Reasonable-time requirement defeats stale securities proceedings and unsupported findings of non-disclosure and misleading disclosure.

Regulatory proceedings based on a GDR issue were held unsustainable where they were initiated after more than 14 years without a reasonable explanation for the delay. Even though no statutory limitation period applied, the power had to be exercised within a reasonable time, and the delay vitiated the show cause process and consequential directions. The findings of non-disclosure of the account charge agreement and of a misleading statement that the issue was subscribed were also rejected, because no legal duty to disclose that agreement was established, the subscription statement was factually correct, and no material showed investor inducement or fraud. The restraint order was therefore set aside.

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Issues: (i) Whether the show cause proceedings and consequential directions were vitiated by inordinate delay and laches. (ii) Whether the findings of non-disclosure of the account charge agreement and of making a misleading statement that the GDR issue was subscribed were sustainable.

Issue (i): Whether the show cause proceedings and consequential directions were vitiated by inordinate delay and laches.

Analysis: The proceedings were initiated after more than 14 years from the GDR issue. Even though the statute prescribed no limitation period, the power had to be exercised within a reasonable time. The explanation that the matter involved foreign entities and collection of information abroad was found insufficient, and the delay was held to be inordinate and unexplained. The remedial powers under sections 11 and 11B could not be invoked after such delay in the peculiar facts.

Conclusion: The proceedings were vitiated by inordinate delay and laches, in favour of the appellant.

Issue (ii): Whether the findings of non-disclosure of the account charge agreement and of making a misleading statement that the GDR issue was subscribed were sustainable.

Analysis: The finding of non-disclosure was unsupported by any discussion showing a legal obligation to disclose the account charge agreement to the stock exchange, and no basis was established for treating the omission as a violation warranting action under sections 11 and 11B. The statement that the issue was subscribed was factually correct, as the GDR issue had in fact been subscribed, and there was no material showing investor inducement or fraud. The conclusion that investors were misled was held to be perverse and based on surmise.

Conclusion: The findings on non-disclosure and misleading statement were unsustainable, in favour of the appellant.

Final Conclusion: The impugned restraint order could not be sustained and was set aside, with the appeal succeeding.

Ratio Decidendi: Where regulatory proceedings are initiated after an inordinate and unexplained delay, the authority must act within a reasonable period, and a restraint order cannot be sustained on unsupported findings of non-disclosure or misleading disclosure.

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