give a personal hearing to the applicant. Interest of justice to give a personal hearing to the Petitioner - argument of the Petitioner that since SEBI has formed an opinion and the rigid application of the Regulations, it is necessary to give an opportunity of personal hearing - As rightly pointed out by SEBI, there is no such formation of opinion. There were no reasons given in the earlier order. The Petitioner has submitted the relevant material. Petitioner has also been given an opportunity to submit additional written submissions. Once there is no requirement of a personal hearing under Regulation 29, we do not find that there is a special case made out by the Petitioner or any extraordinary circumstances exist to give special direction for the Petitioner. Writ Petition is dismissed. Issues Involved:1. Whether the Securities and Exchange Board of India (SEBI) is obliged to grant a personal hearing to the petitioner while considering an exemption application under the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014.2. Whether the power under Regulation 29 is quasi-judicial, thus necessitating a personal hearing.3. Whether the principles of natural justice mandate a personal hearing in the context of Regulation 29.4. Whether the facts of the case warrant a personal hearing in the interest of justice.Issue-wise Detailed Analysis:1. Obligation of SEBI to Grant Personal Hearing:The petitioner, JK Paper Limited, requested SEBI for a personal hearing regarding an exemption application filed under the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014. SEBI refused the request, permitting additional written submissions instead. The court concluded that SEBI is not obliged to grant a personal hearing while considering an exemption application under these regulations. The court emphasized that the regulations do not explicitly mandate a personal hearing, and the process of decision-making can be effectively carried out through written submissions.2. Nature of Power under Regulation 29:The petitioner argued that the power under Regulation 29 is quasi-judicial, thus necessitating a personal hearing. SEBI contended otherwise. The court found no merit in the petitioner's argument, stating that the power to grant relaxation under Regulation 29 is discretionary and aimed at protecting investors' interests. The court noted that the Appellate Tribunal's general comment on quasi-judicial authorities did not amount to a specific finding on Regulation 29 being quasi-judicial. Therefore, the contention that a personal hearing is mandated due to the quasi-judicial nature of Regulation 29 was rejected.3. Principles of Natural Justice:The petitioner contended that principles of natural justice, including fairness, transparency, and the right to be heard, necessitate a personal hearing. The court examined various Supreme Court judgments and concluded that the principles of natural justice are flexible and context-dependent. It held that the requirement for a personal hearing is not an absolute rule and can be fulfilled through written submissions. The court emphasized that the regulations provide a fair process through written submissions and the right to appeal, ensuring transparency and fairness without necessitating a personal hearing.4. Case-specific Requirement for Personal Hearing:The petitioner argued that, given the specific facts of the case, a personal hearing would serve the ends of justice. The court found no extraordinary circumstances or special case warranting a personal hearing. It noted that SEBI had not formed a rigid opinion and had provided opportunities for the petitioner to submit relevant material and additional written submissions. The court concluded that there was no requirement for a personal hearing under Regulation 29 and no special circumstances justifying such a direction in this case.Conclusion:The court dismissed the writ petition, discharged the rule, and made no order as to costs. It extended the period for submitting additional material/submissions by fifteen days from the date of the order's upload. The judgment/order was to be digitally signed and acted upon by all concerned parties.